Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, September 30, 1930, Volume 17, Part 3

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A meeting of the Federal Reserve Board was held in the office of the
Federal Reserve Board on Tuesday, September 30, 1930, at 10:30 a. mi.
PRESENT: Governor Meyer
Mr. Hamlin
rir. Miller
Mr. James
Mr. Cunningham
Mr. McClelland, Asst. Secretary.
The minutes of the meeting of the Federal Reserve Board held on September
25 were read and approved as amended.
The minutes of the meeting of the Federal Reserve Board with the Open
14411'ket Policy Conference held on September 25 were read and action thereon
W" deferred pending receipt of advice of certain changes in verbiage which
the Governor stated Governor Harrison had advised him would be made in the
IsePort submitted to the Board by the Conference.
The minutes of the meeting of the Federal Reserve Board with the
'
3111t Conference of Governors and Federal Reserve Agents held on September
26 were read and approved.
The Assistant Secretary reported that the Comptroller of the Currency
esterday called upon all national banks in the continental United States,
Alaska and Hawaii and all banks in the District of Columbia for reports of
e°11dition as of the close of business September 24, and that a call as of

the same date was made for reports of condition of all state member banks.
Upon motion, the call made on behalf of
the Board was ratified.
Letter dated September 25 from the Secretary of the !ederal Reserve

4tIc of New York; telegram dated September 2? from the Secretary of the
41451'al Reserve Bank of Atlanta and telegram dated September 26 from the




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Secretary of the Federal Reserve Bank of Chicago, all advising that their
boards of directors, at meetings on the dates stated, made no changes in
the bank's existing schedules of rates of discount and purchase.
Without objection, noted with approval.
Memorandum dated September 25 from the Director of the Division of
Research and Statistics recommending that the temporary appointment of
Mts. Grace Idler, expiring at the close of business September 27, be extended
tor a period of two months.
Approved.
Letter dated September 27 from the Assistant Federal Reserve Agent at
New York advising of plans for the merger of the Colonial Trust Company
c)r Newark, New Jersey, a member bank, into the Lincoln National Bank of
Newark, New Jersey, under the name of the latter; the present office of

the trust company to be maintained as a branch of the consolidated institu.
tiOn

Noted.
Report of Committee on Salaries and Expenditures on list submitted by

the Federal Reserve Bank of Atlanta of employees for whom the directors of
that bank authorized leaves of absence with pay, on account of illness, during
the month of August where the total of such absences since January 1, 1930,
448 exceeded thirty days;

the Board's Committee recommending approval of the

ee'larY payments involved.
Approved.
Letter dated September 19 from the Federal Reserve Agent at Philadelphia
"vieing of the appointment of Mr. George Reid as Assistant to Examiners;
Mt. Reid having been previously designated as Special Assistant to Examiners.
Noted with approval.



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Memorandum from Mr. James dated September 29 reporting telephone
conversation with the Chairman of the Federal Reserve Bank of Atlanta
regarding disturbance in banking conditions in Havana, as a result of
Which twenty-five million dollars of currency was forwarded by the
Federal Reserve Bank of Atlanta to its Agency in Havana and Governor
Black and Deputy Governor Taylor visited the island; the memorandum stating
that advice has been received by Mr. Newton from Governor Black that the
aituation has quieted down and at the present time banking conditions are
In this connection both the Governor and Mr. James submitted
telegrams to the same effect addressed to them by Governor Black.
Noted.
The Board then proceeded with consideration of actions taken by the
Conferences of Governors and Chairmen of the Federal Reserve Banks last
Week which were reported to the Board during the course of the Joint
Conference on Friday, as follows:
Report of System Committee on Bank Reserves, dated September 24,
'
lecommending approval of a request that member banks be permitted to
compute their reserves against deposits held at the opening of business
rather than at the close of business on the current day.

(See minutes of

.SePtember 25, 1930.)
The Chairman of the Conference of Governors reported as follows:
"Careful consideration has been given to the
report of the Committee on Bank Reserves submitted
with your letter and I am pleased to advise you that
the Conference voted to approve the Committee's
recommendation."
The report of the Federal Reserve Agents' Conference advised that
"After discussion of the matter, it was moved and
seconded that the recommendation of the majority of the
Board's Committee on Bank Reserves with respect to the



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"time of calculating reserve requirements be concurred
in by this conference. Six voted in favor of the motion and
six against it. Whereupon, it was moved and seconded that
it is the sense of this conference that, while there is
much to be said in favor of granting the request to change
the time of reserve calculation, the whole question of
reserves is of such vital importance that this phase should
not be dealt with separately, but should be left in the
hands of the System committee for its consideration and
should become a part of its complete study of the subject
of reserves. Nine voted in favor of the latter motion
and three against it."
After some discussion, upon motion by Mr.
James, it was voted to approve the request that
member banks be permitted to compute their reserves against deposits held at the opening of
business rather than at the close of business
on the current day, and to instruct Counsel to
prepare such resolution, ruling or amendment
to the regulations as may be necessary to make
the Board's action effective, as of a date to be
fixed later.
The Assistant Secretary was instructed to
advise all Federal Reserve Banks of the action
taken by the Board, as well as Mr. Thomas B.
1,1cAdams who presented the request for iipaediate
consideration of this matter to the Board on behalf of the Association of Reserve City Bankers.
Suggestion that when State member banks file written notice of
intention to withdraw from membership in the Federal Reserve System at

the expiration of six months, the Board publish this fact in the
?ederal Reserve Bulletin in order that the depositors and the public
lerlerally may have advance information of the member banks' intention
t

Withdraw.

(See minutes of September 17, 1930.)

The Governors' Conference voted "that the Conference
Is of the opinion that no change should be made in the
present procedure of not publishing notice of intention to
Withdraw on the part of State member banks for the reason
that such publication will tend to defeat one of the
principal objects of the law requiring that six months'
notice be given."
The Federal Reserve Agents reported that "In the
discussion of this topic, it was brought out that if



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"voluntary notices of intention to withdraw from the System
were published in the Bulletin, when a Federal Reserve Bank
requests a member State bank to withdraw it would also have
to publish this fact, which would be ruinous to the bank.
It was also mentioned that the publication of a list of such
notices, especially if a number of banks were withdrawing,
might arouse unfavorable comment and cause others to file
notice. It was therefore moved, seconded and carried that it
is the sense of this conference that it would be inadvisable
to publish the notices of intention to withdraw."
After discussion, upon motion, it was voted to
continue the present practice of,not making public
the notice of intention to withdraw from the System
filed by State member banks.
Revision of 1:.embership Condition regarding the purchase of bank
stock by State member banks, Board's letter of September 4, 1930 - X-6692
(See minutes of September 3, 1930.)
The Conference of Governors reported as follows:
"The Conference of Governors gave careful consideration
to the Board's letter, ][-6692, subject, 'Revision of Nembership Condition re Purchase of Bank Stocks', and it was voted
that in the opinion of the Conference no material change should
be made in the present condition of membership No. 3 - except
that there might be added a provision that it shall not be
necessary for a State bank member to obtain the approval of
the Federal Reserve Board before purchasing stock in other banks
Where the aggregate amount of such stock does not exceed 5"", of
the capital and surplus of the purchasing member bank or 10% of
the capital of the bank purchased.
"The Conference was in agreement that no material change
in the present condition of membership regarding the purchase
of bank stock should be made until the Committee on Group and
Chain Banking has made a complete report and the Governors'
Conference has made a definite recommendation. In order, however, to eliminate the petty annoyances arising where State bank
members have for one reason or another acquired small blocks of
the stock of other banks and to relieve the Federal Reserve
Board of the necessity of approving such purchases the Conference felt that the action taken was desired."
The report of the Conference of Federal Reserve Agents was
that, "This conference has reviewed the Board's letter X-6692 and
has reached the conclusion that it would not be desirable, at
the present time, to amend condition of membership No. 3 contained in Section IV of Regulation H, which at present requires




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"the Board's permission before any stock of banks or trust
companies may be purchased by a member bank subject to the
condition.
"The conference has adopted this view because the
question has a bearing upon branch, chain and group banking,
a subject which is now being studied by a System committee.
de therefore recommend that the question be held in abeyance
until the final findings of the committee are available."
After discussion, upon motion, it was voted
in accordance with the recommendation of the
Federal Reserve Agents' Conference to hold in
abeyance the proposed revision of the membership
condition referred to.
The Assistant Secretary was instructed, however, to bring to the attention of the System
Committee on Branch, Chain and Group Banking the
reports of the Governors and Federal Reserve Agents
on the matter.
Action of the Governors' Conference in voting to recommend to the
Undersecretary of the Treasury, for his consideration, the suggestions
8et forth in the following memorandum submitted by the Governor of the
ederal Reserve Bank of Boston:
"The Federal Reserve Bank of Boston has discovered that it
is unable to get a very good distribution among its member banks
or the public of Treasury bills which are offered by the Secretary
of the Treasury from time to time. The Boston bank finds, upon
investigation, the following:
Country banks and the public are not accustomed
1.
to buying securities at a discount.
2.
No tables are available to enable country bankers
to figure the yield or return.
3.
Discussions and differences of opinion have developed
as to whether the bills run 90, 91 or 92 days.
"The Federal Reserve Bank of Boston believes that the Treasury
Department would secure a wider distribution of the Treasury bills
if some of these objections were overcome and, therefore, suggests
the following:
1.
That when an issue is announced the Secretary of the
Treasury simultaneously announce that the bills
have 90, 91 or 92 days to run.
2.
That tables be prepared for distribution to the
country bankers and the public showing yields at
bid prices."




Upon motion, this matter was referred to
the Governor.

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Action taken by the Governors' Conference in voting that the Federal
aeeerve Board be requested to give consideration in the publication of its
Regulations to having the size of the pamphlets more nearly conform to the
circular letters of the Treasury Department and the majority of the Federal
lieserve

bunks.
Noted.

Action taken by the Governors' Conference, in reconsideration of the
1/°licY approved at the Governors' Conference in /larch, 1923 in connection

1144 rebates of unearned discount, wherein it was voted by the Conference
that no chance be made in the present practice.
Noted.
Report of the Federal Reserve Agents' Conference on the subject of
s'
EL8

Per classification of deposits, with particular reference to the question
to the steps which should be taken by examiners to determine whether

e

the
the

i

erves on deposits are properly maintained"; the Conference having adopted
following statement with the request that the Board bring the matter to
attention of the System Committee on Bank Reserves:
"The bank examiners should make a thorough check of the
member bank's reserve reports and should compare them with the
general ledger for several dates of each month since last
examination, particularly the dates of call reports. All discrepancies should be called to attention of the management and
explained in detail to the person in charge of the reserve
reports.
"An unissued savings passbook should be inspected to see
if the bank has the right to require notice of not less than
thirty days before a withdrawal is made. Inquiry should be made
Of the savings tellers and the management as to whether the
Passbook is required to be presented whenever withdrawals are
made.
"The certificate of deposit register and the subsidiary
record of certificates due within thirty days should be carefully
scrutinized. The amount of outstanding certificates due within
thirty days on date of examination provides a good guide in
checking this class of deposits on prior dates.




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"All examination reports, of both national and State member
banks, should contain a special sheet fully explaining the
manner of computing reserves in each bank."
Discussion ensued regarding the regulation of the
Board defining savings deposits and consideration which
has been given in the past to a revision of the definition due to the practice which has developed in some
sections, notably California, of designating as savings
deposits, deposits subject to check and to withdrawal
without presentaticn of passbook.
At the conclusion of the discussion it was voted
to refer the statement of the Federal Reserve Agents'
Conference to the System Committee on Reserves with
request for a report as to how far the practice referred
to during the Board's discussion has in fact spread.
Report of the Federal Reserve Agents' Conference on the question of the
'Desirability of providing if possible for examinations of affiliated or
Subsidiary corporations, such as real estate holding companies with a
40Minal capitalization, created to carry 'other real estate', and security
corporations affiliated or organized to deal in securities generally and
8°Metimes to acquire control of banks, in many instances purchasing and
hclding stock in the parent bank in violation of the spirit of Section 9

or

the Federal Reserve Act"; the Conference having adopted the following

report.
"The question raised as to the desirability of providing if
Possible for periodic examination of affiliated or subsidiary corporations of member banks is one of growing Practical importance.
During the recent period of this development, these affiliated or
subsidiary corporations not infrequently have come to be regarded
as a vehicle for shifting poor bank assets and for making speculative
investments which frequently include heavy purchases in the stock
of the parent bank. In a number of instances, these purchases are
publicly known to have turned out disastrously and to have been
attended by heavy deposit withdrawals and a marked loss of prestige
for the parent bank and its management.
"It is recognized that consideration of this subject inevitably raises a number of legal points as to the right of visitation
on the part of bank examining authorities to examine into these
affiliated and subsidiary corporations, including affiliated bank
stock holding companies. It is believed that in principle this




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"development has an intimate relationship to the subject of group
and chain banking now being studied by a special committee of the
System, and it is the sense of this conference that the Federal
Reserve Board be asked to transmit these observations to the
Board's special committee now studying group and chain banking."
In view of the fact that the Comptroller of
the Currency, in his annual report, recommended to
Congress the enactment of legislation along the
lines referred to by the Federal Reserve Agents, it
was voted to refer the above matter to him for such
comments as he might care to make.
Action of Federal Reserve Agents' Conference on memorandum from
8°41198 Assistant Counsel, dated June 23, 1930 (X-6649-a) containing a
auntaa

rY of the provisions of S-4723 introduced by Senator Glass to amend

tIle Provisions of the National Bank Act and the Federal Reserve Act in a
141111ber of respects, the Conference having considered the memorandum paragraph
Paragraph and voted to approve the provizions set out in paragraphs 7
49) to disapprove the provisions of paragraphs 2, 3, 5, 6, 8, 10, 11 and
44
'
124nd to withhold expression on paragraph 4 pending the report of the
r8treM Committee on Branch, Chain and Group Banking.
Upon motion, the Assistant Secretary was instructed
to furnish a copy of the memorandum of the Assistant
Counsel and the action of the Federal Reserve Agents'
Conference to each member of the Board for his information.
REP()
at

OF STANDING COMITTEES:
Sept. 25th

'4

Sept. 25th




Recommending action on application for admission of a
state bank, subject to the conditions stated in the
individual reports attached to the application, as
set forth in the Auxiliary Lanute Book of this date.
Recommendation approved.
Recommending approval of the application of John W.
Everitt, for permission to serve at the same time
as director of the First National Bank of East
Orange, N. J., and director of the Orange National
Bank, Orange, N. J.
Recommendation approved.

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Dated, Sept. 25th

-10Recommending approval of the application of C. A.
Liddle, for permission to serve at the same time
as director of the National Bank of Woodlawn,
Chicago, Ill., and director of the Pullman Trust
& Savings Bank of Chicago, Illinois.
Recommendation approved.

The meeting adjourned at 12:00 noon.

•9
,
/
61,1'1%y:/i?fae/f/
Assistant Secretary

%roved:

ii