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A meeting of the Federal Reserve Board was held in the office of the Federal Reserve Board on Wednesday, September 30, 1931, at 11:15 a. mi. PRESENT: ALSO PRESENT: Governor Meyer Mr. Hamlin Mr. Miller Mr. James Ur. Magee Er. McClelland, Assistant Secretary. Mr. Wyatt, General Counsel Mr. Vest, Assistant Counsel. The Governor reported to the Board that the Federal Reserve Bank of Ilew York yesterday earmarked for the Nederlandsche Bank, 37,000,000 of gold, 714ieh liquidates approximately 80% of that bank's bill holdings in New York; that the National Bank of Belgium has now converted its entire bill holdings illto earmarked gold; that the Swiss iiational Bank has earmarked approximately 1 ,000,000, leaving approximately .)50,000,000 invested in bills and *25,000,000 in Government securities; that the Bank of Italy is liquidating 80111e of its holdings to meet commitments in this market; that the Bank of ll'anoe still holds bills and securities in addition to the considerable 14104nts which have been converted; and that aside from deposits with the ll'ed.eral Reserve Bank of New York and earmarked gold, the total holdings of t°t*eign central ban1cs in the New York market at the present time amount to 41/131'oximately $150,000,000 of bills and ::,30,000,000 of Government securities. Following the Governor's report there ensued a general discussion of the recent transactions by foreign central banks in the New York market as a l'e8111t of the suspension of the gold standard in European countries and their 151 '°13ab1e effects on Federal Reserve credit policy. The Governor then stated that he has received a letter from Mr. Robert Maddox, Chairman of the Resolutions Committee of the forthcoming conite"ion of the American Bankers Association, stating that he would appreciate 9/30/31 -2- 8.11Y suggestions which the Governor might wish to make for his confidential consideration in connection with the Committee's work. During the discussion which followed it was the consensus of opinion that it would be better for the Governor to discuss the general situation with Mr. Maddox personally emne time prior to the Association meeting, if that can be conveniently 41'ranged. Mr. Hamlin then referred to memoranda submitted by Counsel through the Law Committee under date of September 10th and 21st with regard to the question whether bankers' acceptances drawn to finance the storage of cotton by Anderson, Clayton and Company and accepted by the Merchants National Bank cr Mobile, Alabama, are eligible for rediscount at a Federal Reserve bank When secured by warehouse receipts issued by a warehouse corporation, all of the stock of which is owned by Anderson, Clayton ez Co., the majority of such stock however, being trusteed under a voting trust agreement with three independent trustees; Counsel being of the opinion that the warehouse receipts i sued by the subsidiary warehouse company are legally sufficient to convey OX' secure title to the cotton covered thereby but that while the question is 4 close one, from a practical standpoint, the management of the subsidiary W4rchouse company is not in fact properly independent of the borrowing firm 17ithin the meaning of the requirements of the Board's Regulations, and the Etrl'angement should not be approved by the Federal Reserve Board. IlleMorandum of September 21st, Counsel stated In his however, that in view of the l'set that this is a close question, and in view of the high credit standing and, good business reputation of Anderson, Clayton Co., the present state °I* the cotton market, and the prospect for an enormous surplus of cotton hich must be warehoused and financed, an adverse ruling on this question at the Present time might be deemed to be inexpedient, especially since it jTh r;al 9/30/31 r -3- e•PPears that for a number of years commercial banks have accepted, without question, warehouse receipts issued under similar circumstances by other subsidiaries of Anderson, Clayton & Co.; also, that he believes that this Westion should be considered by the Board as one of policy rather than law, but that in his opinion the Board should carefully refrain from issuing any f°11141 ruling which might have the effect of impairing or breaking down the Principle that warehouse receipts securing bankers' acceptances must be issued by 4 Party independent of the customer. A discussion ensued, at the conclusion of which Mr. Miller moved that since the Board, after conferring with Counsel, is informally agreed that a ruling establishing the eligibility for rediscount at Federal Reserve banks of bankers' acceptances secured by warehouse receipts issued by a subsidiary of Anderson, Clayton Zc, Co., of the character involved in this case, would involve the modification of or departure from principles as to independent warehousing laid down in the Board's Regulations, the Board refrain from any formal ruling in this case, as suggested by the Governor of the Federal Reserve Bank of Atlanta in his letter of May 25, 1931, and that the Governor of the Board be authorized to communicate with the Governor of the Atlanta Bank and other interested parties in order to acquaint them with the position Of the Board as to the inadvisability of any change in existing regulations with regard to warehousing requirements. Mr. Yiller's motion, being put by the chair, was unanimously carried. At this point ?Ir. Wyatt and la.. Vest left the meeting. The minutes of the meeting of the Executive Committee of the Federal Reaerve Board held on September 21st were approved, and, upon notion, the "tioas recorded therein were ratified. The Assistant Secretary then presented the following matters of 13118111°3e which were considered and acted upon by the Board: Telegram dated SepteLber 29th from the Chairman of the Federal Reserve Ilenk Of San Francisco, advising of an increase on that date of 1/4% in the r'no 9/30/31 balakt -4- effective buying rates on bankers' acceptances of all maturities. Without objection, noted with approval. Telegram dated September 29th from the Federal Reserve Bank of New Y°rk advising that it was not necessary to make an advance to the Banco de la Necion, Argentina, against the 310,000,000 of gold coin in transit to New York 44 the shipment was received on September 29th and purchased outright. The telegram advised, however, of an advance of 34,767,860 made by the New York Bank to the Sveriges Riksbank secured by :,35,018,800 of Gold in transit to New York, Noted. Report of Executive Committee on letter dated September 24th from the Comptroller of the Currency recommending approval of a salary of 34,500. Per annum for Mr. John F. Utt, National Bank Examiner, assigned to the Seventh Pederal Reserve District; the Board's Committee recommending approval. Approved. Memorandum from Counsel dated September 24th with regard to letter dated August 31st from the President of the Consumers Guild of America, Inc., l'equesting that the Board make an Investigation with reference to certain €elielial charges against better business bureaus and others said to be 481iated with better business bureau organizations; Counsel submitting draft °I' 4 reply advising that the matter is one which, under the law, does not c°144a Within the authority or jurisdiction of the Federal Reserve Board. Upon motion, the proposed letter was approved. Letter dated September 28th from the Federal Reserve Agent at Boston elia1°3in an analysis of report of a credit investigation of the Carroll 9/30/31 lj -5- County Trust Company, Conway, N. H., and calling attention to a possible irregular transaction by the bank in the purchase of 500 shares of the stock or the Continental Bank and Trust Company of New York, made on authority of the Vice-President of the bank, but without approval of the board of directors. Upon motion, it was voted to refer Reserve Agent's letter to Federal the Counsel for report as to whether the purchase involves a violation of law or of the bank's conditions of membership. Report of Executive Committee on letter dated September 24th from the Assistant Federal Reserve Agent at New York, transmitting with his unfavor- able recommendation, application of the West Orange Trust Company, West 4ezge, N. J., for permission to reduce its capital stock from ;250,000 to ' 4)4.5,000. In his letter the Federal Reserve Agent called attention to the tact that the bank is clearly in an unsatisfactory condition, with irregular tl ' ansactions on the part of some of the officers, and an apparent violation 01 one of the conditions under which it was admitted to membership in the :Ted eral Reserve System; that he is of the opinion that, on the basis of the caPital impairment set up by the Federal Reserve examiner, the proposed rein capital will not correct the situation; that the bank probably Will not be able to take care of the capital impairment in any other way t4414 by a reduction in capital stock; that it is possible that failure to secure the approval of the Federal Reserve Board to the reduction will recult in withdrawal of the trust company from membership, but that should the irrlPairment be corrected by some other means, further recommendations will be 1114 "18 with regard to continuance of the trust company's membership in the .eederal Reserve System. 9/30/31 Upon recommendation of the Executive Committee, it was voted to concur in the recommendation of the Assistant Federal Reserve Agent that the proposed reduction be not approved. Letter dated September 17th from the Comptroller of the Currency acammending approval of the application of the qorcester County National 84nk, .jorcester, Mass., for permission to reduce its capital stock from Al '9888,150 to $1,500,000; the memorandum stating that no money will be reto shareholders but that the amount of the reduction will be credited to undivided profits and used presumably to charge of losses and depreciation aGgregating 307,270.65. In this connection, attention was called to the fact that the bank has deposits of 46,892,000, that if the proposed capital ZedlIction is approved the capital and surplus will amount to 43,000,000 with divided profits of approximately 4415,000, after making the proposed ellet geoffs, but that the assets will still include $1,900,000 of slow loans, 322,000 of doubtful paper and net depreciation of :,i24,000. After some discussion, during which was the consensus of opinion that in it view of the condition of the bank, a capital reduction should not be approved, it was voted to advise the Comptroller of the Currency that the Board is not favorably disposed to the plan and feels that the proposed chargeoffs should be effected other than through a reduction of the capital of the bank. The Governor then referred to the matter discussed at the meeting on SePtember 2nd, namely, the proposed publication by the Federal Reserve Bank °r Philedelphia of a pamphlet designed to explain to the general public the aervicas rendered by the Federal Reserve System. At the Governor's suggestion 141's liarrison, Assistant to the Governor, was called into the meeting. He 814ted that he has read a revised draft of the pamphlet, that parts of it are -7not well expressed, and that it contains a number of statements which should be revised. He also questioned whether, as a matter of policy, anything along the lines of the proposed pamphlet should be issued under existing conditions. After some discussion, upon motion, the Assistant Secretary was instructed to advise the Federal Reserve Bank of Philadelphia that the Board does not approve of the publication of the proposed pamphlet. Mr. James then reported that on Friday and Saturday of last week Lir. Walsh, Chairman of the Board of Directors of the Federal Reserve Bank of ipallas, talked with him over the telephone regarding the unanimous feeling of his Board that Er. 3. A. McKinney should be appointed Governor of the Dallas beJak to succeed Mr. Lynn P. Talley, resigned, and that Mr. McKinney's salary 84°Uld be fixed at ::;30,000 per annum, which salary he is now receiving as Vice--)resident of the First National Bank in Dallas. that after conferring with Nr. Magee, the only other member Mr. James stated of the Beard 1)reseat in dashington, and talking over the telephone with Governor Meyer Who was in New York, he advised Er. Walsh that in his opinion, the Beard would " 4 approve a salary for the Governor of the Dallas Bank in excess of .25,000, 17hieh was the salary received by Mr. Talley. Governor Meyer, he said, also t4Iked with Mr. Walsh along the same general lines from New York City. Ur. James further stated that Mr. Walsh had requested that the Board Uve further consideration to the matter, stressing the unanimous feeling of the directors of the Dallas bank that La.. McKinney is the logical selection rt)xl the position of Governor of the Dallas bank, and their further feeling that it 18 irnperative that the vacancy created by Governor Talley's resignation be tillecl With as little delay as possible due to the very unsettled banking e04d1 10n5 which exist in the Eleventh Federal Reserve District at the present t 9/30/31 ,s ‘-7‘.-4`) -8A discussion ensued, at the conclusion of which it was voted to advise Mr. Walsh that the Board has given further consideration to the matter in the light of the disturbed banking situation in the Eleventh Federal Reserve District and the unanimous feeling of the Board of Directors of the Dallas bank, and is prepared to act favorably on a salary of30,000 per annum for Mr. McKinney if and when he is appointed by the directors as Governor of the Dallas bank. IIP- ORTS OF STANDING COICITTEES: Dated, Septeuber 29th bated, Dated IDated, Dated, September 26th September 29th September 29th September 29th Recommending a change in stock at a Federal Reserve Bank, as set forth in the Auxiliary Minute Book of this date. Recommendation approved. Recommending action on an application for fiduciary powers as set forth in the Auxiliary i1inute Book of this date. Recommendation approved. Recommending approval of the application of I. Wm. H. Rogers, for permission to serve at the sane time as director of The Florida National Bank of Jacksonville, Jacksonville, Fla., and as director of the Florida National Bank & Trust Co. at Miami, Fla. Approved. Recommending approval of the application of Mr. B. Murray Peyton, for permission to serve at the same time as director and officer of the Minnesota National Bank of Duluth, Minn., and as director of the Pioneer National Bank of Duluth, Minn. Approved. Recommending approval of the application of Mr. Walter M. Evered, for permission to serve at the same time as director of the Minnesota National Bank of Duluth, Minn., and as director of the Pioneer National Bank of Duluth, Minn. Approved. The meeting adjourned at 12:45 p.m. Approved: Assistant Secretary. AUXILIARY MINUTES (September 30, 1931.) Report of Standing Committee dated September 29th, recommending a Change in stock at a Federal Reserve bank, approved as follows: ARailation for ORIGINAL Stock: bistrict No. 10. Yirst National Bank in Hastings, Nebraska. Shares 120 120 Report of Standing Committee dated September 26th, recommending action °11 an application for fiduciary powers by the following bank: AITLITYED: DISTRICT NO. 7. INDIANA: The Albion National Bank, Albion. (3371. Powers 2, 3, 5, & 8) Assistant Secretary, APProved:
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