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B Y -L A W S O F T H E F E D E R A L A D V I S O R Y C O U N C IL ARTICLE I. OFFICERS Officers o f this Council shall be a President, Vice-President and Secre tary. ARTICLE II. PRESIDENT A N D VICE-PRESIDENT T h e duties o f the President shall be such as usually pertain to the office; and in his absence the V ice-President shall serve. ARTICLE III. SECRETARY T h e Secretary shall be a salaried officer o f the Council and his duties and compensation shall be fixed by the Executive Committee. ARTICLE IV. EXECUTIVE COMMITTEE T h ere shall be an Executive Committee o f six ( 6 ) members o f the C ouncil, o f which the President and Vice-President o f the Council shall be ex-officio members. ARTICLE V. DUTIES OF 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 promulga tions, and communicate the same to the members o f the Council, and to sug gest to the C ouncil from time to time special matters for consideration. T h e Executive Committee shall have power to fix the time and place of holding their regular and special meetings and methods o f giving notice thereof. M inutes o f all meetings o f the Executive Committee shall be kept and such minutes or digest thereof shall be immediately forwarded to each member o f the Council. A m ajority o f the Executive Committee shall constitute a quorum and action o f the Committee shall be by a majority o f those present at any meeting. ARTICLE VI. MEETINGS R egu lar meetings o f the Federal A dvisory Council shall be held in the C ity o f W ashington on the third M on day o f the months o f February, M ay . Septem ber and N ovem ber o f each year. Special meetings may be called at any time and place by the President or the E xecutive Committee, and shall be called by the President upon written request o f any three members o f the Council. ARTICLE VII. AMENDMENTS T h ese B y-law s may be changed or amended at any regular meeting by a vote o f a m ajority o f the members o f the Federal A dvisory Council. MINUTES OF MEETING OF THE FEDERAL ADVISORY COUNCIL* February 21, 1921* A regular statutory meeting of the Federal Advisory Council was held in the Federal Reserve Board room. Metropolitan bank building, Washington, D C at 10:30 A E Monday, February 21, 1921* Present: Messrs, P M Warburg, C E Sullivan, E W Lane, J J Mitchell, F 0 Watte C T Jaffray, B F Swinney, R L Ball, A L Mills and Merritt H Grim, Secretary, Mr E F Swinney called the meeting to order at 10:30 o'clock, and nominated Mr F 0 Watte as temporary Chairman# Mr Watts was unanimously elected and he took the chair* The shair appointed Mr Merritt H Grim secretary for this meeting* The Secretary reported the credentials of the members of the Federal Advisory Council for the year 1921 as certified to him by the twelve Federal Reserve banks as follows: Federal Federal Federal Federal Federal Federal Federal Federal Federal Federal Federal Federal Reserve Reserve Reserve Reserve Reserve Reserve Reserve Re sen*® Reserve Reserve Reserve Reserve Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank of of 0f of of of of of of of of of Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St Louis Minneapolis Kansas City Balias San Francisco Mr Philip Stockton Mr Paul M* Warburg Mr* L* L* Rue Mr. C* E. Sullivan Mr, J * G, Brown Mr E W Lane Mr John J* Mitchell Mr F 0 Watts Mr C T Jaffray Mr E F Swinney Mr R L Ball Mr 4 h Mills The Roll Call showed the following members present: Messrs, P M Warburg, C E Sullivan, E W Lane, J J Mitchell, F 0 Watts, C T Jaffray, E F Swinney, R L Ball and A L Mills* Absent: Messrs Philip Stockton, L L Rue and J 0 Brown. Mr Rue and Mr Brown boing detained by illness the chairman was requested U telegraph them the Council’0 regret The and best wishes for a speedy recovery. following t elegrams ^©re dispatched: "Mr L L Rue. c/o PhiladeJ4Phia National Bank, rhiladelphia, Digitized for "You FRASER were unanimously elected P r e | ident of t h 9 MvisAry Council> the http://fraser.stlouisfed.org/ •flabera of which greatly regret tJlness prevents you attending this meeting* Federal Reserve Bank of St. Louis 2* qaflt tfiehes f®r *P®ed$ recovery* P. M* Warburg, Vice-President»" "Mr J G Brown, c/o Citizens National Bank, Raleigh, N C* <*Xhe members of the Federal Advisory Council greatly regret you are prevented froa attending this meeting by illness* Hope for your speedy recovery* P * M . Warburg, Vice-President.** The Chair stated the next business was the election of officers of the Council* Mr Swxnney nominated tor L L Hue for President, nominations he was unanimously elected, There being no otner J Mr Jills nominated Mr arburg for Vice-President, and t h e n being no other aoainations he was on motion unanimously elected* Mr Vatte then relinquished the Chair to Mr .Varburg, Vice-President * The Vice-President asked for nominations for mentoers of the Executive CflBmittee to consist of four members besides the President and Vice-President whe are ex-officio members* Mr Stockton, M r Mitchell, U r iatts and Mr Swinney were nominated and unanimously elected, The officer* and members of the Executive Commitxee therefore are: President, Mr L L Rue Vice-President, Mr P. M« Warburg Sxecutive Committee, Messrs. L L Rue, P U /arburg, Philip Stockton, Jehn J* Mitchell, F 0 Watte and S F Swinney* The Secretary reported that he had the Recommendations ®f the Council for the part year indexed and bound and had sent copies to the members of the Council, the various Federal Reserve Banks, the members of the Federal Reserve Board, and that the Council's Recommeniations for the year 1920 would be included in the Federal Keserye Board1s annual report about to be published. He also reported his secretarial and incidental expenses for the year ending 31, 1920* A copy of tha report is hereto attached and yade a part of these **«utes» On motion his report was approved# Mr .Yatts moved that the President be authori*ed to appoint a permanent ••iretary of the Council and fix hia salary subject to the approval of the Executive ''•aatttee. Motion duly seconded and carried* The following resolution was unanimously passed: "Resolved that the President be and he is hereby authorized to ask each ,#d*r*i Reserve Bank to contribute $200* towards the secretarial and incidental •*pens*9 of the Federal Advisory Council for the year 1921 and to draw on them for th*t purpose/* 3. M r Swinney moved that ^r Watts be requested te draft a resolution expressing the Council’s appreciation of Ur Jamies B Forgan’s six year*’ service as President of the Federal Advisory G0uncil and its regret at his retirement* otion seconded and carried# M r Swinney moved that Mr Watts be also requested to draft & resolution in connection with Mr Merritt H Grim’s retirement as Secretary of the Council which motion was also seconded and carried* M r Mills moved the adoption of the following: "Resolved that the by-laws of the Council for the past year lie adopted as the by-laws of the Council for the ensuing year." Motion duly seconded and carried* M r ^atts moved that the Council approve the minutes of the previous oeating held Nov, 15, 1920, copies of wkieh had been sent to the members by the Secretary* Lotion duly carried* The Chair laid before the Council the formal topics presented by the Federal Heserve Board for the Council’s consideration at this meeting* See copy hereto attached and made a part of these minutes*The Council then took up the consideration of them informally until the arrival of the members of the Federal Reserve Board at 11:15 A M« S E C R E T A R Y * Feb 2 1 , fUSPORT O f aSCROTJUW, F&JSRAL ADVISORY COUNCIL, 1921. ’OR Y CAR 1 M O galanc» on Hand Dec 31, 1919, according to last report $114,11 jUJCfclPTii; February 24, 1920, Annual ABaeaaments on 12 Federal rteaerve Banka of #200, each, total TOTAL 2400^00. 12514.11 DJiiBUIUaiu^NTS: gxppnaes attending four meetings of the Federal Advisory Council in iaahington as follow: 1920 fab. M*y Sept. Nov, R R Firt 467,55 64.35 89#70 38.72 $310.42 Hotel Lcls Meals |3.26 *39.55 2.91 42.30 6.33 38.50 2.33 32.50 $152.85 #14.33 Total traveling expense* as abova Stenography, stationery Printing Telegrams, Postage Salary Secretary 1920 Balance in "irat National 3 m k Chicago, Dec 31t 1920 Total #110.46 109.56 134.53 _. 123*55 >473,10 478.10 46.50 151*05 2B.53 1200.00 609^93^ '2514.11 Reapect fully, 3 S C R 1C T A R Y. B Y -L A W S O F T H E F E D E R A L A D V I S O R Y C O U N C IL ARTICLE I. OFFICERS Officers o f this Council shall be a President, Vice-President and Secre tary. ARTICLE II. PRESIDENT A N D VICE-PRESIDENT T h e duties o f the President shall be such as usually pertain to the office; and in his absence the Vice-President shall serve. ARTICLE III. SECRETARY T h e Secretary shall be a salaried officer o f the Council and his duties and compensation shall be fixed by the Executive Committee. ARTICLE IV. EXECUTIVE COMMITTEE T h ere shall be an Executive Committee o f six ( 6 ) members o f the Council, o f which the President and V ice-President o f the Council shall be ex-officio members. ARTICLE V. DUTIES OF 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 promulga tions, and communicate the same to the members o f the Council, and to sug gest to the C ouncil from time to time special matters for consideration. T h e Executive Committee shall have power to fix the time and place o f holding their regular and special meetings and methods o f giving notice thereof. Minutes o f all meetings o f the Executive Committee shall be kept and such minutes or digest thereof shall be immediately forwarded to each member o f the C ouncil. A majority o f the Executive Committee shall constitute a quorum and action o f the Committee shall be by a majority o f those present at any meeting. ARTICLE VI. MEE T I N G S R egular meetings o f the Federal Advisory Council shall be held in the City o f W ashington on the third M on day o f the months o f February, M ay, September and N ovem ber o f each year. Special meetings may be called at any time and place by the President or the Executive Committee, and shall be called by the President upon written request o f any three members o f the Council. ARTICLE VII. AMENDMENTS T h ese B y-law s may be changed or amended at any regular meeting by a vote o f a majority o f the members o f the Federal A dvisory Council. 4 JOINT CONFERENCE FEDERAL ADVISORY COUNCIL AND THE FEDERAL RflSSRVE BOARD* Feb, 21, 1921* At 11:15 a joint conference with the Federal Reservo Board waeheld «« arranged* Present: M e bore of the Federal Reserve Board: Governor W P G Harding, Vice^&ovarnor Edmund flatt, Messrs A C Miller, J S Williams, C S Hamlin, D C Wills, and M r W Hoxton, Secretary* Present: Members of the Federal Advisory Council: Messrs. P M Marburg, C £ Sullivan, S 8 Lane, J J Mitchell, F 0 Watts, C T Jaffray, E FStfinney, R L Ball, A L Mills, m d Merritt H* Grim, Secretary. Mr Marburg called the meeting to order and after explaining tho official organisation of the Council and Mr Rue's absence he asked Governor Harding to address the conference. Governor Harding invited the members of the Council to lunch at tho Metropolitan Club at 1:15, and said the Secretary of the Treasury having to appear before a congreesional committee at the Capital had sent his regrets that he could not meert vith the Council, but would join the members at lunch. Governor Harding reviewed the present situation as it affects the Federal Reserve system, and the topics the Board had submitted for the Council’s consideration. Governor Harding asked the Council to make a recommendation in regard to Rediscount rates* tfhile the members of the Council were presenting their reports on commercial tad financial conditions in their districts, the time set for luncheon arrived and the members of both boards proceeded to the Metropolitan Club, After lunch th# reading of members' report* was concluded. Six of the reports wsre in writing and arehereto attached and made a part of these minutes* After some time spent in general discussion the joint session ended and at 3:45 the m&nbers of the Council returned to the Board room* S E C R E T A R Y * MINUTES OF FSDFJUL ADVISORY COUNCIL# At 4:00 ?• M« the Federal Advisory Council resumed its session in the federal Reserve Board room* The unfinished business from the November m eting of the Council relative to sn amendment to the Federal Reserve Act to provide for a greater distribution of the profits of the Federal Reserve banks by paying interest on tne reserve deposits' of members banks was taken up and discussed* On motion of Ur Jatts the aatter m e referred to the Executive Committee to incorporate a negative report on it with the recommendation on the first of the formal topics submitted by the Board* M r Mills moved that the matter of recomraending the abolishment of the office of Comptroller of the Currency on which tho Council had previously express*! itself should b e a :ain taken up by the Council, and that the Executive Committee be requested to prepare a recommendation of the subjeot* tiotion duly carried* The formal topics submitted by the Federal Reserve Board were then fully discussed and referred to the ISxecutive Committee to prepare tentative recommen dations embodying the views expressed* M r Mills moved that the Executive Committee be requested also to prepare a recoumiandation stating the views of the Council in regard to rediscount ratoo, as requested by -overnor Harding. At five o'clock tho Council adjourned until ten A M Tuesday, February 22, 1921* S J S C R B T A R Y * EXECUTIVE COMMITTEE FEDERAL ADVISORY COUNCIL*Feb. 21, 1921* A meeting of the Executive Committee of the Federal Advisory Council was held in the Federal Reserve Board room after adjournment of the Council, at f i v e o'clock, Feb, 21, 1921* Present: Messrs* F M Warburg, J J Mitchell, F 0 Watts and E F Swinney, and Merritt H* Grim, Secretary, The Executive Committee discussed and carefully considered the various matters that had been referred to it* The Executive Committee considered additional matters on whieh it «as thought advisable to suggest that the Council make recommendations to the Federal Reserve Board* At six o'clock the Committee adjourned its sitting until 3:30 A M Tuesday at the Now Dillard Hotel* S E C R E T A R Y , Feb, 22, 1921. The Executive Committee met at 8:30 A M February 22, 1921 at the New /illard Hotel as arranged* The Committee concluded its work and requested the chairman to present its report to the Council at the meeting scheduled for ten o'clock* S E C R E T A R Y * m u m h h b M Mil 7, Minutes of Meeting Of Federal Advisory Council. Feb 22, 1921. The Federal Advisory Council met at 10 A M Tuesday, February 22, 1921, in the Federal Reserve Board room* Present: Messrs P M Marburg, Vice-President, C E Sullivan, £ W Lane, J J gitehell, f 0 Satts, C T Jaffray, 3 F Swinney, R L Ball, A L Mills, m d j^orritt H. Grim, Secretary. The Vies-President called the meeting to order and laid before the Council the report o f the Executive Committee, which was fully considered afed for presentation to the Federal Reserve Board* The Committee’s report in c lu d e d recoram an dat ion* on the five topics submitted by the federal ^eeerve Board on Discount rates and on four otner topics « 3ee printed copy hereto attached and made a part of these minutes* approved It wao understood that the same sub-committee to be appointed in connection vith Topic No. 7 should look after the aiatter mentioned in Topic No 10. Mr r/arburg reported that Governor Harding had agreed that the Council seobers need not prepare a written report of conditions in their districts for the naxt meeting of the Council in May* Mr »Vatts reported to the Council tho two resolutions he was authorized to draft, both of which were unanimously agreed to by ths Council* They are as follows: From the organization in 1915 Mr James B Forgan he has served as the President of the federal Advisory Council* During that period of six years his service and advice have been so able and constructive that the Council wish to make this recorded acknowledgement of. his great value to the Council^to the Federal Heserve Systran and to the Country* The presiding officer is requested to convey this expression to Iwr Forgan and furtner the personal wish of the members for ^ie good health and prosperity through future years* The Federal Advisory Council is advised by kr Merritt li ^rim of hie inability to continue service to the Council in the capacity of Secretary. view his satisfactory service since the organisation covoring a period of six years the Council hereby expresses its appreciation and its regret at the necessity for his retirement from the position* !’o body could have had a more efficient, courteous and capable officer. In The Chairman was authorized to prepare a statement for the Press submitting it for approval to the Governor of the Federal Reserve Board before giving it out. At 11 O ’clock the members of the Federal Reserve Council went into joint conference. SECRETARY* 3©ard arrived and the MINUTES OF JOINT MEETING FEDERAL RESERVE BOARD At® THE FEDERAL ADVISORY COUNCIL* Feb :>2, 1921, As arranged a joint conference with the Federal Reserve Board taf held at 11:15 o'clock* Present: Members of the Federal Advisory Council: Messrs P M Warburg, C S Sullivan, E W Lane, J J MitOhell, F 0 Watts, C T Jaffray, E F Swinney, r l Ball, A L kills, and Merritt H. Gri», Secretary. i-resent: Members of the Federal Reserve Board; Governor I B G Harding, fice-^ovsrnor iidaund Platt, Mesare* A C killer, J S Williams, C S Hamlin, DC fills and «ir .<I Hoxton, Secretary* The Vice-President of the Council, Mr tfarburg oalled the meeting asking Governor Harding to take the Chair* to order Governor Harding then called for the Recommendations of the Council which Mr *‘ /arburg read to the conference* (See printed copy of them in minutes p f tno Council this date*) I li a n followed a g^ieral discussion of the topics* }t& Yarburg suggested that the Council aake a recommendation at the n3xt i««ting revising J3ction 16 of the Federal Reserve Act vhich provides for charging Federal Reserve banks interest on the amount of their Federal Reserve utet outstanding which s u r e s t ion was aoprowed both by the Federal Reserve Board tad by the Council* Governor Harding aaid that the Board had requested the Federal Reserve ban<a not to give out for publication on Saturdays their weekly statements in •raar tnui they ao not appear before the Consolidated weekly statement of all th® Federal Reserve Banks prepared by the Board for publication on Sundays, and tasked the CounciI *3 approval of the change, The Council unanimously approved it, At one o'clock the joint conference adjourned concluding the session of tht Council* S E C R E T A R Y * T O P IC S SUGGESTED BY THE FED ER A L R E S E R V E BOARD FOR D IS C U S S IO N AT THE M E E T IN G OF THE FE D E R A L A D V ISO R Y CO U N CIL FEBRUARY 2 1 , 1 9 2 1 . 1. S h o u ld t h e B o a rd e x e r c i s e t h e a u t h o r i t y g iv e n i t i n S e c t i o n 1 6 o f t h e F e d e r a l R e s e r v e A c t a n d im p o s e a n i n t e r e s t o h a rg e a g a in s t F e d e r a l r e s e r v e b a n k s on th e am ount o f t h e i r F e d e r a l r e s e r v e n o te s o u t s t a n d in g , l e s s t h e a m o u n t o f g o ld o r g o ld c e r t i f i c a t e s h e ld b y th e F e d e r a l R e s e r v e A g e n t a s c o l l a t e r a l s e c u r i t y , and i f s o , w h a t s h o u ld t h e - r a t e o f i n t e r e s t b e? 2. S h o u l d t h e B o a r d e s t a b l i s h , f o r t h e y e a r 1 9 2 |) a t e n t a t i v e l i m i t f o r e a c h F e d e r a l r e a e r v e b a n k o n t h e a m o u n t w h ic h i t m ay r e d i s c o u n t w i t h o t h e r F e d e r a l r e s e r v e b a n k s ? 3« S h o u ld e x i s t i n g p r e f e r e n t i a l r a t e s o n n o t e s s e c u r e d L i b e r t y B o n d s a n d V i c t o r y N o te s be c o n t in u e d ? (a ) (b ) 4* W it h W it h r e s p e c t to c u s to m e rs p a p e r r e d is c o u n t e d ? r e s p e c t ' t o m em b er b a n k s 1 1 5 d a y c o l l a t e r a l by n o te s? S e c t io n 14 p e r m it s a n y F e d e r a l R e s e rv e B an k u n d e r r u le s and r e g u la t io n s to be p r e s c r ib e d b y th e F e d e r a l R e s e rv e E o a r d " t o p u r c h a s e a n d s e l l i n t h e o p e n m a r k e t *::-■»* c a b l e t r a n s f e r s a n d b a n k e r s a c c e p t a n c e s and b i l l s o f e x ch a n g e o f t h e k i n d s a n d m a t u r i t i e s b y t h i s A c t m ade e l i g i b l e f o r r e d i s c o u n t , w it h o r w it h o u t th e e n d o rse m e n t o f a m em b er b a n k , " S e c t io n 1 3 p r o v id e s t h a t " a n y F e d e r a l r e s e r v e b a n k m ay d i s c o u n t a c c e p t a n c e s o f t h e k i n d s h e r e i n a f t e r d e s c r i b e d , w h i c h m ay h a v e a m a t u r i t y a t t h e t im e o f d i s c o u n t o f n o t m o re t h a n s i x m o n t h s , e x c l u s i v e o f d a y s o f g r a c e , w h ic h a r e e n d o r s e d b y a t l e a s t o n e m em ber b a n k ." C o u n s e l i s o f th e o p in io n t h a t th e w o rd s " o f th e k in d s an d m a t u r it ie s e l i g i b l e f o r r e d is c o u n t " a p p ly o n ly to w h i c h t h e r e f o r e c a n n o t b e b o u g h t w h e re b y t h i s A c t m ade b i l l s o f exchan ge th e y have a m a t u r i t y o f m o re t h a n t h r e e m o n t h s , b u t t h a t t h e y do n o t a p p ly t o b a n k e r s ’ a c c e p t a n c e s and t h a t c o n s e q u e n t ly t h e F e d e r a l R e s e r v e B o a r d m ig h t l e g a l l y i s s u e r e g u l a t i o n s p e r m it t in g th e p u rc h a s e by F e d e r a l r e s e rv e b an k s o f b a n k e r s ' a c c e p t a n c e s o f s i x m o n th s m a t u r it y . As a m a t t e r o f s o u n d b a n k in g p o l i c y d o e s t h e C o u n c i l a d v is e th e B o a rd to is s u e su ch a r e g u la t io n ? 5. U nder a u t h o r it y R e se rv e A ct th e g iv e n in B o a rd has S e c t io n 13 a u t h o r iz e d of th e F e d e ra l m em ber b a n k s - -2- to accept d rafts or b i l l s of exchange having not more than three months sight to run, drawn by banks or bankers in Central American and South American Countries for the purpose of furnishing dollar exchange as re quired by the "usages of trade" in those countries. Within the past few days the Board has authorized member banks to accept drafts in the same manner for banks or bankers in A ustralia, New Zealand and other Australasian dependencies, having received assurances that there is now a "usage o f trade" in these dependencies which requires dollar exchange. W ill the "usages of trade" in European countries lik e ly lead to requests fo r the extension of th is privilege to those countries, and i f so , what should the policy of the Board be regarding such applications? 7. 3 0 5 ? Statement fo r the p ress. For release in the morning papers of February,2 * 3 » 1921* The follow ing statement is issued "by the Federal Advisory Council at the conclusion of it s statutory meeting with the Federal Reserve Board in Washington, February 21 and 22, 1921: "A statu tory meeting of the Federal Advisory Council was held Monday and Tuesday, February 21st and 22nd in conference with the Federal Reserve Board. nThis being the f i r s t meeting of the year the organiza tion of the Council was as follow s: P resident, Mr. L. L. Rue, President Philadelphia National Bank, Philadelphia. Vice P resident, Mr. P. M* Warburg of New York. Executive Committee: Messrs. L* L. Rue, P. M* Warburg, P h ilip Stockton, J . J . M itchell, F . 0 . Watts and E. F. Swinney. nMr. Rue has been Vice President of the Council since it s inception in I 9 1 U. Mr. James B* Forgan of Chicago has been it s President u n til this year when he declined reelection to the Council and Mr. M itchell of Chicago was chosen as his successor on the Council by the Federal Reserve Bank of Chicago. "The personnel of the Council is as follow s: ♦Federal Federal ♦Federal Federal ♦Federal Federal Federal Federal Federal Federal Federal Federal Reserve Reserge Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank of of of of of of of of of of of of Boston - Mr. Philip Stockton New York - Mr. P. M. Warburg Philadelphia - Mr. L. L. Rue Cleveland - Mr. C. E. Sullivan Richmond - Mr. J . G. Brown Atlanta - Mr. E. W* lane Chicago - Mr. J. J. Mitchell S t. Louis - Mr. F. 0. Watts Minneapolis - Mr. C. T. Jaffray Kansas City - Mr. Er F. Swinney Dallas <■* Mr. R. L. Ball San Francisco - Mr. A. L. M ills ♦Not present at th is meeting. "The Council had two extended sessions with the Federal Reserve Board at which general business and financial conditions were f u l l y d iscu ssed , the Secretary of the Treasury taking part in the d iscu ssion . M X 3C^2 -2 - nThe Council passed recommendations on the several topics submitted "by the Federal Reserve Board and discussed other topics that were suggested. ,nThe Council gave i t as i t s view that the situation does not warrant any reduction of the discount rates at this time. ” In addition to it s recommendations to the Board., the Council again went on record as favoring the abolishment of the o ffic e of the Comptroller of the Currency and the transfer of its functions to the Federal Reserve Board. The Council expressed i t s e l f a lso as favoring the creation of the o ffice of under-secretary of the treasury to he in charge of f is c a l matters and to take the place of the Secretary of the Treasury or* the Federal Reserve Board, the Governor of the Board to be the chair man of the Board and to be elected by the appointive members. nMr. Paul M* Warburg, the newly elected Vice President, presided over the Council at it s sessions, Mr* Rue, the President, having been detained in Philadelphia by i ll n e s s .” February 22, 1921* R E C O M M E N D A T IO N S O F T H E C O U N C IL TO THE F E D E R A L A D V IS O R Y FEDERAL RESERVE BO ARD February 22, 1921 T O P I C N O . 1— Should the Board exercise the authority given it in Section 16 o f the Federal Reserve A c t and impose an interest charge against Federal Reserve Banks on the amount of their Federal Reserve notes out standing, less the amount o f gold or gold certificates held bv the Federal Reserve Agents as collateral security, and if so, what should the rate of interest b e ? R ecom m endation: T h e Council voted unanimously in the negative. T h e Council is o f opinion that the argument o f excessive earnings should not impel the Board to exercise its authority to impose an interest charge against Federal Reserve Banks on the amount o f Federal Reserve notes outstanding. T h e Council believes that if an educational campaign is carried on stating that the earnings o f the Federal Reserve Banks are used for the purpose o f reducing the amount o f government bonds outstanding, particularly the Liberty Loan and V icto ry notes, it w ould dissipate any unwarranted criticism concerning exces sive earnings made by Federal Reserve Banks, and that it w ould not be difficult to convince the people that the earnings o f the banks could not be used to any better purpose. In this connection, and with the same point in view, the Council ex pressed itself unanimously against the proposition to permit the payment o f interest on member banks’ reserve balances with Federal Reserve Banks. T h e high profits o f the Federal Reserve Banks should not, in the opinion o f the C ouncil, lead to the payment o f interest on balances which in the best interest o f the system should be kept uninvested as far as may be practicable. If interest were paid it w ould act as a stimulant towards keeping the funds o f the Federal Reserve Banks invested and it might therefore interfere with the proper conception on the part o f those in charge o f the Federal Reserve Banks, concerning their first duty to keep the Federal Reserve Banks in a condition o f maximum strength. T O P I C N O . 2— Should the Board establish for the year 1921 a tentative limit for each Federal Reserve Bank on the amount which it may rediscount with other Federal Reserve Banks? R ecom m en da tion : T h e vote o f the Council was unanimously in the negative. T h e Coun cil’ s opinion is that no limit should be placed on the amount which one Federal R eserve Bank may rediscount with other Federal Reserve Banks. T h e Federal Reserve System is one and indivisible and not twelve inde- 1 pendent districts. The Council holds ilij view that the Board should exercise its own discretion and should not limit its own power of action by binding itself to definite rules, which, with conditions varying in the several districts and strongly fluctuating at this time, might fit one condition and one period but might prove embarrassing in others. The Council believes, however, that where Federal Reserve Banks are fairly regular rediscounters with other Federal Reserve Banks their discount rates should not be permitted to be lower than those prevailing with the Federal Reserve Banks granting the rediscounts. TOPIC NO. 3—Should existing preferential rates on notes secured by Liberty Bonds and Victory notes be continued? (a) With respect to customers’ paper rediscounted? (b) With respect to member banks’ 15 day collateral notes? Recommendation: The Council is of opinion that for the time being it may be opportune to continue preferential rates on notes secured by Liberty Bonds and Victory notes, both (a) in respect to customers’ paper discounted, and (b) in respect to member banks’ 15 day collateral notes, but such preferential rates should be discontinued as soon as it can be done advantageously and without injustice. TOPIC NO. 4—Section 14 permits any Federal Reserve Bank under rules and regulations to be prescribed by the Federal Reserve Board to purchase and sell in the open market cable transfers and bankers’ acceptances and bills of exchange of the kinds and maturities by this Act made eligible for rediscount with or without the endorsement of a member bank. Section 13 provides that “any Federal reserve bank may discount acceptances of the kinds hereinafter described, which have a maturity at the time of discount of not more than three months’ sight, exclusive of days of grace, and which are indorsed by at least one member bank.” Counsel is of opinion that the words “of the kinds and maturities by this Act made eligible for rediscount,” in Section 14, apply only to bills of exchange which therefore cannot be bought where they have a maturity of more than three months, but that they do not apply to bankers’ acceptances and that consequently the Federal Reserve Board might legally issue regu lations permitting the purchase by Federal Reserve Banks of bankers’ acceptances of six months’ maturity. As a matter of sound banking policy does the Council advise the Board to issue such a regulation? Recommendation: The Council voted unanimously to advise the Board that in its opinion it should permit Federal Reserve Banks to purchase bankers’ acceptances drawn for the purpose of financing the importation and exportation of goods having a maturity up to six months. T h e Council understands that the B oard has expressed its preference by ruling to have accepting banks, in cases where the transactions extend over a period in excess o f three months, grant acceptance credits in the form o f acceptances running as nearly as may be possible over the w'hole period involved in the liquidation o f such trans actions not to exceed six months, rather than favoring the granting o f accep tance credits extending over ninety days with the privilege o f one renewal. T h is ruling will force the accepting banks to issue their acceptances for periods in excess o f three months, and it is most' important that these accep tances when offered in foreign markets or in the U nited States should find a readv market and should not be penalized by being offered as ineligible bills. It is claimed that the open market might absorb these bills, but the rate for them in that case would be so unfavorable, and moreover the con fidence in their ready salability w ould be so much weakened by the mere fact that the Federal Reserve Banks would not be regular purchasers o f this class o f paper, that it w ould seriously impair the ability o f Am erican Banks to establish themselves in foreign markets as acceptance bankers able to com pete with England. In our opinion it is no more than logical and right for the B oard to follow up its ruling with the granting o f the pow er to Federal Reserve Banks to purchase eligible acceptances financing the im portation and exportation o f goods and having a maturity o f from three to six months. T O P I C N O . 5— U nder authority given in Section 13 o f the Federal Reserve A c t the B oard has authorized member banks to accept drafts or bills o f exchange having not more than three months’ sight to run, drawn by banks or bankers in Central Am erican and South Am erican countries for the purpose o f furnishing dollar exchange as required by the “ usages o f trade” in those countries. W ithin the past few days the Board has authorized member banks to accept drafts in the same manner for banks or bankers in Australia, N e w Zealand and other Australasian dependencies, having re ceived assurance that there is now a “ usage o f trade” in these dependencies which requires dollar exchange. W ill the “ usages o f trade in European countries likely lead to requests for the extension o f these privileges to those countries, and if so, what should the policy o f the Board be in regarding such applications? R ecom m en dation : T h e Council expressed itself unanimously in favor o f endorsing the B o a rd ’ s action in authorizing member banks to accept dollar exchange drafts for banks in Australasia in addition to the authority already granted them to accept in like manner for banks in Central and South American countries. W ith respect to the question asked by the Board whether such power should be extended to banks in European countries the Council is o f opinion that this should not be done. T h e Council does not favor the granting o f this pow er to countries where there exists a system o f a large number o f highly developed banks o f great financial strength which could easily issue drafts for the purpose of furnishing exchange to an extent which might become em barrassing to the Federal Reserve System, and moreover it would appear impossible in these countries, where stock exchange and financial transactions are highly developed, to provide for safeguards which would prevent the abuse of facilities so offered by financing stock exchange loans and other financial transactions not directly involved in export or import operations; nor does it appear that in the exportations of Europe to the United States there are regular seasonal movements which would warrant the drawing of finance drafts in anticipation of exportations such as exist in the United States with respect to cotton or similar crops. The Council feels that the power to accept for the furnishing of dollar exchange should be restricted to such Colonial countries and dependencies and countries on this hemisphere as, after proper investigation, may seem entitled to the granting of the privilege. ADDITIONAL RECOMMENDATIONS TOPIC NO. 6. Recommendation: Resolved that in view of the grave economic conditions abroad and the influence they will exercise upon the future trend of American commerce and trade, it is the sense of this Council that it might be advisable for the Federal Reserve Board to appoint a suitable representative to visit European countries for the purpose of making a thorough first-hand investigation and report of the social, economic and financial situation of those countries. TOPIC NO. 7. The Council wishes to go on record again that in their opinion the office of the Comptroller of the Currency should be abolished and the duties pertaining to this office should be taken over by the Federal Reserve Board and that the number of appointive members of the Board be increased from five to six. The Council favors the creation of the office of an Under-Secretary of the Treasury in charge of financial matters who would take the place of the Secretary of the Treasury as an ex-officio member of the Federal Reserve Board, the Governor of the Federal Reserve Board, who would act as its chairman, to be chosen by the Board itself from its appointive members. Resolved that the Executive Committee, or a subcommittee, not ex ceeding four, of which the President and Vice President shall be members, to be appointed by the President, communicate these views of the Council to the incoming Secretary of the Treasury and to the chairmen of the proper committees o f Congress and that it point out the importance, pending the proposed legislation, o f appointing a comptroller of the currency who could qualify as a member o f the Board in case amendments on lines as proposed should be enacted. R esolved further that the Executive Committee or said subcommittee be hereby authorized and instructed to take such further steps to aid in the at tainment o f the aims above outlined as it may deem proper. T O P IC N O. 8. W ith respect to discount rates it was resolved that the Council does not favor at this time the reduction o f any discount rates. T O P I C N O . 9. T h e Council suggested to the Board the cancellation o f the rediscount rate for bankers’ acceptances. Rediscount rates for bankers’ acceptances now in force appear inoperative and anomalous in their relation to one an other and to the open market rates for bankers’ acceptances. A rediscount rate for bankers’ acceptances, if established at all, should logically be higher than the open market rate for such paper. *£ 5# T O P I C N O . 10. T h e Council urges upon Congress the necessity o f the immediate enact ment o f legislation authorizing the Treasury to pay over to the railroads the sums due them, obviating the delay in those payments which at present seriously hampers the entire banking situation. T h e follow ing members o f the Federal A dvisory Council were present at this meeting: Messrs. Paul M . W arburg, Vice-President, in the Chair; C . E. Sulli van, E dw ard W . Lane, J. J. M itchell, F. O . W atts, C. T . Jaffray, E . F. Swinney, R . L . Ball, A . L. M ills and Merritt H . Grim, Secretary. R EPO R TS OF MEMBERS Of F E D E R A L A D V ISO R Y CO U N CIL at th e STATUTO RY M E E T IN G h e ld , a t W a s h in g t o n , D. C. F e b ru a ry 21 and 2 2 , 1921. -1X -3053 District No. 2 (New York) The Federal Reserve Banks 1 monthly, and in some cases even weekly, reports concerning fin an cial and economic conditions in their d istric ts have been so admirably perfected during the la st two years that i t woaid seem impossible for individual members of the Federal Advisory Council to prepare any statement that could match these very complete reports or could add to the material furnished by them. In complying with t-he Board's request to submit a report, I presume that i t is the object of the the Board to secure the individual expression of the members concern ing the general situ a tio n , rather than to have them attempt to give a detailed s t a t i s t i c a l report. beg to submit my Approaching the matter from this angle, I thoughts as follow s: Business currents in the Second D istrict have followed very much the same course in the la s t three months as in the country at large. There has been a continuous decline in speculative a ctiv ity and a very marked curtailment o f production in the fa cto rie s; but, on the other hand, re ta il trade has continued a t a high level and the purchasing power of the public seems to be f a ir ly unimpaired. Our foreign trade s t a t i s t ic s for October, November and December do Uuf show any notable decline; OCTOBER NOVEMBER DECEMBER (Tne figures being as follow s: _________________________________________ Exports over Imports Exports II2 £Q£?JL ________ Balance______ 7 5 1 ,7 2 8 ,5 7 0 334,263,803 417,464,767 676,706 ,011 321,181,080 355,524,931 7 2 0 ,4 9 3 ,2 6 6 256,105,972 454,387,294 ) the reduced volume of forward dealings in foreign exchange might presage, however, a considerable decline in our exports and imports daring the first quarter of tho current year. Retail domestic trade is generally reported as good; especially by the large department stores, both in the metropolitan d is tr ic t and outside. And th is is true equally of the holiday trade and of trade since the f ir s t of the year, I am informed that careful inquiry among the department stores of New York, a comparison o f reports in Boston and e ls e where, indicate, that the r e t a il drygoods dealers intend to standardize their spring sales as far as p o ssible on a basis of 16 per cent*- below that of the same season la s t year. This is in the face of cuts in cot tors , woolens, knit goods, men's clothing, and the great variety of other merchandise at w holesale, that have readied a f u ll 40 to 50 per cent. The fact that the r e ta ile r s do not intend further to reduce is f a ir ly good proof that they take a rather hopeful view of the situation. Wholesale trade, on the other hand, has been almost at a s ta n d s till, so far as large forward buying is concerned. And the trade is largely of a hand to mouth character, as in the past six months. Even at the present extraordinarily low le v e l of p rice s, there s t i l l appears to be lit t le d isp o sitio n on the part of large buyers to make any heavy commit ments. This is rea d ily understood when one bears in mind that a large num ber of important corporations and firm s, caught with a very heavy load of accumulated and unsold raw materials or finished a r t ic le s , have been practically taken over by th eir creditors. The holdings of these concerns, and others that have s t i l l managed to keep above water, w ill be liq u id a ted as soon as a demand w i ll a r is e , at prices that w ill enable the creditors to collect tn eir debts without s a c r ific e , or even at a loss. I t is only -3 - X -3 0 5 3 vvhen these large accumulations w ill begin actually to move that the new level of prices w ill be established and that the real condition 0 1 the debtors w ill d e fin ite ly be ascertained. This may ultim ately lead to quite a number of f a ilu r e s , but i t is generally believed that the large p r o fits made by the banks in the past have enabled them to provide for impending losses in this regard. Up to February 15th the index of the great basic commodities com piled by the Federal Eeserve Bank of New York showed a decline of 47 per cent, from the peak of la s t May. The curtailment in manufacturing has run very high in some lin e s , and in the te x tile s as high as 40 to 50 per cent. Imports of basic commodities, lik e tin , s ilk and rubber, have fa lle n to very lew le v e l s , and i f the volume of bank clearings be any index of general volume of trade, this curtailment, i f continued, would lead us to expect a marked shortage of goods in some lin es by the summer or early f a l l . VJhile the f a l l in wholesale prices is said to go beyond any precedent known in a century, which might lead us to assume that they have gone to a level below the lin e that we might envisage as our future normal, i t is im possible to f o r e t e ll how much further down they may go, or when and how far they may r ise u n til we know what the European settlement w ill involve with regard to the future standard of liv in g of the world, and with that, with regard to the volume of i t s foreign trade. We cannot a t th is time assess with any degree of confidence when and hew far the crippled buying power of Europe may be restored. As far as our own home consumption is concerned, we may not overlook the fa ct that the pur chasing power of the farming community has been very d ra stic a lly reduced and that at present i t i s l i t t l e more than one-half what i t was la s t year. -4 - Striking a balance in trying to weigh, the many puzzling factors at play, one would, hardly be inclined to reach the conclusion that there is a strong p rob ab ility of an early business boom. Foreign exchanges have generally shown greater strength during this la s t month. The reduced volume of our exports and the shrinkage of prices of our goods are lik e ly to have played an important part in the development of this trend* It is probably sa fe , nowever, to say that in addition psychology has exercised an inportant influence in this regard. Hopes that the indemnity question w ill be se ttle d and that a fte r such a settlem ent, countries may be able to find ways and means to balance th eir budgets and also adjust their indebtedness to us, are no doubt at the root of the present rise. Stating this fact is pointing out the unsafe ground on which the movement is bottomed, A settlement of the indemnity alone w ill not avail unless i t is a s e t t le ment that w ill r e su lt in a balanced Europe; unless i t w ill result in creating conditions in which budgets can be met without further increase in national debts and in which exchanges can be sta b ilize d . The next weeks w ill show whether our hopes for a sa tisfa c to ry settlement in the near future may be f u l f i l l e d , or whether the business world must adjust its gait once more to a prolonged period of uncertainty and disorganiza tion. Rates fo r commercial paper have remained p r a c tic a lly unchanged, though the volume o f borrowing has been m aterially decreased owing to shrinkage of p rice s and business stagnation. banks so h e a v ily indebted to the Federal Reserve However, with the System, a liquidation X -3C 53 -5- of comnercicil borrowing should involve liquidation of bank borrowings with Federal Reserve Banks, but should not result in easier money rates. Comnercial liq u id ation would also mean a greater supply of id le funds for investment. recently; The investment market has shown a good deal of l i f e large volumes of secu rities have been offered and placed. Yhile the f i r s t and most a ttra ctiv e issues have been activ ely absorbed, the weaker offerin gs and the recent issues have shown a greater tend ency to s tic k in the hands of the dealers, so that a good deal of secondary d istrib u tio n remains to be done.' On the whole, i t is reason able to expect that the investment market w ill take this course from time to time. As long as the banks remain so heavily indebted to the Federal Reserve Banks, and as long as the desire mast naturally pre vail on the part of both the Federal Reserve Banks and the member banks to liq u idate these loans, waves of p le n tifu l money supply w ill be comparatively sh o r t-liv e d and available funds are lik e ly to be fairly rapidly exhausted from time to time. Large foreign loans are reported in prospect and awaiting only a somewhat more favorable turn of the market. Brokers report that th eir loans are at a very low le v e l, and some of them at the lowest le v e ls known in years. The stre e t loans of the larger New York banks r e fle c t this great decrease in brokerage com mitments and show a decline of about 50 per cent, from the high le v e l of October and November 1919. The liq u id a tio n in stocks has probably been as complete this la s t year as that follow ing any of our recent and most severe fin an cial -rises, i f our own situ a tio n were not so c lo se ly intertwined with the -6 - X -3053 European tangle, one might "be inclined to say that, judging from the analogies o f the aftermaths following the panics and crises of the past, that conditions should now indicate a gradual upward tendency. In present conditions, however, he would be a bold rcan who would judge the present situ a tio n from past analogies. Summing i t up, one mig£it say that in the second Federal Reserve D istr ic t conditions, financial and conmercial, have been greatly con solidated. Given a favorable development in Europe, a l l factors would point towards a marked improvement. Failing a real settlement in Europe, recuperation, in so fa r as i t would have to rest inclusively on the awakening of our own lo ca l buying power, would seem lik e ly to prove slow. Decidedly unfavorable developments in Europe might indeed have in store for us a period of renewed liquidation with consequent further recession in p rices. P. M. WARBURG. restrict No. U (Cleveland) Business generally in the Fourth Federal Reserve D istrict is facing the problems of d e fla tio n with courage and a sincere desire to get back to a stable basis as rapidly as p o ssib le. Inventories generally have "been taken at thar f i r s t of the year on the basis of wishing to know the worst, and with a desire to get a fresh sta rt from a point as low in value as could be sub stantiated, even by'bankrupt values» The result has been that irany of the statements which are now coming into the banks shew large losses as the result of 1920 operations, to such an extent that the paper of may of our generally considered strong corporations will not be e lig ib le under present rulings of our Federal Reserve Bank* While the business situ ation is so marked by cross currents and con tradictory movements that a general characterization is impossible, s t i l l the preponderance of opinion certain ly is that in a vast majority of lin e s, values can not go much lower, and the b e lie f is that as the public gradually realizes this fa c t, the future w ill show a gradual increase in volume. The recent paralysis of trade has p a r t ia lly resulted from the mere fa c t of rapidly changing values, and s t a b ilit y of prices - even at lower levels - would be a natter of importance to a l l markets. While there is some unemployment there is no problem as yet of taking any care of/ large number of people to avoid su fferin g . Wages have not been reduced in any b ig way, but in spots where the subject has been considered, labor has shewn a d isp o sitio n to take i t s share of the burden of reducing and prices/has of course shown greatly increased e ffic ie n c y . Manufacturing, iro n and s te e l and the coal industries are a l l operating at not more than h a lf time. A ll manufacturers are beginning to eat into their accumulation of in ven tories, and order's - even back to raw m aterials are in prospect fo r the immediate future. thirty days ago This general situation is b etter than -8 - X -3053 The movement of fr e ig h t, principally ore and coal on the Great Lakes which normally sta r ts in April w ill begin on a very lew basis. Hie farmers are much inclined to hold their products, with the result that there is considerable borrowing by country state banks (not members of the Federal Reserve System) from the city banks. They are, however, going ahead with preparations for planting the usual sized crops, "While the tobacco situation in cur D istrict is not what we 7/ould like to have i t , nevertheless, i t is by no means as bad as i t has been pictured. I t is true that there have beer* night riders' threats against placing the le a f on the market, and also threats to intimidate the planters against planting f u l l new crops, yet this action is naturally of the kind which receives the most p u b licity , VJhile the price of tobacco is very low, nevertheless the farmers are marketing i t very rapidly, and while in many cases the prices are causing d istre ss, at the same time the money coming in i s giving re? i e f to the money market and is helping materially to pay o f f debts owed by the farmers . The r e t a il trade appears to be holding up w ell in volume a t, of course, considerably reduced p ric e s, 'out the desire to reduce inventories has not progressed fa r enough and the conviction that we have reached a s ta b iliz a tio n o f p rices has not become su ffic ie n tly settled to encourage buying in volume from the wholesalers. Considerable in te re st has been manifested in the Foreign Trade Financing Corporation. Ib is has not, and w ill not carry through, however, to a point where many of our people w ill purchase stock without a great deal more education, e sp e cia lly in the volume necessary to complete the D is t r ic t 's normal -share of the contemplated capitalization. D i s t r i c t No. 4 (C leveland) It is hoped that the inpending le g isla tio n permitting the Govern ment to s e ttle with the railroads, in part at le a st, fo r the balances iue them as the result of Government Administration w ill be passed quick! as this w ill enable them to take care of their much delayed obligations, and may permit of increased buying of iron and s te e l, and thus allow them to play th eir part in the increased operation of these basis industries. The market fo r new issues of securities appears to be surprisingly good. The sale of foreign government bonds is considerably b etter than we had any reason to expect. The very high rates are attracting cap ital to a degree which was not considered possible by U s . Commercial deposits in 89 selected banks in the c itie s in the D istrict have remained stationary during the past thirty days, while savings deposits have increased s lig h tly . Member banks were on January 10th borrowing from the Federal Reserve Bank - $ 1 2 2 ,5 6 1 ,4 4 0 .4 0 ; on February l 6 th, their borrowings had decreased , 7 9 9 »2 2 5 - 5 3 233*SO. The highest point of borrowing during 1921 - $1 2 2 , 1 2 2 , - Bank clearings have decreased s lig h tly . The fe e lin g of the business and bank people toward the Federal Re serve Bank and System is one of great respect and admiration. A s p ir it of desiring to cooperate with what is recognized as the f i r s t real bank ing system which the country has had, prevails very generally. It would appear that liquidation in our D istr ic t started rather early. Many of our important industries control their own raw material and are engaged in a lin e , which, because of its very nature, is x 0053 -1 0 - calculated, to su ffe r le s s than most others in any depression. Declines in tusiness a c t iv ity a ffe c t industries using raw material which does not grow tut is merely produced by the a c tiv itie s of men in a way that d iffe rs widely from that in which i t a ffe cts industries using raw materials which cLo ^row. The production o f iron ore and coal can he shut off over-night, •but i t takes some time to slow down the production of cotton* wool, leather, and kindred things. ^e re a lise that the only permanent cure for i l l s of the kind we are now suffering is in the healing power of natural forces and comes slowly. Business generally is on the upgrade "but with a rather long pull ahead, and we can not expect immunity from some further "business casualties, as the sins of over-extended cred it and over-expansion w ill exact their t o l l . In conclusion I would say that the general feeling is hopeful, and conservatively o p tim istic . C. F. SULLIVM * - 11 x - 3053 District No. 6 (.Atlanta) The sum and substance of recent developments is that there is a more cheerful fe e lin g in the Sixth Federal Reserve D is tr ic t, but without much actual increase in business* The holiday trade was much better than was expected but since then the buyers seem to have gone on a strike again. The commodity markets are in a narrow, reactionary groove, and r e ta il mer chants are gradually lowering prices * Buyers are holding off pending further reductions as there is more or le ss d istru st of the s ta b ility of present prices. Meanwhile unemployment is s t i l l very large throughout the D istr ic t incident to decreased production, resulting in a lowering of wages. luirber and naval stores industries wages have been reduced from 25$ In the to Reports coming in from d iffe r e n t sections of the D is tr ic t as to general conditions are about the same in tone, with the exception of Florida which seems to be in a more enviable p o sition . The demand fo r money is steady but i t does not seem to be as great as it was a few months ago. Tne re is a slig h t fa llin g off in loans, and on an average about 75? of those maturing are being renewed. The average rate with the larger banks is about 72 ?°* General deposits show a f a llin g o ff in the entire D istr ic t of about 30^» with the exception of Savings Deposits which seem to be on the increase. In this connection, the w riter knows of one large national bank in the Sixth District whose savings deposits increased 25$ during the past year, which indicates that the small depositor is heading the abundant advice put oat on this su b ject. Of course, at some points where business conditions are particularly bad savings deposits have decreased, but this is the exception to the rule. - 12 - In the upland cotton "belt i t is reported that about 4l$ of the crop is being held by the producers and "by the factors. In order to present to your minds a composite picture of the Georgia situation I have only to ssy that in 1919-20 that State produced 1 , 6 7 s ,758 bales of cotton which netted about $ 3 3 5 , 0 0 0 , 0 0 0 , and in addition thereto the seed sold for about $ 7 5 , 0 0 0 ,eOO, whereas, in 1 9 2 Q- - 2 1 the crop was only l , 3 S7 ,GOO bales, which at present prices w ill net ~>nly about $ 8 5 , 0 0 0 , 0 0 0 , or ju st a l i t t l e more than the amount received fo r the sssd la st season. Ginning reports fo r the year 1320-21 show less than 2,000 bales of sea island cotton. This is used princip ally in the manufacture of automobile tires, and since the extreme depression in that industry the price of staple ranges from 25^ to Uo<£ per pound, and i t is doubtful i f i t could be sold for even that p r ic e , while la s t season the best grades sold as high as $1 . 0 0 per pound. The b o ll weevil has p ra ctica lly put an end to this industry, therefore, i t is hardly worth discussing. and M ississip pi This cotton is grown in Florida in this D is t r ic t . Tennessee is carrying large quantities of cotton, tobacco and other commodities and th e ir condition is not altogether unlike that of the other States in the Sixth D is t r ic t . The naval stores situ a tio n in Georgia and Florida is about on a par with the cotton situ a tio n and the indications are that there w ill be no improvement within the next twelve months. The banks in France have called their loans on rosin and such concerns as Colgate & Co., soap manufacturers, are importing rosin from France paying about $4.75 Per barrel f . o. b. /merican p o rts, which is much below the lowest grades of rosin held in .America. - 13 - X—30*53 The market on this commodity has been closed since November 12. 1020, at which time the average grades were quoted at $ 1 1 . 3 0 per barrel. The lumber industry is about the same in a ll sections of the Sixth D is tr ic t. Present prices average about- $25-00 per 1.000 feet aga?nst approximately $ 5 0 * 0 0 at the same a year ago* TLe principal dsuend is coming from railroads and home b u ild ers. About and the ethers are operating at about of their capacity. 75$ 50$ of the m ills are closed It is reported that the coal industry in Alabama has been very active during the past few months, however, the demand for steam coal has dropped heavily during the past th irty days. A number of the furnaces are closing on account of repairs and a lack of ordersRice is one of Louisiana’s principal crops and i t is reported that 85$ of the crop i s s t i l l held by the producers. Warehouses are f i ll e d to cap acity. Even the to u rist business in Florida has suffered in sympathy with the depression in other lin e s , however, under the circumstances, as a whole the result is s a t is f a c t o r y . The decline in travel has been mainly aaong the richer c la s s which has nererr been of any great value to this State. The citrus f r u it crop has been the largest in the history of Florida, but prices have receded in proportion to the increased production. The Federal International Banking Company of New Orleans, vhich was recently organized by the member banks in this D istrict is ready to function, indeed i t is reported that the f ir s t transaction of th^s conpanj involved the shipment of 1 5 .0 0 0 baj.es ol M..ssiss--ppi cotton to Europe. - lU X-.3053 - The D irectors of the "Federal Reserve Bank of Atlanta, including the Branches at New Orleans, Birmingham, Nashville and the Savannah Agency, met with the Directors of the Jacksonville Branch, February 11th and 1 2 th, at which time an opportunity was given each representative to express his views regarding the situation in his immediate territory. Their renorts as a whole were pessim istic, but with one accord they predicted a brighter future. S . W. L A N S. * 15District No. 7 (Chicago) X-3053 The general condition of business in the Seventh Federal Reserve D istr ic t may be reported as fa ir ly satisfactory* Considerable grain has been shipped from the north-west for export, and th is has proved a great relief to the banks in the north-west and particularly in Iowa, which state has been more sorely pressed for funds than any other in our D is tr ic t. This is evidenced by the steady reduction of Iowa bank borrowings of the Federal Reserve Bank of Chicago. The peak of th is item was attained early in December, when these borrowings stood at $ 9 8 , 6 3 6 , 000. At the end of the year they had declined a l i t t l e more than $3,000,000, and on February l 6 th they had been reduced to $77 * 772 , 000, showing liquidation of of the borrowings a t the Federal Reserve Bank, from the agricu ltu ra l sections, $20,864,000 This liquidation of loans i s also reflected in the statement of the correspondent banks in reserve and central reserve c itie s of th is D istr ic t. At the present time the reduction of loans by commercial and industrial borrowers has slowed up somewhat. The marketing of liv e stock and grain apparently i s affo rd in g r e li e f to the banks, but taking the D istrict as a v/hole, th is r e lie f is not as great as had beeil hoped fo r . At the present time there is generally a strong demand for extension of loans, although in some l o c a l i t i e s there is a slight easing of the demand. Speculative tendency i s no longer very noticeable. Bankers prominent in th e ir l o c a l i t i e s , generally report that people seem to have finally reached the conclusion that economy is highly desirable. The raore progressive merchants report a very considerable reduction in stocks of merchandise compared with a few months ago, and manufacturers are making persistent e ffo r t to reduce inventories. While there has been liquidation of inventories by manufacturers, many are s t i l l carrying considerable quantities of raw m aterial, partly finished goods, and products ready for -16shipment, x-3053 This accounts, to some extent at le a st, for the slowness in the liq u id ation of loans in commercial and industrial centers. There is a large amount of a gricu ltu ral loans, both direct and indirect, yet to be liquidated, and bankers report from rrany sections that it w ill take the proceeds of a new crop to repay these borrowings. In Wisconsin there has been quite a liq u id a tio n of country ban* loans, especially in the tobacco growing sections. In one section th is reduction has reached ten per cent in the la s t th ir ty days. The condition of the country roads is also a feature accounting for the slow movement of corn, and quite an old supply of same remains in the country. V/nile there has been some disposition of farmers in the southwest to move their wheat in considerable quantities, going to gulf ports for export, i t is not so marked in th is D istric t, yet it has a bearing on the bank situation here because of loans by larger banks to correspondent banks in other d is t r ic ts . The material decline in market values has also been a factor of retarding liquidation of loans, as borrowers are finding i t d if f ic u lt to realize su fficien t cash from grains and liv e stock to meet obligations incurred when prices were inflated. Land values are beginning to recede from the high le v e ls attained. Farm mortgage bankers report they are making considerable loans, almost entirely to the best c la s s of farmers, the money being used to pay debts already contracted and now carried by banks- They report l i t t l e or no liquidation of mortgage loans on farms th is season. The labor situ a tio n remains p ra ctica lly unchanged since la st month. The best that can be said of i t i s that a slig h t improvement is noticeable. This i s confirmed by answers to labor questionaires from thirty prominent manufacturing concerns in Chicago, which give the numbei employed as compared with December, 6 . 8 $ increase, and as compared -1 7 - x-3053 with the same month a year ago, a decrease of 22. The amount ox pay r o ll fo r December shows 1.1% decrease, and as compared with the same month a year ago, decrease. The percentage of capacity of these plants operating in January 1^20 was 8 January 1921, 6 l .g ^ . 7 . i n December 62.2$, and in The Employers A ssociation of D etroit sta te s that the number of men employed by the seventy-nine firms reporting to them, was 51*7^5 on February 8 th . This i s about 25$ of a year ago. weeks previous the report was 36 ; COO men. Three At the end of December le s s than l k i of the 1 7 6 ,0 0 0 employed in the la t t e r part of September, were working, w h ile 29^ were working on February 8th. There were forty-one shops working on reduced schedule, an average of t h ir t y -s ix hours per man per week. In many instances where the production has been curtailed and men la id o f f , there are signs of increased e ffic ie n c y on the part of those renaining. Some of these report a reduction in wages and a shortening of hours. The coal mines, while operating at f i f t y per cent capacity, nade no change in the mine workers wage scale or hours. lumber m ills report a reduction in "wages, but not in hours. The The building trades of Chicago show the greatest amount of unemployment, and they are followed c lo se ly by metal and machinery workers. It is estimated there are about one hundred thousand unemployed in Chicago a t the present time, tfhile building operations are being widely discussed because of the hous ing problem, nothing so far has been done in an organized way fo r starting work in the spring. The plans are held in abeyance by high costs. Rentals are again being increased in Chicago. Compared with the peak price of 1920, most of the building materials have come down. Lumber has nad a big decline; stocks on hand at most of the mills are below normal. Manu facturing operations have been curtailed and all logging operations this winter have been below normal. The Federal Reserve Bank of Chicago gives the following report by States of borrowings and th eir percentage above their basic lin e , which juay prove of in te r e s t. State of Illin o is Indiana Iowa Mi chimin Wisconsin Per Cent Borrowings Basic Line $ 1 5 7,3 7 5,0 0 0 2 7 , 0 2 .0 , 0 0 0 7 8 /3 1 7 .0 0 0 8 2 ,2 8 2 ,0 0 0 2b . 0S6,000 $253,593,000 28,1^3, 000 3 4 ,0 3 9 ,0 0 0 7 3 , 1 9 0 ,0 0 0 1 2 , 0 1 5 ,0 0 0 oso.ooo $420.980.000 6 2 .0 9 6 .O 2 3 0 .0 112.4 81.1 88.1 It a lso may be of in terest to know the number of Member Banks and number of banks borrowing, which follow s: Number of Member Banks in State Number of Banks Borrowing Number of Banks Bor rowing in Excess of Basic Discount Line for the 10 day period Illinois 391 182 103 Indiana 215 119 62 46l 39 6 326 Iowa Michigan 1C6 Chicago Branch Michigan 120 Detroit Branch 20 58 34 83 J 2Z - Wisconsin 574 1 , U2 6 . q(£__ j < J. MITCHELL. -19- District No. X -3055 8 (St. Louis) Our present banking and credit structure continues to show its value over the old one. Longer time liquidation, under our present system, replaces short time bankruptcy under the old system. While actual business has not decidedly improved during the last three months as measured by volume of business and net profits, yet there is a better underlying tone. It is a time of ’ ’ watchful waiting1' but not with the anxiety of three months ago. Even in normal years, the first three months of a new year are, in this district, rather dull. There is now more of a disposition to be patient, to expect no great industrial activities soon but to work gradually back to norrcal conditions. While unemployment has increased, it does not appear to be ac companied by any marked distress. The movement for readjustment of wages, especially for unskilled workers, is progressing. For unionized labor, conferences between employers and employees are in progress with out promise, at the present, of any serious strikes or labor troubles. Frozen credits are only very slowly thawing out and there is pros pect that this will, under our present banking system, be a gradual process. Bank deposits do not show their accustomed tendency to in crease markedly and reach a high point at this time of the year. There will be from M^rch to March of the past twelve months less difference between the low and high points in deposits than that which usually occurs. Taking July 1st of la s t year as a oasis of 100$ for St. Louis Clearing House Banks, deposits reached a hi^i point of 106^ in the week of July 16th, then fluctuated around 100> until the week of September - 20 - 2 4 th; X -3 0 5 3 then began to decrease, reaching the lowest point of 91% the w e e k of November 1 2 th, and then began to increase and reached the highest point of 112% the week of January 14th. In a ll this time from July 1, 1920 to January 14, 1021, there was only a difference of 21%, which represents $ 2 4 ,5 0 0 ,0 0 0 .oo difference in deposits. Likewise in the B ills Payable at the Federal Reserve Bank there was a general tendency to increase during July and August, reaching 121% the week o f September 3rd, then suddenly decreasing for a few weeks, and then suddenly increasing to the high point of 131% the week of October 8 th. A decrease then began and continued to the low point; of 39% the week of January 14th. Spring demands for funds w i ll soon begin to come in. This w ill tend to retard the decrease in Federal Reserve Discounts for Member Banks. The quiescense in the wholesale and jobbers' f ie ld , which character ized the period preceding the h olid ays, is somewhat improved, due to the receipt of more orders and the improved procpect fo r spring, summer and autumn trade. factory. Tde holiday r e ta il trade was, on the whole, s a t is In a number of cases the sales exceeded those of la st year. The la st six ty days has seen a marked reduction in the stock of goods on the shelves o f w holesalers, jobbers and r e ta ile r s . Further liquidation w ill be necessary in some lin e s , as for example, furniture, but i t is lik e ly that th is w ill come about in a r e la tiv e ly short period, and that by the close of the spring season there w ill be a more normal relation between the e x istin g supply and the promised demand for goods. In many -S I X -3 0 5 3 lines there is a feeling tending to be supported by good reasoning, that prices have reached their lowest level. yet, and properly so, buying carefully. The consuming public is Consumers are still inclined to resist any marked tendency to increase prices. 7/hile their poten tial buying power reirains great, yet due to their acquired and forced ability to economise, resulting from the war, as well as the unemploy ment and reduced wages, prices must continue on an appealing level to bring and keep them in the market. On the farms there has been somewhat of an increased disposition to move produce but farm loans will be liquidated gradually and the prevailing and promised low prices will not make the farmer an active buyer of other products in the spring* In general, it would seem that:(a) Ifrere is a greater confidence in the fundamental soundness of the business and banking situation. (b) A disposition to resume business enterprises cautiously and not to expect "Boom times" this year but to be satisfied with moderate returns, with little or no net profit if the business and its organiza tion can be h eld intact. (c) A general feeling that particular prices and cost of living must be readjusted and equalized and this, perhaps, on a lower basis than that which now prevails. Some reductions may have gone too far, others not far enough, and some about far enough. (d) Laoor in many cases may accept a readjustment of wages as living costs are readjusted and in general will be disposed tc render more efficient service. F. 0 . WATTS X-3053 District; No. 12 (San Francisco). Biis report on business and financial conditions in the Twelfth District is based on letters received from twenty-six banks located in different parts of the district: DEMAND FOR MONEY: Generally the larger c it ie s report the demand for money as ’'a c tiv e ,” "strong ’1 or ’’excessive. ” One or two banks in Southern Oregon state the demand has ’’moderated" or is "about as usual* " PREVAILING INTEREST TL'.TTr: In most of the large centers, rates of interest are from 6 to 8 % per cent, with the ruling rate averaging ? per cent; except in Ogden, Salt Lake and Bouse the minimum is quoted at d is tr ic ts the rate is from 8 to 12 8 per cent. In country per cent. LOANS: Throughout the d is t r ic t loans are liquidating slowly, except in Los Angeles where "Loans are said to be the highest in the h is tory of the c i t y ; " yet. " and in Arizona "Ihere is no liquidation as Ogden reports loans as having been "materially liquidated; ” whereas at S alt Lake i t is stated "Ihere is a marked shortage of loaning funds, but general reduction is being accomplished through pressure exerted by the banks. " Boise reports loans increasing. DEPOSITS: Deposits are decreasing everywhere except in Los Angeles where they are "maintaining a high, level; " in Ogden "'P.iey are holding their own; " whereas at Salt Lake "Deposits have decreased on an average during the year 20 to 25)a. " -23X-3055 LUlvIBER: The lumber industry i s in an unsatisfactory condition. Most of the m ills are shut down and there are but few logging camps operating. Many lumbermen believe the industry w ill show some improvement within the next ninety days, but this imp rovement w ill not be marked u n til: fir s t, there is an adjustment of freight rates that w ill permit the Fir of the Northwest to compete in the Middle West with the Yellow Pine of the South: second, u n til the cost of production is lowered by a material reduction of wages; third, u n til there is more money in the country available for building construction. LIVESTOCK: This industry at present is in a deplorable state due, to the long Winter o f 1919-1920 when i t was necessary to purchase large amounts of feed a t high p rices (in Montana i t was necessary to feed c a ttle s ix months); to the marked decline in prices which has caused many herds to be sa crifice d in an e ffo rt to satisfy the holders of mortgage loans; and to the increased freight charges. However, liv e s to c k went into this Winter fa t and in excellent con d itio n , with cheap feed , $ 6 . to $ 8 . a ton for A lfa lfa and even as low as $3. year. a ton in some se ctio n s, as against $20. to $40. last These cond itions, together with ideal Winter weather give promise to the sheep men o f a lamb crop of one hundred per cent as compared to an average lamb crop la s t year of f i f t y per cent. Should there be a market fo r wool at fa ir prices those sheep men -24- X-3053 who have not had to s e ll th eir breeding stock in order to pay their debts w ill be able to recoup themselves on their heavy losses in the next two or three years, even though prices for wool, lambs and wethers remain at the present low le v e l. Both ca ttle and sheep men report that wages of herders have fa lle n from a maximum of $125. to as lew as $30, and $40. per month, with a considerable reduction in the cost of supplies; and they state further that the e ffic ie n c y of labor has increased in a marked degree. CHOPS: Crop prospects throughout the D is tr ic t generally are reported as ’’good. ” There is evidence however of discouragement on the part of the fanners due to th eir in a b ility to move la s t year's crops even at p re v a ilin g low p r ic e s. reduced acreage. This probably w ill result in a In Arizona i t is stated that many farmers w ill give up r a is in g cotton and return to d iv e rsifie d farming. Northwest there w i l l be about the same acreage in wheat. In the There is more than the usual amount of moisture in the s o i l and Pall sown wheat never looked b etter. TRADE: Pfoolesale trade was good throughout the d is t r ic t u n til late in the F all when there was a decided f a llin g o f f in volume; in January there has been an even more marked decrease. Inventories taken at the clo se o f the year r e fle c t the marked decline in prices of most commodities. W holesalers, fearing further declin es, are s t i l l buying sparingly except in cases where they fe e l that goods are well -25- X-3053 f below the cost of production. Retailers everywhere report an excellent year in 1920, and although, there is considerable price cutting, nevertheless retailers are prospering (at le a st for the present); but lik e the wholesalers they are buying sparingly. Until the .late F a ll co lle ctio n s were good with both wholesalers and r e ta ile r s but for the la s t two months they are reported as "fa ir ", "slow " and "poor. " In the liv e sto c k d is tr ic ts much stress is la id on the fa c t that co lle ctio n s are "very slow. n UBOH: Unemployment is increasing throughout the entire d is t r ic t but esp e c ia lly in the Northwest due to the closing down of the m ills and logging camps. There has been no great amount of suffering as yet from th is cause. T7AGES: Throughout the D is t r ic t wages are f a ll in g although as yet there has been no m aterial reduction in the building trades. I t is ex pected v&en the logging camps open up that there w ill be a reduc tion in wages of about 15 to 20 per cent. In the agricultural d is tr ic ts wages fo r farm hands have been reduced in many cases as much as 50 per cent and in some cases even more. No c ity reports any reduction in wages paid fo r c le r ic a l help. REMARKS: Although conditions today in the Twelfth D is tr ic t generally are un sa tisfa c to ry , nevertheless there is a fe e lin g of optimism on the -8 6 - part of a l l correspondents. X-3053 I t is thought that by April or May conditions w ill "be f a ir ly w ell stab ilized and that the products of the f i e l d s , forest and rivers w ill move faster with a resultant liquidation of e x istin g heavy indebtedness. It is very general ly believed that the worst has passed, but that there may be a number of business fa ilu re s as the outcome of present unsettled conditions. In almost every part of the D istrict banks are over loaned, and the country banks are not only using the Federal Reserve Bank fr e e ly , but also are leaning heavily on their city corre spondents, As an illu s tr a tio n The Portland Branch of the Federal Reserve Bank advises that i t s tota l loans to member banks are $9,4 9 0 ,0 0 0 whereas four banks alone in Portland report a total of loans to country banks of $7,978,646.49. I f our b asic products move freely in the Spring the present situ ation w i ll improve m aterially. Should however the market for cotton, r ic e , wool, liv e sto c k , salmon, lumber, canned goods and our other products not be better than i t is today, there r.0 . 1 be be d if f i c u l t y in financing the farmers and producers during the coming Summer and F a ll. A. L. MILLS. FEDERAL ADVISORY COUNCIL M I N U T E S A N D RECOMMENDAT I ONS 1921-1930 MINUTES OF M E E T I N G of the FEDERAL ADVISORY C O U N C I L F eb ruary 21, 22, 1921 OFFICERS AND MEMBERS OF TH E FEDERAL AD VISORY COUNCIL F or the Y ear 1921 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, Paul M. W arburg Paul M. W arburg Philip Stockton Secretary, H arry L. Hilyard J. J. Mitchell F. O. W atts E. F. Swinney M EM BERS: Philip Stockton Federal Reserve District N o. 1 Paul M. W arburg Federal Reserve District N o. 2 L. L. Rue Federal Reserve District N o. 3 C. E. Sullivan Federal Reserve District N o. 4 J. G. Brown Federal Reserve District N o. 5 E. W . Lane Federal Reserve District N o. 6 J. J. Mitchell Federal Reserve District N o. 7 F. O. W atts Federal Reserve District N o. 8 C. T. Jaffray Federal Reserve District N o. 9 E. F. Swinney Federal Reserve District N o. 10 R. L. Ball Federal Reserve District N o. 11 A . L. Mills Federal Reserve District N o. 12 3 BY-LAWS OF THE FEDERAL ADVISORY COUNCIL ARTICLE I. OFFICERS Officers o f this Council shall be a President, Vice-President and Secretary. ARTICLE II. PRESIDENT AND VICE-PRESIDENT The duties o f the President shall be such as usually pertain to the office; and in his absence the Vice-President shall serve. ARTICLE III. SECRETARY 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. EXECU TIVE COM M ITTEE There shall be an Executive Committee o f six ( 6 ) members o f the Council, o f which the President and Vice-President o f the Council shall be ex-officio members. ARTICLE V. DUTIES OF E XE CU TIV E CO M M ITTEE 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 power to fix the time and place o f holding their regular and special meetings and methods o f giving notice thereof. Minutes o f all meetings o f 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 o f the Executive Committee shall constitute a quorum and action o f the Committee shall be by a majority o f those present at any meeting. ARTICLE VI. MEETINGS Regular meetings o f the Federal A dvisory Council shall be held in the City o f W ashington on the third Monday o f the months o f February, May, September and N ovember o f each year. 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 o f any three members o f the Council. ARTICLE VII. AM END M ENTS These By-laws may be changed or amended at any regular meeting by a vote o f a m ajority o f the members o f the Federal Advisory Council. 4 MINUTES OF MEETING OF THE FEDERAL ADVISORY COUNCIL February 21, 1921 A regular statutory meeting o f the Federal A dvisory Council was held in the Federal Reserve Board room, Metropolitan Bank Building, W ashington, D. C., at 10.30 A . M ., Monday, February 21, 1921. Present: Messrs. P. M. W arburg, C. E. Sullivan, E. W . Lane, J. J. Mitchell, F. O. Watts, C. T. Jaffray, E. F. Swinney, R. L. Ball, A . L. Mills and Merritt H . Grim, Secretary. Mr. E. F. Swinney called the meeting to order at 10.30 o ’clock and nominated Mr. F. O. W atts as temporary Chairman. Mr. W atts was unanimously elected and he took the chair. The Chair appointed M r. Merritt H . Grim, Secretary fo r this meeting. The Secretary reported the credentials o f the members o f the Federal A dvisory Council fo r the year 1921 as certified to him by the twelve Federal Reserve Banks as follow s : Federal Reserve Bank o f Federal Reserve Bank o f Federal Reserve Bank o f Federal Reserve Bank o f Federal Reserve Bank o f Boston N ew Y ork Philadelphia Cleveland Richmond Federal Reserve Bank o f Atlanta Federal Reserve Bank o f Chicago Federal Reserve Bank o f St. Louis Federal Reserve Bank o f Minneapolis Federal Reserve Bank o f Kansas City Federal Reserve Bank o f Dallas Federal Reserve Bank o f San Francisco Mr. Philip Stockton Mr. Paul M. W arbur; Mr. L. L. Rue Mr. C. E. Sullivan Mr. J- G. Brown Mr. E. W . Lane Mr. John J. Mitchell Mr. F. O. W atts Mr. C. T. Jaffray Mr. E. F. Swinney Mr. R. L. Ball Mr. A . L. Mills The Roll Call showed the follow in g members present: Messrs. P. M. W arburg, C. E. Sullivan, E. W . Lane, J. J. Mitchell, F. O. Watts, C. T. Jaffray, E. F. Swinney, R. L. Ball and A . L. Mills. A b sen t: Messrs. Philip Stockton, L. L. Rue and J. G. Brown. Mr. Rue and Mr. B row n being detained by illness the Chairman was requested to telegraph them the Council’s regret and best wishes fo r a speedy recovery. 5 The following telegrams were dispatched: “ Mr. L. L. Rue, c /o Philadelphia National Bank. Philadelphia. Y o u were unani mously elected President o f the Federal A dvisory Council, the members o f which greatly regret illness prevents your attending this meeting. Best wishes fo r speedy recovery. P. M. W A R B U R G , Vice President “ Mr. J. G. Brown, c /o Citizens National Bank, Raleigh, N. C. The members o f the Federal Advisory Council greatly regret you are prevented from attending this meeting by illness. Hope for your speedy recovery. P. M. W A R B U R G , Vice President.” The Chair stated the next business was the election o f officers o f the Council. Mr. Swinney nominated Mr. L. L. Rue for President. nominations he was unanimously elected. There being no other Mr. Mills nominated Mr. W arburg for V ice President and there being no other nominations he was on motion unanimously elected. Mr. Watts then relinquished the Chair to Mr. W arburg, V ice President. The Vice President asked for nominations for members o f the Executive Com mittee to consist o f four members besides the President and V ice President who are ex-officio members. Mr. Stockton, Mr. Mitchell. Mr. Watts and Mr. Swinney were nominated and unanimously elected. The officers and members o f the Executive Committee therefore are: President, Air. L. L. Rue. Vice President, Mr. P. M. Warburg. Executive Committee, Messrs. L. L. Rue, P. M. W arburg, Philip Stockton. John J. Mitchell, F. O. Watts and E. F. Swinney. The Secretary reported that he had the Recommendations o f the Council for the past year indexed and bound and had sent copies to the members o f the Council, the various Federal Reserve Banks, the members o f the Federal Reserve Board, and that the Council’s Recommendations for the year 1920 would be included in the Federal Reserve Board’s annual report about to be published. He also reported his secretarial and incidental expenses for the year ending December 31, 1920. A copy of the report is hereto attached and made a part o f these minutes. On motion his report was approved. 6 Mr. Watts moved that the President be authorized to appoint a permanent secre tary o f the Council and fix his salary subject to the approval o f the Executive Com mittee. M otion duly seconded and carried. The follow ing resolution was unanimously passed: ‘ ‘Resolved that the President be and he is hereby authorized to ask each Fed eral Reserve Bank to contribute $200. toward the secretarial and incidental expenses o f the Federal A dvisory Council for the year 1921 and to draw on them fo r that purpose.” Mr. Swinney moved that Mr. W atts be requested to draft a resolution expressing the Council's appreciation o f Mr. James B. Forgan’s six years’ service as President o f the Federal A dvisory Council and its regret at his retirement. M otion seconded and carried. Mr. Swinney moved that Mr. W atts be also requested to draft a resolution in connection with Mr. Merritt H . Grim ’s retirement as Secretary o f the Council which m otion was also seconded and carried. M r. Mills moved the adoption o f the follow in g: “ Resolved that the By-laws o f the Council fo r the past year be adopted as the By-laws o f the Council fo r the ensuing year.” M otion duly seconded and carried. Mr. W atts m oved that the Council approve the Minutes o f the previous meeting held N ovem ber 15, 1920, copies o f which had been sent to the members by the Secre tary. M otion duly carried. The Chair laid before the Council the form al topics presented by the Federal Reserve Board fo r the Council’s consideration at this meeting. See copy hereto at tached and made a part o f these minutes. The Council then took up the consideration o f them inform ally until the arrival o f the members o f the Federal Reserve Board at 11.15 A . M. M E R R T T T H . G R IM , Sccrctary. 7 R E P O R T OF SE C R E T A R Y , F E D E R A L A D V IS O R Y C O U N C IL F o r the Y e a r 1920 F eb ru a ry 21, 1921 B alance on H an d D ecem ber 31, 1919, a ccord in g to last r e p o r t .................... $114.11 R E C E IP T S F ebru ary 24, 1920, Annual Assessment on 12 Federal R eserve $200 each Banks o f .................................................................................................................... 2 ,400.00 T O T A L ............................................................................................................... $2,514.11 D IS B U R S E M E N T S E xpenses attending fou r meetings o f the Federal A d v is o ry C ouncil in W a sh in g to n as fo llo w s : H otel 1920 R .R . Fare F e b ................... . . . $67.65 Meals Mels. T ota l $39.55 $3.26 $ 1 1 0.4 6 109.56 M a y .............. . . . 64.35 42.30 2.91 S ep t.................. . . . 89.70 38.50 6.33 134.53 N o v .................. 88.72 32.50 2.33 123.55 $310.42 $152.85 $14.83 $47 8.1 0 T o ta l T rav elin g Expenses, as a b o v e .. . 4 6.5 0 Sten ograph y, Stationery . P r i n t i n g ................................................................................................... 151.05 T elegram s, P ostage ............................................................................ 28.53 Salary, Secretary 1920 ....................................................................... 1,200.00 B alance in First N ational Bank, C h ic a g o ................................... 609.93 ----------------$2,514.11 R espectfully, M E R R I T T H . G R IM , Secretary. 8 M IN U T E S O F JO IN T CO N F E R E N C E OF T H E F E D E R A L A D V IS O R Y CO U N CIL 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 F ebru ary 21, 1921 At 11.15 a jo in t con feren ce with the Federal R eserve B oa rd w as held as arranged. P r e s e n t: M em bers o f the Federal R eserve B o a r d : G ov ern or W . P. G. H ard in g, V ic e -G o v e r n o r E dm un d Platt, M essrs. A . C. M il ler. J. S. W illiam s, C. S. H am lin , D . C. W ills, and M r. W . W . H o x to n , Secretary. P resen t: M em bers o f the Federal A d v is o r y C o u n cil: M essrs. P. M . W a rb u rg , C. E . S ullivan, E. W . Lane, J. J. M itchell, F. O . W a tts, C. T . Jaffray, E . F. S w in n ey, R . L. Ball, A . L. M ills, and M erritt H . G rim , S e c retary. M r. W a r b u r g called the m eetin g to o r d e r and a fte r exp la in in g the official o rg a n i zation o f the C ou n cil and M r. R u e ’ s absence, he asked G o v e rn o r H a r d in g to address the con feren ce. G o v e rn o r H a r d in g invited the m em bers o f the C ou ncil to lunch at the M e tro p o li tan C lub at 1.15, and said the S ecretary o f the T rea su ry h avin g to appear b e fo r e a con g ression al com m ittee at the C apitol had sent his regrets that he cou ld not meet w ith the C ou ncil, but w ou ld jo in the m em bers at lunch. G o v e rn o r H a r d in g review ed the present situation as it affects the F ed eral R eserve system and the top ics the B o a rd had subm itted fo r the C ou n cil's con sideration . G o v e rn o r H a r d in g asked the C ou n cil to m ake a recom m en dation in regard to R ed iscou n t Rates. W h ile the m em bers o f the C ou n cil w ere p resen tin g their reports on com m ercia l and financial con d ition s in their districts, the tim e set fo r luncheon a rrived and the m em bers o f both B oa rd s p roceed ed to the M etrop olitan Club. ing o f m em bers’ reports w as con clu d ed . A ft e r lunch the read S ix o f the reports w ere in w ritin g and are hereto attached and m ade a part o f these m inutes. A f t e r som e tim e spent in gen eral discu ssion the jo in t session ended and at 3.45 the m em bers o f the C ou n cil re turned to the B oa rd room . M E R R I T T H . G R IM , Secretary. 9 MINUTES OF MEETING OF THE FEDERAL AD VISO RY COUNCIL February 21, 1921 A t 4 P. M., the Federal Advisory Council resumed its session in the Federal Reserve Board room. The unfinished business from the November meeting o f the Council relative to an amendment to the Federal Reserve Act to provide for a greater distribution o f the profits o f the Federal Reserve Banks by paying interest on the reserve deposits o f member banks was taken up and discussed. On motion o f Mr. W atts, the matter was referred to the Executive Committee to incorporate a negative report on it with the recommendation on the first o f the formal topics submitted by the Board. Mr. Mills moved that the matter o f recommending the abolishment o f the office o f Comptroller o f the Currency on which the Council had previously expressed itself should be again taken up by the Council, and that the Executive Committee be re quested to prepare a recommendation o f the subject. M otion duly carried. The formal topics submitted by the Federal Reserve Board were then fully dis cussed and referred to the Executive Committee to prepare tentative recommendations embodying the views expressed. Mr. Mills moved that the Executive Committee be requested also to prepare a recommendation stating the views o f the Council in regard to rediscount rates, as re quested by Governor Harding. A t five o ’clock the Council adjourned until ten A . M., Tuesday, February 22, 1921. M E R R IT T H . G R IM , Secretary. M IN U T E S O F M E E T IN G O F E X E C U T IV E C O M M IT T E 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 February 21, 1921 A meeting o f the Executive Committee o f the Federal A dvisory Council was held in the Federal Reserve Board room after adjournment o f the Council, at five o ’clock, February 21, 1921. http://fraser.stlouisfed.org/ i Federal Reserve Bank of St. Louis io P resent: Messrs. P. M. W arburg, J. J. Mitchell, F. O. W atts, E. F. Swinney, and Merritt H . Grim, Secretary. The Executive Committee discussed and carefully considered the various matters that had been referred to it. The Executive Committee considered several additional matters on which it was thought advisable to suggest that the Council make recommendations to the Federal Reserve Board. A t six o ’clock the Committee adjourned its sitting until 8.30 A . M. Tuesday at the N ew W illard Hotel. M E R R I T T H . G R IM , Secretary. February 22, 1921 The Executive Committee met at 8.30 A . M . February 22, 1921, at the New W illard H otel as arranged. The Committee concluded its w ork and requested the Chairman to present its report to the Council at the meeting scheduled fo r ten o ’clock. M E R R I T T H . G R IM , Secretary. 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 I S O R Y C O U N C IL February 22, 1921 The Federal A d v isory Council met at 10 A . M. Tuesday, February 22, 1921, in the Federal Reserve B oard room . Present: Messrs. P. M. W arburg, V ice President, C. E. Sullivan, E. W . Lane, J. J. Mitchell, F. O. W atts, C. T . Jaffray, E. F. Swinney, R. L. Ball, A . L. Mills, and M erritt H . Grim, Secretary. The V ice President called the meeting to order and laid before the Council the report o f the E xecutive Committee, which was fully considered and approved fo r presentation to the Federal Reserve Board. The Committee’s report included recom mendations on the five topics submitted by the Federal Reserve Board on Discount rates and on fou r other topics. See printed copy hereto attached and made a part o f these minutes. 11 It was understood that the same sub-committee to be appointed in connection with T op ic N o. 7 should look after the matter mentioned in T op ic N o. 10. M r. W arburg reported that Governor H arding had agreed that the Council mem bers need not prepare a written report o f conditions in their districts fo r the next meeting o f the Council in May. Mr. W atts reported to the Council the two resolutions he was authorized to draft, both o f which were unanimously agreed to by the Council. T h ey are as fo llo w s : “ From the organization in 1915, Mr. James B. Forgan has served as the President o f the Federal A dvisory Council. D uring that period o f six years his service and advice have been so able and constructive that the Council wishes to make this recorded acknowledgment o f his great value to the Council, to the Federal Reserve System, and to the Country. T h e pre siding officer is requested to convey this expression to M r. F organ and fu r ther the personal wish o f the members fo r his good health and prosperity through future years.” “ The Federal A dvisory Council is advised by M r. M erritt IT. Grim o f his inability to continue service to the Council in the capacity o f Secretary. In view o f his satisfactory service since the organization coverin g a period o f six years the Council hereby expresses its appreciation and its regret at the necessity for his retirement from the position. N o body could have had a more efficient, courteous and capable officer.” The Chairman was authorized to prepare a statement fo r the Press submitting it for approval to the Governor o f the Federal Reserve B oard before giving it out. A t 11 o ’clock the members o f the Federal Reserve Board arrived and the Coun cil went into joint conference. M E R R I T T H . G R IM , Secretary. M IN U T E S O F J O 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 I S 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 22, 1921 A s arranged a joint conference with the Federal Reserve Board was held at 11.15 o ’clock. 11 P r e s e n t: M em bers o f the Federal A d v is o ry C o u n c il: M essrs. P. M . W a rb u rg , C. E. Sullivan, E . W . Lane, J. J. M itchell, F. O . W atts, C. T . Jaffray, E . F. S w inney, R . L. Ball, A . L. M ills and M erritt H . Grim , Secretary. P r e s e n t: M em bers o f the Federal Reserve B o a r d : G ov e rn o r W . P. G. H a rd in g, V ic e G o v e rn o r E dm un d Platt. M essrs. A . C. M iller, J. S. W illia m s, C. S. H am lin , D . C. W ills and M r. W . W . H o x to n , Secretary. T h e V ic e P resident o f the C ouncil, M r. W a rb u rg , called the m eeting to order, a sking G o v e rn o r H a rd in g to take the Chair. G o v e rn o r H a r d in g then called f o r the R ecom m en d a tion s o f M r. W a r b u r g read to the con feren ce. the C ou ncil w hich (S e e printed co p y o f them in m inutes o f the C ou n cil this d a te.) T h en fo llo w e d a general discussion o f the topics. M r. W a r b u r g suggested that the C ouncil m ake a recom m en dation at the next m eetin g rev isin g S ection 16 o f the F ederal R eserve A c t w h ich p rovid es fo r ch argin g F ederal R eserve Banks interest on the am ount o f their Federal R eserve N otes ou t stan ding w h ich su ggestion w as ap p rov ed both b y the F ederal R eserve B oa rd and by the C ouncil. G o v e rn o r H a r d in g said that the B o a rd had requested the Federal R eserve Banks n ot to g iv e out f o r publication on S atu rdays their w eek ly statements in ord er that they d o not appear b e fo r e the con solid ated w eek ly statem ent o f all the F ederal R eserve B anks p repared b y the B o a rd f o r p ublication on Sundays, and he asked the C ou n cil’ s a pproval o f the change. At on e o ’clo ck T h e C ou n cil u n an im ou sly app roved it. the jo in t co n fe re n ce a d jo u rn e d con clu d in g the session o f the C ouncil. M E R R I T T H . G R IM , Sccrctary. 13 R E C O M M E N D A T IO N S OF T H E F E D E R A L A D V IS O R Y COUNCIL T O T H E F E D E R A L RESERVE BO ARD F eb ru a ry 2 2 , 1 9 2 1 T O P I C N O . 1— S h o u ld th e B o a r d ex e rc ise the a u th o rity g iv en it in S e c tio n 1 6 o f th e F e d e r a l R e s e r v e A c t a n d im p o se an in terest ch a rg e a g a in st F e d e r a l R e s e r v e B a n k s on th e a m ou n t o f their F e d e r a l R e s e r v e n o tes o u t sta n d in g , less the a m o u n t o f g o ld or g o ld certifica tes h e ld b v th e F e d e r a l R e s e r v e A g e n t s as c o lla te r a l secu rity , a n d if so, w h a t sh o u ld the rate o f in terest b e ? R e c o m m e n d a t io n : T h e C o u n c il v o te d u n a n im o u sly in th e n e g a tiv e . T h e C o u n c il is o f op in io n th at th e a rg u m en t o f e x c e s siv e ea rn in g s sh o u ld n o t im p el th e B o a r d to e x e r c ise its a u th o rity to im p o se an in terest ch a r g e a g a in st F e d e r a l R e se r v e B a n k s on th e a m o u n t o f F e d e r a l R e s e r v e n o te s o u tsta n d in g . T h e C o u n c il b e lie v e s th at if an e d u c a tio n a l c a m p a ig n is ca rried o n sta tin g th a t the earnings o f th e F e d e r a l R e s e r v e B a n k s are u se d for th e p u rp o se o f red u cin g the a m o u n t o f g o v er n m e n t b o n d s o u tsta n d in g , p a r tic u la r ly th e L ib e r ty L o a n a n d V ic t o r y n otes, it w o u ld d issip a te a n y u n w a rr a n ted criticism co n ce rn in g e x c e s siv e earn in g s m a d e b y F e d e r a l R e s e r v e B a n k s , a n d th a t it w o u ld n o t b e d iffic u lt to c o n v in c e th e p e o p le th a t th e ea rn in g s o f th e b a n k s c o u ld n o t b e u sed to a n y b ette r p u rp ose. In this c o n n e c tio n , a n d w ith th e sa m e p o in t in v ie w , th e C o u n c il e x p ressed its e lf u n a n im o u sly a g a in st the p ro p o sitio n to p erm it th e p a y m e n t o f in terest on m em b er b a n k s’ reserve b a la n c e s w ith F e d e r a l R e s e r v e B a n k s. T h e h ig h profits o f th e F e d e r a l R e s e r v e B a n k s sh o u ld n o t, in th e o p in io n o f th e C o u n c il, le a d to th e p a y m e n t o f in terest o n b a la n c e s w h ic h in th e b est in terest o f th e sy stem sh o u ld b e k ep t u n in v e ste d as fa r as m a y b e p ra ctic a b le. I f in terest w e r e p a id it w o u ld a c t as a stim u la n t to w a r d s k e e p in g th e fu n d s o f th e F e d e r a l R e s e r v e B a n k s in v e ste d a n d it m ig h t th e re fo r e in terfere w ith th e p ro p er c o n c e p tio n on th e p a rt o f th o se in c h a r g e o f th e F e d e r a l R e se r v e B a n k s , co n ce rn in g their first d u ty to k eep the F e d e r a l R e s e r v e B a n k s in a co n d itio n o f m a x im u m stren gth . T O P IC NO. 2 — S h o u ld th e B o a r d esta b lish fo r th e y e a r 1921 a ten ta tiv e lim it fo r e a c h F e d e r a l R e s e r v e B a n k o n th e a m o u n t w h ic h it m a y red isco u n t w ith oth er F e d e r a l R e s e r v e B a n k s ? R e c o m m e n d a t io n : T h e v o te o f th e C o u n c il w a s u n a n im o u sly in the n e g a tiv e . T h e C o u n c il’s o p in io n is th at n o lim it sh o u ld b e p la c e d o n th e a m o u n t w h ic h o n e F e d e r a l R e s e r v e B a n k m a y re d isco u n t w ith o th er F e d e r a l R e s e r v e B a n k s. T h e F e d e r a l R e s e r v e S y s te m is o n e a n d in d iv isib le a n d n ot tw e lv e in de- 1 pendent districts. The Council holds the view that the Board should exercise its own discretion and should not limit its own power of action by binding itself to definite rules, which, with conditions varying in the several districts and strongly fluctuating at this time, might fit one condition and one period but might prove embarrassing in others. The Council believes, however, that where Federal Reserve Banks are fairly regular rediscounters with other Federal Reserve Banks their discount rates should not be permitted to be lower than those prevailing with the Federal Reserve Banks granting the rediscounts. T O P I C N O . 3— Should existing preferential rates on notes secured by Liberty Bonds and Victory notes be continued? ( a ) W ith respect to customers’ paper rediscounted? ( b ) W ith respect to member banks’ 15 day collateral notes? Recommendation: T h e Council is of opinion that for ths time being it may be opportune to continue preferential rates on notes secured by Liberty Bonds and Victory notes, both (a ) in respect to customers’ paper discounted, and ( b ) in respect to member banks’ 15 day collateral notes, but such preferential rates should be discontinued as soon as it can be done advantageously and without injustice. T O P I C N O . 4— Section 14 permits any Federal Reserve Bank under rules and regulations to be prescribed by the Federal Reserve Board to purchase and sell in the open market cable transfers and bankers’ acceptances and bills of exchange of the kinds and maturities by this A c t made eligible for rediscount with or without the endorsement of a member bank. Section 13 provides that “ any Federal reserve bank may discount acceptances of the kinds hereinafter described, which have a maturity at the time of discount of not more than three months’ sight, exclusive of days of grace, and which are indorsed by at least one member bank.” Counsel is of opinion that the words “ of the kinds and maturities by this A ct made eligible for rediscount,” in Section 14, apply only to bills of exchange which therefore cannot be bought where they have a maturity of more than three months, but that they do not apply to bankers’ acceptances and that consequently the Federal Reserve Board might legally issue regu lations permitting the purchase by Federal Reserve Banks of bankers’ acceptances of six months’ maturity. A s a matter of sound banking policy does the Council advise the Board to issue such a regulation? R ecom m endation: The Council voted unanimously to advise the Board that in its opinion it should permit Federal Reserve Banks to purchase bankers’ acceptances drawn for the purpose of financing the importation and exportation of goods having a maturity up to six months. T h e Council understands that the Board has expressed its preference by ruling to have accepting banks, in cases where the transactions extend over a period in excess o f three months, grant acceptance credits in the form o f acceptances running as nearly as may be possible over the whole period involved in the liquidation o f such trans actions not to exceed six months, rather than favoring the granting o f accep tance credits extending over ninety days with the privilege o f one renewal. This ruling will force the accepting banks to issue their acceptances for periods in excess o f three months, and it is most important that these accep tances when offered in foreign markets or in the U nited States should find a ready market and should not be penalized by being offered as ineligible bills. It is claimed that the open market might absorb these bills, but the rate for them in that case w ould be so unfavorable, and moreover the con fidence in their ready salability w ould be so much weakened by the mere fact that the Federal Reserve Banks w ould not be regular purchasers o f this class o f paper, that it w'ould seriously impair the ability o f Am erican Banks to establish themselves in foreign markets as acceptance bankers able to compete with England. In our opinion it is no more than logical and right for the B oard to follow up its ruling with the granting o f the power to Federal Reserve Banks to purchase eligible acceptances financing the im portation and exportation o f goods and having a maturity o f from three to six months, T O P I C N O . 5 — U nder authority given in Section 13 o f the Federal Reserve A c t the B oard has authorized member banks to accept drafts or bills o f exchange having not more than three months’ sight to run, drawn by banks or bankers in Central A m erican and South Am erican countries for the purpose o f furnishing dollar exchange as required by the “ usages o f trade” in those countries. W ithin the past few days the Board has authorized member banks to accept drafts in the same manner for banks or bankers in Australia, N e w Z ealan d and other Australasian dependencies, having re ceived assurance that there is new a “ usage o f trade” in these dependencies which requires dollar exchange. W ill the “ usages o f trade” in European countries likely lead to requests for the extension o f these privileges to those countries, and if so, what should the policy o f the B oard be in regarding such applications? Recom m endation: T h e Council expressed itself unanimously in favor o f endorsing the B oa rd ’s action in authorizing member banks to accept dollar exchange drafts for banks in Australasia in addition to the authority already granted them to accept in like manner for banks in Central and South Am erican countries. W ith respect to the question asked by the B oard whether such power should be extended to banks in European countries the Council is o f opinion that this should not be done. T h e Council does not favor the granting o f this power to countries where there exists a system o f a large number o f highly developed banks o f great financial strength wThich could easily issue drafts for the purpose of furnishing exchange to an extent which might become em barrassing to the Federal Reserve System, and moreover it would appear impossible in these countries, where stock exchange and financial transactions are highly developed, to provide for safeguards which would prevent the abuse of facilities so offered by financing stock exchange loans and other financial transactions not directly involved in export or import operations; nor does it appear that in the exportations o f Europe to the United States there are regular seasonal movements which would warrant the drawing o f finance drafts in anticipation of exportations such as exist in the United States with respect to cotton or similar crops. T h e Council feels that the power to accept for the furnishing of dollar exchange should be restricted to such Colonial countries and dependencies and countries on this hemisphere as, after proper investigation, may seem entitled to the granting o f the privilege. A D D IT IO N A L R E C O M M E N D A T IO N S T O P IC N O . 6. Recommendation: Resolved that in view of the grave economic conditions abroad and the influence they will exercise upon the future trend o f American commerce and trade, it is the sense of this Council that it might be advisable for the Federal Reserve Board to appoint a suitable representative to visit European countries for the purpose of making a thorough first-hand investigation and report of the social, economic and financial situation of those countries. T O P IC N O. 7. The Council wishes to go on record again that in their opinion the office of the Comptroller of the Currency should be abolished and the duties pertaining to this office should be taken over by the Federal Reserve Board and that the number of appointive members of the Board be increased from five to six. The Council favors the creation of the office of an Under-Secretary o f the Treasury in charge of financial matters who would take the place o f the Secretary of the Treasury as an ex-officio member of the Federal Reserve Board, the Governor of the Federal Reserve Board, who would act as its chairman, to be chosen by the Board itself from its appointive members. Resolved that the Executive Committee, or a subcommittee, not ex ceeding four, of which the President and V ice President shall be members, to be appointed by the President, communicate these views o f the Council to the incoming Secretary of the Treasury and to the chairmen o f the proper committees o f Congress and that it point out the importance, pending the proposed legislation, o f appointing a comptroller o f the currency who could qualify as a member o f the Board in case amendments on lines as proposed should be enacted. R esolved further that the Executive Committee or said subcommittee be hereby authorized and instructed to take such further steps to aid in the at tainment o f the aims above outlined as it may deem proper. T O P IC N O . 8. W ith respect to discount rates it was resolved that the Council does not favor at this time the reduction o f any discount rates. T O P I C N O . 9. T h e Council suggested to the Board the cancellation o f the rediscount rate for bankers’ acceptances. Rediscount rates for bankers’ acceptances now in force appear inoperative and anomalous in their relation to one an other and to the open market rates for bankers’ acceptances. A rediscount rate for bankers’ acceptances, if established at all, should logically be higher than the open market rate for such paper. T O P I C N O . 10. T h e Council urges upon Congress the necessity o f the immediate enact ment o f legislation authorizing the Treasury to pay over to the railroads the sums due them, obviating the delay in those payments which at present seriously hampers the entire banking situation. T h e follow ing members o f the Federal A d v isory Council were present at this meeting: Messrs. Paul M . W arburg, V ice-P resident, in the Chair; C . E . Sulli van, E dw ard W . Lane, J. J. M itchell, F. O . W atts, C . T . Jaffray, E. F. Swinney, R . L . Ball, A . L. M ills and Merritt H . Grim, Secretary.
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