19440623_Minutes.pdf

A meeting of the Board of Governors of the Federal

4YeteM was held in Washington on Friday, June 4, #1,2,

PRESENT: Mr. Eccles, ChairmanMr. Ransom, Vice ChairmanMr. SzymczakMr. McKeeMr. DraperMr. Evans

1944,

1009

Reserve

at 10:115 a.m.

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

ChairmanMr. Smead, Director of the Division of

Bank OperationsMr. Paulger, Director of the Division of

ExaminationsMr. Pollard, Assistant Director of the

Division of ExaminationsMr. Wyatt, General CounselMr. Nostrup, Federal Reserve Examiner

There were 7-resented te1e7rams to Messrs. Flanders, Leach, and

MeLa„..Presidents of the Federal ReF-rrvc Banks of Boston, Richmond,

arifl A

rtianta, respectively, Messrs. Dillard and Stewart, Secretaries of

the Federal Reserve Banks of Chicago and. St. Louis, respectively, Mr.

41?rller, Vice President of the Federal Reserve Bank

°41clwell. Chairman of the Federal Reserve Bank of

Gilbert. President of the Federal Reserve Bank of8

of Minneapolis, Mr.

Kansas City, Mr.

Dallas, end Mr. Hale,

ecretarY of the Federal Reserve Bank of San Francisco, stating thatthe

Board approved the establishment without change by thp Federal Re-

'ebanks of St. Louis and San Francisco on June 20, by the Federal

"e Banks of Richmond and Atlanta on 'lime 21, by the Federal Reserve

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

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Bank8 of Chicago, Minneapolis, Kansas City, and Dallas on June 22,

1944, and b,T the Fede.,-al Reserve Bank of Boston today, of the rates of

dlscolint and Purchase in their existing schedules.

Aproved unanimously.

There was then presented a letter dated March 15, 1944, from

Chairman TRuner of the Senate PankIng and Crrrenc- Committee asking for

rer(Thrt S. 1777, a bill to establish r small 1-11girP'q finance insur-

flee "ministration in the Depari-mPrit of Commerce and to in financ-

in small business enterprises by insu-;ng 1 -ans to, and nurchases of

8tock in, such enterprises. The reol,Pst had been circulated among the

illerlibers of the Board and had ben held on the docket for consideration

eat a meeting when all the members were prr-ent.

There was unanimous a-reement that,

inasmuch as the bill was not being uivenactive consideration and nerhans would not

be at this session of the Board

should follow its usual procedure end not

submit a report this time.

Rrce was also made to P draft of letter to fhe Federal Re-

nnd Presidents nf all the lierierro Reserve Ban IP- enclosing a

T11%°P°sPd revilon of the memorandum describinr7 the plan for securing Fed-epal

"serve riotp9 by the pledge of participations (undivided interests)d.lrect oblipations of the United States in the System open market ac-

°1111t Which became effective on September 17, 1943. The -principal change

-1O14 be made by the revision would be to provide for the alloca-,.tion

or specific securities to a particular Federal Reserve Bank when


6/23/2,4-3-

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l'equested by such Bank, the Board of Governors, the Federal Open Market

°0111Mittee, or the executive committee of the Federal Open Market Commit-

tee. This chary'e was suggested by Mr. Loan, Counsel for the Federal

ReservF! Ba.nk of Nei., York, to meet technical legal onestions which he

had raised concerninr- the present plan, and the revision of the memo-

had been prepared b7 members of the staff of the New York Bank

after consultation with Messrs. Smead, lAkratt, and Vest of the Board's

"f. The chancre was proPosed by the Federal Reserve Bank of New York

as being desirable for the reasons that (1) it would provide menns

t" terminatinff the plan if and when this was deemed desirable, and (2)

in the event of the insolvency or threatened insolvency- or liquidation

Of Federal Reserve Bank the amendment would avoid technical diffienities

Which mirht otherwise be involved in the oT:eration of the Sirs+em open

41411cet account by providing a mechanism whereby specific direct oblip-a-

ticm-" of the United States in such account could be substituted promptly

toUndivided interests.

A discussion of the proposed revision ensued, during which Messrs.8mead

and Wyatt stated that the present plan was working satisfactorily

41,"'e only reason that they could see for making the change would be to

ea-Li „.aJ-77 the orestions raised by Mr. Logan. The members of the Board felt

that convincing reasons had not been presented for making the nroposed

gea, and they were in a .reement that possible insolvency or liquida-

cf a Federal Reserve Bank was not an adeorate reason for making

chan

tion


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the suPested change since under present circumstancesthere was little

Or no likelihood of such insolvency and any condition that miFht occur,

which would require consideration of the q1.estions raised by Mr. I,N7an,

w°113-d develop over a period of time which would afford ample opportunity

to make suPh co-an r('-

desirable.

During the course of the above discu9si?n, Yr. Thomas, Assist-

Directnr of the Division of Research and Sistics, came into the

Meetinr„.

in the rlan as Tic'ht then seem to be necessar7 or

At the conclusion of the discussion,

Messrs. Smead and Wyatt were requested to

prepare for conSide-Ption by the Board a

draft of letter to Mr. Sproul, President,

of the Federal Reserve Bank of New York,

advising him of the Board's position on

the matter.

At thiF: :4)1.nt Messrs. Pa71ger, Pollard, and Hostrup withd-er

m the meeting and Mr. Parry, Director of the Diyiicn of Security

tOnacame into the roam.

In accordance with the a7reement reached at the meeting of the

°n June 20, 1944, further consideration was criven to the question

17heth er action should be taken by the Board at this time to reduce from

6° to cnper cent the maxmum loan values on securities prescribed in

the t°ard's Regulation T, Extension and Maintenance of Credit by Brokers,

end Members of National Securities Exchanges, and Regulation U,Loan

by Banl's for the Purpose of Purchasing or Carrying Stocks ReEistered


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°n a National Securities Exchange. In this connection, at Mr. Drarer's

l'ecluest, there was read a memorandum addressed to him by Mr. Parry

under date

the Board

nurchases

sales.

of June 22, 19hh, relPting to the reasons for the action of

In 17T-7 in establishing maxinum loan values of 60 per cent on

of securities and P margin requirement of O :er cent on short

There was a discussion of the reasons

that might be advanced for action by the

Board to reduce the maximum loan values

prescribed by the two regulations, and itwas understood that Mr. Draper, in consulta-

tion with Mr. Parry, would prepare a draftof statement of the reasons which might be

given by the Board for such action and thatwhen the statement WPS ready the matter wouldbe considered again by the Board.

Mr. McKe requested that such consIder-

etion be given Pt a meeting at which he would

he present.

At this point Messrs. TITIrston, Smead, Parry, Thomas, and WVatt

/lithfrom the meeting, Pnd the action stated with respect to each

ot'lle matters hereinafter referred to was then taken by the Board:

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

al Reserve S7stem held on June 22, l94t, were PFproyed unanimously.

Letter to the Presidents of all the Federal Reserve Banks read-tng

as follows:

,The Federal Reserve Bank reports of member bank de-

reserves, and borrowings on forms F. R. 1422 andR. /13 are used not only as a measure of weekly and


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"semi-monthly changes in these items, but also as a basisof adjustments in our current daily estimates of requiredand excess reserves. It is desirable, therefore, that thereports reach the Board's offices as early as practicableafter the end of the report period. Accordingly, it willbe annreciated if you will arrange to have these reportsreach the Board's offices in accordance with the followingschedule, so far as feasible:

The weekly report--on or before the second

Monday following the end of the report period,

which ends on Friday.The semi-monthly report—on or before the lastday of the semi-monthly period that follows the

report period."If the current reports of a few of the smaller country

banks are not available in time their reports covering theimmediately preceding report period may be substituted. Inthat event, the renort on form 413 should carry a note show-flg net demand deposits and total time deposits of thebanks for which substitutions were made. Unless otherwiseadvised in any specific instance, it will not be necessaryto submit a revised report later.

"If a weekly or semi-monthly report cannot be dispatchedbY regular mail or air mail in time to reach the Board's of-fices by the scheduled dates indicated above, the amounts ofnet demand deposits and time deposits should be telegraphedto the Board; the other items need not be telegraphed.

"This supersedes the instructions cont-ined in theBoard's letter of July 2, 1936 (B-1161)."

Approved unanimously.

Letter to Mr. Creiuhtcn, Chairman of the Federal Reserve Bank

or Bcsten, rending as follows:

"At the completion of the examination of the FederalResrve Bank of Boston, made as of Anril 29, 19/L by the

/137'rd's examiners, a cony. of the report of examination waseft for your information and that of the directors. A

coPv wms also furnished President Flanders.

C "The Board of Governors will appreciate advice that

rep7rt has been considered by the Board of Directors.„Afr117 comments voll ran's!' care to offer reFarding discussions

trith respect to the examination or as to actions taken orbe taken as P result, of the examination will also be

qpnreciated.


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"The Board is pleased to note the improvements in op-erations, personnel policies, and the personnel situationas brour,ht out in the report of examination and will followWith interest future develonments along these lines.

"At the time of Mr. Paulo.er's visit to your Bank dur-ing the course of the recent examination, he discussed withPresident Flanders the matter of appointing a qualifiedsenior officer to have charge of the bank examination rnr1Pat your Bank. Mr. Flanders indicated that consideration'would be given to the matter. At your convenience, we shallbe glad to learn of the plans in this regard and we arehopeful that we may have the opportunity to discuss thematter further with representatives of the Bank prior toan definite action being taken."


Memorandum dated June 21, 19LL, from Mr. Hooff, Attorney', recom-

cling that there be published in the jul7 issue of the Federal Reserve

tin statements in the form attached to the memorandum with respect

to the following sublects:

APPro

CcnsumerAmendments fc, Regulation W

ReservesWithheld Income Taxes as Deposits

Foreign Funds ControlTreasury Department Releases


Thereupon the meeting adjourned.

Chairman.


19440623_Minutes.pdf

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