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' ' . 96 X-9450 INTERPRETATION BANKING ACT OF 193~ (Copies to be sent to all F'cderal Reserve banks) January 11, 1936. Mr. F. G. Awalt, Deputy Comptroller of the Currency, Washington, D. C. Dear Mr. Av:a1t: This refers to your memorandum of January 10, 1936, transmitting an.inquiry from Mr. - - - - - - - - ' attorney-at-law, - - - - - - ' with respect to of ___ , [~ ___, question raised by the Nationc.l Bc.nk ------------------' involving an interpretation of sec- tion 22(g) of the Federal Reserve lict. It appears that the National Bulk of ____ holds the joint note of Mr. and Mrs. --~-----for the original amount of $7,000 but which hns been reduced to upproximC<toly $6,500. The loan was mc::.ci.c and the note executed during the year 1935 ctt a time when Mr. v:as not an executive officer of the bank. It appears that the bo.:-.rd of directors of the bank novr have under considero.tion the matter of appointing Mr. ___ as an executive officer of the bank and the question arises ~:.s to v:hether the o.ppointment of Mr. --- as an ex.;:cutivo officer of the b:.'1nk in view of the facts above would constitute a viola ... tion of the provisions of section 22(g) of the Feder~ll Reserve Act. The applicable provision of section 22(g) is as follows: "No executive officer of any member bank shall borrow from or otherwise become indebted to any member b[tnk of which he is an executive officer, and no ' 97 . X-9430 -2- mombor bank shall make any loan or extend credit in any other mc.nner to c_ny of its own executive officers * * * . " It is apparent. that tho provision quoted above refers to an executive officer of a member bank who is an executive officer thereof at the time he borrows from or otherwise becomes indebted to tho member bank. Therefore, when a loan is made in good faith by a member bank to an individual who is not at that time an executive officer thereof and the loan is net made in contemplation of his becoming an executive officer of the baruc, there is nothing in the statute which would prohibit such person from becoming an executive officer of such baruc. However, there may be circumstances in a par- ticular case which would involve an attempted evasion of the provision of law, and the above ruling, of course, is not applicable to a case where an attempted evasion might be involved. While the facts con- tained in the inquiry are not entirely clear, it does not appear that the loan in question was made with a view of evading the provisions of law in question. In the circumste.nces, tho Bor~rd is of the opinion th.:1t in the event Mr. _____ is elected as an executive officer of the bank, the extension of credit in question will not constitute a violation of the provisions of section 22(g). Very truly yours, (Signed) Chester IV!orrill Chester Morrill, Secretary.
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