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Memorandum o f Conference o f Repre£>ouit;tlv»s of the B;mk
o f A f r i c a , K.T* & S*A*, and the Board o f Governors
i n ths Federal i-eaarve B u i l d i n g i n W s h i n g t o n a t
2100 p . a . on Wednesday,
r i i 13, and a t l i t 00
on Thursday, A p r i l I X , l r M 9 .
I n accordance v i t h a c t i o n taken by ths Board, a conference
vi-.sj arranged i n the Special Library on ths a o w date for the purpose
of o b t a i n i n g from representatives of tha Bank of * ierie& K t i o m . i
Trust and Slaving a Association, information i n connection v i t h tha
a p l i c a t i o n s o f tha bank t o aotabli&h fcre:ieaas in Fr*rvkf o r t ^ a s j - ^ i n ,
Bremen, <*.r*d tianbttrg, Uamsaqy* There vera present t the conference
Mr* Ftu&sell 0 . S a i t h , Executive Vice President oi* Eunk oi f i © r i e a j
Mr. Poland P i o r o t t i , Washington representative o f the 1
of Americaj
Me? -re. Sayacssak, Clayton, and draper, aieiabers of the 1 ;«.rd; and Messrs*
Cerpenter, Vest, M i l l a r d , Wilkes, &aftbits, «nc.i Ciroeamu, aeafeera of the
Board's s t a f f *
Mr* Ssymcs&k stated t h * t the purpose o f
< nfarenoe was
t o aet information from representatives of the
.
ri«c regarding
i t s policies v i t h respect to (1) expansion of branches i n foreign
countries, (2) types of bu©1nes* conducted ana t y i -?s
c odite extended by tha f o r e i g n branones, (3) experience v i t h race vtly established
branches, and (4) the need and prospective business yi t i - three German
branches f o r vhich a p p l i c a t i o n s had been f i l e d *
I n response to these Questions and related cuestion^ asked by
representatives o f the Board during the conference, Mr, S a i t h • • do sub«
s t a n t i a l i y the following .statements
I t has seeaeri to us t h a t , i n general, the Bank' of America
has obtained a stature that carries with i t certain responsib i l i t i e s , I n t h i s p a r t i c u l a r period of history when America i s
a c r e d i t o r nation and i s attempting to & sauna leadership i n
c e r t a i n f i e l d s of i n t e r n a t i o n a l a f f a i r s , i t i s only l o g i c a l that
A f r i c a n baiika should a t i e rot t^ ln:"I»«ent national policy* v#
think t h a t i s done hy the developsent of correspondent bar,k r e lationships, branches, e t c , , t o an extent to i>e deter;,ined i n each
country. Ve have been
«<»veral tines what our plana are for
expansion of our f o r e i g n business, Ve could not answer t h - 1 then
and I can not answer i t now, Our policy • epends largely on vhat
the a t t i t u d e o f the f e d e r a l r - y a m Board I s toward tha program*
I f the Board would indicate to ue vh t ve should do to iapletaent
n a t i o n a l policy our pl&ns vould be st.de to f i t into that in such
degree as i t vms possible to do so*
Vie ha ve h*>d a branch i n London for tfowe tventy years and
i t has always boen operated as an a d j u n c t o f true i n t e r n a t i o n a l
banking department* A f t e r the war ve vara asked to look i n t o







-2-

the P h i l i p p i n e s i t u a t i o n and a f t e r doing so we decided to
establish a branch t h e r e . >;e studied the i n t e r n a l organisat i o n and methods of operation of the B r i t i s h and /American
banks i n the f o r e i g n f i e l d and we came t o the conclusion
t h a t i n the a d m i n i s t r a t i o n of our f o r e i g n business we would
not attempt to develop a f o r e i g n banking department, as
d i s t i n g u i s h e d from our domestic banking business, w i t h two
sets of a d m i n i s t r a t i v e o f f i c e r s and two managements w i t h
c o o r d i n a t i o n a t the t o p . Vta decided t h a t there should be
c o o r d i n a t i o n a l l along the l i n e , ?-•« have t e c h n i c a l , personn e l , branch supervision, and loan supervision, departments
and we have put the f o r e i g n branches r i g h t i n t o t h a t administ r a t i v e setup a t the management l e v e l because the problems
w i t h respect t o f o r e i g n branches reach management i n the
same way as do the problems of the domestic branches.
Our senior management consists o f a chairman, the p r e s i dent, the vice-chairman, and f i v e executive v i c e presidents.
Each of the executive v i c e presidents has some p a r t i c u l a r
f i e l d of the bank's a c t i v i t i e s . I have the i n t e r n a t i o n a l
f i e l d . I am not tha manager o f the i n t e r n a t i o n a l banking department or manager of tha f o r e i g n branches but I give the
i n t e r n a t i o n a l aspects of the bank's business my primary a t t e n t i o n . P a r t i c i p a t i o n i n the general a d m i n i s t r a t i o n of t h e
bank comes along w i t h t h a t . The manager of a branch i n a
f o r e i g n country i s responsible t o , and receives i n s t r u c t i o n s
from, the supervisor o f branches. He supervises the branches
from the stand p o i n t of operations. Personnel questions i n
the f o r e i g n branches are handled through the personnel o f f i c e r
of the bank. Branch manager loan l i m i t s are s e t by the senior
management on recommendation of the l o a n supervision d e p a r t ment. One o f f i c e r i n t h a t department has one or more f o r e i g n
branches assigned to him along w i t h one or store domestic
tranches. However, we d o n ' t have ope group of loan o f f i c e r s
who supervise a l l loans i n the f o r e i g n branches. One handles
London, one handles tha f a r bastem branches, and the t h i r d
say handle the business which o r i g i n a t e s i n the i n t e r n a t i o n a l
banking department. These o f f i c a r s r e p o r t t o the v i c e p r e s i dent i n charge of the Loan supervision Department who i s a
aeaber of the general finance committee. I have mads t h i s
statement t o demonstrate t h a t the a d m i n i s t r a t i o n and c o n t r o l
o f f o r e i g n branches i s i n the same hands as the a d m i n i s t r a t i o n
and c o n t r o l of the bank as a whole.
i»e expect t o b u i l d the p o s i t i o n of the bmk of America
i n the I n t e r n a t i o n a l f i e l d t o a p o i n t where i t w i l l be comparab l e to the Bank's p o s i t i o n i n the domestic f i e l d . 3a f e e l we
owe i t to the State, t o our Country, t o our customers, and t o
the stockholders. That i s p a r t of the p o l i c y of implementing




-3a n a t i o n a l program - a program of American i n d u s t r y , trade,
and co fierce taking a predominant p o s i t i o n i n the world*
American hanks should go along w i t h t h a t program as one
i n s t r u m e n t a l i t y Tor accomplishing i t . 1 do not mean by t h a t
t h a t we t h i n k i t i s up to any banking i n s t i t u t i o n to finance
the r e c o n s t r u c t i o n of Europe or the P h i l i p p i n e s , the development of backward c o u n t r i e s , or any of the other o b j e c t i v e s
of n a t i o n a l p o l i c y , but r a t h e r t h a t banking i s one of the
t o o l s by which those things are done. For example, we had
no p l a n t o e s t a b l i s h branches i n Japan.
e got i n t o conversat i o n s a t the n'ar Department arid someone asked why we should
not help w i t h the job t h a t had to be done i n Japan and
Germany. %e t a l k e d i t over and decided we would provide the
l i m i t d banking services they wanted i n those countries i f
they would pay our expenses* I n the case o f Japan i t was
di&aonstrated t h a t we d i d not have to ask «ny reimbursement
but t h a t we could make our own way.
When we got t o Japan we found i t was the p o l i c y t o
d e c e n t r a l i s e * We had discussions auout Yokohama, aooe,
and Nagasaki, and we determined t h a t we would e s t a o l i s h
branches i n 7o*onoma and Kobe. However, the p o l i c y o f dec e n t r a l i s a t i o n has not moved as r a p i d l y as planned, and we
do only a nominal business i n those places, our business
i n Tokyo has been l a r g e i n volume a ad q u i t e p r o f i t a b l e . The
$60 m i l l i o n cotton c r e d i t was I n i t i a t e d by us i n the <*ar
Department. Se d r a f t e d and submitted the f i r s t w r i t t e n
p l a n , and i t was only n a t u r a l t h a t when the thing developed
we were p a r t of i t * We have handled over ,$20 m i l l i o n of
c r e d i t on imports of c o t t o n and when the t r a n s a c t i o n i s
completed, we w i l l have loaned $10 m i l l i o n t o the e x p o r t i m p o r t agency out t h e r e . I n a d d i t i o n we have issued a
l a r g e volume of c r e d i t covering imports of o t h e r t h i n g s .
I t has worked out vary w e l l .
W went i n t o China because i t seemed to us t h a t Chinese
e
trade has always been a matter of major importance t o San
Francisco and C a l i f o r n i a . I t was l o g i c a l f o r i s to be i n
Shanghai i f we were t o have a branch over t h e r e . The s i t u a t i o n d e t e r i o r a t e d , however, and tlu»re was a question whether
we should or should not e s t a b l i s h the branch. We f i n a l l y
received the necessary permits and ware then i n tha p o s i t i o n
o f having the p e r a i t s but not the d i s p o s i t i o n t o e s t a b l i s h
the branch. However, we came t o the conclusion i t would be
b a t t e r t o commence operations and suspend then i f necessary
r a t h e r than t o give up the permits which had bean obtained
w i t h so such l a b o r * * e commenced operations under c o n d i t i o n s which are I l k a " c a r r y i n g your o f f i c e i n your h a t " and




-itare prepared to leave a t any time and suspend operations*
The branch h a s n ' t done very ouch* I had a l e t t e r from the
manager r e c e n t l y who said t h a t i f we could get the equival e n t o f $5,000 i n deposits we could pay expenses* That i s
because the only source of revenue t h a t i s open to us i s
day-to-day inter-bank, loans on which the r a t e i s equivalent
to
per cent par annua so t h a t , i f we had $5,000 i n dep o s i t s , we would have 310,000 i n revenue*
I went t o Slam i n 1Sh6 a t the i n v i t a t i o n of the Siamese
Government and a t tiki urging of our State Department.
I
f i r s t declined the i n v i t a t i o n and want to Manila where the
American Consul s a i d t h a t i f I could f i n d i t convenient t o
accept the i n v i t a t i o n , he thought i t would be a desirable
t h i n g to do* The matter having been put t h a t way I d i d not
see how we could refuse* I went on t o Siam, and i t was
apparent t h a t they were extremely anxious t o develop closer
business r e l a t i o n s between Siam and the Unltod States* Bef o r e the war, t i n and rubber, the Important exports next to
r i c e , went through Singapore and they were paid f o r i n s t a r l i n g * The a u t h o r i t i e s t a l k e d t o me a t some length about
the d e s i r a b i l i t y of having an American bank out there and
e s t a b l i s h i n g channels by which t h a t trade would go d i r e c t *
Tha American a u t h o r i t i e s were i n t e r e s t e d i n i t also and
a l t e r t a l k i n g w i t h various people and a f t e r I caasback,
I t a l k e d w i t h people here and came t o the conclusion t h a t
there was a place f o r an American bank out there* So we
made the a p p l i c a t i o n t o the Board* While t h a t a p p l i c a t i o n
was pending wa were i n a r a t h e r embarrassing spot because
o f the p o l i c y of the Siamese Government of a l l o w i n g only one
f o r e i g n bank from each f o r e i g n country* They agreed t o
h o l d a place f o r us, and we were i n a p o s i t i o n where we
could not say whether we would or would not e s t a b l i s h tha
branch. The permission has now bean , ranted, and we are
under way* *e do not plan to get a b u i l d i n g there or make
any s u b s t a n t i a l investment* ae have a r e n t a l arrangement
f o r a b u i l d i n g , and our investment there w i l l be nominal*
I n general, wa do not contemplate maxin^. any investment
i n bank premises i n any of our f or s i g n branches a t l e a s t
u n t i l we hava paid f o r thea out o f p r o f i t s i n the country
and only then i f i t becomes necessary i n order t o hava a
place to l i v e * Neither do wa contemplate any l a r g e i n v e s t ment i n c a p i t a l * i e ware r e q u i r e d t o go t o Manila w i t h
250,000 pesos* That i s represented by $250,000 i n U* S*
currency i n oar v a u l t s * Ifcat i s i n accordance w i t h our
p o l i c y t h a t we w i l l support t h e econoaor o f tha aountry t o
tha extent t h a t i t provides tha deposits* Our loans i n
tha c o u n t r i e s where wa hava branches have been i n r e l a t i o n




t o the deposits we have r e c e i v e d . Ve have loans i n Manila
o f about 50 per cent of d e p o s i t s * I n London over twenty
yeara f o r occasional i n t e r v a l s and only f o r s h o r t t i n e s
have we had any of our own money i n the branch* A t the
moment we h&vo $176,000 which represents a temporary o v e r d r a f t i n the c l e a r i n g account between ttie branch and t h s
head o f f i c e * Loans have always been mads out o f deposits*
Wo have had a p o l i c y o f m a i n t a i n i n g a 50 per cont l i q u i d i t y
—50 per cent of deposits i n cash, bank d e p o s i t s , and c a l l
loans* I f loans i n London increased* t h a t c a r r i e s w i t h i t
the r i g h t o f t h e branch manager t o overdraw h i s branch
c l e a r i n g account i n order to make investments i n cash and
c a l l loans t o m a i n t a i n l i q u i d i t y *
Ths typos o f c r e d i t extended i s d i f f e r e n t i n the
d i f f e r e n t branches* I n London the major emphasis has been
i n the p r o d u c t i o n o f motion p i c t u r e s * Wo have had long
experience i n t h a t f i e l d i n C a l i f o r n i a * Loans are b e t t e r
i n London than i n C a l i f o r n i a f o r the reason t h a t we have
a double guarantee—a guarantee o f the completion o f t h e
p i c t u r e and a guarantee o f repayment of the l o a n *
In
a d d i t i o n , ws f i n a n c e a considerable amount of goods moving
i n coaaerce—imports from t h e U n i t e d S t a t e s , the K i d d l e
East, and the s t e r l i n g a r e a . There i s a f a i r l y good volume
of import-OAport t r a n s a c t i o n s * Those are p r a c t i c a l l y a l l
on an acceptance basis or advances a g a i n s t shipping documents* Us have p r a c t i c a l l y no loans I n connection w i t h
what you would o a l l domestic t r a n s a c t i o n s or r e a l e s t a t e
loans*
I n Manila we do more n e a r l y a general banking business
combined w i t h an i m p o r t - e x p o r t business* We have accounts
w i t h American concerns which are a l l secured* Ws have a
s m a l l volume o f personal loans l a r g e l y t o employees o f
American concerns and soma s e c u r i t y loans* Ws have a few
loans t o Philippine r e s i d e n t s against t h e s e c u r i t y o f
d o l l a r s , and deposits corns mainly from American concerns
or concerns t h a t have an American o r i g i n *
I n Shanghai we have no loans*
I n Japan ws havs about $3,003,000 i n deposits from
m i l i t a r y personnel. Us havs a fsw odds and ends of loans
to individuals which cover ths purchase of automobiles or
household equipment. »e make loans when a man i s transf e r r e d over here, and he wants to clean up his dsbts*
* s havs not and ws do not contemplate using these
branches as pipslines f o r ths investment of our loanable




——
6
funds frees the United States• tie hava no idea of p u t t i n g
any of our depositors' money a t r i s k i n the f o r e i g n branches,
nor do we contemplate p u t t i n g any s u b s t a n t i a l p a r t of our
c a p i t a l a t r i s k i n bank premises, e t c *
Some business w i l l come to the branches because o f
our connections i n the United States* (He discussed one
or two cases as examples o f t h i s k i n d of business*)
I cannot answer your question as t o our plans f o r expansion i n the f o r e i g n f i e l d unless the Board answers ay
aaestion as t o the a t t i t u d e of tha Board toward the development of f o r e i g n bank business by American bancs* Does tha
Board wish t o see American banks develop t h e i r f o r e i g n b u s i ness and i f so, should i t be i n the form of general c o r r e s pondent bank r e l a t i o n s h i p s , the establishment of f o r e i g n
branches, the eatablishment of f o r e i g n banking corporations
under Section 25 and 25a o f the Federal Reserve A c t , or
through a system of representation abroad? Our plans would
be made t o f i t the approved p a t t e r n * I s are now groping
around w i t h the b e l i e f t h a t we owe i t to our stockholders,
our customers, and to our country to do something* W
a
asked f o r permission t o e s t a b l i s h a branch i n Manila to
see what the r e a c t i o n would be* l a have put a representat i v e o f f i c e i n Paris t o see what the f e e l i n g was* Wa hava
a representative i n I t a l y because wa have a large volume
o f I t a l i a n business, possibly the l a r g e s t o f azy American
bank*
I hava discussed these p o l i c i e s w i t h you w i t h tha
utmost candor w i t h o u t holding anything back because I
would l i k e t o i n v i t e the same k i n d of comments from you*
Mr* Giannini and I went t o I t a l y i n 1?1*5. our bank
owns 99 per cent of the stock of the Bank of America da
I t a l i a * Wa v i s i t e d w i t h government o f f i c i a l s , w i t h our
own people i n the m i l i t a r y government, the Embassy, and
w i t h I t a l i a n bankers* I h e n we came back, I made soma
f u r t h e r studies and came t o the conclusion t h a t I t a l y was
a workshop where they import raw materials and f a b r i c a t e
and export t h s a . Be b e l i e v e d wa could develop a business
w i t h no more than a reasonable r i s k , we s t a r t e d out w i t h
modest c r e d i t s t o I t a l i a n banks t o cover imports* We
o f f e r e d t o op an l i n e s of c r e d i t t o c e r t a i n I t a l i a n banks
t o r * r m i t them t o draw d r a f t s up t o ^0 days* Wa f i r s t
confined ourselves t o c o t t o n c r e d i t s as the t h i n g which
they needed vary badly* Their t e x t i l e p l a n t s ware i n tha
be~t shape of any o f t h e i r a c t i v i t i e s , and tnare was a
tremendous demand f o r a l l s o r t s o f t e x t i l e s * Our operat i o n s have gradually extended. We found t h a t i n doing
business w i t h I t a l i a n banks wa wars doing business w i t h




•7-

people who had a high degree o f i n t e g r i t y and who desired
t o keep via i n a safe p o s i t i o n . #e hare simply loaned the
I t a l i a n s t h e i r own &oney, canas i n Kew t o r * are c r i t i c a l
of oar having extended l i n e s o f c r e d i t i n I t a l y . On
balance we have only been lending the- t h e i r own money which
i s a proper baiucing f u n c t i o n and e x a c t l y what we do i n any
coraaunity when we take deposits and lend thesa.
We might have gone t o I t a l y and said, "here i s a
s i t u a t i o n where, f o r p e r f e c t l y obvious reasons, we w i l l extend c r e d i t only t o the 3ank o f m e r l c a de I t a l i a and not
to any other banx, * w .th the r e s u l t t h a t t h a t bars* would
have a monopoly on the f i n a n c i n g o f imports t o I t a l y . *e
d i d not do t h a t b u t extended c r e d i t t o banks i n kone, Naples
and t o a l l other major banks i n I t a l y .
I f I had t o answer a t t h i s time the question whether we
wish t o e s t a b l i s h a branch i n I t a l y I would recommend against
i t , Sfe do business w i t h the l a r g e I t a l i a n banks and w i t h
some a u a l l e r ones. *te have representatives there and are I n formed from day t o day. However, I do not want t o sake a
e fmt a n t h a t we would not want t o e s t a b l i s h a branch there,
ot is e t
( I n answer t o a question as t o whether . l r . Smith's
e a r l i e r comment about the establishment o f rank of America
i n the f o r e i g n f i e l d on a basis comparable t o i t a p o s i t i o n
i n the domestic f i e l d * ) I do not mean t o say that we seek
a volume o f deposits* e t c . i n the f o r e i g n f i e l d which would
be equal t o those i n the domestic f i e l d . Hhat I do mean i s
t h a t we should have i n the f o r e i g n f i e l d a volume o f business,
correspondent r e l a t i o n s h i p s , volume o f d e o s i t s , and volume
of t r a n s a c t i o n s which would be comparable i n size ( i n r e l a t i o n t o the s i s e o f our bank) t o the f o r e i g n business o f
other large American banks i n r e l a t i o n t o t h e i r s i s e , , Jur
i n t e r n a t i o n a l banking department should serve banks i n
* r i t s a r land, I n d i a , A u s t r a l i a , and elsewhere i n the same
manner as other American banks serve t h e i r correspondents
i n these c o u n t r i e s . The f a c t t h a t they do business i n Mew
York and we are I n C a l i f o r n i a should not make any d i f f e r e n c e .
bm d o n ' t take second place t o anyone i n the w ^ r l d i n so f a r aa
our a b i l i t y t o handle a t r a n s a c t i o n i s concerned. 4a have personnel t h a t i s as experienced as aay and, i f necessary* I could go
i n t o d e t a i l and r e l a t e some p a r t i c u l a r instances i n t h a t conn e c t i o n . I t has been an accepted idea t h a t i f you have
f o r e i g n t r a n s a c t i o n s you would go t o &ew York t o finance tftea.
7?e d o n ' t l i k e t o see exports i n >an Francisco financed by
hew Tork l i n e s o f c r e d i t , Mi are out t o get t h a t business.




-aare doing business
t o tiie i a c i f i c area.
banks to the A t l a n t i c
some of which goes t o

w i t h the world and are not confined
Tou do not r e s t r i c t the i.ew York
basin. They ship sugar out of Manila,
Hew York and som to San Francisco.

ffe would l i k e to make plana as t o the methods by which
we would do our f o r e i g n banking business,
-hat i s the a t t i t u d e of the Board toward the organisation of a f o r e i g n
oanking corporation undsr Sec. 25 of the Federal He3erve *.et?
That i s a case where we would be the owner o f an American
c o r p o r a t i o n engaged i n f o r e i g n banking. I f the answer i s i n
the a f f i r m a t i v e , what would be the a t t i t u d e of the Board t o ward the establishment by t h a t corporation of branch o f f i c e s ?
What would be the a t t i t u d e toward making investments i n
f o r e i g n banking concerns, t h a t I s , becoming a m i n o r i t y shareholder i n a f o r e i g n bank, a hat i s the a t t i t u d e o f ths
Board toward the establishment of f o r e i g n branches. I n t h a t
connection, there seemed t o be some question i n the d i s cussions of the a p p l i c a t i o n s t h a t have been f i l e d and i n
the time t h a t has elapsed between the f i l i n g of the a p p l i cations and acvion of the Board as t o the d e s i r a b i l i t y of
branches, fee have had a l l :iorts of i n t e r e s t i n g things t o
consider, fee have been i n v i t e d by various i n t e r e s t s t o
j o i n w i t h them i n combination w i t h w i s s , I t a l i a n , Frsnoh,
B r i t i s h , and other i n t e r e s t s . »e have held them a t arms
l e n g t h because *« do not want t o s t a r t negotiations u n t i l
ws know what our p o l i c i e s can be. £e would expand our
f o r e i g n business t o the extent t h a t we f i n d i t to our advantage t o do so. 3fe are i n business to make money f o r our
stockholders and i t would be admitted a t the outset t h a t we
would go i n t o a s i t u a t i o n because we saw an o p p o r t u n i t y to
do a c o n s t r u c t i v e j o b a t a p r o f i t w i t h o u t r i s k i n g our
c a p i t a l . I f the Board of Governors concurred and i t was i n
conformity w i t h n a t i o n a l p o l i c y ws would l i k e t o f e e l t h a t we
could go ahdrever i t would be good business to go. That i s
q u i t s d i f f e r e n t from saying t h a t ws would go where we wanted
to go.
With respect to the a u d i t c o n t r o l s and r e p o r t s from ths
branches, ths branch managers havs a loan l i m i t which ranges
f o r the d i f f e r e n t branches from £500 t o $5,000. A l l other
loans are reported t o ths head o f f i c e . The f o r e i g n branches
have no loan l i m i t , however, and t h e r e f o r e a l l loans are
r e p o r t e d . Any loan t h a t exceeds t h s loan l i m i t i s submitted
before there i s a sonaibaont. The loan supervisor i s l i m i t e d
t o loans o f 150,000. The head of the department has a l i m i t
o f #75,000* Everything over t h a t amount goes t o ths l o a n
committees and anything over $400,000 goes t o ths gsnaral




-9-

finance committee. Our branches are inspected once a year
by our i n s p e c t i o n and a u d i t department. They make a
thorout^i i n s p e c t i o n from the standpoint of procedure, custody of assets, and c o n d i t i o n of a s s e t s , »e p l a n t o have
an i n s p e c t i o n of each f o r e i g n branch each year. The
Comptroller of the Currency has not examined apy of our
branches i n the Far ast and has not examined the London
Branch since 1931• I t h i n k he contemplates an examination
o f the Far astern branches t h i s y e a r .
he would l i k e to e s t a b l i s h another branch i n London
soae time i n the f i t u r e f o r the reason t h a t our branch i s
located i n the c i t y i n close proximity to the Bank o f
i j i g l a n d . Oar business i s l a r g e l y w i t h concerns t h a t do
business i n the west end. Other American banks have
branches i n the west end l a r g e l y to receive deposits and
we should have an o f f i c e there f o r the same purpose.
T r a v e l e r ' s Checks are an important p a r t o f our b u s i ness. One of the reasons f o r our being i n Germany i s the
l a r g e volume of t r a v e l e r ' s checks to be expected as the
m i l i t a r y personnel t r a v e l s around Europe. £ do not say
t h a t these checks pay t h e i r own way but the f a c t t h a t they
are be in* ; c a r r i e d a l l over the world b u i l d s up our p r e s t i g e .
You advertise the bank one way or another and our check
business has c o n t r i b u t e d s u b s t a n t i a l l y to the bank's p r e s t i g e and general w e l f a r e . The major sources of sales of
t r a v e l e r ' s checks are our branches. They are also sold by
other banks i n the VJ. 3 . and agencies outside of ban*a.
a i t h respect to the a p p l i c a t i o n f o r three branches i n
Germany, i n 19k7 Secretary * atterson wanter banking services
i n Cermany. They thought a t t h a t time they could l i c e n s e
banks to operate i n occupied areas i n the same manner as
thsy authorise f a c i l i t i e s a t army and navy establlenments
during, the war. A t t h e i r suggestion we made a formal app l i c a t i o n to open o f f i c e * i n B e r l i n , F r a n k f u r t and I t h i n k
Breuah. They went through t h e m i l i t a r y and they came back
and asked i f we had the pernlasion o f the f e d e r a l neserve
hoard. >\e then a p p l i e d t o the f e d e r a l Reserve Board. By
t h a t time, however, conditions had changed and we s p o i l e d
f o r permission to e s t s b l i s h branches i n F r a n k f u r t , jremen
and Hamburg.
fte have about £2,500, XX) of l e t t e r s of c r e d i t outstandi n g covering imports i n t o uarmargr f o r C a l i f o r n i a f i r m s , fee
t h i n k t h a t , j u s t as i n any other s i m i l a r s i t u a t i o n , tha
establishment of a branch there now, even though under the
l i m i t e d l i c e n s e of the m i l i t a r y , would put us i n there.
If
they want t o expand we would be t h e r e t o do i t . Before the




-10-

war we had a l a r g o volume o f business i n Germany and
expect t o have i t again. I f i t d o e s ^ t m a t e r i a l i s e ,
ww would cor*te hose.
There are t h i r t e e n branches o f B r i t i s h bancs i n
the B r i t i s h sons and one or more French branches i n
the / r a n c h sons. There are two or three brandies o f
the Chase Bank over t h e r a . The American xpress Company
has a number of o f f i c e s . They do business i n exchange,
f r e i g h t forwarding, and t r a v e l e r s checks.
£e do not know now what the extent o f the business
would be o r whether we would make argr money. On the
other hand, i t would not cost us very much t o have the
branches. Our mswsr t o the question of cost i s t h a t
i f i t would cost as much as *2$,000 a year f o r two or
t h r e e years, t h a t i s n o t much of a r i s k .
»e do not Know
now wJiat we want t o do i n Germany. At some p o i n t we are
going to t u r n the a d m i n i s t r a t i o n back to the Germans.
A f t e r we do t h a t i t i s going t o be too l a t e t o decide
t h a t we want r e p r e s e n t a t i v e s of American business i n t h e r e ,
p a r t i c u l a r l y i n the banking f i e l d . I t might be t h a t one
o f the f i r s t t h i n g s the Germans would do would be t o r e s t r i c t f o r e i g n banking. I f we are already i n t h e r e and
making a peace t r e a t y , they are not l i k e l y t o r e s t r i c t
f o r e i g n banking t o the e x t e n t of p u t t i n g us o u t . I thin*;
one or more A merican barks should be i n Cermatsy now w i t h
a f o o t h o l d i n case we want t o be i n t h e r e . I t would be
easy t o come hose i f we wanted to b u t i t would be hard
t o get i n t h e r e l a t e r on.
There i s no c a p i t a l requirement f o r the establishment
o f the Ceraan branch. ft a wouL.1 j u s t get a l i c e n s e t o go
i n a nd o p e r a t e . Tha amount o f our operations would depend
on our d e p o s i t s .
<a would not put any money i n a t a l l .
I n 3iam our c a p i t a l r e < j i i r e n a n t i s the equivalent of
*2,500. *e probably w i l l have t o i n v e s t i n oiar. i n o p e r a t i n g expenses something 11,ce v 1 , X)Q a month u n t i l such t i k e
as we begin t o make something o f the branch. I n M a n i l l a
before the and of the f i r s t year the bank was not only paying
i t s own way, b u t wa had recouped the o r g a n i s a t i o n expenses.
I n Japan we d i d t h a t vary q u i c k l y . London makes from 4-12,000
t o i l l i , 000 a month a f t e r paying a U5 par cent tax' t o tha
B r i t i s h Government.
On the q u e s t i o n o f how the bank would p r o t e c t i t s e l f i n
the event o f p o l i t i c a l disturbance or war, wa hava had t h a

-11axperience o f two wars which i n d i c a t e t h a t losses are s o a U .
The l i a b i l i t y to d e p o s i t o r s are i n l o c a l currency and i n
case o f occupation, the branch, i s sequestered, becomes
f r o s e n , and the invader ta*es i t over and s t a r t s t o l i q u i date i t on both sides of the l e d g e r .
oae banks s u b s t a n t i a l l y l i q u i d a t e d assets o f t h e i r branches before the war and
a f t e r the war, had d e p o s i t s t o be p a i d i n d e p r e c i a t e d c u r r e n c y . &e can not always expect t o l i q u i d a t e before a a t o m
hat i f i t does come before we are aware o f i t , the enemy
l i q u i d a t e s i t and pays o u t t o the e x t e n t they a r e a b l e t o
l i q u i d a t e the a s s e t s .
At t h i s p o i n t Messrs. Lemhits and Grossman l e f t the conference.
tfr. bsymcsak s t a t e d t h a t the representatives o f the >oard
would l i k e t o discuss the q u e s t i o n of the c a p i t a l p o s i t i o n of the Bank
o f America and the r a t i o o f i t s c a p i t a l funds t o assets.
Messrs. oral t h and ? i e r o t t i were g i v e n copias o f the a t t a c h e d
t a b l e o f r a t i o s of c a p i t a l accounts t o t o t a l assets and t o r i s k assets
and the f i g u r e s shown i n the t a b l e were discussed.
:ir. Smith s t a t e d t h a t he had had no n o t i c e t h a t t h i s matter
would be taken up during the conference, t h a t he was not prepared t o
discuss i t o f f i c i a l l y , and t h a t he c o u l d comment on i t only i n a general
sense. He a l s o s a i d t h a t he d i d n o t t h i n k the q u e s t i o n of c a p i t a l p o s i t i o n was very i m p o r t a n t from the r t a n d p o i n t o f the f o r e i g n branches because the amount of r i s k assets i n v o l v e d o r the employment o f c a r i t a l
i n connection w i t h the f o r e i g n branch operations was i n s i g n i f i c a n t .
Jr. Ssymcsak s t a t e d t h a t the question was broader than t h a t
because o f t h e increased business the bank would get i n the domestic
f i e l d as a r e s u l t o f the existence o f i t s f o r e i g n branches.
Mr. ~>mith responded t h a t the day t o day f l u c t u a t i o n s i n t h s
bank's assets were very l a r g e b u t t h a t they a f f e c t e d the c a p i t a l r a t i o s
very l i t t l e . He also s t a t e d t h a t he would l i x s t o p o i n t o u t t h a t i n
ary a n a l y s i s of t h e bank's c a p i t a l r a t i o s , account should be taken of
the very l a r g e amount o f guaranteed a s s e t s .
Mr. u i l l a r d s t a t e d t h a t the percentage r a t i o o f the bank's
c a p i t a l t o a d j u s t e d r i s k a s s s t s , ( a s s e t s remaining a l t e r deduction of
cash, dus from banks, 0 .
Government s e c u r i t i e s s t p a r , s e c u r i t i e s
of f e d e r a l c o r p o r a t i o n s not guaranteed, Federal i\aserve hank s t o c k ,
r e a l e s t a t e loans i n s u r e d under T i t l e s XL and VI of the National Housi n g A c t , and t*0 per cent o f C. I . loans guaranteed fcy t h e Veterans
A d m i n i s t r a t i o n ) would be 12.7 per cent which, so f a r as ws are able
t o determine from the p u b l i s h e d statements, compares w i t h a percentage
r a t i o o f c a p i t a l accounts t o r i s k asssts a t t h e N a t i o n a l C i t y Bank
o f 15*3 per c a n t and t h s ~hass N a t i o n a l Bank o f 19*7 p s r e s n t .




-12ir* Smith commented that there had been a steady increase
i n the bank's c a p i t a l , that i t s assets, however, had grown tremendously
a t the same time, t h a t the man- ge^ent of the bank was not unaware of
i t s c a p i t a l position and had had discussions regarding i t , but no
plans had been c r y s t a l i z e d *
:3r. Ssymetak suggested t h a t a£r. -mith discuss the whole matt e r w i t h his associates ana co s^unicate e i t h e r through Federal .eserve
:iank of oan Francisco or d i r e c t l y with the Board regarding i t *
This
suggestion was ?aade, i r * Ssymcxak said, because the c a p i t a l p o s i t i o n
of the bank and i t s r e l a t i o n to the establishment of ,ronoaed f o r e i g n
oanking operations was one of the things tho Yoard f s l t i t should take
i n t o account i n considering applications f o r tho establishment of
f o r e i g n branches*
1ir. imith inquired whether he was to understand that the Board
would be hesitant to grant the three German branches on the basis of t h e
bank's c a p i t a l .
afr. Ssymcsak responded t h a t the representatives present could
not speak f o r the ?oard but t h a t i t was not only a question r e l a t i n g to
the pending applications but to f u t u r e applications or other expansion
as w e l l so that the loard could consider the whole p i c t u r e .
i i r . Clayton commented t h a t the f a c t t h a t the opening of three
Com an branches might have an i n s i g n i f i c a n t e f f e c t on the c a p i t a l p o s i t i o n of the bank d i d not mean t h a t the ^oard would consider the question
of c a p i t a l of no importance since i t had the r e s p o n s i b i l i t y to consider
a l l of the factors applying i n the s l t u s t i o n .
J r . 6xymcsak said t h a t the more services the bank could render
i n many d i f f e r e n t places the more business i t would get and that t h i s
would be r e l a t e d to the o v e r a l l ea; l t a l position of the bank.
Mr. Clayton added t h a t the reference to the c a p i t a l r a t i o s of
other American banks was not intended to imply t h a t the Bank of America,
which does a considerable aaount of ssvings deposit business and aakes
a s u b s t a n t i a l number of r e a l estate loans, should have the same degree
of l i q u i d i t y as the National City or whase National ank which do
p r i m a r i l y a metropolitan business and make r e l a t i v e l y few mortgage loans.
& r . omith stated t h a t there was another question t h a t ho would
l i k e to lay before the ;*oard and t h a t was the a t t i t u d e of the ooard to
the possible a c q u i s i t i o n of or merger w i t h s bank i n a foreign country*
Suppose, he said, another f o r e i g n bank desired to withdraw i t s branch
from a f o r e i g n country and wanted to a s l l the business, or suppose a
bank i n a f o r e i g n country wanted to s e l l out which might mean the acquis!
t i o n also of branches of t h a t bank* what would be the a t t i t u d e of the
Board on propositions of t h a t kind?




-13jt» Clayton stated that these transactions would raise the
same questions as to c a p i t a l as had been di»cussed daring the conference.
Mr. iiialth expressed tha opinion that i t would be very helpf u l i f representatives of the bank and the Board could t a l k f r a n k l y
about the various questions raised during t h i s conference and that he
s t i l l did not Know very much about the S a r d ' s a t t i t u d e with respect
to the development of the foreign banking business. He hoped that a t
the proper time the bank would be given some indication of the Board's
attitude.
at, Ssymcsak stated that there had been ^orae indication i n
the discussion that had taxen place.
•at. Clayton stated that the establishment of the branch of
the Bank of -.merles i n ila-n had been approved because of the special
circumstances Involved and that the same facts were not applicable to
the German s i t u a t i o n .
At the conclusion of the discussion i t was understood t h a t
:/.r. omith would review with his associates the question of the c a i l t a l
position of tha bank and that he would communicate with the Board
again.




-14On the w r n i n g o f Thursday, A p r i l 14, 1949*
Smith c a l l e d
Hr« Ssymciak hiuA s t a t e d t h a t he would 11k« m o p p o r t u n i t y t o :ic<»t
again w i t h the r e p r e s e n t a t i v e s o f the Bo^rd w i t h wlion hii a s t f w U r ^ g r *
air. Szymczak advieed Mr, S a l t h t h a t the r^eabers o f the Board «nd the
s t a f f vho *rtjre a v a i l a b l e would be glad to confer w i t h h i a a t 11 o ' c l o c k
and the con foresee eony^r.ed i n the t ^ e d a l Library a t t h a t t i a e with
Ues^re. Smith, P i e r o t t i , Draper, Carpenter, Vest, and M i l l a r d present,
Mr* d n j m w k was riot i n attendance a t the beginning o f t h e conference
but c ^ m i n as noon as he r e t u r n e d froia another




Ur, & i i t h

iade s u b s t a n t i a l l y the f o l l o w i n g «tate»ent»

I appreciate your giving m another opportunity to cone
back sad t a l k a l i t t l e iaorc, After thinking over what t r a n spired at the conference yesterday, I find ay s e l f ao^evrh&t i n
a quandary &nd therms f o r t went to r * i a e another question or two*
F i r s t , I would l i k e to point out that I had a coriaiHilcation from
Ur. Carpenter, the Secretary of the Board, ?/hich s t a t e d i n p a r t i
The Board does not b e l i e v e that I t would be j u s t i f i e d i n approving these a p p l i c a t i o n s on t f c i basis o f
such i n f o r m a t i o n as i t now has* However, there are
c e r t a i n i .portant questions «hich have a r i s e n i n commot i o n with our c o n s i d e r a t i o n of the applications «ad,
before t eking f i n & l a c t i o n i n the :aatter, the Board f e e l s
t h a t i t would be d e s i r a b l e to have a discussion o f these
questions a t a meeting i n Washington betwef^n representat i v e s o f the Bo&rd and a s a i i o r o f f i c e r or o f f i c e r s o f
yos.ir bank, I f t h i s i s agreeable t o you, we suggest t h a t
you gat i n touch w i t h t h e Federal Beserve Bank of S«x
Francisco i n o r d e r t h a t a actually convenient tisic f o r
such * neeting may be arranged.
Sir. Hangals, F i r s t V i c e - P r e s i d e n t o f the Federal Reserve
Bank o f San F r a n c i s c o , fedvi^ed ae on A p r i l 6 t h a t the Bank had
advised the Board o f Governors by telegram t h a t I snd Mr.
P i e r o t t i would aeet a&th r e p r e s e n t a t i v e s o f the Board en A p r i l 13,
I asked M e t e r * , £ a r h a r t *nd Hansels i f t h e y ?ould 'give a * soaa
i n d i c a t i o n o f what the s u b j e c t a a t t « r woold be ao t h a t t could
M a g with
the r i g h t records s/.d be prepared > i t h the r i g h t
information.
ficither
o f t h e a c o u l d give ae .-sor* i n f o r m a t i o n
than was i n d i c a t e d i n Mr* C a r p e n t e r ' s l e t t e r , I came prepared
t o discuss the German s i t u a t i o n . I expected aor^ or l e s s t o be
e n l i g h t e n e d as t o t h e f u t u r e i n Govnftny—natter© o f itnowledge
t h a t a i g f r t n o t be a f e & i l & l e t o
I t appeared t o m$ as I
r e f l e c t e d on t h e conversation o f yesterday t h a t so f a r as t h e

-15-

plans o f the Bank war© concerned w i t h respect t o o p e r a t i o n s ,
procedure, and w h i t wo proposed t o do, t h e r e were no questions*
discussed those t h i n g s a t l e n g t h and since there were no
f u r t h e r questionjs, 1 can o n l y Bimtmn t h a t t h e r e i s nothing
f u r t h e r d e s i r e d i n the way o f i n f o r m a t i o n o r questions, said
t h a t we f i n d our reives i n a g v t e m i l t on questions o f p o l i c y and
procedure. Than you presented the t a b u l a t i o n of c a p i t a l
r a t i o s . There ms m sjqplanatory st&teaent, but 1 do n o t
understand vihy I coula not have been W M d abo-it t i l l s p a r t i c u l a r subject being on the agenda which was prepared i n advance*
The question I would l i k e t o ask I s whether we aro t o understand f r o a t h e discussions yesterday t h a t t h e Board, i n e f f e c t ,
i s saying t h a t i t w i l l deny t h e Bsnk o f America the a u t h o r i t y
I n the f o r e i g n bending f i e l d t h a t i s w i t h i n the powers o f the
Board t o w i t h h o l d unless the Bsnk r a i s e s i t s c a p i t a l r a t i o t o
the average o f a l l banks i n the U n i t e d S t a t e s .
Ivepresentativos o f the Board responded t h a t Ur» f a i t h ' s
assumptions ?md i n t a r p r e t a t l o a o f t h e discussions yesterday were n o t
warranted, t h a t t h e purposes o f the conference yesterday were t o get
a d d i t i o n a l i n f o r m a t i o n on the v a r i o u s p o i n t s discussed which i n f o r m t i o n would be r e p o r t e d back t o t h e Board o f Governors f o r considerat i o n and such a c t i o n i t would viish t o t a k e , t h a t the three s a b e r s
of t h e Board present yesterday were not authorised t o apeak f o r the
Board, t h a t t h e d i s c u s s i o n d i d n o t warrant the assumption t h a t the
Board .-oold agree o r disagree w i t h the p o l i c y or procedures o f t h e
Bank i n the f o r e i g n f i e l d , t h a t t h e r e was no i n t e n t i o n t o take Sir*
Ssiith by s u r p r i s e , bat t h a t the c a p i t a l p o s i t i o n o f the Bank was one
of the important considerations t o be t^ken i n t o account by the Bo&rd
i n considering t h e Bank's a p p l i c a t i o n f o r f o r e i g n branches, *nd t h a t
t h e prasts&tatian o f t h e t a b u l a t i o n o f c a p i t a l r a t i o s w«x£ n o t t o be
i n t e r p r e t e d as a request by the Boerd t h a t the Bsnk increase i t s
capital*
- I n t h e snsuing d i s c u s s i o n , Mr* oaiith s t a t e d t h a t i f t h e
Board was, i n e f f e c t , s.akin?, the Bank t o enlarge i t s c a p i t a l stock
t o the average o f ban^s i n t h e U n i t e d S t a t e s , i t would be asking t h a t
i t add rouu-hly $250 m i l l i o n t o i t e c a p i t a s t r u c t u r e which i s a l o t
o f txaney f r o a t h e standpoint o f t h e s t o c k h o l d e r s , and he -questioned
whether i t could be r a i s e d a t t h i s t i m e . He also said t h a t t h e
C o m p t r o l l e r o f t h e Currency h/vd approved the* establishment o f c e r t a i n
docseatic breaches r e c e n t l y ^nd inaaauch as the j u e s t i a n o f the
s u f f i c i e n c y of t h e Bank1 a c a p i t a l w ^ one p r i a & i l l y f o r considerat i o n by the Comptroller o f t h e Currency, i t was t o be assumed t h a t
since he r a i s e d no question on t h a t p o i n t , he was s a t i s f i e d w i t h the
Bank's c a p i t a l * He went <sa t o say t h a t i n the discussion yesterday
one o f t h e seabers o f the Board r e f e r r e d t o the establishment o f two
o r t h r e e f o r e i g n ormchQ* as a a a t t s r o f t r i f l i n g impact on the




-16c a p i t a l position, and that i t dici n o t seoia reasonable, i f t h a t wt?re
the a t t i t u d e of the Board, t h * t a request f o r a c a p i t a l increase
should he made. As st&tud y s s W r d a / i he s a i d , t h e r e were two r o u t e s
by which the Bulk of Aasrica could expand i t s f o r e i g n banking business, one was through correspondent b&ak r e l a t i a f t £ h i p & over which t h e
Board had no a u t h o r i t y , m & t h e o t h o r w^a through c h a s s i s which the
Board had power t o a u t h o r i s e , H« added t i i a t t h e choice of the Ban*
depended upon t h e ro^uirseaonts o f the Board. He made the f a r t h e r
state&ont t h a t i f he wont back t o Ids Sauk and
the question
prsscntfed trj the Board aa t o what t h e Bank was going t o do about I t s
c^piui-1 p o s i t i o n , the next question would bes Vhat ( t h a t i s , how
rauch c a p i t a l ) d i d the Board want f c r the estahlishtjant of t h e branches?
Eepresant^tives of the Board stated that the discussion
yesterday dwiraloped a gr&at d<*il of information which would m useful
to the Board i n arriving a t the decision on the three Gvrzm br-^ches,
d , i i h i l e one f o r e i g n branch n i g h t n o t be o f i portance f r o a the
standpoint o f i t s e f f e c t on th© c a p i t a l position of the Bank* i f the
nuaber o f f o r e i g n branches should grow to 2$ or 50 o r
that
nunbor tfould lave
important e f f e c t on the a&pit«l position of the
B-roik, and that on that basis, i t wna w e l l to discuss t h e aatier now*
Mr. Siaith responded that t h e question o f a l a r g e nuaaber of branches
«ould not be presented to the Bo^rd a t one time and that i t w o l d
have an opportunity t o pass on e&ch branch as application for i t s
sst&hlishtaartt was laade.
There followed the discussion o f the c a p i t a l r a t i o s shown
i n t h e tabulation presented at the conference yesterd&y *nd o f i h u i g t i
i n the c a p i t a l r a t i o s o f bsuixs i n reoeat years.
reaction t o the d i s Mr. Smith stated that hc» had the
cussion yesterday that he received whtn the Barik w?iS asaed by the
iio^rd, through the Federal Be servo Bank of
Francisco, what i t s
plans m r e f o r s t a f f i n g the branch i n Bangkok, Sifea; that he fteuld not
belisve t h a t t h e Board would be .mich concerned whether the Bank with
i t s 14,000 employees and o f f i c e r s would not have the neeessawj s k i l l
to b r i n g together m adequate s t a f f t o s t a r t the branch a t Bangkok;
arid that the r e v e s t had appeared to be nothing raore than a device
f o r " s t a l l i n g t h e t h i n g alon^.* He had the suae f e e l i n g , he said,
about trie discussion yesterday.
Mr. S a i t h was assure d t h a t t h e r e was no l n t n t i o n on t h e
p a r t o f the Board t o delay a c t i o n , and ha was asked whether hi© v o u l d
agree t h a t the c a p i t a l p o s i t i o n o f the Bank was one o f t h e f a c t o r s
t h a t t h e Board should ta&© i n t o consider;*Lion i n e x e r c i s i n g i t s r e s p o n s i b i l i t y under Section 25 o f t h e Federal Reserve A c t . H i s replywas t h a t ha was n o t sure t h a t he would agree on t h a t p o i n t and t h a t
t h e prlne c o n s i d e r a t i o n was whether t h e branch would serve American
business abroad. Re also s a i d t h a t t h a Comptroller o f the Currency




-17-

concarned himself w i t h the c a p i t a l s t r u c t u r e of n a t i o n a l banks and t h a t
h i s a c t i o n i n g r a n t l n £ establishment of domestic branches had p u t h i s
approval on the c o i t a l p o s i t i o n o f the bank. Representatives of the
Board made i t c l e a r t h a t the Board thought i t should consider t h e c a p i t a l
p o s i t i o n of the bank i n a c t i n g upon a p p l i c a t i o n s f o r permission t o
e s t a b l i s h f o r e i g n branches.
A t t h i s p o i n t ?ir. Ssymczak j o i n e d the conference and upon bein^
informed of the d i s c u s s i o n t h a t had taken place expressed agreement w i t h
the statements made by the o t h e r r e p r e s e n t a t i v e s o f the Board. He added
t h a t t h e Board was not t r y i n g t o delay t h e establishment of branches by
the Bank o f America o r anyone e l s e , t h a t the a p p l i c a t i o n f o r the e s t a b l i s h ment o f a branch i n 3iam r a i s e d the question o f the o v e r - a l l p o s i t i o n of
the bank i n f o r e i g n f i e l d s , and t h a t i t was decided t o take a c t i o n on the
branch o f Slam because o f the s p e c i a l s i t u a t i o n t h e r e , and t o o b t a i n
f u r t h e r i n f o r m a t i o n w i t h respect t o the t h r e e German branches. He made
the f u r t h e r statement t h a t what the p o s i t i o n o f the iJoard would be on these
branches the r e p r e s e n t a t i v e s present c o u l d not say, t h a t the i n f o r m a t i o n obt a i n e d i n these conferences would be presented t c t h e Board a f t e r which i t
would decide the a c t i o n t o be taken, and t h a t i f tha Board should decide
not t o approve the a p p l i c a t i o n s i t would have t o s t a t e the reasons f o r the
decision.
The i n f o r m a t i o n given i n the d i s c u s s i o n yesterday, he s a i d ,
would h e l p t o c l e a r up c e r t a i n questions and enable the Board t o know what
the bank was t h i n k i n g as t o the f u t u r e .
Or. amith s t a t e d t h a t he had f e l t t h a t he would be l e s s than
honest I f he had n o t come back and given tha r e p r e s e n t a t i v e s of t h e Board
h i s r e a c t i o n t o the d i s c u s s i o n yesterday. He also s a i d t h a t the bank kept
t h e Comptroller o f the Currency advised and t h a t he had consented t o a
stock d i v i d e n d o f 20 per c e n t , which hai as i t s purpose a r e d u c t i o n i n t h e
market p r i c e o f t h e s t o c k . I n f i l i n g the a p p l i c a t i o n f o r permission t o
d e c l a r e the stocx d i v i d e n d , ha s a i d , t h e bank i n d i c a t e d t h a t t h a t was a
f i r s t s t e p . I t waa contemplated t h a t soma a d d i t i o n a l stock would be i ssuad,
depending upon c o n d i t i o n s i n t h e market, the k i n d of arrangement t h a t c o u l d
be made, and the judgment o f t h e banx as t o t i m i n g . He added t h a t developments up t o t h i s p o i n t could not be c a l l e d a plan f o r the issuance o f a d d i t i o n a l stock as t h e r e was o n l y an i n t e n t i o n t o do so, which as y e t had
not gone beyond t h e p r e l i m i n a r y stages o f d i s c u s s i o n .
afr. Ssymcsak asked ifir. m i t h i f ha had bean i n touch w i t h o t h e r
o f f i c e r s o f t h e bunk since t h e conference w i t h r e p r e s e n t a t i v e s o f t h e
Board yesterday and he responded t h a t he had*and t h a t , w h i l e t h e r e had
been d i s c u s s i o n o f t h e problem o f a d d i t i o n a l c a p i t a l f o r the bank, t h e
above statement was as much as anyone could say a t t h i s time about the plans
o f the bank f o r an increased c a o i t a l and t h a t no one knew how much stock
would be i s s u e d , when i t would be i s s u e d , or a t what p r i c e .
r e f e r e n c e was made again t o the q u e s t i o n whether the Board
should t a k e the c a p i t a l p o s i t i o n o f a bank i n t o account I n c o n s i d e r i n g
an a p p l i c a t i o n f o r establishment o f f o r e i g n branches and l a s e r s . Smith




-18-

sad P i e r o t t i r e i t e r a t e d t h e i r p o s i t i o n t h a t the p r i a a r y c o n s i d e r a t i o n
i n t h a t connection was whethsr t h e branch would serve A a c r i c y i b u s i ness and t h a t the r e s p o n s i b i l i t y f o r en adequate c a p i t a l s t r u c t u r e
o f a n a t i o n a l bank rested i t h the C o a p t r o l l e r o f the Currency rather
than w i t h t h e Board, Mr. Sayac&ak responded t h a t w h i l e the Comptroller
o f t h e Currency had p r i a a r y r e i j p o n s i h i l i t y thw Board had r e s p o n s i b i l i t y
'lso.
Mr. Ssaith s t a t e d t h a t aside from i t s s p e c i a l powers i n the
f o r e i g n f i e l d , the Board d i d not have a u t h o r i t y over the c a p i t a l o f
n a t i o n a l banks. He repeated t h a t he wanted t o know whether t h e r e was
aagr i m p l i c a t i o n i n t h e d i s c u s s i o n t h a t t h e 3o<;rd was going t o w i t h h o l d
approval o f t h e German branches unless the Bank o f America increased
i t s capites! t o the avor&ge f o r the United S t a t e s . Mr. Ssyaeauak r e p l i e d
t h a t t h e Board had n o t s t a t e d what i t s p o s i t i o n ^ould be on t h a t p o i n t ,
whereupon Mr. S a i t h s t a t e d t h a t i f t h a t roquirwaent was t o be lade, he
was sure the bank would ta&e the route o f developing i t s batik c o r r e s pondent r e l a t i o n s h i p s r a t h e r than t o e s t a b l i s h branches.
M r . SsLymcsak r e f e r r e d t o the eoanent
by Mr. Siaitjh yest e r d a y t h a t the bank would be prepared t o go i n t o any f o r e i g n c o u n t r y
where i t would be i n t h e i n t e r e s t o f the bank t o do so and s t a t e d t h a t
t h a t approach r a i s e d the o v e r - a l l question o f what the p o l i c y o f the
Board should be.
Mr. Szyacsak i n q u i r e d i f Mr. S a i t h had discussed the c a p i t a l
p o s i t i o n o f the bank w i t h t h e Comptroller o f the Currency K h i l e he was
i n Washington, and Mr. S&Lth r e p l i e d t h a t he had. i n response t o an
i n q u i r y from Mr. Ssymcxak as t o whether t h e Comptroller o f the Currency
thought t h a t t h e bank should do something about i t s c a p i t a l p o s i t i o n ,
Mr. S a i t h s a i d t h a t he would not say t h a t t h a t was the ease.
Mr. Smith asked whether he was t o understand froia the d i s cussion t h a t t h e r e was no i m p l i c a t i o n one way o r the o t h e r as t o
whether t h e Board would have a n q i i l r i m t f o r i n c r e a s i n g c a p i t a l i n
connection w i t h t h e establishment o f t h e t h r e e German branches, and
Mr. Sr.yjaeaak responded t h a t t h a t understanding was c o r r e c t , t h a t what
the r e p r e s e n t a t i v e s o f t h e Board would do would be t o ' c o n v e y the i n f o r a c t i o n t h a t they had been givtsa i n the discussions t o the Board and
t h e Board would reach i t s d e c i s i o n i n t h e m a t t e r .
Mr» S a i t h then s t a t e d t h a t he would leave w i t h the under*standing t h a t since he had given i n f o r m a t i o n w i t h re. ape c t t o the
p r e s e t s t a t u s o f t h e Bank's plans f o r i n c r e a s i n g i t s c a p i t a l and
there was n o t h i n g »:ior,ri t h a t could be &aid on t h a t m a t t e r a t t h i s
t i s i » , he was n o t e^cpeeted t o convey t o h i s associates the impression
t h a t the Board would r e q u i r e a d d i t i o n a l c a p i t a l as a c o n d i t i o n precedent
t o the approval o f t h e Gera&n a p p l i c a t i o n s , t h a t the next step was t o
be taken by the Board, and t h a t the Board was t o decide whether i t




-19would or would not approve the three German branches or would approve
th^a only UTjcii c e r t a i n conditions.
The representatives of the Bo^rd stated t i i a t Mr. f a i t h ' s
under standing of the 'aatter was c o r r e c t .