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COPY FEDERAL RESERVE BANK OF SAN FRANCISCO A p r i l 20, 1940 Mr. J . P. D r e i b e l b i s , A s s i s t a n t General Counsel, BoarS o f Governors o f t h e F e d e r a l Reserve System, Washington, D. C„ Dear.,Mr. Dreibelbis: I t was k i n d o f you t o send me y o u r memorandum o f A p r i l 18, r e l a t i v e t o y o u r m e e t i n g w i t h M e s s r s . M u l r o n e y , F o l g e r , and W r i g h t . I have t a k e n g r e a t p a i n s t o g i v e t h e Cormrlittee a l l t h e h i s t o r i c a l background o f t h e p r o v i s i o n s o f t h e agreement r e l a t i v e t o bank p r e m i s e s , so t h a t no f a l s e s t a r t 3 w o u l d be made. We have p r e pared and s u p p l i e d t o t h e Committee e x h a u s t i v e bank premise r e c o r d s f r o m t h e e x a m i n a t i o n r e p o r t s o f a l l member banks w h i c h have passed i n t o t h e T r a n s a m e r i c a system whose b a n k i n g premises w e r e c r i t i c i s e d i n t h e August 31, 1939, e x a m i n a t i o n r e p o r t . I n a d d i t i o n to t h a t , the Bank o f America has s u p p l i e d t h e Committee w i t h p r a c t i c a l l y a l l t h e i n f o r m a t i o n a v a i l a b l e t o i t on s i l l t h e b a n k i n g premises c r i t i c i s e d i n the examination r e p o r t . About two weeks a g o , we f e l t t h a t t h e Committee was r e a d y t o meet w i t h t h e Bank t o d i s c u s s s p e c i f i c c a s e s . C h i e f W r i g h t , however, d e s i r e d t o a b s t r a c t i n f o r m a t i o n from the records of t h e examination r e p o r t s o f t h e r e m a i n i n g member banks t a k e n i n t o t h e Transamerica system, t h e banki n g premises o f w h i c h w e r e n o t t h e s u b j e c t o f c r i t i c i s m i n t h e August 31, 1939, e x a m i n a t i o n r e p o r t . W h i l e I d i d not f e e l t h a t t h i s was p e r t i n e n t t o t h e r e s p o n s i b i l i t i e s o f t h e Committee, i t seemed d e s i r a b l e t o me t o g i v e no appearance o f o b s t r u c t i n g any i n v e s t i g a t i o n o f t h e C h i e f N a t i o n a l Bank E x a m i n e r ' s o f f i c e , so M r . West and I a c c e p t e d t h e s i t u a t i o n a s one w h i c h would cause no harm o t h e r t h a n a s l i g h t d e l a y i n p r o c e e d i n g w i t h t h e program. On s e v e r a l o c c a s i o n s r e c e n t l y I a t t e m p t e d t o communicate w i t h M r . W r i g h t , b u t was i n f o r m e d t h a t he v/as out o f t o w n and would n o t be back f o r s e v e r a l d a y s . There seemed t o b e some m y s t e r y c o n c e r n i n g h i s whereabouts. I l e a r n e d , however, f r o m M r . Day, who t e l e p h o n e d t o me on o t h e r m a t t e r s f r o m Chicago, t h a t he had e n c o u n t e r e d Jdr. W r i g h t and a n o t h e r examiner on t h e t r a i n w h i l e t r a v e l l i n g f r o m Los Angeles t o Chicago. M r - Day a l s o t o l d me t h a t M r . W r i g h t appeared t o have some views i n r e g a r d t o t h e r e s p o n s i b i l i t i e s o f t h e Committee w h i c h were n o t i n a c c o r d a n c e w i t h t h e t e r m s o f t h e agreement. S i n c e r e c e i v i n g t h i s i n f o r m a t i o n , I have t a k e n t h e p a i n s a g a i n t o go o v e r w i t h t h e t w o r e m a i n i n g members o f t h e Committee t h e l e g i s l a t i v e h i s t o r y , i f you p l e a s e , o f t h a t phase o f t h e a g r e e m e n t , and t o s t r e s s t h e f a c t t h a t t h e Committee must n o t d e v i a t e f r o m t h e i n s t r u c t i o n s l a i d down, r e g a r d l e s s o f what may be t h o u g h t t o be a b e t t e r way o f d e a l i n g w i t h t h e 2 - M r . D r e i b e l b i s , Board o f G o v e r n o r s . 4/20/40 B a n k ' s p r e m i s e s . I am g l a d you had t h e o p p o r t u n i t y i n d e p e n d e n t l y t o g i v e M r , W r i g h t y o u r v e r s i o n , w h i c h c o i n c i d e s w i t h what I would have t o l d h i m had he come t o me a g a i n a n d , i n f a c t , w i t h what I had a l r e a d y s t a t e d i n f u l l . The case o f t h e R o l l i n s p r o p e r t y was f u l l y gone i n t o on t h e o c c a s i o n c£ o u r f i r s t m e e t i n g , and was a g a i n d i s c u s s e d i n a second meeti n g o f t h e Committee, a t w h i c h b o t h M r . G i a n n i n i and M r . Smith were present. T t h i n k M r . W r i g h t ' s v i s i t t o Washington w i l l be const m o t i v e i n c l e a r i n g away any d o u b t s he may have h a d , and t h e r e s h o u l d be no f u r t h e r delay i n c o m p l e t i n g t h e work o f t h e Committee. I was i n t e r e s t e d t o l e a r n o f t h e Bank's d i f f i c u l t y i n s u p p l y i n g a c c e p t a b l e c o l l a t e r a l t o s u p p o r t t h e C a p i t a l and C a l i f o r n i a Lands c o n t r a c t s . You may remember my i n s i s t e n c e t h a t t h e r e p r e s e n t a t i v e s o f t h e Bank were e x a g g e r a t i n g t h e f i n a n c i a l c o n d i t i o n o f b o t h t h o s e companies. I t i s my u n d e r s t a n d i n g t h a t Ladenburg Thalmann & Company, New Y o r k , O t i s & Company, C l e v e l a n d , and John J . Bergen & Company, L t d . , New Y o r k , a r e j o i n i n g i n u n d e r w r i t i n g 300,000 s h a r e s . The r e m a i n i n g 500,000 presumably w i l l be t a k e n by t h e T r a n s a m e r i c a C o r p o r a t i o n t h r o u g h t h e lending f a c i l i t i e s of the Reconstruction Finance Corporation. Mr. Lake, r e p r e s e n t i n g Ladenburg Thalmann, t o l d me Wednesday evening t h a t t h e shares a r e t o be s o l d i n s m a l l u n i t s , n o t t o exceed 1,000 ( $ 5 0 , 0 0 0 ) , t o any one i n d i v i d u a l o r i n t e r e s t w i t h o u t t h e a p p r o v a l o f t h e Bank. The p r e f e r r e d s t o c k w i l l have v o t i n g p o w e r , w h i c h i s d o u b l e d i n t h e event o f a 99-day d e f a u l t i n d i v i d e n d s a m o u n t i n g t o $ 2 ; i n o t h e r w o r d s , 15 months* d e l i n q u e n c y . Yours v e r y truly, (Signed) I r a C l e r k , F i r s t Vice President.
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