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1933 A meeting of the Board of Governors of the Federal Reserve System Was held in Washington on Tuesday, September 17, 1935, at 10:30 a. PRESENT: Mr. Mr. Mr. Mr. Mr. Thomas, Vice Chairman Hamlin James Szymczak O'Connor Mr. Mr. Mr. Mr. Bethea, Assistant Secretary Clayton, Assistant to the Chairman Thurston, Special Assistant to the Chairman Goldenweiser, Director, Division of Research and Statistics At the request of Mr. Thomas, the Assistant Secretary read a letter dated September 12, 1935, addressed to Mr. Eccles by Edmund Platt, Vice President of the Marine Midland Group, Inc., New York, New York, tcrnlerlY Vice Governor of the Federal Reserve Board, in which he inquired if he could "obtain a copy of the proposed Regulations for putting into effect the provisions of the Banking Act of 1935n. Mr. Hamlin stnted that he thought the Board should consider the ' l equest of Mr. Platt in the same light as any other outside request and that it should not be influenced by the fact he is a former member of the BOard . Mr. James indicated that he saw no objection to complying with Mr. Platt I s request and stated that he believed copies of the tentative drafts 211°111d be given out to anyone requesting them, even though they had not been co nsidered by the Board. He said that he would prefer to receive all the criticisms and suggestions of the public before rather than after the l'eglaations had been adopted by the Board. Mr. Szymczak said that he agreed that if the Board sent copies of 1934 9/17/35 -2- the proposed regulations to Mr. Platt it should also furnish copies to arlYcrle else renuesting them. He said, however, that he believed the matter involved a question of policy, and that he would prefer to adhere to the Present policy of sending tentative drafts of regulations prepared by the c)ard's staff only to the Federal reserve banks for suggestions and critloisms, with the understanding, of course, that after the regulations had been considered and adopted by the Board they would be promulgated in the usual manner. He pointed out that some of the suggested regulations rnight not be entirely satisfactory to the Board and that, if the drafts Ere made public before being considered by the Board, criticisms might be made through the press or otherwise which would prove embarrassing to the 13°ard or its staff. Mr. Thomas referred to the regulation adopted by the Board pursuant t t "e requirements of the Securities Exchange Act of 1934 (Regulation T), d stated that, in addition to sending copies of tentative drafts of that l'egIllation to the Federal reserve banks, it had invited the suggestions a" e°mments of the stock exchanges and others, and had requested officials C/f thy,. m “ew York Stock Exchange to confer with the Board regarding it; and that• whlle various suggestions and criticisms had been offered very few "em had been accepted by the Board. to a ye his Mr. Thomas then asked Mr. Thurston views on the matter, and Mr. Thurston stated that, while he had n suggestions to make, he desired to call the Board's attention to the f act that publicity given to the regulations in tentative form would ,uotedly result in confusing bankers and others. He also stated that 1935 9/17/55 _3_ he had already been besieged with requests for copies of the proposed l eglaations but that no requests had been granted. ' Mr. O'Connor said that he believed the Board should let the Public know what it is doing and that it should give due consideration to any criticisms which might be received. Mr. Clayton said that the American Bankers Association and the Reserve City Bankers Association had requested copies of the proposed ' l egulations and that, if the Board desired to receive the comments and criticisms of bankers, it would be more practical to have such criticifts come through their organizations rather than to receive perhaps tbcnisands of separate suggestions from individuals. Mr. Goldenweiser, Director, Division of Research and Statistics, sUggssted that, if the drafts of the proposed regulations are to be made PUblic, all copies distributed should be accompanied by a statement to the effect that they are tentative drafts of regulations prepared at the reglIsst of the Board and upon which the Board has taken no action. Mr. James moved that the Federal Reserve banks be authorized to furnish copies of the tentative drafts of the proposed regulations to anyone requesting them, with the understanding that each such copy released would bear a statement indicating that it is a tentative draft of regulation prepared at the direction of the Board but not yet acted upon by the Board. The motion was put by the chair and carried, Messrs. Thomas, Hamlin, James and O'Connor voting "aye", and Mr. Szymczak voting "no" for the reasons given above. In this connection, it was understood that copies of the tentative drafts of the proposed regulations might be made available on the same 1936 9/17/35 —4— conditions upon request at the offices of the Board in cases where it appeared undesirable to refer such requests to the Federal reserve banks. Reference was then made to the action taken at the meeting of the Executive Committee on September 12, 1955, in regard to the evacuation arld demolition of Temporary Building No. 5, and, at the request of Mr. Thomas, the Assistant Secretary read the letter (previously considered) dated September 11, 1935, received from Mr. A. E. Demaray, Acting Dil'eotor. of the National Park Service, which indicated that it would be imPraotical to have the building vacated by the Federal Trade Commission end ready for demolition before November 1, 1935. Mr. Thomas said that it might be desirable to contact the Secretary of the Interior in an effort to enlist his cooperation in furtherance of the Board's desire to obtain possession of the property l'hich it has purchased as the site for its new building at the earliest Pcssible date. He pointed out that the invitation for bids, which were °Pened on September 5, 1955, provided that the contract for the demolition Of' TemPorary Building No. 5 should be awarded within thirty days from that date and that, therefore, the prescribed period would expire on °ctober 5. After some discussion, Mr. Szymczak moved that Mr. Thomas be authorized to confer with Secretary Ickes regarding the evacuation by the Federal Trade Commission of Temporary in an effort to expedite the Building No. matter. 5, Approved unanimously. 1937 9/17/55 -5Mr. Goldenweiser then presented a letter dated September 5, 1935, lir°m Governor Geery of the Federal Reserve Bank of Minneapolis, inclosing 4 Copy Of Thomas a letter dated September 3 received by him from Senator Elmer which stated that there are two committees of the Senate appointed to investigate and make recommendations relative to the present and f\itilre silver policy of the United States, and requested, as chairman of crie committee and as a member of the other, that Governor Geery write hit4 fully on the following topics: The advantages or disadvantages of a single gold standard. The advantages or disadvantages of a bi-metallic standard. The advantages or disadvantages of a managed currency; ax1d in addition with respect to any suggestions and recommendations as to the .Luzure silver policy of the country. Governor Geery's letter stated that it was his understanding that the Board prefers not to have officers of Federal reserve banks go into e°11troversial matters of this sort and requested advice as to whether his unders tanding is correct in order that he might advise Senator Thomas accordingly. Mr. Goldenweiser stated that it was his understanding that s"eraly if not all, of the members of the Board had received similar letters from Senator Thomas. Mr. Hamlin indicated that Senator Thomas had addressed an identical letter to him, but that he felt the matters referred to did not come witht' e province of the Board, and that, in the circumstances, it was not ilacessarY for members of the Board to answer the Senator's questions. 1938 9/17/35 —6— Mr. James said that he had received such a letter and had taken it for granted that, as chairman of one committee and as a member of the Other, Senator Thomas was within his rights in asking for his views on the above topics, and he had, therefore, prepared a reply to Senator Thomas Which he would send unless the Board took a different position on the matter. Mr. Szymczak indicated that he also had received a similar letter, but that he had not replied thereto largely for the reasons given by Mr. Ha • milny although he recognized the fact that Senator Thomas was probably See1rii.g information on which to base reports to the committees on which he is serving. Mr. Thomas suggested that instead of the Board formulating a P°11.OY with respect to the matter each member of the Board should exercise his Own discretion as to whether or not he should comply with Senator Thc)nlase request. Mr. James expressed the feeling that it would be ad— lisable for the Board to reach a decision on the question whether it would be Preferable to send a letter to Senator Thomas expressing the Board's lie178 or to have each member of the Board reply individually. Mr. Szillilezak said that he felt it would be a desirable procedure to hear from 8°1e of the members of the Board's staff regarding the questions asked irt s enator Thomas' letter and then have a letter prepared outlining the 8 views. However, Mr. Hamlin stated that before any action is taken tn the matter he would like to have the Board's counsel render an opinion 48 t° whether the subjects referred to in Senator Thomas' letter are within 1939 9/17/35 the —7— jurisdiction of the Board. Mr. Hamlin thereupon moved that an Opinion of counsel be obtained on the question whether the matters referred to in Senator Thomas' letter come within the jurisdiction of the Board, and that the Assistant Secretary be authorized to acknowledge the receipt of.Governor Geery's letter and advise him that the matter has been referred to the Board for consideration and that he will be informed in due course of the action taken. Approved unanimously. Mr. Thomas then referred to the fact that, in accordance with the action taken by the Executive Committee on September 11, he had this MOrnin g Signed a lease for additional space on the sixth floor of the 17"hington Building adjoining space already occupied by the Board's staff. Re stated that Mr. Daiger, Special Assistant to the Board, who has an °ffice at present on the third floor, had complained about his present quarters and desired to transfer his office from its present location on the 4,. ' 2-rd floor to the newly acquired space on the sixth floor. !!r. Hamlin said he felt that Mr. Daiger should be permitted to 1110 e to the sixth floor temporarily with the understanding that when the ePace • ls required for other purposes he will move to other quarters. The Assistant Secretary stated that he had discussed the matter 11.th r. Morrill, Secretary, before he left on his vacation; that it was s understanding that the space had been acquired pursuant to a suggestion bY Mr. Eccles in order that space would be available for an additional alliber of the Board as required by the 3anking Act of 1935; and that it had 1940 9/17/35 -8- been tentatively decided to leave vacant the newly acquired space until Mr. Eccles returns to the office from his vacation. After a brief discussion, Mr. O'Connor moved that Mr. Thomas be given full power to act in the matter after conferring with Mr. Eccles. Approved unanimously. Memorandum dated September 10, 1935, from Mr. Van Fassen, As sistant Chief, Division of Bank Operations, submitting a letter dated JulY 29 from Mr. Stevens, Federal Reserve Agent at the Federal Reserve Bank of Chicago, which recommended that four member banks in the City of Chicago be granted permission to carry reserves of 10%, instead of 13% 88 at Present, against demand deposits, and stated that the board of directors of the reserve bank concurred in his recommendation. The four banks referred to above and their deposits, as shown by a memorandum submitted with Mr. Stevens' letter, are as follows: The District National Bank of Chicago Merchants National Bank in Chicago The 7Ii1waukee Avenue National Bank of Chicago The South East National Bank of Chicago $1,202,000 1,590,000 1,713,000 1,309,000 v an Fossen's memorandum stated that all of the banks are located several Ues from the so-called "Loop" or central business district of the City Or Chicago; that their activities are confined to tie communities in which the , 4 are located, their customers being principally business men, profes-4- men and residents of such communities; and that none of the banks earl, any deposits of other banks. The memorandum also stated that at Pres.„ -uu there are thirty-four other member banks in Chicago, twenty-one 1941 9/17/35 -9-- Of which have been granted permission to carry a 10% reserve against dem , anu aeposits, and that of these twenty-one banks two are located just outside of the "Loop" and nineteen are located at distances ranging from °ne-half mile to fourteen miles from the "Loop". The memorandum recom- mended that, in view of the fact that the four banks referred to are lacated in outlying districts of Chicago and of the fact that the character Of business transacted by them seems to be typical of banks located in and serving primarily outlying communities, the Board grant permission to each of the four banks to carry a reserve of 10%, instead of 13%, against its aggregate demand deposits, and submitted a proposed letter to the l'sderal Reserve Agent at Chicago to this effect. Approved unanimously. The minutes of the meetingsof the Federal Reserve Board held on Altz. 1113.4 21 and 22, 1935, were approved. The minutes of the meeting of the Executive Committee of the Fedel*al Reserve Board held on August 19, 1935, were approved and the actions recorded therein were ratified unanimously. The minutes of the meeting of the Executive Committee of the Board 01' Go_ vernors of the Federd Reserve System held on August 23, 1935, were e.PProved and the actions recorded therein were ratified unanimously. The Board then acted on the following matters: Letter to the board of directors of the "Miners Bank and Trust e(IMPanirli 4 Lykens, Pennsylvania, stating that, subject to the conditions Pl'escribed in the letter, the Board approves the bank's application for 1942 9/17/35 -10- membership in the Federal Reserve System and for the appropriate amount °f stock in the Federal Reserve Bank of Philadelphia. Approved unanimously. Letter to Mr. Sargent, Assistant Federal Reserve Agent at the Pederai Reserve Bank of San Francisco, reading as follows: "Reference is made to the applications of 'Old National Corporation', Spokane, Washington, and 'Investment and Securities Co.', Spokane, Washington, to vote the stocks, owned or ontrolled by them, of their various subsidiary member banks. he files on these applications and other available information have been reviewed to determine the advisability of considering the issuance of general voting permits to the applicants at this time. "It is noted that Old National Corporation has pledged all of the bank stocks owned by it to Investment and Securities Co. to hold as security for payment of obligations to the Reconstruction Finance Corporation and to holders of participation certificates issued by the company to waiving depositors of :The Old National Bank and Union Trust Company of Spokane'. rhe agreement under which the stocks are held authorizes their sale, under certain circumstances, to meet the claims of the creditors, and also makes provision for the conversion of the ! Ilbsidiary banks into a branch bank system. It also provides ruihat if and when the obligations to the Reconstruction Finance ' orporation and the waiving depositors are paid, Investment and Securities Co. is to return the pledged stocks to Old National Corporation, which will then be the only holding company affiliate. From these facts it seems that present relationships of the applicants are temporary, and that the future status of the suosidiary banks is also uncertain as they, or some of them, may be sold or converted into branches. "In addition to the uncertainty regarding the future status of the units in the group, it appears that the existing .12rcvisions for the group's management are also temporary. If 611e indebtedness to the Reconstruction Finance Corporation and 0 the holders of participation certificates should be paid 1/1 full without the necessity of selling the stocks of the subsidiary banks, the voting trust under which stock of Investment and Securities Co. is held by three trustees, two of whom are quired to be persons satisfactory to the Comptroller of the urrency and the Reconstruction Finance Corporation, would cease, and control of the group would pass from the voting p 1943 9/17/35 -11- "trustees to the management of Old National Corporation. 'Mile no reports of examination have been received by the Board showing the condition of the applicants, it is apparent that neither is in a position to lend financial assistance to the banks in the group. Available information indicates that all of the assets of Old National Corporation have been pledged and that Investment and Securities Co., although it has some assets of its own, is, in reality, subject to the control of the creditors of the group who may even sell the stock of the company, under certain circumstances, to satisfy their claims. "In view of the facts as they appear, the Board feels that the issuance of general votTing permits to the applicants Should be deferred until the organization of the group has assumed a more permanent form. Then you are satisfied tbat the organization of the group has reached a stable basis and that the applicant has a satisfactory management and is in a satisfactory financial condition, it is suggested that you make arrangements for such examinations or investigations as may be necessary and, upon the basis of data then available, '!'hat you submit your recommendations with reference to the issuance of general voting permits. If, in the meantime, the aPplicants desire to vote the stock of their subsidiary member 1?anks, the Board will give consideration to the issuance of the necessary limited voting permits upon receiving requests for such permits and detailed statements concerning the pur?oses for which they are desired. It is suggested that you inform the applicants of the BoardTs position in this case." Approved unanimously. There were then presented the following applications for changes in stock of Federal reserve banks: A 14 , 7 4-J-cations for ADDITIONAL Stock: -7. jig Nevada Nail;ria Bank, Nevada, Iowa. Shares 2 2 Dist The rict No. First National Bank of Mabel, 1,4 Mabel, Minnesota. National Bank in Two Harbors, Two Harbors, Minnesota. No 11 h-'1-rst N. ational Bank of Odessa, Odessa, Texas. 2 1 5 Total 3 5 10 1944 9/17/35 -12- for SURRENDER of Stock: 21§.Illat..22_._ 8The First National Bank of Worden, Warden, Illinois. District No. 9. Northwest Security National Bank of Sioux Falls, Sioux Falls, South Dakota. Shares 20 20 61 Total 61 81 Approved unanimously. Thereupon the meeting adjourned. Assistant Secretary. APPI'oved: Vice Chairman,
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