19340604_Minutes.pdf

1622

Eoard

A. meeting of the Executive Committee of the Federal Reserve

vas held in Washington on Monday, June 4, 1934, at 3:00 p. m.

PRESENT; Mr. Black, GovernorMr. HamlinMr. JamesMr. Szymczak

Er. Morrill, SecretaryBethea, Assistant Secretary

Mr. Carpenter, Assistant SecretaryMr. Martin, Assistant to the Governor

The Committee considered and acted upon the following matters:

Memorandum dated May 31, 1934, from Mr. Goldenweiser, Direc-ter of

the Division of Research and Statistics, recommending the ap-

P°illtrient of Mr. John 0. hergelin as research assistant in the divi-

ai°42 Ilith salary at the rate of v2,800 per annum, effective June 4,1934' subject to his passing a satisfactory physical examination.

eeemmendation was approved by six members of the Board on June 2,The r

1934.

130ard 4_Lr. 71-ood, Federal Reserve Agent at the Federal Reserve

Of BRalk

St. Louis, reading as follows:

artd

Approved.

Telegram dated June 2, 1934, approved by six members of the

re "In view of information contained in your letter May 24Br5ardl.ag service of Mr. Stuart Wilson as member of Red Rivernoldge District Commission, Board is of opinion that service is

c?ntrary to spirit of Board's ruling of December 23, 1915,vall interpose no objection to Er. ;iilson accepting the ap-Polttment."

Approved.

1.10morandumSalariesdated May 29, 1934, from the Committee on

E)Tenditures, submitting a letter dated May 25 from Yr. Walsh,

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

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Chairman of the Federal Reserve Bank of Dallas, which requested ap-

Pr°Iral of a change in the personnel classification plan of the bank

tO PrQvids for a change from "comptometer operator" to "reserve de-

ficiencY Clerk" in the title of a position in the accounting depart-

The memorandum stated that the committee had reviewed the

ProPosed change and recommends that it be approved.

Approved.

Letter dated Juno '2, 1934, approved by six members of theBoard,

to Stevens, Federal Reserve Agent at the Federal Reserve

Bank.of Chicago, reading as follows:

"The Board has reviewed the information submitted with the1,10101ication of the 'Fountain State Bank', Fountain, Michigan,lor

membership in the Federal Reserve System."It has been observed that the bank suspended businessebrFp nary 11, 1933, and resumed operations on Novembor 27, 1933,1-00110-wins a reorganization involving a 100 per cent assessmentt!1 the stockholders and a 50 per cent waiver of deposits, and

:Mt while the information submitted would indicate that the;sset condition of the bank followlng the reorganization isvnsonably satisfactory with a high degree of liquidity, the0';'Ilme of business is small, the bank has no surplus account andn'Y a snall amount of undivided profits, and is under the same

gement and direction as formerly.The application has been transmitted with a recommendationOf thest selral committee appointed by the Board of Directors ofthe pea

Reserve Bank of Chicago to pass upon applications ofdera banks for membership that 'action on the application beyetterred until the bank has been in operation for at least one

and has again been examined by a Federal reserve bank ex-ardner.1

x,75 " As stated in the Board's letter of September 11, 1933,diniela, it has been the consistent policy of the Board not to4.11 1-18

t a bank to membership unless the Federal reserve bank and`. edacco eral Reserve Agent have recomended such admission. Innot ruance With its expressed policy, therefore, the Board does

ber 1.1313r::ethi:

slp mie.lication of the Fountain State Bank for mem-

andIola are requested, therefore, to communicate with the bankYOU

the withdrawal of its application, in Waich event,


a•-•"4 4-

6/4/34

ttalthough the application itself and the accompanying paperswill remain part of the Board's files, no adverse action there-°n Will be taken by the Board. If, at a later time, you feelthat the Board mould be justified in again considering the mat-uer, the Board will be glad to do so upon your recommendation,,ocompanied by a new application and a current report of exam-lnation."

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Approved.

idernorandum dated May 23, 1934, from Mr. Wingfield, AssistantUoun

stating that the Division of Examinations had called his

attemtion, as a possible violation of the provision of section 22(g)ofthe Federal Reserve Act, to the fact that it appears from the

alataysis of the report of examination as of October 7, 1933, of the

Interboro Bank and Trust Company of Prospect Park, Pennsylvania, that

the icsarl of a vice-president of that bank has been renewed with the

ilielusion of interest on such loan. The memorandum suggested that,l'Or

the reasons set forth therein, the Board would be justified inlact reporti g

11 cases of this kind to the Department of Justice; and

that no action be taken in the instant case by the Board.

Suggestion approved.

Letter to Mr. Newton, Federal Reserve Agent at the FederalR"erve Bank of Atlanta, requesting advice with regard to certain mat-

tel'8 e°11114ented on in the report of examination of the Greene County

Greenevine, Tennessee, as of December 27, 1933.

Approved.

4ser

'91) Lank of San Francisco, reading as followm:

Te le6ram to Li.. Newton, Federal Reserve Agent at the Federal


1625

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. "Re Sargent's letters Lay 24, and 29, 1934 regarding con-cltion prescribed in connection with the establishment by thev1st Security Bank of Idaho, Boise, Idaho, of a branch atShelley, Idaho. Comments in Board's letter of January 8, 1934,stating that in connection with the establishment of the oth?,rbranches of the First Security Bank of Idaho a valuation reserveas defined in the letter would be considered compliance with thecondition regarding elimination of losses and depreciation are-1-Icevise applicable in this case. In this connection referencels made to the Board's letter Larch 13, 1934 regarding the gen-eral question of valuation reserves."

Approved.

Letter dated June 2, 1934, approved by six members of theboard, to Mr. O'Connor, Comptroller of the Currency, reading as fol-lows;

"In accordance with the recommendation of Acting Comptrol-ler of the Currency Await, the Federal Reserve Board approves;13. reduction in the common capital stock of 'The Tipp Nationalrt : Of lippecanoe City', Tippecanoe City, Ohio, from 640,000ti; v50,000, pursuant to a plan which provides for the use ofeu:!.released capital in eliminating substandard assets and se-

depreciation and the consolidation of the subject bankCitizens National Bank of Tippecanoe City, all as setorth in Acting Comptroller Awalt's memorandum of May 25, 1934."

Approved.

Letter dated Juno 2, 1934, approved by six members of theLeard, to 11r. O'Connor, Comptroller of the Currency, reading as fol-lows

tio "In accordance with Acting Comptroller Amalt's recommenda-co the Federal Reserve Board approves a reduction in theIdsT,M°n caPital stock of the 'First National Bank in Meridian',P1 idian' Mississippi, from “00,000 to % 200,000, pursuant to abyalich provides that the bank's capital shall be increasedpilins ,000 of preferred stock to be sold to the Reconstructionk;5(7ies Corporation, and that the released capital together withi4,1°00 from the surplus shall be used to eliminate a correspond-

of unsatisfactory assets, all as set forth in Li..s letter of May 25, 1934."

Approved.


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6/4/34

Letter dated June 2, 1934, approved by six members of the

Board, to Er. O'Connor, Comptroller of the Currency, reading as fol-lown:

. "In accordance with Acting Comptroller Amult's recommenda-tlon$ the Federal Reserve Board approves a reduction in thecommon capital stock of llhe American National Bank of Gadsden',Gasden, Alabama, from .,;200,000 to v125,000, pursuant to a plan!Alloh provides that the bank's capital shall be increased by' 5'000 of preferred stock to be sold to the Reconstructioninane° Corporation, and that the released capital shall beused to eliminate approximately c30,000 of unsatisfactory as-sets and to set up a reserve of v45,000 against doubtful items,all as set forth in Lai-. Awalt's letter of Lay 23, 1934."

Approved.

Letter dated June 2, 1934, approved by six members of theboard, to Lir. O'Connor, Comptroller of the Currency, reading as fol-lowz

n,-Ln accordance with the recomrendation of Acting Comptrol-ler A

Await, the Federal Reserve Board approves a reduction inthe eett ,ommon capital stock of 'The First National Bank of Lari-a $ Larietta, Georgia, from ,100,000 to50,000, pursuant tob l'an which provides that the bank's capital shall be increasedpi "MOO of preferred stock to be sold to the Reconstructionton:11!.ce Corporation, and that the released capital shall be usedall aiminate a corresponding amount of unsatisfactory assets,1934.

s set forth in Acting Comptroller Awalt's letter of 'Lay 25,It

In considerinr, the plan under which the reduction in com-atc "

C:17'.0 P1 al stock is to be effected, it was noted that no provl.-

In3 ade for a chan-e in the management although the examiner4i

reD -cj'aes the present management and states in the examination141-crt that there is some question in his mind mhether Presidente

off!eY Should be rotained in the bank as its chief and executiveap1:6" It has been noted from the report of examination thattied"imatelY '11,900 of the loan of President Lassey is classi-Paid (1,'s doubtful by the examiner and that no interest is beingcendlill the loan. It is assumed, however, that you have thisse YOU 1°11 in mind and that whenever it becomes feasible to do11 ti11 effect

such corrections as may be practicable."

Approved.


1_627

6A/34

Letter dated dated June 2, 1934, approved by six members of the

Board, to Mr. O'Connor, Comptroller of the Currency, reading as 2ol-1nm4

PLeceipt is acknowledged of Lr. Awalt's memorandum of May21,.1934, with reference to the proposed reduction in commontl.pa.tal stock of 'The First National Bank of Ripon', Ripon,4isconsin, from :;300,000 to ,/150,000, and the sale of ,;150,000

preferred stock to the Reconstruction Finance Corporation,which wasapproved by the Board on January 31, 1934.ILI'. Await advises that the bank desires to change its

r:tzinal plan to provide for the sale to the Reconstruction4Irance Corporation of ,120,000 of preferred stock instead ofas originally contemplated, and recommends that the4)0ard approve the proposed reduction of ,;30,000 in the amount

Of PTerred stock to be sold.. Since the report of examination of Larch 13, 1934, shows14 Improvement in the condition of the bank to the extent thatsurplus will be unimpaired, whereas on the basis of the

'c'carlanation report of April 7, 1933, which was the report underels cnslderation in connection with the original plan, there wouldhave been an impairment of approximately ii46,000 in the bank'scellir1.1°11 capital, and inasmuch as the bank will have adequate,,Ttal in relation to its deposits, the Board, in accordance

Awalt's recommendation, approves the amended plan pro-for the sale of only :,;120,000 preferred stock, as setforth inMr. Await's memorandum of 21, 1934, with the under-

t411dinc that the other provisions of the plan remain unchanged."

Approved.

Letter dated June 2, 1934, approved by six menbers of the1308.r

to I" O'Connor, Comptroller of the Currency, reading as fol-lows I

ti "In accordance with Acting Comptroller Awalt's recoranenda-0023 the Federal Reserve Board approves a reduction in theci:m11 capital stock of 'The Fidelity National Bank of Oklahomat'Y , Oklahoma City, Oklahoma, from c;300,000 to '150,000, pur-rialklat to a plan which provides that the bank's capital shall becocrea8ed by 300,000 of preferred stock to be sold to the le-rerruction Finance Corporation and/Or others, and that thetn,!),!;s°(1 capital shall be used to eliminate losses and sub—

assets in the amount of approximately c100,000 and to


6/4/34-7-

"set up a reserve for depreciation of $50,000, all as set forthin Lir. Alt's memorandum of Lay 18, 1934."

Approved.


I412*(1' "0 141.0 O'Connor, Comptroller of the Currency, reading as fol-

480

"In accordance with Acting Comptroller Awalt's recommenda-/1, the Federal Reserve Board approves a reduction in the

.rm'i°23- capital stock of 'The Hoisingten National Bank', Hoising-;ion,.Kaneas, from ;';50,000 to 125,000, pursuant to a plan whichProvldes that the bank's capital shall be increased by the sale°f v25,000 of preferred stock to the Reconstruction Finance Cor-1)oration and that the released capital shall be used in eliminat-lng a corresponding amount of losses and substandard assets, all" set forth in Lr. Avalt's memorandum of May 18, 1934."

Approved.

Telegram to Mr. Newton, Federal Reserve Anent at the Federal

TO Bank of Atlanta,t

the application of "Hamilton

stating that the Board has given considera-

hattanoott, Tennessee, for

seetioa 5144 of the Revisedehtitling such organization tothe

Tennesseeti;t National Bank in Harriman", Harriman, Tennessee11,6 First National Bank of Lenoir City", Lenoir City, Tennesseei"° Hamilton National BAnk of Chattanooga", Chattanooga, Tennessee

41°4 has

eubjeet

a voting

Statutes

National Associates, Inc.",

permit under the authority of

of the United States, as amended,

vote the stock vthich it awns or controls

Gear gia

following banks:

'he rirst National Bank of Cartersville", Cartersville,"7r First National Bnnk of Loudon", Loudon, Tennessee11,i_ke en National Bank of Morristown", Morristown, Tennessee"° First :6ational Bank of Pikeville", Pikrille,The

13"Pittsburg,Yirst Lational Bank of South Pittsburg', South

aUthorized the issuance of a limited permit to the applicant,tO the following condition:


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6/4/34-8-

"Prior to the issuance of the limited voting permit herebyauthorized applicant shall re-execute and deliver to you in the!lanner customarily employed with respect to agreements executed3:11 fulfillment of a condition of the issuance of a limited vot-Ing permit, the identical agreement called for by the Board'sA?GIGAR telegram to you dated January 9, except that in thefirst sentence of clause (a) the date 'September 1, 1934; shallbe

substituted for 'April 1, 1934,'."and for the following purpose;

"10 act, at any time prior to September 1, 1934, upon aIlroPosal or proposals to authorize an increase in the capitallunds of each such bank and to do all things necessary for suchPurPose, provided that such proposal or proposals shall be inaccordance with a plan or plans which shall be satisfactory tothe Comptroller of the Currency and the Federal Reserve Agent at'he Federal Reserve Banlr of Atlanta."

The telegram stated also that, Prior to the issuance of a permit en-

the n aPplicant to vote on a proposal to reduce the capitalstock of any of its subsidiary member banks, the details of the plan

°I* Plane for such reduction should be submitted to the Comptroller ofthe currency

and the proposed reduction should be approved by the

Of the Currency and by the Federal Reserve Board. Thetelo

''ram authorized the agent to have prepared by counsel for the Fed-eral reserve oink, and to issue to Hamilton National Associates, Inc.,

d6- voting permit in accordance with the telegram When the condi-

Pr se er.Lbed therein has been complied with.

Approved.

Telegram dated June 2, 1934, approved by six members of the

13°Itrd, to Lir ,44:k -• ,eyton, Federal Reserve Agent at the Federal Reserveof

lainneaPolis 2 stating that the Board has given considerationte the a, ,

4-'1-cation of the "First Bank Stock Corporation", Linneapolis,


1.6306/4/34

-9-

Ili411"cta, for a voting permit under the authority of section 5144

cr the Revised Statutes of the United States, as amended, entitling

such or ganization to vote the stock which it owns or controls in the,NaLional Bonk of Valley City", Valley City, North Dakota, and

43 authorized the issuance of a limited permit to the applicant for

the following purposes:

"At any time prior to August 1, 1934, to act upon a pro-posal ar proposals to create, issue and sell to the Reconstruc-tion Finance Corporation preferred stock of such bank having aPar valof fifty thousand dollars (50,000) and to reduce the

rlrion stock of such bank from one hundred thousand dollars

'i °°,000) to fifty thousand dollars (050,000) and to make such!Illiendments to the articles of association of the bank and totake such other action as may be necessary to carry out suchPull)eeee; such proposal or proposals to be in accordance witha Nan. or plans which shall have been approved by the appropriate

?,upervisory authorities and shall be satisfactory to the Federal4eserve Agent at the Federal Reserve Bank of Minneapolis."

tel°gram also authorized the agent to have prepared by counsel

The

ter the Federal reserve bank, and to issue to the First Bank Stock

4rPorati0_,IL a limited voting permit in accordance with the telegram.

Approved, together with a letter,also dated June 2, 1934, and approved bysix members of the Board, to Mr. O'Connor,Comptroller of the Currency, reading asfollows:

"ti In accordance with Acting Comptroller Awalt's recommonda-c °11, the Federal Reserve Board approves a reduction in the vcrinallIon caPital stock of the 'First National Bank of Valley City',

to a. Plan North Dakota, from 1.00,000 to A0,000, pursuant

er - Plan which provides that the bank's capital shall be in-zteased byq50,000 of preferred stock to be sold to the Recon-ahrXtlon Finance Corporation, and that the released capitalfctes.

rY be used to eliminate a corresponding amount of unsatis-

ortf assets, or to set up reserves therefor, all as seth in mi..Await's memorandum of May 17, 1934."

Letter ,o:linthrop W. Jadrich, Chairman of the Board of


6/4/34

Directors

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of The Chase Bank, New York, New York reading as follows:

"There is inclosed a copy of the report of examination ofthe Head Office of The Chase Bank, New York, as of the closeof business December 4, 1933. The figures pertaining to thef?reign branches shown in the consolidated statement of condi-tion have been obtained from reports submitted by the branches."

4proved.


13(41 to 14r. Charles C. Clough, Comptroller of the Lanufacturers

,-°mPany, New York, hew York, reading as follows:

"On account of the pressure of other matters arising in con-n"tion -with the Banking Act of 1933 the Federal Reserve Board

Iras unable to give prompt consideration to the question presented!,your letter of October 18, 1933, in which you requested ant; of the Board as to whether the L:anufacturers Trust Corn-

11 Y pay interest on a deposit of public funds of the Govern-Of Puerto Rico or of a city in Puerto Rico which is payable

derand; and We regret to find that no reply has as yet beenilkide to the letter.um

ihe answer to the question which you raised depends upon

Thether Puerto Rico is to be considered a State within the man-Axle; of that word as used in Section 19 of the Federal Reserve'ce't relating to the payment of interest on deposits payable on

-'.d an whether the law of Puerto Rico is to be regarded as4.nulring the payment of interest on public Ponds deposited in

Lanufacturers Trust Company. If the matter is one uponp2ell You still desire to have an expression of opinion by the

rai Reserve Board, the Board will be glad to have you sub-coy' if you care to do so, the views of the attorneys for your

•PanY on theseueqtions as an aid in the Board's considerationef the matter." q

Approved.

Letter to Lr. R. I. Fulton, Cashier of The County National

4t Clearfield, Pennsylvania, reading as follows:

re "Receipt is acknowledged of your letter of Yay 17, 1934pc!r4 1nG the right of your bank under the Federal Reservefr,74 Regulation Q to allow the transfer of a savings account

?,ne depositor to another.You state that in accordance with Section VI of Regulation


1_632

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your bank requires thirty days' notice of intended withdrawalfrom savincjs accounts, except that any depositor may withdrawA00 during any calendar month without such notice. You requestto be advised whether, in view of this requirement, you may law-fully permit a savings depositor -whose account is in excess of the0100 limit to divest herself of title to such account by a trans-fer thereof to a savings account, in the name of another depositor,provided that the new account shall immediately be subject to theabove mentioned rule of the bank with respect to withdrawals fromsavings accounts.

"Section 19 of the Federal Reserve Act provides that nomember bank shall waive any requirement of notice before paymentof

any savings deposit except as to all savings deposits havingthe same requirement. iursuant to this provision of the statute,the Federal Reserve Board has prescribed in Section VI (a) of itsRegulation Q that if a member bank requires notice before thePaYnlent of any portion or percentage of the savings deposits ofany depositor, it shall require such notice before the paymentof the care

portion or percentage of the savings deposits of anyOther depositor which are subject to the same requirement. SinceYour bank requires thirty days' notice before the withdrawal of

reunts in excess of ,,,100 during any calendar month, it may not,T:ifully allow The withdrawal of the funds here in question

Ztlhout requiring such notice, unless it should change its prac-re in this regard in accordance with the provisions of Sectionv it Of Regulation Q. It appears that ihe transaction described

Y°ur letter would in effect make available to the savings de-'',?sitor the entire amount of the funds contained in his account'(1)11-3pout requiring notice of withdrawal, thus discharging the

ation of the bank to the depositor, and that a new account

1Z the BRMO amount would then be opened by another depositor.

"tqs the opinion of the Board that such a transaction would con-c031:21te a Payment of the savings deposits in question and: ac-t, 'nglY, that the transaction is not permissible in view of

u..),eforepresent practice of your bank to require notice of thirty

payment of other savings deposits of similar amounts.pe You state in your letter that the two brInks in Clearfield,wiltif,,,lvania, 'have agreed to require 30 days' notice of intendedu4,:Lurawal from savings accounts except that any depositor may18'1.41:11drom 0.00 during any calendar month without such notice.'tio of the requirements of a savings deposit set forth in Regula-be 11,/ is that the depositor must be required, or may at any timewii4e,quIred, by the bank to give notice in writing of an intended-4.1urawo not less than thirty days before a withdrawal is made.

lj not clear from the information sulmitted whether each bankwritlearfield has reserved the legal right to require notice inaziou g of not less than thirty days before withdrawals ofand

the 0.00 or less; and if the contract between the depositor

ank does not reserve to the bank the legal right to


11_6(gz

6/4/34

require the requisite notice of withdrawal of amounts of -,2.00or less, or if such bank may not change its practice in this re-sPeot without the consent of the other bank concerned so as torequire the requisite notice of withdrawal, the amount which isnot Subject to such notice may not be treated as a savings de-posit within the meaning of Regulation Q upon which interest maylawfully be paid. On the other hand, if the bank at its optionIsaY legally require notice in writing of not less than thirtydaYs before the withdrawal of any part of a savings deposit,regardless of the amount to be withdrawn, without cantraveningany Provision af its contract with its depositor or its agree-ment with other banks, the entire amount of such deposit mayproperly be classified as a savings deposit if it otherwise

complies with the definition in Regulation Q. If there is anyquestion as to the ri-ht of your bank in this respect, it issuggested that consideration be given to the advisability of re-ITIsing the contracts with depositors and agreements with other:Inks so as to make clear the bank's legal right at its option.utiol require notice in writing of not less than thirty days before

ord withdrawal of any amount whatever of a savings deposit, iner that the entire amount of such deposit may properly beClas0-Liled as a savings deposit upon which interest may lawfullybe Paid.In this connection it appears that your bank requiresthirty d

(withtha" notice of intended withdrawals from savings accounts

-Lbw —e exception above discussed) but you do not indicate-Lc; .'Ln°tioe in writing is required. Your attention is invitedRe requirement with respect to savings deposits contained inthgu:Lation Q that the depositor may at any time be required bybank to give notice in writin.G. of not less than thirty daysbeei.oro a withdrawal is made :7----

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Approved.

Letter dated June 2, 1934,ik)ard, to

onator Pletcher,

Chaiapproved by six members of the

rman of the Committee on Banking andCUrr encY of the United States Senate, reading as follows:

t

Clerk nP refers to the letter of Lay 18. 1934, from the Acting3632, -A Your Committee, in which a report is requested on S.stat entitled 'A Bill To amend section 5153 of the Revisedto as amended'. The bill would authorize a national bankfuzu7s;17, satisfactory security for bankruptcy and receivership

uePosited with it pursuant to an order of any court of thenited States.

Itrld e Proposed mnendment would affect national banks only't°1114 have no direct effect on State banks which are members


1634,11 6/4/34

of the the Federal Reserve System. Accordingly, the question ofthe desirability of the enactment of the bill S. 3632 would ap-Pear to be one primarily within the jurisdiction of the Comp-troller of the Currency and a matter upon mhich it is unneces-!arY for the Federal Reserve Board to express an opinion.nowever, the Board has no objection to the enactment of the bill."

Approved.

Letter to Senator Fletcher, Chairman of the Committee on Bank-

and Currency of the United States Senate, reading as follows:

%his refers to the letter from the Acting Clerk of your_??Tamittee, dated May 14, 1934, inclosing a copy of S. 3596, en--LI-tied 'A Bill To amend section 21 of the Federal Reserve Act,krici for other purposes', and requesting a report thereon. The

would amend said section 21 so as to authorize the Federalleserve Board or the Comptroller of the Currency, as the caseTnaY be, to waive the requirements of the present law with re-!Peet to reports and examinations of affiliates of member bprks

anY case in which it may appear to the Board or Comptroller,tesPectively, that the report or examination is not necessaryb:,11sclose fully the relations between the affiliate and the

Itricl the effect thereof upon the affairs of the bank.. Section 9 of the Federal Reserve Act, as amended by the

f:L,1,41,k1ng Act of 1933, requires each State member bank to obtaint--111 each of its affiliates other than member banks and furnishO the

Federal reserve bank of its district and to the FederalReserve Board not less than three reports during each year, and0

Publish such reports under the same conditions as govern its041aljendition reports. Said section 9 also requires such exam-las 1°n4 of the affairs of the affiliates of State member banks

arll be necessary to disclose fully the relations betweensull

uanks and their affiliates and the effect of such relationspr the affairs of such banks'. Similar requirements are ap-aril,eal-ae to national banks under the provisions of section 5211coL' 012 section 5240 of the Revised Statutes. The latter section'usttutes section 21 of the Federal Reserve Act.fur The scope of the provisions requiring examinations and the

marliltshing and publication of reports of affiliates depends pH-tamedupon the definition of the term 'affiliate' -which is con-derr in section 2 of the Banking Act of 1933. Under thebu_tilltion in that section, the term includes 'any corporation,is"'llees trust, association, or other similar organization' whichor r14ed or controlled *through stock ownership by a member bankmemj the majority shareholders of a member bank, or of which aa. rin:r bank or its majority shareholders control the election of

-J°r1t1 of the organization's directors, trustees, or other


16356/4/34

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"persons exercising similar functions, or of which a majorityof the organizations' directors, trustees, or other persons ex-ercising similar functions are directors of a member bank. Inan opinion rendered under date of September 7, 1933, the At-to -rney General of the United States considered the questionWhether there may be excluded from the operation of the statutean organization related to the bark in some manner set forth insaid section 2 on account of the nature of the business of the°rganization or the manner in which ownership or control VMSobtained

t a and stated that 'the only safe course is to assume

that the statute means just what it says', and that 'the execu-tive department must accept the law as Congress has written it,?:.?!-Iring it to Congress to correct by amendment any inequitieswin-lch may appear'.

"In view of the fact that the statutory test as to whetheran organization is an affiliate of a member bank does not dependUpon the kind of business in which it is engaged or upon the man-ner -n which ownership or control was established, it has been

Zecessary to rule in certain instances that a newspaper, a sani-°rium, hotels, cemetery associations, eleemosynary institutions,and organizations engaged in various industrial enterprises were

.,ffiliates of member banks, even though it appeared that the re-:aTtienship of the affiliate to the member bank had no substantialr fect on the solvency, management, operations, policies, orcePutation of the member bank, and although in certain of theseot;es it appeared further that control of the organization was

all by the member bank through its acquisition of stock in!t101 effort to protect itself against loss on a debt previouslye ntracted in good faith, or that the organization was an affili-ateof the member bank solely by reason of the fact that a major-(); of the organization's directors, trustees, or other personsthereising similar functions happened to be also directors of

_(3 member bank. Moreover, since the requirements of lam with:Irpect to the furnishing and publication of reports of affili-Boes are in terms mandatory and neither the Comptroller nor thefolefd is authorized to waive such requirements, it was necessaryfi;the member banks to obtain and publish reports of such af-l'ctna ates and to furnish such reports to the Federal reserve banks

:tt? the Federal Reserve board. In those cases in which therel

ferZ liZnshiP of the affiliate to the member bank was purelyu--ous, the furnishing and publication of reports resulted14 .1tTwarrantable expense to the member bank, in the accumulation46 Federal reserve banks and in the offices of the Board of

zo:niation which was of no value, and oftentimes in the public'sreiX1Y associating the member bank with an organization whoseeffe,/,4)nshiP to the bank was wholly casual and of no substantialbalik" on the bank. It is clear that in such cases the memberuseful Purpose,

burdened with unjustifiable trouble and expense to no14 Purpose, and that it was not in the public interest to


1636

6/4/34-15-

require the the furnishing and publication of reports. For similarreasons, it is apparent that examinations of affiliates of thatkind involve expenses whichare disproportionate to any possiblebenefits to be derived therefrom.

"Although it is desirable that the definition of an 'affili-ate should be broad, it is believed for the reasons set forthabove that the provisions requiring affiliates to make reports!t,nd to submit to examination should be discretionary with theboard or the Comptroller, as the case may be, in order to avoid?fmsequences which are undesirable and not in accord with what-11(3 Board believes the intent of Congress to have been in enact-ing the present law. Accordingly, the Board is in favor of theenactment of the amendment proposed in the bill S. 3596 for thisPurposes"

Serve

Approved.

Letter to lir. Worthington, Deputy Governor of the Federal Re-

0f Kansas City, reading as follows:It

is acknowledged of your letter of April 25, 1934,in which you submit certain questions arising out of the ac-quisition by the Federal Reserve Bank of Kansas City of bonds°Iof

Lo

the Federal Farm Mortgage Corporation and bonds of the homeb;4ejsi an Corporation. You state that such bonds are acquired--e bank on account of 'debts previously contracted', and you'0111P1Y that the bonds have maturities at the date of acquisitionb more than 6 months and are ineligible for purchase by theliter. under the provisions of section 14 of the Federal Reserveea YOU desire to know whether there is any objection to your1TYing the bonds so acquired in your investment account.bvLilk :E the bonds are taken for the purpose of protecting theo loss cainst loss on debts previously contracted in good faithbp, In compromise of doubtful claims, it is the opinion of the4rd that in such circumstances the bank may lawfully acquirepartseeurities and that they may thereafter be carried as athat °f its assets. Furthermore, it is the view of the Boardtjlees

%not necessary for the bank to dispose of such securi-a specified period of time, but the Board feels that

:1;th:1)8.:uld dispose of any such bonds which are ineligibleunder the provisions of section 14 as soon as

tleab1e and within a reasomble time after the acquisitionsarae by the bank.

auch You also request to be advised as to the manner in whichqueajeourities should be shown on Form 34. Since the bonds inSeet41°11 are not eligible for purchase under the provisions oftierl:°11 14 of the Federal Reserve Act and were acquired in set-

debts previously contracted, it is suggested that for


1_637

6/4/34-16-

the present they be reported on the Daily Balance Sheet, Form34, among 'Miscellaneous assets' against the caption 'Bonds ac-cepted in settlement of indebtedness'."

Approved.

Letter to Mrs George S. ilovey, President of The Inter-state

°nal Bank, Kansas City, Eissouri, reading as follows:

"Receipt is acknowledsed of your letter of May 8, 1934,CO "Receipt

the Board's letter of May 1, 1934, which stated thattt Ivati unable to grant your application under Section 32 of the"anking Act of 1933 for a permit to serve at the same tine asil esident and director of The Inter-State National Bank, KansasaltY, Lissouri, and as a director of Brown-Grummer Investment"pa, Y, Wichita, Kanoas.

The Federal Reserve Board has considered the statement inYour letter that The Inter-State lational Bank is located in theStockyards and that its business consists largely of receiving

eesl!"its from other banks and making loans to live stock inter-

o s• Your statement that you have not recently expressed an13131nlon to a prospective purchaser concerning the bonds of therrcnin-erumaner Company has also been noted. The Board has alsorrelved a letter from nr. McClure giving further information

'''garV-lag your services.However, the action upon your application was taken pur-

c't_4alit to a general policy which the Board adopted in order toThrY.out the purposes which it believes the Congress had inV.ln enacting Section 32, as stated in my letter of May 1,1-!.; feels that permits should not be granted covering such10 ninshiPs even though the particular applicant has not al-11147' nis interest in a securities company to influence his judg-' Ilnd actions as an officer or director of a member bank.make In the circumstances, the Board does not see how it can

an EPPlic

exception in our case, and therefore has denied yourationen

Letter to Lr, Newton'

Approved.

Federal Reserve Agent at the Federal

Bank of San Francisco, reading as fellows:orr,_

iie Of l'ederal Reserve Board has considered the applications32 of If. Jones, R. E. Jenney, and Frank G. Belcher under Sectionarld4, the Banking Act of 1933 for permits to serve as officers'-r directors of The First National .rust and Savin:;s Bank of


16386/4/31

-17-

"4.n Diego, and as officers and/Or directors of T. A. Hutchinson(!' Company, both of San Diego, California. The Board has alsoconsidered a similar application of F. J. Belcher, Jr., for aPermit to serve as president and director of the above mentionedbank, as director of the Los Angeles Branch of the Federal Re-ser ve Bank of San Francisco, and as director of T. A. HutchinsonCamPany.

"From the information contained in the answer to Question2 of F. R. B. Form 99a, it appears that T. A. Hutchins en.

C?111Pany is engaged in a brokerfq;e business consisting of the pur-se and sale of securities on behalf of others in the open

market."In view of the principles discussed in the Board's letterof April 13, 1934 (X-7860), it appears that Section 32 is not

aPPlicable to the relationships in question, and unless thereare other facts which you believe should be called to the Board'sattention, you may so advise the applicants.

"Incidentally, it should be noted, in connection with the!Pplication of Mr. F. J. Belcher, Jr., that the provisions of:ection

34 apply only to menbor banks, and hence are not appli-able to a branch or a Federal reserve bank."It does not appear from the applications and accompanyingPapers whether or not T. A. Fittchinson Company makes loans se-

cured bY stock or bond collateral, either in connection with theof margin accounts or othomdse. It will be appreciated

if Yc'u will ascertain whether the company makes such loans, andto Y(3'1 find that it does, please call the applicants attentionthe fact that Section 8A of the Clayton Act forbids interlock-relationships between national banks and organizations which) such loans. In this connection, reference is made to theAtu'lng Published at page 244 of the Federal Reserve Bulletin forPrilu1934, and to the Board's letter of April 50, 1934 (X-7884).P it is noted that in the answer to Question No. 5 on F. R. B.-orin Onide„"42 it appears that F. J. Belcher, Jr., is serving as pres-n and director of Garrettson Investment Company, San Diego,4111:ornia, and as director of The Pacific Company, Los Angeles,Ireet,,,°Illia, both of which are engaged in. the business of 'in-

13?ntc 1, and as president and director of Demur & Company,that California, engaged in the business of 'securities';

Jones is serving as a partner of Jones & Fowler, San°tog°, California, and as a director of Dewar Company, Sanboth of which are engaged in the business of

Of DI:itties T; and that F. G. Belcher is an officer and directorthe b"" & Company, San Diego, California, which is engaged inthe ,u3'lless of 'securities'. It is assumed you have in mindPlic;Ti ility that the provisions of Section 32 may be ap-co

atioam, e In connection with the applicants' service to these

Approved.


-47 Ar‘tr73

-18-

Letter to Er. Peyton, Federal Reserve Agent at the FederalRecerve Bank of Minneapolis, reading as follows:

h "This refers to your letter of May 21, 1934, relative toItr.Clayton Act application of Earl Tt. Harrington of Plainview,,a.nnesota, to serve at the same time as an officer and directorof the First National Bank of Plainview, and the Dakota StateBank, Dakota, Minnesota. You state that the Dakota State Bank

itp1148 been absorbed by The Merchants Bank, Winona, Einnesota,'andat

although the Dakota State Bank is not conducting a bankingusirTse. it still continues as a corporate entity.

If the Dakota State Bank makes no new loans secured byZtock or bond collateral within the meaning of Section CA of,he Clayton Act, it will not be necessary for 1.1r. Harringtonthj a Clayton Act permit covering such relationship. Ine.connection it is Iraflerstood that the relationship of Mr.

L' obtain

'aarra..ngton. described above does not otherwise fall within theprovzsionn of Section 8 of such Act."

Approved.

Letter to Mr. kfcClure, Federal Reserve Agent at the FederalReeerve

16ank of Kansas City, reading as follows:

th "This refers to your letter of May 16, 1934, relative tot e Clayton

Je Act permit of 1dr. H. a. Pratt, Hastings, Nebraska,rve at the same time as officer and director of the First

ate. Bank of Hastings, and the State Bank of Juniata, Juni-

tZNebraska. You advise that the State Bank of Juniata has

merged with the Prosser State Bank, Prosser, Nebraska,44L'Inoved to K thenesaw, Nebraska, its name being changed to eop:111 ?°untY Bank, Kenesaw, Nebraska, and that such bank isren--'1nL', under the charter of the State Bank of Juniata. Youceltrt to be advised whether the change in name and locationfor ,e

' Juniata Bank will necessitate a new Clayton Act permitLa. Pratt.

cha"Inam anauch as the mere change of title by a bank does notor the

, the legal entity of the corporation, it is not necessarych - directors, officers or employees of banks which merely

th: 43 their names to file new applications for permits under

loca‘ion provisions of the Clayton Act. However, if the chaw;e inelloh of the Juniata bank to Kenesaw, Nebraska, will bringliactibank into competition with the First National Bank oflickit:gs, consideration should be siven to the question of re-the

Permit already issued to Mr. Pratt."

Approved.


6/4/34

164.0

-1S-

Letters dated June 2, 1934, approved by six nenbers of the

Board, to applicants for permits under the Clayton Act, advising of4Proval

of their applications as follows:

'Cathryn Belts, for permission to serve at the same time as an7m0:0yee of The First National Bank of Mishawaka, Mishawaka,,1,1dlana, and as an employee of the First Trust & Savings Bank,vashavaka, Indiana.

14" GeOrge Yrs Blair, for permission to serve at the same time;8 a director of The First National Bank of Mishawaka, Mishawaka17liana, as a director of the First Trust & Savings Bank,p.al,havaka, Indiana, and as a director of the North Side Trust

oavings Bank, Mishawaka, Indiana.

Esther E., Bumiller, for permission to serve at the same time

!an employee of The First National Bank of Lashauaka, hisha-aka,

Indiana, and as an employee of the First Trust & Savings16ank, Mishawaka, Indiana.

C. A. Bresch, for permission todlreetor of The First National BR*Indiana, as s director of the First!aka,

Indiana, and as a director oflugs Bank, Mishawaka, Indiana.

:14r.

Elmer E. Faller, for permission to serve at the same timeLan 61110-oyes of The First National Bank of Mishawaka, hisha-41 Indiana, and as an employee of the First Trust SavingsIdshawaka, Indiana.

1.71 a

nawa:aleGeorge E. Greelt, for permission to serve at the samekio, s an employee of The First National Bank of Mishawaka,rkas II.Idiana, and as an employee of the First Trust & Sav-anks Mishawaka, Indiana.

4' J. Laing, for permission to serve at the same time as ailld.ctor of The First National Bank of Mishawaka, Mishawaka,170,1 1e-11a' as a director of the First Trust & Savings Bank, lasha-.41 Indiana, and as a director of the North Side Trust &ngri Bank, hishawaka, Indiana.*. A. jdire,f Major, for permission to serve at the same time as atash1-1."°r and officer of The First hational Bank of Lishawaka,s 141'4, Indiana, as a director and officer of the First Trust

of Z11.114"s Lank: Mishawaka, Indiana, and as a director and officer0 Lorth Side Trust & Savings Bank, Mishawaka, Indiana.

serve at the same time as aof Mishawaka, Mishawaka,Trust & Savings Bnnk, hisha-the North Side Trust & Sav-


1841

6/4/34-20-

E. J. Robinson, for permission to serve at the same timeaS an employee of The First National Bank of Mishawaka, hisha-llaka, Indiana, and as an employee of the First Trust & SavingsBank, lishawaka, Indiana.

A. J. Schindler, for permission to serve at the same timeas a director of The First National Bank of Lishawaka, Lisha-ka, Indiana, as a director of the First Trust & Savings Bank,

i,'Ishawaka, Indiana, and as a director of the North SiCe Trust &avinge Bank, Mishawaka, Indiana.

D°nald B. Smith, for permission to serve at the same timeIs an officer of The First National Bank of Nishaunka, Yishawaka,r1.1diana, and as an officer of the First Trust & Savinc,s Bank,.11shawaka, Indiana.

11r. Fred N. Smith, for permission to serve at the same time asector and officer of The First National Bank of Nishawaka,4:1144.17uka, Indiana, as a director and officer of the First Trust

„-avings Bank, Uishawaka, Indiana, and as a director and of-J-lcer of the North Side Trust & Savings Bank, Mishawaka, Indiana.

1/3 Francis E. -.alters, for permission to serve at the same timean officer of The First National Bank of Lishamaka, Mishawaka,ri.idiana, and as an employee of the First Trust & Savings Bank,uzshavaka, Indiana.

17. E AA

serve -nuams, for permission to at the same time as aIsireotor and officer of The First National Bank of Deadwood,Belldwood, South Dakota, and as a director of The First Nationalank of Lead, Load, South Dakota.Ur. Robert E. Driscoll, for permission to serve at the same timeLeadeetor and officer of The First National Bank of Lead,tio , South Dakota, as a director and officer of The First Na-of It1"18

6

,1 Bank of Deadwood, Deadwood, South Dakota, and as a directorBank of Spearfish, Spearfish, South Dakota.

14r, CarltRa A, on U. Gorder, for permission to serve at the same timeSouthofficer of The First National Bank of Deadwood, Deadwood,

fish, stild-laZtaa.s a director of the Bank of Spearfish, Spear-

0• 1,4c a plcuarraugh, for permission to serve at the same time1114,- ul'recter and.,_-L11.1 3, South Dakota,

officer of The First National Bank of Philip,-Late r, andJJankas a director and officer of the Farmers, Dupree, South Dakota.ki

6 J, C. Thelson, for permission to serve at the sane time as a


P

6/4/34-21-

director and officer of the Bank of Spearfish, Spearfish, SouthLakota, and as a director and officer of The First National Bankof Philip, Philip, South Dakota.

Approved.

Letters to applicants for permits under the Clayton Act, ad-ng Of approval of their applications an follows:

Geo. C. Pullinveider, for permission to serve at the same;1,3-rne as a director and officer of The National Bank of Huron,"uron, South Dakota, and as a director and officer of the Hitch-cock State Bank, Hitchcock, South Dakota.

EX Lr.Royhl, for permission to serve at the same time as a

otirector and officer of the First National Bank in Arlington,Arlington, South Dakota, as a director and officer of The So-

di01.1rity National Bank of Huron, Huron, South Dakota, and as arector Slid officer of the Hitchcock State Bank, Hitchcock,uouth Dakota,

Approved.

ahere were then presented the follomins applications for

lictia•Ces ia stock of Federal reserve banks:

lications for ORIGINAL Stock:4strict No Shares . 4. the

Arcanum National Bank, Arcanum, Ohiokztrict No. 7.

ilational Bank of Battle Creek:Battle Creek, Lichigan

itict No. 10.lationa

4PProved:

'aak in Lamar, Lamar, Eissouri

Approved.

Thereupon the meeting adjourned.

over or.

36 36

720 720

36 36Total 792

Secretay.


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