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X-7660 (INTERPRETATION OF BANKING ACT OF 1933) Copies to be sent to a l l Federal reserve banks. October 27, 1933. Mr. W. B. Geery, Governor, Federal Reserve Bank of Minneapolis, Minneapolis, Minnesota. Dear Mr* Geery: Reference i s made to your l e t t e r of September 11, 1933, requesting an interpretation of Section 33 of the Banking Act of 1933 You s t a t e that the employees of a certain corporation had pledged stock owned by them in that corporation as c o l l a t e r a l security for loans made to them by various banks and t h a t , when the stock market broke i n 1929, the corporation took over these loans and has since been allowing i t s employees to make payments periodi c a l l y in reduction t h e r e o f . You further state that t h i s corpora- t i o n does not make a business of making loans on s e c u r i t i e s , nor does i t intend to make any further such loans • In view of these f a c t s , you ask t o be advised whether Section 8A of the Clayton Anti trust Act, as amended by Section 33 of the Banking Act of 1933, pro h i b i t s the o f f i c e r s of such corporation from serving at the same time as directors of a national bank after January 1, 1934. That section refers to organizations, "which s h a l l make loans secured by stock or bond c o l l a t e r a l " , and i t does not, theref o r e , apply to an organization which shall not a c t u a l l y make loans secured by stock or bond c o l l a t e r a l a f t e r January 1, 1934, even though such organization i s authorized to do so, and although - Mr. W« Be Geery ~Z~ X—7660 previously made loans remain outstanding. Accordingly, i f the cor- poration t o which you r e f e r shall make no further loans secured by stock or bond c o l l a t e r a l , Section 8A would not prohibit i t s o f f i c e r s from serving at the same time as directors of a national bank. Very t r u l y yours, (Signed) Chester Morrill Chester Morrill, Secretary.
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