19370514_Minutes.pdf

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A meeting of the Board of Governors of the Federal Reserve Sys-

terl was held in Washington on Friday, May 14, 1937, at 11:30 a. m.

PRESENT: Mr. Eccles, ChairmanMr. SzymczakMr. McKee

terred

Basal:

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

Consideration was given to each of the matters hereinafter re-

-to and the action stated with respect thereto was taken by the

Telegrams to Messrs. Kimball, Strater and Young, Secretaries

of the Federal Reserve Banks of New York, Cleveland and Chicago, re-

81)ectI --Y, stating that the Board approves the establishment without

444" bY the New York bank on May 13, 1937, and by the Cleveland andClaice

€0 banks today, of the rates of discount and purchase in their

4118ting schedules.

bi/ri siCla of Bank Operations, submitting a letter dated May 7 from Mr.

1111144, First Vice President of the Federal Reserve Bank of Richmond,

ich requested approval by the Board of changes in the personnel clas- .

111"tiOn Plans of the bank and its Baltimore and Charlotte branchesto

proVide for the creation of the new positions of "Note Custodian"14 the D

iscount Department at the head office, "Supervisor" in the

Ti'l'Et4Elit Department at the Baltimore Branch, and "Auditor's Representa-

Approved unanimously.

Memorandum dated May 12, 1937, from Mr. Smead, Chief of the

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"tiv tte in the Accounting Department at the Charlotte Branch. The memo-

Stated that the proposed changes had been reviewed and recommendedthat they

he approved.

Approved unanimously.

Letter to Mr. Fry, Vice President of the Federal Reserve Bank

of Richmond, reading as follows:

"Reference is made to your letter of April 16, 1937,inclosing a copy of a reply of the Union Trust Company of1:rYland, Baltimore, Maryland, to the Board's letter of

tEtrell 23, 1937, concerning the acquisition by the bank and

CitY Certificates Corporation of certificates of bene-=,-atnzest held in the treasury of the City Certificatesc

"It is noted that the bank considers its action in ac-,quiring such certificates with cash received in loan settle-

flts or through sale of collateral to have been taken withinthe spirit of the condition of membership relating to theP.Urchase of certificates of beneficial interest; to have;leen necessary because of the Problems confronting the manage-

end4 to have been justified in view of the results ob-tained. However, the Pertinent provisions of condition ofem

bership numbered 23 are:'Such bank shall agree that, except with the written -2.21 ,1 of the Bank Commissioner of the State of Mary-land and the Federal Reserve Agent at the Federal Re-serve Bank of Richmond, any purchase of certificatesOf

beneficial interest issued by the City CertificatesCorporation or any distribution to holders of suchcertificates of beneficial interest, shall be made

;111l1erdr a ro-rata basis ****.' (Underscoring sup-

helis:It is understood that, subsepuent to admission to mem-th '41-13, the management of the bank urged several times thatt;e/r be Permitted to buy the certificates of beneficial in-_Jest but that the Federal Reserve Bank refused permission4c4.01t.also declined to recommend that the Board modify the con-ti 1°11- It is understood also that the State banking authori-so,:s have advised officers of the Union Trust Company that

O f the transactions involving certificates of beneficialzet;erest have been in direct violation of the conditions of

bershiP prescribed by the Board.

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. "The Board does not wish to restrict the bank or theCitY Certificates Corporation in effecting compromise settle-ments with debtors and will interpose no objection to the ac-quisition of certificates of beneficial interest offered bydebtors in connection with such settlements when the bank ortl.le corporation has had no part in the purchase of the cer-tificates offered. The purchase, however, of such certifi-

rtes by the bank or the corporation on other than a pro-rata,s1s, except with the written consent of the Bank Commis-loner and the Federal Reserve Bank (in lieu of the Federal

.eserve Agent as stipulated in the condition of membership),a violation of the condition of membership and such pur-

,hases should be discontinued."

Approved unanimously.

Letter to Mr. Clark, Vice President of the Federal Reserve Bank

°t4tlanta, reading as follows:

Com "Schedule 0 (Form 105b) of the Savannah Bank & TrustPanY, Savannah, Georgia, as of March 31, 1937 was accom-

anied with your memorandum of April 24 and with certaincorrespondence with regard to the Colonial Bunker Oil Com-iZhY of Savannah, Georgia, an affiliate of the member bank.,,, "Pears from the correspondence that the bank was unawarevoli, the affiliation when it published its condition report assh Mal'°h 31, 1937, and that the affiliation, which is brouqhtc bY the fact that three of the four directors of the°-Lonial Bunker Oil Camoany are directors of the bank, willbe Promptly eliminated. In the circumstances, the bank re-

that it not be required to republish its conditionreport together with a statement of the Colonial Bunker OilCompany.

"The latest examination report of the Savannah Bank &Trust Company on file at the Board's offices does not Ten-any affiliation between the subject bank and the Colo-

toQJ- Bunker Oil Company end we have no other information aseh the nature of the affiliation nor as to the extent ands4rIeter of the bank's financial interest, if any, in the1.1116-liate. We are unable, therefore, to determine whether,th er the existing terms of waiver printed on Form 220b,

bank is exempted from the requirement for the submissionPublication of a report of the Colonial Bunker Oil Corn-It Will be appreciated if you will kindly have the

oilr ElIbMit a revised Schedule 0 listing the Colonial Bunkere°mPanY (in addition to the Savannah Corporation which

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"is already listed) and if you will obtain and furnish uswith such other information as may be necessary to enable usto determine whether or not the bank is required to submita report of the affiliate under the instructions, terms ofwaiver and statutory provisions printed on Form 220b. Pleasealso indicete whether or not the affiliation has been ter-minated since the date of the call, March 31, 1937. Upon re-ceipt of this information together with your recommendation,_he Board will consider the request of the Savannah Bank &Trust Company, Savannah, Georgia. If it should be foundnecessary for the bank to submit and publish the statementOf the affiliate, it will not be necessary to republish thereport of the bank itself."

Approved unanimously.

Letter to Mr. Young, Vice President of the Federal Reserve BankOf

Chicago reading as follows:

Br "Schedule 0 (Form 105b) of the Peoples State Bank,onson, Michigan, as of March 31, 1937, which was in-Closed with your letter of April 29, is accompanied with"et appears to be a copy of a letter sent to the memberFITM:sting that it submit and publish a report of its

the H. A. Douglas Manufacturing Company, Bronson,al;„?,higan, because of the fact that on March 31, 1937, the_"-iliate was indebted to the member bank in an amount ex-ceeding 1 percent of the bark's capital and surplus. TheatrUnt given in the memorandum, 0,370, is 4200 more thane figure shown in column 7 of Schedule 0, but it is as-red

that the figure reported in column 7 was meant to bewn in the memorandum, since no amounts are shown in

-(41114.118 3, 4, 5, and 6.

ten "The figures shown in column 7 of Schedule 0 are in-ded tobOtt represent loans made by the bank on capital stock,

Such debentures or other obligations of the affiliate.

illeh loans do not constitute 'indebtedness' within the mean-of th

they doe waiver provisions printed on Form on Form220b, though

cpe ame within the limitations of Section 23A of thebe-eral Reserve Act. The member bank should not, therefore,p rsquired hereafter to submit and publish reports of af-„'Llitites in such circumstances."

Approved unanimously.

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Thereupon the meeting ad ou ed.

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