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FEDERAL RESERVE BANK OF CHICAGO
23O

SOUTH

LA

STREET

June 1 5 , i 35
OFFICE OF THE

\S

CHAIRMAN OF THE BOARD AND
FEDERAL RESERVE AGENT

Hon. Marriner S. Eccles
Governor, Federal Reserve Borrd
Washington, D. C.

0

Dear Governor:
I hare the Board's letter of ^ g ~, 1955j 1-9252, relativ 4 amendments to the Bi king *ct of 1955 concerning changes i.i the Clayton Act i
in Section 52 of the Banking Act of 1955.
I note that this sas referred to the Governors* Conference en !'?••;"• 28,
19?5, and that some of the Governor:: expressed the desire to have copies of
the proposed amendments for further study. Governor Schaller '•. been away since
that time and consequently hrs not discussed the i
Lt bh i riter.

However, you are aware that all matt • laiing to the -" 1 iks,
(other than credit and correspondent relationships') i "? 1
. ." ship, lie
ing
reorganization, supervision and examinatio , and a3J related acti
handled h-j the Federrl Reserve Agent's department. In r< r... l j ., r lettei to
me "f June °, therefore, I venture to express my opinj
" 1 on
rience
in this district.
I this offi ,
have outstanding bout fc ' red 11
"or
directors to serve one or more banks. In addition, there a n any 'ore i
who arc serving as such in a member bank
! E aonmeniber state bank ' ..'' ] • not been required.
In evcr^' crae where we have issui
i
l i t , i t has 1 .. _ ' . L
st
J
n Cul study
be the public i
^ Lnvoli . . Our recommendatic
beer
based on an i n t i 4
1
of J.... 1 nk, th
. " ait} , and I he ir."' • ' r i l r
concerned. The isi ancc of nany of these permitj as involved pro1
ce betwee] t h F 3 -r' B
- T Board and c
.., i . wl Lch i
• beer
r n
"• e t o shor: t o the satisfy ction
'" Board that t h e grants
wj s i n t h _ ublic i . . • . J •
E . also j
insi
•
. • J '
applicatj
1
'
'
we have " luc bhat t
public int
s t wa:
not served.
In the l a s t twe BJ 9\
been devoting much of t l
Line and € j - ' ent bo r . anization of the bank; • .. -1
bting
x
::; ,
' ' \ - ; t o - z; r+ - *j- it
'' - '
,
;h includes t h
""*.•
'
.
P their ]
L b i l i t i e s . We have fc


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

.

!

FEDERAL RESERVE BANK OF CHICAGO

June 13, ^ " r
Hon, "• -riner £. Ec:!:..

it exceedi iglj iifficult in many cases to induce the best-qualified men to serve
directors of banks. The proposed amendment would necessitate hundreds of
resignations in our district and -could intensify this difficult pro1;"1- .
lac from this, however, I am strongly of the opinic that it is distinctly
in the interests of the public and the depositors that in certain instances
qualified men of high standing and influence be allowed to serve as directors
in more than one bank. This is particularly true where banks are in different
communities and have no semblance of competition, and where otherwise the smaller
JG 3 inevitably lose the services o^ some of their most valuable directors.
The experience and knowledge and broad vision rs to trends and general credit
conditions gained by a director in a larger bnnk is frequently of the greatest
vaJ.ue to the smaller bank and tends to better understanding and coordination of
general credit policies of ~ U the bsnks in the public interest.
The operation of Section 3a has resulted in a number of cases in lowering the standards of management of banks and it seems obvious that the application
of the proposed amendments would go a long way further in this respect. It is our
definite opinion therefore that their adoption would have a farreaching pnd serious
effect on the banking situation in our district, as re know that both the bank
management and the public have come to consider thin relationship as very important.
Such a change in so many communities in our district would inevitably srouse much
criticism and antagonism, and I sincerely believe in not a few instances, b?nks,
including some important ones, vrould consider this as a further reason for withdrawal from membership in the Federal Reserve System.
We are therefore of the very definite opinion that there should be
some flexibility under the discretion of the Federal Reserve Board, because there
ar<° so many cases where otherwise a hardship would be placed upon the banks and
a definite lowering of the standards of management would occur to the detriment
of the depositors and the community.
May I add further that if I read aright the proposed amendment to
Section ?2, it would seem that no officer of a corporation could serve as a
director in a b^nk if his corporation at any time and only incidentally might
offer any of its ora shares to its employes. This again has been a matter of
much controversy in the past and if so construed would mean the enforced resignation from the bocrds of banks of a large number of their most valuable directors.
This letter is written as a reflection of a very intimate experience of
several years in handling these matters in our district, and out of a close knowledge of the reactions of the banks, the directors, and the communities to these
questions* We think we know ho?/ much it means to them and consider it our duty
to convey to you what we feel sure is and will be the "altitude of our district in
this matter.
Very trulj


EMS HH


deral Reserve Agent

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