frsbog_mim_v41_0335.pdf

335 FEDERAL RESERVE BOARD

X-9019 WASHINGTON

a d d r e s s o f f i c i a l c o r r e s p o n d e n c e t o t h e f e d e r a l r e s e r v e b o a r d

November 10, 1934.

SUBJECT: Issuance of Voting Permits to Holding Company A f f i l i a t e s .

Dear Sir:

In a l e t t e r to a l l Federal Reserve Agents dated September 28,

1934 (X-8028), the Federal Reserve Board outlined the circumstances

and conditions under which general voting permits would be granted to

holding company a f f i l i a t e s , and stated that i t desires to i ssue general

voting permits in a l l cases where reports of current simultaneous exam-

inations of holding company a f f i l i a t e s and their subsidiaries are ava i l -

able and indicate condition, management and relat ionships to j u s t i f y .

It was also stated that as a condition precedent to the granting of

general voting permits the Board w i l l require holding company a f f i l i a t e s

and their subsidiary banks in general to comply with the same conditions

as to elimination of cr i t i c i zed a s s e t s , corrections of management p o l i -

c i e s , and relat ionships , as i f they were applying for and being admitted

to membership in the Federal Reserve System.

Thereafter, Mr. Leo H. Paulger, Chief of the Board's Divis ion

of Examinations, addressed a l e t t er dated September 29, 1934 (Exam.53),

to a l l Federal Reserve Agents requesting a report concerning the pro-

gress made in completing and analyzing the simultaneous examinations

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

X-9018

of tanks and. holding company a f f i l i a t e s as outlined in the Board's l e t t e r

dated January 20, 1934 (X-7763) and Mr. Paulger•s l e t t e r dated February

16, 1934 (Exam. 20), and concerning the extent to which such banks and

holding company a f f i l i a t e s have been, or w i l l be, able to make the elim-

inations and corrections referred to in the Board's l e t t e r of September

28, 1934 (X-8028).

The Board des ires to issue during this year, or at the ear l i e s t

practicable date, general voting permits in a l l cases in which reports

of current simultaneous examinations of holding company a f f i l i a t e groups

are available and indicate f inancia l condition, management and re la t ion-

ships which j u s t i f y the issuance of such permits. However, from the abovo

mentioned reports as to the status of each holding company a f f i l i a t e , and

from the information contained in the Board's f i l e s , i t i s apparent that,

in many cases, holding company a f f i l i a t e s w i l l not be able to obtain gen-

eral voting permits prior to the January, 1935 meetings of the banks in -

volved, either because arrangements could not be made with the national

and State supervisory authorit ies for simultaneous examinations, or be-

cause the holding company a f f i l i a t e s and their subsidiary member banks

have not completed their rehabi l i tat ion programs of have not made the re -

quired eliminations and corrections, and apparently w i l l not be i n a po-

s i t i o n to do so prior to the January, 1935 meetings.

In a l l cases i n which i t has been or w i l l be impracticable to

i ssue general voting permits prior to the January, 1935 meetings of the


- 3

O ; O U X-9018

banks, the Board w i l l consider the issuance of l imited voting permits

to vote the stock owned or controlled "by holding company a f f i l i a t e s at

the regular annual meetings, or any adjournments thereof , held by share-

holders of the subsidiary member banks prior to April 1, 1935, for the

following purposes:

1. To e lect directors of the subsidiary member banks.

2. To act thereat upon such matters of a routine nature as are ordinarily acted upon at the annual meetings of the subsidiary member banks.

In a l l cases in which the Board has received applications for vot-

ing permits on F.H.B. Form P - l , with exhibits , from holding company a f -

f i l i a t e s in your d i s t r i c t which desire to vote the stock of their sub-

sidiary member banks at the next annual meeting only for the purposes

set forth in 1 and 2 above, i t w i l l not be necessary for the Board to

receive any request for limited voting permits for such holding company

a f f i l i a t e s . I f , however, any such holding company a f f i l i a t e desires to

vote the stock which i t owns or controls of i t s subsidiary member banks

at the January, 1935 meetings for any purposes other than those set

forth in 1 and 2 above, i t w i l l be necessary that the Board be advised

of the additional purposes for which a limited voting permit i s desired.

If you have not already done so, please obtain and furnish to the Board

such information together with a detai led outl ine of the plan or plans

for which such shares are to be voted. Such information when forwarded

to the Board should be accompanied by your recommendation and that of


— 4 ••

f. 338 X-9018

the Executive Committee of your "bank concerning the issuance of a

permit for such additional purpose or purposes, and concerning any

additional requirenents to "be prescribed as a condition to the i s s u -

ance thereof.

In view of the fac t that i t i s impossible at th i s t ine to deter-

mine which of the holding company a f f i l i a t e s w i l l be able to obtain

general voting p e m i t s prior to the January, 1935 meetings, i t w i l l

be appreciated i f you w i l l advise the Board, at the ear l i e s t poss ib le

date concerning any holding company a f f i l i a t e which desires to vote

the stock of any of i t s subsidiary member banks for purposes other

than those stated in 1 and 2 above, except such holding company a f f i l -

i a t e s as have already been granted general voting permits. In any

case in which the Board has not received by December 1, 1934, inform

nation that a holding company a f f i l i a t e desires a l imited voting per-

mit to vote the stock of i t s subsidiary member banks for purposes in

addition to those stated in 1 and 2 above, the Board w i l l consider

that i t w i l l not be necessary to i ssue to such holding company a f f i l -

i a t e a l imited voting permit covering any purposes other than those

mentioned in 1 and 2 above.

As a condition precedent to the issuance of a l imited voting

permit for the purposes set for th in 1 and 2 above, the Board wi l l r e -

quire the fol lowing:


X-9018

Prior to the issuance of the l imited voting permit

the Federal Reserve Agent shal l s a t i s f y himself

that each of the subsidiary banks of the applicant

has charged off or otherwise eliminated (a) a l l

losses in loans and discounts, (b) a l l depreciation

i n stocks and defaulted securi t ies (c) a l l depre-

c ia t ion in secur i t i es not of the four highest grades as

c l a s s i f i e d by a recognized investment service organ-

i za t ion regularly engaged in the "business of rat ing

or grading securi t ies and (d) a l l other los ses ; as

shown by the l a t e s t available reports of examinations

by the appropriate supervisory author i t ies , except

that the charge-offs and eliminations required by (b)

and (c) above may be based upon current appraisals of

marketable securi t ies sat i s factory to the Federal

Reserve Agent.

Prior to the issuance of the limited voting permit

the Federal Reserve Agent shal l s a t i s f y himself that

the holding company a f f i l i a t e has substant ia l ly per-

formed any agreement or agreements heretofore ex-

ecuted by i t as a condition to the issuance of a lim-

i t ed voting permit by the Federal Reserve Board.

Prior to the issuance of the l imited voting permit the

Federal Reserve Agent and the Executive Committee of


r fr

6 ~ : • 340

X-9018

the Federal reserve "bank shal l approve the issu#-

ance of such permit.

The above requirements are minimum conditions which should

"be complied with prior to the issuance of a l imited vot ing permit

and i n certain cases additional requirements may "be imposed, depend-

ing upon the f a c t s and circumstances in any particular case. How-

ever, i n any case in which, in your opinion, compliance with con-

dit ions prescribed in connection with the issuance of a l imited vot -

ing permit i s impracticable or impossible prior to the annual meet-^,.

ing of any of the banks involved, please advise the Board concerning /

a l l of the pertinent facts and circumstances in such case, and fur-

nish the Board with your recommendations as to what modification, i f

any, should be made in the conditions prescribed.

I t i s contemplated that in authorizing the issuance of lim-

i t ed voting permits hereafter the Board w i l l continue the use of the

ANCIGAB telegram procedure outlined in i t s l e t t e r dated December 21,

1933 (X-7730). Instead of writing out the above mentioned conditions

fol lowing the l e t t e r MC" i n each AUCIGAE telegram, as has been done

heretofore, in future AUGIGAB telegrams these conditions w i l l be

referred to by a code word which w i l l have the meaning se t opposite

such word as fo l lows:

AECIEBAT Prior to the issuance of the l imited voting permit authorized herein, ( l ) the Federal Reserve Agent sha l l s a t i s f y himself that each of the subsidiary


- 7 -

341 X-9018

"banks of the applicant has charged off or otherwise eliminated, (a) a l l losses i n loans and discounts, (b) a l l depreci-ation in stocks and defaulted s e c u r i t i e s , (c) a l l depreciation in secur i t i e s not of the four highest grades as c l a s s i f i e d "by a recognized investment service organization regularly engaged i n the "business of rating or grading secur i t i es and (d) a l l other losses ; as shown by the l a t e s t avai lable reports of examinations by the appropriate supervisory authori t ies , exeept that the charge-offs and eliminations required by (b) and (c) above may be based upon current appraisals of marketable secur i t i e s s a t i s -factory to the Federal Reserve Agent; (2) the Federal Reserve Agent sha l l s a t i s f y him-se l f that the applicant has substant ial ly performed any agreement or agreements here-tofore executed by i t as a condition to the issuance of a l imited voting permit by the Federal Reserve Board; (3) the Federal Reserve Agent and the Executive Committee of the Federal reserve bank sha l l approve the i s su -ance of such permit.

Likewise, in. future AHCIGAR telegrams, instead of writing out,

following the l e t t e r »D" in each AITCIGAR telegram, as has been done

heretofore, the purposes for which stock of subsidiary member banks

may be voted as set forth in 1 and 2 of page 2 of this l e t t e r , such

purposes w i l l be referred to by a code word which w i l l have the mean-

ing set opposite such word as fo l lows:

AHCILCO To e lec t directors of such (bank) at the annual (meeting) of shareholders, or at any adjournments thereof , at any time prior to April 1, 1935, and to act thereat upon such matters of a routine nature as are ordinarily acted upon at the annual meetings of such (bank),


» 8 *• 4>

X-9018 °

Where tlio l imited voting permit covers raore than one subsidiary

member bank, please use the plural instead of the singular of the words

inclosed in parentheses above. I t w i l l he appreciated i f you w i l l

promptly forward to the Board two executed copies of any l imited voting

permits issued by you.

In order that general voting permits may be issued in a l l cases

at the e a r l i e s t date practicable, you are requested to continue your

e f for t s to complete simultaneous examinations of holding company a f f i l i a t e

groups in your d i s t r i c t and, in each case in which such examinations have

been completed, to furnish to the Board your recommendations concerning

the conditions upon which a general voting permit should be issued. Re-

gardless of whether simultaneous examinations have been completed or

recommendations furnished in a l l cases, i t w i l l be appreciated i f you

w i l l complete and forward to the Board, i f you have not already done so,

at the ear l i e s t poss ible date, Part II of the status reports requested

in .Mr. Paulger1s l e t t e r dated September 29, 1934 (Exam. 53). I t was con-

templated that Part II of such report covering each holding company a f -

f i l i a t e group in your d i s t r i c t would be forwarded to the Board as soon

as information was obtained in each case, without waiting for the com-

ple t ion of simultaneous examinations, or for information to be obtained

concerning any other holding company a f f i l i a t e group.

Very truly yours,

Chester Morrill , Secretary,

TO ALL FEDERAL RESERVE AGENTS,


frsbog_mim_v41_0335.pdf

Documents

Transcript of frsbog_mim_v41_0335.pdf