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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/ • 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 /h