Full text of Mimeograph Letters and Statements of the Board : Interpretation, Banking Act of 1935: Loan to Partnership Where Executive Officer Is Member with 50% Interest, Number X-9477, Volume 44, Page 219

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INTERPRETATION
BN~KING

ACT OF 1955

X-9477

(Copies to be sent to all Federal Reserve banks)
January 51, 1956.
Mr. John S. Wood,
Federal Reserve Agent,
Federal Reserve Bank of St. Louis,
St. Louis, Missouri.
Dear Mr. Wood:
This refers to your letter of December 13, 1955, with inclosure, from which it apppears that Mr.

____,

-----------------' who is

chairman of the board of directors of ----------- Bank,

--------' a State member bank, is also a partner with his brother in
the firm of
terest in such

, each having an equal one-half infirm~

You inquire whether, in view of the provisions

of section 2 of the Board's Regulation 0, a member bank is permitted
to extend credit to a partnership in which an executive officer of
such bank has a 50 per cent interest therein.
Under the provisions of subsection (g) of section 22 of
the Federal Reserve Act, as amended by the Banking Act of 1955, "barrowing by, or loaning to, a partnership in which one or more executive
officers of a member bank are partners having either individually or
together a majority interest in said partnership shall be considered
within the prohibition of this subsection".

In the case of an execu-

tive officer of a member bank who has exactly a 50 per cent interest
in a partnership, such an interest would not amount to a "majority"
interest within the moaning of that term as it is generally understood



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Mr. John

s.

X-9477

Wood -- 2

and it is, therefore, tho view of the Board that the prohibitions
contained in section 2 of tho Board's Regulation 0 are not applicable to such a partnership.
Moreover, it is a well settled rule of law that partners
are presumed to have equal interests in the firm in the absence
of competent evidence of an agreement to the contrary.

In view of

this legal presumption o.nd the statement that Mr.
does not have a majority interest in the partnership, you are authorized to advise the ------------ Bank that the provisions of section
22(g) of the Federal Reserve Act and the Board's Regulation 0 o.re
not applicable to the partnership in question.




Very truly yours,
(Signed)

Chester Morrill

Chester Morrill,
Secretary.