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F E D E R A L advisory council M I N U T E S A N D RECOMMENDATIONS 1915-1921 This volume was the property o f Mr. L. L. Rue o f P h ila d e lp h ia , rep resen ta tiv e on the Federal Advisory Council from the Third Federal Reserve D i s t r ic t from 1 914-1929. I t was turned over to the Secretary o f the Federal Advisory Council by Ivlr- Howard A. Loeb o f P h ilad elp h ia, rep resen tative on the Federal Advisory Council from the Third fe d e r a l Reserve D i s t r ic t from 1929 on. Walter L ich ten ste in , Secretary. \ January, 1937 199« MEMORANDUM OF SUBJECTS TO BE Submitted to the ADVISORY COUNCIL. Fir st Attention is drawn to Circulars 11 and 12 and to Regu lations "J" and "K" in respect to Acceptances (12 copies attached). Are there any further suggestions on this sub ject? What is the opinion of the Advisory Council as to the policy of allowing the Federal Reserve Banks to buy the acceptances of State banks and private bankers, regardless of the limitations, when National banks are limited by law to one hundred per cent of capital and unimpaired surplus? A ruling, or even a suggestion by the Board that the Federal Reserve Banks should not buy acceptances of banks beyond the limitations fixed for member banks might at this time be taken as an intended ’’slap” at trust companies and might later be used as an argument against the Board in the future should it ever advocate the removal o ? this limitation. What are the views of the Advisory Council on this question? Se c ond :The Federal Reserve Act provides for the discount or purchase of acceptances based upon the importation or expor tation of goods. It has been suggested that importation and exportation should not and cannot properly be limited to importation and exportation to or from the United States and its dependencies. What is the view of the Advisory Council on this question ? Third; The Federal Reserve Board has under considera tion the preparation of a circular and regulation on the subject of the purchase in the open market ( under Section 14) of bills of exchange, foreign or domestic# Recognizing, however, that it was of great importance to safeguard these provisions in every way, yet if safely possible, to provide for the purchase of Dills of ex change ( E. G, documentary bills or oills secured by staples ) accepted either by merchants or manufacturers in good standing against goods actually purchased by them. What are the views of the Advisory Council on this question and is it desirable for Federal Reserve Banks to go into the foreign exchange business at this tiii.e ? -3- Fourth : The subject of tjne admibbion of State banks has been before the Board for several months. On the one hand it is argued that State banks should not be per mitted to enter unless they submit to all the condi tions that are necessary for National banks; that if more favorable terms are granted to State banks, even if allowable by law, it will be taken as an evidence of weakness or will cause National banks to seek State charters. On the other hand, it is argued that if the rules for admission are drastic, only the smaller and weaker State banks will come in; that strong State banks doing a large commercial business will never come in unless liberal concessions are made, most important among them the privilege of withdrawal from the System on suitable notice. In connection with the whole mat ter it is suggested by some that an effective clearance system, added to the discount privilege, will be a sufficient attraction to bring in the larger State banks without other concessions. What are the views of the Advisory Council on these questions? -4 FifthsSection 19, Paragraphs 1.£4 and 165, read as follows: "The reserve carried by a member bank with a Federal Reserve Bank may, under the regu lations and subject to such penalties as may be prescribed by the Federal Reserve Board, be checked against and withdrawn by such member bank for the purpose of meeting existing liabilities: PROVIDED. however, That no bank shall at any time make new loans or shall pay any divi dends unless and until the total reserve re quired by law is fully restored." The first part of this paragraph has an important bearing on clearances. Thus far, the Federal Reserve Board has issued no regulations in respect to the proviso. What are the views of the Advisory Council on this subject? Sixth:Does the Advisory Council wish to give any views about the rediscount policy to be followed between Fed eral Reserve Banks? f a d /d 4/8/l5 CIRCULAR No. 11. Series of 1915. (Supersedes Circular No. 5 of 1915.) FEDERAL RESERVE BOARD. W a s h in g to n , bankers’ April 2, 1915. acceptances. An amendment of the Federal Reserve Act, approved March 3, 1915, made an alteration in paragraphs 3 and 5 of section 13, wliich are quoted at length in Circular No. 12. This amendment granting the right to Federal Reserve Banks to discount acceptances of member banks based upon importation or exportation of goods beyond 50 per cent up to 100 per cent of their unimpaired capital stock and surplus, with the authority of the Federal Reserve Board, has made it necessary to issue a new regulation on the subject of Bankers’ Acceptances. The Federal Reserve Board, therefore, issues this circular which is a reprint of and is to supersede Circular No. 5, Series of 1915. A new regulation is hereto appended which is to supersede Regulation D, Series of 1915, and which contains some alterations that experience has proved desirable. “ Acceptances ” are dealt with in the Federal Reserve Act in two different sections—sections 13 and 14. Section 13 deals with the “ acceptance” as one of the forms of paper in the dis count of which Federal Reserve Banks may engage, restricting the discount of acceptances to such as bear the indorsement of a member bank. Section 14 invests the Federal Reserve Banks, under regulations to bo prepared by the Federal Reserve Board, with power to engage in open-market operations, of which the “ banker’s acceptance” is one of the most important. Careful study has led the Federal Reserve Board to the conclusion that, at any rate in the first stages, so far as practicable, priority should be given to operations under section 13. The acceptance is still in its infancy in the field of American banking. How rapid its develop ment will be can not be foretold; but the development itself is certain. Opportunity is given by the Federal Reserve Act to assist the movement in this new direction; the present regu lations are to be regarded as a first step and will be extended as circumstances and a reasonable regard for the other uses and needs of the credit facilities of the Federal Reserve System may warrant. It is believed that it would unduly restrict the development of the acceptance business to keep it altogether confined within the provisions of section 13, which require that accept ances, in order to be eligible for rediscount at a Federal Reserve Bank, must bear the indorse ment of a member bank. Having found it necessary to extend the scope of dealings in acceptances beyond these limits, the Board has exercised the authority conferred upon it by section 14, and has formulated regulations covering the purchase of acceptances without invariably requiring the indorsement of a member bank. The acceptance is the standard form of paper in the world discount market, and both on this account and because of its acknowledged liquidity universally commands a preferential rate. By reason of its being readily marketable it is widely regarded as a most desirable paper in the secondary reserves of banks and will help to provide an effective substitute for 88434°—15 2 the “ call loan.” Its growth, however, will depend upon the ability of the American market to adjust its rates effectively to those prevailing in other markets for paper of this class. Recognizing these facts, the Federal Reserve Board has determined to allow the Federal Reserve Banks latitude in fixing rates for acceptances: Federal Reesrve Banks may, from time to time, submit for the approval of the Board maximum and minimum rates within which they desire to be authorized to deal in acceptances; within such limits, and subject to such modifications as may be imposed by the Board, Federal Reserve Banks will be allowed to establish the rates at which they will deal in acceptances. The Board believes it to be in accordance with the spirit of the Act to accord preferential treatment to acceptances bearing the indorsement of member banks, offered for rediscount under section 13— even to the point of allowing lower rates for such acceptances, inasmuch as, under the terms of this section, such acceptances are available as collateral against the issue of Federal reserve notes; and the Board will sanction a slight preferential in favor of accept ances bearing the indorsement of member banks. When acceptances bearing the indorsement of member banks are not obtainable in adequate amount or upon satisfactory terms, Federal Reserve Banks desiring to purchase acceptances should restrict themselves, a3 far as possible, to such acceptances as bear some other responsible signature (other than that of the drawer and the acceptor), and preferably that of a bank or banker. CHARLES S. HAMLIN, Governor. H. PARKER WILLIS, Secretary. REGULATION J. Series of 1915. (Superseding Regulation D of 1915.) FEDERAL RESERVE BOARD. W a s h in g t o n , bankers' April 2, 1915. acceptances. I. D E FIN ITIO N . In this regulation the term “ acceptance” is defined as a draft or bill of exchange drawn to order, having a definite maturity, and payable in dollars, in the United States, the obligation to pay which has been accepted by an acknowledgment written or stamped and signed across the face of the instrument by the party on whom it is drawn; such agreement to be to the effect that the acceptor will pay at maturity according to the tenor of such draft or bill without qualifying conditions. II. ST A T U T O R Y R E Q U IR E M E N T S U N D E R SECTION S 13 A N D 14. Section 13 of the Federal Reserve Act as amended provides that— (a) Any Federal Reserve Bank may discount acceptances— (1) Which are based on the importation or exportation of goods; (2) Which have a maturity at time of discount of not more than three months; and (3) Which are indorsed by at least one member bank. (b) The amount of acceptances so discounted shall at no time exceed one-half the paid-up capital stock and surplus of the bank for which the rediscounts are made, except by authority of the Federal Reserve Board and of such general regulations as said Board may prescribe, but not to exceed the capital stock and surplus of such bank. (c) The aggregate of notes and bills bearing the signature or indorsement of any one person, company, firm, or corporation rediscounted for any one bank shall at no time exceed 10 per centum of the unimpaired capital and surplus of said bank; but this restriction shall not apply to the discount of bills of exchange drawn in good faith against actually existing values. Section 14 of the Federal Reserve Act permits Federal Reserve Banks, under regulations to be prescribed by the Federal Reserve Board, to purchase and sell in the open market bankers’ acceptances, with or without the indorsement of a member bank. III. R U LIN G . The Federal Reserve Board, exercising its power of regulation with reference to paragraph II (&) hereof, rules as follows: Any Federal Reserve Bank shall be permitted to discount for any member bank “ bankers’ acceptances” as hereinafter defined up to an amount not to exceed the capital stock and surplus of the bank for which the rediscounts are made. IV. ELIGIBILITY. The Federal Reserve Board has determined that, until further order, to be eligible for discount under section 13, by Federal Reserve Banks, at the rates to be established for bankers’ acceptances: (a) Acceptances must comply with the provisions of Paragraph II (a), ( b), (c) hereof; (&) Acceptances must have been made b y a member bank, nonmember bank, trust com pany, or b y some private banking firm, person, company, or corporation engaged m tne business of accepting or discounting. Such acceptances will hereafter be referred to as “ bankers’ ” acceptances;1 1 Drafts and bills of exchange eligible for rediscount under section 13, other than “ bankers’ ” acceptances, have been dealt with by Regulation B, series of 1915. (3) 4 (c) A banker’s acceptance m ust be drawn by a commercial, industrial, or agricultural concern (that is, some person, firm, company, or corporation) directly connected with the importation or exportation of the goods involved in the transaction in which the acceptance originated, or by a “ banker.” In the latter case the goods, the importation or exportation of which is to be financed by the accept ance, must be clearly specified in the agreem ent w ith or the letter of advice to the acceptor. The bill m ust not be drawn or renewed after the goods have been surrendered to the purchaser or consignee. (d) A banker’s acceptance m ust bear on its face or be accompanied by evidence in form satisfactory to a Federal Reserve Bank th a t it originated in an actual bona fide sale or consignment involving the im portation or exportation of goods. Such evidence may consist of a certificate on or accompanying the acceptance to the following effect: This acceptance is based upon a transaction involving the importation or exportation of goods. Reference N o.-------- . Name of acceptor--------- . (e) Bankers’ acceptances, other than those of m em ber banks, shall be eligible only after the acceptors shall have agreed in writing to furnish to the Federal Reserve Banks of their respective districts, upon request, inform ation concerning the nature of the transactions against which acceptances (certified or bearing evi dence under IV (d) hereof) have been made. (f) A bill of exchange accepted by a “b an k er” m ay be considered as drawn in good faith against “ actually existing values,” under I I (c) hereof, when the acceptor is secured by a lien on or by transfer of title to the goods to be transported; or, in case of release of the goods before paym ent of the acceptance, by the sub stitution of other adequate security; (g) Except in so far as they may be secured by a lien on or by transfer of the title to the goods to be transported, as under (f), the bills of any person, firm, company, or corporation, drawn on and accepted by any private banking firm, person, company, or corporation (other than a bank or tru st com pany) engaged in the business of discounting and accepting, and discounted by a Federal Reserve Bank, shall at no time exceed in the aggregate a sum equal to 5 per centum of the paid-in capital of such Federal Reserve Bank; (Ji) The aggregate of acceptances of any private banking firm, person, company, or corporation (other than a bank or tru st com pany) engaged in the business of discounting or accepting, discounted or purchased by a Federal Reserve Bank, shall at no time exceed a sum equal to 25 per centum of the paid-in capital of such Federal Reserve Bank. To be eligible for purchase by Federal Reserve Banks under section 14, bankers’ acceptances must comply with all requirements and be subject to all lim itations hereinbefore stated, except that they need not be indorsed by a member bank: Provided,, however, T h a t no Federal Reserve Bank shall purchase the acceptance of a “ banker” other than a m em ber bank which does not bear the indorsement of a member bank, unless a Federal Reserve B ank has first secured a satisfactory statement of the financial condition of the acceptor in form to be approved by the Federal Reserve Board. V. POLICY A S TO P U R C H A S E S . While it would appear impracticable to fix a m axim um sum or percentage up to which Federal Reserve Banks may invest in bankers’ acceptances, both under section 13 and section 14, it will be necessary to watch carefully the aggregate am ount to be held from time to time. In framing their policy with respect to transactions in acceptances, Federal Reserve Banks will have to consider not only the local demands to be expected from their own members, but also requirements to be met in other districts. The plan to be followed m ust in each case adapt itself to the constantly varying needs of the country. H. PARKER WILLIS, Secretary. CHARLES S. HAMLIN, Governor. W A S H IN G T O N : G O V E R N M E N T F E IN T IN G OFFICE : 1015 V CIRCULAR No. 12. Series of 1915. F E D E R A L R E S E R V E BOARD. W a s h in g to n , April 2, 1915. ACCEPTANCE BY MEMBER BANKS. By act of Congress approved March 3, 1915, section 13 (paragraphs 3, 4, and 5 of the Federal Reserve Act) was amended and reenacted so as to read as follows: Any Federal Reserve Bank may discount acceptances which are based on the importation or exportation of goods and which have a maturity at time of discount of not more than three months and indorsed by at least one member bank. The amount of acceptances so discounted shall at no time exceed one-half the paid-up and unimpaired capital stock and surplus of the bank for which the rediscounts are made, except by authority of the Federal Reserve Board, under such general regulations as said board may prescribe, but not to exceed the capital stock and surplus of such bank. The aggregate of such notes and bills bearing the signature or indorsement of any one person, company, firm, or corporation rediscounted for any one bank shall at no time exceed ten per centum of the unimpaired capital and surplus of said bank; but this restriction shall not apply to the discount of bills of exchange drawn in good faith against actually existing values. Any member bank may accept drafts or bills of exchange drawn upon it and rowing out of transactions involving the importation or exportation of goods aving not more than six months’ sight to run; but no bank shall accept such bills to an amount equal at any time in the aggregate to more than one-half of its paid-up and unimpaired capital stock and surplus, except by authority of the Federal Reserve Board, under such general regulations as said board may pre scribe, but not to exceed the capital stock and surplus of such bank, and such regulations shall apply to all banks alike, regardless of the amount of capital stock and surplus. g In order to give effect to the above amendment of the law, the Federal Reserve Board issues the appended Regulation K , series of 1915, stating the conditions under which member banks may accept, up to 100 per cent of their capital and surplus, drafts or bills of exchange growing out of transactions involving the importation or exportation of goods and having not more than six months’ sight to run. _ . _ _ __. _ _ _ CHARLES S. HAM LIN, Governor. H . P A R K E R W IL L IS , Secretary. 88433°— 15 REGULATION K. Series of 1915. F E D E R A L R E S E R V E BOARD. W a s h in g to n , April 2, 1915. ACCEPTANCE BY MEMBER BANKS. Any member bank may accept drafts or bills of exchange drawn upon it, haring not more than six months' sight to run and growing out of transactions involving the importation or exportation of goods up to an amount not exceeding the capital and surplus of such bank, provided that— (1) Every such bank shall possess an unimpaired surplus of not less than 20 per cent of its paid-in capital; (2) Every such bank shall file formal application with the Federal Reserve Bank of its district, which shall report to the Federal Reserve Board upon the standing of such applicant, stating also whether the business and banking conditions prevailing in the district warrant the granting of such applications in said district. (3) Every such application shall first have been approved by the Federal Reserve Board. Approval of any such application may be rescinded, and modifications of this regulation may be made, by the Federal Reserve Board upon notice of 90 days to the bank or banks thereby affected. CHARLES S. HAMLIN, Governor. H. PARKER WILLIS, Secretary. (3) W A S H IN G T O N : G O V E R N M E N T P R IN T IN G O F F IC E 1918 VZDEML ADVISORY COUKCII MINUTBS MFi?TCffO DBCS3CBr-H 15, 19X4. The fir«t meeting of the Federal Advisory Council was held in the federal Reserve Board room at the Treasury Building in the City of ^aahington on Tuesday• Deoember IS, 1914. Present: District So. 1, Messrs. I'anlel 0 , wing, District So. £, J . ?. Morgan. District itfo. *♦ X . 1 . Rue, District r^o. 4, ?’* 3. Rowe, District Ho. 5, George J . S e a y , District Wo. 5, Charles A* lyerly, District Ho. 7, James B . Forgan , District No. Q , Holla Wells . District No. 9 , C. T. Jaffray, District H o .10, IS • Swinney, District Ko.ll. J. Ho«t*r:i Ardrey, Absent: District Wo.12. Mr Archibald Kains, first session wac. held t 9: ?■o A. ir. for the organization of the Federal Advisory Council and the election of officers• After the members of the Council had met each other informally, D.D.Kue asked for th«i attention cf those present and suggested the namr of James B. Forgan as Temporary Chairman. He was thereupon duly elected* and on motion of Daniel 0. uirg, J. Howard Ardrey was made Secretary pro ten. Informal discussion w&s had as to the number of officers the Council would require, and on motion of Charles A. Lyerlv, it &&& decided that the offices consist of a President, Vioe-J resident and Secretary, and an Bxacutive Com mittee of five (5), of which the ^resident and Vice-^reeident should he ex-officio members. These rreliminariea being determined, J. ?• Morgan nominated James B. Forgar- as President of the Council, where upon he was unanimously elected. Charles A. Iyerly nominated X. • I.. Hue for ViceTreBi!«nt, whereupon he was unanimously elected. It *as agreed that the Secretary should he a salaried officer and not a member of the officiai Council; and on motion of Charles A . lyerly , tt ?cutive Commi ttee above rrovi led for was authorised to make the selection of a Secretary and to fix his duties and compensation* In the selection of three (5' elective meuibr.tra of rth« .'.Jvecutive Committea: . ?. ftwinney nominated J. . Morganr lowc; and I.Hue nominCharles A . L y e r l y n o m in a te d December 1 5 , lfcl* Cont. ated Daniel G. ^ing. There being no further nominations, on motion, the three gentlemen named were unanimously elected. On motion of George J. Seay, the resident ap pointed a Committee of three, consisting of George J. Seay, C. ?• Jaffray, and Daniel G. Wing, to prepare By-laws fer consideration at a later session. Thereupon the Organization meeting adjourned until P :00 ? X and the members of the lederal Advisory CounolL went into Joint session with the Federal Reserve Board . at 11:00 A. K . , Governor Charles 5. Hamlin presiding. Governor Hamlin expressed the pleasure of him self and the members of the federal Reserve Board in welcom ing the members of the federal Advisory Counoil at this thsir firet joint session; and exrialned that the attention of the Federal Reserve Board at this time #a» being occupied partic ularly with the consideration of the followinc Questions: 1 . The purchase of warrants and acceptances, H. The regulations und>r which national banks may act as trustee, executor, etc., 3. The regulations under which state banks are to be admitted to the system, 4. The clearing of checks through Federal reserve banks, 5. The definitions of time deposits and savings accounts. The discussion of these matters was very informal, and turned primarily to the question of the regulations undor ^fhich state banks v?ere to be admitted to the system. A rather free expression was given of the individual opinions of the members of the Federal Advisory Council, but as it was obvious that the l e d t r & l Advisory Council, as such, had not considered these matters in any manner as would warrant a Joint and official r«cc;m '•>ndatior- 11 .recn , furtherconsiderationo f the ma 11 er was i cferred, and each member of the Federal Advisory Council was asked to report on the business and financial conditions in their respective districts. ^hereupon the joint session was adjourned until 4:00 P.M. 0®oember 15, 1914 .Continued F&ge 3* At 2:00 P U the second session of the Organization seating of tiie 'ederal Adrisory Council waa hold ana George J. ^eay, Ghairiaan of the CeaRittee on B y - m m by imy of a, report read the following: *i$Y-U3B OH* m CTSRAL ADVISORY COUNCIL: Aracjus i. oifxcsKS. ufficom of thisi Council shall be a president, vice-projident and i;acrotary. AKTXCLC IX. I'HXSXDSKt AMD VICE FUmDSHT The duties o f the president shall bo such a? usually pertain to the office; and in ills abuonco the vice-president shall serve. a r i x c w in. s a m r . The secretary shall bs a salaried officer of the Council and his duties raid corcjpensation almll bo fixed by the Executive Cenrcitte*. articl : iv. "xzavzzrs cc&trrz®5. Tfeure ahall b« an focecuiivs CooKiittso of five (5) jneaberc of the Council, of which the President iwl Vice-president 0f the Council shall be ex-officio members. ARTICLE 7. DUTIES 0T !&3C0OTr3 Oa&XV-^. It shall be the duty of ihs Ixecutiye Cossuittee to keep In clo^e tc*ch with the Federal Hessrve Bo-urd and *ith their regulations and profaul&'itions, Mid corjaunicats the s^aa to the mesabors of the Council anil to suggest to the Councilfroti tiaa to tima special matters for coneiJoration. The Executive Committee shall have power to fix the tine ■:j&1 plane of molding their regular and special mootings and methods of giving notice thereof. kinutos of all meting* of th bcccutive Sennitlee sha. 1 be kept and auch cdnutes or digest thereof shall be i&aadlately formrded to each Euaaber of the Council. A majority of the Executive Ceoaittee ohall constitute a quoruia and action of the Co.nit tee shall bo by a majority of those prorent at any seeting. AKTICU! VI. j.u*U;TII©*. Regular meetings of the Federal uivieory Gouncil shall be hold in the City of Jfeshingten on the third Monday of the nonthcJtLl'jl)OM3r# iiag, ^eatoabtr and MsTgnber of each year. special j?.eetin£0 may be called at any tine and place by the fresident or the Executive Ceinraitte# and shall be oilled by the President upon tarritton request of any three c.erabers of the Council. ?4 December 15, 19X4. Cont. a r t i c t e v i i . AHanmarra. These By •law* may be changed or amended at any reg ular meeting by a vote of a majority of the members of the Federal Advisory Council. * On motion of L. 1. Hue the above report and By-laws were unanimously adopted. The members thereupon entered into a discussion in detail of the admission of state banks Into the Federal system, and Holla STells re^d a letter written by Hon. Hreckenridge Jones of St. Louis in connection with the matter. The discussion was continued uj to 4:00 o'clock, when the members of the Federal Reserve Board entered for the adjourned Joint session with the Federal Advisory Council. At this joint session the Hon. Secretary of the Treasury presided, and as the Federal Advisory Council *as not even then prepared to make a final and official recommention with reference to the matter discussed at the morning session, a further joint discussion of these matters rroceeded, each member of the Federal Reserve Board express ing his individual opinion as to the relative importance of the matters above enumerated ^nd the necessity lor immediate action thereon; and each member of the Federal Advisory Council expressing an individual opinion as to the terms on which state banks should be admitted to the system. The members-elect of the Executive Committee announced that they would hold the first session of their Committee on Friday, December 18th , and would at that meet ing formally and definitely express an opinion and recommen dation concerning the matters submitted by the Federal Re serve Board. Thereupon the meeting finally adjourned. (iigned) J. Howar 1 Ardrey, Secretary pro tern. n im stsm x s m i m A meeting of the n iK sm m m ia, 1914 . Ixeoutive Committee of the y m m A L ADVISORY COUkCIL w o o held at the Morgan Library in Kew York City on Friday, December 18, 1914* All members of the Committee being present the first question considered was the appointment of a 'secretary* It became evident from the expressions of opinions of all present based on discussions and conver sations in Washington that it would not be useful or practicable to have a secretary resident In Washington* on motion it was then voted unanimously that the score* tary be under the direction of the President of the Council and that he be authorised to appoint a secretary and f i x his salary* The question of furnishing statements to the press in regard to the acts or findings of the Federal Advisory Council or of the Executive Committee was then discussed and on motion it was unanimously agreed that as the relation of the Council is to the Federal Reserve Board and not to the publie the making of such statements should be left to the discretion of the Federal reserve Board in Washington* 2he President then submitted the following letter from the Federal Heserve Board: *Deoe.<nber 17, 1914. ";:r* James B* Morgan, 3 resident, Federal Advisory Council, C/o First National Bank, Kew York City. nir:At a meeting of the Federal Reserve Board held on Wednesday, Deoember 16th, consideration 'fas given to the order in which matters of importance now pending before the Board should be dealt with* .It was desired that the Advisory Co.mo 11 afford to the Board such suggestions as it way think best to offer* A« the outcome of this consideration I was Instructed to inform you -that the Board desires to take up the following matters In the order Indicated and would be glad to have your suggestions with reference thereto In a similar sequence: 1 * The purchase of warrants and acceptances* 2* The regulations under which national banks may act as trustee, executor, etc* 3* The definition of time deposits and savings ac~ counts* 4* Check clearings* 5* 'i’he regulations untier which State banks are to be admitted to the system* I have the honor to be, Hespectfuily yours, http://fraser.stlouisfed.org/ H Parker Willis, j«orettirjr. * Federal Reserve Bank of St. Louis a December 16 , 19X4, continued« The Committee then proceeded to consider and d i souse seriatim the five matters mentioned In the letter on which the Council*a suggestions were invited: 1* Vhe purchase of Warrants and Acceptances* Xhere was submitted to the Committee a proposed regu lation concerning the purchase of warrants under Section 14# Clause 3* of the J'oderal Heserve Act, as prepared by the lederal neservo Board, o n motion it was unanimously voted that the Committee approve said re<sulatjon covering the purchase of warrants# In regard to the purchase of Acceptances the follow* Ing motion was unanimously adopted; •The Council advises that for the present Federal Reserve Banks should confine their purchases of acceptances to those of member banks of any of the twelve districts or acceptances endorsed by menber banks, and that it is not desirable that there should be upon the face of such accept* ances any statement of detail connected with the transaction originating the bill whleh might affect Its negotiability *11 ft* The Regulations under which National Lanks may act as trustee, executor, etc* After discussion of this question it was resolved that the Board be advised that since under the law tills Is to be done by special permit it is the opinion of the Council that each application should be decided on Its merits and with due regard to the fltate laws under which each bank shall operate* 3* The definition of counts* ime deposits and Havings ac cm this question the following was on motion unanimously adopted: *'Xhia Committee has considered emulation He* 7A, fifth draft, an< reoom^ends but one change in Heation 1 ,head ed "Time Deposits - Open Accounts,1' consisting of striking out the words * checked upon or," in the second line. This Committee is of the opinion that, with this change, the pro posed Regulation satisfactorily defines the character of de posits upon which a 5 per cent renerve is permitted, in view of the terms of Section 19 of the Federal Peserve Act. ^his Committee is, however, of the opinion that the definition of savings accounts contemplated by this regulation will permit the conversion of a large volume of deposit liability into ’ ;Xi ^n of w vOits roquirin; oniy h i»er c«ni r e M m «9 w1 ich nevertheless are virtually demand dopo^ita and subject to 'ithdrtuml at any Uni without, nolisa, "Thin Coiriiittee conoidem that bom fid# saving deposita wpon which t)\m 5 par cent reserve Is Justified fre thooe which »»re United in ttie amount hich m y b» deposited by any ona demerit or* The unrootrioted permission for ne tioiwil t- Vr to rocoivo ciebonite, ithout limit to in cunt, upon ;! ioh thu b*»nk ?#»y exuet n 1ice of SO daya, but cuotoxrrily -ill not do so* will result in the conversion of so largo * volurnu ofdemand deposits Into thin cl***' of account as to provo a meneoe* This 0omit too, therefore, rocomrenda that stops bo taken to seoure on amendment to tho statute by which ooir« li?iit tny bo pit cud ut'OU tho m ount of © savings recount which may bo rv In: ined by any one depocitor, on rLich only t> ?w»s- cont rsservo ia ru irod*" 4* *ck Clc:nriit':o« During tho dinounnion of tMo question tho foJlo-ing tel«f(m n fron the Ftoteral ;t*»orvfc Board was cowunicatod to tho *J°tardttee by Governor strong of tho IWcsmI f;«earvo IterV * of * Torkt "Board, oftor com i<;jration of Coetion 16, TWerol fteoorvo Act* providing that every Fodorf'l Reserve Hrnk shall receive on deponit at pur from member bonks or from FedorsI me rve IVinke cheques and draft© dntwn uj on any of its tfopoe* itora, iff oi opinion thnt ords "on deporit at prr" os there imod, m n credit f t f‘ co valtio i m - itvou♦ fixed collection *T® P°r item, but that wnrda do not neeaeaarily require' imtediato crediting of uch item© without nllcanoe of necessary ti:*. r M «c‘llvJCt.'.<»n# • /. , , r.uor*t^r .** after whJoh on motion tho follewing statement w e unanimously adopted* "Che „u« ivar&ncee* Tho FOoorsl Advisory Council in unable *ft yot to oonr ider thin mibjeot fv3JLy, wnd would liko9 m t* prolirdnnry, a da turnin' tion by the fodoml rio«or’ ve B^ord or 1 ^ ,'Jounnal ’tether, uncler tha reafin? o ^eotion id and 16, thwra la any j^*TJL^ion for a Fsdaral Uoaorra Bank to reaaivo on dopo^it froe» it a doponiioi's ch© .tw a urr^n upon r»rnl^ r bonks or ’V.c <.'*.r,ka of ;r ’ *r di tiricto* **It »«u. fl, t; ; Council :*c?adn it, t> ' ^uch oh« jUeo.onn only bo rocoivyd on deposit by a. T ^ d o m l f*o»onro '»nl; trim another POdornl 'lonervo Itenk, one thwr rololy for OXC •;r;j pt<r. 0tW»9 Council imit*t rdro adviso that it sooma to it unbound in firinoifilo that n cloquo dtttwn on n member brnJr should la c’ r od to it© Fodon^l rtoaerro account by tho FOderal H o f o m l- ri' wit out tJw» nut ority of the bank upon *»hich it ie crawn 4 and without that bank having hod the opportunity of pe.eei»f: ;«on • chu-.iii®* " It elso nearw* to thij Council that there in a serious danger th&t tho attempt to disregard the elements of tiRKi nnc; riictance will no involve the funds of the Federc-l Reserve flanks re to aerioualy impair their usefulness as banfra of is MiO >«n<’ riacount*" a* The Regulation under w^ich State banks are tie be ad it Lee +!• j_1■t . After a long discussion of this subject the C^iRtnittee n notion unanimously agreed to the following utateiaents "In rog*trd to thw qu«etion of tho admission of Stut# banks, the Council udvinea in t *Xe ?ugpaslions sub* ffiitted to it in in Draft No* 7® seevi to us an the tantinlly on ri^ht lines* We would call attention to the fnot, however, that the chief inducement to the rtata hank* tc con® in oust be in connection with the clearing of c)oquus9 amif until thin witter is settled to sueh a point that a State Hank twy kno • hnt advantages it i* roinf to r^cjive on t\ Be lines, there sueine to us little inducement for then to oone in* Thera also oe<»mo to us the great ebataele to their coning in is that they may be unable is withdraw# ~e should advise, therefore* that the Federal Reserve Board git advice of counsel A uthor they ar« aVl© by regulation to establish * set* od thereby stole hanks entering th& eastern may, upon sufficient end ruvnon f.ix .■ 'ico# it" :'r; '? frc-n *M On motion the prenident '-as requested to prepare an answer to the letter of the Federal Reserve Hoard alon£ the lines of the findings of the Coral t.tee as stated in the various resolutions* and atr.tewonta adopted and to send a copy of nans to the members of the Council for their approval or ctitleian» The Uo littee thon adjourned to m.et afain en ?/onday# ltfth, 1915, in -nrlon, ft* C*# at eleven o'clock * FEDERAL ADVISORY COUNCIL Minutes of meeting of the Executive Committee of the Federal Advisory Council held at the Morgan Library in New York City on Friday, December 18, 1914: T.he question of furnishing statements to the press in regard to the acts or findings of the Federal Advisory Council or of the Executive Committee was then discussed and on motion it was unanimously agreed that as the relation of the Council is to the Federal Reserve Board and not to the public the making of such statements should be left to the discretion of the Federal Reserve Board in Washington. F ebruary 18, 1935
@FedFRASER