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MINUTES OF MEETING OF THE EXECUTIVE COMMITTEE OF THE
FEDERAL ADVISORY COUNCIL
January 5,1944
At 11:10 A. M., the Executive Committee of the Federal Advisory Council convened
in the Conference Room of the Federal Reserve Building, Washington, D. C., on Wednes
day, January 5, 1944, the President, Mr. Brown, in the Chair.
Present: Mr. Edward E. Brown, President; Messrs. William Fulton Kurtz, Robert V.
Fleming, and Walter Lichtenstein, Secretary.
The President of the Council discussed a bill dealing with branch and group banking
which he had some reason to believe might be introduced in the Congress.
There was some discussion in reference to the publication of the resolution of the
Executive Committee of December 7, 1943, dealing with the loans to be made by the
Smaller War Plants Corporation. It was decided to postpone a decision until the meeting
of the full Council in February.
It was decided to inquire as to the situation in reference to Regulation Q.
The meeting adjourned at 11:25 A. M.
WALTER LICHTENSTEIN,
Secretary.
12
MINUTES OF JOINT CONFERENCE OF THE EXECUTIVE COMMITTEE OF
THE FEDERAL ADVISORY COUNCIL AND THE BOARD OF GOVERNORS OF
THE FEDERAL RESERVE SYSTEM
January 5, 1944
At 11:30 A. M., a joint conference of the Executive Committee of the Federal Advi
sory Council and the Board of Governors of the Federal Reserve System was held in the
Board Room of the Federal Reserve Building, Washington, D. C.
Present: Members of the Board of Governors of the Federal Reserve System: ViceChairman Ronald Ransom; Governors M. S. Szymczak, John L. McKee, Ernest G.
Draper, and R. M. Evans; also Lawrence Clayton, Assistant to the Chairman; Elliott
Thurston, Special Assistant to the Chairman; Chester Morrill, Secretary of the Board of
Governors; Liston P. Bethea and S. R. Carpenter, Assistant Secretaries of the Board of
Governors; Walter Wyatt, General Counsel; George B. Vest, Assistant General Attorney;
Leo H. Paulger, Director, Division of Examinations; Edward L. Smead, Director, Division
of Bank Operations, and Carl E. Parry, Director, Division of Security Loans.
Present: Members of the Executive Committee of the Federal Advisory Council:
Mr. Edward E. Brown, President; Messrs. William Fulton Kurtz, Robert V. Flem
ing, and Walter Lichtenstein, Secretary.
The President of the Council asked about developments in reference to Regulation Q
and the hearings that have taken place before the Banking and Currency Committee of
the House of Representatives.
Governor Ransom gave a lengthy statement of the present situation.
The President of the Council asked about a bill dealing with group and branch banking
which he understood had been drafted.
Governor Ransom asked that the Council postpone its request for a copy of this draft
until the February meeting of the full Council.
The President of the Council stated, the Executive Committee would refer to the
February meeting of the full Council, the question as to the desirability of publishing the
resolution of the Executive Committee of December 7 which dealt with loans to be made
by the Smaller War Plants Corporation.
The meeting adjourned at 1:15 P. M.
WALTER LICHTENSTEIN,
Secretary.
13
HOTS*
Th is transcript of the Secretary’ s
notes i s not to be r e ^ r d e d us complete or
n ec e ssa rily acc u rate.
The transcript
should be considered as hein# stric tly *'or
the sole use o f the ssotnbers of the Federal
Advisory C o u n c il,
W* L*
Secretary*s notes on meeting of the Executive
Coeislttee o f the Federal Advisory ^cuncll on
January 5 , 19£4.» at 1 1 :1 0 A , M *, In the Con
ference Roos* o f the Federal Reserve Building*
Mr* H a r riso n *s secretary hsd telephoned that
Mr* H arrison was in bed with an stt&ck of
i n f l u e n t s , and Messrs*. Spencer and Huntington
had n o t if ie d the Secretary previously that
they *‘Guld be unsble to bo present at this
s e e lin g o f the Fxecutive C o a sittee. Con
sequently, the only on+>s present were Messrs*
Brown, K u r t s , Flem ing, and Walter Lichtenstein,
Secretary*
BRGfff tpoke o f a b i l l -vhich he understood h&rt been prepared by the
Bo rd of Governors to d ea l w ith branch and t*rwp banking. He understood that
the draft o f this h i l l had been handed in confidence to sop.e of the other
srveraaent agencies concerned*
80 fa r the b i l l had not been introduced into
Congress*
There wast sosas d is c u ss io n In reference to tlie publication of the ~esolu—
ticn of the E xecutive Co^eiittee de?*lin{? v ith the loans to be m d e by the
Ssailer Tar P lan ts Corpora t ion * I t was decided to postpone a decision until
aeeting of the Council in February*
the
Q.
I t whs decided to in q u ire as to the situation in reference to Begnlatioft
The oeetin?? was adjourned at 11s25 A* M*
19U ,
HOT?* On January 5,
at 1 1 0 0 A. W ., , lo4 Bt
M * t l a e of the E xw utiv^ Co-aUtee of the F e d £ a
«
U ^
th" ^
Governors o f t h e
.edeTOl Reserve Syste* m , hold in the Bo rd Hoorn
°- thB Ff"ifir'il Re?« rvp Building, Washington, D. C.
Besides the JMabers of the Executive Corwittee
am, its Secretary, previously listed, the following
sere present froo the Boerd. Vice-Chairman Rsr,*o«,
Governors S l j w a k , KcK<?e, Or^per, and Kvans; also,
Messrs. Clayton, Thurston, Sorrill, Bethea, Caroenter,
8ya+t , Vest, pRuiger, Saeed, and parry.
It should be noted Governor Ssyacsak ioined the aeetinir
only at 12*10 ? , H*
BROrN a.*kad sbout the developments in reference to R eflatio n Q.
and the hearings that had taken place before the Ffetnking and Currency
Ces®ittee of the House of Hepressntatives.
HAS SQM sV ted that Congressman Brent Spence, of Kentucky, had
asked his at the end of December whether ?loae representative of the
Board would be w illing to appear before the Cortmittee and explain the
situation in reference to Regulation Q* A« a result, hea rin g t^sre held
which lasted fiv e days Hid at ^hich in addition to Mr* Ransom, b iaself,
Sessrs. McKee and Dreibelbis of the Board appeared* The seeiinr
probably brought about by Paul B r o ^ , of Georgia, after he and other
Con^resssen had been hearing froa their constituents* Broim hnd discovered
that in 1937 ttiere had been some sort of an agreement r^ade that Congreas
aculd be given thirty days to work out so&e plan before the Board of
Governors took steps to enforce Regulation Q* In the seven years that
had passed since then Congress hfcd not done anything* In these hearings
?*nsca had st*ted there were three possibilities*
1* Bo nothing; 2* Repeal
the law, to which he was opposed; 3* Clarify the law. A few large banks
notified their correspondents they **ould Faake effective the reifulation
on January 1 , 19 M , and, as a re emit, It b^d corse to be believed in soae
marters that the enforce??' nt o f the la^ ras to start on January 1 , l,.\/„*
There wer* t??o «en on the Coamittee v;ho geefsed to have a ful
©
the p^ohles, naaely, Wright Pataan* of Texas, and Fred L . C aw o. , o
Michigan* Sensible questions were asked by Jessie Suaner, c*
If a vote had been taken at the tiae of the h e a r i n g , ^
th? Coartttee r-ould have been opposed to the posit
TOp?ort^l
aCo Cro^lev re d h statement prepared by hi- l©f
Correct record of the proceedings and no them has b*®”up**©-' bants
‘“"in* a .roper record made. In the nesntiae, w n / groups o- «m
a’i
over the country have agreed to obey the l*w. Louisville 1* the most
notcble example of a city not willing to eonfora. Hansom feels progress
has been sad© and the Board will continue to enforce the lar as cases
come before it . A southern banker has suggested the law be amended so
as not to apply on inter-bank deposits. Ransom cited the eftm of a bank
the deposits of ~hich had increased in the course of a few nonthj? froia
§600,000 to V?,0 10,0 00 practically all of *?bieh were in bank deposits*
It had attained this result by advertising freely that, it stood ready
to absorb all exchange charges* H>mn^hilo, its capital regained at only
^130,000. Bearings are to be resumed after the recess, r*nd Bsnson thinks
they bay last t>o to three weeks. Representatives of bankers# sesociations r ill be called as; witnesses and Han so® was ssked to put into the
record the nanes of bankers who wanted the law enforced. He is also pre
pared to file the record of the Federal Advisory Council and he handed
the Secretary of the Council a copy of the record of the Council* Crowley,
according to B&nsosi, took the position that if the Board ruled absorption
of exchange taxes is equivalent to the payment of Interest on demand de
posits th#n the Board would also have to rule that absorption of any service
charges which a bank sci&eiiaes m ke$ would also be equivalent to the paysent of interest. Ransom feels there is a sharp .distinction for in the
former c&se a banJc pays out something in behalf of a custoaer while in
the latter case a b*?nk merely waives its own charge* To put it in another
way: in one esse a bank p^.ya out and in the other It collects.
(It is at this point that Governor Sfoymosak joined the meeting.)
rMSCU stated that he night ask Mr* Bro^n to testify as to the po
sition of the Federal Advisory Council.
3n£F3l says be personally does not agree with the lew forbidding pay
ment of interest on dernnd deposits but as loaf as the law has been passed
it sust be enforced*
•UHSCjM says that if Congress wants to repeal the law it ought tc do
so on its own aerits.
^CKKE stated most numbers of the Congressional Committee did not seers
such interested in the problem*
BHO^li asked if the Board wns going ahead with its present procedure
and was answered in the affirmative.
*
*
*
*
BROfrH raided the q u e s tio n o f the d r a ft o f a b i l l dea lin g *it h group
ani branch banking which he understands the Board has had prepared*
MC&ZZ stated a d r a f t o f a b i l l has not been circula ted but m*r#ly
sent to 'two sup ar v is in f a g e n c i e s .
Furtherm ore, the h i l l does not touch
on th* question o f branch banking at a i l but deals only w ith holding
Ooepanles. In answer to a question by BroMi* McK^e refused to say
whether th*? Hoard a« a v*hola i s in fftv^r of the b i l l though he h i a s e l f ,
i . • * , MeK*et is s a t i s f i e d with i t .
HANiCU a&ya the proposed b i l l hna not been cleared by the Burenu of
the Budget and therefore ought not to ha circulated outside of Government
agencies concerned srith i t .
I t hasn’ t rer-ched the point wham it cnn be
s*idl to be in the l e g is l a t iv e m i l l . He paid if the Council a>\kea a fortsal
request for ft copy of the draft of the proposed b i l l , he 'ronli prefer to
have the question pasted on by the board•
yLi%I;{G anys he does not r*ish to have a r petition o:' the situation
where a statutory body lik e the Council '© uld bf* le ft in ignorance o f pro
posed legislatio n >hich v it a l l y concerns it *
MCK;%H says the b i l l «ould provide there shouli be no expansion of a
holding company without a s p e c ific o erait.
BRr?fl re fers to a
draft of the b i l l ^hich
serce. This ffould have
ec^e under such acts as
MCKEK
preamble *h ic h h*3 understands is embodied in the
states that b?ml<s ere engaged in interstate eona direc t bearing on the question as tc hor far banks
the Federal Wage and Hour law*
questioned whether the B atter of interstate coisserce is involved.
BRC‘:<rN said that at the a e e tin e o f the fu ll Council in February hs v il l
propose that the C ou n cil make a formal request of the Board for a copy of
Zt.Q draft of the b i l l *
*
5>'ALL^
*
*
*
PLANTS C0FV0HA7IC* LOAKS
3?:" H snjs the answer of the Smaller War Plants Corporation to the
resolution of the C ou n cil mao quite inadequate. A ctually, the s V te r a n ts
in the resolution «?ere taxes verbatim from the published circulars of the
cor-oration. Furtherm ore, he *ould lik e tc point out that other govemsent
corporations do not have any h e s it a t io n in charging varying rates of
interest in accordance v it h c red it r is k s involved.
He S'*id the question
of publication of the Council* s resolution **ould be postponed u n til the
Council as a ^hole had an opportunity to consider the setter*
PftAP^K agrees with Bro^n that the Corporation1s answer *a s not a
satisfactory reply*
The aeetintf adjou-ned a t 1 :1 5 P . M.
@FedFRASER