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1071 A, meeting of the Board of Governors of the Federal Reserve System was held in Washington on Monday, October 17, 1938, at 11:30 a. in. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Szymezak McKee Draper Mr. Morrill, Secretary Bethea, Assistant Secretary Mr. Clayton, Assistant to the Chairman The action stated with respect to each of the matters hereinafter referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Federal Reserve System held on October 15, 1938, were approved unanimously. Letter to Mr. McKinney, President of the Federal Reserve Bank of Dallas, reading as follows: "In view of the statements contained in your letter Of October 11 and the appraisal report attached thereto dated October 5, the Board will offer no objection to the carrying on your books of the improvements on the Property at 515 Caroline Street, Houston, recently purchased by your bank, at $17,500 and to the creation of a depreciation reserve thereon at the rate of 5 percent Per annum." Approved unanimously. Letter to Mr. Howard A. Kelly, Executive Secretary, Buffalo Municipal Housing Authority, Buffalo, New York, reading as follows: "This refers to your letter of October 12, 1938, requesting advice as to whether a State member bank of 1072 10/17/38 "the Federal Reserve System may underwrite bonds issued by the Buffalo Municipal Housing Authority for the erection of a slum-clearance project in the City of Buffalo under the regulations of the United States Housing Authority "Under the provisions of section 9 of the Federal Reserve Act, State member banks of the Federal Reserve System are subject to the same limitations and conditions With respect to the purchasing, selling, underwriting, and holding of investment securities and stock as are applicable in the case of national banks under section 5136 of the Revised Statutes. This section of the Revised Statutes forbids the underwriting of all kinds of securities except those specifically exempted from the provisions of the section. It is our understanding that bonds issued by a municipal housing authority are not general obligations of a State or political subdivision thereof and, accordingly, that these bonds do not fall within the class of obligations exempted by the statute. It follows, therefore, that State member banks may not underwrite such bonds. "Although your question was whether a State member bank may underwrite these bonds, it seems probable that YOU also desire information upon the question whether a State member bank may purchase .such bonds for purposes of investment. The office of the Comptroller of the Currency has ruled that the bonds, notes, or debentures issued by public housing agencies and representing the 10 per cent local participation in the cost of low-rent housing or slum-clearance projects under the United States Housing Act of 1937 are investment securities which are eligible for purchase by a national bank within the limitations as to amount prescribed by section 5136 of the Revised Statutes. It is our view that State member banks of the Federal Reserve System also have authority to purchase, for purposes of investment and subject to the limitations stated above, the bonds, notes, or debentures issued by such public housing agencies. "There is inclosed herewith for your information a copy of the Investment Securities Regulation of the Comptroller of the Currency which contains at page 3 the provisions of section 5136 of the Revised Statutes and section 9 of the Federal Reserve Act." Approved unanimously. 1072, 10/17/38 Letter to Mr. Frank T. Neely, Asheboro, North Carolina, reading as follows: "This refers to your letters of October 6 and 7, 1938, addressed to the Federal Reserve Bank of New York, and to your letter of October 7, and your card of October 12, addressed to the Board of Governors of the Federal Reserve System, relating to the payment by the National City Bank of New York of a draft drawn by Wenceslao Escalante on his savings deposit in such bank. "As you know, the National City Bank of New York, in its letter of September 29, 1938, advised you that on September 19, 1938, it had returned Mr. Fscalante's pass book to him with the suggestion that he forward it to you. If the pass book is received by you, you may forward the draft with the pass book attached to the National City Bank of New York. This method of presenting the draft for payment would be in accordance with section 1(e) of the Board's Regulation "If the pass book is not received from Mr. Escalante in the usual course of the mails between Argentina and the United States, it is suggested that you request Mr. Escal -ante to forward the pass book again to the National City Bank of New York. If this is done, it is suggested that you continue to hold the draft until you are advised that the pass book has been received by the National City Bank of New York. Although the provisions of Regulation Q do not permit the payment by a member bank of a draft drawn on a savings deposit where the draft is forwarded by a person other than the depositor and the pass book is forwarded by the depositor, neverthless, in the unusual circumstances of this case and in order to prevent further inconvenience to you, the Board of Governors of the Federal Reserve System will not object to the payment of the draft in question if you forward the draft and Mr. Escalante forwards the pass book to the National City Bank of New York. The Federal Reserve Bank of New York has conferred with the National City Bank of New York regarding this matter and it is understood that the member bank will pay the draft if it is presented in the manner outlined above. "In accordance with your request the letter dated September. 29, 1938, from the National City Bank to you 1074 10/17/38 -4- "and the Board's letter to you dated October 5, 1938, are returned to you herewith." Approved unanimously, together with a letter to Mr. Dillistin, Assistant Vice President of the Federal Reserve Bank of New York, reading as follows: "This refers to your letters of October 7 and 11, 1938, inclosing letters from Mr. Frank T. Neely, Asheboro, North Carolina, with reference to the collection of a draft drawn by :Mr. Wenceslao Escalante on his savings deposit in the National City Bank of New York. "Mr. Vest has discussed this matter on the telephone With Mr. Tiebout and it is our understanding that the National City Bank of New York will pay the draft in question if the pass book is forwarded to the bank by Mr. Escalante and the draft is forwarded by Mr. Neely. "We are inclosing herewith two copies of our letter to Mr. Neely regarding this matter. It will be appreciated if you will transmit one of these copies to the National City Bank of New York and advise the bank that the Board Of Governors will not object to the payment of this draft, in view of the unusual circumstances of the case. If the pass book is forwarded by Mr. Escalante, please have the National City Bank advise Mr. Neely of the fact, or, if the bank prefers, it may advise you and, upon receipt of information from you, we will advise Mr. Neely." Mr. Morrill reported that E. C. Fussell, Secretary of the Reserve Bank of New Zealand had called at the Board's offices today in accordance with advices previously received from the Federal Reserve Bank of New York, and that he had been a mest at luncheon in the Board's dining roam. Ur. Morrill suggested that the Board authorize payment of the cost of the luncheon served to Mr. Fussell. Approved unanimously. 1075 10/i /38 -5- Thereupon the meeting adjourned. APProved: Chairman..
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