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( COPY ) X-4489 36 USE 0? WORDS "FEDERAL" AND "RESERVE" BY BANKS. CORPORATIONS. ETC.. OTHER JHA3T FEDERAL RESERVE BANKS. The following i s a b r i e f statement of the circoms tances of each case wnich has been called to the a t t e n t i o n of the Federal Reserve Board in which the word " f e d e r a l " , the word "Reserve", or a combination of the two has been used as p a r t of the name of a bank, corporation, or firm other than a Federal reserve bank or in the advertising of such a bank, corporation or firm or where such use of these words has been attempted, FEDERAL BANK AND TRUST COMPANY. Under dates of September 4 and October 4, 1915, r e s p e c t i v e l y , the Board received complaints from the presidents of two d i f f e r e n t banks in San Antonio, Texas, complaining of the f a c t that an advertisement was being published in l o c a l papers to the e f f e c t that a bank was being organized for the purpoee of engaging in the general banking and t r u s t business under the name of "Federal Bank and Trust Company" • One of the l e t t e r s s t a t e d that although no o f f i c i a l action had been taken by the l o c a l clearing house a u t h o r i t i e s , i t was the impression of the w r i t e r from conversations with the various members of the Clearing House Association that they f e l t very strongly that such use of -the word "Federal" would be misleading to the public and t h a t many of the p u b l i c would believe that such bank was connected with the Fede r a l Reserve Banks. FEDERAL RESERVE ASSOCIATION. The j^oard received a l e t t e r from a national bank in Pennsylvania, dated ^ovemoer 22, 1915, c a l l i n g a t t e n t i o n to the use by a l i f e i n surance company of the name "Federal Reserve Association". The Board r e f e r r e d t h i s matter to the Postmaster General as a probable v i o l a t i o n of the p o s t a l laws, but i t i s not advised as to what action was taken by the Post Office Department* Under date of September 25, 1919, t h i s case was again called to the a t t e n t i o n of the Board by Mr, R. L, Austin, Federal Reserve Agent a t the Federal Reserve Bank of Philadelphia* Mr. Austin enclosed in h i s l e t t e r a l e t t e r received from a member bank in Wilkes Barre, Pennsylvania, s t a t i n g t h a t the Federal Reserve Association was incorporated under the laws of Delaware on September 6, 1914, as a f r a t e r n a l order with no specified c a p i t a l stock, that i t was sol i c i t i n g insurance on the survivorship payment plan, but that no s t a t e ment of i t s a s s e t s or l i a b i l i t i e s could be obtained. FEDERAL STATE BANK. Under date of February 11, 1916, Mr. John H. Rich, Federal Reserve Agent a t the Federal Reserve Bank of Minneapolis, advised the Board that a p a r t y of men who were organizing a State bank in Minneapolis had inquired of him whether there was any objection to t h e i r - 2 - X-4489 ryy using the t i t l e "Federal State Bank11 • In reply, the Board stated that while i t knew of no s t a t u t e prohibiting the use of the word "Federal11 "by national or s t a t e banks, i t was considering the d e s i r a b i l i t y of asking Congress to enact a provision prohibiting such use of the word "Federal", and suggested t h a t in view of this s i t u a t i o n the p a r t i e s in question probably would ntit desire to Select that name f o r t h e i r proposed bank. RESERVE TRADING COMPANY. Under date of August 4, 1916, the l a t e Honorable M. T. Helgesen, Congressman from North Dakota, transmitted to the Secretary of the Treasury a l e t t e r from the Cashier of a s t a t e bank in North Dakota, comp l a i n i n g of the use of the name "Reserve Trading Company11 by a company giving i t s address as "739 Reserve Bank Building, Kansas City, Missouri". Congressman Helgesen s t a t e d t h a t , " I t occurs to me that the point made by Mr. - - - i s well taken and that if a way i s open to you to put a stop to t h i s form of misrepresentation and fraudulent a d v e r t i s i n g , i t should be taken forthwith." The Secretary of the Treasury r e f e r r e d t h i s l e t t e r to the Federal Reserve Board, and the Board called ^ r . Helgesen 1 s a t t e n t i o n to the f a c t that a b i l l to p r o h i b i t such use of the words "Federal" and "Reserve" was then pending in the House of Representatives. The -board a l s o called t h i s matter to the a t t e n t i o n of the Governor of the Federal Reserve Bank of Kansas City, who advised the Board that the building of the Federal Reserve Bank of Kansas City was not called the Federal Reserve Bank Building" but that there was an o f f i c e building in the c i t y called "The Reserve Bank Building" which was so named from the f a c t t h a t the National Reserve Bank of Kansas City once occupied i t . He s t a t e d that he was unable to obtain any information about the company in question and suggested t h a t there should be a law preventing a l l concerns, as well as banks, from using the words "^ederal" and "Reserve", except with the approval of the Federal Reserve Board. The Board also called t h i s matter to the a t t e n t i o n of the Postmaster General who r e p l i e d that i t would be given consideration in "connection with a similar comp l a i n t a l l e g i n g the use of the mails for fraudulent purposes by the above named concern now under investigation by t h i s s e r v i c e . " FEDERAL RESERVE STATE BANK. Under date of June 29, 1917, Mr. Charles M. Sawyer, then Federal Reserve Agent -at the Federal Reserve Bank of Kansas City, advised the Board that he had received an inquiry from the State Bank Commissioner of Kansas as to whether or not there was any objection to State banks which become members of the Federal Reserve System using the words "Federal Reserve" as p a r t of t h e i r names. I t appeared t h a t a State bank had applied f o r an amendment to i t s charter changing i t s t i t l e to "Federal Reserve State Bank". The Board replied t h a t while there was no s p e c i f i c law p r o h i b i t i n g the use of those words, i t was of the opinion t h a t t h e i r use by State and national banks should be discouraged. -3- X-4489 FEDERAL-AIvERICAN SAVINGS SAME. Under date of July IS, 1917, Mr. A. Heath, Federal Reserve Agent at the Federal Reserve Bank of Chicago, advised the Board that the German-Anerican Savings -Bank of Port Huron, Michigan* which was about to a PP^y for membership in the Federal Reserve System, was contemplating changing i t s name to the ,! Federal-American Savings Bank". The Board r e plied that i t was decidedly against i t s policy to encourage the use of the word ^Federal" as p a r t of the t i t l e of member "banks. FEDERAL CATTLE LOAN SOCIETY. Under date of November 7^ 19l9, the Governor of the Federal Reserve Bank of Kansas City, transmitted to the Board a copy of a l e t t e r r e ceived from a State bank in Kansas inquiring whether paper offered by the Federal Cattle Loan Society11 of Des Moines, Iowa, was accepted and approved by the Federal Reserve Board. The writer explained that i t was the desire of his bank to have i t s s e c u r i t i e s at a l l times such as are acceptable under the Federal Reserve Act, from which i t appears that the name "Federal Cattle Loan Society" caused him to think that probably that society was in some way connected with the Federal Reserve System, The Board also received a l e t t e r from a member State bank in Des Moines, Iowa, s t a t i n g that some of their citizens were organizing a "Federal Cattle Loan Society" and inquiring whether there was any law against such use of the word "Federal". The Board replied that, although i t had always been very much against i t s policy to encourage the use of the word "Federal" in the t i t l e of any banking corporation, i t was not advised of any law prohibiting i t s use for that purpose. FEDERAL RESERVE LIFE INSURANCE COMPANY. Under date of October 15, 1919, the G o v e r n o r of the Federal Reserve Bank of Kansas City transmitted to the Board a clipping from the Kansas City Times of October 14, 1919, announcing the organization of the "Federal Reserve Life Insurance Company" in Kansas, Governor Miller stated that the organizers of t h i s company were o f f i c e r s and directors of s t a t e banks in Kansas none of which had joined the Federal Reserve System, and inquired whether there was not some way to prevent promoters from using the t i t l e "federal Reserve", even for a l i f e insurance company. The Board transmitted a copy of t h i s l e t t e r to the Chairman of the Banking and Currency Committee of the House. FIRST FEDERAL BANK OF WILLIAMSON. Under date of March 24, 1920, Mr. Caldwell Hardy, Federal Reserve Agent a t the Federal Reserve Bank of Richmond, called the Board's a t tention to the fact that a s t a t e ba$k in Williamson, West Virginia, was contemplating changing i t s name to F i r s t Federal Bank of Williamson", -4- X-4489 39 ana applying for membership in the Federal Reserve System* Mr. Hardy inquired whether there was any law prohibiting the use of the word "Federal11 • The Board replied that, while i t was not aware of any statute of the United States prohibiting the use of the word "Federal" in the corporate t i t l e of any State institution, i t had consistently tried to discourage the use of that word in such a manner and on several occasions had recommended to Congress the enactment of a law prohibiting a State corporation from including the word 11 Federal" in i t s t i t l e , but that Congress had not taken any action in the matter. FEBE10VL RESERVE SECURITIES COMPANY. Under date of August 10, 1920, ^r. Charles B. Powell, Counsel for the Federal Reserve Bank of Chicago, advised the Board that the o f f i c i a l s of the Federal reserve bank had recently called to his attention the fact that a corporation was about to be organized under the laws of Illinois to be called 11 ederal Reserve Securities Company", and had requested him to take steps, if possible, to prevent the adoption of that name by the proposed corporation# Mr. Powell stated that he had taken the matter up with the attorneys who were organizing the proposed corporation and that they had agreed not to use the words "federal Reserve" as part of the t i t l e of this corporation. He suggested, however, that legislation ought to be obtained from Congress prohibiting such use of those words, just as the use of the word "national" i s prohibited by ^ection 5243 of the Revised Statutes. FEDERAL RESERVE CORPORATION. One of the most flagrant attempts to use the words "Federal Reserve" in an improper manner was made by the organizers of a proposed corporation intended to compete with the Federal reserve banks* It was f i r s t called to the attention of the Board Mr. L. C. Adelson, Deputy Governor of the Federal Reserve Bank of Atlanta, under date of May 3L£? 1920, who stated that he had been approached by one C. D. Altman who said that he was organizing a corporation along Federal reserve bank lines with the t i t l e 'Federal Reserve Corporation", to rediscount real estate paper for,banks? His purpose was to interest Mr. Adelson in taking some of the stock of the proposed corporation, to get him to serve as a director, and to ascertain i f i t would be possible for directors of the Federal Reserve Bank of Atlanta to serve as directors of the proposed corporation. Mr. Adelson declined the invitation to purchase stock and accept a directorship in the proposed corporation, and tried to persuade A^r. Altman not to use the t i t l e "Federal Reserve Corporation" on the ground that i t would cause such corporation to be confused with the Federal reserve bank. In a few days Mr. Adelson1 s fear that the use of this or a similar t i t l e would cause confusion was substantiated by the fact that the Post Office Department returned to the Federal Reserve Bank of -Atlanta a letter sent out by Mr* Altman, under the name "Federal Trust Company". Under date of June 1, 1920, Governor Harding received a letter -5- X-4489 3() from Mr. Altaian written on plain stationery, in which, without referring in any way to the name of the proposed, corporation, Mr. Aitman stated that he was organizing a ""bankers' hank" to provide for the banks comprising i t s membership a service similar in many respects to that of the Federal- Reserve System but operated in a s t r i c t l y private capacity, that many of the banks feared that membership in such a corporation would interfere with their membership in the Federal Reserve System, and that in order to offset this feeling he would greatly appreciate a line from Governor Harding endorsing the idea, i f properly carried out, and stating that membership with the proposed corporation would not interfere with membership in the Federal Reserve System. Governor Harding replied that 'Hate banks which are members of the Federal Reserve System are permitted under the provisions of Section 9 of the Federal Reserve Act, subject to other provisions of the Act and of the regulations of the Board pursuant thereto, to retain their f u l l charter and statutory rights and may continue to exorcise a l l corporate powers granted them by the States in which they were created, and, therefore, i f the law authorizes a State member bank to hold stock in another corporation this right is not impaired by reason of i t s membership in the Federal Reserve System. Governor Harding called attention to the fact, however, that the National Bank Act forbids national banks to purchase stock in corporations other than federal reserve banks, except that they may purchase stock held as collateral to loans previously made in good faith, in which case they are required to dispose of such stock within a reasonable time-. The Board next received a letter from Ar. Frederic H. Curtiss, Federal Reserve Agent at the Federal Reserve Bank of Boston, enclosing • a circular which Aitman was sending to banks and clearing houses sol i c i t i n g subscriptions to stock of the Federal Reserve Corporation. This circular stated that the Federal Reserve Corporation was being organized for the purpose of rediscounting paper which Federal reserve banks could not rediscount; that i t would not serve individuals but only banks, and that i t s "underlying purpose i s to afford member banks relief for long and short-time paper along the samo lines as those embodied in the FEDERAL RESERVE ACT for early maturing paper only." This circular contained a paragraph headed, "Advantages over Federal Reserve System", in which i t was argued that membership in the proposed corporation was better than membership in the Federal Reserve System. It also contained a paragraph quoting a part of Governor Harding's letter to Aitman to the effect that i f State member banks are authorized by law to hold stock in other corporations, this right i s not impaired by reason of their membership in the Federal Reserve System, which paragraph was so worded as to give the impression that Governor Harding intended to encourage banks which are members of the Federal Reserve System to become members of the "Federal Reserve Corporation". The Board referred this matter to the Attorney General, who in turn referred i t to the District Attorney at Atlanta, who, through negotiations -6- X-4489 with the attorneys for the proposed federal Reserve Corporation, f i n a l l y succeeded in preventing the use of that name "by such corporation. FEDERAL RESERVE PRODUCING- CO!fl>M . Between January 17, and September 16, 1920, the Board received several complaints from the Federal Reserve Bank of Kansas City about the use of the words "Federal Reserve" "by an alleged 11 fake" o i l company, ^his company was using in i t s advertising a trade mark or symbol in the shape of a shield resembling the shield of the United States "bearing the words "Federal Reserve Producing Company". The Board called this matter to the attention of the Chairman of the Committee on Banking and Currency of the Senate with the suggestion that legislation prohibiting such use of the words "Federal Reserve" was "badly needed. It also referred the matter to the Attorney General for such action as he deemed advisable; but i s not advised as to what action, i f any, was taken by the Attorney General. FEDERAL RESERVE CHATTEL MORTGAGE. In March, 1921, the Board's attention was called to a form of chattel mortgage prepared by a printing and stationery company which bore the legend "Federal Reserve Chattel Mortgage". The Board promptly expressed i t s disapproval of the use of any phrase containing the words "federal Reserve" to designate a document of this character for the reason that i t might be taken as signifying that paper secured by an instrument in this form i s entitled to special privileges under the provisions of the,Federal Reserve Act. Subsequently, the Board was advised by the printing company that the form was substantially identical with a form which had been prepared previously and circulated by a Federal reserve bank. The Board replied to the company, however, that the mere fact that this form or a similar form had been approved and distributed by a Federal reserve bank would not eliminate the Board's objection to the use of the words "Federal Reserve" to designate i t , and the Board repeated i t s request that such words be not used in designating the form. FEDERAL SAVINGS BAM AND TRUST COMPANY. Under date of March 22, 1921, the promoters of a State bank in Wilkes Barre, Pennsylvania, advised Honorable J. Fowler, Deputy Comptroller of the Currency, that they were contemplating adopting the t i t l e , "Federal Savings Bank and Trust Company", that they had been informed by the Secretary of the Commonwealth of Pennsylvania that there was no objection to this t i t l e , but that before making a final decision in the matter they wished to be advised whether the Comptroller's o f f i c e would raise any objection. This letter was referred to the Federal Reserve Board, which advised the promoters that, while there was no statute of the United States prohibiting the use of the word "Federal" in the corporate t i t l e of any State banking institution, the Board did not look with favor upon the use of that word in such connection. In -7- X-4489 d e f e r e n c e t o t h e B o a r d ' s o b j e c t i o n , the promoters abandoned the i d e a of u s i n g such name. FEDERAL STATE BASK. Under date of April 28, 1922, a national bank in Idaho complained to the Comptroller of the Currency that there was a State banking institution in i t s city doing business under the name "Federal State Bank", and that i t considered such nanie to be deceptive to the public. The national bank said that when i t s customers came in to liquidate or renew notes which i t had rediscounted with the Federal Reserve Bank and i t advised them that i t would take 2 or 3 days to get the notes returned they sometimes inquired why i t took so long to get the notes, "as the Federal Bank i s right here in our city". The national bank further said that when i t explained to i t s customers that the Federal State Bank was in no way connected with the Federal Reserve System they were somewhat surprised and stated that most people of the community were of the same opinion as they. This matter was referred to the Federal Reserve Board, and the Board suggested that if the national bank which f i l e d the complaint should call the matter to the attention of the Idaho Banking authorities, they might take steps to induce the Federal State Bank to change i t s corporate t i t l e . The Board also explained that while i t appreciated the fact that the use of the word "Federal" by a State banking i n s t i tution in i t s corporate name i s undesirable and that i t s policy had been to discourage such use of this word, there was no Federal statute prohibiting the use of the word "Federal" in the corporate t i t l e of any State institution. FEDERAL RESERVE LOAN COMPANY. The case about which there has been the most complaint i s that of the Federal Reserve Loan Company, which appeared to be an unincorporated association operating under a declaration of trust and engaged in a form of real estate loan business similar in some respects to the business customarily transacted by building and loan associations. Circulars issued by this company indicated that i t s o l i c i t s deposits purporting, to entitle depositors to loans on real estate at some later date* This scheme seemed to be somewhat widespread, as the Board1 s attention has been called to companies operating under this name in k i t t l e ^ock, Arkansas, and also in various different points in Florida. The Board1 s attention was f i r s t called to the Federal Reserve Loan Company of Little Rock, Arkansas, by the Federal Reserve Bank of St. Louis, under date of December 7, 1921. The Board suggested that the Federal Reserve Bank of St# Louis call the attention of the Federal Reserve &oan Company to the impropriety of i t s using the words "Federal -8- X-4489 4> fy Reserve" as part of i t s t i t l e and inform i t that i f i t persisted in i t s plan the Federal reserve "bank would publish a statement giving the public notice that the Federal Reserve Loan Company i s not connected in any way with the Federal reserve batik. The department of Justice has also received an anonymous letter about the Federal Reserve Loan Company of LittleXBock, Arkansas, the writer of which states that there were the names of two men connected with that company who certainly should not handle funds for the public and that he considered the company unworthy of the name "Federal Reserve", as i t i s no doubt used to mislead. Under date of June 1, 1922, Honorable Lew Wallace, Jr., director of the United States Government Savings S y s t e m , advised the Board that he had received a letter from the editor of a newspaper in Ocala, Florida, referring to a company engaged in business under the name "Federal Reserve Loan Company of Ocala, Florida", as a "swindling firm", maintaining that i t had no reliable standing, and questioning i t s right to use the words "Federal Reserve." The Federal Reserve Bank of Atlanta received and transmitted to the Board several complaints about the Fedpral Reserve Loan Company of Gainesville, Florida, which appeared to be operating not only in Gainesville, Florida, but also in other places in Florida. The Federal Reserve Bank of -"-tlanta also received a letter written on the stationery of a business firm in West Palm Beach, Florida, stating that the Federal Reserve Loan Company of Gainesville, Florida, was advertising that i t would grant loans at 3% and that the writer was informed that such company was stating that i t was a branch of the Federal Reserve System. The writer then inquired as to the connection of that company with the Federal Reserve System and as to whether he could make .arrangements for real estate loans along the same lines. Another complaint was received from a member of a firm of real estate brokers in Gainesville, Florida, who was of the opinion that the t i t l e of- the company was misleading and evidently was used for the purpose of conveying the impression that the company was in some way connected with the Federal reserve banks, and a similar complaint was received from a national bank in Gainesville, Florida. At the suggestion of the Federal Reserve Board, Mr. Joseph A. McCord, Federal Reserve Agent at the Federal Reserve Bank of Atlanta, addressed a letter to Mr. B. D. Hiers, President of the Federal Reserve Loan Company of Gainesville, Florida, advising him that i t was the opinion of quite a number of citizens of Florida that the circular i s sued by the Federal Reserve Loan Company would lead people to believe that i t was operating under a Federal charter and i s under Federal Governmental control or that i t was operating under the control of the federal Reserve Board or the Federal Reserve Bank of Atlanta, and re- < questing that he change the name of his company so as not in any way X-4489 to lead p e o p l e to "believe t h a t it i s under F e d e r a l control or the control of the Federal Reserve Bank of Atlanta* In reply Mr, Hiers expressed regret that the Federal Reserve ^arik of Atlanta should object to the name of his company and stated that they certainly had no thought of any infringement nor did i t occur to them that the use of the name would be in any way misleading. He then suggested that i t would be expensive for them to change the name of their company and that they did not feel that they ought to be called upon to do so, "unless i t appears to be our plain duty under the law to do so." He concluded by promising that "in the event i t can be shown that we are viola ting any Federal rule or law or coming close enough to make i t reasonably doubtful whether or not we are doing so, we will take whatever action may be necessary to meet the requirements of the law." Mr. McCord states that he is informed that Mr. Hiers stands well in his community; but, in view of the obvious misleading character of the name adopted by the Federal Reserve Loan Company, i t was hard to believe that the Company acted innocently and in good faith in selecting such a name, or that i t sincerely desired to act in harmony with the wishes of the Federal Reserve Bo&rd and the Federal reserve bank, especially in view of the fact that i t apparently intended to continue to do business under that name in the absence of a Federal statute forbidding i t to do so. Mr. McCord also called this matter to the attention of the Comptroller of the State of Florida, who replied that he would have stopped this company from doing business in Florida, but that there i s no law in that ^tate which affords protection against such concerns. The Board then referred this matter to the Attorney General who through the local United States Attorney finally succeeded in arranging with the officers of the company to change the t i t l e of the Federal Reserve Loon Company. FEDERAL RESERVE HOME BUILDERS ASSOCIATION. On September 25, 1922, the Department of Justice advised the Federal Reserve Board that i t had received an inquiry as to whether the , words "Federal Reserve" in connection with the name of a home building association to be called "The Federal Reserve Ho^e Builders Association of New York" contravened any provision of the Federal statutes. The Department of Justice was -advised that there was no statute prohibiting the use of these words but that there was a b i l l then pending in Congress which would have this effect, i f passed. It was also stated that the Board has consistently taken the position that the use of these words in the t i t l e of any corporation, other than a Federal reserve bank, is fraudulent and unfair and that such a practice should be prevented i f possible. FEDERAL RESERVE ASSOCIATION. Under date of April 23, 1923, the Federal reserve agent of the Federal Reserve Bank of Philadelphia called the/at ten ti on of the Board -10- X-4489 85 to the name of a certain corporation in Wilkes-Barre, Pennsylvania, whose t i t l e was "Federal Reserve Association". This company was also using a letterhead hearing a cut of the United States Treasury Building. This matter was referred by the F e d e r a l Beserve Board to the Attorney General and also to the Federal Trade Commission. A reply received from the Federal Trade Commission stated that i t had no jurisdiction in the case because the corporation in question was engaged in l i f e insurance business, RESERVE DEPOSIT COMPANY. One of the federal reserve examiners early in September, 1923, called the attention of the Board to a certain advertisement appearing in a South Carolina newspaper. This advertisement which was signed by the "Reserve Deposit Company" of Cincinnati, Ohio, stated that this company made loans at six per cent on city or farm property under the Federal Reserve System. This advertisement which i s , of course, most unfair and misleading, was called to the attention of the Federal reserve agent of the federal Reserve Bank of Cleveland with the request that he endeavor tactfully to have this company change i t s name and discontinue the use of su.ch improper advertisement. ADVERT IS35MENTS OF SHOSHONI STATE BANK. Under date of July 13, 1923, the Federal Reserve Agent of the Federal Reserve Bank of Kansas City addressed a letter to the Board stating that the Shoshoni State Bank of Shoshoni, Wyoming, a nonmember bank, was making use of checks bearing the phrase "Federal Reserve Bank Protection" . In reply to this letter the Federal Reserve Agent was requested to communicate with this bank in an attempt to have the use of this phrase on i t s checks discontinued. The attempt was made but no reply was received by the Federal Reserve Agent although he twice wrote to the Shoshoni State Bank in this regard. On September 18 this matter was referred to the Attorney General and the Federal Trade Commission by the Federal Reserve Board. The Federal Trade Commission has advised the Board that i t has no jurisdiction in any case involving banks. The Attorney General advised the Board that he had succeeded in obtaining a statement from the bank that the imprbper phraseology would be omitted from the next supply of blank checks purchased by i t . The Board at a later date was advised that this same bank had distributed calendars on which were printed "Federal Reserve Bank Protection". This matter the Board also called to the attention of the Attorney General and he advised the B0ard that the District Attorney at Cheyenne had been instructed to notify the bank to discontinue the use of any advertising matter containing the words "Federal Reserve Bank Protection". FEDERAL RESERVE BUILDING AND LPAIT ASSOCIATION. On October 9, 1923, the attention of the Board was called to the fact that a corporation located in Philadelphia, Pennsylvania, was operating under the t i t l e "The Federal Reserve Building and Loan Association". The Board advised i t s informant that i t had always taken -ll- X-4489 86 the position that the use of the words "Federal Reserve" "by any corporations other than a Federal reserve bank was misleading to the public and unfair to the Federal reserve hanks and member hanks of the Federal Reserve System and that every effort should he made to prevent such improper practices by private corporations. The Board stated, however, that there was no Federal statute prohibiting the use of these words as part of the name of a private corporation. The Board also requested the federal Reserve Agent at Philadelphia to take this matter up with the federal Reserve Building and Loan Association and endeavor to obtain a change in the t i t l e of that corporation. After some correspondence with the corporation i t s officers stated that they were willing to adopt the name "Federal Building and Loan Association" i f this were agreeable to the Board, •'•he Board agreed to this suggestion, but i t was found that there already existed in the State of Pennsylvania a Federal Building and Loan Association and also a Reserve Building and Loan Association, tht*s making i t impossible for the Federal Reserve Building and Loan Association to adopt either of these names. Ag i t was impossible for the Federal Reserve Building and Loan Association to adopt either the name "Federal Building and Loan Association" or "Reserve Building and Loan Association" and as this association had been in operation for a number of years before the fact was known to the Board i t was decided not to ins i s t upon a change in i t s name, but the Federal Reserve Agent at Philadelphia was requested to advertise in the Philadelphia papers that the Federal Reserve Building and Loan Association had no connection with the Federal Reserve Bank of Philadelphia or the Federal Reserve System and this was done. FEDERAL SAYINGS AMD LOAU ASSOCIATION. On January 24, 1924, a corporation inquired of the Comptroller of the Currency whether there would be any objection to organizing a savings and loan association in the State of Washington under the name "Federal Savings and Loan Association" and whether there was any Federal legislation which would prohibit the use of such name. This inquiry was referred to the Board and i t advised the corporation that there were no statutes prohibiting the use of the word "Federal" by private corporations but that the Federal Reserve Board seriously objected to i t s use because of the misleading effect and the unfair competition involved therein* THE FEDERAL COMMERCE TRUST COMPANY. 4 The Federal Reserve Agent of the Federal Reserve Bank of St. Louis, on January 28, 1924, advised the Board that a trust company had been organized in Missouri under the t i t l e of "The Federal Commerce Trust Company." The Board addressed a letter to Mr. Lonsdale, the organizer of this trust company, stating that i t f e l t strongly that the use of the word "Federal" in the t i t l e s of State banks was likely to prove misleading to the public and that i t had always discouraged this practice in every possible way. The Board also stated that a b i l l was then pending in Congress to prohibit the use of the words "Federal", "Reserve" -12- X-4489 37 or "United States11 or any combination of them in the t i t l e s of any hanks or similar corporations except corporations chartered "by the federal government and the Board requested ^r. Lonsdale to consider some change in the t i t l e of the Federal Commerce Trust Company "by which the word "Federal" might "be eliminated. Mr. Lonsdale advised the Board that he had applied to the Commissioner of Finance of Missouri for permission to use the t i t l e 11 Commerce Trust Company" but that since that t i t l e was already in use "by another trust company in Missouri i t was decided to apply for the t i t l e of "Federal Commerce Trust Company" and this t i t l e had been approved by the Commissioner of Finance. Mr. Lonsdale also stated that at the time the t i t l e was approved he had no knowledge of any objection to the use of the word "Federal" in State bank t i t l e s nor had he heard of the b i l l then pending in Congress, and he was not inclined to make a change in the t i t l e of the trust company. The Board advised Mr. Lonsdale that notwithstanding the facts which he presented i t was s t i l l of the opinion that i t was improper for State banking corporations to include the word "Federal" in their corporate t i t l e s and again requested him to eliminate the word "Federal" from the t i t l e of the Federal Commerce Trust Company, Other correspondence ensued and the Board finally took the matter up with the Commissioner of Banking of Missouri but nothing was accomplished. FEDERAL SAVINGS AMD LOAN ASSOCIATION, On April 17, 1924, a folder published by the Federal Savings and Loan Association of Oklahoma City was sent to the Comptroller of the Currency and the sender inquired whether i t was proper for such corporation to use the word "Federal" in i t s t i t l e , ^he inquiry was referred to the Federal Reserve Board and i t advised the inquirer that i t had consistently taken the position that the use of the word "Federal" as a part of the t i t l e of a private corporation was improper and should be prohibited, but tnrvb there was no statute which prevented the use of this word in the t i t l e of any corporation. PEOPLES RESERVE SYSTEM* The Federal Reserve Agent at the Federal Reserve Bank of Chicago, on June 3, 1924, sent to the Board a copy of a letter from a corporation known as the Peoples Reserve System. It appeared that this corporation authorizes certain retail dealers to use price discounts as a means of saving for their customers, the amount of the discounts being forwarded by these retail dealers to certain banks designated as depositaries of the system where they were held for the account of the customer in whose favor the discount was made. The banks designated as depositaries were authorized to display a sign reading "Member Peoples Reserve System"* Forms used by the retail dealers also bore the words "Member Peoples Reserve System". The Board took the matter up with the Attorney General and the Postmaster General for such action as they deemed advisable to prevent the Peoples Reserve System from competing unfairly with the Federal reserve banks and their members by the use of the word "Reserve" -13- X-4489 and the advertisement "Member Peoples Reserve System". The~Postmaster General advised the Board that it appeared that the only way in which the company could be restricted from using the name adopted by i t was to obtain an injunction in a court of competent jurisdiction and i f such action was to be taken the injunction should be requested by the Federal. Reserve Board and not by the Post Office Department. The Attorney General's Office advised the Board that his department was inclined to believe that sufficient grounds were not shown which would give any assurance that a court of equity would be likely to issue a writ of injunction restricting the Peoples Reserve System from u t i l i z i n g the words "reserve system" and i t was stated that i t was believed that this case was one that could be cared only by the enactment of legislation. The Federal Reserve Agent at Chicago took the matter up with the Peoples Reserve System and i t agreed not to permit banks to use the sign "Member Peoples Reserve System.11 The form used by the retail dealers, however, continued to bear this inscription. FEDERAL BOND AMD MORTGAGE COMPAilY. In September, 1924, the Board's attention was directed to a news item to the effect that the Federal Trade Commission had prohibited the Federal Bond and Mortgage Company of Detroit from using the phrase "federal bonds are better bonds", and also from using the :7ord "Federal" alone in connection with the word bond or bonds and from using the word "Federal" alone in designating or referring to any place of issuing or marketing securities dealt in by such company. FEDERAL COMMERCIAL AMD SAVINGS BAM. The Board was advised on December 29, 1924, that the Federal Commercial and S a vings Bank of Port Huron, Michigan, was displaying advertisements referring to i t s e l f as the "Federal Bank". The B o a r d advised i t s informant that i t was opposed to the use of the word "Federal" by a state banking institution and that i t s policy had been to discourage the use of this word by such banks, but that there was no federal s t a t r ute prohibiting i t s use. The ®oard also requested the ^ederal Reserve Agent at Chicago to take the matter up with the Federal Commercial and Savings Bank. He did so and that bank assured him that there would be no further improper advertising on i t s part. FEDERAL FINANCE AMD CREDIT COMPANY. Mr. Mason, the Counsel of the Federal Reserve Bank of New York, on May 25, 1925, sent the Board a copy of a letter sent out by the Federal Finance and Credit Company of Baltimore, Maryland. This letter stated that i t was to i t s customers what the Federal 'reserve bank was to i t s member banks. The Board sent a copy of the letter to the Federal Reserve Agent at Richmond and requested him to take the matter up with the officers of the Federal •"inance and Credit Company with the request that they eliminate the word "Federal" from the t i t l e of the company and -14- X-4489 in the future refrain from stating that i t was performing the same service as that performed by Federal reserve "banks for .their member hanks. The president of the federal Finance and Credit Company advised the Federal Reserve Agent that i t was not the intention of the company to mislead the public or to benefit from the similarity between the names of the Federal Finance and Credit Company and the Federal reserve bank. He stated that the instance which had come to the Board's attention was the only one in which the objectionable statement had been used by his company and he was instructing a l l departments to use extreme care to present any reference in the future which might possibly give rise to the inference that the Federal Finance and Credit Company was connected with the Federal reserve bank. Upon receipt of this advice from the Federal Reserve Agent the Board advised him that in view of the absence of any statute prohibiting the use of the word "Federal" by private corporations there seemed to be nothing further that could be done toward obtaining a change in the t i t l e of the Federal Finance and Credit Company. FEDERAL RESERVE LIFE INSURANCE! COMPANY. On June 20, 1925, and November 6, 1925, the attention of the Board was directed to the fact that a corporation was operating in Kansas under the title"Federal Reserve ^ife Insurance Company of Kansas City." The Board advised i t s informant that the use of the words "Federal" or "Reserve" in the corporate name of private institutions not connected with the Federal Reserve System was misleading to the public and that the Board was strongly opposed to such practice. The Board also stated that there have been several b i l l s pending in Congress which would prohibit. the use of these words by private corporations, bat that as yet none of these had become ,law.'
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