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Minutes o f meeting o f Tho F e d e r a l A d v is o ry Council F eb ru a ry 1 8 , 191Q A statutory meeting cf the Federal Advisory Council was held in ths Federal Posorve Boara room in the Metropolitan Bank Building, Washington, D.C., Monday, February 18, 1918, at 10:30 a M. Present; Messrs. L. L. Eue, D. G. Wing, W. S. Ro*e, J. 7.* Norwood, Chaa. A. Lyerly, F. 0. Watts, J. R. Mitchell, E. ? V.ilmoi and Herbert Fleishhacker, and Merritt H. Grim, Secretary. Absent: Messrs. J. P. Morgan, James B. Forgan ana E. F. Swinney. Kr. Rue, Vice-President, in the absence of the President, c*& led the meeting to crder, and suggested tho election of a temporary chairman. Qd motion Mr. Rue was unanimously chosen temporary chairman. Hr. Rue stated that Hr. James 3. Forgan and Mr. 2 • F. Swinney were un able to be present bccauae of illness, and that Hr. Morgan was attending the funeral oi' fcir Cecil Spring-Rice, the 3ritish Ambassador. The Secretary presented the credentials of the following members of the Federal Advisory Council for the year 1918. Daniel G. 1 ing, J. ?. Morgan, L.L. Hue , • S. Rowe, J. W. Norwood, Chas. A Lyerly, J. B. Forgan ? 0 Watts. P. Mitchell £ F Gwinney, £ P Sllmot H Fleiahhackor, Federal Federal Federal Federal Federal Federal Fooeral Federal Federal Federal Federal Federal Pieserve Reserve Eeserve Reserve Reserve Beserve Reserve lieserve Reserve Reserve Reserve Reserve district District District District District District District Di strict District District District District No. No. No. No. Ho. No. No. No. No. No. No. No. 1 2 3 4 5 6 7 8 9 10 11 12. tor* Lyerly moveu a vote of thanks to the officers and members of the Executive Commit tee for thoir services during the past year, which motion was unanimously carried. The Chair announced that the first business was the election of Officers of the Council for the year 1918. Kr. latte moved that tho r,ecretory be requested to cast the unanimous b*llot of those present for Mr. James B. Forgan as President, Mr. L.L.Rue as Vice-President, and Messrs. !Torgun. Vine ^ d How© as members of thb jxecutive Committee, in addition to th e tw o o f f i c e r s members ex-officio, for ths yf’&r 1918. The motion wa s unanimously carried, and the Secretary stated that he hud cast the ballot as requested. The Chair thereupon declared the gentlemen elected as follows: president, J a m e s 3. F o r g a n , Vic»~^*esilent, L. L. inae , Executive comm i t t e e : iiessrs. j, P. M o r g a n a n d W. S. H o w e . James 9. F o r g a n , L.L. Hue, D. G. V.ing, Mr. Mitchell m o v e d that lir. M e r r i t t H. G r i m be e l e c t e d s e c r e t a r y of the Council for the e n s u i n g y e a r at a s a l a r y of §1,200. liotion seconded and c arried . The Secretary t h e n r e a d h i s r e p o r t c o v e r i n g h i s t r a v e l i n g a n d other secretarial e x p e n s e s for the y e a r 1917, and ordered s p r e a d on the m i n u t e s . See copy of S e c r e t a r y ’s r e p o r t herewith. Cm motion of iir. L y e r l y the b y - l a w s adopted as t h e b y - l a w s Hr. V ing then m o v e d the of t h i s w h i c h on n o t i o n w a s a c c e p t e d of t he Council C o u n c i l fo r last y e a r w e r e f o r the c u r r e n t year. a d o p t i o n of t he f o l l o w i n g r e s o l u t i o n : "Resolved that the President be and he is hereby authorised to ask each Federal K©serve Bank to contribute yl50. towards the sec retarial anu incidental expenses of the Secretary of the Federal Ad visory Council for the year 1918. and to draw on them for that purpose 6.8 heretofore. M which motion was duly seconded and carried. Mr. lyerly moved that the minutes of the previous meetings of the Federal Advisory Council on Kovember 19th and 20th. 1918, and cf the Executive Commit-ee of Ho-v ember 19th, 1918, copies of which had been sent to members by the Secretary, be approved, which motion was dully carried. The Vice-President stated that he had arranged which the Federal Re serve Board to meet with the Council at 11:15 o’clock, when the Governor of the Board would explain the topics submit led by the Board for con oid .ration of the Council at this meeting, and such other matters as he sight care to submit. She Chair then read Governor Haraing’s letter addressed to Mr. J 3 Morgan,aated January 21, 1917, as follows; ^j-iPPiPAL Washington ^rJ*•c3 Ox the '"governor January 21,1918 ifr. .Tames B* T?organ, President Federal Advisory Council, Chi c:i'?c , Illinois . Dear Mr. Forgan: I have received your letter of the 15th instart , and am interested in your figures rela-ting to the effect of the proposed change in computing reserves upon the total reserves held by the Federal Reserve Bank. Our Statistical Division has not quite completed its final report, but I will send you a copy as soon as it is submitted, which I hope will be in time for its considera tion by a committee of the Federal Advisory Council. It is suggested that ,Wfhen the Council meets, this question of reserves be one of the main topics for discussion,, and that in addition to the usual discussion of discount rates and of the next bond issue, the other topics be: (1) Priorities in capital and bond issues; (2) What steps, if any, may properly be undertaken in limiting commercial credits, The Board proposes to go into this matter of credit priority very thoroughly, and has appointed a committee to effect an organization which will enable it to pass intelligently upon all such matters which may be brought to its attention. I have informed all members of the Board that the next regular meeting of the Council will begin on Monday, February 18th. Very truly yours, (Signed) W- P. G-. Harding, Governor. gr. also r e a d a o a m m n i o a t i o n f r o m iir. J. P. M o r g a n e x p l a i n i n g bis absence a n d g i v i n g h i s v i e w s on the top i c s s u b m i t t e d t o tne Council b y the F e d e r a l R e s e r v e Board. gr. Ii* s u g g e s t e d t h e f o l l o w i n g s u b j e c t s that th e C o u n c i l might consider w i t h a v i e w t o m a k i n g reooraraendations t h e r e o n to the tfsderal R e s e r v e Board: The p r o p o s e d $ 5 0 0 , 0 0 0 , 0 0 0 W a r F i n a n c e C o r p o r a t i o n , The P r o p o s e d F e d e r a l H e s e r v e F o r e i g n B a n k of t he U n i t e d States Trade A c c e p t a n c e C o m m i t t e e ’s s u g g e s t i o n t o m a k e sin g l e name paper i n e l i g i b l e f o r r e d i s c o u n t at F e d e r a l R e s e r v e Banka. She Vice-President wa s r e q u e s t e d t o a s k th e F e d e r a l R e s e r v e B o a r d at tho joint roeetin£ if theso p r o p o s i t i o n s h a d their approval. Mr. *Ving s u g g e s t e d t h a t the V i c e -P re si de nt Reserve Board w h a t b i l l s approval or e n d o r s e m e n t . Hr. Satts m o v e d that It w a s t he chr.ir Swinney e x p r e s s i n g its r e g r e t their speedy r e c o v e r y . The Council then a l s o a s k th e F e d e r a l a r e n o w b e f o r e C o n g r e s s h a v i n g the B o a r d ’s send telegrams at t h e i r Motion adjourned to so o r d e r e d . illness to Mr. ana hopes for carried. receive the members Keserve Board. F o r g a n a n u Hr. its Secrotary. of the Federal Report of Secretary Federal Advisory Council for year 19171 Balance on h a n d D e c . 3 1 r 1 9 1 6 8425*15 Feb* 2 3 , 1 9 1 7 , A n n u a l a s s e s s m e n t 1 2 F e d e r a l R e s e r v e B a n k s o f $150 fro m e a c h b a n k , t o t a l TOTAL R EC EIPTS 1 ,8 0 0 .0 0 $ 2 * 2 2 5 .1 5 DISBURSEMENTS P la c e J l^ R .F a r e H o te l M e a ls K o K* CO • Expenses a t t e n d i n g f o u r m e e t in g s of t h e F e d e r a l A d v i s o r y C o u n c il an d o f t h e E x e c u t i v e C o m m it te e i n W a s h in g t o n and a s p e c i a l m e e t in g o f t h e E x e c u t i v e C o m m it te e i n New Y o rk d u r i n g y e a r 1 9 1 7 # T o tal Jan* 17 New Y o r k $ 6 5 ,2 0 $ 1 0 .0 5 $ 7 .6 3 $ 8 2 .8 8 Feb. 19 W a s h in g t o n 5 4 .8 0 3 6 .0 0 4 .6 9 9 5 .4 9 * A pr. 17 W ash . & P h i l . 49*30 3 8 .0 0 9 .3 5 9 6 .6 5 Sept, , 17 W a s h in g t o n 4 5 .0 0 2 2 .9 0 8 .7 0 7 6 .6 0 Nov. 19 W a s h in g t o n — —. 4 8 .7 8 1 2 6 3 .0 8 2 2 .4 5 6 .2 4 $ 3 6 .6 1 7 7 .4 7 ^ 4 2 9 .0 9 D$te 1917 T o t a ls T o ta l T r a v e l i n g e x p e n s e s a s S t e n o g ra p h e r s , s t a t i o n e r y P r in t in g T e le g ra m s, p o s t a g e S a la ry S e c r e t a r y 1 2 m o n t h s $ 1 2 9 .4 0 above $ 4 2 9 .0 9 14.75 226.60 60. 2 8 1,200. Balance in First National Bank, Chicago, December 31, 1917 Total to b alance - - - ---$2,225.15 - - R e s p e c t f u lly s u b m it t e d , M e r r i t t H . G r im , S e cre ta ry * minutes of Joint Mod ting of The Federal Heserve Board and The Federal Advisory Council. February 18, jl joint meeting of the Federal Reserve Board and the Federa" idviP°ry Council was held in the Board room at 11:15 A.H. Febnmrv 18. 1918* present: governor ». ,.G. Harding, Messrs. F.A.Delano, C. ij.3amlin, *.C*ilill®r » Pricer siillis, Secretary, members of the Federal .-ieserirtJ Board; and Messrs* ~»I»*lue, Vice-;Tesident, D*G«Wing W*S*Howe, J*W. Korwood, Ch&s* A i^yeriy* ?»0*Watts, J.R.Llitchell* % ! ’• »ilmotf Herbert Fleishhaoker, and Merritt H. Grim, Secretary, members of the Federal Ad visory Council. ar. ^ue called the meeting to order and asked Governor Harding to address the meeting. Governor Earding stated that the Secretary of the Treasury the Eon. h.G.McA ioo, had requested the members of the Council to neet him in his office at ten o ’clock tomorrow morning, February 19th, to confer informally with him relative to the fortcoming government bond issue end the current issues of Treasury Certificates of Indebtedness The Governor then reviewed the topics the Board had submitted to the -ouncil ana the requirements of the Government in carrying; on the war; also certain amendments to the Federal Heserve Act which the 3oara h d prepared, a copy of which would be placed before the Council for its further consideration and recommendation; also the measure tb, establish the War Finance Corporation. Mr. :>ae asked the Governor about the suggestion to make single name p^por ineligible for rediscount at the Federal Heserve Banks. The Governor stated that the 3oard h a d not considered it and that the plan had been adbandoned. tae b ro u g h t u p f o r d i s c u s s i o n th e p ro p o s e d F e d e r a l H e s e rv e F o r e ig n Jfifc o f th e United S t a t e s . I t seem ed to be th e o p in io n o f th e B o a rd t the b i l l was n o t l i k e l y to b e c o m e fla w Governor H & rd in g e u g g o s t a d 't h e C o u n c il m ig h t make a re c o n m e n d a tio n a c o n n e c tio n w it h th e r u l i n g o f t h e C o m p t r o lle r i n r e g a r d to e x c e s s iVe lo a n s by b a n k s on g o v e rn m e n t b o n d sJ o in t s e s s io n adjourned* the B o a rd meem bers r e t i r i n g * Co« n o il a d jo u r n e d u n t i l 2 P M . Secretary a f t e r w h ic h 6 At 2:20 the Federal Adviaory Council resumed its IttllM* Tbt Chair laid before the meeting ths topics submitted by the Federal 3e«erve doard in the Governor* s letter of January 21, 1918. (^e# uinutea of meeting of the Council Pebruaiy 18th. These topica were considered informally by th© Council; slso the aaead»>nte to tho federal usserve Act which had been prepared by the federal Reserve Bocri. ffce mrrent is sues of Treasury Certificates of Jn&ebtedness snl the forthcoming Government bond, issue were also inform?*lly 3considered* The concensus of opinion of the member* was Th* t the certificates should beer 4rJ % interest; rhat the bond issue should bear 4' ^ interest and &hould be tsxnbie. At 5:30 o'clock the Council adjourned to meet after the inforrmi conference with the Secretary of the Treasury. OS Stfrta ry 7 Minute* of meeting of The Federal Advisory Council February 19* It18 The Federal Advisory Council set in the J?eder&l Reserve Board roots at \Zx IB M, February 19* 2918. Pmesti ttee*re» L * *tee» Vloa-Presidc&tt In the cmlr* X 0. Wing* W* £. low, Cfcrie* k F. 0 &atts, J* E* Mitcueil, &• P. I litaot* Herbert flaish&ioicsr,. &aa Merritt H Sri*, Leci’9t«n»-y. Hr* Norwood wee excused hiring been called hoiae* ?he topics submitted by the Federal lleserre Board were further considered as were also the proposed &asBj£xmt* to ih& Federal Ssatrve i.o& end *3 m > ts per printed ocpy herewith, »are unanimously adopted end ordered submitted to the Federal Beaerve Board at the joint session to be held at 3 P It* In connection with Topic So* 1, on "notion cf Mr* «attt. duly sscan4ed and carried, the Special Ccsunifctee *ae continued to farther consider tlia Whale subject of tha readjustment of reaerrea of tanks. On notion the Council adjourned until 3 P M» R E C O M M E N D A T IO N S O F T H E F E D E R A L A D V IS O R Y C O U N C IL T O T H E F E D E R A L R E S E R V E B O A R D Feb. 19. 1918 T O P I C N O . 1.— Reserves to be carried by member banks in Fed eral Reserve Banks. Recommendation:— W hile the present system of requiring reserves of 1 3 % in Central R e serve Cities, 1 0 % to be carried by banks in Reserve Cities, and 7 % to be carried by so-called country banks may not be scientific and may work an injustice to some cities, nevertheless it is the opinion of the Council that during the existence of the war and while the whole banking system of the country is being subjected to unusual strain, it would be unwise to attempt any legislation looking to a change in reserves to be carried by member banks. The subject should have the close attention of the Federal Preserve Board and the Federal Advisory Council, so that when matters become normal the necessary legislation may be obtained to correct any inequalities and inconsistencies. T O P IC N O . 2 .— Discount rates. Recommendation:— There appears to be no immediate necessity to change the discount rates of the Federal Reserve Banks. However an increasing tendency for rediscounts is likely to develop and it will probably be necessary to increase the rates of discount later on in order to protect the reserves of the Federal Reserve Banks. The Council is, however, of the opinion that a preferential rate should continue to be accorded to loans secured by Liberty bonds. T O P IC N O . 3 .— Interest on Third Liberty Loan. Recommendation:— W ith the outstanding 4 ' , Liberty bonds selling on the market from three to four points below par, it wrould not seem possible to successfully place a new loan at the same rate. It is the opinion of this Council that the next Liberty Loan should be a short term taxable 4J/2 ( o bond, as the Gov ernment must more nearly approach the market value of money if it wrould successfully place new issues of bonds. The country generally, we believe, expects a bond bearing A/i* < interest and the effect of the increase has been discounted. TOPIC NO. 4.—Priorities in Capital and Bond issues. Recommendation:— The Council approves of the supervision of Capital and Bond Issues as it is essential that private and corporate enterprises should not absorb the credit power of the country to the detriment of the Government s neces sities, the latter being paramount. T O P I C N O . 5.— W hat steps, if any, may be properly undertaken in limiting commercial credits? Recommendation:— It is the opinion of this Council that the proper limiting of commercial credits would be aided if cautionary communications are sent to the various Federal Reserve Banks by the Federal Reserve Board, , bringing to their attention the desirability of the member banks curtailing the extension of all credits not necessary to the conduct of the war. *±:fejr AM ENDM ENTS TO TH E FEDERAL RESERVE ACT. T O P IC N O . 6.— W ar Finance Corporation bill. Recommendation:— The Council is of opinion that the assistance contemplated in the W ar Finance Corporation bill is a public necessity at this time, and that legislation should be enacted granting such relief. w ti? T O P IC N O . 7— Amending Section 4. BE IT ENACTED B Y THE SEN ATE THE UNITED STATES OF AMERICA IN Section 4 of the Act approved December 23, amended and re-enacted by striking out that AND HOUSE OF R E P R E SE N T A T IV E S OF CONGRESS A SSE M BLE D , Section I : That 1913, known as the Federal Reserve Act, he part of such section which reads as follows: “ Directors of Class A and Class B shall be chosen in the following manner: “ The chairman of the board of directors of the Federal Reserve Bank of the district in which the bank is situated or, pending the appointment of such chairman, the organiza tion committee shall classify the member banks of the district into three general groups or divisions. Each group shall contain as nearly as may bo one-third of the aggregate num ber of the member banks of the district and shall consist, as nearly as may be, of banks of similar capitalization. The groups shall be designated by number by the chairman. At a regularly called meeting of the board of directors of each member bank in the district it shall elect by ballot a district reserve elector and shall certify his name to the chairman of the board of directors of the Federal Reserve Bank of the district. The chair man shall make lists of the district reserve electors thus named by banks in each of the aforesaid three groups and shall transmit one list to each elector in each group. Each member bank shall be permitted to nominate to the chairman one candidate for director of Class A and one candidate for director of Class B . The candidates so n o m in a te d shall be listed by the chairman, indicating by whom nominated, and a copy of said list shall, within fifteen days after its completion, be furnished by the chairman to each elector. Kvoi v elector shall, within lifteen days*after the receipt of the said list, certify to the chairman his first, second, and other choices of a director of Glass A and Class B, re spectively, upon a preferential ballot, on a form furnished by the chairman of the board of directors of the Federal Reserv e Bank of the district. Each elector shall make a cross opposite the name of the first, second, and other choices for a director of Class A and for a director of Class B, but shall not vote more than one choice for any one candidate;” and by substituting therefor Jhe follow ing: “ Directors o f Class A and Class B shall be chosen in the following manner: ‘ The Federal Reserve Board shall classify the member banks of the district into three general groups or divisions, designating each group by number. Each member bank shall be permitted to nominate to the chairman of the Board of Directors of the Federal Reserve Bank of the district one candidate for director of Class A and one candidate for director of Class B. The candidates so nominated shall be listed by the chairman, indicating by whom nominated, and a copy o f said list shall, within fifteen days after its completion, be furnished by the chairman to each member bank. Each member bank by a resolution of the Board or by an amendment to its by-law s shall authorize its president, cashier, or some other officer to cast the vote of the member bank in the elections of Class A and Class B directors. W ith in fifteen days after receipt of the list of candidates the duly authorized officer of a member bank shall certify to the chairman his firsij, second, and other choices for director of Class A and Class B, respectively, upon a preferential ballot upon a form fur nished by the chairman o f the board of directors o f the Federal Reserve Bank of the dis-* trict. Each such officer shall make a cross opposite the name o f the first, second, and other choices for a director of Class A and for a director of Class B, but shall not vote more than one choice for any one candidate. Recommendation::— The Council approves this amendment. T O P I C N O . 8 .— Amending Section 16, ninth paragraph. Sec. 3. That the ninth paragraph of Section 16 of the Federal Reserve Act, as amended by the A cts approved September 7, 1916, and June 21, 1917, be further amended and re-enacted so as to read as follow s: “ In order to furnish suitable notes for circulation as Federal Reserve notes, the Comptroller of the Currency shall, under the direction of the Secretary of the Treasury, cause plates and dies to be engraved in the best manner to guard against counterfeits and fraudulent alterations, and shall have printed therefsom and numbered such quan tities of such notes of the denominations of $5, $10, $20, $o0, $100, $500, $1000, $5000, $10000 as may be required to supply the Federal Reserve Banks. Such notes shall be in form and tenor as directed by the Secretary of the Treasury under the provisions of this A ct and shall bear the distinctive numbers of the several Federal Reserve Banks through which they are issued.” Recommendation:— The Council approves this amendment. T O P I C N O . 9 .— Amending Section 19, paragraphs (b ) and ( c ) . Sec. 4. That paragraphs (<b) and (c ) of Section 19 of tho Federal Reserve Act, as amended by the A cts approved August 15, 1914, and June 21, 1!>17, be further amended and re enacted to read as follow s: f ‘ (b ) I f in a reserve city, as now or hereafter defined, it shall hold and maintain with the Federal Reserve Bank of its district an actual net balance equal to not less than ten per centum of the aggregate amount of its demand deposits and three per centum — 3— oi its time deposits: P R O V ID E D , H O W E V E R , that if located in the outlying district* of a reserve city or in territory added to such a city by the extension o f its corporate charter, it may, upon the affirmative vote of four members of the Federal Reserve Board, hold and maintain the reserve balances specified in paragraph (a) hereof. (c) If in a central reserve city, as now or hereafter defined, it shall hold and main tain with the Federal Reserve Bank of its district an actual net balance equal to not less than thirteen per centum of the aggregate amount o f its demand deposits and three per centnin of its time deposits: P R O V ID E D , H O W E V E R , that if located in the outlying dis tricts of a central reserve ci'.y or in territory added to such city by the extension of ita corporate charter, it may, upon the affirmative vote of four members of the Federal Re serve Eoard, hold and maintain the reserve balances specified in paragraphs (a) or (b) hereof. ’ ’ Recommendation:— The Council does not approve of the proposed amendment at this time, believing that this change should be taken up in connection with the whole subject of the readjustment of reserves at some later date, and would re spectfully refer to their recommendation on Topic N o. 1 herewith. T O P I C N O . 10.— Amending Section 2 5 ; (a ). Section 6. That Section 25 of the Federal Reserve A ct be amended and re-enacted by adding thereto the fallow ing: (a) Banking corporations to be organized for the purpose of engaging principally in international or foreign banking, or banking in a dependency or insular possession of the United States, either directly or through the agency, ownership or control of local institutions in foreign countries, or in such dependencies or insular possessions as pro vided by this section, and to act when required as fiscal agents of the United States, may be formed by any number of natural persons, not less in any case than five. Such persons shall enter into articles of association which shall specify iu general terms the object for which the association is form ed and m ay contain any other pro visions not inconsistent with law which the association m ay see fit to adopt for the regu lation of its business and the conduct of its affairs. These articles shan be signed by the persons uniting to form the association and a copy of them shall be forwarded to the Federal R eserve Board to be filed and preserved with its records. The persons uniting to form such association shall, under their hands, make an or ganization certificate which shall specifically state: (1) The name assumed by such association, which name shall be subject to the ap proval of the Federal Reserve Board; (2) The place or places where its operations are to be carried on; (3) The place in the United States where its home oftice shall be located; (4) The amount of its capital stock and the number of shares into which the same shall be divided; (5) The name and places o f residence or of business o f number of shares held by each of them; the shareholders and the (6) The fact that the certificate is made to enable such persons to avail themselves of the advantages of this section. The organization certificates shall be acknowledged before a judge of some court of record or a notary public and shall be, together with the acknowledgment thereof, authen ticated by the seal of such court or notary, and transm itted to the Federal Reserve Board which shall record and carefully preserve the same in its business. Upon duly making and filing articles o f association and organization as provided in this section the corporation shall become as from the date o f its execution of its organ ization certificate a body corporate and as such and in the name designated in the or ganization certificate it shall have power under such conditions and regulations as the Federal Reserve Board may prescribe— First. To adopt and use a corporate seal. Second. To have succession for a periofl of twenty years from its organization un less sooner dissolved by an net of Congress or unless its franchises shall become for feited by some violation of law. (3) To make contracts; (4 ) To sue and be sued, complain and defend in any court of law or equity as fully as natural persons; (5 ) To elect or appoint directors, a majority of whom shall be citizens of the United States and by its board of directors to appoint such oflicers and employees as they may deem proper, define their duties, require bonds of them, and fix the penalty thereof, dismiss such officers or employees, or any of them, at pleasure, and appoint others to fill their places. (6 ) To prescribe by its board of directors by-laws not inconsistent with law and the regulations of the Federal Reserve Board, regulating the manner in which its stock shall be transferred, its directors elected or appointed, its officers and employees appointed, its property transferred, its general business conducted, and the privileges granted to it by law exercised and enjoyed. (7 ) To purchase and sell or discount and negotiate notes, drafts, check, bills of exchange, acceptances, cable transfers, or other evidences of debt; to purchase and sell securities including securities of the United States or any State in the Union; to accept bills or drafts drawn upon it subject to such limitations and restrictions as may be im posed by the Federal Reserve Board; to purchase and sell exchange, coin, and bullion; to borrow and to lend money on real or personal security; to receive deposits and gen erally to exercise such powers as are incidental to the banking business as conducted i,u the country or countries, dependency or dependencies in which its operations are car ried on; (8) To establish and maintain for the transaction of its business a branch or branches, agency or agencies in foreign countries and their dependencies or in the de pendencies of the United States at such places and under such rules and regulations as the Federal Reserve Board may prescribe; and to establish and maintain such additional branches or agencies as the Federal Reserve Board may from time to time authorize even in countries or dependencies not specified in the original organization certificate. (9 ) To purchase, use and hold stock or other 'certificates of ownership in any other banking corporation organized under the provisions of this section or chartered under the laws of any foreign country or of any state in the United States not doing business in the United States except such business as in the judgment of the Federal Reserve Board is necessarily incidental to its international or foreign business: P R O V ID E D , H O W E V E R , that it shall not hold stock in any one corporation in excess of ten per centum of its own paid up and unimpaired capital and surplus, except with the consent of the Federal Reserve Board. The provisions of the A ct approved October 15, 1914, entitled “ A n A ct to Supplement E xisting Laws against Unlawful Restraints and Monopo lies, and for other Purposes,” shall not apply to corporations or to officers, directors or employees of corporations organized under this section. No national bank or other member of a Federal Reserve Bank shall subscribe for or hold stock in banking corporations organized under the provisions of this section aggre gating more than ten per cent of the unimpaired capital and surplus of the subscribing bank. Shareholders in corporations organized under this section shall not be liable for the contracts, debts, and engagements of such corporations. Any member bank may act as agent for any corporation organized under the provisions of this section for the pur pose of dealing with any Federal Reserve Bauk, and the Federal Reserve Board shall promulgate rules and regulations defining and governing transactions which sueh cor poration m ay have with Federal Reserve Banks either direct or through the agency of member banks. No such corporation, however, shall become a member of any Federal Reserve Bank. Should any banking corporation organized under the provisions of this section fail 1o comply with any of its proA'isions or of any applicable laws of the United States, all the rights, privileges, and franchises of such corporation granted to it under this section shall thereby be forfeited. A n y non-compliance with or violation of such laws shall, how ever. be determined and adjudged b y a United States Court of competent jurisdiction in a suit brought for that purpose in the district or territory in which the home office of such corporation is located, by the Federal Reserve Board before the corporation shall be declared dissolved. In case of such non-compliance or violation every director who participated in or assented to the same shall be held liable in his personal or individual •apacitv for all damages which said bank, its shareholders, or any other person shall have sustained in consequence of such violation. Such dissolution shall not take away or impair any remedy against such corporation, its stockholders, or officers for any liability or penalty which shall have been previously incurred. Any such banking corporation may go into liquidation or be closed by a vote of its shareholders owning two-thirds of its stock. W henever the Federal Reserve Board shall become satisfied of the insolvency of any such banking corporation, it may appoint a receiver who shall proceed to administer the estate of such corporation in the same manner in which he would administer the estate of a national bank, the disposition ot the assets of the branches to be subject to any special provisions of the laws of the country under whose jurisdiction such assets are located. The animal meeting of every such banking corporation shall be held at its liornc office in the United States, and every such banking corporation shall keep at its home office books containing the names of all stockholders of such corporation, and members of its board of directors, together with copies of the records furnished by it to the Federal Reserve Board, exhibiting in detail and under appropriate heads the resources and lia bilities of the banking corporation. Every backing corporation shall make reports to the Federal Reserve Board at such times as it may require and shall be subject to ex aminations when deemed necessary by the Federal Reserve Board through examiners appointed by it, the cost of such examinations and the compensation of such examiners to be fixed by the Federal Reserve Board and to be paid by the corporation examined. Recommendation:— This Council approves of National charters being issued to Foreign Bonking Corporations formed under the Federal Reserve A ct instead of Slate charters. (b) (,1>) Any member bank located in a city or incorporated town or village of more than one hundred thousand inhabitants and possessing a capital and surplus of one million dollars or more, under such rules and regulations as the Federal Reserve Board may pre scribe, may establish branches within the corporate limits of the city, town or village in which it is located, not to exceed, however, ten in number. Any member bank located in any other place, with the approval of the Federal Re serve Board and under such rules and regulations as said board may prescribe, may estab lish branches within the limits of the county in which it is located, provided no such branch shall be established unless the capital of the parent bank is at least equal to the aggregate of the amounts which would be required, under the provisions of Section 5138 Revised Statutes, of such bank and each branch, if each branch were an independent national banking association. P R O V ID ED , H O W E V E R , That no member bank shall establish any branch or branches in any State in which neither State banks nor trust companies are permitted under the laws of the State to establish branches. Recommendation:— In reference to the proposed amendment the Council would repeat its recommendation of November 20, 1916, as follows: “ W e still adhere to the opinion expressed in our communication to you of September 21, 1915, to the effect ‘That the National Bank A ct should be amended so as to permit the establishment of branches of national banks having an unimpaired capital and surplus of not less than $ 1,000,000 in central reserve and reserve cities, provided that no branches are placed out side of the limits of the city where the head office of the parent bank is lo cated.’ W e are advised that such a privilege granted to national banks 'would not be affected by State laws and in our opinion any Federal legislation granting such a privilege should apply to all banks in the national system of adequate capital.” *143* T O P IC N O . 11.— Amending Section 11 ( c ) . Be it enacted by the Senate and House of Representatives of the United States of America, in Congress assembled: That Section 11, sub-section (c) of the Act approved December 23, 1913, is hereby amended and re-enacted by adding at the end thereof, the following paragraph: “ Until June 1, 1919, the Federal Reserve Board may, in its discretion, suspend, in "h o le or in part, the reserve requirements specified in this A ct in the case of any State ti— hank or trust company which becomes a member bank and which is located in a State whose laws do not either expressly or impliedly permit balances with a Federal Reserve Bank to be counted in lieu of the State reserve requirements, or to be considered as a reserve deposit made in compliance with those State reserve requirements. Provided, how ever, that each State bank or trust company for which the reserve requirements have been thus suspended shall maintain with its Federal Reserve Bank a balance to be deter mined by said Federal Reserve Bank and approved by the Federal Reserve Board. Recommendation:— The Council approves this amendment. The following members of the Federal Advisory Council were present at this meeting: Mr. L. L. Rue, Vice Pres., in the chair Mr. D . G . W in g Mr. F. O . Watts Mr. W . S. Rowe Mr. J. R . Mitchell M r. J. W . Norwood Mr. E. P. Wilmot Mr. C. A . Lyerly Mr. H . Fleishhacker Mr. Merritt H . Grim, Sec. Minutes of Joint Meeting of the Federal Keeerve Aoard and the Federal Adripory Council. /e b r u a x y 1 9 , 191* A joint aw*tine 9t the Federal Heeerve &oarti and tho federal Advisory Council was held in tho Board room, &b arranged, at I P ii. /ebrury 19, l$i#, feaentt tfoYoraor &» *0* Serain§r, Vice-Governor I -JSU Warburgf* ?*/.»Lolcno« C*^«Kaaiin and ^h&raun Alloa .ssieiant £»ecrotary* nocsbw? of tho Federal aeeerve «oardi and Jfea*r** 2» line* Vice-:resident, D*<j* ..iug, *.s*dowe, Cb»s. a* lyerlyf P.O. Vatte, J. fi. Mitchell, • & i. wilaet, Herbert Fleishhacker* m t Merritt H Or la* loorotary, members of tho Federal iarjfCTy Counoll. Governor Harding exiled the mooting to ordor end tiSked for tho report of tho Federal Advisory Council. Mr. :mo thon presented to tho Board the Becommeniations of the Council. (See printed copy In minutes of Connell thie date.) Vha ■Lemb^ri of both boards vnun joiuod in an open discussion of th# topics &nd othgr iaVters concerning thu federal Ueserve aysltt-s v-a;: the requirement* of tho poveromant for carrying on tho ear. Sr* 3ut on behslf of tho Council brought up for discussion the effect of the proposed amendment to Section 11 (cj on tfhioh the Counel) desired adtUtional infonsetion. After iu e consideration of tho awmitaent. Hr. John H* Mitchell* aored th*t tho Council approve tho 7 r©po#>ed stscniaent* motion seoonded by Er- * a U s and unanimously crrriad l?»ee printed copy herewith-j At 0:15 the Joint cession adjourned* Secretary.
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