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1400 A meeting of the Board of Governors of the Federal Reserve rEitem was held in Washington on Thursday, September 23, 1943, at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Ransom, Vice Chairman Szymczak McKee Draper Evans Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Thurston, Special Assistant to the Chairman Mr. Dreibelbis, General Attorney Mr. Thomas, Assistant Director of the Division of Research and Statistics Mr. Ransom referred to the discussion at the meeting with the Nte ?al Advisory Council on September 20, 1943, with respect to state— Filen-La made by representatives of the Securities and Exchange Commission to a elected banks throughout the country that the Commission was making a t,tIcly of bank deposits at the request of the House Ways and Means Corm ilittee. Mr. Ransom stated that yesterday Mr. Fry, Vice President or the Federal Reserve Bank of Richmond, called Mr. Morrill to say that in a telephone call from Mr. Zimmerman, Vice President of the liknand Trust Company, Baltimore, Maryland, the latter stated that he l eceived a request from representatives of the Securities and Ex— ' ge Commission for information with respect to the deposits of his 14/11. and that he would like to know whether he should comply. Mr. kort,t, '&41 reported that he advised Mr. Fry for his information what had 1401 9/23/43 e°111e -2- to the attention of the Board at the meeting with the Federal AdviscrY Council on Monday and that he (Mr. Morrill) would report to Ransom Mr. Fry's telephone conversation. Following receipt of that information from Mr. Fry, Mr. Ransom 84.1412 he called Mr. Purcell, Chairman of the Securities and Exchange COltrni ' - 8810n, who stated that the study was being made in response to into nilal letters and requests from members of the House Ways and leans rn4, Coth --"tee who were interested in knowing to what extent savings of in`411415 were being placed in cash and demand deposits in banks, that the matter had been discussed several months ago with Mr. Thomas by 141'• L ouchheim and other representatives of the Securities and Exchange °ftlission, and that subsequently he (Mr. Purcell) called Chairman lee about the matter, who said that because of the manpower situa- 1°11 he did not feel that we should call upon the banks to prepare the (late. I especially in view of the fact that the System was already making 8tUdY of the ownership of bank deposits. Mr. Purcell replied that the 8 Ystem study would not give the Ways and Means Committee the infornlatio . n lt desired regarding small accounts. Mr. Ransom also said that 14 hi S c onversation with Mr. Purcell the latter stated that subsequently he had discussed the matter with Mr. Vinson, Director of Economic 8thwho asked that the study be made and that after further t'sations it was decided to go ahead with it on the basis of requestg 8°111e 200 banks to furnish voluntarily the information desired with Pect to their deposits, with the understanding that if the banks did 1402 9/23/43 —3- 11°t have time to prepare the information investigators of the Securities 44d Exchange Commission would be willing to go into the banks for that IDlirPose. Mr. Purcell also told Mr. Ransom that considerable progress had been made but that the study had not been completed, that it was Pron -"ed to furnish copies to the members of the House Ways and Means (410ittee and to Mr. Vinson, and that the Commission would be glad to 4114 a copy to the Board. In response to an inquiry from Mr. Ransom for a statement as what he knew about the matter, Mr. Thomas said that it was recognized that the Securities and Exchange Commission had a genuine in- teres, in the type of information under discussion, that the survey Of Ownership of bank deposits proposed to be made by the Board had 11 discussed with representatives of the Securities and Exchange Narta esion on several occasions as outlined in memoranda which he had 14'ePared for the files on April 14 and to Chairman Eccles under date 12, 1943, and that it was his feeling, which was being borne bY the results of the Board's survey, that the basis upon which the E °ard's study was being made would be a more satisfactory sampling the distribution of deposits and would be more significant than e st udY of small deposits proposed by the Securities and Exchange Cottas He also said that the Budget Bureau, to which the forms NI)o'ed to be used in the Board's survey had been presented, had ap'Q the forms and had requested to be informed if it were found 1403 9/23/43 -4- that the Securities and Exchange Commission was undertaking to make the study proposed by it. Mr. Thomas added that upon being advised Of the discussion with the Federal Advisory Council on September 20 he Called a representative of the Budget Bureau and was informed that the Securities and Exchange Commission's study had not been cleared with the Budget Bureau and that it was a clear violation by the Commission °t the provisions of the Federal Reports Act of 1942 under which the Sec11rities and Exchange Commission was required to obtain the approval Of the plans for the survey before it was undertaken. Mr. Thomas went say that when Mr. Stark, Consultant in the Office of Economic Stabilization, learned of the matter he discussed it with Mr. Vinson, 1v1105 e response was that Mr. Purcell had talked to him about such a 1:131c1Y and that, upon being advised that the System study was a longl'allge Program the results of which would not be available for a long O) he had asked Mr. Purcell to undertake the study contemplated by the s ecurities and Exchange Commission. Mr. Thomas' statement was followed by a discussion of the action the Board might take in connection with the matter. During the se of the discussion Mr. Thomas left the room to talk over the ' c°111 tel, -Phone with a representative of the Bureau of the Budget, and upon - return stated that he had been informed that the Bureau was devela . Plng such information as was available regarding the action of the )ecurities and Exchange Commission and that it was proposed to ' 1404 9 3 . /43 -5- ttigllire of the Commission why it had undertaken the study without obt4illing the necessary approval from the Budget Bureau. At the conclusion of the discussion, it was understood that Mr. Morrill would call Mr. Fry and suggest that Mr. Zimmerman inform the representative of the Securities and Exchange Commission that he had taken the matter up with the Federal Reserve Bank of Richmond which had presented the matter to the Board of Governors, and that until something further was heard he would not be in a position to furnish the information requested. It was also understood that Mr. Evans would keep in touch with the matter and that, if in his opinion further action were called for by the Board, he would make a recommendation accordingly. During the discussion of the above matter, Mr. Goldenweiser, Dire et°1" of the Division of Research and Statistics, joined the meet- There was then presented a form-letter dated August 30, 1943, tl'ortt m rs Bailey, Assistant Director of Legislative Reference of the ttb, of the Budget, asking for the views of the Board with respect ' to a l ePort (attached to the letter from the Budget Bureau) proposed ' -e made by the Secretary of the Treasury on Senate bill 985 to reqtlet u the establishment of branch offices by financial institutions eht ed or insured under the laws of the United States which, if ap' el Pt.oireci would prohibit the establishment by financial institutions as dtrite ct in the statute of additional branch offices. The proposed Na.au report stated that for reasons set forth therein the Treasury 1405 9/23/43 -6-- we's oPposed to the enactment of the bill. Following receipt of the letter from the Budget Bureau, a of reply had been prepared in which it was stated that for the s()ns given by the letter of the Secretary of the Treasury, as well 48 for additional reasons, the Board agreed that the bill should not be enacted. Mr. Ransom stated that Chairman Eccles had felt that the 13°4rd should take a position on holding company, as well as branch barlking, legislation in addition to that stated in the reply, and at hiz request a draft of letter to Senator Wagner, as Chairman of the ate , ommittee on Banking and Currency, had been prepared which read 48 rellOWs "This refers to your letter of April 10, 1943, requesting an expression of this Board's opinion in regard to S. 985, a bill 'To restrict the establishment of branch offices by financial institutions chartered Or insured under the laws of the United States.' "The Board is in accord with the views expressed bY the Secretary of the Treasury in his letter addressed to you disapproving of this measure. Not only would enactment of this bill, as the Secretary's letter states, prevent establishment of banking facilities in many places here such facilities are sorely needed and foster an unIlealthful monopoly situation in communities where branch uanks now exist, but it would be an altogether regressive 8telD, impeding the fundamental improvements in the country's banking structure which are essential to enable it to serve the public interest and meet the modern requirements of commerce, industry and agriculture. "S. 985 has a bearing on one legislative step which in the Board's opinion should be taken as promptly as posible. The Board believes that further growth of the bank holding company device should be prohibited by law and 1406 9/23/43 —7— "that additional statutory power should be given to it In order to enable it to deal adequately with existing bank holding companies. It recognizes, however, that the Problems which the bank holding company device, in most cases, sought to meet cannot be satisfactorily met until a.well-regulated branch banking system is developed, lImited to such areas as the Congress may decide. S. 985 would bar the way to this necessary step in the imProvement and modernization of the country's banking system." was understood that the two letters expressed the views of Chairman celss, and he signed them before he left for the West. Ur. McKee stated that he did not feel that anything more needed said at this time than was said in the proposed reply to the letter 'rom the Bureau of the Budget but that he did feel that the reply h°11-1d be sent without further delay. Mr. Ransom said that he also felt that a reply should be sent °the Budget Bureau promptly but that the proposed draft did not go r enough to satisfy him and that he could not approve the proposed l r ette- -0 Senator Wagner for the reason that it did not reflect corNctiY the position which he had taken with respect to the enactment c)I legislation regarding bank holding companies and the problem of rellell banking, which he felt should be urged by the Board at every orttlnity. The other members of the Board present indicated agreement th the suggestion that a reply to the letter from the Budget Bureau 11°111d be sent promptly, and question was raised whether Chairman 1407 9/23/43 -8- Eccles Would be agreeable to sending the proposed reply without a letter going forward to Senator Wagner. Thereupon Mr. McKee moved that, if agreeable to Chairman Eccles, action on the letter to Senator Wagner be deferred and the reply to the letter from the Budget Bureau be sent immediately over Chairman Eccles' signature, but that, if he were not willing to approve this procedure, the reply to the letter from the Budget Bureau be sent over Mr. Morrill's signature. This motion was put by the chair and carried, Mr. Ransom voting Secretary's Note: Following the meeting Mr. Thurston called Chairman Eccles on the telephone and, upon being advised of the discussion, the Chairman stated that he was agreeable to sending the letter to the Budget Bureau, that if the Board members did not agree on the letter to Senator Wagner then that letter need not be sent, and that if there were any hearings on the bill he would ask for an opportunity to present his views and the other Board members could do the same. Mr. Thurston informed the Secretary's Office of his conversation with Chairman Eccles, whereupon the reply to the letter from the Bureau of the Budget was sent. At this point Messrs. Thurston, Goldenweiser, Dreibelbis, and Withdrew from the meeting, and the action stated with respect to 4ell of the matters hereinafter referred to was then taken by the Board: The minutes of the meeting of the Board of Governors of the Pede_ 'cal Reserve System held on September 22, 1943, were approved unani41°11a1Y. 1408 f c t43 -9Memorandum dated September 15, 1943, from Mr. Paulger, Chief t the Division of Examinations, submitting the resignation of James L b Hardin as an Assistant Federal Reserve Examiner, to become effective as of the close of business on October 1, 1943, and recommending that 4. e 6r1 resignation be accepted as of that date. The resignation was accepted. Memorandum dated September 22, 1943, from Mr. Goldenweiser, Dire ct°P of the Division of Research and Statistics, submitting the r‘e8ignation of Miss Erika L. Goldberg as a clerk-stenographer in that kvi s'°111 to become effective as of the close of business on October 1943, and recommending that the resignation be accepted as of that te. The resignation was accepted. Telegram to Mr. John Davidson Clark, Dean of the College of ksin ess Administration, University of Nebraska, Lincoln, Nebraska, read; 4.11g as follows: "The Board of Governors of the Federal Reserve Syshas appointed you director of the Omaha Branch of the Federal Reserve Bank of Kansas City for the unexpired Portion of term ending December 31, 1943, and will be PIeased to have your acceptance by collect telegram." Approved unanimously. Letter to Mr. Swanson, Vice President of the Federal Reserve ktilt of, Lunneapolis, reading as follows: 1409 9/23/43 -10- "This refers to your letter of September 13 submitting a question under section 22(g) of the Federal Reserve Act, by a member bank in your district. "It is noted that an Assistant Cashier of the member bank has entered the Army and has been granted leave of absence by the bank for the duration of his services in the armed forces. The question is whether the member bank may take over an FHA Title II loan in the sum of aPProximately A4,000 on the home of such Assistant Cashier from the financial institution which now holds the loan, ?rid if so, whether or not the member bank may retain such 4..°an after the Assistant Cashier returns from military service. . Me note that counsel for your bank, in a written °Pinion enclosed with your letter, is of the opinion that he transaction would not be in violation of section 22(g) lf the board of directors of the bank has adopted a resolution to the effect that such officer is not authorized e' Participate in the operating management of the bank. 1,e know of no reason to differ with the opinion expressed kV' Your counsel." Approved unanimously. Letter to the Comptroller of the Currency, reading as follows: "It is respectfully requested that you place an order with the Bureau of Engraving and Printing, supplementing the order of June 15, 1943, for printing of Federal 31eserve notes of the 1934 Series of the Federal Reserve ank of San Francisco in the following denominations and -amounts: Amount Number of Sheets Denomination 5,000,000 $ 41,666-2/3 $10 10,000,000 41,666-2/3 20 notes of the Reserve "The above request for Federal Federal Reserve Bank of San Francisco is to cover notes It:0 be overprinted for use in Hawaii in accordance with l'equest received from the Treasury Department dated September 20, 1943." 1 Approved unanimously. Memorandum dated September 21, 1943, from Mr. Ransom submitting, 1410 9/23/43 -11- accordance with the procedure adopted at the meeting of the Board "eY 12, 1943, a routine request from the Chairman of the Senate Baja king and Currency Committee for the Board's opinion as to the et of Senate bill 1341 which would provide for loans to enable veterans of World War II to pay debts existing at the date of their diecharge from the service, and recommending that no report be made 14 the kerab absence of a specific request from the Chairman or some other er of the Senate Committee. Approved unanimously. Thereupon the meeting adjourned. Secretary. PProved: ice Chairman.
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