19400312_Minutes.pdf

367

A meeting of the Board of Governors of the Federal Reserve

4eltem was held in Washington on Tuesday, March 12, 1240, at 10:30

Eton.

the

PRESENT: Ir. Eccles, ChairmanMr. Ransom, Vice ChairmanMr. Szymczak (first part of afternoon session)Mr. McKeeMr. DavisMr. Draper

Mr. Morrill, SecretaryIr. Bethea, Assistant SecretaryMr. Carpenter, Assistant SecretaryMr. Clayton, Assistant to the ChairmanMr. Thurston) Special Assistant to the

ChairmanMr. 7iyatt, General CounselMr. Goldenweiser, Director of the Division

of Research and StatisticsMr. Smead, Chief of the Division of Bank

OperationsMr. Dreibelbis, Assistant General Counsel

Mr. Ransom referred to Bill H.R. 8638 which was introduced in

House of Representatives on February 23, 1940, and referred to thecoTh 'utattee on Banking and Currency and which, among other things, would

'Ire the Comptroller of the Currency from the board of directors of

the t,"deral Deposit Insurance Corporation, increase insurance to cover

4PORi4.Up to 0_0,000, and reduce the deposit assessment rate from

1/1.2

it wEts not planned to hold hearings on the bill, and that it might pass

the I,n°11ee of Representatives as a substitute for the Byrnes Bill

e,18) which passed the Senate on June 13, 1939, so that when the

144reached the Senate the action would be in the form of sending

to 1/14 of 1%. Mr. Ransom said that he had been informed that

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

368

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the than ged Byrnes bill to conference, and that the bill might have

a good chance of passage at this session of Congress.

After a discussion of whether theBoard should take any action in the matter,Messrs. Goldenweiser and Wyatt were re-quested to prepare an analysis of the billfor consideration by the Board.

During the course of the last six weeks the Division of Re-

Ch and Statistics had sent to the members of the Board and members

°r the staff a first and second draft of the text of the Annual Report

' " the Board for the year 1939 and members of the Board had discussed

the drafts with members of the staff. At this meeting consideration

1148:ellen to a third draft of the report and additional changes were

Ilibeed upon.

At the conclusion of the discussionthe report was approved unanimously sub-ject to such further changes of form asmight be approved by Mr. Davis, with theunderstanding that the report would besubmitted to the Speaker of the House ofRepresentatives and President of theSenate as soon as printed and given suchfurther distribution as approved by Mr.Davis.

The meeting then recessed and reconvened at 3:00 p.m. with41, .

-"le attendance as at the morning session except that Mr. SmeadWA

Present and Messrs. Szymczak, Parry, Chief of the Division

c48"Ilrity Loans, and Piser, Senior Economist in the Division of

Ileee4lIch and Statistics, were in attendance.


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Mr. Davis related telephone conversations which he had during

the,-LUnch hour with Messrs. Day, President of the Federal Reserve

11Wc of San Francisco, and Bolden, Deputy Chairman of the bank, during

Ithich they expressed a preference for the immediate designation of

Mr. l aYmond C. Force, who was appointed a Class C director of the bank

1511 March 8, 1940, as Chairman and Federal Reserve Agent at the bank

r(*the balance of the current year.

Upon motion by Mr. Davis, Mr. Forcewas designated as Chairman and FederalReserve Agent at the Federal Reserve Bankof San Francisco for the remainder of theyear 1940 and his compensation as Chairmanand Federal Reserve Agent was fixed on theuniform basis fixed for the same Positionat all Federal Reserve banks, i.e., thesame amount as the aggregate of the feespayable during the same period to anyother director for attendance correspond-ing to his at meetings of the board ofdirectors, executive committee, and othercommittees of the board of directors.

There was presented for consideration a draft of record cover-

4 actions on questions of policy taken by the Federal Open MarketON—'mUttee

led tothe

kt.

the"trY covering the meeting of the Committee on December 13, 1939.4-arrison's suggestion was discussed, but it was decided that no

h"ge Should be made in the record as submitted with Mr. Morrill's

during the year 1939 and in that connection attention was

a memorandum which Mr. Morrill addressed to the members of

8"rd on March 9, 1940, with respect to an addition suggested by

arrison, Vice Chairman of the Federal Open Market Committee, to


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raEmlorandum of March 9.

-4-

Thereupon unanimous approval wasgiven to the record as submitted.

Mr. Szymczak left the meeting at this point.

Mr. Morrill referred to the communications sent by the Board

t0141% Berle, Assistant Secretary of State, under dates of March 8

Ettid 9) 1940, with respect to the Inter-American Bank, and raised the

411"tion whether copies of the communications should be sent to the

11"eral Reserve Bank of New York for its information.

It was agreed unanimously that therewas no need for sending copies of the let-ters to the New York bank at this time.

Mr. Morrill then stated that a request had been received from

Ktmball, Secretary of the Presidents' Conference, that he be ad-

Of any topics that the Board would like the Presidents to dis-

°488 at their conference which had been called to convene at Washington

rn-'qesdey afternoon, March 19, 1940.

It was agreed unanimously to requestthe views of the Presidents on Bill H.R.8638, to which reference was made at themorning session of this meeting, and, assoon as the analysis of the bill beingprepared by Messrs. Wyatt and Goldenweiseris completed, to send copies to Mr.Kimball for the information of the Pres-idents with the advice that the analysishad been prepared for the information ofthe Board but had not yet been consideredby it.

In connection with the above matter the suggestion was made


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371

that it would be a desirable procedure if arrangement were made at

c°11farences of the Presidents to hold a joint meeting of the Presi-

11348 and the Board prior to the separate meetings of the Presidents.

It was agreed unanimously that thesuggestion should not be made as to theforthcoming conference but Should be of-fered to the Presidents for considerationIn connection with subsequent conferences.

At this point Messrs. Thurston, Wyatt, Goldenweiser, Parry,

e'ibelbis and Piser left the meeting and the action stated with re-

to each of the matters hereinafter referred to was then taken

bYsi,Board:

The minutes of the meeting of the Board of Governors of the

ed'1111 Reserve System held on March 9, 1940, were approved unani-touslys

Telegram dated March 11, 1940, to Mr. Roger B. Shepard, aClets

8 C director of the Federal Reserve Bank of Minneapolis, reading

48 t°11owe:

"Board of Governors of Federal Reserve System haselVointed you Deputy Chairman of Federal Reserve BankOf Minneapolis for remainder of year 1940, and will bePleased to have your acceptance by collect telegram."

Approved unanimously.

Letter dated March 11, 1940, to Mr. Young, President of the

IV Reserve Bank of Boston, reading as follows:

"This refers further to your letter of Tanuary 24,19an

submitting a request of representatives of the


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"Webster and Atlas National Bank of Boston for adviceSS to whether, in the view of the Board, the operationof a Common Trust Fund under a plan which is being con-sidered by that bank would conform to the requirementsOf the Board's Regulation F. It appears that, disregard-ing details, the Point upon which the Board's views aredesired is whether the operation of a Common Trust FundUnder the proposed plan would be contrary to the follow-

Provisions of subsection (a) of section 17 of Regu-lation F:

'The purpose of this section is to per-mit the use of Common Trust Funds, as definedin section 169 of the Internal Revenue Code,for the investment of funds held for true fidu-ciary purposes; and the operation of such Com-mon Trust Funds as investment trusts for otherthan strictly fiduciary purposes is hereby pro-hibited. No bank administering a Coumion TrustFund shall issue any document evidencing adirect or indirect interest in such CommonTrust Fund in any form which purports to benegotiable or assignable. The trust invest-ment committee of a bank operating a CommonTrust Fund shall not permit any funds of anytrust to be invested in a Common Trust Fundif it has reason to believe that such trustwas not created or is not being used for bonafide fiduciary purposes.'"It appears that the creation of the Common Trust

Plind is part of a plan under which the bank proposes tosolicit the public (through paid solicitors or agents ofthe bank, newspaper advertisements, circulars, etc.) tocreate uniform revocable trusts designed specifically toParticipate in the Common Trust Fund. With this in view,the bank has prepared an application and receipt form anda so-called 'Participating Trust Agreement' form. Undersuch trust agreement form, the creator of a trust is todePosit with the bank, as trustee, a stated principal sumIn 120 equal monthly deposits and the bank is directedto invest such deposits, less authorized deductions, inParticipations in the Common Trust Fund. The trust isto terminate upon revocation, death of the creator, noticedelivered by the trustee to the creator after continued


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"default in making deposits, or the expiration of 10Years (i.e., the expiration of the period during whichthe deposits are to be made). In addition to an accept-ance fee of 10, an annual fee of 6 per cent of the in-come of the trust, and a termination fee of 2 per centOf the then cash value of the trust assets, the bank isto receive the first year a fee of 2 Per cent of the:tated principal sum and each year thereafter a fee of'5. Among, other things, it is also noted that the trustagreement form refers to the fact that 'other trust es-tates have been or are to be established under partici-Patine trust agreements respectively, substantiallysimilar to this instrument'. In the application form,the person desiring to create such a trust applies forthe execution of a Participating Trust Agreement, suchParticipation' to be in a stated principal sum. SuchaPPlication form recites that there is paid therewith astated sum, consisting of an acceptance fee of '1.0 andthe first of 120 equal deposits, and also that the bankwill be empowered to invest the net deposits of the ap-Plicant in a Common Trust Fund to be held and managed bythe bank as Collective Trustee pursuant to a CollectiveTrust Plan of a specified date. The bank's representa-tive receiving the application is to give a receipt forthe money but there is to be no binding agreement untilthe application is accepted by the bank and a Participat-ing Trust Agreement is executed by the bank and theapplicant.

"In view of these facts and the other details ofthe matter discussed in the comprehensive opinion ofYour counsel, the Board agrees with the conclusionreached by your counsel that the proposed Common Trust

could not be considered as being operated in con-formity with the Board's Regulation F and particularlythat part of the regulation Quoted above.

"As you know, it is not the Practice of the Bureauof Internal Revenue to make advance rulings on a hypo-thetical basis. However, the Board has no doubt that,if the proposed Conmon Trust Fund should be operated ascontemplated, the Bureau of Internal Revenue would deny&nach Fund the tax exemption granted to Common TrustlAinds operated in conformity with the Board's regula-tions.

"It is requested that you advise the Webster and

as National Bank of the Board's views in the premises.


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"In view of the full opportunity which representativesOf your bank have afforded representatives of the Websterand Atlas National Bank to present fully all facts andarguments involved, it would not seem that it would serveany useful purpose for representatives of the bank tocame to Washington to discuss the matter. However, ifuPon consideration of the views expressed herein repre-sentatives of the bank should desire to submit any.fur-ther information in the premises or should still desireto came to Washington to discuss the matter with repre-sentatives of the Board, the Board, of course, will beglad to have them do so."


Memorandum dated February 28, 1940, from 'Mr. Van Fossen, Assis-

tlInt Chief of the Division of Bank Operations, stating that replies

444 been received from all Federal Reserve agents in response to the

letter of November 15, 1939 (R-553), with respect to the de-

4trtletion of certain records of Federal Reserve agents, and recommend-

that Congressional authority be requested to destroy the records

list" in the statement attached to the memorandum it being understood

t)16:b none of the records listed will be destroyed until their destruc-

tion has been authorized by the Board. A form letter addressed to the

Illichivist of the United States submitting the list of records referred

to Tol

1°atr,-n, reading as follows:

also attached to the memorandum.


Letter to Mr. Young, President of the Federal Reserve Bank of

"There are being sent you at this time under


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the

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separate cover 10 sets of the Federal Reserve Loose-Leaf Service, as requested in your telegram of October91 1939. It will be appreciated if you will see thatthese sets of the Service are distributed to the properpersons.

"Your attention is called to the fact that instruc-tions relating to personnel questions, appointment ofexaminers, surety bonds, and other related matters havebeen placed at the end of the Service in a separate divi-sion under the heading 'Miscellaneous Matters'. In viewOf the suggestion made by one of the Federal Reservebehks that it might be desirable to omit such mattersfram the Service, this arrangement has been followed sothat it will be possible for any Federal Reserve bankto delete this group of instructions, if it so desires,When sets of the Service are distributed, although theGeneral Index, of course, will include references to theinstructions in question.

"In order that the maximum usefulness may be obtainedfrom the Federal Reserve Loose-Leaf Service, it is ex-'remely Important that each user of the Service famil-iarize himself with its setup and the mechanics of itsOperation by reading carefully the 'Explanation of Ser-vice' and 'Federal Reserve Loose-Leaf Service Letter No.1', which will be found near the beginning of Volume I."

Approved unanimously, together withsimilar letters to the Presidents of allother Federal Reserve banks.

Mr. Morrill suggested that the Board authorize the payment of

cost of luncheon served to Mr. John G. Nichols, Chief, Divisionor

Minetions, Federal Deposit Insurance Corporation, and Mr. W. P.?oig

er, Chief National Bank Examiner, Comptroller of the Currency, in

the Board's dining room today.



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Thereupon the meeting adjourned.

C.,C)aalo

Chairman.

376


19400312_Minutes.pdf

Documents

board of governors

assistant secretarymr

federal reserve bank

assistant general counselmr

federal reserve4eltem

annual report

discussionthe report

ged byrnes bill