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X-7959 INTEEPEETA.TION OP BACKING ACT OF 1933 (Copies to be sent to a l l Federal Reserve Banks) July 6, 1934. Mr. W. W. Hoxton, Federal Reserve Agent, Federal Reserve Bank of Richmond, Richmond, Virginia. Dear Mr. Hoxton: This r e f e r s to your l e t t e r of March 13, 1934, making cert a i n inquiries with regard to the procedure you should f o l l o w i n reporting p o s s i b l e v i o l a t i o n s of the provisions of Section 32(g) of the Federal Reserve Act. With reference to loans or extensions of credit made to i t s own executive o f f i c e r s by a State member "bank i n your d i s t r i c t , you should, as indicated i n your l e t t e r , proceed i n accordance with the provisions of the Board's circular l e t t e r of July 22, 1933, (X-7518). In cases where i t appears from information which has come to your a t t e n t i o n through reports of examination or other o f f i c i a l sources that a State member hank or a national bank In your d i s t r i c t has made a loan to an executive o f f i c e r of another State member bank i n your d i s t r i c t or has permitted that o f f i c e r t o become indebted to i t within the purview of Section 22(g) of the Federal Reserve Act, you should ascertain whether the particular executive o f f i c e r has f i l e d with the chairman of the board of directors of X-7959 Mr. W. W. Hoxton — 2 h i s bank a report of the kind required "by Section 22(g) of the Federal Reserve Act. I f such a report has not "been furnished, you should report the matter i n the usual manner to the Board and the l o c a l United States Attorney as a possible v i o l a t i o n of Section 22(g). I t i s suggested that you consider the a d v i s a b i l i t y of obtaining through your examiners the required information as to whether a loan to an executive o f f i c e r which comes to the a t t e n t i o n of your o f f i c e has been reported to the chairman of the board of directors of the member bank of which he i s an executive o f f i c e r , e i t h e r at the time of the next examination of the member bank by which the executive o f f i c e r i s employed or by correspondence i n connection with the examination of the bank making the loan. Where i t appears from such information that an executive o f f i c e r of a S t a t e member bank i n another Federal reserve d i s t r i c t has obtained a loan or extension of credit from a State member bank or a national bank i n your d i s t r i c t , you should bring to the a t t e n t i o n of the Federal Reserve Agent for that d i s t r i c t such f a c t s as you may have i n your possession regarding the transaction i n question and that Federal Reserve Agent should thereupon proceed i n accordance with the procedure above s e t f o r t h . However, where you have been advised that executive o f f i c e r s of a national bank i n your d i s t r i c t have borrowed from or have become indebted to a State member bank i n the same or another Federal X-7959 Mr. W. W. Hoxton — 3 reserve d i s t r i c t , the Board i s of the opinion that i t i s only necessary for you to report such d e t a i l s of the transaction as you may have to the chief national bank examiner for your d i s t r i c t f o r such action as he considers advisable. In t h i s connection, your a t t e n t i o n i s directed a l s o to the Board's l e t t e r of February 8, 1928, (X-5072). The Board appreciates that there may be cases i n which executive o f f i c e r s of State member banks w i l l borrow from non-member banks and that, except with the cooperation of the State banking a u t h o r i t i e s , information regarding such cases would not be a v a i l a b l e to you. Accordingly, i t i s suggested that, i f you have not already done so, you acquaint the State banking authorities i n your d i s t r i c t with the provisions of Section 22(g) of the Federal Reserve Act and request that, i f i t i s f e a s i b l e to do so, they furnish you from time to time with any information they may have readily available regarding loans by non-member banks to executive o f f i c e r s of State member banks. If the State authorities do not f e e l that they can furnish you with such information they may be w i l l i n g to take the matter up i n each case with the State member bank involved. Very truly yours, (Signed) Chester Morrill Chester Morrill, Secretary.
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