19371026_Minutes.pdf

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A, meeting of the Board of Governors of the Federal Reserve

Yet held held in Washington on Tuesday, October 26, 1937, at 11:00

PRESENT: Mr. Eccles, ChairmanMr. SzymczakMr. McKeeMr. Davis

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

Consideration was given to each of the matters hereinafter re-

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

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

hderal Reserve System held on October 25, 1937, were approved unani-

oIxely.

Telegram to Mr. Gilbert, First Vice President of the Federal

°141811re Bank of Dallas, stating that the Board approves the establish-

Ivithout change by the bank today of the rates of discount and

Dilrehase jn -ts1 existing schedule.

Approved unanimously.

Memorandum dated October 22, 1937, from Mr. Smead, Chief ofthe ti

11810n of BAnk Operations, submitting a letter dated Octoberle Attebery, First Vice President of the Federal Reserve Bank

or StL---e, which requested approval by the Board of changes in the

13e1.80,_'"Iel classification plan of the Louisville Branch of the Federal

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Reserve Bank of St. Louis to provide for changes in the maximurr sal-

aries for the Positions of "Head of Department" and "Assistant Bead

01 DePartnent", in the R.F.C. Collateral and Collection Department, and

r°r the creation of the new positions of "Note Custodian" and "Super-

visor of Remittances and Accounting", in the R.F.C. Collateral and Col-

lecti011 Department. The memorandum stated that the proposed changes

bed beenreviewed and recommended that they be approved.

_Approved unanimously.

Letter to the "Peoples Bank and Trust Company", Seattle, Wash-

reading as follows:

has :The Board of Governors of the Federal Reserve System&Nen consideration to the application for permission

to exercise fiduciary powers made on behalf of the nationalwank into which the Peoples Bank and Trust Company, Seattle,

bnl_ineton, is to be converted, and grants such nationalT'ulz authority, effective if and when the Peoples Bank and

tirlIst Company is converted into a national banking associa-

°I1 and is authorized by the Comptroller of the Currencyr commence business as Peoples National Bank of Washington

1101 Seattle to act, when not in contravention of State or()peel law, as trustee, executor, administrator, registrarc'e.stocks and bonds, guardian of estates, assignee, re-rildver, committee of estates of lunatics, or in any other

or ucial'Y capacity in which State banks, trust companiesti other corporations which cane into competition with na-st°nal banks are permitted to act under the laws of thesutte of Washington, the exercise of all such rights to be

the ject to the provisions of the Federal Reserve Act and

Re regulations of the Board of Governors of the Federalserve System.

Com,—"fter the conversion of the Peoples Bank and Trust

be into Peoples National Bank of tashington in beattlethecoes effective and the Comptroller of the Currency au-

°11-2,es the national bank to commence business, you are'qUested to have the board of directors of the national

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"?alak adopt a resolution ratifying your application for per-to exercise trust Dowers, and a certified copy of

the resolution so adopted should be forwarded to the Federal

Reserve Bank of San Francisco to be forwarded to the Board1?.f Governors of the Federal Reserve System for its records.hen

a copy of such resolution has been received by theBoard, e formal certificate covering your authority to ex-ercise trust powers will be sent to you."

Approved unanimously, together witha telegram to Mr. Sargent, Vice Presidentof the Federal Reserve Bank of San Fran-cisco, reading as follows:

Seattle,

"Fiduciary application 'Peoples Bank and Trust Company',Washington, has been approved by Board, effective

11)on completion of conversion. Usual letter to applicantDank being mailed today."

Letter to "The National Metals Bank of Hancock", Hancock, Michi-

‘Itlis reading as follows:

"Phis refers to the resolution adopted on May 26, 1937,by the board of directors of your bank signifying the bank'sl ire to surrender its right to exercise the trust powerss'lch have heretofore been granted to it by the Federal Re-Ferve Board, now known as the Board of Governors of the"ere' Reserve System.ch "The Board understands that your bank has been dis-arged or otherwise properly relieved in accordance with

the; law of ell of its duties as fiduciary. The Board, there-tri:e) has issued a formal certificate to your bank cer-t, Yine: that it is no longer authorized to exercise any of3p fiduciary powers covered by the provisions of sectiont4 1,19 of the Federal Reserve Act, as amended. This cer-'lleete is inclosed herewith.

"In this connection, your attention is called to theIV that, under the provisions of section 11(k) of theha "81 Reserve Act, as amended, when such e certificate

Re: been issued by the Board of Governors of the Federal10,-,erve System to a national bank, such bank (1) shall noth'ger be subject to the provisions of section 11(k) of

Federal Reserve Act or the regulations of the Board ofGovernors of the Federal Reserve System made pursuant thereto,

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“(2) shall be entitled to have returned to it, any securi-ties which it may have deposited with the State or , similarauthorities for the protection of private or court trusts,anA (3) shall not exercise any of the powers conferred bysection 11(k) of the Federal Reserve Act except with thePermission of the Board of Governors of the Federal ReserveSYstem.”

Approved unanimously.

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

Of Chico reading as follows:

from "AB You know, there have been admitted to membershipYour district durina the recent past a number of re-

crganized banks whose earnings are pledged for the benefit

Y waiving depositors for specified periods covered in the'. ac)rganization agreements. Each of these banks is subjectt° a condition of membership requiring it to establish and

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rnaintain during such periods a 'Trustees' profit account'4.. ch should be separate and apart from the undivided prof-

account and should reflect clearly at all times the net

waiving of earnings due to the trustees or agents for the

aiving depositors."There is some lack of uniformity among the banks inthe manner of treating undivided profits in condition re-

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_rts and published statements, and a question arises as'es) whether the practice of some of the banks may not be in-

4nsistent with the condition of membership. It is under-th006 that in some of the banks subject to the conditiontie earnings are no longer pledged by reason of the expire-

Of the agreements, but according to the Board's recordsagreQnents are still in effect in the following cases.

ulled bEinks are grouped according to the manner of treatingme ivided profits in condition reports and published state-

1t , and the date shown after the name of each bank isdate to which the earnings are pledged under the reor-

nization agreement.Dansard State Bank, Monroe, Michigan (7-22-38)American

State Savings Bank, Lansing, Michigan (4-29-38)

or 4,thrhere is apparently no question as to the correctness80 manner in which these banks treat their earnings, inctil'er as the conditions of membership applicable to the in-

Iltions are concerned. Transfers are made periodically

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Undivided profits to the trusts for waiving depositors!Ind in condition reports and published statements any remain-

Undivided profits are either excluded from capital ac-?ounts and shown in other liabilities as being amounts due

trusts, or are included in capital accounts with note-

uh !ions to the effect that the amounts are for the benefit of

e aiving depositors. In other words, the condition re-Perts and published statements properly show that earnings°fl the dates of the statements do not accrue to the banks.

Central State Bank, Muscatine, Iowa (Earnings arePledged until the sum of $125,000 has been paid

(3 einn7.liquidating agents of two predecessor13

, "Transfers of specified sums have been made periodical-J-Y to the segregated assets held for the benefit of the de-P°sitorsirne teen of the predecessor banks, a total of V75,000 hav-

transferred up to June 30, 1937, but in condition4 ePorts remaining balance in undivided profits is included4..L.the bank's capital account and with no notation to indi-','"e that the earnings are for the benefit of the old bank'suePositors.

The Mount Clemens Savings Bank, Mount Clemens,, Michigan (11-15-38)00persville State Bank, Coopersville, Michigan(12-7-37)

The Home State Bank of Lawrence, Lawrence, Michigan(1-3_38)

The Peoples State Bank of Holland, Holland, Michigan(6-28-38)

wai "Apparently these banks transfer to the trusts forencjing depositors the entire net profits on hand at the

hUt °f earning and dividend periods, June 30 and December 31,

tan condition reports and published statements in the in-ejlIns the net profits are included in the banks' capital

that Illits and with no Qualifying notations to the effect

- the amounts are for the benefit of waiving depositors.that "The condition of membership in question contemplatesba„ it. all condition eports and published statements theb ''s

incinvolved should not overstate their capital accountsl A.

egr -IluanR therein earnings which under reorganizationEIQMer

e

auj are to accrue to waiving depositors; unless, of

er'a,

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qualifying notations are made in the reports to the .de eet that such earnings are for the benefit of the waiving

St t°ra- Accordingly, it is requested that the Central-ve Bank, Muscatine, Iowa, and the four banks listed in the

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"last group be informed of the manner in which the earningssh°111d be shown in all future reports of condition and pub-lished statements. If there are any other member banks in

c1.r..6strict reorganized under a similar plan which are in-

jpledged earnings in their capital accounts in condi-

°11 reports and published statements, their attention should

Isitn steh be to the proper manner in which such earnings

the"In this connection, it has been noted that in most ofreports of examinations of those banks whose earnings are

ledged , the examiners have included the net undivided profits111 the banks' capital accounts. It is requested that in thet ture the reports of all such banks, whether or not subject

4. the condition, be prepared in such a manner as will re-the the true condition of the capital accounts."

Approved unanimously.

Memorand dated October

rneznorandurn dated October 12

141recl. in accordance

O

keust 23, 1937,

111811rElnee that it would be

end in connection with

recommended:

(1)

16, 1937,

from Mr.

from Mr. Morrill submitting

Koppang, which had been pre-

with the request made at the meeting of the Board

that an investigation be made as to the types of

desirable to carry on the Board's new build-

its operation. Mr. Morrill's memorandum

'Filet no general fire insurance on either the build-;re or contents be provided at this time but that

Personnel Committee be authorized to purchase,11 an investigation shows it to be advisable, a Finets Policy on the contents of such of the rooms and

in such amounts as the Committee may decide; such

Policy to insure not only against fire but also againstwater damage, theft and malicious destruction.

That elevator and public liability coverage each inthe amount of 50,0004200,000 limitation be pro-vided.

That such machinery coverage be obtained as in the°Pinion of the Board's Building Manager should be

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covered, subject, of course, to the approval of thePersonnel Co ittee.

That no flood insurance be carried but that, if pos-sible, protection against water damage of the machinin the basement be included in the policy describednext above.

That coverage against riot, civil commotion, maliciousmischief and vandalism and insurance against othersuch miscellaneous risks and in such amounts be ob-tained as the Personnel Committee may deem advisable.

Approved unanimously.

Thereupon the meeting adjourned.

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