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181 A meeting of the Federal Reserve Board was held in the office of the Peaerai Reserve Board on Tuesday, October 9, 1928 at 10:45 a.m. PRESENT: Governor Young 'Ir. Platt Mr. Hamlin Mr. Miller Yr. James Mr. Cunningham Mr. Eddy, Secretary Mr. McClelland, Asst. Secretary The minutes of the meeting of the Federal Reserve Board held on October 5th were read and approved. Memorandum dated October 3rd from the Deputy Comptroller of the Currency, aavising that on October 8th the Comptroller would call upon all National banks, atd all banks in the District of Columbia, for reports of condition as of the 0108e Of business, Wednesday, October 3, 1928. The Secretary advised that on Ootober 8th a call as of the same date was made upon all state member banks. Noted, with approval. Telegram dated October 5th from the Secretary of the Federal Reserve 1344k °f ClevelaLid, advising that the board of directors at a meeting on that aate made no change in the bank's existing schedule of rates of discount and fiftIrchase Without objection, noted with approval. Matter approved on initials on. October 6th, namely, letter dated °Qt°13er 6th from the Comptroller of the Currency, recommending approval of aglarY Of 44,000 per annum for National Bank Examiner Michael H. Sims, "signed to the Third Federal Reserve District. Formally approved. letters dated Report of Committee on Salaries and Expenditures on 182 -2- October 5th from the Secretary of the Federal Reserve Bank of Cleveland and October 3rd from the Chairman of the Federal Reserve Bank of Dallas, transmitting lists of employees for whom the directors of those banks approved leaves Of absence with pay, on account of illness, during the month of September, where the total of such absences since January 1, 1928 has exceeded thirty days; the Board's Committee recommending approval of the salary payments involved. Approved. Letter dated October 8th from the Assistant Federal Reserve Agent at New Y13111C advising of the proposed merger, effective about December 15th, of the Pirst National Bank of Brooklyn into the Bank of Manhattan Company, New York City; the Assistant Agent stating that the main office and branches of the Pirat National Bank are to be continued as branches of the Bank of Manhattan Company. Noted. Memorandum from Counsel dated October 8th, with reference to the Clayton " 4 application of 'Mr. Herman A. Metz, involving the First National Bank and St COmpany of Mamaroneck, N. Y., the First National Bank of Brooklyn and the Ballk Of United States of New York City, which the Board on September 12th advised 11r. 1:4etz it would approve upon receipt of advice of his resignation from the Irit r national Germanic Trust Company of New York City; Counsel stating that Metz has now advised the Board that his resignation as a director of the i4ternational Germanic Trust Company has been accepted. Upon motion, 11r. lIetz's application was formally approved. Memorandum dated October 8th from the Assistant Secretary, recommending 183 0 10/9/28 -3- aPPrcval of a change in the interdistrict time schedule of the Federal Reserve to Bank of Philadelphia from Philadelphia to Portland and Seattle of from five is agreeable to the 'days; the Assistant Secretary advising that the change f°/11 Pederal Reserve Bank of San Francisco. Approved. Report of Committee on District 7-al on the matter referred to it at the Federal Res'fleeting on October 5th, namely, letter dated October 1st from the erve Agent at Dallas, with reference to a statement regarding the current cotcrop made in a report to the Southwest Shippers' Advisory Board by Er. j. EVan, W. the subject of critAssistant Federal Reserve Agent, which has been ical comment by the press and others in the Southwest; the Board's Committee recommending that a letter be written to the Federal Reserve Agent at Dallas, ea1t1°11ing him that any statements made with regard to the size of crops, etc. hoUld be directly buttressed by authority so as to take the greatest precaution and made to serve the P"aible against having them wrested from their context Parposes of speculators. statement Mr. Hamlin pointed out that inasmuch as the United States the by e estimat was apparently based upon a crop to the states previou weeks several Department of Agriculture specificalshould Agent Reserve ment, the letter to the Federal Reserve Federal the by made is ce referen r ly advise that wheneve state bank to any such report care should be taken to clearly report. the source and date of the ee,.as amended Upon motion, the recommendation of the Committ not voting. by Mr. Hamlin's suggestion, was adopted, Mr. Miller on October 5th, nameMatter referred to the Law Committee at the meeting Agent at San Francisco, letter dated September 25th from the Federal Reserve 184 lo/9/28 -4- ansmitting copies of a letter addressed to the United States District Attorney ' tl at Los Angeles reporting certain transactions of the former Pacific Southwest Trust and Savings Bank of Los Angeles, disclosed by an examination of that in stitution made as of February 5, 1927. The Secretary reported that the Law Committee had noted the letter and enclosures, and. upon motion it was voted that copies of the letter to the United States District Attorney be transmitted to the Department of Justice, in accordance With the Board's usual procedure. At this point, Mr. McIntosh joined the meeting. The Governor then referred to a proposed amendment to Section XI (3) of the 13°41rd's Regulation A, which he has discussed with the Board informally on several recent occasions, which would make eligible for rediscount and purchase bY Federal Reserve banks bankers' acceptances drawn by an elevator or warehouse 2014PenY and secured by warehouse receipts of the elevator or warehouse Company that draws the draft. He submitted a proposed form of amendment which some time ag° he suggested to the Federal Reserve Bank of Minneapolis and stated that an allaenciment of the kind would meet the situation in Minneapolis which gives rise to the question. After considerable discussion, upon motion, the amendment to Section XI (3) of Regulation A submitted by the Governor was amended and adopted in the following form, Messrs. Miller and Platt voting "no": "The storage in the United States or in any foreign country of readily marketable staples, i)rovided that the bill is secured at the time of acceptance by a warehouse, terminal, or other similar receipt, conveying security title to such staples, issued by a party independent of the customer or issued by a grain elevator or warehouse company duly bonded and licensed and regularly inspected by State or Federal authorities with whom all receipts for such staples and all transfers thereof are registered and without whose consent no staples may be withdrawn; and provided further that the acceptor remains secured 185 -5- "throughout the life of the acceptance. In the event that the goods must be withdrawn from storage prior to the maturity of the acceptance or the retirement of the credit, a trust receipt or other similar document covering the goods may be substituted in lieu of the original document, provided that such substitution is conditioned upon a reasonably prompt liquidation of the credit. In order to insure compliance with this condition it should be required, when the original document is released, either (a) that the proceeds of the goods will be applied within a specified time toward a liquidation of the acceptance credit or (b) that a new document, similar to the original one, will be resubstituted within a specified time." Mr. Platt stated that although he favored the amendment as submitted by the Governor, relating only to acceptances against grain, he voted "no" because the amendment had been broadened to include all commodities. The Secretary then read to the Board a letter addressed to Governor Young 114cler date of October 9th, dictated over the telephone by the Chairman of the Pecie ral iteserve Bank of Richmond, inviting the members of the Board and its staff to attend the formal opening of the Baltimore Branch Building on Thursday $ October 18th; the Chairman stating that the Board members are invited to attella. a joint meeting of the boards of the Richmond bank and its two Branches tc) be held in the new building daring the morning and to be followed by a lunch" 4 arid inspection of the building. In his letter, the Chairman also referred to . rw ltations being sent to the members of the Board by the Baltimore Clearing /1014. . 4ssociation to attend a dinner on the evening of October 17th. During the discussion which followed, Messrs. Platt, Hamlin and McIntosh signified their intention of attending the formal opening of the Branch Building. Ilemoranduth dated October 5th from the ;1ssistant Secretary, advising that cille to the contemplated absence of Governor Young and LIr. James, by direction °r the Vice Governor he advised the Chairman of the Federal Reserve Bank of 11.11.1. 4clelphia that it is necessary for the Board to postpone the hearing to the 186 10/9/28 -6- Ph iladelphia Clearing House Association, fixed for October 16th, regarding apPlications which have been made to the Board by member banks for reduction in reserve requirements. Upon motion, Wednesday, October 24th was fixed as the date for the hearing. Letter dated October 8th from the Deputy Governor of the Federal Reserve Balak O.,. New York, Acting Chairman of the Open Market Investment Committee, advisiag of instructions received from a foreign correspondent to convert into cesh 440,200,000 of short-time government securities and that in order to avoid 44Y change in the System's holdings of securities arrangements have been made to sell ,00,000,000 to the Treasury and 1,;2,500,000 to another foreign corres13°11dent, with the expectation that before the next published statement the rettleining 47,500,000 will be marketed. Noted. The Governor then referred to the question of examination of State member banks which is special order of business for this morning's meeting. At this point, Messrs. Gilbert, Herson and Wyatt were called into the Meeting. Mr. Hamlin submitted and moved adoption of the following resolutions: "Whereas, the Federal Reserve Board recognizes its duty under the Federal tl,!erve Act to keep itself informed as to the condition of all member banks, "character of their management, and whether they are complying with the °visions of the Federal Reserve Act, the regulations of the Federal Reserve ' 131 -4:".9 and the conditions of membership applicable to them; 4 Whereas, the Board is of the opinion that it is justified in relying sr1.11 the Comptroller of the Currency for such information as to national banks reliable elc:_°11g as the Comptroller continues to make at least two complete and "kultaations of each national bank each year; the Board is of the opinion that it is justified in relying 11p0,, Thomas, authorities reports of examination of State member banks made by the State ie 10/9/23 -7- Only When such examinations are made by competent and reliable examiners and Illrnish full and complete information as to the condition of such banks, the character of their mana!=;ement and whether or not they are complying in every respect with the provisions of the Federal Aeserve ct, the Board's ..Aegulalons and all applicable conditions of membership; , dhereas, the Board is of the opinion that, if the State authorities f,ail to make at least one such examination each year of each State member uank, it is the duty of the Federal Reserve Board to cause at least one such ! xamination to be made each year, either by its own examiners, by the Federal eserv e igent, or by the Federal Reserve Bank, and to assess the costs there"against the banks examined; 4hereas, the Federal Reserve Agents are at present charged with the duty Of seeing that at least one examination of each State member bank is made each Year and this appears to be the most convenient and practical method of Obtaining such examinations; Whereas, the reports of examinations of State member banks now being received are not in all cases entirely adequate to inform the Board as to t condition of State member banks, the character of their management, and Whether or not they are complying in every respect with the provisions of the Federal Reserve Act, the Board's regulations and all applicable conditions Of membership; lOw, Therefore, Be It Resolved By The Federal Reserve Board, That: (1) Each Federal Reserve Agent shall obtain and forward to the Feders.‘ Reserve Board at least one report of examination of each State member bank in his district each year, each such report to result from an ex:ad-nation made by reliable and competent examiners and to contain full and !omplete information as to the condition of such bank, the character of its "Eigement and whether or not it is complying in every respect with the proVisions of the Federal Reserve Act, the Board's regulations and all applicable nditions of membership; (2) If possible, the Federal Reserve Agents shall obtain reports Of such examinations from the State authorities; (3) Whenever the State authorities fail to make at least one exarAination of each State member bank each year or whenever the examinations tle by the State authorities are not made by competent and reliable exor do not furnish full and complete information as to the condi' ' .07a of such banks, the character of their management, and whether or not theya are complying in every respect with the provisions of the Federal ReAct, the Board's regulations and all applicable conditions of memberi;".11), the Federal Reserve Agent shall cause such examinations to be made his own examiners and shall assess the costs thereof against the banks t (4) Each Federal Reserve Agent shall use every reasonable means W i ithin his power to correct all matters criticized in the reports of examOf State member banks in his district (exclusive of technical vio4.0ns of state law which do not constitute violations of the Federal Res-' 10/9/28 r" Act, the Board's regulations, or the conditions of membership applicable ! 43 such banks, and which do not endanger the solvency of such banks), either : y direct correspondence with the banks or through cooperation with the State _u thorities and shall report to the Federal Reserve Board only such matters as require definite action by the Board or by the Department of Justice; (5) Whenever the Federal Reserve Agent is unable to bring about the correction of matters criticized in the reports of examination and whenSuch matters are of sufficient importance to require action by the Fed712111 deserve Board, he shall report the matter to the Federal Reserve Board with a definite recommendation for specific action to be taken by the Fedsral Reserve Board; (6) There is hereby created in the staff of the Federal Reserve Boa ,,4 , -4- a division to be known as the 'State Bank Examining Division' which -1 keep a constant check upon the number and character of reports of ex:" ] _ ation of State member banks received from the Federal Reserve Agents and 01 11,l : _'.6he activities of the Federal Reserve Agents in correcting the matters riticized by the Examiners, and shall, after reasonable notice to the Fed! Reserve Agents and after affording them a reasonable opportunity to °T131Y With the provisions of this resolution, call to the attention of the Fe u eral Reserve Board any continued neglect of any Federal Reserve Agent to (3111Ply fully with the provisions of this resolution." : 7 James submitted the following resolutions, and moved their adoption as a substitute for those submitted by Li.. Hamlin: "BE IT RESOLVED, That the Federal Reserve Board recognizes its duty 1111aer the Federal Reserve Act to keep itself informed as to the condition r all member banks, the character of their management, and whether they f : e ccmPlying with the provisions of the Federal Reserve Lot, the regulations 0, the Board, and the conditions of membership applicable to them; Federal Reserve BE IT FURTHER RESOLVED, That the Board is of the opinion that it is t stified in relying upon the Comptroller of the Currency for such informa' ' '°/1 as to national banks; BE IT 171JR2HER RESOLVED, That the Board is of the opinion that it is rstified in relying upon reports of examination of State member banks made he State aUthorities when such examinations furnish full and complete c)rmation as to the conditions of such banks and the character of their -sn agement; BE IT FILO.= RESOLVED, That whenever the reports of examination of Stat e member banks, furnished by the State authorities, are not deemed comete :and satisfactory, the Federal eserve Board shall order or make at Ile st one 0.:„amination or investigation per year of such character as it deems cost of such exessary to provide it with the requisite information, the examined." Jalation or investigation to be assessed against the member bank Z subA detailed discussion then ensued of the resolutions were thereof paragraphs mitted by Mr. James, and the several discussed separately and amendments suggested. 189 10/9/28 -9- Mr. Cunningham then moved that the substitute resolutions submitted by Ir. James be amended, and adopted in the following form: "BE IT RESOLVED, That the Federal Reserve Board recognizes its duty under ," Federal Reserve Act to keep itself informed as to the condition of all memuer banks; fi_ BE IT FURTHER RESOLVED, That the Board is of the opinion that it is just].in relying upon the Comptroller of the Currency for such information as to gational banks; ber b_BE IT FURTHER RESOLVED, That whenever reports of examination of State memunks furnished by State authorities are not deemed satisfactory either to ' l34,5 Federal Reserve Bank or the Federal Reserve Board, examinations of such memf.7r banks shall be made at least once each year by the Federal Reserve authori43 and shall be of such character as the Federal Reserve Board deems neces179 the cost of such examinations to be assessed against the banks examined." X Mr. Hamlin then moved that the resolutions be further amended and adopted the following form: "BE IT RESOLVED, That the Federal Reserve Board recognizes its duty under the, b zederal Reserve Act to keep itself informed as to the condition of all memer banks; BE IT FURTHER RESOLVED, That the Board is of the opinion that it is justi.4 in relying upon the Comptroller of the Currency for such information as f?' ,v National banks; menthe BE IT FURTHER R:SOLVED, That whenever the reports of examination of State r banks furnished by the State authorities are not deemed satisfactory e4,,Ier to the Federal Reserve bank of the district concerned or to the Federal inerve Board, the Federal Reserve bank or the Board shall cause to be made at 1t one examination or investigation each year of such character as to furn1. 7 i.n satisfactory information, the cost of such examinations or investigations "v be assessed against the member banks examined." At the conclusion of the discussion, the resolutions, as last quoted above were gut to a vote and carried, Ir. Platt voting "no". Mr. Hamlin then suggested that a letter be addressed to all Federal ileserve banks advising that nothing in the resolutions just adopted is intended to interfere with the present practice of having necessary examinations concilletga under authority of the Chairman of the Board and Federal Reserve Agent, 45 ' l e presenting the Federal Reserve Bank and the Federal Reserve Board. Upon motion, Ir. Hamlin's suggestion was laid on the table. 190 -10.- lar. James then submitted the following resolutions, action on which was cleterred until the meeting tomorrow: "Whereas, the Board has today adopted a policy and established certain relating to examinations of state member banks and; n_ Whereas, the Board has petitioned Congress to so amend the Federal ,IuSerVe Act as to make it discretionary as to assessment of costs of examIllation to banks examined; co Be It Resolved, that the ruling just made on the matter of assessing %a rta °f examination be held in abeyance pending action of the Banking and renPY Committee and Congress." tf, "Be It Resolved, that the Board, through the Governor, address a letter Elva the Chairman of the Banking and Currency Committee of the House, calling roPeeial attention to the recommendation made in the Board's Annual Report 112 , 1927, Page 48 (4) 'An amendment making it discretionary with the Federal 0:8erve Board to assess the costs of examining member banks against the banks ortnedl, and urgently request prompt action on the part of the coming session Congrees.fl 1100Prilz OF 6TkNDING COLKITTEES: Bated, October 5th, Recommending changes in stock at Federal Reserve Banks as 6th, set forth in the Auxiliary Minute Book of this date. 8th, Recommendations approved. 9th, Bated, October 5t t/ 11 , Recommending action on applications for fiduciary powers as set forth in the .11xi1iary Minute Book of this date. Recommendations approved. Bated, October 1st, Recommending approval of the application of Mr. Oscar Daniels for permission to serve at the same time as director of the City National Bank, Miami, Fla., as director of the Miami Beach First National Bank, Miami Beach, Fla., and as director of the First National Bank, Tampa, Fla. Recommendation approved. Bated, October 1st, Recommending approval of the application of Mr. Charles L. Briggs for permission to serve at the same time as director of the Merrimack National Bank, Haverhill, Lass., and as director of the City National Bank in Miami, Fla. Recommendation approved. Bated., October 4th, Recommending approval of the application of Mr. Kelley Graham for permission to serve at the same time as officer and director of the First National Bank of Jersey City, N. J., and as director of the First National Bank, Millburn, N. J. Recommendation approved. The meeting adjourned at 1:00 p
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