19370909_Minutes.pdf

A meeting of the Board of Governors of the Federal Reserve

Srstell was held in Washington on Thursday, September 9, 1937, at 11:00

ra.

PRESENT: Mr. Eccles, ChairmanMr. Ransom, Vice ChairmanMr. BroderickMr. Szymczak

Mr. Bethea, Assistant SecretaryMr. Carpenter, Assistant Secretary

Consideration was given to each of the matters hereinafter re-

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

Bo6ird:

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

4clei.to--4 Reserve System held on September 7, 1937, were approved unani-

kollsly.

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

44Reserve System held on September 8, 1937, were approved and

theactions recorded therein were ratified unanimously.

Telegram from Mr. Leach, President of the Federal Reserve Bank

Qr.—chmond, stating that the board of directors of the bank, at its

leet ing today, voted to establish a rate of 2 percent on advances to

be r banks under the provisions of Section 10(b) of the Federal Re-

eer,ve Act,to establish the following minimum buying rates on bankers'

eetoi„-puances:

1 to 90 days, 1/2491 to 120 days, 3/4Y0121 to 180 days, 1;70,

'O establish without change the remaining rates in the bank's

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e)°"sting schedule of rates of discount and purchase, all effective the

Ilrs4.t business day following that on which approved by the Board of

Governors.

The rate of 2 percent on advances un-der Section 10(b), fixed by the directors

of the Richmond bank, was approved unani-

mously, effective September 10, 1937, and

the buying rates on bankers' acceptances were

noted with approval.

The establishment by the bank without

change of the other rates of discount and

purchase in its existing schedule was alsoapproved unanimously.

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

01,2

''Icago, reading as follows:

'Phis refers to your letters of June 17, July 8, andAugust 4, 1937, and their inclosures, relating to the con-dition of membership under which a State member bank sub-ject to such condition must deposit security with its trustdePartment if trust funds held by it are deposited in itsbanking department or otherwise used in the conduct of itsbusiness, and to the question whether a State bank in Illi-la°18 can validly pledge securities with its trust departmentto. secure such funds.

"While the situation is unsatisfactory because of thequestion concerning the constitutionality of the pertinentProvisions of section 3 of the Illinois Trust Companies Act48 applied to banks, the Board feels that, in view of therecent Appellate Court decision in Barrett v. Reuter, 289Ill. App. 221, 7 N.E. (2d) 74, the opinions of the StateAttorney General and your counsel inclosed with your latestletter, and the position of the office of the State AuditorOf Public Accounts as indicated by your earlier letters, itMust assume that State banks in Illinois can validly pledgesecurities for the purpose described above. In the absenceOf court decisions or other developments indicating thattaat view is incorrect, the Board will not object to thebanks subject to the condition of membership in questiondepositing trust funds in their own banking departments pro-

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"vided they pledge the required securities with their trust

departments. However, the Board desires that you or your

counsel keep it advised concerning any court decisions or

other developments having a bearing on this matter."

Approved unanimously.

Letter to Honorable J. F. T. O'Connor, Comptroller of the Cur-

4.1LcY, reading as follows:

"Section 21 of the Federal Reserve Act, as amended, pro-

vides in part that, whenever member banks are required to ob-

tain reports from affiliates, the Board of Governors of the

Federal Reserve System or the Comptroller of the Currency,

as the case may be, may waive such requirement with respect

to any such report if, in the judgment of the Board or the

Comptroller, respectively, such report is not necessary to

disclose fully the relations between such affiliate and suchbank and the effect thereof on the affairs of such bank.

"Pursuant to these provisions of law, the Board and the

Comptroller now waive the requirement for the submission and

Publication of reports of affiliates (other than holding

company affiliates) of member banks when the indebtednessof the affiliate to the member bank does not exceed 45,000

?/' 1 percent of the bank's capital and surplus, whichever

is the smaller, also where the affiliate relationship is

based solely on control of the affiliate by the merber bank

in a fiduciary capacity."Since the adoption of these waiver provisions certain

ceses have came to the Board's attention which seem to make

it desirahle to modify the terms of waiver so as to make it

necessary to submit and publish reports (1) where the in-

debtedness of the affiliate to the member bank is fully

secured by United States Government obligations and (2) where

the affiliate relationship is based solely on the fact thata majority of the affiliates' directors, trustees, or other

Pei'sons exercising similar functions are directors of any°Ile member bank, except where they constitute one-half ormore of the directors of the member bank. A copy of the

Boards 'Instructions for preparation of reports of affil-

and holding company affiliates of member banks (on

1°17ms 220 and 220a)', on which the proposed revisions have

been indicated, is attached."Since the present waiver provisions of the Board ap-

Plicable to State bank members are the same as those of your

°iTice applicable to National banks, if agreeable to you the

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"Board would like to have its staff discuss the proposedChanges in the waiver provisions with your office beforeformal action is taken thereon by the Board. It will beappreciated if you will advise the Board whether or not thisProcedure is satisfactory to you."

Approved unanimously.

Letter to "The First National Bank of Emlenton", Emlenton, Penn-

1-1"an1a, reading as follows:

"The Board of Governors of the Federal Reserve Systemhas given consideration to your application for permissionto exercise United fiduciary powers, and grants you au-thority to act, when not in contravention of State or local4w, as trustee of the trusts which you were administeringOn March 29, 1937, the exercise of such right to be subjectto the provisions of the Federal Reserve Act and the regula-tions of the Board of Governors of the Federal Reserve Sys-

"This letter will be your authority to exercise thefiduciary power granted by the Board pending the prepare-

of a formal certificate coverirg such authorization,which will be forwarded to you in due course."

Approved unanimously.

Letter to "The Highland Park State Bank", Highland Park, I111-

11°4) reading as follows:

"The Board of Governors of the Federal Reserve Systemhas given consideration to your application for permissionto exercise fiduciary powers, and grants you authority, ef-fective if and when The Highland Park State Bank, Highlandl'ark, Illinois, is converted into a national banking associa-tion and is authorized by the Comptroller of the Currency tocolmence business as 'The First National Bank of Highland1:ark', to act, when not in contravention of State or local

as trustee, executor, administrator, registrar of stocksend bonds, guardian of estates, assignee, receiver, committee

estates of lunatics, or in any other fiduciary capacityin which State banks, trust companies or other corporationsv'hich come into competition with national banks are permittedt0 act under the laws of the State of Illinois, the exercise

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"of all such rights to be subject to the provisions of the

Federal Reserve Act and the regulations of the Board of Gover-nors of the Federal Reserve System.

"After the conversion of The Highland Park State Bankinto The First National Bank of Highland Park becomes effec-tive and the Comptroller of the Currency authorizes the na-tional bank to commence business, you are requested to havethe board of directors of the national bank adopt a resolu-tion ratifying your application for permission to exercisetrust powers, and a certified copy of the resolution soadopted should be forwarded to the Federal Reserve Bank of

Chicago, to be forwarded to the Board of Governors of the

Federal Reserve System for its records. When a copy of such

resolution has been received by the Board, 8 formal cer-

tificate covering your authority to exercise trust powerswill be sent to you."

Approved unanimously.

Letter to Honorable I. F. T. O'Connor, Comptroller of the Currency,

l'ee4i4g es follows:

"Pursuant to an informal request received from yourMr. J. L. Robertson, there is inclosed herewith for the useOf Your office, in confidence, a copy of a report addressedtO the Board of Directors of The Colonial Trust Company ofPittsburgh by Mr. G. T. Spettigue, Jr., relating to certaintransactions of Mr. Avery J. Bradford. It is understood thatYour office desires the information contained in this reportfor its confidential use only in connection with its consid-eration of the qualifications of Mr. Bradford to act as aReceiver of a national bank."

Approved unanimously.

Letter to Mr. George H. Auffinger, Jr., Assistant Vice President

or he Marine Midland Group, Inc., Buffalo, New York, reading as follows:

"This refers to your letter of August 28, 1937, request-ing advice as to whether the Board has ever issued a defini-tion of cash balances which are too small to be investedseparately to advantage within the meaning of section 10(c)or the Board's Regulation F relating to the investment ofElmall amounts of trust funds in pools of mortgage bonds orOther securities.

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"The Board has not attempted to define specificallyWhat constitutes such small amounts, but it may be statedthat at one time the Board's rulings limited such amountsto $50. However, as a matter of introducing some flexibilityinto the requirement, it is now stated in the regulation inthe general terms above referred to. It has been suggestedto the Board that this provision of its regulations be amendedS o as to permit the operation by national banks of commontrust funds without being restricted to the investment inaUch funds of only small amounts. The Board has this sug-gestion under consideration but I am not in a position to ad-vise you at this time as to when a decision will be reachedaS to that amendment, if any, will be made to this provisionor the Board's regulation. Of course, whenever any suchamendment is made to the regulation, it will promptly becelled to the attention of all national banks."

Approved unanimously.

Letter to Mr. P. H. Todd, Chairman of the Michigan Public Utili-

ties Commission, Lansing, Michigan, reading as follows:

"Referring to your letter of August 31, the Board ofGovernors is aware of complaints that the market for commonstocks is at present relatively 'illiquid'. To what extentthese complaints are justified and to what extent they pro-ceed chiefly from disappointment in the current lack of large!_r dirg volume, the Board is not in a position to state. AsLo the prospects for 'more liauid markets in common equitiesOr utility companies', it is believed that the SecuritieslInd Exchange Commission is better qualified than is the BoardOf Governors to express an opinion, and your letter is, there-rore, being referred to the Commission."

Approved unanimously.

Thereupon the meeting adjourned.

Assistant Secretary.

Chairman.

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