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MINUTES OF MEETING of the FEDERAL ADVISORY COUNCIL February 19, 20, 1923 O F F IC E R S A N D M E M B E R S OF T H E F E D E R A L A D V IS O R Y COU NCIL For the Year 1923 O F F IC E R S : E X E C U T IV E C O M M IT T E E : President, L. L. Rue L. L. Rue Vice President,9 P. M. W arburg o P. M. Warburg Secretary, H. L. Hilyard A. L. Aiken J. M. Miller, Jr. J. J. Mitchell E. F. Swinney M EM BERS: A. L. Aiken Federal Reserve District No. 1 P. M. W arburg Federal Reserve District No. 2 L. L. Rue Federal Reserve District No. 3 C. E. Sullivan Federal Reserve District No. 4 J. M. Miller, Jr. Federal Reserve District No. 5 E. W . Lane Federal Reserve District No. 6 J. J. Mitchell Federal Reserve District No. 7 Federal Reserve District No. 8 G. H. Prince Federal Reserve District No. 9 E. F. Swinney Federal Reserve District No. 10 R. L. Ball Federal Reserve District No. 11 D. W . T w ohy Federal Reserve District No. 12 F. ** J- W ade B Y-LAW S OF T H E F E D E R A L A D V I S O R Y COUNCIL A R T I C L E I. OFF I C E R S Officers of this Council shall be a President, Vice-President and Secretary. ARTICLE II. P R E S I D E N T A N D V I C E - P R E S I D E N T The duties of the President shall be such as usually pertain to the office; and in his absence the Vice-President shall serve. ARTICLE III. S E C R E T A R Y The Secretary shall be a salaried officer o f the Council and his duties and com pensation shall be fixed by the Executive Committee. ARTICLE IV. E X E C U T I V E C O M M I T T E E There shall be an Executive Committee o f six ( 6 ) members o f the Council, of which the President and Vice-President o f the Council shall be ex-officio members. ARTICLE V. DUTIES O F E X E C U T I V E C O M M I T T E E It shall be the duty o f the Executive Committee to keep in close touch with the Federal Reserve Board and with their regulations and promulgations, and com municate the same to the members o f the Council, and to suggest to the Council from time to time special matters for consideration. The Executive Committee shall have powrer to fix the time and place of holding their regular and special meetings and methods o f giving notice thereof. Minutes of all meetings of the Executive Committee shall be kept and such min utes or digest thereof shall be immediately forwarded to each member o f the Council. A majority of the Executive Committee shall constitute a quorum and action of the Committee shall be by a majority o f those present at any meeting. A R T I C L E VI. M E E T I N G S Regular meetings of the Federal Advisory Council shall be held in the City of Washington on the third Monday o f the months o f February, May, September and November of each year, unless otherwise directed by the Executive Committee. Special meetings may be called at any time and place by the President or the Exec utive Committee, and shall be called by the President upon written request of any three members of the Council. ARTICLE VII. A M E N D M E N T S These By-laws may be changed or amended at any regular or special meeting by a vote of a majority of the members o f the Federal Advisory Council. February 20, 1923. M IN U T E S O F M E E T IN G OF T H E F E D E R A L A D V IS O R Y COU N CIL February 19, 1923. The organization meeting o f the Federal Advisory Council for the year 1923 was held in the Federal Reserve Board room, Treasury Building, Washington, D. C., at 10.30 A. M., Monday, February 19, 1923. Present: District No. 1 District No. 2 District No. 3 District No. 4 District No. 5 District No. District No. 9 District No. District No. District No. 12 District No. 7 Secretary Mr. A. L. Aiken Mr. P. M W arburg Mr. L. L. Rue Mr. C. E. Sullivan Mr. J. M. Miller. Jr. Mr. E. W . Lane Mr. G. H. Prince Mr. E. F. Swinney Mr. R. L. Ball Mr. D. W . Tw ohy Mr. E. A. Hamill Mr. H. L. Hilyard 6 10 11 A bsen t: Mr. J. J. Mitchell Mr. F. J. W ade District No. District No. 7 8 Mr. Rue called the meeting to order and upon motion, Mr. Swinney was asked to act as temporary Chairman. The Secretary reported that he had received communications from all the Federal Reserve Banks certifying to the election o f their representatives for the year 1923. Mr. Swinney, temporary Chairman, called for nominations for the office o f Presi dent o f the Council for 1923, and Mr. L. L. Rue was nominated. On motion, duly seconded, Mr. Rue was unanimously elected President. The President, Mr. Rue, took the Chair and called for nominations for Vice-Presi dent. Mr. Paul M. W arburg was nominated, and on motion, duly seconded, was unanimously elected Vice-President. The President called for nominations for the four appointive members o f the Executive Committee, and Messrs. A. L. Aiken, J. M. Miller, Jr., J. J. Mitchell and E. F. Swinney were nominated. On motion, duly seconded, they were declared elected members o f the Executive Committee, the President and Vice-President being ex officio members. The President presented communications from the absent members, Messrs. J. J. Mitchell and F. J. W ade, regretting their inability to be present. I The President presented communication from the Federal Reserve Bank of Chicago, appointing Mr. E. A. Hamill as temporary representative o f the Chicago District, in the absence of Mr. Mitchell. Mr. Hamill was asked to take part in the proceedings without the privilege o f voting. The President called for the financial report o f the Secretary for the year 1922, which had been audited by the Auditor o f The Philadelphia National Bank, and which was on motion, duly seconded, approved. The report is attached hereto and made a part of these minutes. The President called for nominations for Secretary, and Mr. FI. L. Hilyard was nominated. On motion, duly seconded, Mr. Hilyard was unanimously elected Secre tary of the Council for the year 1923. On motion, duly seconded, the Secretary’s salary was fixed at $1,500. for the year 1923. On motion, duly seconded, the following resolution was unanimously adopted: “ Resolved, that the President be and he is hereby authorized to ask each Federal Reserve Bank to contribute $250. toward the secretarial and incidental expenses o f the Federal Advisory Council for the year 1923 and to draw on them for that purpose.” On motion, duly seconded, Council adopted By-laws for the year 1923, copy of which is attached hereto and forms part o f these minutes. On motion, duly seconded, the minutes o f the November 20, 1922, meeting of the Council, copies of which had previously been sent to the members, were approved. The President read communication from Hon. W . P. G. Harding, dated Decem ber 21, 1922, expressing his appreciation o f the engrossed copy o f Resolution adopted by the Council at its meeting September 26, 1922. The President presented letter from Acting Governor Edmund Platt, of the Federal Reserve Board, dated January 20, 1923, with reference to eligibility for rediscount of demand drafts, with bills o f lading attached, and Council's recom mendation No. 2, of the September 26, 1922, meeting, since which time the Board had agreed to the insertion in the Rural Credits Bills— S. 4280 Capper and S. 4287 Lenroot— of a section which permits the rediscount or purchase o f such bills under certain conditions. After discussion, the Council decided to take no further action in regard thereto. Continuing the discussion of the provisions in the Rural Credits Bills— S. 4280 and S. 4287 Lenroot— Mr. Warburg recommended that the Council disapprove a pro vision in those Bills which provides, under certain conditions, for an extra dividend of 3% to member banks on stock o f the Federal Reserve Banks. On motion, duly seconded, Council disapproved this provision as contained in the Bills mentioned. (Recommendation No. 2.) Mr. Prince brought up for discussion the matter o f the handling of collection items by the Federal Reserve Banks, which in some Districts is becoming somewhat of a burden. (See below in Joint Meeting.) At 11.45 A. M. the Council adjourned to meet in joint session with the members of the Federal Reserve Board. H. L. H IL Y A R D , Secretary. 2 M IN U T E S O F JO IN T C O N F E R E N C E 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 A N D T H E F E D E R A L R E S E R V E B O A R D February 19, 1923. At 11.45 A . M. a joint conference o f the Federal Reserve Board and the Federal Advisory Council was held as arranged. Present: Members o f the Federal Reserve B oa rd : Vice Governor Edmund Platt. Plon. D. R. Crissinger, Comptroller o f the Cur rency, Messrs. Charles S. Hamlin, A. C. Miller and John R. Mitchell, also Mr. S. P. Gilbert, Jr., Undersecretary o f the Treasury. Present: Members o f the-Federal Advisory Council: Mr. L. L. Rue. President, Mr. P. M. Warburg, Vice President, Messrs. A. L. Aiken, C. E. Sullivan, J. M. Miller, Jr., E. W . Lane, G. H. Prince, E. F. Swinney, R. L. Ball, D. W . Tw ohy, E. A. Hamill, and IT. L. Hilyard, Secretary. The President o f the Council, Mr. Rue, called the meeting to order and invited Vice Governor Platt to address the confer'ence. Mr. Platt discussed two subjects as follow s: 1. Rediscount rates o f the Federal Reserve Banks— particularly those of Boston, New Y ork and San Francisco, which are / l 2% below the other Federal Reserve Banks. 2. The address made by Mr. Paul M. W arburg before the Annual Meeting o f the American Acceptance Council in New York, January 19, 1923. The members o f the Board and o f the Council discussed these subjects inform ally; also the provisions o f the Rural Credits Bills— S. 4280 Capper and S. 4287 Lenroot— particularly the provision in those Bills which allows, under certain condi tions, an extra dividend o f 3 % to be paid to member banks on stock o f the Federal Reserve Banks. Mr. Platt stated that the approval which the Board had previously given to this provision had later been withdrawn, and the House Committee on Bank ing and Currency had been so advised. Mr. John M. Miller, Jr., suggested that consideration should be given to the matter o f withdrawals from the Federal Reserve System by some o f the larger banks. Mr. Prince again presented the question referred to in the minutes o f the morning meeting regarding the present method o f handling collection items by the Federal Reserve Banks without compensation. M r. Platt reported that the Board had already given this subject consideration, and would bring it up also at the next conference of the Governors o f the Federal Reserve Banks. Mr. Aiken presented for discussion the present method o f approving applications for charters o f national banks, expressing the opinion that such applications should be approved by the Board o f Directors o f the Federal Reserve Bank in whose District the applying bank was located, and also by the Federal Reserve Board. Mr. Crissin ger stated that he felt the present system was satisfactory, and that applications for charters were granted by the Comptroller and the Secretary o f the Treasury only after conferring with the Federal Reserve Agent and the Chief National Bank Examiner of the District. 3 At 1.30 P. M., the joint conference adjourned. H. L. H IL Y A R D , Secretary. MINUTES OF JOINT CO N FEREN CE O F T H E F E D E R A L A D VISO RY COUNCIL AN D T H E F E D E R A L R E S E R V E BO A R D February 19, 1923. At 2.45 P. M., the Federal Reserve Board and the Federal Advisory Council reconvened as arranged. Present: Members of the Federal Reserve Board: Vice-Governor Edmund Platt, Hon. D. R. Crissinger, Comptroller of the Cur rency, Messrs. Charles S. Hamlin, A. C. Miller, and John R. Mitchell; also Mr. S. P. Gilbert, Jr., Undersecretary of the Treasury. Present: Members of the Federal Advisory Council: Mr. L. L. Rue, President, Mr. Paul M. Warburg, Vice President, Messrs. A. L. Aiken, C. E. Sullivan, J. M. Miller, Jr., E. W . Lane, G. H. Prince, E. F. Swinney, R. L. Ball, D. W. Twohy, E. A. Hamill, and H. L. Hilyard, Secretary. The President, Mr. Rue, called the meeting to order and asked the members of the Council in turn to give their views relative to present rediscount rates in their respective Districts. / An informal discussion was again held concerning the subject matter of Mr. Warburg’s address before the American Acceptance Council, January 19, 1923. At 4.40 P. M., the joint conference ad journed. H. L. H IL Y A R D , Secretary. MINUTES OF MEETING OF T H E F E D E R A L A D V IS O R Y COUNCIL February 19, 1923. At 4.40 P. M., the Federal Advisory Council reconvened in the Federal Reserve Board room as arranged, the President, Mr. Rue, in the Chair. The Council gave further consideration to the topics presented by Vice Governor Platt at the morning session and instructed the Executive Committee to prepare recommendations for submission to the Council for approval at the session to be held the following day, on the subjects o f rediscount rates and the provision in the Capper and Lenroot Bills relative to an extra dividend o f 3% on stock o f the Federal Reserve Banks. 4 On motion, duly seconded, the President was requested to appoint a Committee to prepare a Recommendation relative to the subject matter o f Mr. Warburg's address above referred to, for submission to the Council for approval at the session to be held the follow ing day. The President thereupon appointed Messrs. Warburg, Aiken and Sullivan, a Committee to prepare this recommendation. At 6 P. M., the meeting adjourned. H. L. H IL Y A R D , Sccrctary. M IN U T E S O F M E E T IN G O F T H E E X E C U T IV E C O M M IT T E E OF T H E F E D E R A L A D V IS O R Y CO U N C IL February 19, 1923. At 6 P. M., the Executive Committee o f the Federal Advisory Council met in the Federal Reserve Board room as arranged. Present: Mr. L. L. Rue, Chairman, Messrs. P. M. Warburg, A. L. Aiken, J. M. Miller, Jr., E. F. Swinney, and H. L. Hilyard, Secretary. The Committee prepared for presentation to the Council recommendations on the topics referred to it. A t 6.45 P. M., the meeting adjourned. H. L. H IL Y A R D . Sccrctary. M IN U T E S O F M E E T IN G O F T H E F E D E R A L A D V IS O R Y CO U N CIL February 20, 1923. At 9.30 A . M., the Federal Advisory1 Council reconvened in the Federal Reserve Board room as arranged. P resent: Mr. L. L. Rue, President, Mr. P. M. Warburg, Vice President, Messrs. A. L. Aiken, C. E. Sullivan, J. M. Miller, Jr., E. W . Lane, G. H. Prince, R. L. Ball, D. W . Tw ohy, E. A. Hamill, and H. L. Hilyard, Secretary. Mr. Rue, Chairman o f the Executive Committee, presented to the Council report embodying the recommendations which had been prepared by the Committee. The recommendations were discussed by the Council and unanimously approved for presen tation to the Federal Reserve Board. Copy o f the report is attached hereto and made a part o f these minutes. (T opics No. 1 and No. 2.) 5 Mr. Warburg, Chairman o f the Special Committee appointed the previous day, presented a report which had been prepared by that Committee, which was discussed by the Council and unanimously approved for presentation to the Federal Reserve Board. Copy of the report is attached hereto and made part o f these minutes. (Rec ommendation No. 3.) At 10 A. M., the meeting adjourned. H. L. H IL Y A R D , Sccrctary. MINUTES OF JOINT M EETIN G OF T H E F E D E R A L A D V IS O R Y COUNCIL AND T H E F E D E R A L R E S E R V E B O A R D February 20, 1923. At 10 A. M., a joint meeting o f the Federal Advisory Council and the Federal Reserve Board was held in the Federal Reserve Board room as arranged. Present: Members o f the Federal Reserve Board: Vice Governor Edmund Platt, Hon. D. R. Crissinger, Comptroller of the Cur rency, Messrs. Charles S. Hamlin, A. C. Miller and John R. Mitchell. Present: Members o f the Federal Advisory Council: Mr. L. L. Rue, President, Mr. Paul M. Warburg, Vice President. Messrs. A. L. Aiken, C. E. Sullivan, J. M. Miller, Jr., E. W . Lane, G. H. Prince, R. L. Ball, D. W. Twohy, E. A. Hamill and H. L. Hilyard, Secretary. The President of the Council, Mr. Rue, called the meeting to order and submitted the Council’s report, following which the various recommendations were discussed by the members of the Board and o f the Council. An informal discussion was held regarding rate policies and business conditions throughout the country. At 11.30 A. M., the joint conference adjourned, concluding the session of the Council. H. L. H ILY A R D , Sccrctary. R E P O R T O F S E C R E T A R Y O F T H E F E D E R A L A D V IS O R Y COUNCIL For the Year ending December 31, 1922 Balance 011 hand January 1, 1922 .......................................... $ 434.7-1 Salary Printing and Stationery........... 263.07 Annual assessment for 1922 011 T w e l v e Federal Reserve B a n k s ........................................ 3,000.00 Traveling E x p e n se s................. 271.08 Corporation Trust Service . . . 25.00 Telegrams ................................... 109.12 Postage ....................................... 34.65 Miscellaneous ............................ 189.78 Balance 011 hand 1 2 /3 1 /2 2 ... 1,042.04 ......................................... $1,500.00 $3,434.74 $3,434.74 Philadelphia, January 8, 1923. To the Federal Advisory Council: W e have audited the books, vouchers and accounts o f the Secretary o f the Federal Advisory Council for the year ending December 31, 1922, and certify that the above statement agrees therewith. Respectfully, J. A. D U FF Y , Assistant Cashier The Philadelphia National Bank. 7 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 CO U N CIL T O T H E FED ERAL RESERVE BOARD February 20, 1923 T O P IC 1. Rates. R E C O M M E N D A T IO N : Council believes that time and conditions now war rant increases in the rediscount rates o f the Federal Reserve banks o f Boston, New York and San Francisco to four and one-half per cent. T O P IC 2. Provision for three per cent extra dividend on stock o f Federal Reserve banks as contained in Capper Bill S-4280 and Lenroot Bill S-4287. R E C O M M E N D A T IO N : Council is o f the opinion that the provision in the Capper and Lenroot Bills, providing under certain conditions for an extra dividend o f three per cent to member banks, violates an important principle which was adopted when, after mature deliberation at the time o f the passage o f the Federal Reserve Act, dividends on stock o f the Federal Reserve banks were limited to six per cent. The Federal Reserve banks were not organized for profit, and in this lies an impor tant protection to the System. A fter six per cent has been paid to stock-holding banks, and provision made for surplus as required by law, all additional profits should be turned over to the Government and thus benefit the taxpayer. Council requests that the Federal Reserve Board forward this recommendation to the Banking and Currency Committees o f the Senate and House o f Representatives. R E C O M M E N D A T IO N 3. A t the request o f the Federal Reserve Board, Council discussed a paper submitted by the Vice-President, Mr. Paul M. Warburg, entitled: “ Annual Address o f President Paul M. Warburg, American Acceptance Council, New York, January 19, 1923.'’ This paper contains two suggestions: 1. Finance Bills. Council is impressed with the importance o f securing for American banks power to accept finance bills to be drawn by banks o f such foreign countries as may attain economic and fiscal conditions sufficiently strong to warrant them to undertake the stabilization o f their exchanges and the re-establishment o f their gold standards; such bills to be drawn under the auspices o f the government banks o f the foreign coun tries involved and accepted by member banks under the regulations o f and with the approval o f the Federal Reserve Board. The Council recommends to the Board close study o f this question and would welcome an expression o f the Board's view at the next meeting o f the Council. 2. Rediscount and open market policies. Council believes that the second suggestion contained in Mr. W arburg’ s address is deserving o f the Federal Reserve B oard’ s most careful study and investigation. This suggestion deals with the importance o f having the Federal Reserve System adopt two entirely distinct policies, one affecting the rediscount transactions of the Federal Reserve System, and the other the open market operations o f the System, as fully described in that paper. I f the Board shares the view o f the Council it is suggested that it invite the officers o f the Federal Reserve banks to devote their attention to the topic with a view o f developing some plan which by gradual steps would lead to a broader use o f acceptances as investments by the member banks. i
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