System

708

A meeting of the Board of Governors of the Federal Reserve

was held in Washington on Friday, May 17, 1940, at 11:30 a.m.

PRESENT: Mr. Eccles, ChairmanMr. McKeeMr. DavisMr. Draper

Mr. Morrill, SecretaryMr. Bethea, Assistant SecretaryMr. Clayton, Assistant to the Chairman

The action stated with respect to each of the matters here-inafter referred to was taken by the Board:

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

Reserve System held on May 16, 1940, were approved unani-kolialy

Telegrams to Mr. Sanford,lleeerve g

Assistant Secretary of the Federal

of New York, Mr. Post, Secretary of the Federal ReservekakOr Phi

ladelphia, Mr. Leach, President of the Federal Reserve

!allk atellmorW, Mr. McLarin, First Vice President of the Federal

"serve knk of Atlanta, Mr. Olson, Assistant Secretary of the Fed-

elL1 ileeerve Bank of Chicago, and Mr. Hale, Secretary of the Federal11"erve Batik of San Francisco, stating that the Board approves the4t4b1

ishilletit Nithout change by the Federal Reserve Banks of Richmond714884 Prancisco on May 14, by the Federal Reserve Banks of New York,Atlanta, chicago,

erfti Izeeerve B and San Francisco on May 16, 1940, and by the Fed-

of Philadelphia today, of the rates of discount and

PlIrchltse in their existing schedules.

Approved unanimously.

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709

Letter to the board of directors of the "Crowell State Bank",

CroweiiTexas, stating that, subject to conditions of membership

rillnibereci 1 to 3 contained in the Board's Regulation H and the follow-

ing 8Pecial condition, the Board approves the bank's application for

niernbershiP in the Federal Reserve System and for the appropriate

eill°1111t of stock in the Federal Reserve Bank of Dallas:

"4. Such bank shall make adequate provision for deprecia-tion in its banking house and furniture and fixtures."

Approved unanimously, togetherwith a letter to Mr. Gilbert, Presi-dent of the Federal Reserve Bank ofDallas, reading as follows:

appro;Tehe Board of Governors of the Federal Reserve Systemcro s the application of the 'Crowell State Bank',temwell, Texas, for membership in the Federal Reserve Sys-le'? subject to the conditions prescribed in the enclosed104:er which you are requested to forward to the Board ofa-;-,reectors

of the institution. Two copies of such letteroth also enclosed, one of which is for your files and thesi4r °f which you are requested to forward to the Commis-• er 1°f Bankinr, for the State of Texas for his informa-tion.

cia "Since it was reported that the estimated losseswe :siti:ied in the report of examination for membershipusilcuarged off at the conclusion of the examination, thei110C,.`, condition regarding the elimination of losses hasbeen

Prescribed."

Letter to Mr. Young, President of the Federal Reserve BankOf 15k.4)Ston

3 reading as follows:

the },alis is to advise you that the Board has approvedped -,uget for the bank examination department of the

tel.si;la3111 However, there are certain matters in con-

Reserve Bank of Boston for the calendar year 1940ee

'tnent1(41 with the operations of the bank examinationepart-convs at the Board would like to discuss with you, lf

-nlent, the next time you are in Washington."

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Approved unanimously, togetherwith a similar letter to Mr. Day,President of the Federal ReserveBank of San Francisco.

710

Letter to the Chairmen of all Federal Reserve Banks, readingas follows:

due A nt.inder date of April 24, 1940, Senator Mead intro-

e" in the Senate a bill, S.3839, to amend Section 13bthe Federal Reserve Act for the purpose of liberalizing

t"? authority of the Federal Reserve bans to make indus-brlal loans. A companion bill, H.R.9530, was introducedZ, wi congressman Thomas F. Ford of California in the HouseRepr

esentatives on April 25, 1940.the

"A copy of H.R.9530, an analysis of the changes which

sttb,,ill would effect in the present law, and a briefmeritonai with respect to legislation enacted and proposed

'is subject are being sent to you with this letter.sent."1"°u will note that the Mead bill would eliminate fromca-:1°11 13b the requirements that loans must be for working

Purposes, that they may be made only to establishedfiv--ees enterprises, and that maturities may not exceedtiare, ears. The bill would require each financing institu-Res.- L,0 obligate itself, to the satisfaction of the Federalas erve bank, for at least 10 percent, instead of 20 percent,ta ° ded in the present law,of any loss which may be sus-seer'4 on obligations acquired from it and would direct thebanketfarY of the Treasury to pay to each Federal Reservescrib:12.4°1 time to time such amounts, up to the amount sub-anee by the bank for stock of the Federal Deposit Insur-are n-orPoration, as in the judgement of the Board of Governorsthe -ecessary to enable the Federal Reserve banks to grant

ef'edit authorized by Section 13b.The Board has no means of knowing whether these bills

Plies4 given active consideration by Congress during thelight session, but would be glad to know whether, in theoffic °f the experience of your bank, your directors andPo8alers would favor the Mead-Ford proposal, the Frank pro-or some other type of legislation."llith The Board would also appreciate receiving any commentsit, e sPeot to this matter that you think would be helpful tot Ugh though they may relate to points not covered in either'ead or Frank proposals."

Approved unanimously.

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711

Letter to Mr. Rounds, Vice President of the Federal Reserve

Of New York, reading as follows:

"Reference is made to your letter of May 9, 1940,regarding Regulation T.

"It is understood that a member firm of a national

-t—e,urities exchange proposes to organize a wholly owned,sidiary corporation which, in accordance with exchange

1;LLes recently adopted in this connection, would carryonthe firmls underwriting and investment banking busi-

ee s: The firm wishes to supply certain funds to theell'sldiarY by purchasing unsecured debentures of theTrPoration rather than by acquiring additional stock.suechquaeebstenitonurperse. sented is whether the firm may purchase

let "The Board agrees with the view indicated in yourth ter that such a purchase of unsecured debentures byviesifo5m:lituuttibmel permissible under the present pro-

w, It seems, however, as you suggest, that it mightpr1-1- be desirable to facilitate such transactions. Appro-uajte changes in the regulation for this and similar sit-flir4.1.°11s are being studied, and we will communicate with you

'her with respect to the matter in the near future."

Approved unanimously.

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

Kansas City, reading as follows:

you„ :lin view of the special circumstances outlined inobi' -Letter of May 13, 1940, the Board interposes noto Zlelti°n to the payment by your Bank of the sum of $144Chanibe fund being raised by the Downtown Committee of thedistr. u improve ommerce to prove the downtown business

let

o

of Kansas City, Missouri."

Approved unanimously.

Gelleral Ilem°randum dated May 16, 1940, from Mr. Ungfield, Assistant

orthe:78e1 recommending that there be published in the June issue

tk e'eral Reserve Bulletin statements in the form attached tokemor

anclura with respect to the following subjects:

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4.

5.

6.

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Amendments to Regulation F.

Inter-American Bank.

Authority of the President to Regulate Trans-actions in Property in Which Foreigners Havean Interest.

Executive Order and Regulations on Transfersof Property of Belgium, Luxembourg, and theNetherlands.

General Rulings and General Licenses Issued BySecretary of the Treasury.

Financial Transactions under Neutrality Act of1939.

Approved unanimously.

Thereupon the meeting adjourned.

Chairman.

71_2

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