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MI N UT ES OF MEETING o f the F E D E R A L ADVISORY COU NCIL N o v e m b e r 19 , 1923 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 November 19, 1923. A regular statutory meeting o f the Federal A dvisory Council was held in the Federal Reserve B oard room , Treasury Building, Washington, D. C , Monday, November 19, 1923. The President, M r. Rue, called the meeting to order at 10.30 A . M. P resen t: Mr. L. L. Rue, President District No. 3 Mr. Paul M . W arburg, V ice President District No. 2 Mr. A . L. A iken District N o. 1 Mr. C. E. Sullivan District N o. 4 Mr. J. M. M iller, Jr. District N o. 5 Mr. E. W . Lane District N o. 6 M r. J. J. M itchell District N o. 7 Mr. F. J. W a de District N o. 8 Mr. G. H . Prince District N o. 9 M r. C. W . A llen d oerfer District N o. 10 Mr. W . M . M cG regor District N o. 11 M r. D . W . T w o h y District N o. 12 M r. FI. L. H ilyard Secretary The President, M r. Rue, presented com m unications from the Federal Reserve Banks o f Kansas City and Dallas appointing Messrs. C. W . A llendoerfer and W . M. M cGregor, respectively, as alternates in place o f Messrs. Swinney and Ball. Messrs. A llendoerfer and M cG reg or were asked to take part in the proceedings o f the Council without the privilege o f voting. On m otion, duly seconded, the minutes o f the Council meeting o f September 17 and 18, 1923, copies o f w hich had previously been sent to the members, were approved. The President, M r. Rue, reported that in accordance with Council's instructions o f September 17, the Com m ittee consisting o f himself, M r. W arburg and Mr. Miller had appeared and testified b efore the Congressional Joint Committee o f Inquiry on membership in the Federal Reserve System, O ctober 5, 1923. The President presented com m unication from V ice G overnor Platt, o f the Federal Reserve Board, dated O ctober 31, 1923, relative to the shipment abroad o f Federal Reserve notes o f the Federal Reserve Bank o f Dallas. The question was discussed inform ally by the m embers o f the Council. A t 12.45 P. M ., the Council adjourned to convene in joint session with the Federal Reserve Board. H . L. H I L Y A R D , Sccrctary. 21 M IN UTES OF JO IN T C O N F E R E N C E O F THE F E D E R A L A D V ISO 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 November 19, 1923. At 12.45 P. M., a joint conference o f the Federal A dvisory Council and the Fed eral Reserve Board was held as arranged. Present: Members o f the Federal Reserve B oa rd : Hon. D. R. Crissinger, Governor, V ice G overnor Edmund Platt, Hon. H. M. Dawes, Comptroller o f the Currency, Messrs. A . C. Miller, G. R. James, and E. H. Cunningham. Present: Members o f the Federal A d visory C ou n cil: Mr. L. L. Rue, President, Mr. P. M. W arburg, V ice President, Messrs. A. L. Aiken, C. E. Sullivan, J. M. Miller, Jr., E. W . Lane, J. J. Mitchell, F. J. Wade, G. H. Prince, C. W . Allendoerfer, W . M. M cG regor, D. W . T w ohy and H. L. Hilyard, Secretary. The President o f the Council, Mr. Rue, called the meeting to order and an infor mal discussion was held by the members o f the Board and o f the Council on the subject matter contained in Mr. Platt's letter o f October 31, 1923, relative to the shipment abroad of Federal Reserve notes o f the Federal Reserve Bank o f Dallas. The Board suggested that the Council might consider the subject o f branch bank ing by State member banks with particular reference to the Board’s resolution and reports o f November 7, 1923. At 1.30 P. M., the joint conference adjourned. IT. L. H IL Y A R D , Sccrctary. M INUTES OF M E E TIN G O F T H E F E D E R A L A D V I S O R Y COUNCIL November 19, 1923. At 3 P. M., the Council reconvened in the Federal Reserve Board room, the Presi dent, Mr. Rue, in the Chair. Further consideration was given to the subject matter contained in Mr. Platt s letter o f October 31st, relative to shipment abroad o f Federal Reserve notes of the Federal Reserve Bank o f Dallas. The members o f the Council unanimously disap proved the proposition and the matter was referred to the Executive Committee to draft formal recommendation to be presented to the Federal Reserve Board. (Rec ommendation No. 1.) The President presented for discussion three topics which had been submitted by Mr. C. E. Sullivan as follows: 22 1. Elimination o f all limits to the use o f Federal Reserve Exchange. 2. A llow country banks (those banks required to maintain only a 7% reserve) to deduct the float as between themselves and the Federal Reserve Bank, and in addition, cash in the vault before computing their deposits fo r reserve purposes. 3. Experience o f the Federal Reserve Banks in purchasing debentures o f Federal Intermediate Credit Banks in view o f the Board’s ruling o f Sep tember 27th m aking them eligible for purchase. These topics were inform ally discussed by the members o f the Council. Mr. Sullivan with the approval o f the Council withdrew T opic N o. 3 above and also with the approval o f the Council requested that consideration o f Topics Nos. 1 and 2 be deferred until C ouncil’s next m eeting in February. At the request o f M r. James, o f the Federal Reserve Board, Council discussed the collection o f non-cash items by Federal Reserve Banks. The Executive Committee was requested to form ulate and present recommendation to the Board embodying views o f the members on this topic. (R ecom m endation N o. 2 .) The Council discussed branch banking by State member banks and requested the Executive Com m ittee to form ulate recommendation thereon em bodying views o f the members. (R ecom m en dation N o. 3 .) A t 4.30 P. M ., the C ouncil adjourned. H . L. H I L Y A R D , Secretary . M IN U T E S O F M E E T I N G O F T H E E X E C U T I V E C O M M IT T E 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 Novem ber 19, 1923. A t 4.30 P. M ., a m eeting o f the Executive Committee o f the Federal A dvisory Council was held in the Federal Reserve Board room as arranged. Present: M r. L. L. R ue, C hairm an; Messrs. Aiken, W arburg, Miller, Mitchell, and H. L. H ilyard, Secretary. T h e Com m ittee form ulated recommendations upon the three topics presented, in accordance with the instructions o f the Council, and also formulated recom m endation on the subject o f rediscount rates. (Recom m endation No. 4 .) C op y o f the recom m endations is attached hereto and made part o f these minutes. On m otion o f M r. W a rb u rg , the Com m ittee also passed a resolution relative to political pressure to w hich the Federal Reserve Board has been subjected in connec tion with appointments o f Class C D irectors o f Federal Reserve Banks. The Secre tary was instructed to send a cop y o f the resolution to each member o f the Council, and if their approval cou ld be obtained to have it made a part o f the proceedings o f the Council fo r this meeting. ^3 At 5.30 P. M., the Committee adjourned, concluding the sessions o f the Council. H . L. H IL Y A R D , Secretary. December 29, 1923. The unanimous approval o f the members having been subsequently obtained by correspondence, the resolution above referred to, copy o f which is attached, is hereby made part o f the proceedings o f the meeting held N ovem ber 19, 1923, and of the recommendations to the Federal Reserve Board. H . L. H IL Y A R D , Secretary. 24 R E C O M M E N D A T IO N S O F T H E F E D E R A L A D V I S O R Y C O U N C IL T O T H E F E D E R A L R E SER VE BOARD N O V E M B E R 19, 1923 Recommendation N o. i. R eferrin g to letter from V ice Governor Platt, o f the Federal Reserve B oard, addressed to the Federal A dvisory Council, dated October 31, 1923, relative to the shipment abroad o f Federal Reserve notes o f the Federal Reserve Bank o f Dallas, the transaction as proposed involves in substance the shipment abroad by a N ew Y o r k mem ber bank o f Federal Reserve notes. It would require a very strained construction o f the Federal R eserve A ct to conceive that the Federal Reserve Bank o f N ew Y o rk fo r such purpose would be warranted in pay ing out Federal Reserve notes issued by the Federal Reserve Bank o f Dallas; nor does the C ouncil approve such a transaction fo r the purpose either o f increasing the reserve or the open market investments o f the Federal Reserve Bank o f Dallas, in view o f its position as disclosed by its latest published statement showing governm ent securities and open market investments o f $44,000,000. and a reserve o f 54.9 per cent. T he Council sees all the less reason for giving favorable consideration to this suggestion inasmuch as the object to be sought is not to create needed additional credit facilities fo r the Federal Reserve Bank o f Dallas but appar ently to enlarge its earning capacity. Recommendation N o. 2 . Council refers to its recommendation N o. 1 to the Fed eral Reserve B oard o f M ay 21, 1923, relative to the collection o f non-cash items by Federal Reserve Banks, at w hich time it was understood that the question was being studied by a special com m ittee o f Governors appointed by the Federal Reserve Board. Council is not in form ed o f the com m ittee’s report, but upon further consideration is o f the opinion that the collection o f non-cash items by Federal Reserve Banks, other than coupons, should be discontinued. Recommendation N o. j . A t the request o f the Federal Reserve Board, the Coun cil has considered the resolution and reports o f the Board dated November 7, 1923, concerning state-w ide branch banking. Council believes that the resolution, if carried into effect, w ill give a position o f m onopoly to those state banks that have already established state-w ide systems o f branches, while those state banks that have refrained from branch banking w ill be placed in a position o f great disadvantage. Recom mendation N o. 4. Council has received no communication from the Federal R eserve B oard w ith respect to discount rates, but is o f the opinion that no changes at this time are necessary o r warranted. 11 Resolution. The Federal A dvisory Council lias been inform ed that in connection with pending appointments or reappointments o f Class C D irectors o f Federal Reserve Banks, the Federal Reserve Board has been subjected to the embarrassment of an attempt to influence it by political pressure and organized campaign, with the object in view o f replacing tried servants o f the Federal Reserve System by others aspiring for their positions. The Council expresses itself as unanimously opposed to such attempts which are gravely deterimental to the best interests oi the country and apt to injure the System and to undermine its high standards. The Council requests that each member convey these views to his own District and use his influence to counteract movements o f this character wherever they may arise. The Council feels that the Board should not be embarrassed in the exercise of its duties by ill advised campaigns o f this kind and that the Board may safely be relied upon not to sacrifice deserving and trusted officers or directors to the aspirations of ambitious and unqualified persons. 12
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