19331204_Minutes.pdf

271

Ix meeting of the Federal Reserve Board was held in Vashington onMonday

December 4, 1933, at 12:45 p. m.

PRESENT: Mr. Black, GovernorMr. HamlinMr. MillerMr. JamesMr. ThomasMr. SzymczakMr. O'Connor

Mr. Morrill, SecretaryMr. Carpenter, Assistant SecretaryMr. Bethea, Assistant SecretaryMr. Martin, Assistant to the GovernorMr. Paulger, Chief of the Division of

ExaminationsMr. Wyatt, General CounselMr. Wingfield, Assistant Counsel

Reference was made to theCommittee of the Board

40(1111sition of certain

IY",Wheeling, West Virginia)itatitution of

the"DollarwEt3

Presented a memorandum datedIstEint

Counsel, stating that, whilehe i of

N4ira

W°111C1 be legally justified in not objecting

held by the Dollar Savings and Trust Company

8tocits

discussion at the meeting of the Executive

on November 29, 1933, with regard to the proposed

corporate stocks by the"Nheeling Bank and Trust Cam-

a member bank, through the merger with that

Savings and Trust Company",a nonmember, and there

December 4, 1933, from Mr. Wingfield, As-

the opinion,for the reasons

the question is a very doubtful one,

stated in the memorandum, that the

to the acquisition of the

the

tlet Company through the proposed merger, if, in view

by Wheeling Bank

of all the cir-

The, 11"3 inv°1ved, the Board feels that it should not raise any%Gal°

het t ratic1411 al" suggested that, if the Board should decide not to ob-

sholli: the acquisition by the member bank of the stocks in question, it

811"e8t, in accordance with its usual policy, tha

objection.

t, as a matter of

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

til°t betore the Board is not only whether the Board will interpose no ob-

12/4/33- 2-

272

(°0c1 banki--lig Practice, the merged institution dispose of such stocks as soon

a8 POSSible.

A discussion ensued during which it was pointed out that the ques-

Jectlob- 60 the acquisition by the member bank of the stocks in question,

30 whether, on the basis of counsel's opinion, the Board will take

sition that the word "purchase" as used in section 5136 of the R

8ed St atutes includes the acquisition of corporate stocks by merger orconsolid

ati°n with a member bank of the institution holding the stocks.

the At the conclusion of the discussion, Yr. Tames moved taat8Z Board take the position that the acquisition of corporate

With Y a member bank through a merger of, or consolidation

anoth4,0111rvisio__ er banking institution is not a purchase within the113 of section 5136 of the Revised Statutes.

bit

the po

Carried.

it 10r. James then moved that the Board reconsider its actionat 131'°ving the letter addressed to the Federal Reserve Agentthi;'eveland under date of November 24, 1933, in connection with84- matter, and that the agent now be advised that, in view ofto jhe circumstances involved, the Board withdraws its objectionthe :6 acquisition by the Wheeling Bank and Trust Company throughthe

;°a-t11°13°eed merger of the corporate stocks referred to, but that

rtilid;'d feels that stocks are not suitable for investment ofquir-A°1% commercial banking institutions, that the stocks ac-the trait the Dollar Savings and Trust Company as a result ofso _ -erger should be disposed of as soon as it is feasible to doprc;b:Ibld that it is understood that the agent feels this canfeotealY be

is

within one year after the merger is ef-

Carried.krth

liovetilbe er consideration was given to the letter received under date of

Z11,1401: 21' 1933, from Mr. Albert A. Sprague, Director of the Continental

the Nati"al Bank and Trust Company, Chicago, Illinois, inquiring ifN.ect n

°4 Ur. Ranney as chairman of the board of the Continental


27312/4/33

-3

National Bank and Trust Company meets with the full approval ofthe

Federal Reserve Board.

be advised that the Board believes that Mr. Ranney is a man of,s,te!ling character and high ability, and well fitted for thevosltion offered.

^ Mr. Hamlin moved that Governor Black's suggestion be amended°1c.""u. "The Board believes Mr. Ranney is a man of sterling

f'_"'Iracter and high ability, and among the class of men qualified°r the Position offered."

After discussion, Governor Black suggested that Mr. Sprague

Ur. Mr. Hamlin's motion was put by the chair and lost,

Hamlin voting "aye."

The Governor was then authorized to address a let-t,er to Mr. Sprague in accordance with his suggestion;'viesara. Hamlin, Szymczak, and O'Connor voting "no."

a 44 Mr. Szymczak, in explanation of his vote, stated that he hadmr:gh regard for Mr. Ranney and for his ability, and also fori4 SPrague, and that his vote should not be construed as indicat-84ithet he is opposed to the choice of Mr. Penney for the po-t() m°11 referred to, but that he felt that in addressing a letterBoa,1;* SPrague along the lines suggested by Governor Black thet1m-es4 *Quid be acting in a situation presented to it for the firsttskian d would be setting a precedent as to the action to beas

the similar cases arising in the future, and that inasmuchgestad tplard's letter of October 19, 1933, in which it was sug-was to at the management of the national bank be strengthened,raas 'dressed to the Comptroller of the Currency, there is norector Y the Board should express directly to the board of di-thar2r8 of the Continental Illinois National Bank, or any committee

11114,;-1 ;°f, its opinion with regard to Mr. Ranney or any other choice8,11;0. the

new management is completely set up by the bank with thetr011:!4" °I' the Reconstruction Finance Corporation and the Comp-

more —' the Currency, at which time the Board could properlymett ef

fectively express its opinion as to the proposed manage-

The Board then considered and acted on the following matters:

‘40arti 1T:legraM dated November 29, 1933, from Mr. Curtiss, Chairman of the

kr, "erve Bank of Boston, and letter dated November 29, 1933, from

Secretary of the Federal Reserve Bank of New York, both advising


12/4/33

that, at mee

changes were

and Purchase.

ings of the boards of directors on the dates stated, no

made in the banks' existinE schedules of rates of discount

Without objection, noted with approval.

Memorandum dated November 28, 1933, from Mr. Morrill stating that,

la C/rdeT to maintaiL a regular thirty-minute schedule of messenger service

between theTreasury end the Shoreham Building, it has been found necessary

t0 h0e an additional messenger, and that, therefore, it is recommended

that haseD Smith be appointed as a messenger to fill this need, with

411fary at the rate of 4840 per annum, effective as of the date upon whichIle

enters uloon the performance of his duties; the recommendation having

111 aPProved by four members of the Board on December 1, 1933.

Approved.

t116 13°e:r

TelegraPhic reply on December 1, 1933, approved by four members of

t° e letter dated November 22 from Mr. Walsh, Federal ReserveA(eltlt et I)

alias; the reply reading as follows;

1. Neil tter"Y°1-Ir leNovember 22. Board approves appointmentof Edwin

Your b an a3 Examiner in the Federal Reserve Agent's depaFtmenthe assElteatall= rate of 43,000 per annum. Please advise date

Approved.

Letter dated December 1, 1933, to

1141"al Reserve

Mr. Helm, Deputy Governor of the

Bank of Kansas City, approved by four members of the Board,atfqiuE: that,

or in accordance tiro with the recommendation contained in his letter

lianter 21, theD411 Board approves changes in the personnel classification°t the

bank to provide for tAv new positions in the Federal reserve


275

12/4/33-5

agent - examination department and three new positions in the auditing

clePartme—11v, the discontinuance of the position of "office boy" in the

feriellel service - mail department, and a change from "messenger" to "mes-senger-el, ,

--re in the title of one position in the general service-maildePartraent.

Approved.

RePlY on December 1, 1933, approved by four members of the Board, to4 lett

1e- . A,ated November 16 from Mr. Norris, Governor of the Federal Reserve44k 0.' Philadelphia; the reply reading as follows:

tel:Your letter of November 16 in regard to the portion of my let-as "'November 11 to Chairman Austin which referred to your servicehese'hdirector of the Beneficial Saving Fund Society of PhiladelphiaMay ;:en ,brought to the attention of the Federal Reserve Board. Youthe ;-"11 that in the Board's circular letter of May 7, 1924, X-4048,

lowing statement was made:e Federal Reserve Board believes it will be asobvious to the directors of the Federal reserve banks!.8 it is to itself that the good conduct and repute ofube FedeOtf the

rel reserve system require that the officersFederal reserve banks shall give their entirebin* and attention to the affairs of the banks and not

"The identified with any outside business interests'.?4 Board Board quoted this statement in its circular of April 29, 1933,ti048 °rend requested that it be advised with respect to any connec-

'r any ,,cel

°!'ficers of the Federal reserve banks with business concerns4.11. act

the BenA1:41ing to the July, 1933, edition of the Bankers Directory114(1 Saving Fund Society had total deposits of 05,000,000

liabilities of 1;5,500,000; it had outstanding loans and" 0.,c't 3,700,000; it had investments in bonds and securitiesiet:Tr::40)0,14)ts cash and exchanges due from banks amounted to

; it operated two branches in Philadelphia; andere& rt2„1,1°1-Pal correspondents were important member banks of the Fed-"gEiteed-erve system. Evidently it has a large organization and ist)ao„, orto

„C verY considerable extent in activities comparable toilet 1'nor important banking institutions. It is conceivable

;11direct8Ome instances it might have some transactions, directly orwith the Federal Reserve Bank, and the possibilities of

questions affecting such an institution, in which the


27612/4/33

cent Bank Bank might be concerned, are illustrated by the re-

York negotiations of the mutual savings banks of the State of New

serk with the Reconstruction Finance Corporation and the Federal Re-ank of New York for the purpose of establishing certain re-

41t;c)ns and providing for lines of credit. It may be added thatAct

Ual savings banks' asyou know, under the terms of the Bankingor 1933 ''ins„ are eligible for the benefits of heFederal Deposittem7lice

Corporation and for membership in the Federal reserve sys-

"In .racot -w of all the circumstances the Board feels sure that uponposi,a4.7iueration of the matter you will recognize the wisdom of itsr11,:;40n and terminate your connection as a director of the savings

as soon as it is feasible for you to do so."

Approved.

Memorandum from Assistant Secretary Carpenter advising that the re-

ellt elections at Federal reserve banks resulted in the election of the fol-

1414 Cless A and B directors at Federal reserve banks, each for a term of

tille Years beginning January 1, 1934:

Class A Directors

Name

Edward S. KennardCecil R. BerryGeorge W. RellYBen R. ConnerCharles Ryburn RiemanG. Cl3"arlie3 R ay. LeavellRMax B. Naha).. C.

HansenC.

R C.

Parks. E.

HardingEeith

Powell

tdward Rob X. Frost

ert T. Stevens*

J.. Carl DeLaCour

**

Xohn L Galvin

Charles C. Peed

Class B Directors

Bank

BostonNew YorkPhiladelphiaClevelandRichmondAtlantaChicagoSt. LouisMinneapolisKansas CityDallasSan Francisco

BostonNew YorkPhiladelphiaClevelandRichmond


27712/4/33

Name

X. A. McCraryIlex N. BabbX. N. HarrisAlbert P. Funk'1. D. HosfordX. R. MilanMalcolm McNa:c..:hten

ReelectedThe

-7-.

Class B Directors Cont'd)

Bank

AtlantaChicagoSt. LouisMinneapolisKansas CityDallasSan Francisco

orL11.. .1"^/—

'''leril°r

-""

andum also stated that the Board had been advised of the election

* - H. Hanna as a Class B director of the Federal Reserve Bank ofRichton,

a for the unexpired portion of the term ending December 31, 1934,to

'ueeed Mr. Edwin C. Graham, resigned.

Lette

Noted.

r dated December: 1933, to the board of directors of the

'%)Pcsitors Trust Company", Maine, approved by four members of theAugusta,

134rci, stating that, subject to the conditions prescribed in the letter and"33

eet also to the approval of the Comptroller of the Currency of the es-

t:blishrnent and continued operation of the institution's nine branches lo-

'";ed in 14eine, the Board approves the institution's application for member-

111P in the Federal Reserve System and for the number of shares of stock of

the ecieral Reserve Bank of Boston to which the institution will be entitled

1-1111 the basis of its capital and surplus as of the date upon which its mem-te11111)

becomes ePfective.

4 The

.,c111113a. y Board has received an application of the 'Depositors Trust

'4)€'111111i jlugueta, Maine, for membership in the System. The bank--e tran

saction of business on October 9, 1933, and is now

Approved, together with a letter dated De-cember 2, 1933, to Mr. O'Connor, Camptroller ofthe Currency, also approved by four members ofthe Board, readin as follows:


12/4/338

40,erating the following branches, all of which are located in the'arTle or adjoining counties:

LOCATION POPULATION

Boothbay Harbor 2,076Fairfield 3,500Hallowell 2,675Madison 3,000Oakland 2,500Richmond 2,000Winthrop 2,234Wiscasset 1,186Gardiner 5,609

tors"The establishment and operation of the branches by the Deposi-

tbesTrust Company have been authorized by the Bank Commissioner ofpally—ate of Maine pursuant to State law. The Augusta Trust Corn-at 11" in the hands of a conservator, formerly maintained branches;eh of

these points except at Gardiner.hes ,ha Federal Reserve Agent at the Federal Reserve Bank of Boston

'"°mmended that the application be granted, and the Board hasmewtoved the application subject to your approval of the establish-condiZnd operation by the bank of its branches, and to the followingBoerd:i°11, in addition to the conditions usually prescribed by the

16.Prior to admission to membership, such bank, if ithas not already done so, shall dispose of any corporatestocks carried in its assets except such stocks as maybs lawfully purchased by a national bank.

tieS 4 '

era aPPears to be a need for banking facilities in the communi-tosr,n wh

feels ich the main office and branches are located, and the

be a.̀c , in view of the available information, that the bank shouldBoeraT4ed to membership with all of its present branches. The

brs °I the opinion that the establishment and operation of thePl'oviei,lichess at the places indicated, is in accordance with the°:vat -hs of the Federal Reserve Act governing the establishment ofcues bY a State member bank, provided your approval thereof is

or There

the are inclosed for your information the report of examination°ctobe osito rs Trust Company made as of the close of business1()stotl- 4'11 1933, by an examiner for the Federal Reserve Bank of

R:):14d con of a memorandum prepared in the office of the Fed

e aln 41/aerIlh -erve Agent at Boston relative to the bank's application for

"It wilDrove 1 be

appreciated if you will advise the Board if you ap-tbec) the establishment and continued operation of the branches6o niernbA-ePositors Trust Company, in the event the bank is admitted

-1'shiP on the terms and conditions prescribed by the Board."

tf(


27912/4/33

9

Letter dated December 2, 1933, to the board of directors of "The

Riverview State Bank", Kansas City, Kansas, approved by four members of the

stating that, subject to the conditions prescribed in the letter,

the 13°ard aPproves the bank's application for membership in the Federal Re-

8ela SYstem and for the number of shares of stock of the Federal Reserve

411k of Kansas City to which the bank will be entitled upon the basis of

it8cePital and surplus as of the date upon which its membership becomesertective.

Approved.

Elt

"ul°11d, approved by four members of the Board, reading as follows:

193;Ra.”iPt is acknowledged of Fry's letter of November 22,lin'.nelosina copy of a letter dated November 21, 1933, from

NallEhton, Cashier of the 'Seat Pleasant Bank', Seatticyn-arYland, requesting the withdrawal of the bank's applica-call for m

embership in the System inasmuch as it would be practi-tyitY imPossible for the directors to purchase the number of quail-xi Shea, e s

required under the Banking Act of 1933.accordance with the request of the Seat Pleasant Bank, its

Ders cation will be considered as having been withdrawn. The pa-Pwii.°111PrisinE the application for membership will be retained as1-Or 4-

arficial permanent files of the Federal Reserve Board."

Letterdated December 1, 1933, to Mr. Hoxton, Federal Reserve Agent

Approved.

--J on December 1, 1933, approved by four members of the Board, to4 1etter d

ated November 10 from Mr. Hale, Cashier of the Federal Reserve Bank

l'Elneisco; the reply reading as follows:

10 vi,',!w of the circumstances set forth in your letter of Novem-N.4 the Board has no objection to the waiving of the penalty of

tti f°11 re8erve deficiencies incurred by the Old National BanktPer181ti°4 Trust Company or Spokane during the month of February

o ja,siggregating :4Z05.85 incurred by 14 unlicensed member banks4he banking holiday."

OrS


"80

12/4/33-10-

Approved.

Reply on December 2, 1933, approved by five members of the Board, to

a 4tier dated October 4 from Mr. Austin, Federal Reserve Agent at Philadel-

PhIs;48 reply readinq as follows:

a "Reference is made to your letter of October 4, 1933, inclosingyo:!py Of a letter received by you from the York Trust Campany,11'1 Pennsylvania under date of August 2, 1933, relative to thetiZof the York Trust Company to acquire stock in other corpora-

"The Board understands that the York Trust Company holds a notepcoltue York Securities Corporation, an affiliate of the trust com-

uis ?r,' secured by a pledge of certain stocks as collateral, that ittioesired to effect the dissolution of the York Securities Corpora-be lal'a and that, in this connection, the trust company has asked tocol

a,-vieSd whether it may lawfully purchase the stocks so held asici1J;teral

and hold them for a more favorable market rather than1088 in e Present forced sale at prices which might result in aderedt.° the trust company. You inclose a copy of the opinion ren-cazielli vir Your counsel with respect to this question, in which theectio;3'°11 is reached that the trust company may lawfully take thetact ProPosed provided such action is necessary in order to pro-Poratitor.lf against loss on a loan made to the York Securities Cor-

ttAs

the Y_ou know, section 9 of the Federal Reserve Act as amended byabell

u ine Act of 1933 arovides, in part, that State member

bank s

epee; s subject to the same limitations and conditions with re-Ilatiob

othe purchasing of stock as are applicable in the case of

visei banks. Paragraph 'Seventh' of Section 5136 of the Re-ttig th tatutee as amended by the Banking Act of 1933, after limit-and ari riEht of a national bank to deal in investment securities*except er defining such securities, provides further that,'* *40thi

1

es he reinafter provided or otherwise prohibited by law,eocialt herein contained shall authorize the purchase by the as-"cord:,4 °f any shares of stock of any corporation * * * *. Inever, T:ee with certain decisions of the U. S. Supreme Court, how-

Seems that a national bank may acquire stock in other cor-1Ilticin; With a view to its subsequent sale in order to reduce anu0 the- i3-eu loss, as by becoming the owner of shares of stock pledged

nk as collateral for a loan. See California National Bank A IC-4'44m 197 U. S. 332, 17 S. Ct. 831,833 (1897); First Nationalzat,_4t1tho 1:National Exchange Bank, 92 U. S. 122, 23 L. Ed. 679 (1876).*;he litin,thsse decisions were rendered prior to the enactment of

Act of 1933, it does not appear that their force has beensenea by such amendment.


28112/4/33

-11-

clu"Accordingly, the Board is in general agreement with the con-of your counsel that the York Trust Company may acquire the

dll-cez' in question provided such action is in fact necessary to re-

each loss or to eliminate the possibility of loss and provided thatstock is disposed of as soon as it is practicable to do 90."

Clarren

eY) approved by four members of the Board, reading as follows:

Approved.

Letter dated December 1, 1933, to Mr. O'Connor, Comptroller of the

130,2n accordance with your recommendation, the Federal Reservetv;'`' aPproves a reduction in the common capital stock of 'ThecicZett

National Bank', Everett, Massachusetts, from c;200,000 toceni:(4° in accordance with a plan which provides that the bank'spr;;i'al shall be increased by the sale at par of ;200,000 par valueael erred stock to the Reconstruction Finance Corporation and theParevn Par to the bank's present stockholders or others of 0.00,000red cin;ue of new common stock, and that the funds released by the13,:'°11 in common capital stock, together with 08,000 from thekatea' Undivided profits account, shall be used to eliminate esti-01 3;osses amounting to approximately T 66,194, and approximatelyEt8 ;Cu °f the existing depreciation in substandard securities,Iletio:”iried in the report of examination of the bank made by ayo111,-.114 bank examiner as of August 2, 1933, all as set forth in

IrIlemorandum dated November 14, 1933.cEtpitll considering the plan under which the reduction in common

1%e stock is to be effected, the Board noted that no provisionclde,2 in the plan for the elimination of approximately ,A7,000 it4palc'eiation in securities, which, if considered as a loss, would

bank's common capital stock to the extent of approxlmate-q66).J. In addition there will remain in the bank approximate-

Of of doubtful a' th t assets, as well as a heavy investment in

17,5 arld furniture and fixtures. The Board assumes, however,uecom—a%have these undesirable features in mind and, whenever itt° b4e;Arasible to do so you will require such further corrections

--4'48 in the condition of the bank as may be practicable."

Letter4t dated December 2, 1933, to Mr. Stevens, Federal Reserve AgentCh

Approved.

' approved by four members of the Board, reading as follows:

the ce„iirt

41

is acknowledged of Mr. Young's letter dated November 17,141,;:sing of the proposed reduction in common capital stock of

w'w0,000—gn State Savings Bank', Adrian, Michigan from 4150,000 toill connection with its reorganization.


0.6212/4/33

- 12 -

e, "It aPpears from information submitted by Mr. Young that onlyr'44d assets are to be retained by the bank, that the funds to bet!alized by the resale of 100,000 of common stock are to be paid

before reopening, and that there will be no liability on the part,v4,1 the bank for repayment to depositors for the amount of deposits

atved bY them.ths" li the basis of such information and in view of the fact that

q.h4 °era's consent to the proposed reduction in capital is not re-'4red bbeltk Y law, or the conditions of membership applicable to thisthe ' the Board offers no objection to the reduction in capital inco amount indicated, with the understanding of course, that yourpelllaci.sel has considered the case and is satisfied as to its legal as-st51:8) that such reductions in the common capital stock and the re-cor:,(If A-00,000 in common stock will not result in any change in thethe'j!te existence of the bank which will affect its membership inor ,;':aueral Reserve System, and that the transaction has the approvalfle Michigan State Banking Department."

41V y 0

k approved by four members of the Board, reading as follows:

liese"rThe Board has reviewed the report of examination of the FederalBank or New York as of May 27, 1933, copies of which were

r you and Governor Harrison.,Page 23 the examiner comments upon the inferior quality of the paper upon which credit has been extended to member bankstiollan the form of direct loans, to individuals, firms, and corpora-01)14e'4the undesirability as investments of many of the municipal

tei:11:1°ns held under repurchase agreement, and the doubtful char-the

Hungarian credits. The Board is in accord with the sug-et of its examiner with regard to the reserves thereon to be:it the end of the year.Der wa 'his connection it is noted that appraisal of much of the pa-

P,Ert o Possible because of the fact that in many instances a largelv )000. 'ha Paper Pledged by borrowing banks consisted of loans underDeee 22011 which current financial statements were not available. On

t On thefthe report the examiner states that this situation was".'011 attention of the management who stated that considera-zrrlEtila_`(14 be

r lines. given to the advisability of obtaining statements on

Itarere., atIPPlementary memorandum the examiner raises a question withZe, arld e to theaccountint, connected with the sale between February

Sra):41,,a'rell 29, 1933, of United States Government securities to other'‘ero "eserve"8 thai. utinEls under repurchase agreements. The Board under-

en this matter was discussed by the Board's examiner

Approved.

Letter dated December 2, 1933, to Mr. Case, Federal Reserve Agent at


12/4/33- 13 -

283

th °fricers of the reserve bank, Deputy Governor Burgess statedhat the reserve bank did not wish to show any liability on itsate111ent for securities sold under repurchase agreement and had re-

the transactions as sales under gentlemen's agreements suchere customarily entered into in connection with the handling of

D( Slratem Special Investment Account. In view of the facts as re-i;ued by the examiner, the Board feels that the transaction should2417e been shown as a liability of the bank on its records and in itsqlblished statements. Inasmuch, however, as paragraph (b) of Sec-on!n,11 of the Federal Reserve Act provides a specific way by whicher' zederal Reserve bank may obtain accommodation from another Fed-areil Reserve bank, the Board requests that, if a situation shoulddatr, IlEein which makes it advisable for your bank to obtain accommo-or --4 from other Federal Reserve banks, the Board's formal approvalraa the1, specific form of the accommodation be obtained, so that thereY (;!. an adequate record and the transaction may be properly recorded.

thattt-a Page 28 of the report the examiner calls attention to the factat the time of final settlement unlicensed banks had been charged

tef at at the rate of four per cent on the net daily liability af-coll i"lance for any credit balances held in cash collateral ac-lish and that there was no record that such a rate had been estab-nlittee bY the Board of Directors of the reserve bank or had been sub-that k: to the Federal Reserve Board for its approval. It is notedgosrahe management stated that adjustments would be made and thethe4;t17:431% kg:dt.o be advised as to the manner of adjustments and

it e :2fd le pleased to note that the recommendation (page 26)e.kal,rze; -,.‘ner that audits of the Fiscal Agency Department be en-sob as to provide for a checking of all subscriptions received! adopted. It is requested that you advise the Board what ac-

anY, has been taken regarding the recommendation that thebe oc; Of the collection and check departments at the Buffalo Branch

c°rIlinzT°11allY enlarged in scope so as to include a control on in-and a; Zell for a period of time subsequent to the date of the audit,to what decision was reached regarding the practicability ofat the such Procedure to occasional audits of similar departments

to ,v:lad Office. It is also requested that you advise the Boardthat hether any action has been taken regarding the recommendation!11 1. natur, 83 on reconcilements of balances due to member and non-c)peri2n±cs be checked to determine whether they are signatures of,04 J

authorized officials.liebilit,e 26 of the report the examiner has recommended that the

gold i; existin:s at the end of 1933 for melting and alloy chargesthEq ti e estimated and that any excess held in suspense account at21e

representit. ̀ qted t_ rig deductions made for meeting such charges be10,4 Will ci=erd loss. The Board notes that this recommenda-

114 is uIlk ha noted (page 27) that several of the officers of the reserve

-a number of instances obtuLned payment of their salaries


12/4/33#

- 14 -

1' Portions thereof in advance, at times other than when the regu-Ir Pay day would fall within a vacation period, and the Board is'eased to note that this Practice will be discontinued.

ior,"? Page 225 of the report the examiner calls attention to the'1,--e".Ce at the Buffalo Branch of releasing to local banks, againsti:ceiPte, bills of ladino and other documents received with itemsB'rwarded to the Branch for collection. It would appear that the

4't4ertlt awEl acting without authority in releasing such documents

instructions of its indorser and the Board isf eased to note that the practice will be discontinued. The Board

1-1°tea that the recommendation of its examiner that cash with-blac a for Pay roll Purposes at the Branch previous to date of dis-th;seraent be held under dual control until the day of payment andmast, an armed guard or other designated employee accompany the pay-

his rounds, will be adopted.or The Board has been informed that in your absence the questiononestrengtheninq the examination department by the employment ofthe

Or more experienced and trained examiners was discussed by

tit pcird's examiner with Assistant Federal Reserve Agent Dillis-diej," tha ouestion of personnel in the auditing department wasto b2ased with the Assistant General Auditor. The Board desires

,l'tadvised of the present situation as to these matters.Ezenii, has been reported that the financial affairs of Assistantthe 11-er E. G. Steadman are apparently somewhat involved and thatPere;n°11nal files contain other unfavorable data regarding hisaesis:al- affairs. Inasmuch as the appointment of examiners and130aant examiners for the reserve bank must be approved by thearreirY°u are requested to forward a brief statement as to thehie rist of such assistant examiner aid your recommendation as to”Inrneaa to continue in that capacity.

ee or JrMation at hand indicates that the average cost per employ-844k ue welfare and medical unit of the New York Federal Reserveeral r! almust three times the average for the eleven other Fed-or thelerve

banks. In discussing this matter with the officers't such allk the Board's examiner suggested that a survey be madeqtlate

activities to determine Whether the bank is receiving ade-be advised for the expense incurred, and the Board would like to

as to whether such a survey has been undertaken.ti, ter the received the considers--n or t,_ report and this letter have

Nliested -ue board ofdirectors of the Federal Reserve Bank, you arebetake, t° advise the Board as to what action has been or will" on the matters discussed."

LetterEtt gated December 1, 1933, to Mr. Williams, Federal Reserve Agent

Cleveland,

approved by four members of the Board, readin as follows:

Approved.


12/4/33- 15 -

285

ques"Mr• Fletcher's letter of November 14, 1933, asks severaldi

--ti-ons arising under the Clayton Act regarding the service of

ii,-1ectors of certain banking institutions at Pittsburgh, including

1)..le Mellon National Bank, The Union Trust Company, The Union Savingstlt:trik, The Farmers Deposit Trust Company, and The Farmers Deposit

Bank, all of Pittsburgh, Pennsylvania.th It aPPears that some of these directors already have receivedore Pe Mission of the Federal Reserve Board covering their serviceseni.s°111e of the banks involved. As stated in the Board's letter ofre;11ther 16, 1933, X-7591, such permits continue in force untiltevr°"d; and it will not be necessary for these directors to obtainPa

and

covering the services described in their present per-

sey.:Tt ePPears, however, that some of the directors involved are1:10—.'ng banking institutions which are not covered by their presentSeetti ts; end, if these institutions come within the prohibitions of

tho,:°_,4 8A of the Clayton Act, it will, of course, be necessary forWhiCh uirectors to obtain new pennits covering the other institutions

theY are serving.or t"),',I aPPear 8, further, that the permits which were issued to somewhi„-88 directors did not cover their service of one institutioncei4 theY were serving because that institution came within an ex-secti°4 contained in Section 8 of the Clayton Act which makes thattiori i°n inaPPlicable where all of the stock of one banking institu-clAt ins%"ned by the stockholders of another. However, as pointedto the -ection IV of Regulation L, that exception is not applicablenow Provisions of Section 8A, with the result that a pennit isto it 5 'Y coverina that institution if Section 8A is applicable

clire"tt is not clear from Mr. Fletcher's letter whether any of theother (31:11's involved are serving a national bank and more than two8A. Rnallicing institutions corning within the provisions of Section

whir:uwevers your attention is called to Section V(a) of RegulationPerniit'" Points out that the Board is not authorized to issue aecraing "inE the service of more than three banking institutionserly di wlthin the prohibitions of the Clayton Act. Accordingly, if

14:te?t°r is serving a national bank and more than to other bank-be flee coming within the prohibitions of Section 8A, it

sileh 44,6„"ssarY for him to sever his connection with all but two"Eitio„,,""iuer

b institutions, or else sever his connection with alleriks.,

Letteruated December 2, 1933, to Mr. Young, Governor of the Federalsititpet

idOS tOtt approved by four members of the Board, reading as

Approved.


28612/4/33- 16 -

"Reference is made to your Inquiry No. 20 dated June 27, 1933,and subsequent correspondence concerning the question of the payment17 interest on deferred deposits by the Second National Bank of'"huas New Hampshire.r "care,,

cceisideration has been given to the opinion of counsel211 Your bank and to the form of Certificate of Special Deposit is-'lilted to the subordinating depositors of the Second National Bank.

th...18 noted that the certificate states that the funds evidenced byt certificate have been deposited as a special deposit subordinatedd° all other deposits, except other special deposits, and adds 'this

r:Posit shall der

be subject to such restrictions as to withdrawal andlirlt4e of interest as may be determined by the directors of this bank

the

be

of the Comptroller of the Currency'. The cer-esttoocettehaelso provides that if the bank shall later issue preferred

depositor may elect to convert his deposit into suchwhen and as issued.

Pay 3.4 this connection, it is observed that such deposits are notet anY specified future date or at the expiration of any

eire'L44'ed Period, but at such time as it may be practicable in thewitCui:

llnances of the case as determined by the directors of the bank

he cin e approval of the Comptroller of the Currency. There being14`'

st maturity provided, and in the absence of a provision forthat."'" 30 days' written notice before payment, it would appearnieellin3Uch dePosits would not constitute time deposits within thelicteci-81,°f Regulation Q, upon which interest could be paid. It is

-ter ad',(fgever, that your counsel has suggested a form of resolutionProvi,—,P'.1°/1 by the board of directors of the Second National Bankthe ,"`Ing substantially that such deposits may not be withdrawn bythatIPQsi tors until the Comptroller of the Currency shall determinesery he retention of such subordinated deposits is no longer neces-he,ve Etiirld then only after the board of directors of the bank shalleach °ted to release said subordinated deposits and, in the case ofthe sPet_cial deposit, after the depositor thereof shall have givento at least thirty days' notice in wtiting of his intention!hoUld cli,12,"• If the board of directors of the Second National Bank

(.;"opt a resolution, approved by the Comptroller of the Cur-esteci onteining a Drovision substantially in the form of that sug-

Is b-

tich a dy your counsel and containing an additional provision that,""least th-°,81-t may not be converted into preferred stock until at

days' notice in writing shall have been given by the%IriPertsdr to the bank of hi s intention to wi thdraw the depos it or toserve 33 it into u preferred stock, it is the opinion of the Federal Re-I Dayabi,°, that such subordinated deposits may then be regarded as41,,esritylp, after thirty days' and, therefore, time deposits within the

c)r Section 19 of the Federal Reserve Act and that interesttlist 'cter ace

Provided ruing may be paid thereon at a rate not in excess of

the in Regulation Q.ctil

s cant 4-111ormation at hand the Board does not agree with theveld iziter "tion that the subordinating depositors may lawfully beeston +uhe subordinated deposits at a cumulative rate of


12/4/33- 17 -

"6:° Pox' annum. The rate of interest must not exceed the rate pre-in the in the Board's Regulation q, and interest on such time de-maY be paid only for the period commencing on the date on

dicated. "a action is taken by the Board of Directors of the bank as above

Approved.

Tel-egraphic reply on December 2, 1933, approved by four members of

the Board, to telegraas dated November

G°17ertor of the Federal Reserve Bank o" t011ow8

Was amur wires November 15 and 29. Section 19 Federal Reserve ActPsd nded by Banking Act of 1933 so as specifically to requirerilayei;e7 Reserve Board to limit by regulation rate of interest which

nlatte/' Paid by member banks on time deposits and it follows as a

bajaka- °f law that the rate of interest which may be paid by membertract °n such deposits under the terms of any certificate or can-16, 19:hich has been or may be issued or entered into after JuneBoard :3' mel, not exceed the rate as limited by the Federal Reserve

t 'rom time to time pursuant to the statute. In the circumstan-or

t.'„i 2"d feels it would be appropriate for member banks to stamp(I u*;t 1t the sentence suggested in X-7676 on all time certificatesposit

hereafter issued."

"1) at it-phi4deei 11 that the Board has received from the Federal Reserve Bank of

15 and 29 from r. Clerk, Deputy

f San Francisco; the reply reading

Approved.

Memoreodum dated November 22$ lZ,from Mr. DuBois, Assi stant Coun-

Phia an agreement executed by Gimbel Brothers, Inc., as the holding

a tri ate of Gimbel Brothers Bank and Trust Company, Philadelphia,

1:c3Eitcit 8Printed form

, but that therellited torn,

'11e.ertellt

a State member bank; that the agreement was executed on the

was typed in at the end of the

e Proviso that the company executing the agreement made the

"bc1,1t °IllY in the event that it is in fact a holding-111ellY affiliate within the meaning of the provisions


28812/4/33

- 18 -

"Of the Banking Act of 1933, and that said Act isconstitutional in so design.:ting it; and the under-signed asserts and reserves the right to establishthat it is not in fact such a holding company af-filiate and is not bound by or subject to any ofthe terms or provisions of said Banking Act per-taining to holding company affiliates; and that ifthe Act is so construed as to consider it a hold-ing company affiliate the Act is unconstitutionalas to the undersigned."

The memorandum also expressed the opinion that the Board would be

RIstified in accepting the agreement as filed, and recompinded that it be"caPted.

Approved.

ReP1Y on December 1, 1933, approved by four members of the Board,to e, ,e

tter dated November 3 from Mr. C. A. Collins, Trust Officer of The

rstlonal Bank of West Bend, Wisconsin; the reply reading as follows:

°f latter of November 3, 1933, addressed to the Comptrollerrepi 6 CUrrency, , has been referred to the Federal Reserve Board for33 0.1;„.„11°11 request to be advised whether section 32 and sectionNit(the Banking Act of 1933 prohibit a director or officer of asch°111,1a1 bank from holding stock in a loan or securities company

if

ploye'allk director or officer is not an officer, director, or em-Such loan .()! such loan or security company.

directi i°n 32 of the Banking Act of 1933 prohibits an officer or°f any member bank from serving after January 1, 1934, as

or uti', director, or manager of any corporation, partnership,neorPorated association engaged primarily in the business of

4:111q-, selling, or negotiating securities.1311/110,11"1°n BA of the Clayton Act as amended by section 33 of there Act of 1933 makes it unlawful after January 1, 1934, for aJircl °pricer, or employee of a national bank to serve at the

(other-;;: aa e director, officer, or employee of any corporationbY 8toe;'an e mutual savings bank) Which shall make loans secured

bend collateral other than to its own sabsidiaries.h°40,11:ther of these sections contains any prohibition against the°rtice`' Of stock in a loan or securities company by a director ortIlet ?ft a national bank; and i t is not necessary, therefore,'ea stock be disposed of by a bank director or officer."

Approved.


.'"

12/4/33- 19 -

Reply on December 1, 1933, approved by four members of the Board, to

a letter dated September 16 from Itir. Robert E. Minnich, Prentice-Hall, Inc.,

iv yort.iv) New York; the reply reading as follows:

ad "Receipt is acknowledged of your letter of September 16, 1933,"reseed to the Governor of the Federal Reserve Board, in which

request to be advised of any ruling of the Federal Reserveh°t:rci 14 respect to the meaning of the words 'bona fide owner inrph;: .bOwn rig', as used in Section 31 of the Banking Act of 1933.it- tffoard has not issued any such rulinc, and it does not feel thatwhieRould undertake at this time to define in detail the words to

cp,11 You have reference.seri It an,-4'1-ears from your letter, however, that one of your sub-

renWiers desires to know whether the provisions of Section 31 wouldoui;i7r, unlawful the pledge by a director of a manber bank of hiso'pi--;:4Ying shares as collateral security for a loan. It is theeff:1°11 of the Board that, after one year from Tune 16, 1c33, theow:ethie date of Section 31, a director of a State member bank mustsha'irthe

required qualifying shares in his own riffht, and that sucha io-s IllaY not lawfully be hypothecated or pledged as security forthe El.nn or debt after that date. This conclusion finds support inezenclact that Section 5146 of the Revised Statutes, which has beentati ed in part by section 31, provides that every director of astajlidal bank must 'own in his own right' qualifying shares inis itie-talni,°1111t8, and that Section 5147 of the Revised Statutes, whichbank t-,11:::-L force and effect, requires each director of a nationalhis --take an oath that he is the 'owner in good faith, and intiti:31/11 right, of the number of shares of stock required by thisthe as"' subscribed by him or standing in his name on the books ofvie issd°eiati°n* and that the same is not huothecated, or in any 1)crtio,e; ecl as security fory loan or debt'. The underscoredwords or Section 5147 indicates that Congress considered theglialt vr/11 in his own right'

' as used in Section 5146, to mean thatarid uhrl,--rie shares of a director of a national bank shculd be unpledgedthe w-o-YPothecated, and there does not appear to be any reason why

lic18 tc)wiler in his own right', right', as used in Section 31 of therie Act of 1933, should be constmed differently."

Approved.There

b()1, -- was presented for the record the following letter dated Novena-Ze, 193

3' received by Mr. Szymczek from LIr. Stevens, Chairman of the Fed-rEll

"Ile Bank of Chicago:


2,9012/4/33

- 20 -

"Referring to our telephone conversation today with respect to mylettert of October 6, in which I asked for approval of additional

by to our general counsel for the remainder of this year,oy reason of developments since that letter was writtenorill YouPlease disregard such a request."The general counsel of the bank is Carl Meyer, and he has forrinime years designated Charles B. Dunn, of his office, to represent,

h the handling of nost of our rout the matters, which Mr. Dunnras done t to

o our general. satisfaction. While the arrangement re-

the in ''Y previous letter to give us all of Mr. Dunn's time forcore si-36 of the year was satisfactory to Mr. Meyer, upon furtherer-al d,eration, both by our board and in consultation with the Fed-

Kveserve Board in Washington, we all determined to consider aou- arrangement for the ensuing year which would presume our engagingerIrt4 Own counsel for whole time service for next year, who should betrelY disassociated from any other legal firm; that in additionso-Teto. w

4. -6 might retain the services of outside counsel for a2441c purpose where advisable.I was authorized to take this matter up tentatively with our

geile

cit„rel Counsel, Carl Meyer, but in the meantime he had left the

tore" end will not return until after the middle of December. There-short nothing can be done until his return. The time is now sobeen

uere4 ,s'at we consider that we should leave the matter as it has

L,ofore until after consultation with Mr. Meyer and until al'angaelle,118enlent may be made as of the first of next year. The ar-rary —'16 suggested in my previous letter to you was to be a tempo-rene°11e in the expectation that it would lead to a permanent ar-

thcludenifi ell:t for the new year, but owing to the necessary delay we con-ere- ',hat

a temporary one would run for such a short period thattti no further necessity of considering it.tion 'rust that this will explain the situation to your satisfac-

when't}.71d we will, of course, advise you prcmptly, for your approval,-e permanent arrangement may be ready to submit."

Noted.

Meraorendum dated November 28, 19331tecolitiendia the

renewal, atto

the

Congressional servicetitahe

frcca Mr. Wyatt, General Counsel,

a cost of ,,10C, of the Board's subscription

regd by the C

orporation Trust CompanYC°11€tess

which commences on Wednesday,

for the

bEtli 3,

11 been aPProved by four members ofjanthueaBryoard

Approved.

arding banking and currency matters fur-

forthcoming session of

1934; the recomnendation

on Dece_aber 1, 1933.


'191_12/4/33

-21 -

Letters dated December 1, 1933, approved by four members of the

to aPPlicaats for permits under the Clayton Act, advising of ap-

Proval of their applications as follows:

ne,I°hn H. Brooks, for permission to serve at the same timeuirector and officer of The Brooks Bank and Trust Company,

p(Ii!rington, Connecticut, and as director and officer of The1st National Bank of Litchfield, Litchfield, Connecticut.

Gilbert H. Scribner, for permission to serve at the samechaile as director of the National Boulevard Bank of Chicago,Ba,lag°, Illinois, and as director of The Terminal National

Chica,zo, Chica6o, Illinois.

Mr. Otto Ntime • Frenzel, Jr., for permission to serve at the sameas director and officer of the Merchants National Bank,

Trustans, Indiana, as director and officer of The IndianaFou compan_Y,Indianapolis, Indiana, and as director of the

n Square State Bank, Indianapolis, Indiana.

Approved.

There were then presented the following applications for originalatock of

Federal reserve banks:4

lications for ORIGINAL Stock:148tziet xo.2.

Shares 1%tional

Spraker Bank in Canajoharie,Catajoharie, New York 84 84

!),18trict No. 4.

qrst National Bank at East Palestine,.LEElat

Palestine, Ohio 44431, National Bank of Braddock,

152l'addock, P

ennsylvania 108pLi%let No. 5.101.)laa

National Bank of Hancock,11le iTilE ill"ek ) aion Na Maryland 36tioonal Bank of Oxford,75

°4rord, North Carolina 39131striet ,1/4„. 7.114tiori "0st,

Hastings,

al Bet.„1,

36"-rigs Michigan 36


449

4,se

12/4/33- 22 -

A lications for ORIGINALDistrict No. 9•

Stock: (Continued)

Ii•rst National Bank in Ontonagon,, Ontonagon, Michigan°lion National Bank of Ashland,Ashland, Wisconsin

Approved.

Shares

36

66 102Total

Thereupon the meeting adjourned.

kripr011red


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