19320712_Minutes.pdf

1932,

A meeting of the Federal Reserve Board was held on Tuesday, ally 12,

at 12:10 p. n6

PRESENT: Governor MeyerMr. HamlinMr. MillerMr. JamsMr. Pole

Mr. Norrill, SecretaryMr. McClelland, Assistant SecretaryMr. Harrison, Assistant to the Governor.

The minutes of the meetings of the Federal Reserve Board held on

J41Y 1 and 7, 1932, were approved.

The following matters were then presented for the consideration and

"tion of the Board:

Telegrams dated July 8, 1932, from the Secretaries of the Federal

aeserve Banks of Cleveland and Atlanta and July 11, 1932, from the Secretary

or the Federal Reserve Bank of Minneapolis, all advising that at meetings of

the boards of directors, on the dates stated, no changes were made in the

13'444' existing schedules of rates of discount and purchase.

Without objection noted with approval.

Letter dated July 7, 1932, from the Chairman of the Federal Reserve

1344k of Atlanta advising of the death on Sunday, July 3, 1932, of Mr. A. E.

1744",Managing Director of the Birmingham branch of the Atlanta bank.

Noted with regret.

Reply to a letter dated June 13, 1932, from the Federal Reserve Agent

Ettmlaineapolis requesting approval by the Board of a salary of3,000 per

fixed by the board of directors of the bank for Mr. A. L. Cooper, who

448 been ap.pointed auditor at the Helena branch; the reply stating that

bero_13 giving final consideration to this request the Board desires to call

theagent's attention to the report submitted by a committee appointed in

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

7/12/32 -2-

1924 to review the auditing procedure of all Federal reserve banks and

branches, questioning the necessity of maintaining an audit staff at any

Inernorandum branch and suggesting that serious consideration be given to the

subject of branch auditing by all Federal reserve banks having such branches.

Th0 reply also requested that the agent advise whether the suggestion re-

rerl'ed to was given consideration at the time the Llinneapolis directors

4PPointed Mr. Cooper as auditor at the Helena branch and whether the

directors had in mind the question whether liT. Cooper should be classified

48 an officer or as an employee of the branch.

Reply approved.

Telegraphic replies, approved by five members of the Board on July

8, to letters dated July 7, 1932, from the Governor of the Federal Reserve

86Ink of New York stating that (1) the Austrian National Bank had advised the

/361•41 for International Settlements that, unless other loan negotiations are

NIcluded favorably, the Austrian National 3ank will be unable to repay any

134I't of the central bank credit which matures on July 16, 1932, and the bank

4841 therefore requested a renewal of the credit for three months, or until

allch time as other foreign credits are made available to it, (2) the

1-144garian National Bank had advised the Bank for International Settlements

th" repayment at maturity on July 18, 1932, of any part of the principal of

the credits to the Hungarian National Bank will be impractical and the bank

4841 requested the renewal of the credits for a period of three months, and

(3) at the meeting of the board of directors of the Federal Reserve Bank of

New -„.Iork on July 7, it was voted, subject to the approval of the Federal

'"'ve Board, to authorize the officers of the bank to arrange for the

exlewal ) for a period not exceeding three months, of the Federal reserve


7/12/32 3-

1/411ke t participations of approximate/y :,;975,000 and !',4,000,000 in the credits

to the Austrian National Bank and the Hungarian National Bank, respectively,

Provided the other principal participants in these credits likewise extend

their Participations; the replies stating that the Board offers no objection

to the action of the directors, it being understood that the renewals will

be made upon the same terns and conditions as govern the existing credits.

Replies approved.

Telegraphic reply, approved by five members of the Board on july 8,

1932, to a telegram of that date from Deputy Governor Rounds of the Federal

Reserve Bank of New York requesting authority for an advance, in accordance

With the Provisions of section 10(b) of the Federal Reserve Act, as amended,

to the Cornwall National Bank, Cornwall, New York, in the amount of ,r1510,000,

tol' a period of ninety days, at a rate of 5 1/2;7) per annum, and on the

eeoUrity of miscellaneous collateral unsecured notes and domestic bonds

with a margin of not less than 25; the advance being desired to meet the

Ilithdrawal from the bank of a municipal deposit which exhausted the bank's

"1114ble funds. The reply stated that the Board authorizes the advance

811bjeot to the terms and conditions recommended.

Reply unanimously approved.

Telegraphic reply to a telegram dated July 11, 1932, from Deputy

qc)/rerilor Rounds of the Federal Reserve Bank of New York requesting authority

tor a-u advance, in accordance with the provisions of section 10(b) of the

PecleReserve Act, as amended, to the Peoples Bank and Trust Company,

'41c, New Jersey, in the amount of $500,000, for a period of ninety days,

4t a rate of 5 1/21; per annum, and on the security of miscellaneous stocks


7/12/32

and bonds

-4

and unsecured notes with a margin of at least 25%; the advance

being desired to nset heavy withdrawals of deposits from the bank. The

raPlY stated that the Board authorizes the advance subject to the terns and

ftaditions recommended.

Reply unanimously approved.

Reply, approved by five members of the Board on July 9, to a letter

dated Ally 6, 1932, from the Federal Reserve Agent at Cleveland with regard

t° the necepsity for building up his staff of examiners and inquiring

Whether it will be satisfactory to the Board if he should determine to employ

ell additional examiner; the reply stating that under existing conditions

the Board appreciates that it may be very difficult, with the limited force

which the agent now has, to carry out the policy of Obtaining complete in-

rerm.„4--- Luon regarding the condition of State member banks, and that, accord-

the Board will entertain a definite recommendation for the appoint-

Of an additional examiner, which should be accompanied by full informa-

tion regarding the experience and the qualifications of the appointee

l'eeoMitended.

Reply approved.


4ted 3.1-0-Y 2, 1932, from the Federal Reserve Agent at Cleveland reporting

that the Second National Bank of Erie, Pennsylvania, was continuously

4811-dient in its required reserves during the period of six months ending

48, 1932; the reply stating that, in view of the information submitted

%ad14 accordance with the agent's recommendation, the Board will take no

"tiQa in the matter at this time other than to forward a copy of the

"'s letter to the Comptroller of the Currency. The reply also requested


28

7/12/32 -5-

thattilt.' _agent advise the Board within a reasonable time as to whether the

bezk has restored and is maintaining the required reserves.

Reply approved.

Letter to the Federal Reserve Agent at Chicago, approved by five

membersof the Board on Suly 9, 1932, referring to the analysis of report

eXamination of the Chemical State Savings Bank, Midland, Michigan, as

°t April 4, 1932, which reveals that the transaction whereby the member bank

4beorbed the Peoples State Savings Bank of Midland, resulted in adding

1\1rther to a situation where the capitalization of the bank is utterly

illadeqUate to support the deposit liabilities and where the solvency of the

State member bank depends almost entirely upon the successful operation of

the Dow Chemical Company, and stating that the Board feels that the bank

has undulY delayed making a correction of this situation, that some immediate

action is necessary, and that it is accordingly suggested that the agent

e°11rer riith the bank and with the Commissioner of Banking and advise the

113al'd as to results of any conference on the natter.

Letter approved.


titecl Juno 28, 1932, from the Federal Reserve Agent at Kansas City referring

ther to the condition of the Sundance State Bank, Sundance, Wyoming, and

the effect upon that institution of its absorption of the Hulett State Bank,

11111 ett ng a nonmember; the reply stating that the Board has reviewed

Inl'ormation submitted and in view of the unsettled conditions which have

in the community and the comments of the agent and the State bank

eXaTh4-'ner, the Board, in accordance with the agent's recommendation,

concurred

the executive committee of the Federal reserve bank, will take no


,

7/12/32

action at this time towards the discontinuance of the bank's membership in

the Federal reserve system. The reply also stated that it is assumed that

the agent will keep in close touch with the bank, and requested that he

al'range to have an examiner Participate in the next examination and submit

tO the Board the information thus developed, together with his recomenda-

tiOn.

Reply approved.

Letter to the City National Bank, Lansing, Michigan, approved by

five members of the Board on July 9, 1932, inclosing a certificate showing

that the national bank has duly surrerdered the right to act in any fiduciary

e4Pacity and is no longer authorized to exercise trust powers under the pro,

7181-(3ns of section 11(k) of the Federal Reserve Act; together with letters

to the Comptroller of the Currency, the Federal Reserve Agent at Chicago,

444 the Treasurer of the State of Michigan, also approved by five members

Of the Board on ally 9, 1932, advising of the issuance of the certificate.

The Secretary reported for the record that the City National Bank had filed

With the Board a certified copy of a resolution of the board of directors

(1)1' the bank signifyinG its desire to surrender its right to exercise trust

13°17ere, that the Federal Reserve Agent at Chicago had recommended that the

Of the bank to exercise trust powers be terminated, and that, Pursuant

to a l'equest made by the Board on April 11, 1932, the Comptroller of the

C\11'relloY, after an investigation of the trust records of the national bank,

h" aavised the Board that the bank had been discharged or otherwise

131'cler1Y relieved of all of its duties as fiduciary under the provisions of

aeetion 11(k) of the Federal Reserve Act.


7/12/32 -7-

The certificate referred to was approved, aswere the letters to the City National Bank, theComptroller of the Currency, the Federal ReserveAgent at Chicago, and the Treasurer of the State of

Michigan.

Reply, approved by five members of the Board on 7uly 9, to letters

dated Tune 10, 24, and 20, 1932, from the Federal Reserve Agent and Assist-

6kIlt Fede ral Reserve Agent at San Francisco, with regard to the application

°I* the Pacific State Bank of South Bend, Washington, for approval of the

eatablishment of a trust department under authority granted to it by the

State of Washington on December 19, 1929; the reply stating that the Board

reltiewed the data submitted by the agent and, in view of the infornation

diaelosed approves the action taken by the bank in establishing a trust

departraent.

Reply approved.

Letter to the Burke State Bank, Burke, South Dakota, stating that

the Federal Reserve Board has considered the bank's application for member-

4hiP ta the Federal reserve system and for 21 shares of the capital stock of

the"bederal Reserve Bank of Minneapolis and has approved the application

ellbject to certain conditions set forth in the letter.

Application and letter approved.

Letter to the Federal Reserve Agent at Richmond, approved by five

of the Board on Tuly 9, 1932, referring to the report of examination

°r the bank made by the Board's examiners as of i'.ay 9, 1932, requesting that

theeeent advise as to the action taken upon each of the examiner's recommend-

end the matters referred to in the report which were discussed with

the(nricers and that in any case where the recommendation of the examiner

40t been adopted the Board be advised fully as to the bank's views, and


31

7/12/32 -8-

stating that advice is especially desired as to the steps which have been

°r will be taken by the bank to improve the situation with respect to the

eZ4mination, from a credit standpoint, of paper discounted or accepted as

collateral.. The letter also noted that on January 4, 1932, a currency depot

Was established at Charleston, South Carolina, which has since been discon-

tinued) and of which the Board had not been advised; requested that the agent

iiircam the Board fully as to the reasons for establishing the depot without

°Ipts'ininG the Boardts approval of such action; and stated that it is the

4ssire of the Board to be informed currently as to the establishment and

4iseentinuance of all such depots; that in the event the establishment of a

eUrreneY depot should again be considered,the matter should be submitted to

he Board for its approval in advance, and that if an emergency should

clell)end immediate action making it impracticable to obtain such advance

44thorization, the Board should be advised as promptly as possible by wire

telephone as to the action taken. The letter further requested that the

s4eattination report and the agent's reply to the Board's letter be brought

to the attention of the board of directors of the bank.

Letter approved.

Letter, approved by five members of the Board on July 8, 1952, to

1111. 3.• W. Adams, Division T:anager of the American Telephone and Telegraph

C°11115ttnY, inclosing forms of renewal contracts covering telegraph and tele-

1111°Ile services to be furnished by the company to the Board during the

Ilellod from July 1, 1932, to Tune 30, 1933; the letter suggesting certain

Q1114,-.--%ee in the contract forms and stating that if the amended forms are

alltiaractory to the company, it would be appreciated if the division manager


7/12/32 -9-

W°uld arrange to have them executed and returned to the Board, together with

Pr°Per evidence of the authority of the officer signing the contract on

behalf of the company, following which the Board will execute the contract

end return to the company one of the triplicate originals for its files.

Letter approved.

Reference was then made to the new unemployment relief bill, now

Pending in the form of a proposed Senate amendment to H. R. 9642, as a re-

slat of the veto by the President yesterday of the so-called Wagner-Garner

14116111PloYment relief bill, H. R. 12445. The new measure contains a proposed

araerichnent to section 13 of the Federal Reserve Act which would add, after

the second paragraph thereof, a new paragraph providing as follows: "In

1111481181 and exigent circumstances, the Federal Reserve Board, by the affilma-

tly's vote of not less than five members, may authorize any Federal reserve

beltk, during such periods as the said board may determine, at rates establish-

ed ta accordance with the provisions of section 14, subdivision (d), of this

4", to discount for any individual or corporation notes, drafts, and bills

Q1' -cuenge of the kinds and maturities made eligible for discount for mem-

hel' banks under other provisions of this Act when such notes, drafts, and

hille of exchange are indorsed and otherwise secured to the satisfaction of

the Federal reserve bank: Provided, That before discounting any such note,

drett OP bill of exchange for an individual or corporation the Federal re-

"I've bank shall obtain evidence that such individual or corporation is

e to secure adequate credit accommodations from other banking

inetitUtions. All such discounts for individuals or corporations shall be

ellbject to such limitations, restrictions, and regulations as the Federal

"e Board may prescribe. No note, draft, or bill of exchange discounted


k.4t)

7/12/32 -10-

Under the provisions of this paragraph shall be eligible as collateral

security for Federal reserve notes."

A discussion ensued, during which idr. Hamlin reported that in a

telephone conversation with Senator Glass on Saturday morning at about

12:30 - one-half hour before the close of the working day, he had expressed

tO Senator Glass his disapproval of the power granted in the relief bill to

tlie Reconstruction Finance Corporation to make loans to

that he added that if such a power were suggested to be

eral Reserve System, he personally would favor it, that

individuals, and

given to the Fed-

such a power was

lie8ted in practically all of the European central banks, and actually

e4e1cised by many of them. Ho also stated that Senator Glass did not

respond favorably to the idea, but later called him back on the telephone

alld requested that he draft an appropriate amendment to the Federal Reserve

Aets which he had done hurriedly with the assistance of Counsel's office,

o the clear understanding with Senator Glass that this was done as a

Ipereonal natter only, at his request, without in any way representing the

views Of the Federal Reserve Board or my of its mcribers, except himself.

The Secretary stated that the amendment was considered and approved

bY thpBanking and Currency Committee of the Senate this morning, that he is

‘11r°1121ed that it is planned to bring the bill up on the floor of the Senate

thiaafternoon, with the probability that it will be passed by the Senate

toq„-4) and that it is possible, because of the desire in Congress for an

ee'rlY adjournment, that the bill will be acted upon immediately by the

4011se of Representatives.

Some members of the Board indicated the feeling that in other

tunatances there might be merit in an amendment to the Federal ReserveCize


7/12/32 -11-

Act 1ving the Federal reserve banks authority to discount paper for indi-

lridUals, etc., under proper safeguards, but that the present is not an

°PPortune time for such an amendment and all of the members, except Er.

Ikealin, expressed strong disapproval of the procedure by which the Act

be amended in an important respect without an adequate opportunity for

t10 Bc)ard, the Federal reserve banks, or the member banks of the system to

e°14sider it carefully or to be heard regarding it.

It was pointed out that, as the amendment had already received the

4131311°Inll of the Senate Committee on Banking and Currency, it would probably

be acted. upon by the Senate today, and Perhaps also by the House; that

tile bill related chiefly to other matters with which the President would be

concerned as a result of his veto of the Wagner-Garner bill, and that it

tilight be transmitted to the President for approval before the Board's

1)°8tion could be effectively presented to either House of Congress.

In view of these exceptional circumstances, Mr.

Miller was requested to arrange for a talk with the

President of the United States on the telephone and

to express to him the Board's disapproval of the in-

clusion of such an important amendment to the Federal

Reserve Act in the pending unemployment relief and

construction hill, especially in view of the fact

that there had not been afforded an opportunity for

a hearing on the proposal or careful consideration of

its merits.

Reports of Standing Committee dated Ally 8, 9, 11, and 12, 1932,

l'ecs3rarliending approval of the following changes in stock at Federal reserve

beziks:

D'IZrt fr?If ADDITIOYAL Stock: te

1°17'4 State Bank, Algona, Iowa.(Increase in surplus)

Shares

6 6


7/12/32 -12-

4-Z,21......_.-ications for SURRENDER of Stock: District No. 1.Atlexitie

National Bank, Boston, /lass. (V.L.Abs.by First National Bank of Boston)

District No. 5.Elkin National Bank, Elkin, 11. C. (Insolvent)First National Bank, Vilson, N. C. (Insolvent)

i lliance National Bank, Chicago, Ill. (Insolvent) 240-°vIlliariville National Bank, Chicago, Illinois.

(Insolvent) 2164irst

National Bank, Oneida, Ill. (Insolvent) 26CcAlrilercial Savings Bank, Farragut, Iowa. (Insolvent) 30liPi°nal Bank of flilton, Iowa. (Insolvent) 21lrst

National Bank, Le Ears, Iowa.,, (Reduction of surplus) 24'4rst National Bank, Thompson, Iowa. (Insolvent) 45

"°1.rst National Bank, Texas City, Texas. (IT.L.Abs.by Texas City National Bank) 18

.4118t Rational Bank, Xayton, Texas. (Insolvent) 36

VA.t.ZAZILliq. 12*11"8t National Bank, Sandpoint, Idaho. (V..L.Abs.p4 by

Benner County National Bank of Sandpoint)4.r8t

National Bank, Beverly Hills, California.(Insolvent)

4ted States National Bank, La Grande, Oregon.13

(Insolvent)611tk of Southern Utah, Cedar City, Utah. (Decrease

in caDital and surplus)

Shares

11,625

36300

'11)prov

Approved.

36

480

81

69 Total

11,625

336

602

54

66613,283

Report of Standing Committee dated July 11, 1932, recommending

al of the following Clayton Act application:

Mr. C. H. Sweet, for permission to serve at the same time asdirector of the Security National Bank of Arkansas City, Kansas,

01,-1as director and officer of the Exchange National Bank of Tulsa,

Approved.


Thereupon the meeting adjourned.


19320712_Minutes.pdf

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