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1232 A meeting of the Board of Governors of the Federal Reserve S em was held in Washington on Tuesday, September 7, 1937, at 5:00 P. me PRESENT: Mr. Mr. Mr. Mr. Ransom, Vice Chairman Broderick Szymczak Davis Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Wyatt, General Counsel Mr. Parry, Chief of the Division of Security Loans Mr. Thomas, Assistant Director of the Division of Research and Statistics Mr. Piser, Senior Economist in the Division of Research and Statistics Mr. Bryan, Senior Economist in the Division of Research and Statistics Mr. Parry referred to the sharp reaction which had occurred in the securities markets today and in that connection Mr. Broderick stated tll "Mr. Charles R. Gay, President of the New York Stock Exchange, had led him on the telephone this afternoon and had stated that, on the 1)131 8 of the lower market quotations, over 60% of the margin accounts b Y members of the New York Stock Exchange were on a restricted resulting in pressure on the market. Mr. Broderick also said tile* Mr. Gay had inquired whether the Board was in a position to act "r. 131i°PiPt-LY with respect to a change in margin requirements should that bee, ',Ize necessary and that he (Mr. Broderick) had replied that the Board WELa1. "ePing in close touch with the situation, that he did not believe the ' 50ard felt that such action was called for at the present time, bkkt hat it would be prepared at any time to take such action as in ita 4tkugment, circumstances warranted. 917/37 -2Mr. Ransom stated that following the conference of the members of the executive committee of the Federal Open Market Committee with the Secretary of the Treasury on Saturday, September 4, he had disIlesad further with the Secretary of the Treasury the question presented by the anticipated decline in excess reserves of member banks bet wean now and the end of the year. The Secretary had stated, Mr. Re. — 11Q,An said, that he was giving serious consideration to discontinuing the present policy of sterilizing gold imports and, at the same tim announcing a change in the Treasury financing program which 1/(3112-d contemplate the issuance of only three-months bills and of certi, ,i ,cates of indebtedness in the event a demand for the latter developed ' to, 'eaace six and nine-months bills. Mr. Ransom also stated that the SA '''Cr et erY expected that the announcement would refer to the oroposal et the Board of Governors be given authority to increase reserve l'ecIllirements on foreign balances as a means of offsetting the effects Or gqd imports. The Secretary had felt, Mr. Ransom stated, that since th. treasury had embarked on the gold sterilization program after a ' rkila discussion of the matter with the Board, he did not want to change the existing policy without conferring with the Board and affording it oPportunity to consider the matter carefully and to express an With respect to the proposed action or with respect to any acthat might be taken in lieu of the cessation of the sterilization Dror,' " 4 -e]m to meet the decline in excess reserves which it was agreed by 1234 9/7/37 -3- Concerned would occur before the end of the year. Mr. Ransom added that he was to have lunch with the Secretary tomorrow and would like t0 be able to state to him at that time the position of the members of the Board who are in Washington regarding the matter. At the request of Mr. Ransom, Messrs. Thomas and Piser disclass,,A Present and prospective business and credit conditions includ- 14 the reserve position of member banks between now and the end of the Year and there followed a discussion of the effect on bank re8Ess of the cessation of the sterilization of gold imports, and of the desterilization of a given amount of gold by the Treasury. Mr. Bryan outlined the present status of the proposed legislat* 3411 With respect to the taxation of returns on foreign investments ' 1 4 thi s country and with respect to the granting of additional authority to 41, 411e Board of Governors to increase reserve requirements on foreign (1613c)sits. Mr. Ransom stated that he had discussed the entire matter over the t slsphone with Chairman Eccles this afternoon who felt that the koet desirable action in the circumstances would be an open market °Pars..44 - -Lon by the Federal Reserve System and that if action were not take„ by the System, and, in the opinion of the Treasury Department, 11 ellQuld became necessary for it to take action, he would favor the 4etel'ilization of a given amount of gold and the continuation of the '14‘43,kr„ —all' of sterilization until a solution of the entire problem could r be °411d. Mr. Ransom also said that Chairman Eccles had repeated a 1235 9/7/37 -4which he had made previously that the Board suggest to the Treasury Department that it defer action until such time as the 8Thtem has had an opportunity to deal with the problem, that a meeting of the Open Market Committee be called for the purpose of con814"ing a program of open market operations, and that, in the. event the Caamittee is unable to agree upon such a program, the System should Nlognize that the Treasury may feel compelled to take action with respect to changing its policy of gold sterilization. The suggestion was made that a meeting of the Federal Open Market Committee be called to consider the problem, and it was agreed that Mr. Ransom should advise the Secretary of the Treasury that the Board had discussed the matter and that it would prefer that the Secretary defer action for a sufficient length of time to enable the Board to present the matter to the Federal Open Market Committee with a view to the formulation of a program which night be followed in lieu of the cessation of the sterilization program or of the desterilization by the Treasury of a stated amount of gold. It ert was reported that under date of August 31, 1937, the Presi- issued an executive order providing for the closing at 1:00 p.m. PIldaY, September 17, 1937, of all executive departments, independent est bia t Thlishments and other governmental agencies in the District of Columin observance of the 150th anniversary of the signing of the Constin of the United States, and inquiry was made as to what action the l'(*d wished to take with respect to its own offices. Mr. Broderick moved that the Board close its offices (with the exception of the telegraph office and interdistrict settlement fund) 1236 9/7/37 -5at 1:00 p.m. on Friday, September 17, 1937, and that the Federal reserve banks be so advised. Carried unanimously. At this point Messrs. Wyatt, Parry, Thames, Piser and Bryan left the rmeeting and consideration was then given to each of the mattor% hereinafter referred to and the action stated with respect thereto /418 taken by the Board: The minutes of the meeting of the Board of Governors of the Pedel-al Reserve System held on August 27, 1937, were approved unani- tOusiy The minutes of the meetings of the Board of Governors of the 4cier'a1 Reserve System held on August 30 and 31 and SeDtember 1 2 and 3 ' 193?) were approved and the actions recorded therein were ratified TelegrAms to Messrs. Powell and Sargent, Secretaries of the anal Reserve Banks of Minneapolis and San Francisco, stating that the 11- '"ard approves the establishment without change by the respective today of the rates of discount and purchase in their existing eelledUles, Approved unanimously. Memorandum dated September 2, 1937, from Mr. Thomas, Assistant 14re n+. -41r of the Division of Research and Statistics, recaamending the E114)Thatment for a probationary period of eight months of Miss Lottie 'cll.a gel as a secretary in the Division, with salary at the rate of 1237 9/7/37 11,620 Per annum, effective as of the date upon which she enters upon the Performance of her duties after having passed satisfactorily the 111.8-1- physical examination. Approved unanimously. Letter to the board of directors of "The Brighton State Bank", 41ghton, Colorado, stating that, subject to the conditions of member- ' .4'11113 numbered 1 to 3 contained in the Board's Regulation H and the -nE special condition, the Board approves the bank's application tor me mbership in the Federal Reserve System and for the appropriate 11111clint of stock in the Federal Reserve Bank of Kansas City: "4. Such bank shall make adequate provision for depreciation in its furniture and fixtures." Approved unanimously, together with a letter to Mr. Hamilton, President of the Federal Reserve Bank of Kansas City, reading as follows: "The Board of Governors of the Federal Reserve System apProves the application of'The Brighton State Bank', Brighton, Colorado, for membership in the Federal Reserve System, subject to the conditions prescribed in the inclosed letter which You are requested to forward to the board of directors of the Institution. Two copies of such letter are also inclosed, one of which is for your files and the other of which you !ra requested to forward to the State Bank Commissioner of .6he State of Colorado for his information. "The examiner's comments both in connection with the ,PPlicant institution and the related Fort Lupton State Bank - dicate that the management has not shown proper regard for J he maintenance of adequate banking records. It has been noted, however, that the management has given assurance that 111 of the matters of criticism contained in the report of 2Xemination for membership will be corrected, and that in 'he future the bank will be more observant of approved practices in this respect. It is assumed, of course, that you ! ill follow to a satisfactory conclusion the correction of 6he matters criticized by the examiner." 1238 9/9737 -7Letter to Mr. Ziemer, Vice Present and Cashier of the Federal ese11.17'e Bank of Minneapolis, reading as follows: "This refers to your letter of August 18 inclosing a tabulation of differences between deposit figures as shown in reports of condition as of Tune 30, 1937 and as shown in semi-monthly reports of deposits submitted for reserve Purposes. "It is noted that a difference of $141,500 in the case of the First State Bank, Libby, Montana, represents allowable deductions which the bank refuses to take credit for in comPkIting its reserve requirements, also that the officers of Your Helena Branch have called upon the member bank but have eceived no assurance that such deductions would be made in future reports. It is assumed that the suggestions made in the inclosure accompanying the Board's letter X-9474 of Ianliery 31, 1936 have been followed in discussing this matter with the member bank. It will be appreciated, however, if You will advise us on this point, also if you will keep the 310erd informed of any further steps taken by your bank to insure the submission of correct reports of net demand deposits by the member bank." Approved unanimously. There was submitted a recommendation, which had been approved bY the la -ersonnel Committee, that the Board authorize the purchase of 11111r°11ms and dresses for building personnel in the amount of set tk 600.97 forth in purchase order No. 2075, and furniture and equipment, Llsted in purchase orders Nos. 2002, 2003, 2018, 2019, 2020, 2022, Z431 2024, 2025, 2026, 2027, 2028, 2029, 2030, 2032, 2033, 2034, 2054, 2066, 2069, 2070, 2071, 2073, 2074, 2077, 2078, 2081, 2082, 2083, ZO$4. ) 2093 and 2101, at a total cost of 4',5,106.75. Approved unanimously. There was submitted a recommendation, which had been approved by the el'eonnel Committee, that the Board authorize the payment of a voucher 1239 M7/37 -8- the amount of 0.42, covering cup dispensers for use in the Board's Ilew building, as called for in purchase order No. 1988. Approved unanimously. Thereupon the meeting adjourned. Assistant Secretary. Vice Chairman.
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