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A meeting of the Federal Reserve Board was held in the office of the Federal Reserve Board on Wednesday, October 21, 1931, at 10:45 a. in. PRESENT: ALSO PRESENT: Governor Meyer Mr. Hamlin Mr. Miller Mr. lames Mr. Magee Mr. Morrill, Secretary. Mr. McClelland, Assistant Secretary. Mr. Harrison, Assistant to the Governor. The minutes of the meeting of the Federal Reserve Board held on October 14 were approved. The minutes of the meeting of the Executive Committee of the Federal Reserve Board held on October 15 were approved, and, upon motion, the action recorded therein was ratified. The following matters were then presented and acted upon by the Board: Telegram dated October 20 from the Chairman of the Federal Reserve Bank of Dallas, advising that the Board of Directors of the bank, on that date, eetablished a rediscount rate of 4% on all classes of paper of all maturities, rtsetive the first business day following that on which approved by the Federal Reserve Board; the Executive Committee of the Board, in accordance with the "ti°n taken at the meeting on October 14, yesterday having approved informally he rate established by the Dallas directors, effective today. Upon motion, the informal action of the Executive Committee was ratified. Telegram dated October 20 from the Chairman of the Federal Reserve Of San Francisco, advising that his Doard of Directors, on that date, Voted $ subject to the approval of the Federal Reserve Board, to establish a red i --ecoUnt rate of 3 1/2% on all classes of paper of all maturities, effective today. the Executive Committee of the Board, in accordance with the action take_ 4 at the meeting on October 14, yesterday having approved informally the 10/21/31 -2- rate established by the San Francisco directors, and noted with approval the est ablishment at the bank on October 20 of the following schedule of effective buying rates on bankers' acceptances, also reported in 1.1r. Newton's telegram: 1 to 90 days 91 to 120 days 121 to 180 days Repurchase 3 3 3 3 1/8% 1/4';', 1/2% 1/4% Upon motion, the informal actions of the Executive Committee were ratified. Reference was then made to the action taken by the Board at the meeting °I1 October 14 in authorizing the Executive Committee, for a period of one week from that date, to approve, for and on behalf of the Board, an increase not in eZcess of 1% in the discount rate of any Federal Reserve bank. After discussion, upon motion, it was voted to amend the authority granted to the Executive Committee nnd to authorize it, for a period of one week from this date, to approve, for and on behalf of the Board, an increase in the discount rate of any Federal Reserve bank up to a rate not exceeding 0. Telegram dated October 21, just received from the Chairman of the Pederal Reserve Bank of Philadelphia, advising that his Board of Directors toclaY voted to establish a rediscount rate of 3 1/2% on all classes of paper r Ea]. maturities, effective the first business day following that on which aPProved by the Federal Reserve Board. After discussion, upon motion, it was voted to approve the rate of 3 1/2% established by the Philadelphia directors, effective tomorrow, October 22. Report of Executive Committee on letter dated October 20 from the C°:4113troller of the Currency, recommending approval of a salary of 5,000 per 411111n1 for Mr. Frank W. Krippel, National Bank Examiner, assigned to the Sixth 'e(lel'al Reserve District; the Board's Committee recommending approval. Approved. CI? . 10/21/31 -3- Draft of reply, approved by the Executive Committee, to letter dated October 1 from the Assistant Federal Reserve Agent at Chicago submitting information with regard to the acquisition by the Chemical State Savings Bank, Michigan, of the business of the Peoples State Savings Bank of Midland, arla stating that his department is arranging to join in the next examination clf the bank; the proposed reply advising that, until receipt of a report based °la the forthcoming examination, the Board will defer consideration of the qUestion whether the action of the member bank has resulted in any change in the general character of its assets within the meaning of the conditions under Which it was admitted to membership in the Federal Reserve System, and request- the Federal Reserve Agent to arrange to have his representative discuss With the member bank certain other phases of its condition. Upon motion, the proposed letter was approved. Report of Executive Committee with regard to memorandum dated October 7 r14°Ira the Comptroller of the Currency submitting the application of the Merchants lietictlal Bank, Dunkirk, New York, for permission to reduce its capital from 300n^ 9`Ju0 to 4150,000, through a reduction in the par value of the outstanding "k, it being the plan, immediately following the reduction, to increase the " cam* "L'al to 4;;250,000 by the sale of 4,000 shares of 81 25 par stock at c5.0 per 1 the amount of the capital reduction and a premium of 0.00,000 realized rrom the sale of new stock to be credited to the surplus account, out of which 4 St°ck dividend of $50,000 will be declared to further increase the capital to 00; the Comptroller recommending approval of the application under the 111" °utlined upon condition (1) that the new stock be sold only to persons or e°11"Ills who have knowledge of the present condition of the bank, (2) that the Droc eeds from the sale of the new stock be at hand before the present capital 10/21/31 -4- is reduced, and (3) that losses in the amount of 4217,160 set up by the examiner at the time of the last examination be eliminated. Upon motion, it was voted, in accordance with a recommendation of the Executive Committee, to approve the reduction as outlined, subject to the conditions recommended by the Comptroller of the Currency, and to the further condition that instead of setting up a surplus in the amount of 4300,000, the bank charge off at this time, in addition to the 4217,160 of losses set up by the examiner, bond depreciation in the amount of 453,239, which the examiner classified as doubtful. Letter dated October 19 from the Assistant Secretary of the Federal Farm enclosing a recommendation made in a confidential report of the Coarse Gr ins Advisory Committee that wide publicity be d.ven to the first pert of I'eLl ' agraph 1 of Section 13(a) of the Federal Reserve Act relating to the eliibilitY for rediscount at Federal Reserve banks of agricultural and live stock 13e'Per with maturities up to nine months; the letter stating that the matter is beillg brought to the attention of the Federal Reserve Board and the Federal Farm Loall Bureau for such action as may be deemed advisable as it is believed that the °rganizations are in better position to meke such information available to the public than is the Federal Farm Board. The letter further stated that the l'arm Board would welcome a conference with representatives of the Federal ''Ire Board at an early date. Upon motion, the matter was referred to Mr. Magee who has been attending the meetings of the Coarse Grains Advisory Committee. Governor Meyer then presented the following telegram received this )1(1111111g from the Governor of the Federal Reserve Bank of San Francisco: "Referring your wire today answering mine of yesterday I consider prompt attention to this matter essential and am advised that executive committee of Open Market Policy Con- 10/21/31 -5"ference will meet next Monday which in view of the tight situation which is imminent if not here does not satisfy me. I received following wire from Governor Harrison dated yesterday quote: In view of the reduction in amount of free gold and in reserve ratio which is affecting the several reserve banks somewhat unequally it may be desirable to take steps which will protect the position of all banks and avoid too great fluctuation in these figures. In view of hesitancy on the part of some of the other banks to participate in repurchases of governments and or bills unless absolutely essential, it occurs to us that it would be advisable promptly to set up some procedure whereby some one central source or committee will have figures available daily for each Federal reserve bank and some more or less definite authority to mnke adjustments from day to day as occasion arises. With that in mind would it be agreeable to you to prefer this task to the executive committee of the Open Market Policy Conference in order that they may perhaps appoint a subcommittee to watch the situation and handle it from day to day.. We see no other practicable way of satisfactorily making adjustments which may be needed. unquote. "end send following reply dated today quote. we would be disposed to approve setup suggested your wire nineteenth provided ".A." Board approves that part of recommendation of Open Market Policy Conference August eighteenth meeting giving executive committee authority to sell governments. I have suggested this to Governor Meyer. "B" Some assurance that executive committee will at least let this years remaining maturities have effect. "C" Preliminary to beginning of day to day adjustment, adjustment be made to at least start with less wide inequalities as to free gold and reserves than now obtain unquote. "I have a wire from him dated today which does not appear to be an answer to my telegram but does appear to have been sent to all Federal reserve banks quote: referring telegram last night regarding adjustment of reserve position of various Federal reserve banks faced with declining reserve percentage replies already received indicate that there is some misunderstanding and difference of opinion as to scope and purpose of proposal. Obviously no operating committee of the System or of the Open Market Policy Conference can require or should be in a position to require any reserve bank to buy or sell any of its governments or bills. On the other hand we are day by day receiving requests from some of the federal banks asking the System to take over some of their holdings of government securities and 10/21/31 -6or bills. With declining reserve percentages the problem of allocating governments or bills is becoming increfisingly difficult inasmuch as different reserve banks have varying degrees of reluctance or incapacity to take over either. I therefore have reQuested the members of the executive committee of the Open Market Policy Conference to hold a meeting in New York on Monday next to discuss setup of adequate machinery to handle applications from individual reserve banks. In the meantime in view of general reluctance of many of the reserve banks to increase their holdings of government securities it is suggested that any reserve bank desiring to improve its reserve pdrcentage advise us promptly of the amount of bills which they would like to have us offer for participation by other Federal reserve banks the general sentiment being that adjustments of reserve percentage should be made through a resale of bills rather than through a resale of governments. I am sending similar telegram to all governors pending meeting of executive committee on Monday next unquote." A general discussion of the present open market policy of the Federal Reserve System followed. The Governor stated that, with the approval of the /3°ard, he would attend the meeting of the Executive Committee of the Open LiQ ''v1.4 Policy Conference in New York on Monday and report to the Board thereon. It was the view of the Board that the Governor should be present at the meeting. Telegram dated October 21 from the Chairman of the Federal Reserve Bank °t Atlanta, advising of the establishment today of the following schedule of erfective buying rates on bankers' acceptances: 1 to 90 days 91 to 120 days 121 to 160 days 2 3/4% 2 7/8i, 3 p Without objection, noted with approval. The meeting adjourned at 12:00 noon. 4be/JX ApPr011ed: - 2 j , , /1CPL4, -A-,t) Secre ary.
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