The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
1655 A meeting of the Board of Governors of the Federal Reserve System was held in Washington on Tuesday, September 8, 1936 at 11:00 a. in. PRESENT: Mr. Mr. Mr. Mr. Ransom, Vice Chairman Broderick McKee Davis Mr. Bethea, Assistant Secretary Consideration was given to each of the matters hereinafter referred to and the action stated with respect thereto was taken by the Board: The minutes of the meeting of the Board of Governors of the Federal Reserve System held on September 4, 1936, were approved unanimously. Memorandum dated September 4, 1936, from Mr. Broderick submitting the report received from the Federal Reserve Bank of Philadelphia covering the survey made by the bank of its operations and organization pursuant to the Board's letter of March 25, 1936, X-95321 as well as a draft of a letter to President Sinclair reading as follows. The memoran- dum and letter have been previously circulated among the members of the Board for their consideration: "The Board has reviewed the report of the survey made Of the operations of the Federal Reserve Bank of Philadelphia forwarded with your letter of August 6, 1936. "In the Board's letter of March 25, 1936, it was stated that the Board had in mind a procedure looking toward the placing of the chairmanship largely upon an honorary basis with the thought that the ministerial duties with respect to the issuance of Federal Reserve notes and the holding in 1656 9/6/36 -2- "custody of collateral therefor would actually be performed by Assistant Federal Reserve agents who would be experienced in such work and who would receive salaries commensurate with the duties and responsibilities to be assumed. In this connection, there is attached a copy of a letter to Mr. Walsh, Federal Reserve Agent at Dallas, with respect to the duties to be performed by him as Chairman and Federal Reserve Agent on an honorary basis. The Board would expect the principles and procedure set forth in the letter to Chairman Walsh to be followed at all Federal Reserve banks. "The Board's letter of March 25, 1936, also stated that the procedure contemplated would result in the transfer of the bank examination work and the research work, heretofore handled by the Federal Reserve agents, to the banking departments with the understanding, however, that such functions would, as heretofore, be conducted under the general supervision of the Board of Governors. "In order to acquaint you more fully with the conditions under which it is contemplated that the examination and research work will be transferred to the banks, these conditions are set forth below in general terms. With respect to the examination function, the plan contemplates that: 1. All appointments of examiners at the Federal Reserve banks will continue to be subject to the approval of the Board of Governors. 2. The examination department will continue as a separate unit. 3. The examination department will be under the supervision of a Vice President to be designated by the bank after consultation with the Board of Governors. 4. The budget for this function will be subject to advance approval of the Board of Governors. "The Vice President in charge of examinations will be designated as an examiner for the Federal Reserve bank and the Board would expect that official to be responsible directly to the President of the bank and not to another Vice President or other officer. The Board notes with approval the action of your board, as advised in your letter of September 2nd, in placing the bank examination department under the supervision of Mr. E. C. Hill who has been elected a Vice President of the bank. The Board also approves a salary of t8,000 for Mr. Hill for the balance of this year as fixed by your 1657 9/8/36 -3- "Board of Directors and the designation of him as an examiner for the Federal Reserve Bank of Philadelphia. "While it is expected that the President will keep himself informed of the activities and policies of the examination department, it is contemplated that correspondence, other than that relating to policy matters, would be carried on by the Board and its staff directly with the Vice President in charge of examinations. This procedure would be similar to that generally followed with respect to other correspondence about routine operating matters. "After the transfer is made the Board will expect that the present policy of decentralization of examination work under the ultimate responsibility of the Board will continue, that the examination work will be conducted by the Federal Reserve banks under the general policies adopted by the Board, and that general supervision of the examination work of the System as a whole will continue to be exercised by the Board's Division of Examinations. "In the past the Federal Reserve agent's department has had custody of the reports of examinations made by the various agencies, which reports have been made available to certain officers of the bank and to certain designated employees in the Credit and Discount and other departments of the bank. When the bank examination department is transferred to the Federal Reserve bank instructions should be issued providing that the bank examination department will continue to have custody of reports of examinations, and proper safeguards should be established in order to preserve the confidential character of such information and to insure that the reports will be made available to officers or employees of other departments only when justified in the performance of their duties. "The principles to govern the operations of the research and statistical organizations after their transfer from the agent's department to the bank are outlined in the following Paragraphs which supersede those transmitted with the Board's letter of August 11, 1926, X-4646. "Scope and Purpose: The purpose of the work of the research and statistical divisions of the Federal Reserve banks is to collect and digest information bearing on the problems with which the Federal Reserve System is confronted, either as a matter of current operation or as the basis of Federal Reserve policies. "These divisions should provide a necessary service to the officials of the banks and to the Board 1658 9/8/36 -4- "of Governors of the Federal Reserve System and should also be useful to the general public. Owing to the joint usefulness of these services the Board expects its Division of Research and Statistics to keep in close touch with the activities of similar departments at the Reserve banks, and expects full cooperation in the System's work in this field. "When a new project in the research and statistical field is in contemplation at a Reserve bank it should be worked out in cooperation with the Board's Director of Research and Statistics, except as to projects of small scope which involve no considerable expense. From time to time the Director of the Board's Division of Research and Statistics may find it necessary to request the cooperation of one or more Federal Reserve banks on research studies. "Publications: The Board wishes to continue the present practice under which all publications of the Federal Reserve banks dealing with matters of more than local interest are submitted to the Board of Governors and issued only with the approval of the Board. "Budget and Personnel.: The budget of the statistical and analytical function should continue to be subject to the advance approval of the Board and all appointments of persons to supervisory positions in the statistical and analytical function should be subject to the approval of the Board. The Board would expect the person in charge of the research and statistical functions to report directly to the President of the bank and not to a Vice President or other officer. "It is further contemplated that any work heretofore handled by the Federal Reserve agents in connection with administration of the Securities Exchange Act of 1934 will also be transferred to the banking departments with the understanding that this work, like the examination work and the research work, will, as heretofore, be conducted under the general supervision of the Board of Governors. The conditions of transfer contemplated by the plan do not include any specifications as to whether the reserve bank shall have a separate unit for doing this work, as this would appear at present to be necessary at only a few of the Federal Reserve banks, but it is expected that all appointments or 1659 9/8/36 -5- "assignments of persons to supervisory positions in handling this work at each Federal Reserve bank will be subject to the approval of the Board of Governors. "The matter of the appointment of an Assistant Federal Reserve Agent to serve after the transfer of the non-statutory functions of the Federal Reserve Agent to the bank is the subject of a letter, a copy of which is attached, which is today being sent to Mr. Austin. The primary duties of the Assistant Federal Reserve Agent will be in connection with the issuance and retirement of Federal Reserve notes and the custody of collateral therefor. When the Assistant Federal Reserve Agent is not engaged in work connected with the issuance and retirement of Federal Reserve notes, it is assumed that with the authorization of the Federal Reserve Agent and the approval of the president he will perform other work in the bank which is not inconsistent with his duties as Assistant Federal Reserve Agent. "It is not expected that the Assistant Federal Reserve Agent will be charged with responsibility under section 30 of the Banking Act of 1933. The Vice President in charge of examinations should be charged with the responsibility of keeping the Federal Reserve Agent advised of violations of law by Directors and Officers of State member banks and of unsound banking practices in order to enable the Federal Reserve Agent to comply with the requirements of that section regarding the issuance of warnings to the Directors and Officers involved and the certification of facts in such cases to the Board of Governors. "Please advise the Board of the effective date of the transfer of the examination and research work to the bank." The proposed letter was approved unanimously, together with a letter to Mr. Austin, Federal Reserve Agent at the Federal Reserve Bank of Philadelphia, reading as follows: "According to the report of the survey of operations of the Federal Reserve Bank of Philadelphia, forwarded with President Sinclair's letter of August 6, 1936, it is proposed to have Mr. A. E. Post continue to serve as Assistant Federal Reserve Agent at his present salary of $8,000 per annum after the non-statutory duties have been transferred from the Federal Reserve Agent to the bank, and to have him 1660 9/8/36 -6- "retain his official status. "The Assistant Federal Reserve Agent appointed after the transfer of the non-statutory duties of the Federal Reserve Agent to the bank should be a careful and conscientious employee of unquestioned integrity, competent to handle all work in connection with the issuance and retirement of Federal Reserve notes, and whose primary duties will be in connection with such work. He need not, however, be a person of the experience and ability required for performing the Other statutory duties placed upon the Chairman and Federal Reserve Agent, and ordinarily his salary should not be at a higher rate than that paid employees occupying other positions in the bank involving comparable responsibilities. In this connection you were advised in a telegram dated June 23, 1936 (Trans 2406) that Assistant Federal Reserve Agents appointed to serve after the transfer of the nonstatutory duties of the Agent to the bank would not be considered by the Board as officers. "While the Board appreciates the statements contained in Mr. Sinclairls letter of August 6, with reference to the Position of Assistant Federal Reserve Agent, and is not unmindful of the services Mr. Post has rendered during his long period of service, the approval of a salary of $8,000 for Mr. Post as Assistant Federal Reserve Agent and the continuing of that position at your bank as an official one would be contrary to the policy adopted by the Board and would result in paying Mr. Post a salary out of line with the duties to be performed as Assistant Federal Reserve Agent. It will be appreciated, therefore, if you will review this situation with President Sinclair and try to work out some plan for handling the matter which will be satisfactory to you and to President Sinclair. "As you know, the Board has previously approved the appointments of J. Frank Rehfuss, Manager, Department of Research and Statistics, and Zell G. Fenner, Chief Examiner, as Acting Assistant Federal Reserve Agents at the Federal Reserve Bank of Philadelphia and no further action by the Board regarding such appointments is necessary at this time. "There is attached for your information a copy of a letter which has today been sent to President Sinclair regarding the transfer of the non-statutory functions of the Federal Reserve Agent to the bank, and a copy of a letter to Mr. Walsh, Federal Reserve Agent at Dallas, with respect 1661 9/8/36 -7- "to the duties to be performed as Chairman and Federal Reserve Agent on an honorary basis." Letter to "The Callicoon National Bank", Callicoon, New York, reading as follows: "This refers to the resolution adopted on May 29, 1956, by the board of directors of your bank signifying the bank's desire to surrender its right to exercise trust powers which have been granted to it by the Federal Reserve Board. "The Board of Governors of the Federal Reserve System understands that your bank has been discharged or otherwise properly relieved in accordance with the law of all of its duties as fiduciary. The Board, therefore, has issued a formal certificate to your bank certifying that it is no longer authorized to exercise any of the fiduciary powers covered by the provisions of section 11(k) of the Federal Reserve Act, as amended. This certificate is inclosed herewith. "In this connection, your attention is called to the fact that, under the provisions of section 11(k) of the Federal Reserve Act, as amended, when such a certificate has been issued by the Board of Governors of the Federal Reserve System to a national bank, such bank (1) shall no longer be subject to the provisions of section 11(k) of the Federal Reserve Act or the regulations of the Board of Governors of the Federal Reserve System made pursuant thereto, (2) shall be entitled to have returned to it any securities which it may have deposited with the State or similar authorities for the protection of private or court trusts, and (3) shall not exercise any of the powers covered by section 11(k) of the Federal Reserve Act except with the permission of the Board of Governors of the Federal Reserve System." Approved unanimously. Letter to Mr. Sargent, Vice President of the Federal Reserve Bank of San Francisco, reading as follows: "Reference is made to your letter of August 29, 1936, transmitting, with a favorable recommendation, the request 1662 9/8/36 -8- "of the 'Monterey County Trust & Savings Bank', Salinas, California, for permission under the provisions of membership condition numbered 8, to transfer from other real estate account to bank premises account a building adjoining the property acquired by the main office, such transfer to be made at the present carrying value of $15,460, and to expend approximately $12,000 for alterations and Improvements in bank premises. "It appears that the building in question was originally acquired for the purpose of enlarging the main office quarters, that the property was carried in bank premises account until September 1933, when it was transferred to other real estate account, and that the proposed transfer of the property from other real estate account to bank premises account has been approved by the State Banking Department. "In view of all the circumstances and your recommendation, the Board will interpose no objection to the proposed transfer from other real estate account to bank premises account of the property adjoining the main office quarters, such transfer to be made at a figure not in excess of present carrying value of the property, and to the expenditure of approximately $12,000 for alterations and improvements in the premises." Approved unanimously. Telegram to Mr. Curtiss, Federal Reserve Agent at the Federal Reserve Bank of Boston, reading as follows: "Your letter September 2, 1936, regarding proposed release by Quincy Trust Company, Quincy, Massachusetts, of the directors' secured guaranties aggregating approximately $340,000 under a plan which provides for the sale to the guarantors of $100,000 new common stock of the bank at a premium of $50,000. In view of the circumstances and your recommendation, Board will interpose no objection to the release under the plan submitted, provided, of course, the written consent of the Reconstruction Finance Corporation is obtained as required under the agreement executed June 4, 1934. "It has been noted that the president of the bank has Indicated that as part of the proposed program, the bank will comply with the requests of the Reserve Bank as regards the elimination of estimated losses and securities depreciation. 1663 9/8/36 -9- "It is assumed, therefore, that losses and depreciation will be eliminated in a manner satisfactory to your office. Please advise the Board of the action taken in this connection." Approved unanimously. Thereupon the meeting adjourned. Assistant Secretary.
@FedFRASER