19400508_minutes.pdf

644

A meetinp of the Board of Governors of the Federal Reserve

8778tem was held in WashinFrton on Wednesday, May 8, 1940, et 10:30a.m.

PRESENT: Mr. Szymczak, Chairman pro ternMr. McKeeMr. DavisMr. Draper

Mr. Morrill, SecretaryMr. Bethea, Assistant SecretaryMr. Carpenter, Assistant SecretaryMr. Clayton, Assistant to the ChairmanMr. Wyatt, General CounselMr. Stnead, Chief of the Division of

Bank OperationsMr. Goldenweiser, Director of the

Division of Research and StatisticsMr. Dreibelbis, Assistant General CounselMr. Gardner, Senior Economist in the

Division of Research and Statistics

Mr. Szymczak was elected ChairmanPro ten of this meeting.

There was presented

Ile131Y, which was discussedthe

reql-lest receivedthe Board on

4 c't the

°lithe security of

the te11118 of the loanelli°1111t Of the loan be

section

for consideration

at the meeting

a revised draft of the

of the Board yesterday, to

from the Bureau of the Budget for the views of

5 of a proposed bill which would amend section

Federal Reserve

real

Act to permit national banks to make loans

estate for a period of fifteen years Provided

require that sixty percent of the principal

amortized within that period.

The draft of reply was discussedand, upon motion by Mr. Davis, was ap-proved subject to changes in form ap-proved by Mr. Draper.

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

645

The letter as approved by Mr. Draperin accordance with the above action reades follows:

"This is in further response to your letter of Aprilregarding the draft of a proposed bill 'To authorize

'Le Purchase by Reconstruction Finance Corporation of

Ztock of Federal Home Loan Banks; to amend the Reconstruc-n Finance Corporation Act, as amended; and for other'Poses'.'1T he Board has subsequently been advised that its

views ere desired only with respect to section 5 of theA PO bill bill amending section 24 of the Federal Reserveet, which deals with the authority of national banks towt4ca loans on the security of real estate. Section 5b°111d liberalize in some respects the power of national0"ks to make reel estate loans; hut it would represent15113r a Partial approach to the problem in a bill dealing;1:,:anEr1lY with unrelated subjects. It -would not in any2'Y affect the power of Statemenber banks and other in-'ured State banks to make such loans.be The Board is opposed to the enactment of piece-meal2king legislation where no great or tnmediate urgency:fsts and would prefer that amendments of this type be

ZstPoned until the problem can be piven adequate consid-e:ti". as part of a comprehensive review by Congress of

re rig banking laws, which now reflect the cumulative

:tilts of various attempts to meet competitive conditions%!cific situations and energencies.

ro he Board is not advised of any substantial reason114 an immediate liberalization of the existing power ofof i"al banks to make real estate loans. The introductionAi Ea amendment such as that contained in section 5 would

involve the denrer that other legislative proposalsbe tt less desirable character richt be attached and might

a%cted without adecuate consideration.

the Therefore, if the proposed bill is to be introduced,ev. ard would prefer that section 5 be omitted. How-

it is not omitted and the Board has occasion toreas its views on the subject, it would report favorably

illeijcInme liberalization of the power of national banks totheejaal estate loans on an amortization basis providedj 04."-ew were also amended at the same time so as to sub-

811 State member and nonmember insured banks to the'imitations and restrictions on real estate loans asaPplicable to national banks."


346

5/B/4o-3-

Before this meeting there had been circulated among the

inenlbers of the Board a memorandum dated April 29, 1940,

Gilildenweiser in which he stated that a request had been

e National Bureau of Economic Research under dat

1940, that the Board

PEtti°11 in the corporateized at the meeting of theelso

stated that the

from Mr.

received

e of April

continue through June 30, 1941, its partici-

bond project on the same basis as was author-

Board

cost to the

%ltkOriZed W8S $'6,250, and

11°"cl alithoriza a

141rt1cipation through Tune 30, 1941, provided that the project spon-sors

on October 31, 1938. The memorandum

Board of the participation already

Stid

that it was recommended (1) that the

similar contribution of E.,250 to continue its

eacceed in making arrangements with other cooperating agencies

Illth the Works Progress Administration to continue the project

Elec°rding to Present Plans, and (2) that the Board authbrize the use

Of ta

rt °f its contribution for the payment of salary and expensesor Pe n

1* -118, other than members of the Board's staff, who would beklecte- by the

1)1118 b

etlid:le done by other Government agencies contributing to the

sticeto

utilize for other purposes the services of Mr. Dirks,r Economist in the Division assigned to the study, which would

Project director. The memorandum stated furtherthet

thesecond recommendation, which was in accordance with what

w°41d make it possible for the Division of Research and Sta-

s Aesirable

arrangement.


647

5/s/40-4—

UPon inouiry by Mr. McKee, Mr. Goldenweiser stated that the

Pitiect had developed information which would be of considerable valuet()

the °Ystem and also to member banks in connection with their in-es fl

Policies, that it was believed that the project could be

Sheain another year, that the other Government agencies that

had8P°11sored the project had agreed to participate for another year,

tilat the Works Progress Administration would make a further allotment

" flinds to the project if the necessary appropriation were made by

e°rLOess, but that if the appropriation were

I3robably would be discontinued asit on

without the

Mr. McKee

(113151"oPriation should not

Stati sti cs

be t41ert by the Board andt"tke the findings of the

e°11eill'red in this suggestion.

interested

available.

agencies of Government to

Other members of the Board

At the conclusion of the discussion,Upon motion by Mr. Davis, Mr. Goldenweiser's

recommendations were approved unanimously.

slit Reference was made to a memorandum dated April 22, 1940, from

4 "(I submitting a copy of a plan which would authorize the Board,•kil order

contribution of

not made the study

it would not be possible to carry

the Works Progress Administration.

suggested that, if the Works Progress Administration

be made, the Board's Division of Research

Should look into the possibility of what steps might

other

study

111120und over-cxpansion by individual banks, to limit by reg-14Eltion,

'he volume of deposits which a bank may carry, such limitation

tc) Prevent injurious credit expansion or contraction and alsoto „oid


648

5/B/40

to be based on the capital,

elld to fix the ratio betweer capital, surplus,

"a dePoeit liability of banks at not less than six nor more thantwebre times the total of such capital accounts.

this Plan had been incorporated in a bill which had been introduced

-5-

surplus, and undivided Profits of the bank,

and undivided profits

It was stated that

the Senate under date of April 26, 1940, as bill S.:3967, that the

(5EIrcl had received a routine request from the Senate Committee on

8allking and Currency for a report on the bill, and that today the

cl." of the Committee telephoned and asked that the

"1rePort that it intended to make on the bill.

Or the

tending an invitation to

rtla•Y attend the

ThirtY-tilte of tanking

44erEll Reserve

110110r of the repre

e°11vention on the

Board expedite

Upon motion by Mr. Davis, Counsel wasrequested to prepare a draft of a reporton the bill which would contain a statementalong the same lines as that with respectto the position taken by the Board in theletter to the Bureau of the Budget abovereferred to relating to piecemeal bankinglegislation at this time, as well as anexpression of the Board's views on S.3867.

Mr. 1,Inorrill read a letter received from M. Young, President

Federal Reserve Bank of Boston, under date of May 6, 1940, ex-

any of the representatives of the Board who

eighth Annual Convention of the American Insti-

to be held in Boston on 3-line 3-7, 1940, to visit the

Bank and to attend a dinner which will he given in

sentatives of the Federal Reserve System at the

evening of Tune 3.


5/8/40-6-

Mr. Morrill was reauested to adviseMr. Young that Mr. Szymczak would accept theinvitation and that, if possible, Mr. Daviswould arrange his Plans so that he could bepresent also.

649

In connection with the discussion at the meeting of the Board

3resterclaY with respect to the possible appointment of T. H. McKittrick,_tts

n American director and Chairman of the Bank for InternationalSet tia4lit,mts

M. Gardner stated that under the existing statutes of the

two Americans may be invited by the Governors of the Central4rate of

Beldam, France, Great Britain, Italy, and Japan to became

Of the Bank unless objection is made by the bank of issue

Ntes,

mid operating in the principal financial market of the United

which is the Federal Reserve Bank of New York; that on that

8 MeS8r5• Gates McGarrah and Leon Fraser were elected directors

"the 33 In 1930 for a term of three years and were reelected in1933

second three-year term; and that these appointments werellot Objected

to by the Federal Reserve Bank of New York. He also

41c1 that since the passage of the Banking Act of 1933 which author-14d the

,,oard of Governors to exercise special supervision over alll'eletti

batik, t"shiPs entered into by any Federal Reserve Bank with any foreign

° Darther appointments of American directors have been made,el1(1 th t igllirec: 't appeared that inasmuch as the New York Bank would be re-

zi(11711. /111der existing law to present the matter to the Board before

ll the Bank for International Settlements whether it would objectto the

413P°intment of Mr. McKittrick, the matter was being brought


C50

W40

ilit°rolttay to the attention of the Board at this time to ascertain

whether the Board would have any objection to the appointment since

the 33ank for International Settlements probably would not wrnt to pro-

74th the election if there were any objection on the part of thetoard

of Governors.

After a discussion, it was agreed unani-mously that Chairman Eccles should adviseMr. Cochran, Technical Assistant to theSecretary of the Treasury, in response tohis inquiry, that, should the question ofthe election of Mr. MOKittrick as ChairmanOf the board of directors of the Bank forInternational Settlements be presented inthe usual course, the Board mould interposeno objection thereto.

At this point Messrs. Bethea, Carpenter, Wyatt, Sneed,

ellweiser,Dreibelbis, and Gardner left the meeting.

Nference was then made to a memorandum dated May 4, 1940,

Goldenweiser recommending that Mrs. Gertrude P. Verner be

t1)1111ted as aclerk in the Division of Research and Statistics on a

t'ill%rary basis for a period of three months, with salary at the rate

" T3120 per month, effective as of the date upon which she enters uponthe

Perfolizance of her duties.

Approved unanimously.

There wasGoi also presented a memorandum dated May 3, 1940, from

idetweiser, recomlnendinp that Miss Melva R. Kaplan who on Feb-6_ $ 1940, was appointed as a clerk-stenographer in the DivisionQrpeseee

and Statistics on a temporary 1-,asis for a period of three


651

5/8/40-8-

rtielItils) be retained on a permanent basis at the expiration of her

tetlaPorary appointment at the close of business on May 15, 1940, and

til" her salary be increased as of that date from 1,440 per annumtO the

rate of $1,620 per annum. The memorandum stated that since

aPpointment Miss Kaplan had married Dr. S. A. Li schinsky,who is

eillPloyed by the Amalgamated Clothing Workers of America to pre-

Pere material on oases to be brought before the Wage and Hour Admin-

istration.

her

At the conclusion of a discussion,it Was voted unanimously to extend thetemporary appointment of Miss Kaplan fora period of three months from May 15,1940, with no change in her present sal-ary, with the understanding that at thefirst meeting of the Board at which allof the members are Present considerationwill be given to the policy to be adoptedby the Board on the question of the em-ployment of married women as mambers ofits staff.

?ed

"el Rase rve System held on May 7, 1940, were approved unanimously.

The action stated with respect to each of the matters herein-

referred to WBS then taken by the Board:

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

Letter to MI-. Post, Secretary of the Federal Reserve Bank of

edelphia readinF as follows:

reea "Reference is made to your letter of April 23, 1940,itc.hr4Igga the

to e question raised by the Philadelphia Stock

whether certain 3-:V4% bonds issued by thellinneYlvs-- a Turnpike Commission are 'exempted securities'


652

5/8/40-9-

for the purposes of Regulation T."This question involves the interpretation of sec-

ti" 3(a)(12) of the Securities Exchange Act of 1934, aProvision which is also of interest to the Securities and&hange Commission. You will recall that the Board's-Letter of March 17, 1939 to President Sinclair dealt withEsi,eimilar inquiry which was presented by the Philadelphiabock Exchange with respect to certain 2-1/2°/ Serialwjter Revenue Bonds of the Bethlehem Municipal Water Au-4"°ritY. As indicated in that letter, in view of the4-nterest secti

or the Securities and Exchange Commission inon f XI3ka,k12), the views of the Commission were re-

Zaested with respect to the question whether suchethlehenMunicipal Water Authority Bonds are 'exemptedeecurities' within the meaning of section 3(a)(12). The°office of the Commission's General Counsel expressed thePinion that they are not such 'exempted securities',

.etlid the Board stated in its letter of March 17, 1939,that it saw no reason to differ with that view.

bee,, "An expression of the Commission's views has similarly, reauested with respect to the bonds of the Pennsyl-;ria turnpike Commission. As indicated in the attachedsePY of its reply, the General Counsel's Office of thege,e,4rities and Exchange Commission has reconsidered theha-eral question involved and upon such reconsiderationor' exPressed the view that both the Water Revenue Bondsxitthe Bethlehem Municipal Water Authority and the Turn-111,, e l evenue 3-3/4 Bonds issued by the Pennsylvania

Commission are 'exempted securities' within thelue ning of section 3(a)(12).Boa "UPon further consideration of the cuestion, theev,I'd agrees with the view that both securities are 'bed'ex-

securities within the meaning of section 3(a)(12),„Ild it will be appreciated if you will advise the Phila-"lPhi a Stock Exchange' accordingly."

Approved unanimously, together witha letter to Mr. Chester T. Lane, GeneralCounsel, Securities and Exchan7e Cammis-sion, readily?: as follows:

4, 1:We wish to thank you for Mr. Davis' letter of May,bota°4°) with respect to the question whether the 3-3/4'1,tez 8 issued by the Pennsylvania Turnpike Commission are3(a7riTtd securities' within the meaning of section

4-2) of the Securities Exchange Act of 1934.


_ 653

5/6/40

til tthe Board authorize the purchase of a 1940 Chrysler Crown Imperial

1343erdi.1*937 Chrysler Custom Imperial Limousine, at a net cash price

or 11)400.

-10-

"We note that your office has reconsidered its pre-View that the 2-1/e Serial Water Revenue Bonds of

the Bethlehem Municipal Water Authority are not 'exempted

Zecurities' within the meaning of section 3(0(12), andg hat uPon such reconsideration it is of the opinion that

t13°th Such Bethlehem Municipal Water Authority bonds and

teP ennsylvania Turnpike Commission bonds involved in

..e Present question are 'exempted securities' within"the meaning of the provision.

As indicated in the attached copy of our letter tothe Federal Reserve Bank of Philadelphia, the Board, upon

the ;!rther consideration, agrees with your view that both

securities are such 'exempted securities', and it has!,quested the Federal Reserve Bank of Philadelphia to ad-vise the Philedelphia Stock Exchance accordingly."

Memorandum dated May 8, 1940, from Mr. Morrill recommending

ne as described in the memorandum, to take the place of the

The recommendation was approved unani-mously, with the understanding that theaPProoriate item of the 1940 budget for thefacretary's Office would be increased by

.t1,400 to cover the cost of the new car.

Thereupon the meeting adjourned.

.05'PeAL, fr)ADDroyed:

Secretar, .


19400508_minutes.pdf

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bill dealing1

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