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FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7481
July 1, 1933,
Dear Sir:
For your information there is attached a
copy of a letter addressed "by the Federal Reserve
Board to the president of a member trust company
in response to his inquiry as to whether, 'under
the provisions of the Banking Act of 1933, the
trust company may continue to hold certain preferred stocks purchased prior to June 16, 1933,
and held "by it on that date.
Very truly yours,
Chester Morrill,
Secretary.
Xnclosure.
TO ALL FEDERAL RESERVE AGENTS.
X-7481-a
COPY:
July 1, 1933.
Dear Sir:
Tour letter of June !9t 1933, addressed to the Comptroller of
the Currency, has been referred to the Federal Reserve Board for reply.
You inquire whether, under the provisions of the Banking Act of 1933,
your trust company may continue to hold certain preferred stocks purchased prior to June 16, 1933, and held by it on that date*
Paragraph "Seventh11 of Section 5136 of the Revised Statutes of
the United States, as amended by Section 16 of the Banking Act of 1933,
which was approved June 16, 1933, provides that "Except as hereinafter
provided or otherwise permitted by law, nothing herein contained shall
authorize the purchase by" a national bank of any shares of stock of any
corporation; and, under section 5(b) of the Banking Act of 1933, this
provision is also applicable to State member banks. As contained in an
earlier draft of a similar bill considered in the 72nd Congress, this provision read "Except as hereinafter provided or otherwise permitted by law,
nothing herein contained shall authorize the purchase or holding by" any
member bank of any shares of stock of any corporation. The words "or
holding" are omitted from this provision in the law, however; and, accordingly, it is the view of the Federal Reserve Board that the law does
not forbid a member bank of the Federal Reserve System to continue to
hold corporate stocks which were lawfully acquired prior to June 16, 1933,
and held by it on that date.
Very truly yours,
Chester Morrill,
Secretary#
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7482
July 1, 1933.
SUBJECT: Legality of Agreements, Consolidations
or Mergers Involved in Applications
Submitted for Board's Approval.
Dear Sir:
Applications of State tanks and trust companies for membership and also other applications requiring the Board's approval,
are in some instances made "by institutions organized to take over
assets and assume liabilities of other banking institutions or by
institutions which are the result of consolidations or mergers of
banking institutions, under agreements executed by the institutions
involved. Such applications also frequently involve agreements
between the banks and their stockholders or depositors. In all
cases of this kind, it is important to determine, before the Board
acts on the application, whether any agreement entered into is
legally effective under the provisions of the laws of the State in
which the bank is located and whether any such agreement, consolidation or merger has been entered into or executed in accordance with
the requirements of the State law.
You are accordingly requested when considering an application for membership or other application involving circumstances
X-7482
—
2 ~
such as those described above, to request the counsel for your
bank to examine the agreements entered into or to be entered
into and the laws of the State covering each such agreement,
transfer of assets, consolidation or merger and furnish you with
an opinion, to be forwarded to the Board with the application,
as to whether such agreement, transfer of assets, consolidation
or merger complies with the requirements of the State law and
is legally effective under the provisions of the laws of the
State in which the bank involved is located.
Very truly yours,
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS
X-7483
COPY.
TELEGRAM
FEDERAL RESERVE BOARD
Washington
July 3, 1933
Nevin
Pittsburgh
Please advise First national Bank, Pittsburgh, as follows: Letter
June 28 to Deputy Comptroller of Currency referred to Federal Reserve
Board. Pending issuance of regulations pursuant to Section 11(b) of
Banking Act of 1933, Board will not object to payment of interest on
deposit represented by certificate referred to in your letter. Attention is called to fact, however, that certificate fails to comply
with requirement of definition of time certificate of deposit contained
in Board's Regulation D, Section 11(e) 4; that bank retain option
to require in writing not less than 30 days' notice before repayment
and certificate therefore may not properly be classified as time
depdsit for purpose of computing reserves.
CARPENTER
COPY.
X-7484
TELEGRAM
FEDERAL RESERVE BOARD
Washington
June 27, 1933
Case
Austin
Williams
Hoxton
Hewton
Stevens
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
Wood
Peyton
McClure
Walsh
Hewton
St. Louis
Minneapolis
Kansas' City
Dallas
San Francisco
TRAITS 1833
In reply to an inquiry from a Federal reserve bank the Board
has advised as follows:
"Eighth paragraph of Section 13 of Federal
Reserve Act, as amended by section 9 of Banking Act of 1933, does not
require a member bank which has obtained advances from Federal Reserve Bank pursuant thereto to refrain from making further loans secured by collateral or to doalers in securities until an official warning is given by the Federal reserve bank of the district or by the
Federal Reserve Board as provided in the statute; and an increase by
a member bank in the amount of such collateral loans or loans to securities dealers during the life or continuance of an advance under
the provision of said paragraph does not subject the bank to the
penalties prescribed therein unless occurring after the issuance of
such an official warning. In connection with this subject, please
see also Section 11 (m) of the Federal Reserve Act as amended by Section 7 of Banking Act of 1933."
MORRILL
X-7435
COPY.
t
June 29, 1933.
Calkins - San Francisco
Your letter of June 20 regarding sugar factors in
Hawaii. As section 21 of Banking Act of 1933 does not "become
effective until expiration of one year after date of its enactment immediate determination of question raised in your letter
does not seem to "be necessary. You will observe however that
this section provides a penalty of fine or imprisonment for
violation of its provisions and in the circumstances if sugar
factors referred to feel that their business is not subject to
provisions of this section the question would appear to fall
within jurisdiction of Department of Justice. Therefore an
expression of opinion by Federal Reserve Board on question
would not afford protection from criminal prosecution if Department of Justice upon consideration of the matter should
take position that transactions involved were within statute and
should feel it necessary to prosecute for violation of this
section.
Morrill
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7486
July 6, 1933.
Dear Sir:
For your information, there is attached a
copy of a self-explanatory letter addressed by the
Federal Reserve Board to Governor Young of the Federal
Reserve Bank of Boston in response to an inquiry received from him with regard to the continuance of certain
existing transactions of Federal reserve banks with foreign central "banks.
Very truly yours,
Chester Morrill,
Secretary.
Incl.
TO ALL FEDERAL RESERVE AGENTS.
X-7486-a
July 6, 1933.
Mr. R. A. Young, Governor,
Federal Reserve Bank of Boston,
Boston, Massachusetts.
Dear Governor Young:
Receipt is acknowledged of your letter of June 20, 1933,
with reference to the provisions of Section 14(g) of the Federal Reserve Act, as amended by Section 10 of the Banking Act of 1933, approved June 16, 1933, which reads as follows:
"(g) The Federal Reserve Board shall exercise special supervision over all relationships and transactions of any kind
entered into by any Federal reserve bank with any foreign
bank or banker, or with any group of foreign banks or bankers,
and all such relationships and transactions shall be subject
to such regulations, conditions, and limitations as the Board
raay prescribe. No officer or other representative of any Federal reserve bank shall conduct negotiations of any kind with
the officers or representatives of any foreign bank or banker
without first obtaining the permission cf the Federal Reserve
Board. The Federal Reserve Board shall have the right, in its
discretion, to be represented in any conference or negotiations
by such representative or representatives as the Board may designate. A full report of all conferences or negotiations, and
all understandings or agreements arrived at or transactions
agreed upon, and all other material facts appertaining to such
conferences or negotiations, shall be filed with the Federal
Reserve Board in writing by a duly authorized officer of each
Federal reserve bank which shall have participated in such
conferences or negotiations."
You invite attention to the fact that the Federal Reserve
Bank of Boston has participated in many agreements and accounts heretofore entered into by the Federal Reserve Bank of New York with foreign
to
X-7486-a
Mr. R. A. Young, Governor - 2
central "banks and that transactions in these accounts are taking place
daily; and you inquire whether it would be possible for the Board to
grant the Federal Reserve Bank of Boston permission to continue existing transactions until such time as the Board can issue regulations
with reference^ to foreign accounts.
For the present the Federal Reserve Board will interpose
no objection to the Federal Reserve Banks continuing to participate in
normal transactions in accounts heretofore opened with the approval of
the Federal Reserve Board between the Federal Reserve Bank of Hew York
and foreign banks or bankers; but the Federal Reserve Board reserves
the right to require changes to be made in the practices in connection
with such accounts and the agreements respecting such accounts or to
require the discontinuance of such accounts at any time either by regulation or without the issuance of formal regulations governing the
subject.
Very truly yours,
Chester Morrill,
Secretary.
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7487
July 6, 1933.
SUBJECT: New Issue Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in
Government securities "between Federal reserve "banks, the
code word "UOXDYAD" has been designated to cover a new
issue of Treasury Bills, dated tfuly 12, 1933, and maturing October 11, 1933.
This word should "be inserted in the Federal Reserve Telegraph Code "book, following the supplemental
code word "NOXDHEL" on page 172.
Very truly yours,
J, C. Uoell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
X-7488
( r m m m k m o T s or m m m
act of 1933)
Copies to be sea* to all Federal
Reserve Agents.
July 6, 1933.
mtskteM"e«aB™leu":nal ^
"*
C o B
^-
Gentlemen:
Your telegram of June 28, addressed to the Comptroller of
the Currency and inquiring whether under the Banking Act of 1933
you may continue to pay interest on postal savings funds, has been
referred to the Federal Reserve Board for reply.
Section 11(b) of the Banking Act of 1933 forbids a member
barik to pay interest on any deposit (with certain specified exemptions)
which is payable on demand, except ig accordance with the terms of a
contract entered into in good faith prior to June 16, 1933, and in
force on that date.
No such contract may be renewed or extended unless
modified so as to eliminate the provision for the payment of interest
on deposits payable on demand, and every member bank is required to
take action necessary to eliminate any such provision as soon as
possible consistently with its contractual obligations.
The Federal Reserve Board understands that instructions
have been sent by the Third Assistant Postmaster General to the
various postmasters under date of June 86, 1833, rea&ixg in part
as follows:
"Pursuant to the enactment of the Banking Act
of 1933, the Postal Savings System will, at an
early dale, adjust its deposits in all depository
banks to a time basis# During the transitional
1°
C 0 P Y
The Pittsfield Third National Bank and Trust Company - 2
X-7488
stage, the administrative officers of the system
will hold that its contractual relations with such
hanks wherein they are "bound "by the regulations promulgated "by the "board of trustees are in full force and effect. Accordingly, all postal-savings funds on deposit
in local qualified "banks to the credit of the board of
trustees, Postal Savings System, will continue to earn
interest, and the rate of 2|- percent remains unchanged
until further notice.
As an initial step toward making all postal-savings deposits in qualified "bank time deposits, direct
accounting and central accounting postal-savings postmasters shall at once discontinue drawing checks on
"banks holding their checking accounts and, pending further development of procedure, shall obtain funds to
meet postal-savings withdrawals."
It will "be observed from those instructions that it is contemplated that the Postal Savings System at an early date will adjust
its deposits in all depository "banks to a time basis; and, inasmuch
as the contract under which postal savings funds are deposited in
'4
$
depository banks requires the payment of interest on such deposits, it
is permissible under the law for a member bank, which was a party to
such a contract in force on June 16, 1933, to continue to pay interest on postal savings funds until such time as it is possible for the
member bank consistently with such contract to eliminate the provision
for the payment of interest on those funds or to change them to a
time deposit basis.
Very truly yours,
Chester Morrill,
Secretary.
•7
14
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
Jllly
f f
1933#
SUBJECT: Proposed Regulations and Forms re Voting
Permits for Holding Company Affiliates
of national and State Member Banks.
Dear M r .
There are inclosed herenith six copies of a tentative draft of regulations and forms governing tho issuance of voting permits authorizing holding
companies rrhich orm or control National or State member 'banks to vote the
stock held "by them at meetings of the stockholders of such "banks; and it mill
be appreciated if you and the officers of your Federal reserve baric will study
these documents and give the Federal Reserve Board your comments and suggestions thereon at the earliest practicable date, not later than Monday morning,
July 17, 1933.
Under the provisions of section 5144 of the Revised Statutes, shares of
stock of a national bank o w e d or controlled by a holding company affiliate
cannot be voted at any meeting of the shareholdere of such bank until such
holding company has obtained a voting permit.
In vietr of the fact that
numerous national banks are notr in process of reorganization and some of them
are controlled by holding company aff iliates * it is important that regulations
V
>
and forms far this purpose be issued as soon as possible.
*
Very truly yours.
»
Chester Morrill,
Secretary.
•>
Inclosures.
TO
OF
cmmsai
ALL F. B. BASKS.
X-7490
CO P I
July 8, 1933,
McClure
Kansas City.
Be your telegram July 5. Section 2 subparagraph (b), subdivision (2)
of the Banking Act of 1933 defines affiliate as including any corporation
of which control is held, directly or indirectly, through stock ownership
or in any other manner, by trustees for the benefit of the shareholders
of any member bank.
Since you state trustees hold for benefit of stock-
holders of a member bank all stock of investment corporation which in
turn owns all stock of cattle loan company and all stock of a nonmember
bank, it is the opinion of the Board that trustees control the investment
corporation directly, and the cattle loan company and nonmember bank indirectly through the medium of the investment corporation, for the benefit
of the shareholders of a member bank, and that each of corporations in
question is an affiliate of the member bank within the meaning of the
statute. Accordingly reports of condition of each such corporation must
be obtained as required by section 5(c) of the said Act.
MORRILL
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7491
July 10, 1933.
SUBJECT: Alternates for Members of Federal
Open Market Committee.
Dear Sir:
There is attached hereto, for your information,
a copy of a letter addressed by the Board to the Secretary of the Federal Reserve Bank of Philadelphia under
date of July 8, 1933, with, regard to the status of
alternates for regularly selected members of the Federal Open Market Committee.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
TO ALL I. B. AGEKGS.
X-7491-
COPY
July 8, 1933.
Mr. C. A. Mcllhenny, Secretary,
Federal Reserve Bank of Philadelphia,
Phi ladelphia, Pennsylvania.
Dear Mr. Mcllhenny:
Receipt is acknowledged of your letter of June 28, 1933,
advising that, at a meeting of the Board of Directors of the Federal
Reserve Bank of Philadelphia held on June 21, 1933, Mr. George W.
Morris, Governor, was elected a member of the Federal Open Market
Committee to represent the Federal Reserve Bank of Philadelphia and
Mr. William H. Hutt, Deputy Governor, was elected his alternate,
Under the provisions of Section 12A of the Federal Reserve
Act, as amended by Section 8 of the Banking Act of 1933, the Federal
Open Market Committee is a statutory committee; the Board of Directors
of each Federal reserve "bank is authorized to select only one member
thereof annually; and no provision is made for an alternate. In the
circumstances, it would seem that an alternate would have no legal
status as a member of the Committee, even in the absence of the reguularly appointed representative of his Federal Reserve Bank, and that
the vote of an alternate on any matter coming "before the Committee
could not be counted, if a point of order were made against it.
There would seem to be no reasonable objection, however ,
X-7491-a
Mr. C. A. Mcllhenny,
- 2-
to an alternate attending the meetings of the Committee and participating in the discussion, in the absence of the regularly appointed
representative of his Federal Reserve Bank.
Very truly yours,
Chester Morrill,
Secretary.
X-7492
Statement of Bureau of Engraving and Printing
For furnishing Federal Reserve Bank Notes (National Currency)
Series 1929
June 1-17, 1933,
|5
$20
Total
Sheets
Amount
-
54,000
$5,238.00
Boston
18,000 36,000
New York
18,000 72,000 18,000
108,000
10,476.00
72,000 36,000
108,000
10,476.00
36,000 180,000 54,000
270,000
26,190.00
Chicago
-
270,000 sheets @ $97,00 per M.
, , .
$26,190,00
FEDERAL RESERVE B O A R D
WASHINGTON
A D D R E S S OFFICIAL. C O R R E S P O N D E N C E T O
T H E FEDERAL RESERVE BOARD
X-7493
July 11, 1933.
Dear Sir:
There is attached hereto, for your information,
a copy of a letter addressed by the Board to Acting
Governor Johns of the Federal Reserve Bank of Atlanta
in response to his request for advice as to who is to
he considered an executive officer of a member bank
within the meaning of Section 22(g) of the Federal Reserve Act as amended by the Banking Act of 1933, which
prohibits borrowings from a member bank by an executive
officer of such bank and requires reports of borrowings
by such executive officer from any other bank.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
TO ALL F. R. AGENTS.
COPY
X-7493-a
July 11, 1933.
Mr. W. S. Johns, Acting Governor,
Federal Reserve Bank of Atlanta,
Atlanta, Georgia.
Dear Mr. Johns:
This refers to your letter of June 22, 1933, in
which you request advice as to the Board's views on the question
who is to he considered an "executive officer" of a member hank
within the meaning of section 22(g) of the Federal Reserve Act,
as amended by the Banking Act of 1933, which prohibits "borrowings
from a member "bank by an executive officer of such bank and requires reports of borrowings by such an executive officer from
any other bank.
The question whether a person is to be considered
an executive officer of a member bank within the meaning of this
provision would seem to depend primarily upon the character of his
duties and the functions which he actually performs rather than
upon his official title or the name of the position which he
occupies. A person having a certain title or holding a certain
position in one bank may have duties and may perform functions
which would bring him within the meaning of the term "executive
officer", while the duties and functions of a person holding a
title or position of the same name in another bank might be of
such a different character that he would not be regarded as an
X-7493-a
Mr. W. S. Johns.
- Si-
executive officer of such tank. It is "believed, therefore, that
no classification of persons according to their titles or the
names of their positions would he an accurate guide in determining whether they are executive officers within the meaning of
the provision of law in question. Each case must depend upon the
facts involved, and no general rule can he promulgated with safety.
The law provides a penalty of fine or imprisonment
for violations and the determination of the question whether persons
should he prosecuted for such violations is a matter entirely within
the jurisdiction of the Department of Justice. The Federal Reserve
Board is not specifically authorized to prescribe regulations on
this subject; and, in the circumstances, an expression of opinion
by the Federal Reserve Board on the question who is to be considered
an executive officer would not afford protection from criminal
prosecution, if the Department of Justice upon consideration of the
matter should take the position that such a person was within the
statute and should feel it necessary to prosecute for violation of
this provision. Accordingly, the Federal Reserve Board does not
feel that it would be appropriate for it to undertake to express
opinions upon questions of this kind.
Very truly yours,
Chester Morrill,
Secretary.
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7494
July 11, 1933.
Dear Sir:
There is attached hereto, for your information, a copy of a letter addressed "by the Federal
Reserve Board to Mr. Austin, Federal Reserve Agent
at the Federal Reserve Bank of Philadelphia, advising, in response to his inquiry, that it appears
that a conservator of a national "bank is not a
director or other officer or employee of the hank
within the meaning of the Clayton Act.
Very truly yours,
Chester Morrill,
Secretary.
•
Inclosure.
TO ALL F. R. AGENTS EXCEPT PHILADELPHIA.
COPY
x-7494-a
July 11, 1933.
Mr. R. 1. Austin,
Federal Reserve Agent,
federal Reserve Bank of Philadelphia,
Philadephia, Pennsylvania.
Dear Mr. Austin:
Receipt is acknowledged of your letter of June 25, 1933,
inquiring as to the status, with respect to the Clayton Act, of an individual who is serving as a director of two national "banks, one of
which has resources aggregating more than $5,000,000, and as a conservator of a third national bank, whose resources also exceed $5,000,000.
You state that the two larger "banks are located in the same town hut
that the smaller one is located in a neighboring town.
In view of the fact that one of the two national banks of
which this person is a director has resources aggregating more than
$5,000,000, his service of such two banks falls within the prohibitions
of section 8 of the Clayton Act, and consequently it is necessary for
him to have a permit in order to serve as a director of such banks.
With regard to the question whether it is necessary for
him to have a permit covering his service as conservator, you will
note that Section 8 of the Clayton Act makes it unlawful for a "director or other officer or employee" of a national bank with resources
aggregating more than $5,000,000 to serve as a director, officer or
employee of another national bank unless a permit has been issued.
X-7494-a
- 2 -
Section 8A of that Act, which was added "by section 33 of the Banking
Act of 1933, also applies to directors, officers and employees, "but
does not "become effective until January 1, 1934. Neither section refers to receivers, conservators or similar officials.
Section 203 of the Act of March 9, 1933, authorizes the
Comptroller of the Currency, under certain conditions, to appoint
a conservator for a bank who shall "take possession of the "books,
records, and assets of every description of such "bank, and take such
action as may "be necossary to conserve the assets of such "bank pending
further disposition of its "business as provided "by law. Such conservator shall have all the rights, powers, and privileges now possessed
"by or hereafter given receivers of insolvent national "banks and shall
"be subject to the obligations and penalties, not inconsistent with
the provisions of this title, to which receivers are how or may hereafter become subject. During the time that such conservator remains
in possession of such bank, the rights of all parties with respect
thereto shall, subject to the other provisions of this title, bo
the same as if a receiver had been appointed therefor."
Jt appears, therefore, that a conservator is not a director,
officer or employee of a bank, but is an official appointed by the
Comptroller of the Currency to take possession of the bank, acting
under direction of the Comptroller, the effect of his appointment
being to remove control of the affairs of the bank from the directors,
officers and employees of the bank, and to vest such control in the
' %
X-7494-a
- 3 conservator, under the direction of the Comptroller. In these respects,
the office of a conservator is very similar to that of a receiver of
a national "bank.
It, therefore, appears that a conservator, who is an official appointed hy the Comptroller of the Currency to conserve tho
assets of a "bank pending its reorganization, reopening or liquidation,
is not a "director, or other officer or employee" of the hank within the
meaning of the Clayton Act.
Consequently, it is not necessary for a
person to have a permit under the Clayton Act in order to serve as
conservator of a national hank, even though he is also a director,
officer or employee of another national hank which comes within the
prohibitions of the Clayton Act.
Very truly yours,
Chester Morrill,
Secretary.
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7495
July 12, 1933.
Dear Sir:
There is attached hereto, for your information, a copy of a letter addressed "by the Board to
a national bank with regard to the issuance by that
"bank of new time certificates of deposit with an
agreement to pay interest thereon, pending the issuance of regulations "by the Federal Reserve Board
limiting the rates of interest which member banks
may pay on time deposits.
Very truly yours,
(Inclosure)
Chester Morrill,
Secretary.
To all Federal Reserve Agents.
X-7495-a
COPY.
July 12, 1953.
Dear Sir:
Your letter of June 26, 1933, inquiring whether your bank
may issue new time certificates of deposit and agree to pay interest
thereon pending the issuance of regulations "by the Federal Reserve
Board limiting the rates of interest which member banks may pay on
time deposits, has been referred to the Federal Reserve Board for
reply.
Pending the issuance of regulations on this subject by the
Federal Reserve Board, there is no legal reason why your bank may
not issue time certificates of deposit and agree to pay interest
thereon at the customary and usual rate; provided that such certificates comply strictly with the definition of time certificates of
deposit contained in the Federal Reserve Board's Regulation D, a copy
of which is inclosed for your information. In order to avoid any
misunderstanding with your depositors, however, it would be advisable
for you to place on each time certificate issued since June 16, 1933,
a notation to the effect that the rate of interest payable on the deposit represented thereby is subject to adjustment in accordance with
such regulations as the Federal Reserve Board may issue, pursuant to
the provisions of Section 19 of the Federal Reserve Act, as amended
by the Banking Act of 1933.
Inclosure.
Very truly yours,
Chester Morrill,
Secretary.
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
•
X-7496
July 13, 1933.
SUBJECT: New Issue Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in
Government securities "between Federal reserve banks, the
code word "NOXDYCE" has been designated to cover a new
issue of Treasury Bills, dated July 19, 1933, and maturing October 18, 1933.
This word should be inserted in the Federal Reserve Telegraph Code book, following the supplemental
code word "NOXDYAD" on page 172.
Very truly yours,
J• C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7497
July 14, 1933.
SUBJECT: Discounts for Individuals, Partnerships
and Corporations.
Dear Sir:
The authority granted "by the Federal Reserve Board to all Federal reserve banks in its circular of July•26, 1932 (X-7215a), as amended
by its letter of January 23, 1933 (X-7329), to discount eligible notes,
drafts and bills of exchange for individuals, partnerships and corporations, subject to the provisions of the law, the Board's regulations,
and that circular, will expire at the close of business on July 31, 1933.
The Board has decided to extend such authorization for an additional six
months, and, accordingly, has further amended section II of its circular
of July 26, 1932 (X-7215a), to read as follows:
"AUTHORIZATION BY THE FEDERAL RESERVE BOARD.
The Federal Reserve Board, pursuant to the power
conferred upon it by the amendment hereinbefore
quoted, hereby authorizes all Federal reserve banks,
for a period ending at the close of business on January
31, 1934, to discount eligible notes, drafts and bills
of exchange for individuals, partnerships and corporations , subject to the provisions of the law, the Board's
regulations, and this circular."
Very truly yours,
Chester Morrill,
Secretary.
TO CHAIRMEN AND GOVERNORS OF ALL F. R. BANKS.
51
FEDERAL RESERVE B O A R D
WASHINGTON
«
X-7498
July 14, 1933.
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
SUBJECT: Regulations re.(1) Open Market Operations
and (2) Relations with Foreign Banks and
Bankers.
4
Dear Sir:
There are inclosed herewith two copies each of tentative drafts
of regulations on the above subjects and it would "be appreciated if you
will deliver one copy of each of them to the representative of your "bank
who will attend the forthcoming meeting of the Federal Open Market Committee in Washington on July 20, 1933, and request him to study them
carefully with a view of discussing them at that meeting.
It will also be appreciated if you will study these tentative
regulations and give the Board the benefit of your comments and suggestions at the earliest possible date, not later than Monday, July 24,
1933.
These tentative drafts have not yet been considered by the
Federal Reserve Board; but the Board desires to have them discussed
during the forthcoming meeting of the Federal Open Market Committee,
in order that regulations on these subjects may be issued at an early
date, if deemed desirable.
Very truly yours,
Chester Morrill,
Secretary.
Inclosures.
TO ALL F. R.
AGENTS.
FEDERAL RESERVE B O A R D
&
WASHINGTON
.;-7499
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
July 15, 1933.
SUBJECT:
Interpretations of Banking Act of 1933.
Dear Sir:
In order that the Federal reserve tanks may be advised as promptly as possible of the interpretations of the Banking Act of 1933 sent out
by the Federal Reserve Board in response to inquiries received by it, arrangements have been made to have the letters and telegrams containing such
interpretations mimeographed with the following notation at the top:
pretation of Banking Act of 1933.
banks.11
"Inter-
Copies to be sent to all Federal reserve
Bach communication will be given an X number, and one copy thereof
will be sent to the Governor and one copy to the Federal reserve agent at
each Federal reserve bank, and the same number of additional copies will be
forwarded to your bank as are sent in the case of the regular letters of the
Board bearing X numbers.
These interpretations are being sent to you in order that the information contained therein will ,be available to you in answering inquiries received in regard to the Banking Act qf 1933, and, unless otherwise indicated,
the communications received from the Board in this form are not for distribution outside of the Federal reserve bank.
Very truly yours,
Chester Morrill,
Secretary.
t
x-7500
(Interpretation of Banking Act of 1923)
Copies to be sort to all Federal Reserve Banks.
July 12, 1933.
Olson - Denver
President
of (a national bank) discussed with Governor Black on
July 7 question of payment by a member "bank of premium on bonds securing deposits of public funds and left with him a copy of letter addressed to you by
Clearing House Association dated June 27
on this subject. Board understands that amount of premium paid by
member bank on such a bond is a certain prescribed percentage of the
average amount of such funds on deposit with such bank ovor period
covered by the bond with provision for a minimum premium where the
average amount is less than a certain amount fixed in advance. In
view of fact that amount paid by member bank in form of premium on such
bond in usual case is a
f5xod percentage of the amount of such funds
on deposit in the bank# it is Board's opinion that payment of such
premium constitutes an indirect payment of interest on such deposit
within the meaning of the provision of section 19 of the Federal Reserve
Act as amended by section 11(b) of the Banking Act of 1933 prohibiting
the payment of interest on deposits payable on demand. Attention is
called to the fact, however, that provision in question does not apply
to any deposit of public funds made by or on behalf of any State, county,
school district or other subdivision or municipality, with respect to
which payment of interest is required under State law. Please advise
Mr. _________ and _______ Clearing House Association of the views of the
Federal Reserve Board as above expressed.
MORRILL
X-7501
8 4
(INTERPRETATION OF BANKING- ACT OF 1933)
Copies to be sent to all Federal Reserve Banks.
July 17, 1933.
Mr# W. W. Hoxton,
Federal Reserve Agent,
Federal Reserve Bank of Richmond,
Richmond, Virginia.
Dear Mr. Hoxton:
Reference is made to your letter of July 11, 1933, with
which you inclosed a copy of a letter from the Commissioner of Insurance and Banking of the State of Virginia with reference to the operation of branches by State member banks of the Federal Reserve System,
Apparently, the Commissioner wishes to be advised as to whether a State
bank, which has a paid-in and unimpaired capital stock of less than
$500,000# may become a member of the Federal Reserve System and continue to operate, outside of the city in which the parent bank is situated, offices or receiving stations whose functions would be limited
to receiving deposits and cashing chocks.
Section 9 of the Federal Reserve Act, as amended by the
Banking Act of 1933, provides in part as follows;
"Any such State bank which, at the date of the approval of this Act, has established and is operating a
branch or branches in conformity with the State law, may
retain and operate the same while remaining or upon becoming a stockholder of such Federal reserve bank; but no
such State bank may retain or acquire stock in a Federal
reserve bank except upon relinquishment of any branch or
branches established after the date of approval of this
Act beyond the limits of the city, town, or village in
which the parent bank is situated. Provided, however.
Mr. W. Vvr. Hoxton
-2'
X-7501
That nothing heroin contained shall prevent
any State member bank from establishing and
operating branches in the United States or any
dependency or insular possession thereof or
in any foreign country, on the same terms and
conditions and subject to the same limitations
and restrictions as arc applicable to the establishment of branches by national banks,"
Section 5155 of the Revised Statutes, as amended by section
23 of the Banking Act of 1933 requires, among other things, that a national bank, located in a State having a population of 1,000,000 or
more inhabitants, have a paid-in and unimpaired capital stock of not
loss than $500,000, in order to establish a branch outside of the
city, town or village in which it is situated; and, under the above
provision of section 9 of the Federal Reserve Act, a State member bank
must also meet this requirement in order to establish a branch outside of the city in which it is situated.
The Federal Reserve Board has given careful consideration
to the question raised by the Commissioner of Insurance and Banking
and is of the opinion that an office or receiving station of a State
bank at which deposits are received and checks arc cashed must be
considered a branch within the meaning of the above provision of section 9 of the Federal Reserve Act, Accordingly, it is the Board's
view that a State bank located in the State of Virginia, which has
a population of more than 1,000,000 inhabitants, may not become or
remain a member of the System and continue to operate such an office
or receiving station established after February 25, 1927 beyond the
limits of the city in which the parent bank is situated, unless such
X-7501
Mr* W. W t Hoxton
bank has a paid-up and unimpaired capital stock of not less than
$500,000 and complies with the other requirements applicable to the
establishment and operation of branches by a national bank beyond the
limits of the city in which such bank is situated#
Very truly yours,
Chester Morrill,
Secretary#
8 7
(INTERPRETATION OF BANKING- ACT OF 1933)
X-7502
Copies to bo sent to nil Federal Reserve Banks#
July 17, 1933.
Honorable
, Judge,
Circuit Court of the City of
$
,
•
Dear Sir:
Your letter of Juno 26, 1933, addressed to the Secretary of
the Treasury, has been referred to the Federal Reserve Board for reply*
You inquire whether, under Section 19 of the Federal Reserve Act as amended by Section 11(b) of the Banking Act of 1933, a member bank of the Federal Reserve System may pay interest on funds deposited to the credit of
your Court in various suits or actions at law pending final disposition.
Those funds remain on deposit for an indefinite period of time and, presumably, aro payable on demand.
As you know, Section 19 of the Federal Reserve Act as amended,
forbids a member bank, directly or indirectly, to pay any interest on
any deposit which is payable on demand, except in accordance with a contract entered into prior to June 16, 1933 in good faith and in force on
that date; and member banks are required to eliminate from such contracts
provisions for the payment of interest on deposits payable on demand as
soon as possible consistently with their contractual obligations. Deposits of certain kinds arc excepted from the provision of law in
question; but deposits to the credit of your Court in suits or actions at law pending final disposition would not appear to come within
any of the exceptions mentioned in the statute and the Federal Reserve
Board has no authority to make any additional exceptions to the pro
Honorable
X-7502
hibitien of the law against payment of interest on deposits payable on
demand. It appears, therefore, that a member bank is forbidden by law
to pay interest on deposits of your Court of the kind mentioned which
are payable on demand, except in accordance with a contract entered into
in good faith before June 16, 1933 and existing on that date, and such
a contract must be modified by the bank as soon as possible to eliminate
any provision for the payment of interest.
You will note from the statute that member banks may pay
interest on time deposits subject to regulations to bo prescribed by
the Federal Reserve Board*
The Board has not as yet proscribed regula-
tions pursuant to this provision of law; but, pending the issuance of
such regulations, member banks may continue to pay interest on time deposits in accordance with their usual practice or existing bona fide
contracts.
A copy of the Banking Act of 1933 is inclosed herewith for
your information and your attention is invited to the provisions of
Section 11(b) on page 22.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure,
X-7503
(INTERPRETATION OF BANKING ACT OF 1933)
Copies to be sent to all Federal Reserve Banks*
July 17, 1933.
Mr, W. S. Johns, Acting Governor,
Federal Reserve Bank of Atlanta,
Atlanta, Georgia.
Dear Mr, Johns;
Receipt is acknowledged of your letter of June 22, 1933,
inclosing a letter dated June 21, 1933, from Mr.
President of (a national bank). Mr,
,
requests a definite ruling
on the question whether a bona fide oral agreement (or arrangement by
correspondence) made prior to June 16, 1933, to pay interest on demand
deposits in accordance with clearing house regulations constitutes "a
contract heretofore entered into" within the meaning of Section 19 of
the Federal Reserve Act, as amended by Section 11(b) of the Banking
Act of 1933.
If the answer is in the affirmative, Mr. ________ desires
to know whether member banks may continue to pay interest on any such
account and for what period of time in the future.
The proviso regarding payment of interest "in accordance
with the terms of any * * * contract heretofore entered into in good
faith" which was in force on June 16, 1933, does not authorize payment
of interest until the end of a customary interest period unless there
was a definite contract to that effect. In deciding such question,
the determinative factor is not whether the alleged agreement to pay
interest was oral or written, but whether the bank in question is under
a legal obligation to pay interest on any deposit payable on demand in
40
Johns - Atlanta
-2-
X-7503
accordance with a bona fido agreement, Vi/hether oral or written, which
was in force on Juno 16, 1933.
Accordingly, if an oral agreement (or arrangement by correspondence ) to pay interest on a deposit payable on demand, which was
entered into in good faith and was in force on June 16, 1933, is the
valid and binding obligation of the bank, interest nay be paid in
accordance with the terns thereof and for such period as may be provided for therein. Conversely, if a contract in respect to payment
of interest on such deposits, whether oral or written, is subject to
cancellation at the option of bank and without liability on the part
of the bank, it must be canceled as soon as possible, unless the
deposit which is the subject of the contract is one payable only at
an office of the bank located in a foreign country, or a deposit made
by a mutual savings bank, or a deposit of public funds made by or on
behalf of any State, county, school district, or other subdivision or
nunicipality, with respect to which payment of interest is required
by,State law.
It seems probable that, in most instances of an alleged
oral contract, the agreement or understanding to allow interest
would not be sufficiently definite in respect to the interest period,
the amount of interest, and other essentials to constitute it a valid
and binding contract, Therefore, in any case in which interest on
deposits payable on demand is allowed under an alleged oral contract,
the bank so allowing interest, if requested to do so, must bo able to
show clearly to the satisfaction of the examiner duly authorized to
Johns - Atlanta
X-7503
-3'
examine such bank, or to the Federal Reserve Board, or to any other
duly constituted authority that such agreement could not have been
terminated legally by such bank at its option and without liability*
As you were advised by telegram under date of June 20, 1933,
member banks arc forbidden to renew or extend any contract for payment
of interest on deposits payable on demand which are not within a class
excepted by statute, unless they eliminate the provision for payment
of interest; and they are required to take such action as may be
necessary to eliminate payment of interest on such deposits as soon
as possible consistently with their contractual obligations#
Very truly yours,
Chester Morrill,
Secretary.
X-7504
(INTERPRETATION OF BANKING ACT OF 1933)
Copies to bo sent to all Federal Reserve Banks#
July 17, 1933.
Mr, W. W. Hoxton,
Federal Reserve Agent,
Federal Reserve Bank of Richmond,
Richmond, Virginia#
Dear Mr. Hoxton:
Receipt is acknowledged of your letter of July 12, 1933,
inclosing a copy of a letter addressed to you on the some date by Mr#
, Executive Manager of (a nonber bank), inquiring
whether the provisions of Section 23A of the Federal Reserve Act, as
amended by Section 13 of the Banking Act of 1933, arc retroactive.
It appears from Mr#
' letter that the (member bank)
has two affiliates and that the investments which it had made in the
capital stock of such affiliates, prior to June, 1933, exceed the
limits proscribed by Section 23A.
To conform to other provisions of
the Banking Act of 1933, those affiliates are now being liquidated;
but, during the period of liquidation, they dosiro to borrow reasonable
sums for expenses and other purposes, and the bank apparently desires
to know whether it may make loans to those affiliates.
The first paragraph of Section 23A, which is the only part
of that section pertinent to this inquiry, reads as follows:
"Sec. 23A. No member bank shall (1) mate any loan or any
extension of credit to, or purchase securities under repurchase
agreement from, any of its affiliates, or (2) invest any of its
funds in the capital stock, bonds, debentures, or other such obligations of any such affiliate, or (3) aecopt the capital stock,
bonds, debentures, or other such obligations of any such affiliate as collateral security for advances made to any person,
partnership, association, or corporation, if, in the ease of any
Mr* We W. Hoxton
2-
X-7504
such affiliate, the aggregate amount of such leans, extensions
of credit, repurchase agreements, investments, and advances
against such collateral security will exceed 10 per centum of
the capital stock and surplus of such member bank, or if, in
the case of all such affiliates, the aggregate amount of such
loans, extensions of credits, repurchase agreements, investments,
and advances against such collateral security will excoed 20 per
centum of the capital stock and surplus of such member bank."
In view of the words underlined, it is clear that these provisions do not require a member bank to dispose of any such loans or
investments acquired prior to June 16, 1933; but they forbid a member
bank to make additional loans or investments of this character, if
the addition of the amount of such now loans or investments to the
amount of those previously existing will increase the aggregate to an
amount exceeding 10% of the capital and surplus of such member bank,
in the case of any one affiliate, or 20% of the capital and surplus of
such member bank, in the case of all affiliates of such bank.
Since the investments made by the (member bank) in the capital
stock of its affiliates, prior to June 16, 1933, exceed the limits prescribed by the law, the (member bank) may not lawfully make loans to
such affiliates while it holds such investments.
Very truly yours,
Chester Morrill,
Secretary,
X-7505
(INTERPRETATION OF BANKING ACT OF 1933)
Copies to bo sent to all Fodoral Reserve Banks#
July 17, 1933.
Mr, L. R. Rounds, Deputy Governor,
Federal Reserve Bank of Now York,
New York, Now York.
Dear Mr. Rounds,
Receipt is acknowledged of your letter of June 30, 1933,
inclosing copy of your letter of the same date to Mr.
Counsel for (a member bank)•
It appears that Mr.
contends
that, since the laws of Now York do not require publication of reports
of condition of affiliates of a trust company in that State, the publication of such reports is not required under section 9 of the Federal Reserve Act, as amended by section 5(c) of the Banking Act of
1933.
After providing that each State bank or trust company which
is a member of the Federal Reserve System shall obtain from each of
its affiliates other than member banks, and furnish to the Federal
reserve bank of its district and to the Federal Reserve Board, not
less than three reports during each year, section 9 of the Federal
Reserve Act, as amended by section 5(c) of the Banking Act of 1933,
provides that, "The reports of such affiliates shall be published by
the bank under the same conditions as govern its own condition reports•"
In view of the fact that the Federal Reserve Act does not require the publication of reports submitted to the Federal Reserve Board
and the Fodoral reserve banks by State member banks, the only reasonable construction that can be given to the requirement qtiofcod above
X-7505
Mr. L. R. Rounds -
2
is that reports of affiliates of Stato nonbor banks must bo published
if the State law requires such State banks to publish their own reports.
Even though the State law m y net require the publication of reports
of affiliates of State banks, therefore, the Federal Reserve Act requires the publication of such reports whenever the State law requires
the reports of Stato member banks to bo published#
The conditions governing the method and frequency of publishing such reports depends upon the provisions of the State law regarding
the method and frequency of the publication of reports of the State
banks; and, therefore, it is not entirely accurate to say that the reports of such affiliates must be published whenever the Federal Reserve
Board calls for reports of condition of State mombor banks.
Very truly yours,
Chester Morrill,
Secretary,
/
46
X-7506
(INTERPRETATION OF BANKING ACT OF 1933)
Jul
y
13
> 1933.
Copies to "be sent to all Federal Reserve Banks,
Walsh
Dallas
Ro your inquiry whether verbal agreement to pay interest on demand deposits
for fixed period is QUOTE contract UNQUOTE within moaning of paragraphs
B and C of Trans• number 1826, You are advised that the determinative
factor is not whether agreement to pay interest is written or oral, but whether
the particular bank is under a binding obligation to pay interest on a demand
deposit in accordanco with a bona fide agreement, whether oral or written#
Accordingly, if an oral agreement to pay interest on demand deposits, which
was entered into in good faith and in force on June 16, 1933, is a valid
and binding obligation of the bank, interest may be paid in accordance with
the terms thereof.
Conversely, if contract in respect to payment of interest
on demand deposits, whether oral or written, is subjoct to cancellation at
option of bank and without liability on part of bank, it must bo canceled
as soon as possible. However, it seems probable that, in most instances
of an alleged oral contract, the agreement or understanding to allow interest would not bo sufficiently definite in respect to the interest period,
the amount of interest, and other essentials to constitute it a valid and
binding contract. Therefore, in any case in which interest on deposits
payable on demand is allowed under an alleged oral contract, the bank so
allowing interest, if requested to do so, must be able to show clearly to
the satisfaction of the oxaninor duly authorized to examine such bank, or
to the Federal Reserve Board, or to any other duly constituted authority
47
x-7506
that such agreement could not have boon terminated legally by such bank
at its option and without liability. Of course, no such contract nay
be renewed or extended without eliminating the provisions for payment
of interest.
Morrill
' '
4 8
X-7507
(INTERPRETATION OF BANKING ACT OP 1933)
Copies to be sent to all Federal Reserve Banks#
July 12, 1933.
Mr# W. S. Johns, Acting Governor,
Federal Reserve Bank of Atlanta,
Atlanta, Georgia.
Dear Mr. Johns:
Reference is made to your letter of June 27, 1933, and your telegram of June 28, in which tho question is raised whether a member bank, in
view of the provisions of section 19 of the Federal Reserve Act, as
amended by section 11(b) of the Banking Act of 1933, prohibiting the payment of interest by member banks on deposits payable on demand, may absorb
exchange or collection charges in connection with checks and other items
received by such bank for credit to the account of a correspondent bank.
The Board understands that, unless a sufficient balance is maintained by the correspondent bank to recompense the member bank for the
absorption of such charges, a charge will be assessed against such correspondent bank. Presumably, however, there is no fixed ratio between the
amount of such charges so absorbed by the member bank and the amount of
tho balance maintained by the correspondent. Tho amount of charges absorbed is not based upon the amount of such deposit balance, but depends
rather upon the number of items roceived in the correspondent's account,
the time necessary to colloct then and tho manner of collection necessary.
Moreover, it is understood #ien the amount of such deposit balance is
above tho minimum required for the absorption of such charges, there is
no corresponding increase in the cost of the account to tho member bank
or in the benefits to the correspondent bank#
X-7507
Mr# W. S» Johns —
2
Upon consideration of the natter, it is tho Board's opinion
that the absorption of such collection or exchange charges in tho circumstances described is not to be regarded as payment of interest directly
or indirectly within the meaning of section 19 of the Federal Reserve Act,
as amended#
Very truly yours,
Chester Morrill,
Secretary.
• 50
COPY
THE FIRST NATIONAL BANK OF CHICAGO
X-7508
CHICAGO-ILLINOIS
July 14, 1933
Dear Governor Black:
I appreciate highly your permission to file with you objections to several of the recommendations made to the Federal Reserve
Board under date of July 10, 1933, by special committees of the American
Bankers Association and the Association of Reserve City Bankers. While
the members of these two committees are experienced bankers, it is perhaps not unfair to point out that most and possibly all of them are men
who have had little or no practical experience in the handling of savings
deposits.
Of course, the same is true in my case, but I am merely
the mouthpiece of a number of the officers of the savings departments of
the larger Chicago banks. The recommendations, in so far as they deal
with savings deposits, were submitted by me to men concerned with the
actual handling of savings accounts, and whit they do not commit their
banks officially to the opinions hero expressed, they are all of one
mind as to tho probable effect upon savings bank business in Chicago if
some of tho recommendations in question arc to be embodied in regulations
of the Federal Reserve Board.
On page 4 of the letter addressed to you by the two committees, the following observations are made:
"4. Recognizing the several reasons for the distinction
between savings deposits and time deposits, and that the element of
thrift and its encouragement is necessarily involved in any regulations
affecting savings deposits, and believing further that by inference the
Federal Reserve Board is charged in the Banking Act of 1933 with the
duty of defining savings deposits, the Committee makes the following
observations:
"(a) In order to prevent the abuse of savings deposits
by shifting from demand or time accounts into savings accounts to obtain the higher rate of interest, the Committee feels that savings accounts should be limited to accounts of individuals and that they should
not include deposits of firms, partnerships, corporations or any other
business accounts.
"(b) That savings accounts should be limited as to the
total amount to be carried in the account, which limit it is recommended
shall not exceed $10,000,00.
"(c) That the method of calculating interest and the
period within which interest is to be paid on savings accounts should
be uniform#"
Governor Black - page 2
X-7508
In rcspoot to suggestion (a) the group which I consulted
is in entire agreement as to the desirability of preventing the shifting
of funds from demand or time accounts into savings accounts for the purpose of obtaining a higher rate of interest, I desire to point out, however, that in Chicago and probably also in other centers, such as St.
Louis, Cleveland, Minneapolis, and St, Paul, there are corporations and
associations not organized for profit, such as labor unions and fraternal
organizations who have maintained for many years true savings accounts
which represent the reserves of these organizations. Those are not business enterprises, and thoro would seem to be no valid reasons why they
should not be permitted to lay aside funds in savings accounts for the
benefit of their members to be drawn upon in time of need just as is true
of individuals. Also any regulations to be adopted should be so drawn
that it would not become illegal to open and maintain joint savings accounts. After many years of effort the banks in Illinois wore successful
in having the state laws amended to the end that, e,g», husband and wife
could open savings accounts in their joint names. It would be a hardship
in many cases if this wore made impossible in the future.
In respect to (b) it must be remomborcd that in Chicago,
and in many other conters of this part of the country, there arc only a
few banks which are in a position to handle savings accounts of sizable
amount. In How York City, and in the East generally, where in addition
to the commercial banks handling savings accounts in one form or another,
there are many mutual savings banks the situation is very different. All
the larger Chicago banks have numerous true savings accounts which have
boon on their books for years and which are in oxcoss of $10,000,00. My
ovm bank had for very many years a single savings account amounting to as
much as $200,000.00, of which the capital was loft intact, the ownor drawing semi-annually the interest to pay for her livelihood. While so largo
an account is an exception, true savings accounts of $25,000,00-50,000,00
have boon by no moans uncommon. It need not bo pointed out that these
large accounts which have been left more or less undisturbed for many
years have been over the course of years by far the most profitable savings accounts tho Chicago banks have had.
In this connection, it has been suggested that if the Fcd»
oral Reserve Board should decide to place some limit upon the amount of
each savings account, such limitation should bear samo relation to the
capital and surplus of tho bank. In a bank with capital and surplus of
$100,000,00 a single savings account of $10,000 might arouse suspicion,
while in a bank with capital and surplus of $25,000,000 a savings account
of $50,000,00 or oven $100,000.00 would bo a relatively unimportant item.
Finally, in many instances any regulation of this typo would simply load
to evasion by the opening of accounts in the name of various members of
the same family.
5 2
Governor Black - pago 3
X-7508
In regard to (c), it is believed by those whom I consulted
that every part of the country and almost every city has adopted a different method of computing interest on savings accounts. These various
methods have becomo established usage and custom in nearly all instances.
Attempts have been made at various times by committees of the Savings
Bank Division of the American Bankers Association to devise some uniform
plan of calculating interest, but it has proved impossible to devise any
scheme which "mould harmonize the conflicting views and interests# If
there were any great advantage to be gained by imposing a uniform system
in this respect upon the banks of the country, it might be desirable to
make some regulations to bring about this result, but according to tho
belief hold here, tho disadvantages and possible injustices arising from
the present lack of uniformity are too slight to justify the adoption of
rules which would be regarded as unfair and as a hardship by many member
banks•
It is our hope that the Federal Reserve Board will not
adopt the recommendations made by tho two committees in question in so far
as these concern savings accounts without further and careful consideration. It might be woll if the Board suggested that a committee bo appointed by tho Savings Bank Division of tho American Bankers Association
to confer with the Board. Such a committee should include representatives
of the savings departments of tho ordinary commercial banks as well as
representatives of tho mutual savings banks,
I trust it may not bo taken amiss if I emphasize the fact
that wo have a vital interest in those problems• Excepting a few mutual
savings banks, tho First National Bank of Chicago has a larger amount of
savings deposits than any other bank in tho country carrying on operations
under one roof, and tho Continental Illinois Bank and Trust Company of
Chicago is a close second in this rcspoct.
r
I also wish to repeat tho thought expressed above that in
a city like Chicago with only five large banks and no mutual savings banks
tho limitations suggested in tho recommendations would not merely curtail
seriously the earning power of tho banks, but would constitute a real and
just grievance to important organizations like labor unions.
Thanking you again for your willingness to receive those
comments, believe mo to bo
Sincerely yours,
(Signed) WALTER LICHTENSTEIN
Hon. Eugene R. Black,
Governor of the Federal Reserve Board,
Washington, D. C.
Vice President
r
X-7509
copy
CHICAGO CLEARING HOUSE ASSOCIATION
FEDERAL RESERVE B A M BUILDING
164 West Jackson Boulevard
CHICAGO
July 15, 1933
My dear Governor Black;
Mr. Walter Lichtenstein, Vice President of the
First National Bank of Chicago, has shown me a copy of his
letter to you dated July 14, 1933, in which he set forth
objections to several of the recommendations made to the
Federal Reserve Board under date of July 10, 1933 by special
committees of the American Bankers Association and the
Association of Reserve City Bankers.
As President of the Chicago Clearing House
Association I am writing you to endorse the ideas and objections set forth by Mr. Lichtenstein in his letter of July 14th.
Mr. Lichtenstein1 s letter to you relates primarily
to the subject of savings accounts. He tells me that he feels
sure you would be glad to hear from me, as President of the
Chicago Clearing House Association, regarding certain other
recommendations made to the Federal Reserve Board in the same
letter of July 10, 1933 by the above mentioned special committees. Accordingly, I am taking the liberty of sending you
this letter by air mail as I understand from Mr. Lichtenstein
that the Federal Reserve Board will probably meet on Monday,
July 17, to consider these matters.
On page 4 of the said letter addressed to you by
said two committees the following observations are made:
" (5) We recommend that the Board, by regulation, issue
a strong caution to all member banks that any changes in
existing relationships with depositors, who have heretofore
received interest on demand deposits, which waives a previous
charge for any service as an offset to interest previously
paid, will be construed as a 'device' within the meaning of
the Act and that the deposit of current funds and the withdrawal of funds following frequent or standing notice, in or
from a newly established special time deposit account, bearing
interest under written contract, will be evidence of the
purpose to evade the prohibition against interest payments
on demand deposits."
* * * * * * * * * * * * * *
i
X-7509
copy
CHICAGO CLEARING HOUSE ASSOCIATION
FEDERAL RESERVE B A M BUILDING
164 West Jackson Boulevard
CHICAGO
Governor Black;
page 2
July 15, 1933
" (3) The Committee recommends that no deposit be
considered a time deposit if at the time it is accepted
or at any subsequent time, the depositor, ty agreement
with his banker, may be permitted to borrow against said
time deposit at a lesser rate of interest than the rate
of interest for rediscounts charged by the Federal Reserve
Bank in that district."
It seems to us that their suggestion, (5) above
quoted, that any changes in existing relationships with depositors™ **** "be construed as a 'device1 within the meaning of the
Act", would be an unwise regulation for the Federal Reserve Board
to issue and might seriously hamper a member bank from conducting
its business and its relations with its customers in accordance
with what it considers conservative and proper banking policies.
Conceivably, a member bank might consider it a wise policy to
reduce a depositor's line of credit, or to increase the line of
credit, or to require collateral where it had not formerly required
security, or to waive security where it had formerly required it,
or to charge a lower interest rate or a higher interest rate in
accordance with market conditions, and the circumstances of the
particular case; but any regulation with such broad wording as
recommended by said two committees in (5) above quoted might be
construed as preventing the member bank from using its own proper
business judgment and discretion.
11
Certain clearing houses, including the Chicago Clearing House Association, have for years imposed reasonable exchange
charges on out-of—town checks deposited for immediate credit and
availability, while other clearing houses have not imposed such
exchange charges or have abolished them in more recent years since
the establishment and wide extension of the Federal Reserve collection system. Such a regulation, as proposed by said two committees in (5) above quoted, might hamper clearing houses or banks
which are still imposing exchange charges from changing or reducing
or abolishing such exchange charges if they should deem it wise to
do so at some later date, and might have the result of giving those
clearing houses or banks, which have heretofore abolished such
exchange charges, a distinct permanent advantage over those who
are still imposing such charges. I don't believe that the Federal
Reserve Board would wish to croate any such situation.
h5
copy
X-7509
CHICAGO CLEARING HOUSE ASSOCIATION
FEDERAL RESERVE BANK BUILDING
164 West Jackson Boulevard
CHICAGO
Governor Black:
page 3
July 15, 1933
With regard to recommendation (3) above quoted,
the Chicago Clearing House respectfully suggests that if the
Federal Reserve Board issues any such regulation, there be
added at the end of (3) above quoted, the following words: •»
"or charged by the Federal Reserve Bank of Hew York, which
ever is lower".
As you know, it has for a long time been the policy
of the Chicago Clearing House Association when fixing rates of
interest to be paid on commercial deposits, both demand and time,
to follow closely the rates fixed by the Hew York Clearing House,
Obviously, this is necessary because many large corporations
doing a national business carry accounts both in New York and
Chicago, and if there were any substantial variation in rates of
interest on deposits, the banks paying the higher rate would have
been loaded with money at a time when they could not use it to
advantage. Obviously, therefore when the Chicago Clearing House
banks are limited to the same rates of interest on time deposits as
the New York Clearing House banks they must also be in position
to compete on an equal basis with New York when fixing rates for
loans and similar accommodations to mutual customers.
If the Chicago Clearing House Association or any of
its officers or members can be of assistance to the Federal Reserve
Board in any way we shall be very pleased to have you call on us.
Respectfully submitted,
(Signed)
President.
Hon. Eugene R. Black,
Governor of the Federal Reserve Board,
Washington, D. C,
Frank R. Elliott
S
Frank R. Elliott
X-75i0 u o
copt
THE
AMERICAN BANKERS
ASSOCIATION
22 East 40th Street
Hew York, N.Y.
Branch Office
708-9 Colorado Building, Washington, D, C.
Washington, D. C.
July 11, 1933.
Hon. Eugene Black,
Governor of the Federal Reserve Board,
Washington.
My dear Governor Black:
Referring to the informal conference which you oo kindly granted
to the Joint Committees of the American Bankers Association and the Association of Reserira City Bankers on Saturday last, I beg to advise that
these Committees have carefully debated the questions involved in the
new banking law with respect to time and savings deposits, in regard to
which regulations must be issued by the Federal Reserve Board. The Committees have approved a report which I am herewith transmitting to you.
Following the suggestion made by Mr. Hamlin, I am also transmitting
an additional supply of copies of this report so that the members of the
Board as well as of your staff, as for instance, Mr. Wyatt, your General
Counsel, may each have a copy.
The Joint Committee has appointed a Sub-Committee from the membership of the two Committees, comprised of gentlemen from nearby points who,
if you so desire, will be happy to discuss this report with you and the
Board at your convenient opportunity.
On behalf of the Joint Committee, allow me to express our high appreciation of the courtesy extended to us and to assure you of our willingness
to cooperate with the Board in every way.
http://fraser.stlouisfed.org/
enclosures
Federal Reserve
Bank of St. Louis
Yours Very respectfully,
(Signed) Robert V. Fleming
Chairman of the Joint Meeting of the
Special Committees of the American Bankers
Association and the Association of Reserve
City Bankers.
COPY
X-7510-a
Washington, p. C.
July 10th, 1933
Hon, Eugene Black,
Governor of the Federal Reserve Board,
Washington.
Dear Governor Black;
The Special Committees of the American Bankers Association and the
Association of Reserve City Bankers, appointed "by these respective "bodies
to consider the effect of the interest regulations of the Banking Act of
1933 and which Committees have met jointly in Washington, July 8th and 9th,
first wish to express to the Federal Reserve Board our appreciation of the
courtesy extended to us in permitting us to meet informally with members of
the Board in order to discuss the various problems which this new legislation presents.
Our Committees wish to moke it clear that we have no other thought in
submitting this report to the Board than that of "being helpful in the way of
presenting for consideration what we consider to "be some of the practical
"banking and economic questions which will undoubtedly arise with respect to
regulations of interest upon time and savings accounts. We "believe it
essential that the regulations should "be drawn so as to prevent any evasion
of the law intentionally or unintentionally "by "bankers or the depositing
public. We "believe it is equally important that the true intent arid purpose
of the law shall "be served in every particular so that "banks shall be encouraged, and perhaps where such measures may "be necessary , compelled to
so direct their policies of interest payments as to produce as rapdily as
may "be expedient funds with which to restore depleted surplus and earnings
accounts and, at the same time, set up the means wherewith to meet the
requirements of the Insurance of Deposits provisions of the Banking Act.
A careful analysis of Section 11(b) of the Banking Act of 1933, in
relation to other pertinent sections of the Act to previously existing laws,
and in the light of Congressional intent, leads this Joint Committee to
three basic conclusions as regards the ends to be sought by Federal Reserve
Board regulations concerning the payment of interest on time and savings
deposits and the prevention of interest payments on deposits technically
in those classes but in reality demand deposits. These conclusions are
that the purposes of the Act are as follows:
1. To increase member bank earnings so that they may absorb losses
and meet deposit insurance fund assessments.
2. To restore commercial bank practice to a sound basis and reduce
interest competition for depositors' funds which tends to force
such funds into unwise investments.
3.
To place broad powers in the Federal Reserve Board in relation
to the foregoing purposes so that the initiation of important
changes in banking practice in these and other respects will be
accomplished
with the least disturbance to commerce and industry
X-7510-a
'
5 8
and without undue interruption of the natural flow of deposits.
Pursuant to these conclusions, the "broad purposes to he attained are
as follows:
(a) Definitions heretofore given of demand, time and savings deposits
for purposes of reserve calculations should be revised to lengthen
the minimum period for time deposits and to modify existing
practices with relation to savings deposits.
(b) Recognizing that the prohibition against interest payments on demand
deposits will continue and accelerate the increasing trend to time
deposits as evidenced in recent years and, if abused, destroy the
needed revenue gains to banks, time deposits should be for periods
of not less than 60 or 90 days and not more than one year, and rates
of interest fixed on such deposits, particularly under present
conditions, should in all probability be substantially lower than
heretofore generally paid. Sound reasons exist for the payment of
a higher rate on savings deposits in restricted form than the
maximum rate to be allowed on time deposits.
(c) Under the phrase in section 11 (b) prohibiting demand interest payment "directly or indirectly by any device whatsoever" the Board
will have authority to deal summarily with evasions certain to
develop through unsound competitive practice. These evasions may
take the form of the absorption of service, exchange or other
charges heretofore paid by the depositor, or undue activity both in
deposits and frequent withdrawals, after notice, in and from the
special time deposit account, making such account in reality a
demand deposit, although technically a time deposit subject to notice
While it is apparent that the Federal Reserve Board would depart from
its established policy and assune large responsibilities should it promulgate regulations in great detail, depriving management of its prerogatives,
it is nevertheless clearly indicated that the Board must define in general
terns practices to be followed by all member banks in these matters, and
thereafter, through the power conferred upon it to fix rates by localities
and according to conditions in those localities, deal swiftly and surely
with every unsound or evasive practice indulged in by any member bank.
To that end, this Committee recommends to the Board:
1.
That it explore the possibilities of regulations by the Federal Deposit Insurance Corporation to require, as an essential to their
fitness, that non-member banks which are permitted to bo covered
by the G-uaranty Fund should be subjected to regulation in regard to
the interest paid; in other words, that all banks in the Fund,
member banks and non-member banks, should be subjected to like
regulations on that point.
Similarly, through coordination of the activities and relationships
of other Governmental agencies, particularly the Reconstruction
Finance Corporation, cooperative agreements should be established
with relation to the interest practices and payments by mutual
savings banks.
X-7S10-a g g
- 3 2. That it shall "be the policy of the Federal Reserve Board to fix
national maximum rates for savings deposits and national maximum
rates for time deposits.
In its deliberations on this point, the Committee considered two
other methods of fixing the rates; (1) the fixing of rates by Reserve
Districts and (2) the fixing of rates "by Reserve Cities, Clearing House
Cities and Country Banks. While the Committee recognizes that from
time to time differences in rates will properly exist as between districts and as among the classes of cities described, it was felt that
under present conditions the fixing of rates on a national basis would
permit a freedom of action on the part of Clearing House Associations
and banks within the maximum rate, at the same time reserving to the
Board under its permissive powers full authority to correct inequities
or abuses.
3.
We recommend that the term Time Deposit shall include all deposits
evidenced by written contract, having a fixed maturity of not less
than 60 or 90 days, or without fixed maturity but repayable only
upon notice of not less than 31 days.
Before arriving at this conclusion the Committee discussed fully
whether or not the intent of the Act was to provide that all tin© deposits should be for a definite amount and of a fixed maturity and if
the minimum period for which interest should be paid on such deposits
should be longer than the 30 days heretofore contemplated by the definition of time deposits for reserve requirements.
4.
We recommend that the term Savings Deposit shall mean those deposits
in respect to which (a) The passbook must be presented to the bank whenever withdrawn
al is made;
(b) The depositor may at any time be required by the bank to
give notice of intended withdrawal of not less than 31 days
before the withdrawal is made; and
(c) The Bank's printed regulations accepted by the. depositor at
the time the account is opened, include the above requirements.
During the discussion on this subject, several members of the
Committee pointed to the possible construction of the Act which would
apparently make mandatory notice by the depositor of intention to withdraw, particularly since such notice is definitely required under the
terms of the Act in relation to time deposits. The view was expressed,
however, that since depositors in the Postal Savings System arc permitted
withdrawals without notice and upon forfeiture of interest, the regulations on savings deposits of member banks should not be upon a mandatory
notice basis.
The Board will observe that in the definition of Savings Deposits,
we have followed the language of Regulation D of the Federal Reserve Board,
eliminating the words "certificate or other similar form of receipt" as
- 4 -
X-7510-a
we "believe it is the intent of the law that there should "be two
separate classifications: (1) Time Deposits, and (2) Savings Deposits
strictly of a thrift character.
5. We recommend that the Board, "by regulation, issue a strong caution
to all member banks that any changes in existing relationships with
depositors, who have heretofore received interest on demand deposits,
which waives a previous charge for any service as an offset to interest previously paid, will he construed as a "device" within the
meaning of tho Act and that the deposit of current funds and the
withdrawal of funds following frequent or standing notice, in or
from a newly established special time deposit account, hearing interest under written contract, will he evidence of the purpose to
evade the prohibition against interest payments on demand deposits*
Pursuant to these recommendations, the Committee offers the following
observations:
1. In fixing the regulations covering the payment of interest by banks,
it is the opinion of the Committee that no balances shall receive any interest
unless said funds have remained on deposit at least 60 or 90 days.
2. In the event notice of withdrawal has been given but not exercised
at the maturity of such notice, said deposit, or that portion thereof on which
notice has been given, shall automatically become a demand deposit, without
interest.
3. The Committee recommends that no deposit be considered a time deposit
if at the time it is accepted or at any subsequent time, the depositor, by
agreement with his banker, may be permitted to borrow against said time deposit at a lesser rate of interest than the rate of interest for rediscounts
charged by tho Federal Reserve Bank in that district.
4. Recognizing the several reasons for the distinction between savings
deposits and time deposits, and that the dement of thrift and its encouragement is necessarily involved in any regulations affecting savings deposits,
and believing further that by inference the Federal Reserve Board is charged
in the Banking Act of 1933 with the duty of defining savings deposits, the
Committee makes the following observations:
(a) In order to prevent the abuse of savings deposits by shifting
from demand or time accounts into savings accounts to obtain the higher
rate of interest, the Committee feels that savings accounts should be
limited to accounts of individuals and that they should not include
deposits of firms, partnerships, corporations or any other business
accounts*
(b) That savings accounts should be limited as to the total amount
to be carried in the account, which limit it is recommended shall not
exceed $10,000*
(c) That the method of calculating interest and the period within
ihich interest is to be paid on savings accounts should be uniform.
X-7510-a
- 5(d) The Committee further believes that the above regulations with
respect to savings accounts must take into consideration the fact that in
certain large and important sections of the country commercial and other
"banks are in competition with mutual savings "banks. The Committee therefore "believes that the regulations adopted should not he retroactive "but
should apply only to new accounts opened or to deposits made hereafter in
accounts existing at the time the regulations of the Board shall "become
effective.
The Joint Committee expresses its appreciation of the suggestion made "by
members of the Board that we continue our study of those or other problems as
they may develop in the operation of the amendments to the Federal Reserve Act
contemplated in the Banking Act of 1933, and we appreciate the Board's invitation to present to it at any future time such studies, conclusions and
suggestions as may develop from our further study of these matters.
Since it will not be possible for the entire membership of the Joint Committees to remain in Washington, there has been appointed a Sub-Commjt tee of
this Committee which is authorized to discuss this report with the members of
the Board at such time as may be convenient to the Board.
Respectfully submitted,
SPECIAL COMMITTEE OF THE
AMERICAN BANKERS ASSOCIATION:
SPECIAL COMMITTEE OF THE
ASSOCIATION OF RESERVE CITY BANKERS:
(Signed)
Leonard P. Ayres, Cleveland, 0.
(Signed)
Richard S. Hawes, St. Louis, Missouri
(Signed)
Thomas B. McAdams, Richmond, Va.
(Signed)
John E. Hogan, Chicago, Illinois.
(Signed)
Robert Strickland, Jr., Atlanta, Qa.
(Signed)
Hugh H. McGee, New York, N. Y,
(Signed)
0. Howard Wolfe, Philadelphia, Pa.
(Signed)
James Ringold, Denver, Colorado,
(Signed)
Robert V. Fleming, Washington, B.C.
Chairman.
(Signed)
0. Howard Wolfe, Philadelphia, Pa.
(Signed)
H. Lane Young, Atlanta, Ga.
(Signed)
Richard R. Hunter, New York, N, Y,
Chairman.
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
SUBJECT:
X-7511
_
,
- ll U i y
, Q
J . £7
f
Qrjrr
X ? 0 0 •
Code Words in Connection With Shipment of Federal Reserve Bank Notes.
Dear Sin
The following code words have been designated for use,
effective July 24, in connection with requests to the Board for
shipment of Federal reserve "bank notes and advice from the Board
that arrangements are "being made for shipment of such notes:
CHINLACE
Please request Comptroller of the Currency to
ship (Federal Reserve Agent, Assistant Federal
Reserve Agent, Bank or Branch) Federal reserve
"bank notes as follows: (amount) (denomination)
Confirmation is being forwarded "by mail.
CHIHLAEK
Comptroller of the Currency is arranging with
the Bureau of Engraving & Printing for shipment
today to (Federal Reserve Agent, Assistant Federal Reserve Agent, Bank or Branch) of Federal
reserve "bank notes as follows: (amount) (denomi
nation).
These words should be inserted in the Federal reserve Telegraph
Code following the word CHINKIRK, on page 49.
Very truly yours,
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS,
FEDERAL RESERVE B O A R D
WASHINGTON
'
July 19, 1933.
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT:
Code Words for Advice to Federal Reserve
Bank and Agent of Federal Reserve Bank
Notes Redeemed.
Dear Sir:
In order to reduce the phraseology in telegrams sent "by the Treasurer
of the United States to Federal reserve hanks and "by the Comptroller of the
Currency to the Federal reserve agents covering notification of redemptions
of unfit Federal reserve "bank notes, the following code words have "been designated for use effective July 24:
TO THE FEDERAL RESERVE B A M
DROOPWORT
$
of unfit Federal reserve hank notes of your
hank have today "been redeemed and charged to the hank's
redemption fund for Federal reserve hank notes.
TO FEDERAL RESERVE A&EUT
DROOPYARD
$
of unfit Federal reserve hank notes of your
hank received today from the Treasurer of the United
States for destruction (verified and credited to your
account).
These words should he inserted in the Federal Reserve Telegraph
Code following the word DROOPING, on page 79.
Advice as to the denominational distribution of the Federal reserve
hank notes redeemed will he furnished to the bank on Form 6239, R.A., and to
the Federal reserve agent on Form 6239A, R. A.
Very truly yours,
TO GOVERNORS OF ALL
F. R. BANKS.
J. C. Noell,
Assistant Secretary.
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7513
July 19, 1933.
SUBJECT:
Code words for advice to Federal reserve
"bank and agent of Federal reserve notes
redeemed and charged to the bank's gold
redemption fund.
Dear Sir;
In order that there may "be a synchronization of charges by
the Treasurer of the United States and "by the Federal reserve banks
against the banks1 gold redemption funds on account of Federal reserve
notes redeemed, beginning July 24, 1933, the national Bank Redemption
Agency of the Treasury will advise the Federal reserve banks of such
redemptions by wire, using the following code word:
DE0PTA3IS $
of unfit Federal reserve notes of
your bank have today been redeemed and charged
against the bank's gold redemption fund for Federal reserve notes, and delivered for the account
of your agent to the Comptroller of the Currency
for verification and destruction.
The Office of the Comptroller of the Currency will advise the
Federal reserve agents by wire of the receipt from the Treasurer of the
United States of Federal reserve notes for destruction, using the following code word:
DHOFTIDE
$
of unfit Federal reserve notes of
your bank received today from the Treasurer of
X-7513
-2-
> '
G 5
the United States for destruction (verified and credited
to your account).
The above code words should be inserted in. the Federal reserve Telegraph
Code following the word DROPSY, on page 79.
Advice as to the denominational distribution of the Federal
reserve notes redeemed will he furnished, as at present, to the Federal reserve "banks on Form 6232-A, E.A. and to the Federal reserve
agents on Form 6232-B, R.A.
Digitized for TO
FRASER
GOVERNORS OF
Very truly yours,
J. C. Noell,
Assistant Secretary.
ALL F. R . banks.
6 6
X-7514
(IZTERPRETATIOM OF BANKING- ACT OF 1933)
Copies to be sent to all Federal Reserve Banks.
July 18, 1933,
Mr. Isaac B. Newton
Federal Reserve Agent
Federal Reserve Bank of San Francisco
San Francisco, California
Dear Mr. Newton:
Reference is made to your letter of July 8, 1933, with
regard to the capital stock which State member banks located in
certain States of the Twelfth Federal Reserve District are required
to have in order that they may establish out of town branches under
the provisions of Section 9 of the Federal Reserve Act, as amended
by the Banking Act of 1933.
Section 9 of the Federal Reserve Act, as amended, provides in part as follows:
"Any such State bank which, at the date of the
approval of this Act, has established and is operating
a branch or branches in conformity with the State law,
may retain and operate the same while remaining or upon
becoming a stockholder of such Federal reserve bank; but
no such State bank may retain or acquire stock in a Federal reserve bank except upon relinquishment of any branch or
branches established after the date of approval of this
Act beyond the limits of the city, town, or village in
which the parent bank is situated. Provided, however,
That nothing herein contained shall prevent any State member bank from establishing and operating branches in the
United States or any dependency or insular possession
thereof or in any foreign country, on the same terms and
conditions and subject to the same limitations and restrictions as are applicable to the establishment of
branches by national banks."
Section 5155 of the Revised Statutes, as amended by Section
23 of the Banking Act of 1933, requires, among other things, that a
national bank, located in a State having a population of one
million
6 7
X-7514
Mr. Isaac B. Newton
-2-
or more inhabitants, have a paid-in and unimpaired capital stock of
not less than $500,000, in order to establish a "branch outside of
the city, town, or village in which it is situated. A national bank,
located in a State having a population of less than one million and
having no cities located therein with a population exceeding one hundred thousand, must have a capital of not less than $250,000, in
order to establish such a branch. A national bank, located in a
State having a population of less than one-half million, and having
no cities located therein with a population exceeding fifty thousand,
must have a capital of not less than $100,000, in order to establish
such a branch.
Accordingly, under the above provisions of Section 9 of
the Federal Reserve Act, a State bank, located in a State with a
population of one million or more inhabitants, may not become or
remain a member of the Federal Reserve System and operate a branch
established after February 25, 1927, beyond the limits of the city,
town or village in which the parent bank is situated, unless such
bank has a paid-up and unimpaired capital stock of not less than
$500,000.
A State bank, located in a State having a population of
less than one million and having no cities with a population exceeding one hundred thousand, or located in a State having a population
of less than one-half million and having no cities with a population
exceeding fifty thousand, must likewise have an amount of capital equal
X-7514
Mr. Isaac B. Newton
-3-
to that required of national banks in such cases, respectively, as
above set out, in order to become or remain a member of the Federal
Reserve System and operate a branch established after February 25,
1927, beyond the limits of the city, town, or village in which the
parent bank is situated.
In any such case, a State member bank mast comply with the
other requirements applicable to the establishment and operation of
branches by a national bank beyond the limits of the city, town, or
village in which such bank is situated, including the requirement
that the aggregate capital of such bank and its branches shall not be
less than the aggregate minimum capital required by law for the establishment of an equal number of national banks situated in the
various places where such bank and its branches are situated.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
X-7515
(INTERPRETATION OP THE BANKING ACT OF 1933)
Copies to be sent to all Federal Reserve Banks#
July 18, 1933.
Hy dear Mr, Newton:
The Federal Reserve Board has referred to me an excerpt from a
letter addressed to you by Mr,
, President of (a national
bank), asking for certain interpretations of the Banking Act of 1933•
Please be advised that the word "issued" as used in Section 22
of the Banking Act of 1933 is interpreted by this office not to include
stock certificates of existing national banks transferred from seller
to buyer, or stock certificates of existing national banks called in and
subsequently re-issued, nor does it include stock certificates issued
after appropriate corporate action changing the par value of the stock
of the banks
It is the opinion of this office that the word "issued" is
limited in its meaning to the issue of stock in a now bank or in an increase of capital stock of an existing national bank.
With respect to the second question raised as to whether or not
(a national bank) could own all of the stock of the- First National Company as a charged off asset for liquidating purposes, please be advised
that a national bank can not legally acquire the stock of a company such
as tho First National Company.
Very truly yours,
Mr, Isaac B, Newton, Chairman,
Federal Reserve Bank,
San Francisco, California.
(Signed) J. F. T. O'CONNOR,
Comptroller.
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7516
July 21, 1933.
SUBJECT:
New Issue Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in
Government securities between Federal reserve banks, the
code word "NOXDYNA" has been designated to cover a new
issue of Treasury Bills, dated July 26, 1933, and maturing
October 25, 1933.
This word should be inserted in the Federal Reserve Telegraph Code book, following the supplemental code
word "NOXDYCE" on page 172.
Very truly yours,
J. C. Nooll,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
FEDERAL RESERVE B O A R D
X-7517
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
July 31, 1933.
SUBJECT;
Holidays during August. 1933.
Dear Sir:
The Federal Reserve Board has been advised that the following holidays will "be observed by Federal reserve banks and branches
during August:
Tuesday, August 1
Denver
Colorado Day
Saturday, August 36 Dallas
Election Day
"
"
" El Paso
"
"
"
"
" Houston
"
"
11
"
" San Antonio
"
"
On the dates given the offices affected will not participate
in either the transit or the Federal reserve note clearing through the
Gold Settlement Fund. Please include transit clearing credits for
each of the offices concerned with your credits for the following busi
ness day.
No debits covering shipments of Federal reserve notes for
account of the Federal Reserve Bank of Dallas should be made on Saturday, August 26.
Please notify branches.
Very truly yours,
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F.R. BANKS.
FEDERAL RESERVE B O A R D
<
WASHINGTON
X-7518
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
July 22, 1933.
SUBJECT:
Reports of violations of Section
23(g) of the federal Reserve Act,
Dear Sir:
Reference is made to the Board's letter of July 11, 1933,
(X-7493) with which was inclosed a copy of a letter addressed by
the Board to the Acting Governor of the Federal Reserve Bank of Atlanta with respect to the question who is to be considered an, "executive officer" of a member bank within the meaning of Section 22(g)
of the Federal Reserve Act, as amended by the Banking Act of 1933.
The Board stated that the determination of the question whether
persons should be prosecuted for violations of this provision of
law is a matter entirely within the jurisdiction of the Department
of Justice and that, accordingly, the Board does not feel that it
would be appropriate for it to undertake to express opinions upon
questions of this kind.
It should be understood, however, that ex-
aminers of member banks will be expected to call attention in their
reports of examination to all cases discovered by them where the
positions or duties of the officers involved are such as to make it
appear to the examiners that there has been a violation of the provisions of Section 22(g) of the Federal Reserve Act, as amended, and
X-7518
I
S
-2-
Federal reserve agents are requested to report the facts of any
such case coming to their attention to the local United States
District Attorney and to send a full report of the matter to the
Federal Reserve Board in triplicate, as requested in cases of
violations of other criminal statutes by the Board's letters of
April 4, 1923, (X-3683) and September 1, 1927 (X-4939),
Very truly yours,
Chester Morrill,
Secretary.
LETTER TO ALL FEDERAL RESERVE AGENTS.
Oj
X-7519
(INTERPRETATION OF BANKING ACT OF 1935)
Copies to be sent to all Federal Reserve Banks.
July 21, 1933.
Mr. J. F. T. O'Connor,
Comptroller of the Currency,
Washington, D. C.
Dear Mr. Comptrollers
The Federal Reserve Board has been advised by Mr. F. G.
Await, Deputy Comptroller of the Currency, in a memorandum under
date of July 6, 1933, that it is proposed to consolidate the
__________ Bank, a territorial banking institution on the Island of
Maui, and the (a national bank in Honolulu, T. H.,) under the
Act of November 7, 1918, as amended. Both banking institutions
are located in the Territory of Hawaii, and neither bank is a
member of the Federal Reserve System. Although the (national
bank) is a national banking association, it is located in a territory of the United States and is not required by law to become,
and has not become, a member of the Federal Reserve System.
From the memorandum submitted by Mr. Await, the Board
understands that
Company, Ltd., owns substantially all
the stock of both of these banks, and that Mr. _________
|
executive vice president of the national bank, desires to know
what steps
Company, Ltd., must take in order to obtain
from the Board a permit to vote the stock of the national bank
in connection with the proposed consolidation.
Since the (nation-
al bank) is not a member of the Federal Reserve System, there is
presented the question whether the provisions of Section 5144
X-7519
Mr. J. F» T. O'Connor
- 2 -
of the Revised Statutes, as amended, are applicable to a company
that owns a national bank which is not a member bank of the Federal
Reserve System.
It is the opinion of the ^oard that the provisions of the
said Section 5144 are not applicable to such a company, and, accordingly, that ____ _______ Company, Ltd., is not required by the said
Section 5144 to obtain a permit from the Board as a prerequisite
to its voting the shares of stock of the national bank which it owns.
Section 5144 of the Revised Statutes, as amended by Section
19 of the Banking Act of 1933, provides that shares of stock of a
national bank which are controlled by a "holding company affiliate"
may not be voted unless such "holding company affiliate" first obtains
a voting permit from the Board and such voting permit is in force at
the time such shares are voted. The provisions of Section 5144 are
applicable to every "holding company affiliate" of a national bank
and, accordingly, are applicable to
Company, Ltd., if that
company is a "holding company affiliate" of the national bank within
the meaning of the statute.
The definition of the term "holding company affiliate" is
found in Section 2 of the Banking Act of 1933, which reads as follows t
"Sec. 2. As used in this Act and in any provision of law a&ended by this Act—
*****
"(c) The term 'holding company affiliate'
shall include any corporation, business trust,
association, or other similar organization —
"(l) Which owns or controls, directly or
indirectly, either a majority of the shares of
X-7519
Mr. J. F. T, O'Connor
capital stock of a member "bank or more than 50
per cent-urn of the number of shares voted for
the election of directors of any one "bank at
the preceding election, or controls in any manner the election of a majority of the directors
of any one bank; or
11
(2) For the "benefit of whose shareholders
or members all or substantially all the capital
stock of a member bank is held by trustees."
(italics supplied.)
After considering the above definition, it is the opinion of
the Board that the term "holding company affiliate", as used in the Banking Act of 1933, means a corporation, business trust, association, or
other similar organization which is affiliated with a member bank in any
manner set forth in the definition above quoted, and that it does not
have reference to, or include, an organization which is not affiliated
with a member bank.
Although it appears that the word "bank" is twice
used in subdivision (l), sub-paragraph (c) of Section 2, without the
qualifying word "member", the first reference to a banking institution
in this subdivision is to a "member bank", and the reference in the subdivision following is likewise to a "member bank".
In view of such ref-
erences and of the context of the Act, the Board is of the opinion that
the word "bank", as used in said subdivision (l), connotes a "member
bank"; and that the term "holding company affiliate" is limited in its
meaning to an organization which is affiliated with a member bank in
the manner set forth in Section 2, sub-paragraph (c) of the Act.
cordingly, although
Ac-
Company, Ltd., owns substantially all
the stock of the national bank, and is affiliated with such bank in
the manner set forth in Section 2 (c) of the Act, it is not a "holding
company affiliate" of such bank by reason of the fact that the national
X-7519
Mr. J. F. T. O'Connor
- 4 -
bank with which it is affiliated is not a member bank of the Federal
Reserve System. Therefore, since
:
I
_____ Company, Ltd., is not a
"holding company affiliate" of the national bank, it does not appear
to be necessary for the company to obtain a permit from tho Board before voting the stock of the national bank which it owns.
The
Bank is neither a national banking association
nor a member bank of the Federal Reserve System; the lav/ does not require the holding company of any such institution to obtain a permit
to vote the stock owned by the holding company in such institution; and,
accordingly, it will not be necessary for _____ ________ Company Ltd., to
obtain a permit to vote the stock of this bank.
Very truly yours,
(s) CHESTER MORRILL
Chester Morrill,
Secretary.
78
X-7520
(INTERPRETATION OF BANKING ACT OF 1933)
Copies to be sent to all Federal Reserve Banks.
July 22, 1933
Mr. J. F. T. 01 Connor,
Comptroller of the Currency,
Washington, D. C.
Dear Mr. Comptrollers
In a memorandum dated June 29, 1933, Mr* F. G. Await, Deputy
Comptroller of the Currency, requested a ruling on the question whether
a member bank, which has purchased certain assets from a conservator or
receiver of a national bank, may lawfully pay interest on a deposit of
funds representing the unexpended portion of the purchase price credited
in a lump sum to the account of such conservator or receiver by the
purchasing bank, pursuant to a provision in the contract, reading as
follows i
"From and after tho expiration of sixty days from
date of delivery of assets hereunder, Purchaser will pay to
the Conservator interest upon the unexpended balance remaining in said lump sum credit account at the rate of 1jgfo per
annum upon the daily balance thereof, computed in the- same
manner in which interest is now computed upon depository accounts of the Comptroller of the Currency, said interest
payments, if any so made, to be treated and considered as
part of the 1 Class B Assets' for all purposes of this contract, and Purchaser will furnish adequate security for such
remaining unexpended balance to the satisfaction of tho Conservator."
Since the exact effect of such a provision can not be determined
without reference to the other provisions of the contract in which it
is incorporated, the Board must consider each such case with reference
to tho provisions of the particular contrabt, and cannot undertake to
express an opinion which could be considered as applicable to all cases
Mr. J. F. T. O'Connor —
2
X-7520
involving contracts containing such a provision*
However, it is under-
stood that Mr. Await has particular reference to a certain contract between (a national bank) and Mr.
, Conservator of the
, which contract was approved by the Supremo
Court of
on
, and become effective
on such date in accordance with the terms thereof. Under such contract,
the national bank purchased certain assets from the conservator of the
savings bank, and, in consideration of the tramsfor of such assets to it,
the national bank credited to the conservator, upon its books, a lump
sum equal to the amount of the assets purchased, and agreed to pay interest thereon in accordance with the provision quoted.
Section 19 of the Federal Reserve Act, as amended by Section
11(b) of the Banking Act of 1933, docs not prohibit tho payment of interest on deposits payable on demand in accordance with tho terms of a
contract which was entered into in good faith and was in force on Juno
16, 1933. However, it forbids renewal or extension of any contract which
includes a provision for the payment of interest on deposits payable on
demand which are not within a class excepted by the statute, unless such
contract is modified so as to eliminate the provision for the payment
of interest, and it requires member banks to take such action as may be
necessary to eliminate payment of interest on such deposits as soon as
possible consistently with their contractual obligations.
In tho instant case, it appears that the contract for the
payment of interest by the (national bank) on tho "unexpended balance
Mr. J. F. T. O'Connor —
X-7520
3
remaining in said lump sum crod.it" was ontorod into in good faith and
was in force on June 16, 1933; that it is the valid obligation of the
(national bank); that it is not subject to cancellation or modification
at the option of the said national bank; and, accordingly, that interest may be paid on such deposit in accordance with the terms of such
contract for the period provided for therein.
Very truly yours,
Chester Morrill,
Secretary.
X-7521
(Interpretation of Banking Act of 1933)
Copies to "be sent to all Federal Reserve Banks.
July 22, 1933.
Mr.
, President
Bank,
Dear Sir:
Your letter of June 23, 1933, addressed to the Comptroller of
the Currency and requesting advioo as to the effective date of the
amendments to the 10th paragraph of Soction 9 of the Federal Reserve
Act contained in the Banking Act of 1933 end as to the capital -which a
now State bank located in a city vrith a population of 800 inhabitants
would be required to have in ordor to bo eligible for admission to
membership in the Federal Reserve System, has been referred to the Fed
oral Reserve Board for reply.
The amendments to the 10th paragraph of Soction 9 of tho Federal Reserve Act contained in the Banking Act of 1933 became effective
on Juno 16, 1933, the date of tho approval of tho Banking Act of 1933.
The 10th paragraph of Section 9 as amended reads as follows:
"No applying bank shall bo admitted to membership in a
Federal reserve bank unless it possesses a paid-up unimpaired
capital sufficient to entitle it to become a national banking
association in the place whore it is situated under the provisions of the National Bank Act, as amended:
Provided,
That this paragraph shall not apply to State banks and trust
companies organized prior to tho date this paragraph as amended
takes effect and situated in a place the population of which
does not excood throe thousand inhabitants and having a capital
of not loss than $25,000, nor to any State bank or trust company which is so situated and which, while it is entitled to
the benefits of insurance under soction 12B of this Act, increases its capital to not loss than $25,000."
8 8
Mr.
—
X-7521
2
Undor the requirements of this provision of law, a State bank
organized on or after June 16, 1933, in a place with a population of
not exceeding 3,000 inhabitants is required to have a capital of
$50,000 in order to bo eligible for membership in the Federal Reserve
System, unless it is at the time entitled to the benefits of insurance
undor Section 12B of tho Federal Reserve Act, in which* event it is
eligible for membership in tho Federal Reserve System if it has a
capital of not loss than $25,000#
If you decide to organize tho now
State bank referred to in your letter, it is suggested that you communicate with the Federal Reserve Agent at the Federal Reserve Bank of
, -who will be glad to give you detailed information with regard to the requirements for admission to membership in the Federal
Reserve System*
Very truly yours,
Chester Morrill,
Secretary.
X-7522
(INTERPRETATION OF BANKING ACT OF 1933)
Copies to be sent to all Federal Reserve Banks.
July 22, 1933.
Mr. C. C. Walsh,
Federal Reserve Agent,
Federal Reserve Bank of Dallas,
Dallas, Texas.
Dear Mr. Walsh:
Receipt is acknowledged of your letter of July 11, 1933,
in •which you request to be advised -whether, under the provisions
of section 9 of the Federal Reserve Act, as amended by saction 5(c)
of the Banking Act of 1933, it will bo nocessary for (a member bank)
to obtain a report of condition from tho _____ _____ State Bank,
______ _____ Texas. and to publish such report under the same conditions as govern its own condition report.
From the copy of the letter signed by
, Presi-
dent of the (member bank) _________ ______ under date of July 8,
1933, which you inclosed rath your letter of July 11, 1933, the
Board understands that the ______ ______ State Bank was placed in
voluntary liquidation on January 31, 1933, pursuant to appropriate action by its stockholders; that it has no liabilities of
any kind except in indebtedness in the amount of $9,900, which
represents the balance due on a lorn made by the (member bank)
to the
______ State Bank; and that it is authorized to do no
business of any kind except to collect its loans outstanding
and sell its other property, to satisfy its indebtedness to the
(member bank) and to distribute any assets remaining to its
stockholders.
X-7522
-
2 "
It has been noted that the Texas statutes provide that,
when the requisite number of shareholders of a State bank vote in
favor of placing such bank in liquidation, the bank's directors
must proceed forthwith to wind up the business of such corporation.
In view of such provision, and of the advice that the _____ ______
State Bank is in course of voluntary liquidation and is not authorized to engage in any business except such as may be necessary
or incidental to the winding up of its affairs, it is the opinion
of the Board that the instant situation does not come within the
purview of the Banking Act of 1933, and accordingly, that it will
be unnecessary for the (member bank) to obtain and publish a report of condition of the _______ ______ State Bank*
Very truly yours,
(s) CHESTER MORRILL
Chester Morrill
Secretary
(INTERPRETATION OF BANKING- ACT OF 1933)
Copies to be sent to all Federal reserve banks.
July 22, 1933.
Mr.
City of
,
, Corporation Counsel,
Dear Sir:
Receipt is acknowledged of your letter, under date of
July 13, 1933, which was addressed to the Honorable
United States Senator, and referred by Senator
Federal Reserve Board for reply.
'
to the
You raise the question whether
(a national bank) may pay interest on deposits made by the City
of
which are payable on demand.
Section 19 of the Federal Reserve Act, as amended by
section 11(b) of the Banking Act of 1933, reads in part as follows
"No member bank shall, directly or
indirectly by any device whatsoever, pay any
interest on any deposit which is payable on demand;
Provided. That nothing herein contained shall be
construed as prohibiting the payment of interest in
accordance with the terms of any certificate of deposit or other contract heretofore enterel into in
good faith whitii is in force on the date of the
enactment of this paragraph; but no such certificate
of deposit or other contract shall be renewed or extended unless it shall be modified to conform to this
paragraph, and every member bank shall take such action
as may be necessary to conform to this paragraph as soon
as possible consistently with its contractual obligations: Provided, however, That this paragraph shall not
apply to any deposit of such bank which is payable only
at an office thereof located in a foreign country, and
shall not apply to any deposit made by a mutual savings
bank, nor to any deposit of public funds made by or on
behalf of any State, county, school district, or other
subdivision or municipality, with respect to which payment of interest is required under State law."
X-7524
w ew
3
Under the provisions quoted, a member bank may not payinterest on a deposit payable on demand, unless it is obligated to
do so under a bona fide and binding contract, which was in force on
June 16, 1933, or unless the deposit in question is one of a class
excepted by statute.
The statutory prohibition against payment of
interest on deposits payable on demand does not apply to a deposit
of public funds made by or on behalf of any State, county, school
district, or other subdivision or municipality, provided that payment of interest with respect to such deposit is required under State
law.
In accordance with such provisions and in the absence of
a State law requiring such payment of interest, the (a national bank)
may not pay interest on any deposit of such bank made by or on behalf
of the City of
which is payable on demand, unless the bank
is obligated to do so under a valid and binding contract which was
entered into in good faith and was in force on June 16, 1933.
Two copies of the Banking Act of 1933 are inclosed
herewith.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE B O A R D
X-7525
July 27, 1933.
SUBJECT:
New Issue Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in
Government securities between»Federal reserve banks, the
code word "NOXDYS" has been designated to cover a new
issue of Treasury Bills, dated August 2, 1933, and maturing
November 1, 1933.
This word should be inserted in the Federal Reserve Telegraph Code book, following the supplemental code
word "NOXDYNA" on page 172.
Very truly yours,
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BABES.
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE B O A R D
X-7526
July 28, 1933.
SUBJECT; Expense, Main Lines, Leased Wire
System, June, 1953.
Dear Sir:
Inclosed herewith you will find two mimeographed
statements, X-7526-a and X-7526-b, covering in detail
operations of the main lines, Leased Wire System, during
the month of June, 1933.
Please credit the amount payable by your bank for
your share of the expense of the Leased Wire System, to
the Federal Reserve Bank of Richmond in the transit clearing, for the account of the Federal Reserve Board, and
advise the Federal Reserve Bank of Richmond by wire the
amount and purpose of the credit.
Very truly yours,
Fiscal Agent.
Inclosures.
TO GOVERNORS OF ALL F. R. BANKS.
X-7526-a
REPORT SHOWING CLASSIFICATION AMD EMBER OF WORDS TRANSMITTED OVER MAIN LINES
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF JUNE, 1933.
Business
reported
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total
Words sent by
New York chargeable to other
F. R. Banks (1)
Uo,oU7
179,905
36,001
56,733
63,429
57,376
92,012
67,188
37,382
71,092
56,812
96,032
854,009
2,190
-
2,351
2,350
2,423
2,539
2,816
2,663
2,303
2,558
3,131
3,858
29,182
F. R. Board business
Net Federal
reserve
bank
business
42,237
179,905
38,352
59,083
65,852
59,915
94,828
69,851
39,685
73,650
59,943
99,890
883,191
Percent of total
bank business (*)
4.78
20.37
4.34
6.69
7.46
6.78
10.74
7.91
4.49
8.34
6.79
11.31
100.00
354,731
Reimbursable "business Incoming and Outgoing
Total words transmitted over main lines
(*)
These percentages used in calculating the pro rata share of leased wire expense as shown
on the accompanying statement (X-7526-b).
(l) Number of words sent by New York to other F. R. Banks for their sole benefit charged to
banks indicated in accordance with action taken at Governors' Conference
November 2-4, 1925.
1,237,922
522,351
1,760,273
X-7526-b
REPORT OF EXPEtTSE m i ? LINES
FEDERAL RESERVE LEASED WISE SYSTEM, JUHE, 1933.
Name of Bank
Boston
Hew York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
-Kansas CityDallas
San Francisco
JPederal Reserve Board
Total
Operators'
salaries
Operators'
overtime
$260.00
1,iso.00
225.00
306.66
211.00
243.00
4,020.42 (#)
195.00
262.67
Wire
rental
$ 7.00
$260.00
1,187.00
225.00
-
230.00 (&)
4,039.42
$26.00
195.00
262.67
273.00
251.00
380.00
15,680.61
$23,744.36
273.00
380.00
15,691.86
$15,921.86
Reimbursable charges:
Treasury Department
$3,l65.4l
Exp. Uat. Bkg. Emergency Act, 3-9-33
510.02
Reconstruction Finance Corporation
3,245.32
Federal Home Loan Bank Board . . .
2.55
Comp.Currency Div.Insolv.Nat.Banks .
75-26
Farm Credit Administration :
Federal Farm Loan Bureau
16.98
Federal Farm Board
30.47
less: Reimbursable charges
{&) Main line rental, Richmond-Washington.
(#) Includes salaries of Washington operators.
(*) Credit.
(a) Amount reimbursable to Chicago.
306.66
441.00
243.00
19.00
251.00
$7,807.75
Total
expenses
Pro rata
share of
total
expenses
$798.18
3,401.45
724.71
1,117.12
1,245.70
1,132.15
1,793.40
1,320.84
749.76
1,392.64
Credits
$260.00
1,187.00
225.00
306.66
441.00
243.00
4,039.42
1,688.58
195.00
262.67
273.00
251.00
380.00
$16,698.35
$8,063.75
1,133.82
Payable to
Federal
Reserve
Board
$538.18
2,214.45
499.71
810.46
804.70
889.15
2,246.02 (
1,125.84
487.09
1,119.64
882.82
1,508.58
$10,820.62
2,246.02 (
$ 8,634.60
$7,046.01
$16,698.35
T -
FEDERAL RESERVE B O A R D
X-7527
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
July 29, 1933 •
T H E FEDERAL RESERVE B O A R D
SUBJECT:
Regulations regarding (l) Open Market
Operations and (3) Relations with Foreign Banks and Bankers.
Dear Sir:
The Federal Reserve Board has given careful consideration to the recommendations submitted to it by the
Federal Open Market Committee during its meetings in Washington
on July 20 and 21, 1933, and to the suggestions which have
"been received from the various Federal reserve agents, in
regard to the tentative drafts of regulations governing open
market operations and relations with foreign "banks and "bankers
which were sent to all Federal Reserve Agents in the Board's
letter of July 19, 1933 (X-7498).
These regulations have
"been revised in the light of such recommendations and suggestions; and at a meeting of the Board on July 28, 1933, were
adopted for issuance on August 10, 1933.
They are to he pub-
lished in the August Bulletin and also printed in separate
pamphletsA mimeographed copy of each of these regulations
is inclosed herewith,
Inclosures,
http://fraser.stlouisfed.org/TO THE
Federal Reserve Bank of St. Louis
Very truly yours,
Chester Morrill,
Secretary.
CHAIRMEN AH) GOVERNORS OF ALL F. R. BANKS.
X-7528.
Board of Directors,
Dear Sirs:
The Federal Reserve Board approves the application of
for stock in the Federal Reserve Bank of
,
subject to the numbered conditions hereinafter set forth.
1. Except v/ith the permission of the Federal Reserve Board,
such bank shall not cause or permit any change to be made
in the general character of its business or in the scope
of the corporate powers exercisedby it at the time of
admission to membership.
£. Such bank shall at all times conduct its business and exercise
its powers with due regard to the safety of its depositors.
3. Such bank shall maintain its loans r / i t h i n the limits
prescribed by the lav.rs of the State in which it is located.
4. The board of directors shall not permit loans to directors,
officers, employees, principal stockholders and/or their
interests including loans to, or upon the security of stocks
of, corporations in which any of them have substantial
interests, to assume unduly large proportions or to endanger
the bank's solvency or the liquidity of its assets, and the
board of directors shall give special attention to all such
loans.
5. Such bank shall maintain adequate credit data in connection
v/ith all unsecured loans.
6. Such bank shall keep past due paper and overdrafts at a
minimum, and shall not hold any checks in cash items to avoid
overdrafts.
7. Except with the permission of the Federal Reserve Board, such
bank shall not purchase or acquire through any device whatever
any stock of any other bank, trust company, or other corporation
of any kind or character except in satisfaction or protection of
2 -
X-7528.
debts previously contracted in good faith; and all stock
acquired in satisfaction or protection of debts shall be
disposed of within six months from the date on which it was
acquired unless the time is extended by the Federal Reserve
Board on the application of such bank for good cause shovm.
8. Such bank shell not permit any investment in a bank building
or in a site for a bank building to assume such proportions
as, in the judgment of the Federal Reserve Board, would
endanger the bank's solvency or liquidity or would otherwise
be unduly large or improper, and before any investment is made
in a bank building or a site for a bank building the bank
shall refer the matter to the Federal Reserve Board for
consideration.
9. Such bank shall not reduce its capital stock except with the
permission of the Federal Reserve Board.
10. Such bank shall not pay any dividends which will reduce its
surplus below an amount equal to at least 20 per cent of its
capital stock, and if at any time its surplus should be less
than 20 per cent of its capital stock it shall carry to its
surplus account annually , or for any shorter period covered
by each closing of its books, not less than 50 per cent of
its net earnings for any such period after deducting all losses
and providing reserves for depreciation.
11. Such bank shall reduce to an amount equal to 10 per cent of
its capital and surplus all balances in excess thereof, if any,
which are carried with banks or trust companies which are not
members of the Federal Reserve System, and shall at all times
maintain such balances within such limits.
12. Except with the permission of the Federal Reserve Board, such
bank shall not, after the date of its admission to membership,
engage in the business of issuing or selling, either directly
or indirectly (through affiliated corporations or otherwise)
notes, bonds, mortgages, certificates, or other evidences of
indebtedness representing real estate loans or participations
therein, either with or without a guarantee, indorsement or
other obligation of such bank or an affiliated corporation.
15. Such bank may accept drafts and bills of exchange drawn upon it
of any character permitted by the laws of the State of its
incorporation; but the aggregate amount of all acceptances outstanding at any one time shall not exceed the limitations
imposed by section 13 of the Federal Reserve Act, that is, the
aggregate amount ox acceptances outstanding at any one time which
are drawn for the purpose of furnishing dollar exchange in
countries specified by the Federal Reserve Board shall not exceed
50 per cent of its capital and surplus, and the aggregate amount
93
X-7-528.
of all other acceptances, whether domestic or foreign, outstanding at any one time shall not exceed 50 per cent of its capital
and surplus, except that the Federal Reserve Board, upon the
application of such bank, may increase this limit from 50 per
cent to 100 per cent of its capital and surplus 3 provided, however, that in no event shall the aggregate amount of domestic
acceptances outstanding at any one time exceed 50 per cent of
the capital and surplus of such bank.
14. The board of directors of such bank shall adopt a resolution
authorizing the interchange of reports and information between
the Federal Reserve Bank of the district in which such bank is
located and the banking authorities of the State in which such
bank is located.
15. Such bank shall maintain an amount of paid-up and unimpaired
capital and unimpaired surplus which, in the judgment of the
Federal Reserve Board, will be adequate in relation to its total
deposit liabilities, having due regard to the general principle
that a bank's capital and surplus ordinarily should not be less
than one-tenth of the average amount of its aggregate deposit
liabilities and, in some circumstances, should be more than onetenth of such amount.
~/\ -a- ->r
•>(- >r
If the applicant bank is exercising
trust powers, the following three
conditions should be included:
16. Such bank shall not, after the date of its admission to membership, invest trust funds held by it in obligations of the bank's
directors, officers, employees or their affiliations or corporations affiliated with the bank.
17. Except with the permission of the Federal Reserve Board, such
bank shall not, after the date of its admission to membership,
invest the funds of various trusts held by the bank in participations in pools of mortgage bonds or other securities, and the
funds of all such trusts shall be invested separately from each
other; provided, however, that the Federal Reserve Board will not
object to the collective invescnent of small amounts of trust
funds where the cash balances to the credit of certain trust
estates are too small to be invested separately to advantage, if
the bank owns no participation in the securities in which such
collective investments are made and has no interest in them
except as trustee or other fiduciary.
%
X-7528.
OR
18. If trust funds held by such bank are deposited in its banking
department or otherwise used in the conduct of its business, it
shall deposit with its trust department security in the same
manner and to the same extent as is required of national banks
exercising fiduciary powers. * * * * # *(Insert special condition).
Under the provisions of the Federal Reserve Act, the Federal Reserve
Board is specifically required to consider the financial condition and the
character of the management of each bank or trust company applying for membership in the Federal Reserve System and whether or not the corporate powers
exercised by it are consistent with the purposes of the Federal Reserve Act,
and the conditions of membership described above are designed to maintain a
sound condition in banks admitted to membership and to insure that powers
exercised after their admission will be consistent with the purposes of the
Federal Reserve Act.
Your particular attention is called to the condition
numbered one above which requires that after your bank is admitted to membership there shall not be any change in the general character of its business
or in the scope of the corporate powers exercised at the time of admission
except with the permission of the Federal Reserve Board. Accordingly, if after
the admission of your bank to membership you should desire to make any change
in the general character of your business or in the scope of the corporate
powers exercised at the time of aduission, it will be necessary for you to
obtain the permission of the Federr.1 Reserve Board before making any such change,
•if- -x -x- * * if the State law or bank's charter permits it to exercise fiduciary
powers but such powers were not being exercised at the time of its application
for membership, the following statement should be included in this letters
In this connection it appears that your bank may under its charter exercise
fiduciary powers, but it is not now exercising such powers, and if you hereaiter
1
—
"
X-7528.
5 ""
f?
desire to exercise fiduciary powers, or exercise any other powers not now
exercised, you should obtain the permission of the Federal Reserve Board
before doing so. * It may also be noted that an acquisition by your bank of
the assets of another institution through merger, consolidation or purchase
may result in a change in the character of your assets or the scope of your
functions within the meaning of the condition numbered one, and if at any time
you anticipate making any such acquisition, a detailed report setting forth
all of the facts in connection with the transaction should be made promptly to
the Federal Reserve Agent, the local representative of the Federal Reserve
Board at the Federal Reserve Bank of your district.
* (If sentence regarding fiduciary powers is not included in letter, this
sentence should begin: In this connection, it may be noted that an
acquisition etc.)
In connection with condition numbered fifteen above and in the absence
of any special action by the Board, if in any period of twelve months ending on
the thirtieth day of November the average amount of deposit liabilities of your
bank during such period, as determined on the basis of reports made by your
bank to the Federal Reserve Bank for the purpose of computing its required
reserve, exceeds ton times the aggregate amount of" your bank's paid-up ana
unimpaired capital stock and unimpaired surplus, the Board will expect that
your bank, as soon as possible and within the next succeeding six months, will
increase the aggregate amount of its paid-up and unimpaired capital and unimpaired surplus to an amount at least equal to 10 per cent of the average amount
of its deposit liabilities during such twelve months.
-x-
#
Insert any comments to the bank.
*
—
6
X-7528.
—
^
It is suggested that, if at any time you should make any change in
or amendment to your charter, you should advise the Board through the Federal
Reserve Agent at the Federal Reserve Bank of your district, furnishing copies
of any documents involved, in order that it may be determined whether such
change affects in any way your status as a member of the Federal Reserve
System.
Acceptance of the conditions of membership contained in this letter
should be evidenced by a resolution adopted by your board of directors and
spread upon its minutes, and a certified copy of such resolution, together
with advice of your compliance v/ith the conditions numbered (prior condition),
should be filed with the Federal Reserve Agent at the Federal Reserve Bank of
The Federal Reserve Agent will thereupon arrange for the
Federal Reserve Bank to accept payment for an appropriate amount of Federal
reserve bank stock, to accept the deposit of your required reserve balance and
to issue the appropriate amount of Federal reserve bank stock to you. The
time within which your admission to membership in the Federal Reserve System
in the manner described may be accomplished is limited to thirty days from the
date of this letter, unless you apply to the Federal Reserve Board and obtain
an extension of time. V.'hen the Board is advised that all of the requirements
have been complied with and that the appropriate amount of Federal reserve bank
stock has been issued to your bank, the Board will forward to you a formal
certificate of membership in the Federal Reserve System.
Very truly yours,
Secretary.
X—7528-a.
Federal Reserve Agent,
Federal Reserve Bank of
Dear Mr.
,
:
This is to advise you that the Federal Reserve Board has
approved the application of the (name of applicant bank and location),
for membership in the Federal Reserve System, subject to the conditions
contained in the inclosed letter which you are requested to forward to
the board of directors of that institution. Two copies are also inclosed, one of v/hich is for your files and the other of v/hich you are
requested to forward to the (Head of the State Banking Department) for
his information.
Comments and suggestions to Agent. * * * * * *
* # If officers and employees are not bonded or not adequately
bonded, this paragraph should be inserted to conform with
the particular circumstances of the case; * *
According to the report of examination of the (name of bank),
made by one of your examiners as of (date of examination), (name of
officer of officers concerned) appear to be inadequately bonded (or are
not bonded).
It will be appreciated, therefore, if you will ascertain
whether these officers, even though they may be inactive in the management of the bank, have access to its cash and securities, and, if so,
it is suggested that you request the board of directors of the bank to
give careful consideration to the advisability of having suitable bonds
provided.
Very truly yours,
Secretary.
X-7529
July 2S, 197,5.
(INT13RPRETATlOta OP BAKKll^ ACT OF 19S3)
Copies to be serve to all Federal Rer:cr--e Ban-cs.
telegram
Olson - Denver
Please advise President
National Bank as
follows: Referring your wire July 27 section 19 of Federal Reserve Act as amended by section 11(b) of Banking
Act of 1933 does not forbid member bank to pay interest
on deposit of public funds payable on demand made by or
on behalf of any State, county# school district or other
subdivision or municipality with respect to which payment of interest at the time of accrual thereof is required under State law, regardless of whether State law
in question was in effect on date of approval of Banking
Act of 1933 or is enacted b;y Statu legislature at a
later date.
MORRILL
100
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE B O A R D
X-7530
August 1, 1933.
SUBJECT: New Issues of Treasury Notes
and Treasury Bonds.
Dear Sir:
In connection with telegraphic transactions between
Federal reserve banks covering Government securities, the
following code words have been designated to cover new issues of Treasury Notes and Treasury Bonds:
"HOIEYRAX" 1 5/8# Treasury Notes, Series B-1935,
to be dated August 15, 1933, and due
August 1, 1935.
"NOWCEDED" 3 1/4$ Treasury Bonds of 1941, to be
dated August 15, 1933, and due August 1,
1941.
These code words should be inserted in the Federal
Reserve Telegraphic Code book, on page 172.
Very truly yours,
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
X-7532
(INTERPRETATION OF BANKING ACT OF 1933)
Copies to be cent to all Federal Reserve Banks.
August 2, 1933.
Mr*
, President,
of
,
3
•
Dear Sirs
Your letter of July 14, 1933, addressed to the Comptroller
of the Currency, has been referred to the Federal Reserve Board for
reply.
From the statements and other information in your letter,
the Board understands that you own a majority of the outstanding stock
of the ______ National Bank of
National Bank of
State Bank of
,
,
,
,
,
,
, of the
, and of the ____________
, respectively; and that you
and your wife, who own 189%- shares of stock of the _______ National Bank
of
, out of a total of _____ shares outstanding, also own a
majority of the stock of the State Bank of
,
,
. From
the list of stockholders which you submitted, it appears that certain
other individuals own stock in more than one of the banks in the group.
You state that, notwithstanding such common stock ownership, each bank
in the group is operated independently of each other bank in the group,
and you request to be advised whether, under the circumstances stated,
the national banks and the two State banks, neither of which is a
member of the Federal Reserve System, are "affiliates11 of each other
within the meaning of Section 2, subparagraph (b) of the Banking Act of
1933.
X-7532
•• 2 *•
102
It is the opinion of the Board that the __________ National
Bank of
of
, the _______
State Bank of
, and the State Bank
, are "affiliates" of the ______ National Bank of
and that the
Bank of
National Bank of
, the
;
State
, and the State Bank of ______ are "affiliates" of the
__________ National Bank of
. Neither national bank is an "affili-
ate" of either State bank, and neither State bank is an "affiliate" of
the other.
Section 2, subparagraph (b) of the Banking Act of 1933,
provides in part that "Except where otherwise specifically provided,
the term 'affiliate' shall include any corporation, business trust,
association, or other similar organization * * * * * *
"(2) Of which control is held * * * through stock
ownership or in any other manner, by the shareholders
of a member bank who own or control * * * a majority
of the shares of such bank."
Under this definition, in deciding whether a corporation,
business trust, association, or other similar organization is an
"affiliate" of a member bank, the determinative factor is whether
control of such organization is held by shareholders of a member
bank who own or control a majority of the shares of such member
bank, and not whether such organization and member bank are operated
103
- 5 -
X-7532
independently of each other. Accordingly, since shareholders of the
______ National Bank of
, a member bank, who own a majority
of the shares of stock of such bank, own more than 50$ of the outstanding stock of the other banks in the group, it appears that control of each such other bank is held through stock ownership by
shareholders of a member bank who own more than a majority of the
shares of the member bank, and it is the opinion of the Board that
each such other bank is an "affiliate" of the ________ National Bank of
within the moaning of the Banking Act of 1933. Likewise,
it appears that the ________ National Bank of
State Bank of
, and the State Bank of
by shareholders of the _________ National Bank of
, the ___________
are oach controlled
, who own a
majority of the shares of such member bank, and that such banks are
"affiliates" of the ________ National Bank of ______ within the meaning
of the Banking Act of 1933.
You will note that the definition quoted above has reference
to corporations, business trusts, associations, and other similar
organizations which are owned or controlled by shareholders of a member
bank, and does not include any such organization which is not controlled
by shareholders of a member bank. Accordingly, the national banks are
not "affiliates" of the State banks, as that term is used in the definition quoted, even though they are controlled by shareholders of the
104
- 4 -
X-7532
State banks "who own a majority of the shares of such State banks,
for the reason that the State banks are not member banks»
For a like
reason, neither non-member State bank is an "affiliate" of the other.
Very truly yours,
Chester Morrill,
Secretary.
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE B O A R D
X-7533
August 3, 1933.
SUBJECT! New Issue Treasury Bills.
Dear Sirs
In connection with telegraphic transactions
in Government securities between Federal reserve banks*
the oode word "NQXEAR" has been designated to cover a
new issue of Treasury Bills, dated August 9, 1933, and
maturing November 8, 1933.
This word should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental
code vrord "NOXDYS" on page 172.
Very truly yours,
J« C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
X-7534
(lETBRPRETATION OF BANKING ACT OF 1933)
Copies to be sent to all Federal Reserve Banks.
August 3, 1933.
Mr. W. H. Dillistin,
Assistant Federal Reserve Agent,'
Federal Reserve Bank of New York,
New York, New York.
Dear Mr. Dillistin:
Reference is made to your letter of July 11, 1933,
inclosing a copy of a letter from (a member bank) with regard to the
time of publication of reports of affiliates of State member banks in
the State of
•
It appears that the _________ State law requires that
a report of condition of a State bank or trust company shall be published by such bank or trust company within thirty days after it has
been filed with the Superintendent of Banks.
The Superintendent of
Banks, however, did not issue a call for reports of condition of State
banks or trust companies as of June 30, 1933, the date of the Board's
recent call for condition reports of State member banks and their affiliates.
In view of the requirement of section 9 of the Federal Reserve Act, as amended by the Banking Act of 1933, that reports
of affiliates of a State member bank be published by the bank under
the same conditions as govern its own condition reports, in view of the
fact that tho Federal Reserve Act does not require the publication of
reports of State member banks rendered pursuant to call of the Federal
107
Ifr. W. H. Dillistin
- 2 -
Reserve Board, and. in view of the requirement of the ___________ statute
that a bank's report of condition made pursuant to call of the State
authorities be published within thirty days after it has been filed,
it is the opinion of the Federal Reserve Board, after careful considertion of the subject, that reports of affiliates of a State member bank
or trust company in the State of
, rendered pursuant to the
Board's call of June 30, 1933, should be published in the same paper
and on the same date as the condition report of such bank or trust
company rendered pursuant to the next succeeding call of the State
authorities after June 30, 1933.
In order, however, that reports of condition of affiliates of State member banks hereafter rendered may be published, if
possible, as of the same date as those of the respective banks, it is
suggested that your office endeavor to arrange with the State authoritities to issue calls for reports of condition of State banks as of the
same dates as the calls made by the Federal Reserve Board.
Very truly yours,
Chester Morrill,
Secretary.
FEDERAL RESERVE B O A R D
X-7535
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE B O A R D
August 5, 1933.
SUBJECT: Pro-posed Regulation Regarding
Payment of Interest on Deposits
"by Member Banks.
Dear Mr.
There are inclosed herewith six copies of a proposed
regulation governing the payment of interest on deposits "by member banks, pursuant to the provisions of section 19 of the Federal
Reserve Act, as amended by the Banking Act of 1933.
This proposed
regulation has been tentatively approved by the Federal Reserve
Board.
It will be observed that the proposed regulation prescribes a single maximum rate of interest of three per cent per
annum on all tine and savings deposits.
Careful consideration
has been given to suggestions that maximum rates of interest, varying according to the maturity of the deposits, the locations of
the banks or other factors, be prescribed; but so many factors
enter into the determination of rates which may be paid by member
banks in different sections of the country on different classes
of time or savings deposits that it appears to be impracticable,
at this time to undertake to solve all of these varying problems
1{
1-7535
—
2
—
in a satisfactory manner.
Numerous inquiries with respect to the payment of interest
on deposits have "been received and the Board is desirous of issuing
a regulation on the subject at the earliest practicable date.
It
will be appreciated, therefore, if you and the officers of your Federal reserve bank will consider this proposed regulation and give the
Federal Heserve Board your comments and suggestions thereon not later
than Monday, August 14, 1933.
Very truly yours,
Chester Morrill,
Secretary.
Inclosures.
TO CHAIRMAN OF ALL FEDERAL RESERVE BANKS.
1.10
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7536
August 8, 1933i
SUBJECT:
Section 33 of Banking Act of 1933.
Dear Sir:
Pursuant to the procedure outlined in the Board's letter of
July 15, 1933 (X-7499), regarding the forwarding of interpretations
of the Banking Act of 1933, there is attached hereto a copy of a letter to Acting Governor Johns of the Federal Reserve Bank of Atlanta
•with respect to the effect of section 8A of the Clayton Antitrust Act,
as amended by section 33 of the Banking Act of 1933.
In connection with the statement in the attached letter that
the director involved may file an application at this time for a permit to serve the two institutions after January 1, 1934, and that the
Board's regular forms 94, 94a and 94b may be used for that purpose,
your particular attention is invited to the fact that the circumstances
of the particular case involved were such as to justify handling it as
an emergency matter.
It is requested that, except in cases of great urgency, the
filing of all applications for the Board's permission to serve two or
more banks affected by the provisions of section 8A of the Clayton Act
h i
-
2
•*
as amended by section 33 of the Banking Act of 1933, be deferred pending the issuance of regulations on that subject and the preparation of
forms for use in that connection.
Very truly yours,
j y > r i d ^
Inclosure.
TO ALL FEDERAL RESERVE AGENTS.
Chester Morrill,
Secretary.
X-7536-a
J
Mr. W. S. Johns, Acting Governor,
Federal Reserve Bank of Atlanta,
Atlanta, Georgia.
Dear Mr. Johns:
Reference is made to your letter of July 29, 1933, addressed to Governor Black, regarding the inquiry made by Mr.
, vice president and director of the
,
Bank of
, as to whether he may also serve after Janu-
ary 1, 1934, as a director of a new national "bank to be organized in
,
, in view of the provisions of section 8^ of
the Clayton Ajiti-trust Act, as amended by section 33 of the Banking
Act of 1933.
That section in so far as applicable to the present case
prohibits the service of an officer or director of a national bank
as an officer or director of any institution (except a mutual savings
bank) which makes loans secured by stock and bond collateral. However, under the provisions of the so-called Kern Amendment in section
8 of the Clayton Anti-trust Act, the Board is authorized to grant permission to an officer, director or employee of a national bank to
serve at the same time as an officer, director or employee of another
banking institution falling within the prohibitions of any provision
of the Clayton Act, if in the judgment of the Board it is not incompatible with the public interest.
113
Mr. W. S. Johns —
X-7536-a
2
Therefore, it would be unlawful, after January 1, 1954,
for Mr.
. to serve as an officer or director of both of these na-
tional banks if either of them shall make loans secured by stock or
bond collateral, unless there is in force a permit covering such services issued.by the Federal Reserve Board.
The Board, of course, will
not be in a position to say whether or not a permit will be issued,
until after an application in proper form has been submitted to it.
You are requested to advise Mr.
that in the event he desires to
obtain the permission of the Board covering his service as an officer
or director of these banks, he should submit his application for such
permission to the Federal Reserve Agent at the Federal Reserve Bank of
Atlanta. Pending the issuance of further forms and regulations, it is
requested that the Board's regular forms 94, 94a, and 94b be used; and
it is also requested that in addition to the information heretofore required in connection with such an application there be submitted a
statement showing, as to each of the institutions involved, whether it
makes or proposes to make loans secured by stock or bond collateral,
the purposes for which such loans are made, and other details so that
the Board may be advised fully as to the nature and extent of such business in the case of each of the institutions.
The Board received a telegram from Mr#
on this sub-
ject under date of July 20, 1933 and this matter was receiving attention
before your letter was written. However, the Board's staff is overwhelmed
with important matters arising under the Banking Act of 1933 and, in
fairness to all concerned, is endeavoring to deal first with those questions
Mr. W. S. Johns —
X-7536-a
3
which arise under provisions of the Act which became effective immediately and which are of general interest to all member banks and not
merely of special interest to a single member bank or a few manber
banks.
Co-operation in this policy by the Federal reserve banks will
be appreciated.
Very truly yours,
Chester Morrill,
Secretary.
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7537
Aligns t 7, 1933 •
SUBJECT! Changes in Inter-District Time Schedule.
Dear Sir?
tfpon agreement "between the Federal reserve banks
affected, the Federal Reserve Board has approved the following changes in the inter-district time schedule:
From Houston
it
tt
I!
it
n
it
ti
it
it
ft
it San Antonio
ti
it
it
tt
it
ti
it
it
To Helena
it San Francisco
ti Spokane
it Portland
it Denver
it Omaha
it Helena
n San Francisco
it Spokane
it Denver
it Omaha
From
it
it
it
tt
it
tt
it
IT
It
II
Very truly yours,
Chester Morrill,
Secretary.
TO GOVERNORS OF ALL F. R. BAMS.
5 days to 4 days
It 4 w
3 "
it 4 "
5 «
it 4 »
5 "
tt 2 «
3 »
tt 2 "
3 "
tr 4 »
5 »
it 4 «
3 »
it 4 «
5 «
tt 2 «
3 "
tt 2 «
3 »
116
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7538
August 7, 1933.
SUBJECT: Regulation P, and Forms for Use in
Connection With Applications for
Voting Permits "by Holding Companies.
Dear Sir;
For your information, there is inclosed herewith one copy
each of the Board's Regulation P, regarding holding company affiliates, and of the forms for use in connection with applications for
voting permits "by holding company affiliates of member "banks, and
"by holding companies of nonmember "banks applying for membership in
the Federal Reserve System.
The regulation and forms were approved
"by the Board on August 4, 1933, and "became effective immediately.
Twelve extra mimeographed copies of the regulation and of each form
are "being furnished to each Federal reserve "bank and a limited
number of additional copies can be furnished if actually needed.
The regulation and forms are "being printed, and printed .
copies will "be furnished to the Federal reserve banks as soon as
they are available, Please advise the Board at your earliest convenience as to the number of printed copies of the regulations and
forms desired by your bank.
The Board prefers that no application be filed on the
X-7538
1 1 7
2
mimeographed copies inclosed herewith except in an emergency; hut
you may furnish mimeographed copies of the regulations and forms
to any prospective applicant xrith the understanding that no application trill he filed on such forms unless the exigencies of the
particular situation necessitate the immediate filing of an application for a voting permit.
The Board's Regulation P trill be published in full in the
August issue of the federal Reserve Bulletin,
Very truly yours,
Chester Morrill
Secretary.
Inclosures.
TO CHAIRMEN AND GOVERNORS OF AIL F. R. BAMS*
x
" 75 ' 39
11
(INTERPRETATION OF BA1TKIHG- ACT OF 1933)
Copies to be sent to all Federal Reserve Banks.
August 7, 1933.
Honorable
United States Senate,
Washington, D. C.
Dear Senator
,
:
Permit me to acknowledge receipt of your letter of
June 28, 1933, addressed to Honorable Eugene R. Black, Governor of the
Federal Reserve Board, in which you inclosed a letter to you from Mr.
'
, Cashier of
.
In his letter, Mr.
Bank,
submits the question whether
cooperative banks in Massachusetts are "mutual savings banks" within the
meaning of section 19 of the Federal Reserve Act, as amended by section
11(b) of the Banking Act of 1933, which excepts from the prohibition
against payment of interest on deposits payable on demand deposits made
by a "mutual savings bank".
The Federal Reserve Board has communicated with the
Federal Reserve Bank of Boston with respect to this matter, and it appears that cooperative banks in Massachusetts are incorporated under
Chapter 170 of the General Laws of Massachusetts as amended by Chapter
144 of the Acts of 1933. Under the provisions of the Massachusetts
statutes, such an institution may be incorporated for the declared purpose of "accumulating the savings of its members and loaning such accumulations to them", and such institutions appear to be organized for the
primary purpose of making loans to aid in home construction.
Capital is
X-7539
- 2 -
1 1 9
obtained by issuing in series either paid-up shares, or unmatured shares
for which payment is made in fixed periodical installments. Under the
law, the accumulated funds in any such institution may be loaned in
limited amounts to applicant members on the security of real estate or
unpledged shares, or may be invested in the manner prescribed by law.
Net profits, less certain reserves, are distributed annually, semiannually, or quarterly to the shares then existing before the close of
business on each day when a new series of shares is issued.
It does not
appear that such institutions accept deposits of moneys, or that they
are authorized to engage in any of the primary banking functions of
deposit, discount, or circulation.
After careful consideration of the nature of a cooperative bank in Massachusetts, it is the opinion of the Federal Reserve Board that such institutions may not properly be considered "mutual
savings banks" within the meaning of section 19 of the Federal Reserve
Act, as amended.
Cooperative banks in Massachusetts are engaged primarily
in making loans on the security of real estate, and do not accept deposits of money, and it would seem clear that they are not "savings
banks".
On the other hand, they are substantially similar to organ-
izations commonly known as "building and loan associations", and it
would appear that they should be so classified. The fact that the
corporate structure of such institutions may be similar to that of a
"mutual savings bank" cannot affect this conclusion, since the question
vðer an organization is a "savings bank" ultimately depends upon
X-7539
- 3 the kind of business done, and not merely upon the form of corporate
structure. Accordingly, since the character of the "business actually
engaged in by cooperative banks incorporated under the laws of Massachusetts is so distinct from that of a savings bank, it is the opinion
of the Board that such institutions cannot be said to be "mutual savings banks" within the meaning of the Act, and that payment of interest
by a member bank on any deposit made by such an institution, which is
payable on demand, would be within the prohibition of section 19 of
the Federal Heserve Act, as amended.
Mr.
1
s letter is returned herewith for
your files.
Very truly yours,
Chester Morrill,
Secretary.
4
_J|L.
(INTERPRETATION OF BANKING ACT OF 1933)
X-7540
Copies to be sent to all Federal Reserve Banks.
August 7, 1933.
Mr. Frederic H. Curtiss,
Federal Reserve Agent,
Federal Reserve Bank of Boston,
Boston, Massachusetts.
Dear Mr. Curtisss
Reference is made to your letter of July 18, 1933,
designated "Inquiry No. 29", wherein you inquire whether, under the
provisions of Section 23A of the Federal Reserve Act, as amended by
Section 13 of the Banking Act of 1933, a member bank may make loans
to an affiliate secured by real estate mortgages.
You state that, "The affiliate in question is a company to which the member trust company has transferred assets or property taken over from time to time on debts previously contracted,
including certain parcels of real estate, the affiliate managing and
operating such properties until they can be disposed of in a satisfactory way.
The loans by the member trust company to the affiliate
would be secured by mortgages on the real estate, which, in the opinion
of the officers of the member trust company, would have a market value
of at least 20 per cent in excess of the amount of the credit."
Section 23A reads, in part, as follows:
"Within the foregoing limitations, each loan or
extension of credit of any kind or character to an
affiliate shall be secured by collateral in the form
of stocks, bonds, debentures, or other such obligations having a market value at the time of making
the loan or extension of credit of at least 20 per
centum more than the amount of the loan or extension
-122
Mr. Frederic H. Curtiss —
2
X-7540
of credit, or of at least 10 per centum more than the
amount of the loan or extension of credit if it is
secured by obligations of any State, or of any political subdivision or agency thereof."
In view of the requirement that each loan to an affiliate be secured by "collateral in the form of stocks, bonds, debentures,
or other such obligations" having a certain "market value", the answer
to your inquiry depends upon whether the real estate mortgages in question are "other such obligations having a market value" within the
meaning of the above provision.
Since it follows the words, "stocks, bonds, debentures",
the phrase "other such obligations" clearly includes only obligations
which are of the same general character as stocks, bonds and debentures —
i.e., obligations of the kind commonly known as "investment securities",
which ordinarily do not arise out of direct loans but are issued for
sale to investors on the open market. Furthermore, the phrase "having
a market value * * * of at least 20 per centum more than the amount of
the loan or extension of credit" indicates strongly that the law refers
to obligations for which there are sufficient price quotations on the
open market to make it possible to determine their market value with
reasonable accuracy.
While it is not impossible for real estate mortgages to
conform to the above requirements, it is believed that those arising out
of the ordinary type of direct loans on real estate usually are not obligations of the kind contemplated by the statutej and, where a member
123
Mr. Frederic H. Curtiss —
3
X-7540
bank transfers to an affiliated, corporation real estate which the bank
has acquired in satisfaction of debts and either takes a mortgage from
the corporation as consideration for such transfer or subsequently
makes a loan to the affiliate secured by a mortgage on such real estate,
such a mortgage is not an obligation of the kind contemplated by the
statute.
Very truly yours,
Chester Morrill,
Secretary.
X-7541
(IMERPRETATIOR OF BANKING ACT OF 1933)
Copies to be sent to all Federal Reserve Banks.
August 4, 1933*
Mr. W. S. Johns, Acting Governor,
Federal Reserve Bank of Atlanta,
Atlanta, Georgia.
Dear Mr. Johns:
Reference is made to your letter of July 26, 1933, in which, you
make inquiry with regard to the effect of section 9 of the Banking Act of
1933, which amends the eighth paragraph of -section 13 of the Federal Reserve Act, as amended.
You point out that section 28 of the Emergency Farm Mortgage Act
of May 12, 1933 amended the eighth paragraph of section 13 of the Federal
Reserve Act so as to authorize Federal reserve "banks to accept Federal
farm loan bonds as security for advances to member banks on their promissory
notes under the authority of that paragraph; you refer to the fact that
the eighth paragraph of section 13, as amended and reenacted by section 9
of the Banking Act of 1933, approved June 16, 1933, omits the reference
to Federal farm loan bonds; and you state that, in the opinion of your
General Counsel, such omission amounts to a repeal of the authority to
accept such bonds as security for such notes. In view of the numerous
inquiries which you have received you request a ruling on this point.
The Board concurs in the view expressed by your General Counsel
on this subject.
Very truly yours,
(Signed) Chester Morrill,
Secretary.
X-7542
;
(INTERPRETATION OF BAMINO ACT OP 1935)
Copies to be sent to all Federal Reserve Banks*
August 8, 19i:iu«
Messrs.
Street,
New York City, New York,
,
Gentlemen:
Reference is made to your letter of July 14, 1953, with enclosures, with respect to the question whether the Philippine Islands
and Puerto Rico may be regarded as foreign countries within the meaning of section 19 of the Federal Reserve Act, as amended by section
11(b) of the Banking Act of 1935, -which forbids a member bank to pay
interest on any deposit payable on demand, with certain exceptions including "any deposit of such bank which is payable only at an office
thereof located in a foreign country"• You also state that you would
like to be advised of ary ruling tnat the Board may make with respect
to the status of the Canal Zone in this connection.
The Federal Reserve Board has given this matter careful consideration and, in view of the decisions of the courts with reference
to the status of the territories in question, is of the opinion that
none of them may properly be regarded as a foreign country within the
meaning of the statute referred to and, accordingly, the prohibition of
section 19 of the Federal Reserve Act upon the payment of interest by a
member bank on deposits payable on demand, with the exceptions therein
stated, applies to deposits payable at an office of such bank located
in Puerto Rico, the Philippine Islands or the Canal Zone#
Very truly yours,
Chester Morrill,
Secretary.
1.25
I 126
X-7543
(INTERPRETATIOIT OF 3AMING ACT OF 1933)
(Copies to be sent to all Federal Reserve Banks)
August 8, 1933.
Mr. C. S. Young,
Assistant Federal Reserve Agent,
Federal Reserve Bank of Chicago,
Chicago, Illinois.
Dear Mr. Young:
Receipt is acknowledged of your letter of July 29, 1933, in
which you advise the Board that on July 31, 1933, you intend to commence an examination of the
State Bank,
a member bank of the Federal Reserve System.
State Bank is owned "by the
____
,
.
You state that the
Corporation, which
also owns 38 other banks, and that the 38 other banks include 23 State
nonmember banks and eight national banks in the 7th District in
. and 3 State banks and 4 national banks in the 9th District in
.
Apparently, it is your opinion that you are required to
examine the holding company affiliate; that the examination of the
organizations in the group should be confined to the ________ State Bank
and its holding company affiliate; and .that the requisite information
with respect to the 38 other banks owned by the holding company affiliate
may be obtained from reports of such banks in the files of tjae various
supervising authorities of these banks.
Section 9 of the Federal Reserve Act, as amended by section 5(c)
of the Banking Act of 1933, provides that "In connection with examinations
of State member banks, examiners selected or approved by the Federal
X-7543
-2-
Eeserve Board shall make such examinations of the affairs of all
affiliates of such hanks as shall he necessary to disclose fully the
relations "between such "banks and their affiliates and the effect of
such relations upon the affairs of such "bank."
Although you have
furnished the Board with no detailed information as to the ownership
or control by the ________ ___________ Corporation of the "banks in
question, it would appear that the national and State "banks which are
subsidiaries of the
the
Corporation are affiliates of
State Bank within the meaning of section 2, subparagraph (b)
subdivision (2) of the Banking Act of 1933, and, therefore, that the
Federal reserve bank examiners are required to make such examinations of
each such affiliate of the member bank as may be necessary to disclose
fully the relations between the member bank and its affiliates, and the
effect of such relations upon the affairs of the member bank.
Since the
nature of the examination which may be necessary to disclose the requisite
information will be dependent to a large extent upon the facts of each
particular case, the Board is of the opinion that an examination restricted to a review of the reports of the supervising authorities may
not meet the requirements of the statute in every case, and accordingly,
that the affiliates of the
State Bank should be subjected to
a more detailed examination if it should appear from the facts developed
in the course of examination of the member bank or any of its affiliates
that such additional examination should be made.
In any such case, the
X-7543
-3Board is of the opinion that the extent and. form of examination of any
affiliate of the member bank should rest in the sound discretion of
the examiners duly authorized to examine the member bank.
It is the opinion of the Board that the word "affiliate", as
used in that provision of section 9 of the Federal Reserve Act, as amended,
which requires examination of each affiliate of a State member bank, may
not be construed as including a "holding company affiliate", and that a
holding company affiliate of a State member bank (other than a member bank)
is not subject to examination unless and until it enters into an agreement
to be subject to all the applicable provisions of section 5144 of the
Revised Statutes, as amended, and makes an application to the Board for
a voting permit under the authority of section 5144.
The ____________
Corporation has not filed with the Board any such agreement and
application, and accordingly, the law does not require an examination of
this holding company affiliate by Federal reserve bank examiners at this
time.
Very truly yours,
Chester Morrill,
Secretary.
FEDERAL RESERVE B O A R D
X-7544
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
August 9, 1933
SUBJECT:
Charge for Printing Federal
reserve notes and Federal reserve bank notes.
. Bear Sir:
The Bureau of Engraving and Printing advises
that the charge for printing Federal reserve notes during
the fiscal year ending June 30, 1934 has been fixed at
$88.50 per thousand sheets and of Federal reserve bank
notes at $94.00 per thousand sheets.
This is a reduction
of $3.00 per thousand sheets on Federal reserve notes and
of $3.00 per thousand sheets on Federal reserve bank notes.
Veryn truly yours
TO GOVERNORS OF ALL F. R. B A M S
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7545
August 10, 1933
SUBJECT: Hew Issue Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in
Government securities between Federal reserve "banks, the
code word "UOXEJBL* has "been designated to cover a new
issue of Treasury Bills, dated August 16, 1933, and
maturing November 15, 1933.
This word should "be inserted in the Federal Reserve Telegraph Code "book, following the supplemental
code word "HOXEAR" on page 172.
Very truly yours,
J. C. Obeli,
Assistant Secretary
TO CrOVEBNOBS OF AIL F. R. BANKS.
1.31
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7546
August 11, 1933
Dear Sir:
There is attached hereto, for your information,
a copy of a letter addressed by the Federal Reserve
Board under date of August 10, 1933, to the Federal Reserve Agent at Minneapolis, with regard to the eligibility of certain renewed paper as security for Federal
reserve notes.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure
TO ALL F. R. AGENTS,
X-7546-a
August 10, 1933.
Mr. John K. Peyton,
Federal Reserve Agent,
Federal Reserve Bank of Minneapolis,
Minneapolis, Minnesota.
1
Dear Mr. Peyton:
Reference is made to your letter of June 30, 1933, with
regard to the eligibility of certain renewed paper as security for Federal reserve notes.
As the Board understands your inquiry, you wish to be advised whether notes acquired by the Federal reserve bank under the following circumstances are eligible for the purpose mentioned:
(1) Certain notes were rediscounted for and with the indorsement of a member bank which was subsequently placed in the hands of
a conservator.
These notes were renewed at maturity, and it is assumed
that the renewal notes were indorsed by the conservator in the name of
the member bank;
(2) Advances were made by the Federal reserve bank to a
member bank upon its promissory notes, secured by paper eligible for
discount, under the eighth paragraph of Section 13 of the Federal Reserve Act.
Subsequently, the member bank was placed in the hands of a
conservator, and, upon maturity of the principal obligations, new notes
made by the conservator were taken by the Federal reserve bank in lieu
of the original notes of the member bank.
After careful consideration of the questions you raise,
the Federal Reserve Board is of the opinion that renewal notes of the
133
Mr. John N. Peyton
- ?, -
X-7536-a
kinds described in (l) and (2) above should not be used as collateral
security for Federal reserve notes under the provisions of Section 16 of
the Federal Reserve Act,
The Board has noted the statement in the third paragraph
of your letter that "these loans are renewed for thirty day periods".
In view of the status of a bank in the hands of a conservator, the question naturally arises whether the Federal Reserve Bank should accept renewals of obligations of such a member bank or should carry the obligations as past due items.
In the circumstances, it is suggested that
you consult with your counsel with reference to this matter, if you
have not already done so.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
X-7547
(INTERPRETATION OF BANKING ACT OF 1933)
Copies to be sent to all Federal Reserve Banks,
August 8, 1933.
Mr. C. S. Young,
Assistant Federal Reserve Agent,
Federal Reserve Bank of Chicago,
Chicago, Illinois.
Dear Sir:
Receipt is acknowledged of your letter of July 18, 1933, inclosing copy of a letter from Mr,
Bank of
, President of the
, under date of July 17, 1933. Mr*
desires to
know whether the
Company is an "affiliate" of
the
__ Bank will be required to ob-
Bank, and whether the
tain and publish a report of condition of the
Mr,
states that in December of 1932, the
Bank "took the stock of the
on our books at |1,"
Company*
Company and we now carry it
If this means that the
Bank acquired
ownership of, and now owns or controls, all or a majority of this
stock, it would appear that the
_________ compary is a corporation
of which a member bank owns or controls a majority of the voting shares,
and that such company is an affiliate of the member bank within the
meaning of section 2(b) of the Banking Act of 1933.
stances, it would appear that the
In such circum-
Bank is required to obtain
a report of such company, and to publish such report under the same conditions as govern its own condition reports.
tf> #W"
> 0 0
Mr* C, 8* Young
-
X-7547
2 —
As you know, section 9 of the Federal Reserve Act, as amended
by section 5(c) of the Banking Act of 1933, is mandatory in its terms,
and the Board has no authority to waive the requirement of that sec*
tion that each State member bank shall publish the reports of its affiliates under the same conditions as govern its own condition reports.
However, it is unnecessary for a member bank to publish any such report unless and until it is required to publish its own condition report o
The statement of the
Company inclosed in
your letter fails to state specifically the character of its business
and its relations with the
Bank of
; and you are re-
quested to obtain and forward to the Board another statement furnishing
this information specifically in the space provided for that purpose on
the Board's form 220a.
Very truly yours,
Chester Morrill,
Secretary.
X-7548
(INTERPRETATION OF BANKING ACT OF 1933)
Copies to be sent to all Federal Reserve Banks#
August 8, 1933.
Mr. Frederic H. Curtiss,
Federal Reserve Agent,
Federal" Reserve Bank of Boston,
Boston, Massachusetts.
Dear Mr. Curtiss:
Receipt is acknowledged of your letter of July 24,
1933, inclosing the original of a letter, under date of July 24, 1933,
addressed to you by Mr.
, Chairman of the Board of
Directors of the
Mr.
Trust Company,
requests that the
_•
Trust Company be relieved
of the necessity of publishing a report of condition of the _________
Corporation.
From the statements in Mr,
Board understands that the
' s letter, the
Trust Company owns all the
outstanding stock of the
Corporation, an
investment corporation which ceased to do business in 1932, and that
such corporation is being dissolved as rapidly as possible.
It is
further understood that on April 25, 1932, the Commissioner of Corporations of
ruled that no further certificates of condi-
tion would be required from this corporation.
The Board does not consider that the provisions of the
Banking Act of 1933, requiring reports of affiliates, are applicable
to organizations which have been formally placed in liquidation or receivership prior to the date of the Board's call for condition reports
1
Mr. Frederic H, Curtiss
- 2 -
X-7548
of State member banks and their affiliates; and, if the _________ _____
Corporation was formally placed in liquidation or receivership on or before June 30, 1933, it will not be necessary for the
Trust Company to furnish or publish a report of the
securities corporation. However, it does not appear from the information submitted whether the securities company had been formally dissolved or formally placed in liquidation or receivership on that date.
The fact that the securities corporation ceased to do business prior
to June 30, 1933, would not affect its status as an "affiliate" of the
trust company, unless, in addition, formal action had been taken to
dissolve the corporation.
Inasmuch as the determination of the question whether
an organization has been formally placed in liquidation or receivership depends to a large extent on the applicable State law, it is suggested that you refer the instant question to your counsel for an
opinion*
If you desire the Board to consider the matter further after
receiving the views of your counsel, it is requested that you submit
the question to the Board and furnish the Board with a copy of your
counsel's opinion.
Very truly yours,
Chester Morrill,
Secretary.
1.38
FEDERAL RESERVE B O A R D
WASHINGTON
A D D R E S S OFFICIAL C O R R E S P O N D E N C E T O
T H E FEDERAL RESERVE BOARD
X-7549
August 14, 1933
Dear Sirs
The Federal Reserve Board had occasion recently to consider an application for membership in the Federal Reserve
System filed by a state bank which had obtained agreements from
depositors under which twenty-five per cent of their deposits
were assigned to the bank, in return for which the bank delivered
to each depositor making such assignment a deferred certificate
of deposit to be retired out of the earnings of the bank, the certificate to have priority over the claims of shareholders upon
liquidation of the bank.
A copy of the letter addressed by the Board to the Federal reserve agent, advising that it would not be justified in
approving the application for membership, is inclosed, for your
information.
Very truly yours
(inclosure)
To all Federal reserve agents•
Chester Morrill,
Secretary.
X-7549-a
.* ^
-i tjS
August 14, 1933.
Mr •
,
Federal Reserve Agent,
Federal Reserve Bank of
_>
Dear Mr.
,
»
:
Receipt is acknowledged of your letter of June 28,
1933, forwarding an application of the
State Bank,
,
__ , for membership in the Federal Reserve System, together
with a report of examination made by a Federal reserve examiner as
of May 16, 1933, and relative data.
From the information submitted it appears that on
December 31, 1932, the applicant bank obtained agreements from the
depositors whereby 25% of their deposits were assigned to the bank
and used, together with a 28% assessment on the stockholders, to eliminate criticized assets, and whereby the time of payment of the remaining 75% of their deposits was deferred until the board of directors of the bank deemed it proper to release such deposits.
The re-
strictions on the 75% of the deposits apparently have been removed,
as evidenced by a certified copy of the resolution passed by the
board of directors of the bank on June 28, 1933. However, in connection with the 25% of deposits assigned to the bank and used to eliminate criticized assets, it is noted that the bank delivered to each
depositor making such assignment a deferred certificate of deposit to
be retired out of the earnings of the bank, and these certificates
have priority over the claims of stockholders upon liquidation of the
bank.
It is apparent, therefore, that the institution has a liability
X-7549-a
— 2
^
.'i
—
for the payment of these deferred deposits which is not reflected in
its books and in its statements•
Such liability for the payment of
such deferred deposits out of future earnings of the bank would be a
serious handicap to the future of the institution, and the liability
upon liquidation of the bank to retire these certificates before any
distribution to stockholders is sufficient to eliminate substantially
all of the capital, surplus and undivided profits of the bank.
In
this connection, your attention is called to the fact that under the
provisions of Section 9 of the Federal Reserve Act, as amended, an applying bank must have an unimpaired capital in order to be eligible
for membership in the Federal Reserve System. Your attention is also
called to the Board's letter of June 20, 1933, (X-7455), with inclosures, in which circumstances comparable to those here involved were
discussed in connection with the reduction of capital of national bankse
In these circumstances, the Board would not be justified in approving the application of the
State Bank for member-
ship at this time, and the Board feels that the application should be
deferred until the bank is released from the liability for payment of
deferred deposits or the impairment in its capital is otherwise eliminated and provision is made for the payment of nuch deferred deposits,
the general character of its assets has been improved materially, and,
since the restrictions on the withdrawal of 75% of the deposits have
been removed only recently, the public's reaction toward the institution
and the possibility for successful operation can be determined more
1 4 1
- *5 -
X-7549-a
f
definitely#
It is requested, therefore, that you communicate with the
bank and suggest the withdrawal of its application from further consideration at this time, in which event, although the application itself
and the accompanying papers will remain a part of the Board's files,
no adverse action thereon will be taken.
If at a later time you feel
t
that the Board would be justified in considering the matter again,
there should be a new application and a new examination as a basis for
your recommendation.
There is inclosed for your confidential information,
a copy of a memorandum prepared in connection with the bank's application by the Division of Examinations of the Federal Reserve Board.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
I
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
August 16, 1933
Subject: Applications for membership involving a holding
company owning or controlling the applicant banks.
Dear Sir;
There is attached hereto a copy of a letter the Federal
Reserve Board has addressed to one of the Federal Reserve Agents
•with regard to action on applications by two State banks for membership where it appeared that such banks were ovmed by a holding
company which, under the provisions of the Banking Act of 1933,
must obtain a voting permit if the State banks are admitted to
membership. This letter is being forwarded to you for your information and guidance in the event that sirJlar cases arise in
your district.
Very truly yours,
Chester Morrill,
Secretary.
.Inclosure.
TO ALL FEDERAL RESERVE AGENTS
X~7550a
Dear Mr.
:
Reference is made to the applications of the
Banlc,
,
,
, and the Bank of
,
, for membership
in the Federal Reserve System and in this connection it has been noted
that a majority of the shares of the capital stock of each of these
banks is owned by the
Corporation,
•
If the banks above referred to are admitted to membership
in the Federal Reserve System, it will be necessary for the
Corporation to agree to accept the same conditions
and limitations as are applicable under Section 5144 of the Revised Statutes of the United States, as amended, in the case of holding company affiliates of national banks and to obtain from the Federal Reserve Board
a voting permit as required by the provisions of Section 9 of the Federal Reserve Act and 5144 of the Revised Statutes, as amended by the
Banking Act of 1933.
In acting upon an application for such a voting
permit, the Board is required under the law, among other things, to consider the financial condition of the applicant holding company affiliate, the general character of its management and the probable effect of
the granting of such permit upon the affairs of the member bank. The
Board does not, at this time, have sufficient information m t h regard
X-7550a
: 144
- 2 -
to the
.
Corporation to determine whether or not
it should be granted a voting permit, and it does not feel that it should
act upon the applications for membership of the ______________________ and
until it is also in a position to determine
whether it can properly grant a voting permit to the holding company affiliate of these banks, the
Corporation.
Mimeographed copies of the regulations and appropriate forms
"with regard to the issuance of voting permits to holding company
affiliates are being transmitted to you.
In view of this fact and the
circumstances described above, you are requested to advise the
and
that the Board will defer
action upon their applications for membership and that copies of the
regulations and forms relative to voting permits of holding company affiliates will be furnished to the banks as soon as practicable, in order
that the _______________________________ Corporation may take appropriate
action preparatory to its application for a voting permit.
The Board
will, therefore, consider the applications for membership of the ________
___________________ and the
when an application
for a voting permit has been received from the
Corporation and the ^oard has given favorable consideration to such an
application*
It is essential that the voting pelimit be applied for as
soon as possible
after receipt of the Board's regulations in order to
obviate the necessity of any further examinations of the banks applying
for membership, since it is important that the information regarding
such condition of the banks be current.
X-7550a
— 3
w
In advising the applying tanks of the Board's position in the
matter of their applications5 it is suggested that you point out to the
institutions the undesirable features of their condition, as reflected
in the reports of examination of the respective institutions* with the
request that in the interim they make every effort to effect correction
of or a material improvement inthe matters of criticism, advising the
Board at the time of the submission of the holding company1s application for a voting permit what progress has boon made in this direction*
In this connection, there are inclosed copies of memoranda prepared by
the BoardTs Division of Examinations in which the unfavorable features
of the conditions of the banks are pointed out in detail.
Very trgly yours,
(Signed) Chester Morrill,
Chester Morrill,
Secretary*
Inclosure*
i 146
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
^
7 5 5 1
August 16, 1933.
SUBJECT: Application for cancelation of Federal reserve bank
stock by State member bank in hands of conservator.
Dear Sir:
For your information and guidance, in the event similar cases
arise in your district, the following quotation is taken from a telegram the Board has forwarded to one of tho Federal reserve agents in
connection with a request by a conservator of a State member bank for
cancelation of the Federal reserve bank stock held by the member bank:
"Your wire regarding application of conservator of —
—
Bank, - — — — , for cancelation of Federal reserve bank stock.
In order to avoid any question as to right of Federal reserve
bank to cancel such stock it is suggested that board of directors o f — — — Bank file notice of intention to withdraw
from membership under provisions of Section 9 of Federal Reserve Act and Section VIII of Board's Regulation H and request Board to permit withdrawal immediately waiving usual
six months' notice. Conservator must join in such notice of
intention to withdraw and request for waiver. Upon
advice that you have received such notice and request for
waiver in accordance with the provisions of Section VIII of
Regulation H and that your counsel is satisfied as to the
legal aspects of such notice and request for waiver, together
with your recommendation, the Board will take action thereon
as soon as possible.
The procedure outlined should also be followed in connection
with applications for cancelation of Federal reserve bank stock made by
other State officials acting in a capacity similar to that of conservators, as, for example, a custodian appointed to take charge of the
-
X-755 1 ! 4 7
2 -
affairs of a State member bank pending the development of a plan of
reorganization.
Another letter (X-7552) with regard to the cancelation of
Federal reserve bank stock held by a National bank in the hands of a
conservator is being sent to you today.
Very truly yours,
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
148
FEDERAL RESERVE B O A R D
WASHINGTON
ADDFyZSS O F F I C I A L C O R R E S P O N D E N C E T O
T H E FEDERAL RESERVE BOARD
X-7552
August 16, 1933.
SUBJECT:
Cancelation of Federal reserve bank stock
of national banks in conservatorship.
Dear Sir:
For your information there is inclosed a copy of a letter sent
by the Board to the Acting Comptroller of the Currency under date of
May 3, 1933, requesting that, in the instant case and in any other
case in which the Comptroller's office desires that the Federal reserve
bank stock outstanding in the name of a national bank in conservatorship be canceled, the Federal Reserve Board be furnished a statement of
the facts in the case substantially in accordance with a form inclosed
with the Board's letter. A copy of the form referred to is also attached.
It is now the Comptroller's practice to furnish the Board a
statement in the desired form in each case in which the conservator of
a national bank has been authorized by the Comptroller to apply for
cancelation of Federal reserve bank stock outstanding in the name of the
bank*
The Comptroller's office also advises the Federal reserve agent#
in the appropriate Federal reserve district, of each instance in which
the conservator of a bank has been so authorized, and furnishes the
Federal reserve agent a copy of the letter of authorization sent to the
conservator.
X-7552
Accordingly, when you have been advised by the Comptroller of the
Currency that the conservator of a given national bank has been authorized to apply for cancelation of Federal reserve bank stock, it is suggested that you furnish the conservator an appropriate number of copies
of Federal Reserve Board Form 87 (Application by receiver of insolvent
member bank for surrender of stock), with the word "Receiver" changed to
"Conservator".
The application need not be accompanied by a copy of the
authorization above referred to, nor of the commission given by the Comptroller to the conservator. If in any case a conservator of a national
bank who has not been duly authorized to do so applies for cancelation
of Federal reserve bank stock, please suggest that he request such
authority from the Comptroller.
The Board is addressing another letter to you today (X-7551)
with regard to the procedure which may be followed in connection with
the cancelation of Federal reserve bank stock held by a State member bank
which is in the hands of a conservator or similar State authority.
Very truly yours,
Inclosures.
TO ALL FEDERAL RESERVE AGENTS.
Chester Morrill,
Secretary.
COPY
X-7552-a
May 3, 1933.
Honorable F. G. Await,
Acting Comptroller of the Currency,
Washington, D. C.
Dear Sirs
The Federal Reserve Board has before it for consideration an
application from the Conservator of the
, for the
cancelation of Federal reserve bank stock heretofore issued to that
bank.
As you know, the Federal Reserve Act provides that when a receiver is appointed for a national bank, Federal reserve bank stock
owned by it shall bo canceled, and, under the provisions of the Bank
Conservation Act, a conservator of a national bank is given the rights,
powers and privileges of a receiver of an insolvent national bank and
the rights of all parties with respect to the bank, subject to the
other provisions of the Bank Conservation Act, are the same as if a receiver had been appointed. A bank in the hands of a conservator, however, may, in the discretion of the Comptroller of the Currency, be
permitted to resume its business or, with the Comptroller's approval,
may be reorganized.
In order that Federal reserve bank stock owned by
a national bank in the hands of a conservator may be canceled in any
case, the Federal Reserve Board feels that it is necessary to have definite and authoritative advice that your office has decided that the
bank is to be liquidated and is not to be permitted to resume business
or to reorganize.
1 ^
Honorable P. G. Await
- 2 -
X-7552-a
Accordingly, if you desire that the Federal reserve bank stock
outstanding in the name of the
*
National Bank of
,
, be canceled, it will be appreciated if you will transmit to
the Federal Reserve Board a statement as to the facts in the case substantially in the form of that inclosed herewith.
It is also requested that, in other cases which may arise in
which you may authorize the conservator of a national bank to apply for
the cancelation of Federal reserve bank stock, you submit to the Federal
Reserve Board a statement similar to that inclosed with such changes as
may be appropriate to the facts of the particular case.
Very truly yours,
(Signed) Chester Morrill
Inclosure.
Chester Morrill,
Secretary.
X-7552-b
COPY
JL5;
TO THE FEDERAL RESERVE BOARD.
This is to advise you that
was on
National Bank of
(Name of Conservator)
, 1933, appointed conservator of the
, pursuant to the provisions of the
Bank Conservation Act; that approximately
per cent of the
assets of the bank have been sold to, and approximately
per cent of its deposit liabilities have been assumed by, the ______
Bank of
National Bank of
: that this office has decided that the
, should be liquidated and should
not be permitted to resume the transaction of its business or to reorganize under the provisions of the Bank Conservation Act or otherwise to transact any business except such as shall be necessary to
liquidate the affairs of the bank; that the affairs of the bank are
now being liquidated; that, if by reason of future developments, it
should be considered advisable to permit the bank to reorganize or
in any other manner to resume the transaction of banking business, it
will not be permitted to do so unless it shall have first subscribed
and paid for stock in the Federal reserve bank of its district in the
amount required by law; that, in view of the facts stated, it is desired that the Federal reserve bank stock heretofore issued to the
bank be canceled and proper refund made in accordance with the law;
and the Comptroller of the Currency has, therefore, authorised the conservator above named to make application to the Federal reserve bank
of the district in which the national bank is located for the
153
X-7552-b
cancelation of Federal reserve bank stock heretofore issued to the
bank and for the refund of all moneys, securities or other valuables
due by the said Federal reserve bank to the estate of the said national bank as provided by law and to do such other acts as may be
necessary to adjust and settle the accounts between the said Federal
reserve bank and the said national bank.
Comptroller of the Currency
FEDERAL RESERVE B O A R D
WASHINGTON
X-7553
address official correspondence t o
the federal reserve board
August 18, 1933.
SUBJECT?
New Issue Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in Government securities "between Federal reserve "banks, the code
word "NOXEFE" has been designated to cover a new issue of
Treasury Bills, dated August 23, 1933, and maturing Novembet 22, 1933.
This word should be inserted in the Federal Reserve
Telegraph Code book, following the supplemental code word
"NOXEEL" on page 172.
try truly yours
J. C. Hoell,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS.
X-7554
i.55
FEDERAL RESERVE B O A R D
WASHINGTON
AUgUSt 19 j
address official correspondence t o
1933 •
t h e federal reserve board
SUBJECT: Holidays during September, 1933
Dear Sir:
On Monday, September 4, Labor Day, the offices of the Federal
Reserve Board and all Federal reserve banks and branches will be closed*
The Board has been advised that holidays also will be observed
by Federal reserve banks and branches during September, as follows:
Saturday, Sept. 9, San Francisco) Admission Day
Los Angeles ) (California)
Tuesday, Sept. 12, Baltimore,
Defenders Day
(Maryland)
On the dates given tho offices mentioned will not participate
in either the transit or the Federal reserve note clearing through the
Gold Settlement Fund.
Please include transit clearing credits for the
offices affected on each of the holidays with your credits for the following business day.
No debits covering shipments of Federal reserve
notes for the Federal Reserve Bank of San Francisco should be included
in your note clearing of Saturday, September 9.
Please notify branches.
TO GOVERNORS
Very truly yours,
J. C. jTooTl,—"
Assistant Secretary
OF ALL P. R. BANKS
X-7555
(INTERPRETATION OF BANKING ACT OF 1933)
Au
Sust
21
>
1955
*
Copies to be sent to all Federal Reserve Banks#
Mr. Walter S. Logan, Deputy Governor,
Federal Reserve Bank of New York#
New York, New York.
Dear Mr. Logans
Reference is made to your letter of June 28, 1933, with
inclosure, in which the question is raised -whether, under the provisions
of Section 19 of the Federal Reserve Act, as amended by the Banking Act
of 1933, a trust company organized under the laws of the State of New
York, and a member of the Federal Reserve System, may pay interest on
deposits of funds belonging to an estate or trust of which it is acting
as executor or trustee and deposited by the trust department in the commercial department of the trust company, subject to immediate withdrawal.
In this connection, you refer to a provision of the Banking Law of New
York which requires a trust company to pay interest on funds received by
it in a fiduciary capacity; but the law does not appear to require that
deposits of such funds in another department of the trust company shall
necessarily be made payable on demand.
As you know, Section 19 of the Federal Reserve Act, as
amended by Section 11(b) of the Banking Act of 1933, forbids a member
bank, directly or indirectly, to pay interest on any deposit which is
payable on demand, except in accordance with a contract entered into in
good faith prior to June 16, 1933, and in force on that date; and a
member bank is required to eliminate from any such contract any provision
for the payment of interest on deposits payable on demand as soon as
lir. Walter S. Logan
-
X-7665
2 -
157
possible consistently with its contractual obligations. Deposits of certain kinds are excepted from the provision of law in question; but deposits of the kind which are the subject of your inquiry would not appear
to come within any of the exceptions mentioned in the statute (unless
payable only at an office of a member bank located in a foreign country);
and the Federal Reserve Board has no authority to make any additional
exceptions to the prohibition of the law against the payment of interest
on deposits payable on demand. It is the opinion of the Board, therefore,
after a consideration of the question which you raise, that a member bank
is forbidden by law to pay interest on deposits of funds payable on demand which belong to an estate or trust in which it is acting as executor
or trustee and which are deposited by the trust department in the commercial department of the bank, except in accordance with a contract entered
into in good faith before June 16, 1933, and existing on that date, and
such a contract must be modified by the bank as soon as possible to
eliminate any provision for the payment of interest on deposits payable
on demand.
Very truly yours,
Chester Morrill,
Secretary.
158
FEDERAL RESERVE B O A R D
X-7556
WASHINGTON
address official correspondence t o
t h e federal reserve board
August 21, 1933.
Dear Sir:
There is inclosed herewith, for your information, a copy of a letter addressed by the Board to
the Federal Reserve Agent at Chicago with regard to
the consideration of applications for membership received from State banks which have been reorganized
on the basis of plans involving a partial waiver of
deposits.
Very truly yours
Chester Morrill,
Secretary.
(inclosure)
TO ALL F. R. AGENTS EXCEPT CHICAGO.
COPY
X-7556-a
August 21, 1933.
Mr. Eugene M. Stevens,
Federal Reserve Agent,
Federal Reserve Bank of Chicago,
Chicago, Illinois.
Dear Mr. Stevens:
The Board has received your letters of July 13 and July
31, 1933, with regard to the policy which should be followed in the consideration of applications for membership received from State banks which
have been reorganized, with the approval of the State banking department,
on the basis of plans involving a partial waiver of deposits, such plans
of reorganization giving evidence that the shareholders have forced the depositors to bear the burden of the reorganizations and themselves have not
made proper contributions toward rehabilitating the banks.
The Board notes
that such banks, after reorganization, may be in a position technically to
qualify for membership but that you have grave doubts of the continuing confidence of the community in banks which have forced their depositors into
reorganizations of this kind and of the future success of such banks, particularly where the management remains unchanged, and that such procedure is
at variance with the reorganization policy of the Federal Reserve Bank of
Chicago which requires the shareholders first to bear the burden of correction.
It is also noted that your general experience over the past ten
years with many such banks is that they have been unable to survive, and
you inquire whether the general policy which you are following of asking
such banks to defer their applications until such time as the possibility
of their successful operation can be determined to your satisfaction is
in conflict with the rights of the banks asking for membership.
.160
-
2 -
X-7556-a
Under the provisions of the Federal Reserve Act, as you
know, the Federal Reserve Board is specifically required to consider
the financial condition and the character of the management of each bank
applying for membership in the Federal Reserve System. Accordingly, in
each such case, the Board gives careful consideration to all factors
which may affect the financial condition of the applying bank. As it is
apparent that the manner in which an existing bank is reorganized may
have a decided bearing on the condition of the institution which should
be taken into account in connection with an application by such bank for
membership, full information should be obtained with regard to the manner
in which such reorganization was effected, and careful consideration
given to its possible effect on the condition of the bank and the institution's ability to maintain a sound financial condition in the future.
The Board feels that when, after a careful consideration
of all the facts involved, the Federal reserve agent is of the opinion
in any case that there is grave doubt as to the ability of the applying
bank to maintain a sound condition on account of inequities in the plan
of its reorganization, or for any other reason, he is fully justified in
suggesting that the application for membership be deferred until it can
be determined more definitely whether the bank will be able to maintain
a sound condition or until appropriate action has been taken to correct
the inequities. Of course, if in any such case the applicant bank requests that its application be submitted to the Federal Reserve Board,
the Board will be glad to consider the application, upon receipt of full
information as to all the facts in the case and the recommendation of the
~
3 -
X-7556-a
Federal reserve agent, together with that of the Committee of his bank*
as to the action "which should be taken#
In all of these cases, whether submitted to the Board or
not, careful inquiry should be made into the plan of reorganization for
the purpose of determining whether, under such plan, the shareholders
have been or will be released from any obligation to correct the condition of the bank, the reasons for any such release, whether the management has made full effort to conserve the interests of the depositors,
the attitude of the community toward the reorganized institution, the
character of the institution1s management and whether any changes should
have been made therein, the need for the institution in the community and
whether the possibilities for its future growth and ability to survive
are favorable*
In this connection, in any case where the reorganization
has not resulted in a change in the management, careful consideration
should be given to the responsibility of the management for the condition
of the bank which required its reorganization, and a statement which establishes a clear justification for the continuance of such management
from the standpoint of the welfare of the institution must be furnished#
There may be some instances where the depositors will
benefit through a reorganization of the type mentioned where the shareholders' liability is uncollectible and the liquidation of the institution through receivership proceedings would entail a greater loss than
through a waiver of deposits • However, the Board feels that, in the
absence of special circumstances, it would not be justified ih admitting
a bank to membership on the basis of a reorganization plan under which
4
X-75564
-
62
the shareholders evidently have not assumed a reasonable share of the
burden of correcting the bank's unsatisfactory condition and particularly where the management responsible for the bank's unsatisfactory condition remains unchanged, until the bank has demonstrated that it is in
sound condition and that it has the confidence of the community.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
FEDERAL RESERVE B O A R D
WASHINGTON
X-7557
address official correspondence t o
t h e federal reserve board
August 22, 1933
Dear Sir:
There is attached hereto, for your information, a
copy of a letter addressed, by the Board under date of July 20,
1933, to the Secretary of the Treasury, together with a copy
of a reply dated August 7, 1933, from Under Secretary Acheson,
with regard to the admission to membership and the licensing
of State "banks which have obtained agreements from their depositors restricting the withdrawal of deposits.
A copy of the letter
to the Governor of Ohio, referred to in this correspondence, is
also attached.
Very truly yours,
•o
Chester Morrill
ecretary
Inclosures
TO ALL I. R. AGErTTS EXCEPT CLEVEIAHD.
1 0 4
X-7557~a
COPY.
July 20, 1933.
Honorable W. H. Woodin,
Secretary of the Treasury,
Washington, D. C.
Dear Mr. Secretary:
There is inclosed a letter, together with a copy thereof for
your files, which the Federal Reserve Board has received from the Governor of the State of Ohio, requesting advice as to whether a nonmember
State bank which has obtained agreements from its depositors restricting
their right to withdraw their deposits would be ineligible for admission
to membership in the Federal Reserve System. The Board's proposed reply
to this letter is also inclosed for your consideration.
Section 9 of the Federal Reserve Act requires the Federal Reserve Board in acting upon the application of any State bank for membership in the Federal Reserve System, to consider, among other things, the
financial condition of the applying bank. Accordingly, in a case of the
kind referred to above the Board gives careful consideration to the circumstances out of which the necessity for the restriction agreements
arose, their terms and their effect on the condition of the applying
bank, and its ability to repay such restricted deposits. In a few such
cases, the Board has admitted the tank to membership in the System, where
after a careful consideration of all the circumstances involved, the Board
found that its condition was satisfactory.
1.65
Honorable W. H. Woodin - 2
X-755?-a
k
Upon the consideration of Governor White's letter there was
brought to the Board's attention the ruling of your Department of April
»
3, 1933, with regard to licenses granted to member banks to reopen and
which reads as follows:
j,
"Member banks which have been granted Federal
licenses to reopen are not permitted to take advantage
of any State Stabilization Act providing for limitation
of withdrawals or otherwise to operate on restricted basis. Federal reserve banks are authorized and directed
to advise any member bank which has been granted a license
to reopen that unless it reopens to the full extent permitted by such license it will be necessary to revoke its
license. If such member bank fails to reopen to the full
extent permitted by its license after being thus advised,
Federal reserve banks are authorized and directed to revoke
the license of such member bank heretofore granted."
In this connection, however, attention was also called to the
^
following statement contained in a telegram which the Secretary of the
Treasury sent to State Banking Authorities in each State on March 11,
1933, with regard to the licensing of member banks:
"The Secretary of the Treasury will not permit
any member bank, state or national, to open in any such
Federal Reserve city unless opened for normal business
on an unrestricted basis, except so far as affected by
legal contracts between the banks and depositors with
respect to withdrawals or notice of withdrawals."
The Board, of course, does not wish to approve any applicaptions of State banks for membership in the Federal Reserve System under
circumstances which may later subject such banks to the revocation of
the license granted by your Department at the time of their admission
X-7557-a
Honorable W. H. Woodin - 3
to membership.
Accordingly, it will be appreciated if you will give
consideration to the proposed attached letter to the Governor of the
State of Ohio and give the Board any suggestions you may have with
regard thereto.
Respectfully,
(signed) Chester Morrill
Chester Morrill,
Secretary.
Inclosures
167
X-7557-b
COPY.
August 7, 1933.
My dear Mr. Morrill:
Receipt is acknowledged of your letter of July 20 with which
you. transmitted for consideration a proposed reply to a letter of June
30 from the Governor of the State of Ohio in regard to the position of
the Federal Reserve Board with respect to applications of State banks
for membership in the Federal reserve system in cases where such banks
have obtained agreements from their depositors restricting to some extent the right to withdraw their deposits. You called attention to a
telegram which was sent on March 11, 1933, by the Secretary of the Treasury to the State Banking authorities, and to a ruling of this department of April 3, 1933, the latter containing the following statement:
"Member banks which have been granted Federal
licenses to reopen are not permitted to take advan-
tage of any State Stabilization Act providing for
limitation of withdrawals or otherwise to operate
on restricted basis. Federal reserve banks are authorized and directed to advise any member bank which
has been granted a license to reopen that unless it
reopens to the full extent permitted by such license
it will be necessary to revoke its license. If such
member bank fails to reopen to the full extent permitted by its license after being thus advised, Federal
reserve banks are authorized and directed to revoke
the license of such member bank heretofore granted."
It is noted that under the Federal Reserve Act the Federal Reserve Board, in acting upon the application of any State bank for membership in the Federal reserve system, considers, among other things, the
financial condition of the applying bank; that in any case involving
restriction agreements the Board gives careful consideration to the circumstances out of which the necessity for the agreements arose, their
terms and their effect on the condition of applying bank, and its ability
to repay such restricted deposits; that in a few such cases the Board has
admitted banks to membership in the system where, after careful consideration of all the circumstances involved, the condition of the banks was
found to be satisfactory; but that the Board does not wish to approve applications under circumstances which may later subject the banks to the
revocation of the licenses granted by this department at the time of their
admission.
X-7557-b
2 -
After considering the views set forth in the proposed letter
to Governor White, this department has no suggestions to offer regarding it, and the Secretary of the Treasury, upon the appropriate recommendation in each such case, will authorize the issuance of a license
to a State bank, when the Federal Reserve Board has approved the "bank's
application for membership. It may be added that, in similar circumstances, the Secretary of the Treasury will issue a license to a reorganized national bank or a national bank organized to take over the
assets of another bank, upon the approval of the Comptroller of the Currency. It follows, therefore, that the Secretary of the Treasury will
not revoke a license issued heretofore, because of the existence of agreements of depositors of the kind referred to, restricting their right of
withdrawal of deposits, which were in force at the time of the approval
granted by the Federal Heserve Board or the Comptroller of the Currency.
To this extent the ruling of April 3, 1933, quoted above, may be regarded
as having been modified.
As copies of the ruling of April 3, 1933, were sent to the Federal reserve banks, it will be appreciated if you will transmit a copy of
this letter to each of the Federal Reserve Banks for their information.
Very truly yours,
(Signed) Dean Acheson
Acting Secretary of the Treasury.
Chester Morrill, Esq.,
Secretary, Federal Reserve Board.
copy
X-7557-e
August 21, 1933.
Honorable George "White,
Governor, State of Ohio,
Columbus, Ohio.
My dear Governor:
It is evident from your letter of June 30 that you
have not been fully advised as to the position of the Federal Reserve
Board with respect to applications of State banks for membership in
the Federal Reserve System in cases where such banks have obtained
agreements from their depositors restricting to some extent their
right of withdrawal of their deposits. The Board has taken the position
that the fact that there are in existence agreements of depositors
waiving their right to demand payment of a portion of their deposits
for a specified period of time does not make a bank ineligible for
membership in the Federal Reserve System, and the Board, in a few instances of this kind, has admitted banks to membership in the System
where their condition was otherwise satisfactory.
Section 9 of the Federal Reserve Act requires the Federal Reserve Board in acting upon the application of any State bank
for membership in the Federal Reserve System to consider, among other
things, the financial condition of tfce applying bank. Accordingly, in
a case of this kind the Board gives careful consideration to the circumstances out of which the necessity for the waiver agreements arose,
their terms and their effect on the condition of the applying bank, and
its ability to repay such restricted deposits.
Honorable George White
-
X-7557-c
2 -
As your letter indicates that you are in agreement
with the view that a bank applying for membership in the Federal Reserve System must have an adequate unimpaired capital, it may interest
you to know that the Board now prescribes for each bank applying for
membership in the Federal Reserve System the following condition:
"Such bank shall maintain an amount of paid-up
and unimpaired capital and unimpaired surplus
which, in the judgment of the Federal Reserve
Board, will be adequate in relation to its total
deposit liabilities, having due regard to the
general principle that a bank* s capital and surplus ordinarily should not be less than one-tenth
. of the average amount of its aggregate deposit
liabilities and, in some circumstances, should
be more than one-tenth of such amount• "
In some cases involving so-called waivers of deposits
which have come to the Board's attention, it has been found that, although depositors waived their right to demand immediate payment of
their deposits, the bank remained liable to repay such deposits at some
future time and, when such liability was taken into consideration, the
bank's capital was impaired or wiped out. In such a case, of course,
the bank was not eligible for membership in the Federal Reserve System.
You have directed attention to the form of agreement
which it appears was exacted by the
of
,
Ohio, from its depositors; and it is noted that this agreement places
in the hands of the officers of the bank the power either to pay or
to withhold any amount due any depositor within the 80% restriction,
since the statement is made that "the bank reserves the absolute right
to withhold payment of any check and to refuse any withdrawal of funds,
whether commercial or savings account or certificate of deposit, when
Honorable George White
171
X-7557-o
the officers of the bank, in their sole judgment, determine that such
action is in the best interest of the bank and its depositors".
The
existence of such an agreement in the case of a bank in sound condition
and otherwise able to meet all of the requirements of admission to membership in the Federal Reserve System would raise a serious question as
to the justification for vesting solely in the discretion of the officers of the bank a power to discriminate among depositors which might
be exercised unfairly and arbitrarily and which would leave not only
the drawers of such checks but also the subsequent holders in due
course in uncertainty as to whether payment might be refused at any
time.
This would be of especial concern to the Federal reserve banks
in view of the fact that they handle for collection practically all
checks drawn on member banks and deposited with banks in other cities.
In the circumstances, the Board would not admit a bank to membership
while it has in force an agreement of this kind*
It is further noted that the agreement inclosed with
your letter also involves an agreement by the stockholders of the bank
authorizing the payment of any dividends on their stock to depositors
who have released the bank from liability for 20% of their deposits
until such depositors have been repaid the amount so released.
It ap-
pears that, in these circumstances, the stock of tne bank will have
little, if any, value from the standpoint of earnings of the bank for
a considerable period and accordingly will not be marketable.
It is
questionable whether on such basis the people of the community will retain confidence in a bank so as to enable it to maintain or increase its
deposits.
1.72
Honorable George White
- 4 -
X-7557-c
As you know, the State of Ohio is within the district
of the Federal Reserve Bank of Cleveland#
All applications of State
banks in Ohio for admission to the Federal Reserve System must be filed
with the Federal Reserve Agent at the Federal Reserve Bank of Cleveland; and it is suggested that you refer any bank which may be interested in submitting an application to Mr. L. B. Williams, Federal Reserve Agent at the Federal Reserve Bank of Cleveland, who is the Board's
official representative in that district, and who, I am sure, will be
glad to give detailed information regarding the conditions under which
such bank may be admitted to the System and assist it in every way possible in the circumstances•
Very truly yours,
(Signed) E. R. Black
Governor.
-J w o
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t0\
the federal reserve board
X-7558
August 22, 1933.
SUBJECT:
Questions relating to requirements of
State laws regarding payment of interest
on public funds.
Dear Sir $
The provision of Section 19 of the Federal Reserve Act, as
amended by the Banking Act of 1933, which forbids a member bank to
pay interest on any deposit payable on demand excepts "any deposit of
public funds made by or on behalf of any State, county, school district, or other subdivision or municipality, with respect to which
payment of interest is required under State law".
The Federal Reserve
Board has been requested to rule upon questions as to -whether the pay*ment of interest is required on such public funds under the provisions
of particular State statutes.
In view of the numerous and varying provisions of the laws of
the States on this subject, the Board feels that, when a question as
to whether a particular State law requires the payment of interest on
public funds is presented to a Federal reserve bank, it is advisable
that it be considered by counsel for the Federal reserve bank and his
opinion should be followed in the matter, unless there appears to be
doubt as to the proper interpretation to be placed upon the law and
it is considered advisablevto present the matter to the Federal Reserve
Board.
W
- 2-
1.7
X-7558
In any case in which a question of this kind is submitted to
the Federal Reserve Board, it is requested that there be furnished to
the Board copies of all pertinent provisions of the State law, a copy
of an opinion of counsel for the Federal reserve bank discussing all
aspects of the question fully and in detail, and a copy of an opinion
on the question rendered by the State Attorney General or other State
official having similar authority, together with any other information
which may be relevant.
It will also be appreciated if you will furnish the Board,
merely for its information, with a copy of any opinion which may be
rendered by counsel for the Federal reserve bank on a question of this
kind, even though it is not considered necessary to present the matter
to the Federal Reserve Board for a ruling.
Very truly yours,
)
Chester Morrill,
Secretary.
TO CHAIRMEN OF ALL FEDERAL RESERVE BANKS.
l
T
)
C
X
A
-
i
y
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-7560
August 24, 1933.
SUBJECT: New Issue Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in
Government securities between Federal reserve banks, the
code word "NOXEGO" has been designated to cover a new
issue of Treasury Bills, dated August 30, 1933, and maturing November 29, 1933.
This word should be inserted in the Federal Reserve Telegraph Code book, following the supplemental
code word "NOXEFE" on page 172.
Very truly yours,
TO GOVERNORS OF ALL F. R. BANKS
176
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
X-7561
August 25, 1933.
Dear Sir:
There is attached hereto, for your information, a
copy of a letter addressed by the Board to the Reconstruction
Finance Corporation with regard to the question whether debentures
issued by a bank under the provisions of the laws of the State
of New York may be considered as capital in determining whether
or not such bank has a capital sufficient to make it eligible for
membership in the Federal Reserve System.
Very truly yours,
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
177
August 25, 1933.
Reconstruction Finance Corporation,
Washington, D. C.
Gentlemen:
Reference is made to the letter addressed "by your Counsel, Mr. James
B. Alley to the Federal Reserve Board on August 5, 1933, requesting advice
as to whether debentures issued by a bank under the provisions of the laws
of the State of Hew York may be considered capital by the Federal Reserve
Board in determining whether or not such bank has a capital sufficient to
make it eligible for membership in the Federal Reserve System.
It appears that the laws of the State of Hew York authorize a
State banking institution "to issue by its board of directors capital
notes or debentures when so specifically authorized by the superintendent
of banks".
The Hew York laws apparently do not in terms prescribe any of
the qualities or rights and liabilities of such debentures or of the holders thereof. However, it is understood that under the provisions of the Constitution of the State of Hew York any stock issued by banks located in that
State, including preferred stock, is subject to double liability and that the
amendment to the laws of the State of Hew York authorizing banks to issue
debentures was enacted in order to enable banks in that State to obtain funds
for the protection of depositors without the holders of such debentures
being subject to double liability as in the case of holders of capital
stock of banks in that State.
178
X-7561-a
Reconstruction Finance Corporation —
2
It has also "been noted that under the provisions of Section 304
of the Act of March 9, 1933, as amended, the Reconstruction Finance Corporation is not authorized to purchase preferred stock in a State banking institution if under the laws of the State in which such institution is located the holders of preferred stock are not exempt from double liability.
However, in any State where a State "banking institution is not permitted
to issue preferred stock exempt from double liability the Reconstruction
Finance Corporation is authorized to purchase legally issued capital notes
or debentures of State banking institutions located in such State.
It has
also been noted that under the provisions of R. F. C. From P. S. 2, Form
of Bank Debentures, debentures which will be purchased by the Reconstruction Finance Corporation represent promises to pay on a specified date the
amount of money paid in on such debentures and to pay the holders of the
debentures a prescribed rate of interest semi—annually, and that so long
as any of the debentures are outstanding the bank may not, except under
certain circumstances, issue additional debentures or incur any "other indebtedness" except for certain specified purposes.
Such Form further pro-
vides that except under certain circumstances no debentures shall be called
for redemption unless the unimpaired capital, surplus and undivided profits
of the bank is in excess of a prescribed amount. Under the provisions
of the laws of Hew York and the form of debenture prescribed by the Reconstruction Finance Corporation, the holders of such debentures apparently
179
X-7561-a
Reconstruction Finance Corporation —
3
are not entitled to voting rights in the management of the corporation.
In the circumstances described above, it seems clear that the New
York law and the form of debenture prescribed by the Reconstruction
Finance Corporation contemplate that such debentures shall represent borrowed money of the issuing bank and are not intended to represent a proprietary interest in the bank as is usually represented by capital stock
of a bank or other corporation.
Under the provisions of the Federal Reserve Act, banks become
members of the Federal Reserve System through subscriptions for stock in
a Federal reserve bank, and, except in the case of mutual savings banks
or similar institutions which are not here involved, the Federal Reserve
Act requires that the subscription for Federal reserve bank stock shall
be made on the basis of the "paid-up capital stock and surplus" of the subscribing bank.
The Federal Reserve Act also provides that a State bank shall
not be admitted to membership unless it possesses "a paid-up unimpaired
capital sufficient to entitle it to become a national banking association
in the place where it is situated", except that banks located in a place
having a population of not exceeding three thousand inhabitants may be admitted under certain circumstances with a capital of not less than $25,000.
In
this connection, attention is called to the fact that, under the provisions
of Section 303 of the Act of March 9, 1933, the term "capital", as used in
provisions of law relating to the capital of national banking associations
X-7561-a^^Q
Reconstruction Finance Corporation —r 4
"shall mean the amount of unimpaired common stock plus the amount of
preferred stock outstanding and unimpaired."
The term "capital", as
used in connection with the capital requirements of national banks,
therefore, includes only common and preferred stock, and, in view of
the facts described above, this definition of "capital", applicable to
national banks, is also applicable to capital requirements for admission of State institutions to membership in the Federal Reserve System.
In view of the above circumstances and the provisions of law referred to, it seems clear that, vuder the provisions of the Federal Reserve Act, the eligibility of a State bank for membership in the Federal Reserve System depends upon the amount of its capital stock and
cannot be determined upon the basis of its capital stock plus borrowed
money obtained through the issuance of debentures or other methods.
In
this connection, it may be* noted that, under the law and the consistent
position of the Board, the surplus of a bank is not included in determining whether the bank has sufficient capital to make it eligible for
admission to membership.
You are accordingly advised that, in the opinion of the Federal
Reserve Board, debentures issued under the provisions of the laws of
•the State of New York, as described above, may not be included in determining whether a State bank has a capital sufficient to make it eligible
for membership in the Federal Reserve System.
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
181
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
X-7562
August 26, 1933.
SUBJECT:
Opinion of the Attorney General
as to meaning of term "Executive
Officer".
i
Dear Sir:
For your information, there is inclosed herewith a copy of an opinion of the Attorney General of
the United States rendered under date of August 18,
1933, vdth regard to the interpretation of the term
"executive officer" as used in Section 22(g) of the
Federal Reserve Act as amended by the Banking Act of
1933
Very truly yours
hf~)cnAsi£J^
Chester Morrill,
Secretary.
Inclosure
TO CHAIRMEN AND GOVERNORS OF
ALL FEDERAL RESERVE BANKS.
COPY
X-7562-a
OFFICE OF THE ATTORNEY GENERAL
WASHINGTON, D. C.
August 18, 1933*
The Honorable,
The Secretary of the Treasury.
My dear Mr. Secretary:
I have the honor to refer to your letter of August 4, 1933,
requesting my opinion (l) concerning the legality, under Section 12 of
the Banking Act of 1933 (approved June 16, 1933), of the proposed acquisition by a new national bank in the District of Columbia of notes
evidencing indebtedness of its executive officers to closed banks whose
assets will be taken over by the new bank, and (2) as to what officers
of a bank are comprised within the term "executive officer"»
Section 12 amends the Federal Reserve Act (U.S.C.
Title 12,
221 et seq.) by adding thereto the following paragraph:
"No executive officer of any member bank shall borrow
from or otherwise become indebted to any member bank of
which he is an executive officer, and no member bank shall
make any loan or extend credit in any other manner to any
of its own executive officers: Provided, That loans heretofore made to any such officer may "be renewed or extended
not more than two years from the date this paragraph takes
effect, if in accord with sound banking practice* If any
executive officer of any member bank borrow from or if he
be or become indebted to any bank other than a member bank
of which he is an executive officer, he shall make a written
report to the chairman of the board of directors of the
member bank of which he is an executive officer, stating
the date and amount of such loan or indebtedness, the security therefor, and the purpose for which the proceeds have
been or are to be used. Any executive officer of any member
bank violating the provisions of this paragraph shall be
deemed guilty of a misdemeanor and shall be imprisoned not
exceeding one year, or fined not more than $5,000, or both;
X-7562-a
and any member bank violating the provisions of this paragraph shall be fined not more than #10,000 and may be fined
a further sum equal to the amount so loaned or credit so
extended."
If a bank should acquire by purchase a note evidencing an indebtedness of one of its executive officers, the officer would certainly
"become indebted to" the bank, within the literal meaning of the words,
and it is to be borne in mind that a contrary conclusion might make possible the circumvention of the statute by subterfuges»
However, it is provided that loans made prior to the enactment
of the statute may be renewed or extended not more than two years, if in
accord with sound banking practice, with evident purpose to avoid the
harshness and possible losses consequent upon immediate foreclosures and
cancellations; and I do not perceive that there is less reason for application of the principle when, during the two-year period, the bank is affected by a reorganization or other such turn in its affairs which results in the transfer of its assets to another corporation in which some
or all of its officers will serve•
Understanding, therefore, that the loans in question were proper
and lawful when made and come within the spirit of the proviso authorizing renewals or extensions for not more than two years, if in accord with
sound banking practice, I perceive no objection to approval of the proposed organization because of the fact that notes evidencing such loans
are among the assets which will be acquired by the new bank#
Upon the question who are executive officers, your Solicitor
quotes from Arkansas Amusement Corporation v. Kempner, 33 S.W. (2d) 42,
to the effect that "an executive officer or employee is one who assumes
184
X-7562-a
- 3 -
command or control and directs the course of the business, or some part
thereof, and who outlines the duties and directs the work of subordinate
employees", as usually provided for in the articles of association, the
by-laws, or a resolution of the directors.
The Supreme Court of Oklahoma,
determining that "the cashier of a national bank clearly is an executive
officer", derived assistance from statutory provisions concerning his
duties. First National Bank v. Mee, 126 Okla. 265, 269.
I approve these general conclusions, but, they permit no categorical answer to the question which you have submitted.
"It is not the
designation under which one is known but the nature of his duties which
characterizes him as an 'executive officer1."
Small v. Gibbs Press, 225
N.Y» S. 141, 142.
It is the duty of the banks and of all officers who by any possibility might be affected to keep within the statute and to weigh carefully
all the facts and circumstances (peculiarly within their possession) before
acting.
If cases arise in which it appears that the statute may have been
violated, I shall be glad to consider the advisability of prosecutions;
and I shall, of course, be glad to advise you in connection with any such
cases wherein you may have some duty to perform.
In either event, however,
it would be necessary that I be fully informed as to the facts.
Respectfully,
(Signed) HOMER S. CUIvMIHGS
Attorney General.
COPY
185
x-7564
Statement of Bureau of Engraving and Printing
For furnishing Federal Reserve Bank Notes (National Currency)
Series 1929
July 10-31, 1933.
Total
Sheets
$5
$10
Boston
75,000
53,000
128,000
$12,032,00
New York
66,000
50,000
116,000
10,904.00
Atlanta
-
67,000
67,000
6,298.00
Chicago
82,000
68,000
150,000
14,100.00
223,000
238,000
461,000
$43,334,00
461,000 sheets @ #94.00 per M,
Amount
$43,334.00
186
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
X-7565
August 29# 1933
SUBJECT:
Code Vford covering Deposits with the Federal
Reserve Bank of Richmond for account of the
Federal Reserve Board.
Dear Sirs
In order to reduce phraseology in telegrams sent by the
Federal Reserve Board to Federal reserve banks, covering various
assessments which are to be credited to the Federal Reserve Bank
of Richmond through the Gold Settlement Fund for account of the
Federal Reserve Board, the following code word has been designated for use effective August 30th:
CHAGRUST:
Credit this amount to the Federal Reserve
Bank of Richmond in your daily statement
of credits through the Gold Settlement Fund
for account of the Federal Reserve Board
and wire Richmond the amount and purpose of
the credit.
This word should be inserted in the Federal Reserve Telegraph Code book, following the word CHAGRINED on page 47.
http://fraser.stlouisfed.org/ TO GOVERNORS
Federal Reserve Bank of St. Louis
Very truly yours
AND AGENTS OF ALL F. R. BANKS.
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
X-7566
August 29, 1933.
SUBJECT: Expense, Main Lines, Leased Wire
System, July, 1933 •
Dear Sir:
Inclosed herewith you will find two mimeographed
statements, X-7566-a and X-75&6-b, covering in detail
operations of the main lines, Leased Wire System, during
the month of July, 1933*
Please credit the amount payable "by your bank for
your share of the expense of the Leased Wire System, to
the Federal He serve Bank of Richmond in the transit clearing, for the account of the Federal Reserve Board, and
advise the Federal Reserve Bank of Richmond by wire the
amount and purpose of the credit.
Very truly yours,
Fiscal Agent,
Inclosures,
•TO GOVERNORS OF ALL F, R. BASKS.
X-7566-a
REPORT SH0WI17G CLASSIFICATION AH) MTMBER CF '70HDS TRANSMITTED OVER MAIM LIEES
05* THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MOSTTH OF JULY, 1933.
Business
reported
by banks
From
Boston
ITew York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total
37,603
160,337
34,189
52,745
58,015
55,624
85,383
62,267
30,831
69,833
57,582
86,827
791,236
Words sent by
Hew York chargeable to other
F. R. Banks (1)
1,830
—
2,015
1,960
1,809
1,793
2,109
2,015
1,845
1,798
3,221
3,852
24,247
F. R. Board "business
ITet Federal
reserve
bank
business
39,433
160,337
36,204
54,705
59,824
57,417
87,492
64,282
32,676
71,631
60,803
90,679
815,483
Percent of total
bank business (*)
4.83
19.66
4.44
6.71
7.34
7.04
10.73
7.88
4.01
8.78
7.46
11.12
100.00
314,853
Reimbursable "business Incoming and Outgoing
Total words transmitted over main lines . . . . . .
(*)
1,130,336
480,911
1,611,247
These percentages used in calculating the pro rata share of leased wire expense as shown
on the accompanying statement (X-7566-b).
(l) Number of words sent by Hew York to other F. R. Banks for their sole benefit charged to
banks indicated in accordance with action taken at Governors' Conference
November 2-4, I925.
qq
00
X-75b0-b
REPORT OF EXF5T3E l-AIl' li:"ES
FEDERAL RESERVE LEASED WISE SYSTEM, JULY, 1933.
Uaire of Bank
Operators'
salaries
Operators'
overtime
Boston
$260.00
$1.00
1,284.14
ITew York
3.00
Philadelphia
225.00
Cleveland
306.66
Richmond
175.00
Atlanta
243.00
Chicago
4,086.87 (#) 14.50
St. Louis
195.00
Minneapolis
211.24
Kansas City
287.00
Dallas
251.00
San Francisco
380.00
Federal Reserve .Board
Total
$7,904.91
$18.50
Wire
rental
$
$261.00
1,287.14
225.00
306.66
230.00 (&)
405.00
243.00
4,101.37
195.00
211.24
287.00
251.00
—•
380.00
15,637.45
15,637.45
$15,867.45
$23,790.86
Heirrbursable charges:
Treasury Denartrrent
$2,737*18
Reconstruction Finance Corporation . 3,808.39
Exp. I7at. Bkg. Emergency Act, 3-9-33
413.27
Federal Hoire Loan Bank Board . . . .
4.90
Agriculture Dept. Disbursing Clerk .
3*51
Comp. Currency, Div. Insolv. Uat.Bks
61.40
Farm Credit Administration:
Federal Farm Loan Bureau . . . . .
24.13
Federal Farm Board . . . . . . . .
47.81
Less: Reimbursable charges.
(&) Main line rental, Richmond-Washington.
(f) Includes salaries of Washington operators.
(*) Credit.
(a) Arrount reimbursable to Chicago.
Total
expenses
-
$7>100.89
$16,689.97
Pro rata
share of
tot al
expenses
$806.13
3,281.25
741.04
1,119.90
1,225.04
1,174.97
1,790.83
1,315.17
669.27
1,465.38
1,245.07
1,855-92
Credits
$261.00
1,287.14
225.00
306.66
405.00
243.00
4,101.37
195.00
211.24
287.00
251.00
380.00
—
$16,689.97
$8,153.41
Payable to
Federal
Reserve
Board
$545.13
1,994.11
516.04
813.24
820.04
931.97
2,310.54 (*)
1,120.17
458.03
1,178.38
994.07
1,475.92
—
$10,547.10
2,310.54 (a)
$ 8,536.56
k0"
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
X-7567
AUgUSt 30, 1933 .
SUBJECT; Regulation Q, - Payment of Interest on Deposits.
Dear Sir:
For your information, there is inclosed herewith a mimeographed
copy of the Board's Regulation Q, which relates to the payment of deposits
and interest thereon by member "banks. The regulation was approved "by the
Board on August 29, 1933, and became effective immediately, except that,
in accordance with Sections IIl(c) and V(c) of the regulation, the limitation on the rate of interest which may be paid on time deposits or savings
deposits will become effective on November 1, 1933.
An official print of the regulation will be made and you are
requested to advise the Board at your earliest convenience as to the number
of copies which you desire the Board to furnish your bank.
However, in order that member banks may be advised as soon as
possible of the provisions of the regulation, it is requested that each
Federal reserve bank issue to each member bank in its district as soon as
possible a; special circular containing the complete text of the regulation
as inclosed herewith.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
TO CHAIRMEN
AM) GOVERNORS OF ALL F. R. BAMS.
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
X-7568
August 30, 1933
Dear Sir:
There is attached hereto, for your information, a copy of a letter addressed by the
Board to the Federal Reserve Agent at Chicago
with regard to the issuance by member banks of
capital stock not subject to assessment.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
TO ALL F. E. AGENTS EXCEPT CHICAGO.
COPY
X-7568-a
4
August 28, 1933.
Mr. Eugene M. Stevens,
Federal Reserve Agent,
Federal Reserve Bank of Chicago,
Chicago, Illinois.
Dear Mr. Stevens:
I regret that due to pressure of other matters there
has not been an opportunity for an earlier reply to your letters of
July 19 and August 21, 1933, with regard to whether the Board would
object to the issuance of stock not subject to assessment in reorganizations of State member banks.
In this connection you forwarded a copy of
a letter you had received from the Commissioner of Banking of the State
of Michigan, in which he called attention to the fact that under the
provisions of Section 22 of the Banking Act of 1933 the additional
liability imposed upon shareholders in national banking associations
by the provisions of Section 5151 of the Revised Statutes, as amended,
shall not apply with respect to shares in a national bank issued after
the date of the enactment of the Banking Act of 1933.
The Federal Reserve Board does not require that the
capital stock of State banks admitted to membership in the Federal Reserve System shall be subject to assessment where under the laws of
the State under which the bank is organized non-assessable stock may
lawfully be issued, and in a number of instances it has admitted banks
to membership having capital stock not subject to assessment.
In the
X-7568-af O*?
Eugene M. Stevens.
- 2 -
circumstances, the Board would not object to the issuance of stock not
subject to assessment in the reorganization of a State member bank where
the issuance of such stock is authorized under the laws under which the
bank is organized.
Very truly yours,
Chester Morrill,
Secretary.
X-7569
q
--i
(INTERPRETATION OF BAMING ACT OF 1933)
Copies to be sent to all Federal reserve banks .
August 29, 1933#
Honorable George II# Dern,
Secretary of War,
Washington, D# C.
My dear Mr# Secretary:
Reference is made to your letter of July 6, 1933, in which you
submit the question whether, under the provisions of Section 19 of the
Federal Reserve Act, as amended by Section 11(b) of the Banking Act of
1933, the
Bank of the City of
, a member bank
of the Federal Reserve System, may pay interest on funds of the Government of the Philippine Islands deposited with such bank, subject to payment on demand, under the provisions of an agreement entered into between the bank and the Secretary of War, a copy of which was inclosed
with your letter*
Under the terms of the agreement, the bank agreed to receive on
deposit, safely keep, and properly account for all moneys deposited
with it from time to time by representatives of the Government of the •
Philippine Islands, to pay promptly checks against such deposits, and
to pay over all balances of funds so received when called upon to do so#
The rate of interest paid by the bank on deposits made under this agreement has been changed from time to time by supplementary agreements, effected by letters exchanged between the Chief of the Bureau of Insular
Affairs, under authority of the Secretary of War, and the
Bank,
The agreement contains no provision as to the period for which
it shall be effective or as to the date upon which it shall terminate,
Honorable George H# Dern
X-7569
-2-
J.95
but the Government of the Philippine Islands has the right to terminate
the agreement at any time without notice or liability to the bank.
Section 19 of the Federal lie serve Act, as amended by the Banking Act of 1933, provides in part as follows:
"No member bank shall, directly or indirectly by any device whatsoever, pay any interest on any deposit which is payable on demands Provided, That nothing herein contained
shall be construed as prohibiting the payment of interest in
accordance with the terms of any certificate of deposit or
other contract heretofore entered into in good faith which is
in force on the date of the enactment of this paragraph; but
no such certificate of deposit or other contract shall be renewed or extended unless it shall be modified to conform to
this paragraph, and every member bank shall take such action
as may be necessary to conform to this paragraph as soon as
possible consistently with its contractual obligations: Provided, however, That this paragraph shall not apply to any
deposit of such bank which is payable only at an office thereof located in a foreign country, and shall not apply to any
deposit made by a mutual savings bank, nor to any deposit of
public funds made by or on behalf of any State, county, school
district, or other subdivision or municipality, with respect
to which payment of interest is required under State law."
It will be noted that the law obviously contemplates that any
contract of a member* bank for the payment of interest on deposits payable on demand, which was entered into prior to the date of enactment
of the Banking Act of 1933, June 16, 1933, and in effect on that date,
should be terminated by such bank as soon as possible after that date,
if legally possible to do so under the contract.
After a careful consideration of this matter, it is the view
of the Federal Reserve Board that the
Bank may at
any time
lawfully terminate the agreement submitted with your letter, upon giving reasonable notice to the duly constituted representatives of the
Government of the Philippine Islands of its intention to terminate such
contract; and that, accordingly, it became the duty of the
Honorable George H. Dern
-3-
X-7569
Bank to terminate or modify the contract as soon as possible after June
16, 1933 so as to eliminate any provision for the payment of interest
on deposits payable on demand * After such modification of the contract, no interest may be paid on deposits which have been received
under its provisions and which are payable on demand•
The opinion of the Federal Reserve Board on a question of this
kind, as you know, does not necessarily constitute a final determination of the rights of the parties to the transaction and does not prevent any party who may desire to do so from obtaining a determination
of any such question which may be of a justiciable character in a
court of competent jurisdiction.
A copy of this letter is being transmitted to t&e
Bank for its information in this connection#
Very truly yours,
Chester korrill,
Secretary.
X-7570
(INTERPRETATION OF BANKING ACT OF 1933)
^
.J
Copies to be sent to all Federal reserve banks.
August 29, Id33.
Mr. T. A. Walters,
First Assistant Secretary,
Department of the Interior,
Washington, D. C.
Dear Sir:
Reference is made to your letters of July 8 and. July 15, 1933,
addressed to the Governor of the Federal Reserve Board, in which you
submit the question whether, under the provisions of Section 19 of the
Federal Reserve Act as amended by Section 11(b) of the Banking Act of
1933, a member bank may pay interest on deposits of Indian funds which
are payable on demand.
It appears from the information which you have
submitted that the agreement for the receipt of such deposits and the
payment of interest thereon is contained in letters exchanged between
the member bank and the Department of the Interior and that the bank
also agrees to comply with regulations of the Department on the subject.
The member bank is required to give security for the deposits received
and to pay interest at a stipulated rate computed on actual daily balances.
There is apparently no provision as to the period for which the
agreement governing the deposit shall be effective or as to the date
upon which it shall terminate, but it appears that the Department of the
Interior may effectually terminate the arrangement at any time through
withdrawal of the balance with the member bank.
Section 19 of the Federal Reserve Act, as amended by the Banking
Act of 1933, provides, in part, as follows:
"No member bank shall, directly or indirectly by any device whatsoever, pay any interest on any deposit which is
Mr. T. A. Walters
X-7570
payable on demands Provided, That nothing herein contained
shall be construed as prohibiting the payment of interest in
accordance with the terms of any certificate of deposit or
other contract heretofore entered into in good faith which is
in force on the date of the enactment of this paragraph; but
no such certificate of deposit or other contract shall be renewed or extended unless it shall be modified to conform to
this paragraph, and every member bank shall take such action
as may be necessary to conform to this paragraph as soon as
possible consistently with its contractual obligations: Provided, however, That this paragraph shall not apply to any
deposit of such bank which is payable only at an office thereof located in a foreign country, and shall not apply to any
deposit made by a mutual savings bank, nor to any deposit of
public funds made by or on behalf of any State, county, school
district, or other subdivision or municipality, with respect
to which payment of interest is required under State law."
It will be noted that the law obviously contemplates that any contract with a member bank for the payment of interest on deposits payable
on demand, which was entered into prior to the date of enactment of the
Banking Act of 1933, June 16, 1933, and in force on that date, should be
terminated by such bank as soon as possible after that date, if legally
possible to do so under the contract.
After careful consideration of this matter, it is the view of
the Federal Reserve Board that a member bank in which Indian funds have
been deposited in accordance with the terms of an agreement such as that
exemplified in the inclosures with your letter of July 15 on this subject, may lawfully terminate the contract at any time upon giving reasonable notice to the Department of the Interior of its intention to terminate such contract, and that accordingly it became the duty of such a
member bank to terminate or to modify such contract as soon as possible
after June 16, 1933, so as to eliminate any provision for the payment of
interest on deposits payable on demand. After such modification of the
Mr. T. A. Walters
- 3 v
X-7570
contract, no interest may be paid on deposits which have been received
under its provisions and which are payable on demand.
The opinion of the Federal Reserve Board on a question of this
kind, as you know, does not necessarily constitute a final determination
of the rights of the parties to the transaction and does not prevent any
party who may desire to do so from obtaining a determination of any such
question which may be of a justiciable character in a court of competent
jurisdiction.
Very truly yours,
Chester Morrill,
Secretary.
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence to
the federal reserve board
X-7572
August 30, 1933.
Dear Sir;
Inclose'd are ten copies of a memorandum prepared in
order to expedite the handling of applications for membership
in the Federal Reserve System through obtaining reasonable
uniformity in the arrangement and form of data accompanying
applications as submitted to the Board.
It will be appreciated if you will instruct your
department to prepare such data in the form outlined in the
inclosed memorandum. Additional copies of this outline are
available for the use of your department if desired.
Very truly yours,
Chester Morrill,
Secretary.
Inclosures
TO ALL F. B. AGENTS.
^;01
Exam 2
GENERAL STYLE OF MEMORANDUM
TO ACCOMPANY APPLICATIONS FOR MEMBERSHIP
This outline is intended only to obtain reasonable uniformity in the arrangement and form of memoranda covering applications for membership and is not intended
to limit the scope of the information to be submitted. Each memorandum should include information relative to any other circumstances which have a significant^.-bearing on the condition of the applicant bank and which should be considered in
passing upon the application.
The memorandum to be prepared in this general style
is not intended to supplant the analysis on Federal Reserve Board Form 212 which
should accompany the report of examination and the application.
PLEASE SUBMIT EACH MEMORANDUM IN ORIGINAL AND FOUR CARBON COPIES
(in typewriting the memorandum, please double-space all textual matter)
1. DATA ON CITY OR TOWN IN WHICH BANK IS LOCATED (include information as to size
and character of community, relative location of city or town in the State
with respect to other cities, and nature of principal business or agricultural
activities. Give number of other banks in community, with comment as to
whether open, closed, or operating under restrictions. If located in a large
city, give location of bank with respect to principal business district,nature
of the district served, and general type of business conducted ty the bank).
2. STATUS OF BANK (Is bank now operating free of restrictions, and if not, on
what basis? Give full information as to any previous restrictions or waiver
plans and date when restrictions were removed. If bank has ever been a member, give period of membership and reason for discontinuance c£ membership).
3. CONDENSED STATEMENT OF CONDITION (Show from where taken and the date).
After statement of condition, show following information, where available;
Past due paper &
(Also show portion of this amount which represents paper past due 6 months or more, if available).
Loans predicated on real estate
(Also show portion of this amount
which' represents paper secured ty junior liens and amount representing
debts previously contracted, if available).
Potential "other real estate" in loans $>
.
Liability of directors, officers, employees and their interests;
Direct
#
Indirect
Total
$
Public deposits $
.Assets pledged to secure:
Borrowings
&
Public deposits
Total pledged
S
k()2
g -
CLASSIFICATION OF CRITICIZED ASSETS
(Show from where taken)
In tabular form show classification of the various assets. Show depreciation on investments in various subheadings: (a) U. S. Government5
(b) State, county, and municipalj (c) First four grades; (d) Lower
grades; (e) Not rated; (f) Defaulted bonds; (g) Stocks; (h) Any other
headings necessary to show proper picture.
Explain any reclassification of assets criticized ty examiner.
LIQUIDITY
General comment, with various ratios to Cash and exchange
Cash and exchange and unpledged U. S.
Government bonds
Cash and exchange and market value of
unpledged securities
Amount of paper eligible for rediscount.
Total
Deposits
Unsecured
EARNINGS, DIVIDENDS AND CHARGE-OFFS (Earnings and charge-off record of the
bank over a period of several years and voluntary contributions made
or assessment paid try shareholders of the bank during such period.
Set up in tabular form where possible).
TREND OF DEPOSITS (List deposits on the last day of the year for a period
of several years).
ORGANIZATION AND POTTERS (Enumerate powers which Federal reserve bank's
counsel advises bank is authorized to exercise under charter and State
law, pointing out any other or unusual powers being exercised try bank.
Make definite statement"as to whether or not bank is exercising any
powers other than those incident to usual commercial banking operations).
TRUST DEPARTMENT (Information as to the operations of the trust department,
if any. If the trust department was not covered by the current examination, state when an examination of this department was last conducted and the condition disclosed ty such examination. Discuss investment policies; supervision by directors; extent of investment in
securities of affiliated interests, directors' interests, or other
friendly interests; source of principal purchases of trust investments).
AFFILIATIONS (If the institution is controlled by a holding company, give
the name of such company, the extent of its control and supervision by
such company, and if the subject institution owns, controls, or is
closely affiliated in any way with other corporations, give detailed
information as to the nature of the affiliation, the condition of the
affiliate, and the effect of the affiliation on the affairs of this
bank).
BRANCHES (Include information whether there are branches outside the city
limits, when and where established, etc.).
CHARACTER OF MANAGEMENT AND CONTROL
(Discuss fully).
'•UO
Exam 2
-» 3
15. COMMENTS OF BANK EXAMINER WHO MADE THE EXAMINATION
14. COMMENTS OF EXAMINER WHO PREPARES THIS ANALYSIS
by examiner under No. 13).
(Any comments not covered
15. COMMENTS OF FEDERAL RESERVE AGENT
16. RECOMMENDATION OF RESERVE BANK COMMITTEE
Note:- Under heading
13, 14, or 15 discuss need of the community for the
banking facilities provided by the applicant bank, its competitive position,
and the probability of the successful operation of the bank in view of all
of the circumstances involved.
204
FEDERAL RESERVE B O A R D
WASHINGTON
X-7573
address official correspondence t o
the federal reserve board
August 30, 1933.
SUBJECT:
Charge for National Bank
Examination Reports.
Dear Sir:
Reference is made to the Board's letter of November 25, 1932,
X-7298, approving the payment of a fee of $10.00 for each report of
examination of a national "bank furnished to the Federal reserve banks
until June 30, 1933, it being understood that after that date, in the
absence of further action by the Federal Reserve Board, the payment
of a fee of $5.00 for each such report of examination would be resumed*
The Comptroller of the Currency has requested that the fee of
$10.00 be continued, and at the meeting of the Federal Reserve Agents1
Conference on August 16, 1933, it was voted, subject to the approval
of the Federal Reserve Board, to continue for one year from July 1,
1933, the payment of a fee of $10.00, in accordance with the Comptroller's request.
The Federal Reserve Board has approved the action taken by the
Federal Reserve Agentsf Conference and is advising the Comptroller of
the Currency accordingly.
Very truly yours
( T l y U .
Chester Morrill
Secretary.
To all Governors and Federal reserve agents.
X-7574
(INTERPRETATION OF BANKING ACT OF 1933)
'
<
Copies to be sent to all Federal reserve banks.
August 30, 1933
President
Bank
Mr.
The
Dear Sirs
Reference is made to your letter of July 15, 1933, in which you
raise the question whether your bank is required under the provisions
of section 19 of the Federal Reserve Act as amended by section 11(b) of
the Banking Act of 1933 to pay interest accruing after June 16, 1933 on
deposits of Postal Savings Funds which are payable on demand•
The Federal Reserve Board understands that prior to June 16,
1933, your bank agreed to comply with the regulations of the Postal
Savings System governing the deposit of Postal Savings Funds in banks,
and that this agreement was in effect on that date.
Under the provisions
of the regulations (edition of October 1931) relating to the deposit of
Postal Savings Funds, banks which have qualified to receive deposits of
such funds are required to pay interest thereon at a stipulated rate
and a bank surrendering its Postal Savings deposits is required to credit
the interest due on the date its account is closed.
The Board of
Trustees of the Postal Savings System may make changes in the rate of
interest to be paid by the banks as it may deem proper.
The regulations
apparently contain no provision as to the period for which such an arrangement shall continue or the date upon which it shall terminate, but
the funds on deposit may be withdrawn by the Board of Trustees at any
time.
The regulations further provide that whenever a bank desires to
relinquish the whole or a part of its Postal Savings deposits it shall
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X-7574 ^
notify the Third Assistant Postmaster General and comply with certain
other requirements, and the Third Assistant Postmaster General will direct
the bank as to the disposition to be made of the relinquished deposits.
Section 19 of the Federal Resorvo Act as amended by the Banking
Act of 1933 provides in part as follows:
1t
No member bank shall, directly or indirectly by any device
whatsoever, pay any interest on any deposit which is payable on
demand: Provided, That nothing herein contained shall be construed as prohibiting the payment of interest in accordance with
the terms of any certificate of deposit or other contract heretofore entered into in good faith which is in force on the date of
the enactment of this paragraph; but no such certificate of deposit or other contract shall be renewed or extended unless it
shall be modified to conform to this paragraph, and every member
bank shall take such action as may be necessary to conform to
this paragraph as soon as possible consistently with its contractual obligations: Provided, however, That this paragraph
shall not apply to any deposit of such bank which is payable only
at an office thereof located in a foreign country, and shall not
apply to any deposit made by a mutual savings bank, nor to any
deposit of public funds made by or on behalf of any State, county,
school district, or other subdivision or municipality, with respect to which payment of interest is required under State law."
It will be noted that the law obviously contemplates that any
contract of a member bank for the payment of interest on deposits payable
on demand, which was entered into prior to the date of enactment of the
Banking Act of 1933, June 16, 1933, and in effect on that date, should
be terminated by such bank as soon as possible after that date, if legally
possible to do so under the contract.
After a careful consideration of this matter, it is the view of
the Federal Reserve Board that a member bank in which Postal Savings
Funds have been deposited subject to the provisions of the regulations of
the Postal Savings System (edition of October, 1931) may, at any time,
lawfully terminate the contract for the receipt and holding of such deposits and the payment of interest thereon upon compliance with the
-• 3 -
X—7574
\J
provisions of the regulations with respect to the relinquishment by such
bank of the whole of its Postal Savings deposits; and that accordingly,
it became the duty of such a member bank as soon as possible after June
16, 1933, to take such action as may be necessary to terminate the contract or to eliminate any provision for the payment of interest on deposits payable on demand. After such modification of the contract no
interest may be paid on deposits which have been received under its provisions and which are payable on demand.
The opinion of the Federal Reserve Board on a question of this
kind, as you know, does not necessarily constitute a final determination
of the rights of the parties to the transaction and does not prevent any
party who may desire to do so from obtaining a determination of any such
question which may be of a justiciable character in a court of competent
jurisdiction.
Very truly yours,
(Signed) Chester Morrill,
Chester Morrill,Secretary.
i
FEDERAL RESERVE B O A R D
2 0 8
WASHINGTON
address official correspondence t o
the federal reserve board
X-7575
August 31, 1933.
SUBJECT:
New Issue Treasury Bills.
Dear Sir:
In connection with telegraphic transactions in
Government securities between Federal reserve banks, the
code word "NOXEKE" has been designated to cover a new
issue of Treasury Bills, dated September 6, 1933, and maturing December 6, 1933.
This word should be inserted in the Federal Reserve Telegraph Code book, following the supplemental
code word "NOXEGO" on page 172.
Very truly yours
TO GOVERNORS OF ALL F, R. BANKS.
FEDERAL RESERVE B O A R D
2{)
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-7576
August 31, 1933.
SUBJECT:
Employment of Trust Examiners.
Dear Sir:
At its meeting on August 16, 1933, the Federal Reserve
Agents' Conference approved a report of a committee of the Conference with regard to the responsibility of Federal reserve agents
under the Banking Act of 1933. Paragraph (c) of the report states
that "Every Federal reserve agent should have a thoroughly trained
man on his force to examine the trust departments of State member
banks and his services or those of his staff should also be available for the examination of trust departments of national banks«"
The Federal Reserve Board approves this recommendation and
requests that the Federal reserve agent at each Federal reserve bank
take steps immediately to arrange for the employment of a trust
examiner with the qualifications contemplated by the report. The
Board feels that special care should be exercised in the selection
of such an examiner, and, when a person who clearly meets the requirements is found, the Federal Reserve Agent should submit a
specific recommendation to the Federal Reserve Board with regard to
his appointment and salary, the recommendation to be accompanied by
X-7576
Page Two
^''iO
a full statement in detail of the experience and qualifications of
the appointee for the position of trust examiner on the agent's
staff.
Very truly yours,
~&£Lgxzaj
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
I
Y
I
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i
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?
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
X-7577
September 1, 1933
SUBJECT:
Proposed agreement covering services by Federal
Reserve Banks as depositaries, custodians, and
fiscal agents for the Federal Emergency Administrator of Public Works#
Dear Siri
Since the Board's telegram of August 31, 1933 (Trans 1866), on
the above subject was transmitted to you, certain changes in the proposed memorandum of agreement covering the services proposed to be
rendered by the Federal reserve banks as depositaries, custodians, and
fiscal agents for the Federal Emergency Administrator of Public Works
were agreed upon as a result of further negotiations between the Treasury Department, the Federal Emergency Administrator of Public Works
and the Federal Reserve Bank of Mew York; and there is inclosed here\
with a copy of the proposed memorandum of agreement as further revised
so as to incorporate the changes thus agreed upon. The changes consist of the insertion in the proposed agreement of the words underlined on the inclosed copy and they ore believed to be self explanatory
You will note that the new paragraph numbered 8 eliminates one of the
five points of difference mentioned in the Board's telegram of August
31; and that the Administrator of Public Works has now accepted in
substance all but four of the suggestions made by the Federal reserve
banks•
As stated in the Board's telegram of August 31, in view of the
decision of the Treasury Department, the Federal Reserve Board offers
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X-7577
no objection to any Federal reserve bank acting upon receipt of a request of the Secretary of the Treasury, in the capacities indicated, in
the inclosed form of agreement, provided such agreement is satisfactory
to the contracting Federal reserve bank.
It is understood that the Under Secretary of the Treasury will
promptly request each Federal reserve bank to act in the capacities indicated and that the Administrator of Public Works m i l forward copies
of the proposed memorandum of agreement to all Federal reserve banks
for execution.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
TO THE GOVERNORS OF ALL FEDERAL RESERVE BANKS•
MEMORANDUM OF AGREEMENT, effective this
- day of
1933, by and between the FEDERAL RESERVE BANK OF ________ _____ (hereinafter
called the "Bank"), and TIIE UNITED STATES OF AMERICA.
Whereas, the Secretary of the Treasury has requested the Bank
as fiscal agent of The United States of America to act in accordance
with this agreement as depositary, custodian, and fiscal agent for the
Federal Emergency Administration of Public Works, an agency of The United
States of America organized under Act, Public No. 67, of the 73rd Congress, approved June 16, 1933, (hereinafter called "Public Works"), and
the Bank has agreed to act for Public Works in such capacities»
NOW, THEREFORE,
1.
The bank shall from time to time make payments of moneys
to be loaned, granted, or otherwise transferred by Public Works in accordance with instructions, telegraphic or written, from time to time
received from Public Works, provided that the Bank is then authorized to
draw checks in the name and on behalf of the disbursing officer of Public
Works»
Unless otherwise instructed, the Bank shall make such payments
by drawing checks upon the Treasurer of the United States, in the name
and on behalf of the disbursing officer of Public Works, under Symbol
No. 95-100, payable to the order of the proposed recipient of such funds
designated by Public Works or to the order of a bank designated by such
proposed recipient (hereinafter called the "Borrower") for tho credit of
the Borrower.
If so instructed by Public Works the Bank may make such
payments by telegraphic transfer and shall thereupon reimburse itself by
drawing checks upon the Treasurer of the United States, in the name and
on behalf of the disbursing officer of Public Works, under Symbol No.
95-100, payable to the order of the Bank.
X-7577-a
In making payments for Public Works the Bank assumes no liability as to the legality or advisability of payments authorized by
Public Works, the financial responsibility of the Borrower, the adequacy
of the security, or any other matter affecting the credit risk assumed
by Public Works under its arrangements with the Borrower, or the priority
or validity of the lien of any instrument deposited with the Bank.
The
Bank assumes no liability as to the filing or recording, or the refiling
or maintaining of record of any instrument executed in connection with
any loan, grant car other transfer of funds made by Public Works; or the
payment of any tax or assessment, the discharge of any lien, or the existence or maintenance of any insurance with respect to premises referred
to in any such instrument; or the performance of any condition or covenant
contained in any such instrument other than conditions specifically set
forth in instructions to the Bank from Public Works in connection with
the payment of any such loan, grant or other transfer of funds.
2.
The Bank shall receive and handle as custodian for Public
Works, checks, notes, drafts, contracts, bonds, coupons, warrants, debentures, bills of exchange, acceptances, receipts, and other obligations
or instruments evidencing loans, grants or other transfers of funds made
by Public Works or representing collateral for such loans or other transfers of funds, including all instruments and other documents tendered in
connection therewith, and shall keep the same separate and apart from the
assets of the Bank, and upon the request of Public Works shall deliver
the same or any designated item or items thereof at any time to, or upon
the order of, Public I'lorks» The Bank shall handle for collection and
credit in the General Account of the Treasurer of the United States,
X-7577-a
Symbol No. 95-100, any instruments for the payment of money held by it
as custodian and any items sent to it for collection by Public Works•
Unless otherwise directed by Public Works the Bank shall handle such
items for collection upon the terms and conditions provided in the collection circulars of the Bank then in force with respect to the collection by the Bank of cash and non-cash items for member banks.
If requested by Public Works the Bank shall maintain or secure
the maintenance of a fidelity bond or bonds, providing coverage, in addition to any coverage that may be already in effect, for all officers
and employees of the Bank engaged in handling such items, under the
terms of which Public Works will be protected to its satisfaction*
The
cost of all additional premiums for such coverage for the benefit of
Public Works will be paid by Public Works as part of the expenses of the
Bank provided for herein.
3.
The Bank shall transmit all items payable to bearer by
registered mail, express or otherwise, and shall when reasonably necessary obtain insurance covering such items, and the cost of such insurance
together with mail and express charges, will be paid by Public Works as
part of the expenses of the Bank provided for herein*
4.
The Bank shall keep separate accounts and records of all
its transactions for and on behalf of Public Works under this agreement,
shall transmit from time to time such receipts, reports and statements
as Public Works may reasonably require, and shall permit Public Works
at any reasonable time to examine all such accounts and records, except
securities located in the vaults of the Bank.
Such securities are
ordinarily examined at least once each year by the examiners of the
- 4 -
X-7577-a
Federal Reserve Board and by the General Auditor of the Bank, and at the
time of such examinations the reports concerning such securities m i l be
reconciled with the records of Public Works.
5.
Under no circumstances shall the Bank be held responsible
to Public Works for any loss arising from any cause whatsoever in carrying out the provisions of this agreement or any directions or instructions
of Public Works hereunder, except such as may arise from its negligence
or that of its officers, directors, employees or duly authorized agents.
In acting or disbursing any funds hereunder, the Bank shall be entitled
to rely on any directions or instructions of Public Works, or any of its
duly constituted agents, whether telegraphic, written or otherwise, which
the Bank believes to be genuine and duly authorized, and to have been
f
given, made, sent or signed by the proper person, and in so acting and
disbursing funds the Bank shall be fully protected and without liability
of any kind whatsoever except for its own negligence*
6•
Public Works shall reimburse the Bank for all expenses in-
curred by the Bank on account of or arising out of services rendered by
the Bank hereunder, statements of such expenses to be rendered by the Bank
monthly.
7. All action to be taken by or on behalf of Public Works hereunder shall be taken by Harold L, Iekes, Federal Emergency Administrator
of Public Works, or his successor or successors in office, or his or their
duly authorized agent or agents. Public Works shall keep on file with
the Bank the names, titles and specimen signatures of all such persons
authorized to act hereunder.
8.
Either party hereto may terminate this agreement by giving
to the other 30 days written notice.
- 5 -
X-7577-a
IN WITNESS liVHEREOF the Bank, by its duly authorized officer,
and The United States of America, by the Federal Emergency Administrator
of Public Works, have executed this memorandum of agreement.
ATTEST j
FEDERAL RESERVE B A M OF
by
Governor
THE UNITED STATES OF AMERICA
by
Federal Emergency Administrator of
Public Works.
18
s.
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
X-7578
September 5, 1933..
Dear Sirs
In connection with the Board's letter of August
5, 1925 (X-4397), with regard to estimating population
of towns and cities in which banks applying for membership are located, there is inclosed a copy of a telegram
recently addressed to one of the Federal Reserve Agents,
for your information in the event that a case involving
similar circumstances arises in your district.
Very truly yours,
~$>ReA.cw hf)
Chester Morrill
Secretary.
Inclosure.
To all Federal Reserve Agents.
X-7578-a
COPY
Referring your wire August 3, 1933, in absence of detailed
information as to reasons for apparent decrease in population
of
,
, and as to temporary or permanent
character thereof, Board is unable to advise definitely whether
evidence submitted is sufficient to determine eligibility of
_________ Bank and Trust Company for membership with capital
less than $100,000.
If estimates of population are to be ac-
cepted by Board in lieu of population as shown by 1930 census,
such estimates in a case of this kind should be accompanied by
detailed advice of cause of decrease since 1930 census and any
available local statistics indicating whether estimates are
justified.
It is suggested that, if you have not already done
so, you should obtain independently of State bank involved disinterested estimates of present population of
, together
with the other information above mentioned and forward to Board
full information in this matter, together with your opinion of
present population of __________ on basis of evidence obtained.
Morrill.
X-7579
(INTEEPEETATIOM OF BANKING ACT OF 1933)
Copies to be sent to all Federal reserve "banks.
Mr.
, Secretary,
_ _ _ _ _ _ Bankers Association,
Dear Sir:
The Comptroller of the Currency has referred to the
Federal Reserve Board for reply your letter of July 18, 1933, in which
you submit an inquiry as to whether a member bank of the Federal Reserve System may lawfully "allow a credit for a balance in a checking
account merely for the purpose of arriving at the cost to charge the depositors".
From the information in your letter, the Board understands
that if the interest computed on any such balance is in excess of the
amount of charges against such account, the bank pays no interest to the
depositor, but presumably, it does pay or absorb the charges against the
account.
In the event that the interest computed on any such account
is less than the charges against the account, the depositor is required
to pay the bank the actual cost of carrying the account in accordance
with a schedule of the bank.
It does not appear whether the sum the de-
positor is required to pay is fixed with reference to the amount of interest credited on his balance, or otherwise bears any relationship to
the amount of such interest.
The prohibition against the payment by a member bank of
interest on any deposit payable on demand which is contained in Section
X-7579
Mr.
—
221
2
19 of the Federal Beserve Act, as amended by Section 11(b) of the Banking Act of 1933, applies not only to the direct payment of interest,
but also to the indirect payment of interest in any manner or by any
method, practice or device whatsoever.
The payment or absorption of charges
or other expenses by a member bank, in an amount which varies with or
bears a substantially direct relation to the amount of a deposit payable
on demand, constitutes an indirect payment of interest on such deposit
within the meaning of this section and is within the prohibition thereof.
The information contained in your letter is not sufficiently
complete to enable the Board to advise you definitely whether the instant
situation would come within the prohibition of said Section 19, as amended. However, it seems that in certain cases charges and expenses are
absorbed in lieu of the payment of interest; that the question of the
absorption of such charges is determined with reference to the amount of
the deposit balance; and, therefore, that the absorption of such charges
is directly related to the amount of such deposit balance.
In such cir-
cumstances, it would appear that the absorption of such charges would
constitute an indirect payment of interest and would be unlawful.
You are further advised that in any case in which a member bank
pays or absorbs charges or other expenses in connection with any deposit
payable on demand, it must be prepared to show that such payment or absorption of charges or expenses is not a device to evade the statutory
prohibition.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
2
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
X-7580
September 9, 1933.
SUBJECTi
New Issue of Treasury Certificates
of Indebtedness.
Dear Sirs
In connection with telegraphic transactions between Federal reserve banks covering Government securities,
the following code word has been designated to cover a new
issue of Treasury Certificates of Indebtedness:
"NOWHOBIER"
1/4$ Treasury Certificates of Indebtedness, Series TJ-1934, to be dated
September 15, 1933, and to mature June
15, 1934.
This code word should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental
code word "NOWHOBIAT" on page 172.
Very truly yours,
S. R. Carpenter,
Assistant Secretary.
TO GOVERNORS OF ALL P. R, BANKS.
^
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
X-7581
September 11, 1933
SUBJECT:
Statement of Board's general policy
in connection with consideration of
applications for membership.
Dear Sir:
You will recall that upon the request of some of the Federal reserve agents during the conferences with the Board on August
15 and 16, 1933, there was submitted a preliminary draft of a statement of the Board's general policy in connection with the consideration of applications for membership in the Federal reserve system.
This statement has been revised and amplified in the light of the
discussions during those meetings and the suggestions made by the
Federal reserve agents with regard thereto.
There are attached here-
to mimeographed copies of the revised statement which may be used
solely for the guidance of the appropriate committee of the Federal
reserve bank and members of your staff in considering applications
for membership.
Very truly yours
Chester Morrill,
Secretary.
Inclosures.
TO ALL FEDERAL RESERVE AGENTS.
GEHERAL PRINCIPLES APPLICABLE TO CONSIDERATION
OF lPPLICinrI0NJ'F0FM®ER¥HIP' IH
"FEDERAL' REiSERYE "SYSTEM
X-7531-a
Under the provisions of the Federal Reserve Act, the Federal
Reserve Board, in acting upon an application for membership, is specifically required to consider the financial condition of the bank, the
general character of its management and whether or not the corporate
powers exercised are consistent with the purposes of the Federal Reserve Act.
The Federal Reserve Act further provides that no applying
bank shall be admitted to membership unless it has an unimpaired capital.
While no rigid formula can be prescribed for the admission of
State banks to the system, the following is an expression of the Board's
general policy on the points mentioned. It should be clearly understood
that they do not necessarily cover all questions that may be involved
in any case, and that each particular case must be determined on its
merits after careful consideration of all circumstances involved. In
this connection, the standard or customary conditions of membership
which the Board now prescribes for all banks admitted to membership are
set forth in the circular letters dated March 11, 1933 (X-7356) and
June 30, 1933 (X-7469).
1.
The bank must be sound with unimpaired capital which, to-
gether with the bank's unimpaired surplus, must be adequate in relation to its total deposit liabilities, having due regard to the general
principle that a bank's capital and surplus ordinarily should not be
less than one-tenth of the average amount of its aggregate deposit
liabilities and, in some circumstances, should be more than one-tenth
of such amount.
—2—
X-7581~a
2. All amounts classified as losses must be eliminated from
the assets prior to admission to membership.
3. All depreciation on stocks and defaulted securities and
all depreciation on other securities not in the four highest grades
should be eliminated prior to admission to membership.
4#
The surplus, undivided profits, and applicable reserves must
be sufficient to cover all depreciation on securities in the four highest
grades.
5. While, in the absence of special circumstances, it is not
the Board's general practice to require chargeoffs on account of assets
classified as slow and doubtful, consideration must be given to the fact
that substantial losses often develop in the liquidation of such assets,
and therefore, the aggregate of such assets should not exceed a reasonable amount when considered in relation to the bank's capital structure,
the nature of its other assets, and the stability of the deposits*
Con-
sequently, in some cases, provision for loss to the e x t e n t of a part or
all of the doubtful assets may bo required through elimination or establishment of reserves, as circumstances warrant.
6.
Investment in banking house, furniture and fixtures should
be reasonable, the reasonableness of the investment t o be determined in
each case after taking into consideration the limitations prescribed by
Section 24A of the Federal Reserve A c t , as amended by Soction 14 of the
Banking Act of 1933, the bank's capital structure, the nature of the build
ing, the community, the income produced, the liquidity of tho other assets
etc.
7•
Other real estate is an undesirable asset for a bank and
should be disposed of as soon as practicable•
In determining whether
-3-
X—7 581-8.
immediate removal of other real estate should be required, consideration
should be given to the nature and amount of such assets, taking into consideration the distribution and character of other assets, the soundness of
the values, and the length of time the properties have been held. In some
cases where the combined investment in banking house furniture and fixtures and other real estate has been large as compared with the total unimpaired capital and surplus of the applicant bank but where the other*
features of the bank's condition were such that the Board felt justified
in approving the Federal Reserve Agent's recommendation that the bank be
admitted to membership in the System, the Board has prescribed a condition
requiring that a substantial part of the bank's net earnings be carried
annually to its surplus account before the payment of any dividend, until
such time as its unimpaired capital and surplus has been increased to a
prescribed amount which bears a proper relation to its investment in banking house, furniture, fixtures and other real estate or until such investment has been reduced by a corresponding amount.
8s Since, under the provisions of the Federal Reserve Act as
amended by the Banking Act of 1953, a member bank may not purchase corporate stocks, except in certain limited classes of cases where national banks
are permitted to purchase stocks, a State bank, prior to admission to membership, should be required to dispose of at least all corporate stocks acquired
within such a short time previously as to indicate that such stocks were acquired in anticipation of membership. Moreover, the Board has taken the
position that an applicant for membership should divest itself of all stocks,
no matter how acquired, through which the applicant may have control
over any other banking institution or over any corporation which carries on a business in which the applicant would not be permitted to
X-7581-a
- 4 engage directly as a member "bank. In general, it may be observed that
the Board feels that stocks are not suitable investments for funds of
commercial banking institutions and has suggested to applicants admitted
to membership that they consider the advisability of disposing of all
stocks held by them as soon as it is feasible to do so.
9.
The bank's liquid position, considering the distribution of
its assets, its borrowing capacity, and the nature of its deposits, should
be satisfactory and such as to indicate that it would not need to resort
to emergency loans or to borrow continuously in order to remain in business.
10.
Special consideration should be given to the character of
the management and control of the institution, and any changes should
be effected prior to admission which previous conduct of the bank's management or other circumstances indicate are desirable. When a directorate or management is retained in whole or in part notwithstanding the
fact that the record of the institution may have been unsatisfactory,
there must be an affirmative showing that the persons retained do not
merit substantial criticism for the unfavorable conditions and that confidence may properly be reposed in them in the future.
In this connection,
particular consideration should be given to whether the directorate and
management of the bank have a substantial financial stake in the success
of the bank through ownership of its stock.
11.
Careful consideration should be given to all corporate powers
exercised by the bank and their effect on the bank and whether they are
consistent with the purposes of the Federal Reserve Act. Prior to admission to membership, the bank should be required to terminate the
X-7581-a
5 ™
,VL'
exercise of any powers that are not appropriate for a "bank receiving
deposits, such, for example, as insxxring or guaranteeing titles to real
estate, executing surety bonds, acting as warehouseman, or carrying on
any class of business covered by the Federal Reserve Board's standard
condition number 12, contained in the Board's letter of March 11, 1933
(X-7356).
12.
Attention should be directed in each case to the needs of
the community for the "banking facilities to be provided by subject bank,
and to the probability of the successful operation of the bank in view
of all circumstances involved in the particular case.
In this connection
particular consideration should be given to the circumstances involved in
any reorganization of the applicant bank which has occurred within a short
time prior to its application for admission to the system, and attention
is called to the Board's letter of August 21, 1933 (X-7556), with regard
to applications involving such circumstances.
It may be added that it has been the consistent policy of the
Board not to admit a bank to membership unless the Federal Reserve Agent
and the Federal Reserve Bank committee have recommended such admission.
As pointed out in its letter of March 11, 1933 (X-7356) the Board would
like to have the recommendations of the bank*s committee and the Agent as
to any special requirements which in their judgment should be prescribed
in each particular case with the view to correcting or preventing unsatisfactory conditions.
In connection with each such recommendation there
should be a clear statement of the circumstances which form the basis of
such recommendation.
It should also appear that counsel for the Federal
reserve bank is satisfied with all legal aspects of each case*
X-7583
(I1^ERPRI.;T^TI01\: OF W m i N G ACT OP 1933)
Copies to be sent to all Federal reserve banks»
September 11, 1933.
Lr• Frederic h e Curtiss, Chairman,
Board of Directors,
Federal Reserve Bank of Boston,
Boston, Massachusetts.
Dear Mr. Curtiss:
Reference is made to your letter of July 10, 1933,
11
Inquiry No•
24, Supplementing Inquiry No# 17", in which you state that a nonmember
banking institution which has applied for membership in the Federal
Reserve System desires to be informed, before completing arrangements
for membership, whether Section 8A of the Clayton Act, as amended, prohibits an interlocking directorate between a State member bank and a
manufacturing corporation which occasionally makes loans to its employees, secured by its own stock, for the purpose of enabling such
employees to become stockholders in the corporation.
As you point out, the answer to this question depends on two
other questions: (a) does the phrase "organized or operating under
the laws of the United States" apply to State member banks, and (b)
does the phrase "corporation * * * organized for any purpose whatsoever"
apply to the manufacturing corporation.
Under date of September 10, 1917, the Acting Attorney General
of the United States rendered an opinion with respect to Section 8 of
the Clayton Act in which he held that the phrase "organized or operating under the laws of the United States" does not include State banks
which are members of the Federal Reserve System.
The Federal Reserve
X-7583
Lir. Frederic ii. Curtiss
-2-
Board has decided that the reasoning of the opinion is equally appli<
able to that phrase as used in Section 8A of the Clayton Act.
Since Section 8A is not applicable to State member banks, it
becomes unnecessary to answer the other question which you ask.
Very truly yours,
(Signed) Chester Morrill,
Chester Morrill,
Secretary.
X-7584
(IKTBRPRETiilION OF BANKING ACT OF 19S3)
Copies to be sent to all Federal reserve banks•
September 11, 1933
Mr.
, Secretary,
Building and Loan Association,
3
•
Dear Sir:
Your letter of August 25, 1933, addressed to the Comptroller
of the Currency, has been referred to the Federal Reserve Board for reply.
You inquire whether the provisions of Section 8A of the Clayton
Antitrust Act as amended by Section 33 of the Banking Act of 1933 apply
to a director of a national bank who is serving at the same time as a
director of your Association, in view of the fact that your Association
makes loans to its
shareholders secured by shares of the Association.
You state that your Association is a mutual association, which
makes loans to its shareholders secured by its stock or by mortgages on
improved real estate, and that the earnings of the Association, less necessary expenses, are allocated to the shareholders.
The Federal Reserve Board is of the opinion that the loans made
by a building and loan association to its shareholders on the security
of stock of the association, as a part of the general plan under which
such associations usually operate, are not the type of loans "secured by
stock or bond collateral" contemplated by Section 8A of the Clayton Antitrust Act.
Therefore that Section does not prohibit a director of a na-
tional bank from serving at the same time as a director of your Association.
Very truly yours,
(Signed) Chester Morrill,
Chester Morrill,
Secretary.
FEDERAL RESERVE B O A R D
WASHINGTON
x-7585
address official correspondence t o
t h e federal reserve board
September 13, 1933.
SUBJECT: Proposed regulation and. forms dealing with
Section 32 of the Banking Act of 1933.
Dear Sir:
There are inclosed herewith six copies of a tentative draft
of a regulation and forms, designated Regulation R, and Forms 99a
to 99g, inclusive, pertaining to the provisions of Section 32 of
the Banking Act of 1933. There are also inclosed for your information six copies of a memorandum addressed to the Federal Reserve
Board discussing certain questions arising in connection with the
provisions of Section 32.
In view of the large number of applications which will
probably have to be acted upon before January 1, 1934, it is
desirable that the revised regulation and forms be issued as
promptly as possible, and therefore it will be appreciated if you
and the officers and counsel cf your Federal reserve bank will
consider the proposed regulation and forms and if you will give
the Federal Reserve Board the resulting comments and suggestions
thereon at your earliest convenience.
Inclosures.
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Very truly yours,
Chester Morrill
Secretary.
PiiRTiiPVTil A flERrKPPR
FEDERAL RESERVE B O A R D
WASHINGTON
X—7586
address official correspondence t o
t h e federal reserve board
September 13, 1933.
SUBJECT:
Revision of Regulation L and Forms pertaining
to Interlocking Bank Directorates and other
Relationships under Sections 8 and 8A of the
Clayton Antitrust Act as amended by the Banking
Act of 1933.
Dear Sir:
There are inclosed herewith six copies each of a tentative draft of
a revision of the Board's Regulation L and of the Board's Forms 94, 94a, and
94b, pertaining to the provisions of Section 8 of the Clayton Antitrust Act,
as well as to the provisions of Section 8A thereof, which was added "by Section 33 of the Banking Act of 1933.
»
Your attention is invited to the fact that none of the provisos contained in Section 8, except the last proviso which authorizes the issuance
of permits, is applicable to the provisions of Section 8A.
Consequently,
services for which no permit was required under the provisions of Section 8
because falling within the terms of these provisos, may nevertheless be forbidden by the provisions of Section 8A unless covered by a permit.
Moreover,
Section 8A contains no limitations with regard to the size or location of
the institutions covered by its provisions, with the result that permits
will be required in many cases in which no permit was previously required.
These differences are pointed out, however, merely by way of illustration,
and your attention is directed to the proposed revision of Regulation L
X-7586
- 2 -
where the provisions of the Act are covered in greater detail.
In view of the large number of applications which will probably
have to be acted upon "before January 1, 1934, it is desirable that the
revised regulation and forms "be issued as promptly as possible, and
therefore it will be appreciated if you and the officers and counsel
of your Federal Reserve Bank will consider the proposed regulation and
forms and if you will give the Federal Reserve Board the resulting comments and suggestions thereon at your earliest convenience.
Very truly yours,
Chester Morrill
Secretary.
Inolosures.
TO ALL FEDERAL RESERVE AGENTS.
«OD
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
X-7587
September 13, 1933.
SUBJECT: Establishment of out-of-tovm. branches
by State member banks.
Dear Sir:
Under the provisions of section 9 of the Federal Reserve Act,
as amended by the Banking Act of 1933, a State member bank may establish and operate a branch outside of the city, town, or village in
which it is situated "on the same terms and conditions and subject to
the same limitations and restrictions as are applicable to the establishment of branches by national banks"; and a national bank is required, among other things, to obtain the approval of the Comptroller
of the Currency in order to establish a branch beyond the limits of
the city, town or village in which it is situated. The question has
arisen whether, in these circumstances, it is necessary that a State
member bank obtain the consent of the Comptroller of the Currency in
order to establish and operate an out-of-town branch. The Board's
counsel has given careful consideration to this question and has reached
the conclusion that it must be answered in the affirmative.
In order that some practical method for the handling of applications or requests of State member banks for the approval of the establishment and operation of out-of-town branches might be arranged,
this matter has been taken up with the Comptroller of the Currency and
X-7587
-2-
the following method has been agreed upon:
Such a request or application may be submitted by a State member bank to the Federal Reserve Agent of the district in -which the
bank is located and transmitted by him, with his recommendation and
comments and a copy of the complete report of the most recent examination of the bank, to the Federal Reserve Board# The Board will then
consider such request on the basis of the facts and recommendations
submitted and of the information which it has in its records with respect to the member bank in question. The Board will then present the
request of the State member bank to the Comptroller of the Currency
for his consideration, advising him of the recommendation of the Federal Reserve Agent and also of its own views on the question, with the
request that the Comptroller inform the Board as to his conclusion in
the matter•
It is requested that cases in which State member banks in your
district may desire to establish out-of-town branches be handled in accordance with the procedure above set forth#
Yours very truly,
Chester Morrill,
Secretary#
TO THE CHAIRMEN OF ALL FEDERAL RESERVE BANKS.
*
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
X-7538
September 14, 1933.
SUBJECT:
!Tew Issue Treasury Bills
Dear Sir:
In connection with telegraphic transactions in
Government securities between Federal reserve banks,
the code word "MOXEMA." has been designated to cover a
new issue of Treasury Bills, dated September 20, 1933,
and maturing December 20* 1933.
This word should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental
code -word "NOXEKE" on page 172.
Very truly yours,
J. C. Eoell.
Assistant Secretary
TO GOVERNORS OF ALL F. R. BAHKS.
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
X-7589
September 16, 1933 •
Dear Sir:
For your information there is inclosed,
herewith a copy of an opinion of the Attorney General of the United States, which was rendered
under date of September 7, 1933, in regard to reports of affiliates of national banks•
Very truly yours
Chester norrill
Secretary.
Inclosure.
TO ALL FEDERAL laSJRVE AGENTS
X-7589-a x '
G
0
P
Y
OFFICE OF THE ATTORNEY GEKERAL
0
P
Y
WASHINGTON, D. C
September 7, IS33
The Honorable5
The Secretary of the Treasury.
My dear Mr# Secretary:
I have the honor to refer to your letter of August 23rd, requesting my reconsideration of the questions submitted in your letter
of August 11th as arising under the Banking Act of 1933.
I understand from your letters and from conferences between
members of our respective Departments that the Comptroller has called
upon the national banks to render reports and, in connection therewith,
to furnish reports of their affiliates, as provided by Section 27 of
the Banking Act, and the banks, finding it burdensome or otherwise objectionable to follow the letter of the statute and conceiving that
it may not be literally applied in all instances, have submitted to
your Department many questions with requests for rulings. As stated
in my letter of August 18th, I cannot properly undertake to resolve
such questions for the banks.
You refer to the duty of the Comptroller to determine vdiether or
not the banks have complied with the statutory obligation to furnish
reports of their affiliates in response to his call.
This question, I
think, cannot properly be said to arise except as particular banks may
fail or refuse to furnish the reports.
-2-
X-7589-a,
You also call attention to the statutory provision concerning
the examination of affiliates in connection with examination of national
banks•
Section 28 (a) provides for examining affiliates "as shall be
necessary to disclose fully the relations between such bank and such
affiliates and the effect of such relations upon the affairs of such
bank,"
The ordinary and preferable course would be to decide the ques-
tion of the Comptroller's power to examine particular affiliates as
occasion may arise and in the light of the facts and circumstances then
apparent.
"vVhile, as stated, I prefer not to pass upon these questions except as particular cases actually arise, it does not seem objectionable
to say that I perceive the force of your Solicitor's conclusion that
ownership and control through majority stockholding does not include a
holding by a bank merely as executor or in some other such fiduciary or
representative capacity, subject to control by a court, or by a beneficiary or a principal, and without the incentive and opportunities which
might arise from a holding of the stock by the bank as its own property.
Upon the question of excluding from the operation of the statute
classes of concerns which the bank owns or controls, or by which the
bank is owned or controlled, or in which a majority of the directors
are also directors of the bank, upon consideration of the nature of the
business of the concern or the manner in which ownership or control was
obtained# the only safe course is to assume that the statute means just
what it says, with the burden upon any one assuming an exception in the
particular case to establish it.
In interpreting the Act of Congress I
-3
X-7589-a
could not properly be concerned with the scruples of the hanks about
literal compliance, but it is nevertheless worthy of note that the
Senate Committee which reported the Bill stated a purpose to discourage "affiliates of all kinds,"
(S. Kept. 77, p. 10.) I am familiar
with the statements of members of Congress made to your Department
and to mine, that Congress did not intend to go so far as apparently
it has in the definition of "affiliates."-
However this may be, the
executive department must accept the law as Congress has written it,
leaving it to Congress to correct by amendment any inequities which may
appear.
To illustrate the difficulties confronting us in any attempt to
distinguish between "affiliates" upon a consideration of the nature of
their business, I invite your attention to the following?
Section 13
of the Act regulates certain transactions between a bank and its affiliate —
and it is quite probable that the reports by and examinations
of affiliates are required largely in aid of this and similar provisions
If an unsecured loan, forbidden without qualification by Section 13, is
to be deemed as forbidden when the affiliate is engaged in one business
but permissible if the affiliate is engaged in another, perhaps equally
hazardous, my attention has not yet been directed to any provision making such a distinction.
I have thus gone into the matter at some length in order that
you may understand the difficulties that would be encountered in attempt
ing to answer at this time the questions submitted by you and, aside
from that, the apparent inadvisability of doing so. Please be assured,
X-7589-a^:S
however, that I shall be glad to advise you promptly and definitely,
upon your request, in connection with any particular cases in which
banks may fail to submit reports of "affiliates,11 observing the letter
of the statutory definition, or in which it may be desired to make some
examination and the right to do so is challenged by the parent bank or
by the "affiliate."
Respectfully,
(Signed) HOMER S. CUMMINGS,
Attorney General.
X-7590
INTBEPHETATIOH OF 3MKING ACT OF 1933
(Copies to "be sent to all Federal Reserve Banks)
September 13, 1933.
Mr.
The
, Conservator,
Banking Company,
•
"
Dear Sir:
Reference is made to your letter of June 16, 1933, addressed to
the Board's General Counsel, in which you raised the question whether a
State member bank of the Federal Reserve System located in the city of
, Ohio, may lawfully establish a branch in
, Ohio.
I regret that it has not been possible to advise you with reference to
this matter at an earlier date but the question presented involved a
legal problem of some difficulty which has had. the careful consideration
of the Board's Counsel.
As you know, under the provisions of section 9 of the Federal
Reserve Act, as amended by the Banking Act of 1933, a State member bank
is authorized to establish and operate branches outside of the city in
which it is located "on the same terms and conditions and subject to the
same limitations and restrictions as are applicable to the establishment
of branches by national banks"; and, under the provisions of section 5155
of the Revised Statutes, as amended by the Banking Act of 1933, a national
bank, subject to certain proscribed restrictions and conditions, may establish a branch at any point within the State in which it is located "if such
establishment and operation are at the time authorized to State banks by
the statute law of the State in question by language specifically granting
X-7590
2 -
such authority affirmatively and not merely by implication or recognition,
and subject to the restrictions as to location imposed by the law of the
State on State banks.11
The Board understands that the statute of the State of Ohio contains the following provision with reference to branches of State banks
organized under the laws of that State:
"Sec. 710-73. * * * * * * * * No branch bank
shall be established until the consent and the approval of the superintendent of banks has been first
obtained, and no bank shall establish a branch bank
in any place other than that designated in its articles
of incorporation, except in a city or village contiguous
thereto, or in other parts of the county or counties in
which the municipality containing the main bank is located. If such consent and approval is refused, an appeal may be taken therefrom in the same manner as is
provided in section 710-45 of the General Code."
After careful study of the question presented, it is the view
of the Federal Reserve Board that a State member bank, located in the
State of Ohio, may lawfully establish and operate a branch in a city
or village contiguous to the place designated in its articles of incorporation or in other parts of the county or counties in which the
municipality containing the main bank is located, provided that said
State bank complies with all requirements of the law applicable to the
establishment of out-of-town branches by national banks.
Among the
requirements in question is that the approval of the Comptroller of
the Currency be obtained before the establishment and operation of any
such out-of-town branch.
Accordingly, it is suggested that if a State
member bank located in Ohio desires to establish and operate an out-oftown branch, it communicate its request or application for approval of
- 3-
X-7590
£5/1
the establishment of such branch to the Federal Reserve Agent of the
Federal Reserve Bank of Cleveland. The Federal Reserve Agent, after carefully considering the matter and obtaining such information as may appear
to be necessary, will transmit the request to the Federal Reserve Board,
which will submit it to the Comptroller of the Currency.
"Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
fz
(INTERPRETATION OF BMKING ACT OF 1935)
X-7591
Copies to be sent to all Federal reserve banks *
September 16* 1933.
Mr,
The __
, President,
Bank of
,
Dear Sir;
This refers to your letter of August 17, 1933, inquiring
whether you may continue to serve as a director of the
National Bank of
_________ National Bank of
of the
,
, as a director of the
,
Bank of
, and as officer and director
,
^.
On March 6* 1930, the Federal Reserve Board issued to you a
permit to serve the banks named above; and such permits continue in
force until revoked*.
While Section 8A of the Clayton Antitrust Act, -as amended by
Section 33 of the Banking Act. of 1933, forbids certain relationships
which were not forbidden by the provisions of Section 8 of the Clayton Antitrust Act, nevertheless permits heretofore issued covering
services within the prohibitions of Section 8 authorize the person
to whom they were issued to serve the same banks, although such banks
are now within the prohibitions of Section 8A, as well as Section 8.
It will not be necessary, therefore, for you to obtain a new permit
covering the services described in your present permit.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
X-7592
(INTERPRETATION OF BA1IKING ACT OF 1933)
Copies to be sent to all Federal reserve banks.
September 18, 1933.
Mr.
The
•
National Bank of
J
Dear Mr#
,
,
»
:
Receipt is acknowledged of your letter of September 7, 1933,
addressed to the Governor of the Federal Reserve Board, with regard
to the Board's Regulation Q, relating to the payment of deposits and
interest thereon by member banks of the Federal Reserve System.
This regulation was approved by the Federal Reserve Board on
August 29, 1933, and became effective immediately, except that, in
accordance with Sections IIl(c) and V(c) of the regulation, the limitation on the rate of interest which may be paid on time deposits or
savings deposits will become effective on November 1, 1933.
Regarding your comments with respect to savings accounts, the
Federal Reserve Board does not feel that it should undertake at this
time to define in detail the words "bona fide thrift purposes" or
further to define the term "savings deposit" as used in the regulation.
The Board suggests that each member bank exercise its best judgment
in determining whether deposits are of such a nature that they may
properly be classified as savings deposits within the meaning of the
Board's definition and, if a case arises in which the bank is in doubt
as to the correctness of its conclusion, that it submit the matter to
the Federal reserve bank of its district for advice on the question#
-2-
.
2 4 8
X-7592
If the Federal reserve bank feels the question is one which should
properly be considered by the Federal Reserve Board, it will submit the
matter to the Board for a ruling.
Very truly yours,
(Signed) L. P. Bethea,
L. P. Bethea,
Assistant Secretary.
FEDERAL RESERVE B O A R D
WASHINGTON
X-7593
address official correspondence t o
September 20, 1933.
the federal reserve board
SUBJECT: Holidays during October, 1933.
Dear Sir;
On Thursday, October 12, Columbus Day, there will be neither
transit nor Federal reserve note clearing and the books of the Federal
Reserve Board's Gold Settlement Fund will be closed.
The offices of
the Federal Reserve Board and the following Federal reserve banks and
branches will be open for business as usual:
Richmond
Charlotte
Atlanta
Nashville
Jacksonville
St. Louis
Little Rock
Memphis
Minneapolis
Kansas City
Denver
Oklahoma City
Detroit
The Board is also advised that, in addition to the holiday
mentioned, the following branches of the Federal Reserve Bank of
Atlanta will be- closed on the dates indicated:
Tuesday, October 10, Havana Agency (Anniversary of
(Revolution of Yara
Friday, October 13, Jacksonville
Farmers' Day
Please notify branches,
Very truly yours,
TO GOVERNORS OF ALL
F. R. B A M S .
J. C. Hoell,
Assistant Secretary
FEDERAL RESERVE B O A R D
0
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7594
September 20, 1933
SUBJECT: Use of Preferred Stock or Debentures
"by Banks in Obtaining Funds.
Dear Sir:
There is inclosed for your information, a copy of
a letter which the Board has addressed to the Federal
Reserve Agent at the Federal Reserve Bank of Kansas City,
with regard, among other things, to the uses which may he
made of preferred stock and capital notes or debentures
for the purpose of obtaining funds to improve the condition of banks.
Very truly yours,
L. P. Bethea,
Assistant Secretary
Inclosure
TO ALL F. R. AGENTS EXCEPT AT KANSAS CITY.
COPY
X-7594-a
September 19, 1933
Mr. M. 1. McClure,
Federal Reserve Agent,
Federal Reserve Bank of Kansas City,
Kansas City, Missouri.
Dear Mr. McClure:
Receipt is acknowledged of your letter of September 5, 1933,
enclosing copies of letters you have addressed to the State Banking
Departments of Missouri and Colorado and advising of other steps
you have taken to obtain information with regard to the condition
and needs of "banks in Groups 3 and 4 and to suggest to the State
Banking Departments of the States in your district that banks in
such groups make application to the Reconstruction Finance Corporation for the purchase of such preferred stock as may be necessary
to place the banks in sound condition. Your efforts in this connection and the cooperation you are giving in working out the problems involved in this matter are greatly appreciated.
It is noted that you have called the attention of at
least one of the State Banking Departments to the fact that the
Reconstruction Finance Corporation can supply funds through loans
to the purchasers of preferred stock which is subject to double
liability, and it is suggested that, if you have not already done
so, you call this fact to the attention of the State Banking Departments of the other States located in your district, the
k - 7 5 9 2 % *
Mr. M. L. McClure
-2-
laws of which do not authorize banks to issue preferred stock exempt
from double liability.
As you know, the Board has ruled in its letter of August
25, 1933 (X-7561) that capital debentures which represent the indebtedness of the issuing bank for money borrowed rather than a proprietary
interest in such bank may not be considered capital stock of the bank
for the purpose of determining whether it has sufficient capital to
make it eligible for admission to membership in the Federal Reserve
System. However, in any case where a bank has sufficient capital
stock to make it eligible for membership but the amount of its capital
stock and surplus is not adequate from the standpoint of a proper
relationship to its deposit liabilities, there would seem to be no
objection to the bank obtaining funds for the protection of its
depositors through the issuance of capital notes or debentures which
would be subject to payment by the bank only after claims of depositors
are satisfied. As you know, the Reconstruction Finance Corporation is
authorized to purchase legally issued capital notes or debentures of
State banks, if the laws of the State in which the bank is located do
not authorize the issuance of preferred stock exempt from double liability
or if such preferred stock may only be issued by unanimous consent of the
stockholders of the bank.
In this connection, it may be noted that lawfully issued
capital debentures of the kind referred to above may properly be included in determining whether capital and surplus funds of a bank
l.
X-7594-a
Mr. M. L. McClure —
3
are adequate in relation to its total deposit liabilities within the
meaning of the Board's usual condition of membership number 15.
In
any case where capital debentures are issued for protection of depositors,
it would be advisable at the time of such issuance to make provision for
an appropriate increase of the capital stock of the bank if and when such
debentures are retired, in order that the bank may at all times have an
adequate amount of capital funds for the protection of its depositors.
It appears from your letter that the constitution of the State
of Nebraska forbids the issuance of bank stock which is not subject to
double liability; and it would seem advisable to consider the enactment
of legislation in that State authorizing the issuance of such capital
debentures if they cannot be issued under existing law.
It also appears from your letter that Kansas, New Mexico,
Oklahoma and iteming have no constitutional provisions forbidding the
issuance of preferred stock not subject to the double liability; and it
would seem advisable to obtain legislation in those States authorizing the
issuance of such preferred stock.
Summarizing the situation, it would seem that:
(1) If the laws of a State permit banks located in such
State to issue preferred stock which is exempt from the double liability,
the best method of strengthening the capital structure of banks is for
them to issue preferred stock and sell the same to the Reconstruction
Finance Corporation, if it cannot be sold to other purchasers.
254
X-?594~a
Mr. M. L. IfcClure —
4
(2) If the laws of the State do not permit the issuance of
preferred stock exempt from double liability but there is no consittutional provision forbidding the issuance of such stock, it would seem
desirable to seek legislation authorizing the issuance of preferred
stock exempt from double liability, in order that the assistance of the
Reconstruction Finance Corporation may "be obtained through the purchase
of such stock.
(3) If the constitution of a State forbids the issuance of
preferred stock exempt from double liability but permits the issuance of
preferred stock which is subject to double liability, it would seem desirable to issue such preferred stock and seek a loan from the Reconstruction Finance Corporation to enable the purchasers to pay for it; but would
not seem proper in any case for a bank to make loans on the security of
its own stock.
(4) If preferred stock cannot be utilized in any of the ways
suggested above as a means of strengthening the capital structure of a
bank, it would seem that relief must be sought through the issuance of
capital notes or debentures for sale to the Reconstruction Finance Corporation.
It would seem possible through this method to obtain the additional
protection needed for depositors and to improve the condition of the bank
for the purpose
of obtaining admission to the Federal Deposit Insurance
Fund; but it is not possible by this method to make a bank eligible for
X-7594~a
Mr. M. L. McClure —
5
membership in the Federal Reserve System if it has insufficient capital
to comply with the legal requirements of the Federal Reserve Act.
This,
however, is not the question presented in your letter. That question
covers only the means of bettering the condition of hanks to enable them
to enter the Deposit Insurance Corporation on a sound basis, and that
question I have endeavored to answer fully.
Very truly yours,
(Signed) E. R. Black
E. R. Black,
Governor.
256
FEDERAL RESERVE B O A R D
WASHINGTON
X-7595
address official correspondence t o
the federal reserve board
September 20, 1933.
SUBJECT: Appointment of Examiners at Federal Reserve Banks,
Dear Sir:
In view of the necessity for exceptional care in the selection
and approval of examiners at Federal reserve "banks the Board has decided
that the procedure set out in this letter shall be followed hereafter.
Whenever a new examiner is to he added to the examination division in a Federal reserve agent's department, the field of possible
appointees should be carefully canvassed in order to obtain the services
of the applicant best fitted for the position.
When a decision is reached
as to such a person, the Federal reserve agent's recommendation should be
submitted to the Board with detailed information in regard to the experience and qualifications of the person recommended.
In order that the Board
may be advised fully it is suggested that the report cover the matter along
the following lines:
1. Applicant's name, date of birth, nationality, marital
status, condition of health, physical defects if any.
2. Education, including names of schools and colleges attended, periods of attendance, degrees obtained, other
training, special examinations and results thereof,
and diplomas or certificates received.
3. Previous employment, names and addresses of employers,
periods of employment, positions held and nature of
work, salary received in each case, reasons for leaving
previous positions, and information obtained from
previous employers as to quality of applicant's work.
In this connection, care should be exercised to ascertain independently of the applicant the attitude of
X2previous employers with respect to his services
and the reasons for termination thereof.
4. All other experience which would have a bearing on
applicant's qualifications as an examiner.
5.
Information as to applicant's indebtedness, if any,
whether indebted to member banks, their subsidiaries
or affiliates, when indebtedness was contracted, its
original amount, progress being made in liquidation,
and whether, if tendered appointment by the Federal
reserve bank as an examiner, the applicant will resign any official connection he may have with other
business concerns and discontinue any other existing
relationship which may have an undesirable effect
upon his service as an employee of the Federal reserve
bank
6. Any other information which will be of assistance in
the consideration of the recommendation.
Upon receipt of the recommendation, accompanied by the information requested above, it will be referred to the Chief of the Board's
Division of Examinations with tho request that he make such investigation as may appear to him to be desirable with regard to the qualifications of the applicant and his fitness for tho position, and that ho
submit a recommendation to the Board with regard to approval of the appointment . Upon submission of the recommendation of the Chief of its
Division of Examinations, the Board will consider the proposed appointment in the light of the information and recommendations received, and
the Federal reserve agent will be advised promptly of the action taken.
TOFRASER
AIL F. B. AGENTS.
Digitized for
yours,
Assistant Secretary
X-7596
(INTERPRETATION OF BAKKIEG ACT OF 1933)
q,
Copies to be sent to all Federal reserve banks.
September 20, 1933
Mr.
, Vice President,
_______________ National Bank,
,
*
Dear Sir:
Your letter of August 14, 1933, addressed to the Comptroller
of the Currency, with reference to whether a Pennsylvania building
and loan association is a mutual savings bank within the meaning of
section 19 of the Federal Reserve Act, as amended by section 11(b)
of the Banking Act of 1933, has been referred to the Federal Reserve
Board for reply.
The Board notes that in your letter to the Board of June 30,
1933, in regard to this matter, the particular association to which
you refer was described as a "savings and loan association". In
view of the fact, however, that associations so titled have, in
Pennsylvania, been regarded as building and loan associations (see
Folk v. State Capital Savings and Loan Association, 214 Pa. 529, 63
Atl. 1013), it is assumed by the Board that the association here in
question is, in fact, a building and loan association within the meaning of the Building and Loan Code of Pennsylvania, which became effective July 5, 1933.
Associations which are subject to the provisions of that Code
exist primarily for the purpose of granting loans to their shareholders in order to encourage private building enterprise. Such associations issue to their jnembers in series or non-serially shares
X-7596
—2-
of stock which may be full-paid, prepaid or paid for in installments.
They do not appear to have authority to receive deposits or to perform any of the characteristic functions of a mutual savings bank.
The Board does not have detailed information as to the type
of business in which the association here involved is engaged.
If,
however, as the Board assumes, such association is one to which the
Building and Loan Code is applicable, it is the opinion of the Board
that such association cannot be considered a mutual savings bank for
the purposes of section 19 of the Federal Reserve Act as amended.
Very truly yours,
(Signed) Chester Morrill,
Chester Morrill,
Secretary.
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
X-7598
September 21, 1933.
SUBJECT: Liability of banks on deferred
certificates issued to depositors#
Dear Sir;
There is inclosed herewith for your information a copy of a letter the Federal Reserve
Board has addressed to the Auditor of Public Accounts of the State of Illinois with regard to the
liability of certain banks in that State on deferred
certificates issued to depositors who waive their
right to demand immediate payment of a part of their
claims against the bank.
Yours very truly.
L. P. Bethea,
Assistant Secretary.
Inclosure.
TO ALL FEDERAL RESERVE AGE1TTS.
X-7598-a
September 21, 1933.
COPY
Hon. Edward J. Barrett,
Auditor of Public Accounts,
State of Illinois,
Springfield, Illinois.
Dear Mr. Barretts
Reference is made to the conferences which you and members
of your staff had with members of the Federal Reserve Board and the
Board's staff on September 11, and 12, 1933, with regard to the obligation of reorganized State banks located in the State of Illinois
on deferred certificates which they have issued to their depositors
who have waived their right to demand immediate payment of their deposits. Reference is also made to your letter of September 12, 1933,
inclosing copies of the Depositor's Agreement and the Deferred Certificate which have been used in the reorganization of the State Bank
of Collinsville, Collinsville, Illinois.
It is understood that the
provisions of this agreement and certificate are substantially similar
to the provisions of agreements and certificates which have been used
in the reorganization of many other State banks in Illinois, and the
Federal Reserve Board has given most careful and sympathetic consideration to the problems involved in this matter.
It has been observed that the Depositor's Agreement provides
that, in lieu of payment in cash of 50 per cent of his deposit claim,
the depositor will accept a deferred certificate issued by the bank
for a like amount, payable out of future recoveries on segregated assets and the net profits of the Bank, and before any dividend or
Hon. Edward J. Barrett
-2-
X-7598-a
returns of any kind or character are payable to stockholders.
The
Deferred Certificate which is issued by the bank states that the bank
agrees to pay the amount represented by the deferred certificate to
the holder thereof solely out of the future net profits of the bank
and recoveries, but, in all events, before the payment of any dividends
to the stockholders of the bank. It further provides that, in the
event of liquidation, the termination of the bank's business, the consolidation with or transfer of all or a major part of its assets to
another banking institution prior to the payment of the deferred certificate, the holder of the certificate shall be entitled to share in
the proceeds of the liquidation, sale, merger, or consolidation after
liabilities of the bank to its depositors and other creditors shall
have been paid or provided for and that, in any event, the holder of
the certificate shall be entitled to priority over any of the stockholders of the bank.
In these circumstances, it seems apparent that a bank issuing
such a deferred certificate assumes a definite obligation to pay the
amount of such certificate at some time, and that there is no way by
which it can be released from such obligation except by the consent of
the certificate holder.
The obligation of the bank for the payment
of such deferred claim is a liability of the bank, to the same extent
as the obligation of the bank to pay the claim of any depositor. The
only differences between the two classes of claims are as to time of
payment and preference of payment in the event of liquidation, and it
%
Hon. Edward J• Barrett
X-7598-a
seems clear that these differences do not justify a conclusion that
there is no liability on the bank for the payment of the deferred
certificates described above•
The Board has considered the suggestion which has been made
that the stockholders of the bank have authorized the bank to act
merely as agent in distributing to deferred certificate holders future
recoveries and earnings, to which the stockholders would normally be
entitled, and that, accordingly, the liability for the payment of such
deferred certificates is on the stockholders of the bank rather than
on the bank itself. However, it does not appear how this can be true,
on the basis of the facts involved in the case presented, when the
stockholders of the bank are not parties to any of the agreements but
such agreements are between the bank itself and the depositors thereof • It may also be noted that there does not appear to be any m y in
which a stockholder can relieve a bank from its liability to pay the
claims of depositors, but that a bank can only be relieved of such
liability by the agreement of the depositor and in accordance with
the terms of any agreement executed by the depositor. As noted above,
the depositors here involved have not relieved the bank of the obligation to pay their deposits but have merely entered into agreements
with the bank, permitting a deferment of payment of such claims.
After a careful consideration of all the circumstances involved in this matter, the Federal Reserve Board is of the opinion
that a bank which issues deferred certificates such as the one inclosed
Hon# Edward J• Barrett
-4-
X-7598-a
in your letter of September 12, 1933, has a liability for the payment
of such certificates.
Under the provisions of Section 9 of the Federal Reserve Act,
a State bank may not be admitted to membership in the Federal Reserve
System unless it has an unimpaired capital. Accordingly, in any case
where a bank has issued deferred certificates of the kind described
above and the amount of liability on such certificates, together with
the other liabilities of the bank to depositors and other creditors,
as compared with the amount of the assets of the bank, is sufficient
to impair the bank's capital stock, it would not be eligible for admission to membership in the Federal Reserve System.
As suggested when you conferred with members of the Board, the
fact that reorganized Illinois State banks may not at this time be
eligible for admission to membership in the Federal Reserve System on
account of an impairment of their capital, as a result of liability on
deferred certificates of the kind described above, need not necessarily
result in serious consequences to such banks• It is possible that
these banks may obtain the benefits of the Federal Deposit Insurance
Corporation and, while entitled to such benefits, eliminate their
liability on deferred certificates and become eligible for admission
to membership in the Federal Reserve System. It is understood that
you have taken this matter up with the Federal Deposit Insurance Corporation.
' K
Hon. Edward J. Barrett
-5-
}
X-7598-a
It would seem that the liability of a hank on such deferred
certificates might he eliminated hy having the hank transfer all
charged off assets to trustees for the benefit of deferred certificate
holders and obtain from each certificate holder an agreement releasing
the bank from any liability on such certificates and accepting, in
lieu thereof, a certificate from the trustees entitling the certificate
holder to a pro rata share of any recoveries from the charged off assets transferred to the trustees.
If deemed advisable, agreements might also be obtained from
the stockholders of the bank to the effect that, until all certificates
issued by such trustees have been, paid in full, the stockholders vrill
transfer to the trustees, for the benefit of the certificate holders,
any dividends declared on their stock by the bank. The Board questions
the advisability of a bank obtaining any such agreement from its stockholders, since it is apparent that, for a considerable period of time,
any dividends on the stock of the bank will not be for the benefit of
stockholders.and that, for such period, the bank's stock will have \
little, if any, value from the standpoint of the earnings of the bank
and, accordingly, will not be marketable. It appears questionable,
therefore, whether on such a basis the people of the community mil
retain confidence in the bank so as to enable it to maintain or increase its deposits in competition with other banking institutions.
The Board feels that, in any case of a reorganization of a bank where
Hon. Edward J. Barrett
-6-
X-7598-a
the stockholders have done everything possible to di scharge their obligation
to the "bank and to save the depositors from loss, the de-
positors are not equitably entitled to future earnings of the bank.
However, there may be circumstances whore the stockholders have not
fully discharged their obligation and the depositors have already
agreed to a plan of reorganization and accepted the obligation of the
bank to conserve future net earnings for the benefit of depositors,
until their claims are satisfied, which justify the execution of
agreements by stockholders to turn over any dividends to deferred
certificate holders, in lieu of tho agreement of the bank to conserve
earnings for the benefit of such certificate holders.
As you know, the State Bank of Collinsville, Collinsville,
Illinois, is now a member of the Federal Reserve System, and the question involved in that case is whether the Secretary of the Treasury
should issue a license to that bank to reopen as a member bank.
This
question is not one for the determination of the Federal Reserve Board,
but, since it is understood that the liability of the bank on the proposed deferred certificates would substantially impair, if not entirely eliminate, its capital, it would not seem advisable to reorganize
and reopen this member bank until its capital is restored.
It is sug-
gested that, in the case of the State Bank of Collinsville and similar
cases, the procedure outlined in the first paragraph commencing on
page five of this letter be followed prior to the reopening of the
bank in order to eliminate the liability of the bank on deferred certificates and the consequent impairment if not entire elimination of
its capital. Of course, as you know, this bank might voluntarily
withdraw from membership in the Federal Reserve System and reopen as
a nonmember State bank and, after its liability on the deferred cer
http://fraser.stlouisfed.org/
tificates has
Federal Reserve Bank of St. Louis
been eliminated, apply for readmission to the Federal
Hon. Edward J. Barrett
-7-
A-7598-a
Reserve System. The Board feels, however, that it would, be more desirable for such elimination of liability to be accomplished prior
to the reopening of the bank.
The Board fully appreciates the efforts you are making to effect sound reorganizations of banks in your State, and it desires to
be of all possible assistance to you in this connection. Accordingly,
if there is any further information you desire or anything that properly can be done by the Board to be of assistance, it will be appreciated if you will advise the Board.
Very truly yours,
(Signed) E. R. Black
E. R. Black,
Governor.
X-7599
(IITTEEPRETAIIOIT OF BANKING ACT OF 1933)
Copies to be sent to all Federal reserve banks•
September 21, 1933#
Honorable J. F# T* O'Connor,
Comptroller of the Currency,
Washington, D. C.
Dear Mr• 0TConnor:
Reference is made to Mr. Await* s memorandum of August 9,
1933, asking to be advised whether the Federal Reserve Board approves
of the answer which your office proposes to make to a question arising under Section 23A of the Federal Reserve Act, as amended by Section 13 of the Banking Act of 1933.
The memorandum states that a national bank has sold certain
of its assets to an affiliate, which has given its note in payment
therefor, and states that although it has long been the position of
your office that such a transaction would not be considered a "loan"
under Section 5200 of the Revised Statutes, you contemplate advising
the bank that the transaction is to be considered an "extension of
credit" to the affiliate by the bank and that consequently it comes
within the prohibition of Section 23A.
Section 5200 of the Revised Statutes places certain limitations upon the total obligations to any national bank of any individual,
partnership or corporation, the term "obligation" being defined as the
liability of the maker, acceptor, indorser, drawer, or guarantor, who
discounts paper with, or sells paper to, or obtains a loan from a
Honorable J. F• T. O'Connor
-2-
X-7599
national bank. It appears that it has been the position of your office
that this provision has reference to transactions involving the borrowing of money from a national bank, and does not have reference to
a transaction involving, for instance, the acceptance of a promissory
note by a national bank in payment for bonds sold by the national bank,
although, the latter transaction would constitute an "extension of
credit" within the commonly accepted meaning of that phrase.
Section 23A of the Federal Reserve Act, however, provides that
except within certain limitations "no member bank shall (l) make any
loan or any extension of credit to" any of its affiliates, (2) invest
any of its funds in the stock, bonds or other obligations of any such
affiliate, or (3) accept the stock, bonds or other obligations of any
such affiliate as collateral for advances to any person. Section 23A
therefore covers a broader class of transactions than the discounts
and similar transactions involving the borrowing of money which are
covered by Section 5200 of the Revised Statutes.
Therefore, the Board is fully in accord with the conclusion
referred to in Mr. Await1s memorandum that the transaction therein
described, whereby the member bank accepts the promissory note of its
affiliate in payment for assets of the bank sold to the affiliate,
should be considered an "extension of credit" within the meaning of
Section 23A of the Federal Reserve Act.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-7600
September 21, 1933.
SUBJECT: New Issue Treasury Bills.
Dear Sir:
In connection with telegraphic transactions
in Government securities between Federal reserve banks,
the code word "UOXENT" has been designated to cover a
new issue of Treasury Bills, dated September 27, 1933,
and maturing December 27# 1933.
This word should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental
oode word "HOXEMA" on page 172.
Very truly yours
J. C. Noell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BAIKS.
FEDERAL RESERVE B O A R D
WASHINGTON
address official correspondence t o
the federal reserve board
X-7601
September 22, 1933#
SUBJECT: Absorption of Exchange Charges
by Member Banks.
Dear Sir:
1
There is inclosed herewith for your information a
copy of a letter "which the Federal Reserve Board is addressing
to the Federal Reserve Agent at Atlanta with respect to the
absorption of exchange or collection charges by member banks#
It is requested that you take this matter up with any of the
clearing house associations located in your district which
are following practices in conflict with the spirit or the
letter of the law on this subject, and that you endeavor to
have any such associations cooperate voluntarily in a modification or adjustment of these practices which will bring them
into conformity with the statute.
Very truly yours,
Ls P. Bethea,
Assistant Secretary#
Inclosure.
TO ALL FEDERAL RESERVE AGENTS EXCEPT ATLANTA.
COPY
X-7601-a
2 7 3
September 21, 1933.
Mr. Oscar Newton,
Federal Reserve Agent,
Federal Reserve Bank of Atlanta,
Atlanta, Georgia.
Dear Mr • Newton:
Receipt is acknowledged of your letter of September 15, 1933,
in response to the Board's letter of August 28, 1933, with regard to
the absorption of exchange or collection charges by Atlanta banks in
connection "with items received by them on deposit from correspondent
banks•
It appears that it has heretofore been the practice of the
clearing house banks in Atlanta, in connection with deposits received
from correspondents and payable on demand, to absorb exchange or collection charges in an amount equivalent to 2 per cent of the amount
of the collected balance of a correspondent bank.
The Federal Reserve
Board is of the opinion that the absorption of such charges is clearly
in violation of the provisions of Section 19 of the Federal Reserve
Act which prohibit the payment of interest on deposits payable on demand either directly or indirectly by any device whatsoever • The
Board is, therefore, gratified to note that the clearing house banks
of Atlanta are advising their correspondent banks that it is necessary
to discontinue the practice of absorbing such charges and that the
clearing house banks will not hereafter absorb charges on items received on deposit but will charge them against the depositing bank.
The prohibition contained in the statute upon the payment of
interest on deposits payable on demand was enacted in order to assist
p i " * * }
'
Mr. Oscar Newton
-2-
1
*
f
o
X-7601-a
member banks by eliminating some of the expense in connection with
deposit balances; and it would, therefore, seem especially incumbent
upon the banks to take such action as may be necessary to comply
with both the spirit and the letter of the law on this subject. In
the circumstances, the Board will expect clearing house associations
voluntarily to prescribe rules forbidding the absorption of exchange
or collection charges which may be in conflict either with the spirit
and purpose or with the letter of the statute and that such rules
will be applicable to all members of such clearing house associations
whether or not members of the Federal Reserve System.
It is noted that the bankers of Atlanta contemplate calling
a conference of bankers from a number of other southern cities in an
endeavor to have action taken in such other cities similar to that
taken by the clearing house banks of Atlanta; and, in this connection,
the Board requests that you cooperate in this matter with a view to
having any clearing house practices which do not conform to the spirit
or the letter of the law modified or adjusted by voluntary action of
the clearing house associations so as to comply with the statute.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary#
X-7602
INTERPRETATION OF BANKING ACT OF 1933
(Copies to "be sent to all Federal Reserve Banks.)
Mr.
;
,
September 31, 1933.
t
Dear Sir:
Receipt is acknowledged, of your letter of July 20, 1933,
addressed to the Board's General Counsel, inclosing an inquiry from
the
National Bank,
, Kentucky, with refer-
ence to whether the absorption by a member bank of a tax on demand
deposits imposed by the laws of Kentucky would constitute a payment
of interest prohibited by Section 19 of the Federal Reserve Act, as
amended by Section 11(b) of the Banking Act of 1933.
Section 4019a-l of Carroll's Kentucky Statutes (Baldwin's
revision, 1930) provides in effect that every person having a deposit
in a bank in the State of Kentucky on the first day of July shall pay
to the State a tax assessed at the rate of one-tenth of one per cent,
annually upon the amount of such deposit, and that the taxes so imposed
shall be paid by the bank "for and on behalf, and as the agent" of the
depositor.
Section 4019a~3 provides that no other tax shall be assessed
on such deposits in the bank or against the depositor of said deposits by
the State or its subdivisions. Under the terms of Section 4019a-3, the
bank is authorized to charge to, and deduct from, the deposit of each
X-7602
-
2
-
depositor
the amount of the tax so m
"for
j-v i d
|
i • i and
i • i on
i i —his
11
i "behalf",
ii ' 11 n» 'I i i and is
1
*
expressly given a lien on such deposits to secure repayment of the tax.
The statute also provides a penalty for willful failure "by the "bank to
make payment for its depositors.
It would seem clear that the Kentucky tax on "bank deposits is
a tax imposed on the depositor, and that the bank acts only as an agent
of the depositor in paying such tax.
The requirement of the statute that
the tax "be paid by the bank, and the provision permitting the bank to
deduct the amount of the tax paid from the deposit, are merely aids to
collection, and do not necessarily affect the incidence of the tax, which
falls on the depositor unless the bank voluntarily absorbs such tax.
Ac-
cordingly, it is the opinion of the Board that the absorption of any such
tax by a member bank would constitute an indirect payment of interest
within the prohibition of Section 19 of the Federal Reserve Act, as amended
and would be unlawful.
Furthermore, it is the opinion of the Board that
the amount or size of the tax does not affect the legal principles involved
or alter the conclusion reached herein.
Very truly yours,
(Signed) L. P. Bethea
L. P, Bethea,
Assistant Secretary.
X-7603
(INTERPRETATION OF BANKING ACT OF 1933)
Copies to be sent to all Federal reserve banks.
September 21, 1933.
Mr.
, President,
Dear Sir:
Reference is made to your letter of July 18, 1933, in which
you requested to be advised -whether, in the opinion of the Federal Reserve Board, the
Company, a
"affiliate" of the
corporation, is an
Bank of
,
,
,
within the meaning of the Banking Act of 1S33.
From the statements in your letter, the Federal Reserve Board
understands that all of the capital stock of the __________ Company,
with the exception of directors' qualifying shares, was issued in the
names of certain individuals as trustees for the stockholders of the
- National Bank of
of
. The ________ National Bank
was formerly affiliated with the
of
, the present _ _ _ _ _ _ _ Bank of
the hands of a receiver.
of the
Savings Bank
, and is now in
It appears that a majority of the directors
Company were directors of the
Bank of _____
on the date of your letter, but in a telegram under date of
July 27, signed by "
Bank of
rectors of the
, President,
", it is stated that no member of the board of diCompany "is now a director of this bank". Al-
though the telegram was signed by you as
National Bank of
National
of the
, it is assumed that you had reference
X-7603
2-
therein to the
Bank of
National Bank of
, and not to the
.
From the information submitted, it would not appear that the
Company is an "affiliate" of the
Bank of
_ _ _ _ _ _ within the meaning of section 2, subparagraph (b), subdivision (l) or (2) of the Banking Act of 1933, unless the shareholders
of the
Bank of
, who own "more than 50 per centum of
the number of shares voted for the election of directors of such bank
at the preceding election", and who also own more than 50 per centum
of the beneficial interest in the stock of the
Company,
control the latter company, directly or indirectly, through stock owner
ship or in any other manner, within the meaning of the Act.
that such stockholders do not control the
You state
Company, notwith-
standing that they own a majority of the beneficial interest in the
stock of that company.
In the absence of additional information and
of an opportunity to examine any agreement under which the shares of
the
Company are trusteed for the benefit of the shareholders
of the
National Bank of
, the Board is unable to
determine whether your conclusion in this respect is correct, and it
cannot at this time undertake to rule on this point.
It appears that a majority of the directors of the
Company were directors of the
'
Bank of _ _ _ _ _ _ _ until
July 25, 1933, when an entire new board of directors of the
Company was elected.
Since a majority of the directors of the _______
Company were directors of the
Bank of
prior to the
X-7603
election of new directors, the
of the
Bank of
Bank of
Company was an "affiliate"
.
during such time, and the
must obtain and furnish a report of such affiliate
as of June 30, 1933, unless the subsequent termination of the affiliation is held to relieve the _________ Bank of the duty imposed upon it
by law to obtain such report. It is the opinion of the Board that if
a State member bank is affiliated with any corporation, business trust,
association, or other similar organization, on the date the Board issues a call for condition reports of State member banks and their affiliates, the member bank is required by law to obtain a report of
such affiliate as of the date of call, notwithstanding the fact that
such affiliation may have been terminated subsequent to that date; and
the member bank is also required to publish such report under the same
conditions as govern its ovm condition reports.
In this connection,
however, you are advised that the Board will offer no objection if the
Bank of
the
publishes with any report of condition of
Company an explanatory statement of the relationship
existing between the two institutions.
Under date of August 1, 1933, the Board advised you that it
understood that a question similar to that discussed above had been
submitted by the Comptroller of the Currency to the Attorney General
of the United States for an opinion. The Attorney General has now
rendered an opinion, but you will note from the copy thereof inclosed
herewith that he refused to rule on the matter in question.
For your information, there is also inclosed a copy of a press
X-7603
release relative to the publication of reports of affiliates of member
banks.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
Inclosures.
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7604
September 23, 1933
Dear Sir:
There is attached hereto, for your
information, a copy of a self-explanatory letter addressed by the Federal Reserve Board to
Mr. Case, Federal Reserve Agent at New York,
under date of September 21, 1933*
Very truly yours,
L. P. Bethea
Assistant Secretary
Inclosure
TO ALL FEDERAL RESERVE AGENTS EXCEPT NEW YORK.
2S()
COPY
X-7604-a
September 21, 1933.
Mr» J. H. Case, Federal Reserve Agent,
Federal Reserve Bank of New York,
New York, Mew York.
Dear Mr. Cases
Receipt is acknowledged of your letter of September 14,
1933, recommending that the Federal Reserve Board designate the
following employees in the Federal Reserve Agent's Department of
your bank as "Assistant Federal Reserve Examiners:"
* * * * * * * * * * * * *
* * * * * * * * * * * * *
* * * * * * * * * * * * *
As you know, each examiner in the employ of the Federal Reserve Board is designated as "Federal Reserve Examiner" or "Assistant
Federal Reserve Examiner" as the case may be.
The Board feels that,
in order to avoid any possible confusion on the part of member banks,
or others, the use of such titles should be confined to employees of
the Federal Reserve Board. While this aspect of the matter was not
brought out in the Board's letter of Juno 28, 1933, the desirability
of drawing a clear cut distinction between examiners in the employ
of the Federal Reserve Board and examiners in the employ of the
various Federal reserve banks has become increasingly apparent in
recent months due largely to the expansion and development of the
Board's examining staff.
In the circumstances, the Board approves the designation of
Messrs. *******, ******* and ***********, respectively, as "Assistant
Examiner" in the Federal Reserve Agent's Department of your bank.
Mr. J. II. Case
X-7604-a
-2-
In this connection, it is suggested that you may wish to recall all
identification cards which have been issued to employees of the
Bank Examinations Department of your bank indicating that any employee has been designated as "Federal Reserve Examiner" or"Assistant
Federal Reserve Examiner" and to issue revised identification cards
shomng their designation as merely "Examiner" or "Assistant examiner"
in the employ of the Federal Reserve Bank of Hew York,
The Board m i l be pleased to have your advice as to the action taken in the premises.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
X-7605
(INTERPRETATION OF BANKING ACT OF 1933)
Copies to be sent to all Federal reserve banks.
September 22, 1933.
Mr* Frederic H. Curtiss,
Federal Reserve Agent,
Federal Reserve Bank of Boston,
Boston, Massachusetts.
Dear Mr. Curtiss:
Reference is made to your letter of July 19, 1933, headed
Inquiry No. 30, submitting to the Board a request of the President
of The
Trust Company,
,
, for
permission not to publish a report of condition of The
Real Estate Trust.
From the information which you have furnished to the Board,
it appears that certain property was conveyed to trustees, in accordance with the terms of an instrument of trust, to be held and
managed for the benefit of such persons as might from time to time
be the holders of transferable certificates issued by the trustees.
This arrangement is known as
Real Estate Trust, and
a majority of the trustees of this trust are directors of The
Trust Company, a member bank of the Federal Reserve System.
Under Section 9 of the Federal Reserve Act, as amended by
Section 5(c) of the Banking Act of 1933, each State member bank is
required to obtain a report of condition from each of its affiliates
and to publish such report under the same conditions as govern its
own condition reports.
Section 2, subparagraph (b), subdivision
(3) of the Banking Act of 1933, provides, among other things, that
Mr. Frederic H. Curtiss
2-
X-7605
tho term "affiliate" shall include any business trust of which a
majority of its trustees are directors of any one member bank.
It
would seem clear that __________ Real Estate Trust is a business
trust, as that term is used in said section; that it is an "affiliate" of the member bank within the language of the Act, since a
majority of its trustees are directors of the member bank; and that
the member bank is required by said Section 9 to obtain a report
of such affiliate and to publish the report under the same conditions
as govern its own condition reports.
Your attention is called to the requirement that each state
member bank must publish the reports of its affiliates "under the
same conditions as govern its own condition reports".
In view of
the fact that the Federal Reserve Act does not require the publication of reports submitted to the Federal Reserve Board and
Fed-
eral reserve banks by State member banks, the only reasonable construction that can be given to that requirement is that reports of
affiliates of State member banks must be published only if the
State law requires such State banks to publish their own reports,
and accordingly, it will not be necessary for The
Trust Company to publish the report of
Real
Estate Trust unless publication of its own condition report is required under State law.
You are further advised that there will be no objection to
The
Trust Company publishing with any report of
Real Estate Trust an explanatory statement as to the
Mr. Frederic H. Curtiss
-3-
X-7605
actual relationship which exists between the member bank and its
affiliate.
Very truly yours,
(.Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary,
X-7606
Statement of Bureau of Engraving and Printing
For furnishing Federal Reserve Notes
Series 1928, August 1-30, 1933.
$5
Boston . . . .
New York . . .
9,000
Philadelphia .
Cleveland. . .
Richmond . . .
Atlanta. . . . 50,000
Chicago. . . .
St. Louis. . . 20,000
Kansas City. . 10,000
Dallas . . . .
San Francisco. 10,000
99,000
Total
Sheets
Amount
10,000
12,000
10,000
15,000
10,000
20,000
75,000
64,000
25,000
20,000
50,000
50,000
42,000
30,000
15,000
30,000
$1,770.00
6,637.50
5,664.00
2,212.50
1,770.00
4,425.00
4,425.00
3,717.00
2,655.00
1,327.50
2,655.00
185,000
137,000
421,000
$37,258.50
$10
$20
10,000
20,000
25,000
10,000
25,000
10,000
-
-
-
50,000
45,000
-
50,000
10,000
10,000
-
—
421,000 sheets, @ $88.50 per M, . . . $37,258.50
2 8 7
X-7607
Statement of Bureau of Engraving and Printing
For furnishing Federal Reserve Bank Notes (National Currency)
Series 1929.
August 1-31, 1933.
$5
000
$].0
-
$50
Total
Sheets
-
-
74,000
$ 6,956.00
$20
Amount
50,000
25,000
-
140,000
13,160.00
Cleveland, . . . 39,000
36,000
-
-
75,000
7,050.00
000
51,000
25,000
25,000
181,000
17,014.00
258,000
137,000
50,000
25,000
470,000
00
470,000 sheets, @ $94.00 per M, . .$44,180.00
h
co
o
New York, . . . 65,000
1 - 7 6 0 8
(INTERPRETATION OF BANKING ACT OF 1935)
Copies to be sent to all Federal reserve banks•
September 23, 1933.
To all Federal reserve agents:
Trans• 1369
In regard to reports of affiliates of State member banks,
it is the opinion of the Board that where a group consists of a
large number of member banks and non-member affiliates, the furnishing by each nonmember affiliate of a report containing requisite information in regard to relationship between such affiliate
and each member bank in the group would constitute a substantial
compliance with the provisions of Section nine of the Federal Reserve Act, as amended, which requires each member bank to furnish
the Board a report of each of its affiliates other than member
banks • However, each such report should set forth as separate
items the information in regard to the relationship between such
affiliate and each member bank, and each State member bank in the
group should publish that part of the report of each affiliate
which pertains to the relations between such affiliate and the
member bank making the publication, if publication of reports of
such member bank is required by State law.
If member bank has al-
ready published its own report as of June 30 it should publish it
again with report of affiliate.
BSTHEA
X- 7609
(INTERPRETATION OF BMKIHG ACT OF 1933)
Copies to be sent to all Federal reserve banks»
September 23, 1933.
To all Federal reserve agents:
Trans. 1870.
The Federal Reserve Board has issued the following
ruling:
QUOTE
If a State member bank obtains from its
holding company affiliate an agreement on Federal Reserve
Board Form P-5, and files such an agreement -with the
proper Federal Reserve Agent on or before October 1,
1933, such filing will constitute a compliance with Section III of Regulation P, and will satisfy the requirements of the statute relative to State member banks obtaining such agreement within such time as the Board may
prescribe.
UNQUOTE.
BETHEA
FEDERAL RESERVE B O A R D
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
SUBJECTS
X-7611
September 23, 1933.
Changes in Inter-District Time Schedules.
Dear Sir:
Upon agreement between the Federal reserve banks affected,
the Federal Reserve Board has approved the following changes in the
inter-district time schedules:
Kansas City
11
Denver
ii
u
it
it
II
II
Oklahoma City
tt
it
it
ii
it
Omaha
II
it
it
New York
tt
*co
tt
tt
it
it
«
it
n
it
ii
n
ii
ii
n
ii
H
it
n
H
it
n
ii
Baltimore
Philadelphia
Minneapolis
Baltimore
Richmond
Seattle
Houston
San Antonio
Hew York
Philadelphia
Baltimore
Cleveland
Cincinnati
Detroit
San Francisco
Atlanta
Salt Lake City
Los Angeles
San Antonio
New York
Denver
Omaha
From
To
3 days
3
2
4
4
4
3
3
4
4
3
3
3
3
4
2
3
4
3
3
4
3
2 days
2
1
3
3
3
2
2
3
3
2
2
2
2
3
3
2
3
2
2
3
2
Very truly yours,
L. P. Bethea,
Assistant Secretary.
TO ALL GOVERNORS.
X-7612
INTERPRETATION OF B AMINO ACT OF 1933.
Copies to be sent to all Federal reserve tanks.
September 23, 1933.
Mr.
,
«
Dear Sir:
Reference is made to your letter of July 7, 1933, in which you
requested to be advised whether each bank controlled by the
Corporation is an "affiliate", as that term is used in The Banking Act
of 1933, of each other bank*controlled by such corporation, and of your
letter of July 11, 1933, supplementing your letter of July 7, 1933.
Since you have not submitted to the Federal Reserve Board any
information as to the form, manner, or extent of control by the __________
Corporation of the banks in question, the Board is unable to rule definitely on the question which you have presented.
the letter from Messrs.
However, the copy of
, which was inclosed with
your letter to the Board of July 7, 1933, indicates that it is your contention, and that of your counsel, that the banks controlled by the ________
Corporation are not affiliates of the member banks in the group solely on
the theory that subdivision (2), sub-paragraph (b), Section 2 of the Banking Act of 1933, contemplates control by "shareholders" of a member bank
other than a "holding company affiliate", and that, since the banks in
question are controlled by a "holding company affiliate", as distinguished
from " shareholders", the banks are not affiliates of the member banks in
the group within the meaning of the Banking Act of 1933.
In their letter
of July 11, 1933, your counsel contend that, if banks controlled by a
X-7612
-
2 -
holding company affiliate were to be regarded as "affiliates" of the subsidiary member banks within the meaning of the Act, subdivision (4), paragraph (a) of Section 5144 of the Revised Statutes, as amended, which requires
a holding company affiliate to agree that individual or consolidated statements of its banks may be required, would be superfluous and serve no useful
purpose.
The Board is unable to concur in the conclusion that the term
"shareholders", as used in Section 2, sub-paragraph (b), subdivision (2) of
the Banking Act of 1933, should be interpreted to exclude from the scope of
its meaning a "holding company affiliate". There is no obscurity or ambiguity
in the language of this particular section, and there is, therefore, no occasion or justification for considering the word "shareholders" except in its
ordinary and usual signification. Moreover, it does not appear that, as a
result of such interpretation, the provisions of subdivision (4), paragraph
(a) of Section 5144 of the Revised Statutes would be rendered superfluous.
Sections 5(c) and 27 of the Act do not require publication by a member bank
of reports of condition of its affiliated member banks, but, under the provisions of subdivision (4), paragraph (a) of Section 5144, publication of
statements of all banks which are subsidiaries of a holding company affiliate,
both member banks and nonmember banks, may be required, if deemed advisable.
/
In addition, such provisions of Section 5144 provide a means whereby the Board
or other duly constituted authority may require publication of consolidated
statements, in contradistinction to individual statements, of such banks.
It should also be noted that, if the construction for which you contend were adopted, Section 13 of the Banking Act of 1933, and the sections
requiring reports, and publications thereof, would be subject to ready evasion.
X-7612
~
.
2 9 3
o
It is the Board's opinion that the construction which you favor would tend
to frustrate the clear purposes of the Act, and that the law cannot properly
be construed in such manner.
The Board, therefore, is of the opinion that the word "shareholders",
as used in Section 2, sub-paragraph (b), subdivision (2), of the Banking
Act of 1933, means any person or organization of any kind whatsoever which
holds stock in a member bank, including a "holding company affiliate" of
such bank.
Accordingly, if the
Corporation holds the requisite
control of the banks in question, each nonmember bank in the group would
appear to be an "affiliate" of each member bank in the group, and the member
banks would appear to be "affiliates" of each other, within the meaning of
the Banking Act of 1933.
Under date of August 7, 1933, the Board advised you that it understood that a question similar to that discussed above had been submitted by
the Comptroller of the Currency to the Attorney General of the United States
for an opinion.
The Attorney General has now rendered an opinion, but you
will note from the inclosed copy thereof that he refused to rule on the matter in question.
For your information, there are also inclosed a copy of a press
release relative to the publication of reports of affiliates of member banks,
and a copy of a telegram relative to the furnishing of reports of such affiliates.
It is believed that the procedure set forth therein will ameliorate
somewhat the inconvenience and expense involved in the making and publication
of such reports.
Very truly yours,
(Signed) L. P. Bethea
Inclosures.
L. P. Bethea,
Assistant Secretary.
A-..
X-7613
IHPERPR3TATI0H OF BAHKIHG ACT OF 1933.
Copies to be sent to all Federal reserve "banks.
TELEGRAM
September 22, 1933.
McCLURE - KANSAS CITY
Referring your wire September 19, national Bank Act as amended by Banking
Act of 1933 requires capital stock of at least $50,000 for organization of
new national "bank in place having population not exceeding 6,000 inhabitants.
If located in place exceeding 6,000 inhabitants and not in excess
of 50,000 inhabitants new bank would be required to have capital of at
least $100,000 and if located in place which exceeds 50,000 inhabitants
new national bank would be required to have capital of at least $200,000.
Under provisions Section 5143 Revised Statutes of United States, a national
"ban!: may not reduce its capital to any sum below amount required for organization of new national bank.
Accordingly, a national bank now in existence
with capital of $25,000 would not, under law, be authorized to reduce such
capital and a national bank having capital exceeding $85,000 may not reduce
its capital below $50,000 when located in place with population hot exceeding 6,000 inhabitants. However, if any such bank should increase its capital by issuance of preferred stock to an amount in excess of amount required
for organization of new national bank in place in which it is located it
might then reduce its common stock if it so desired provided that after
such reduction aggregate amount of its common and preferred stock was not
less than minimum amount required for organization of new bank.
In any such
,
2 9 5
X-7613
2 —
case "bank should issue additional common stock if and when its preferred
stock is retired in an amount equivalent to preferred stock so retired so
as to maintain minimum capital required. A State bank organized on or after
June 16, 1933, date of enactment of Banking Act of 1933, and situated in
place with population not exceeding 3,000 inhabitants is eligible for admission to membership in Federal Reserve System if entitled to benefits of
insurance under Section 12B of Federal Reserve Act and has capital of not
less than $25,000 at time of admission to Federal Reserve System.
BETHEA
(Signed) L. P. Bethea
FEDERAL RESERVE B O A R D
&96
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7614
September 25, ID53.
SUBJECTi
Applications by Holding Company Affiliates
for Voting Permits.
Dear Sir:
Section V of the Board's Regulation P, relative to applications
by holding companies for voting permits, provides in part that the Federal reserve agent of the district in which the applicant's principal
office is located shall forward the original and one executed counterpart of each application to the Board with his recommendation and that
of the Executive Committee of the Federal reserve bank of such district,
and that the Federal reserve agent of any other district in -which a subsidiary member bank or a subsidiary nonmember bank applying for admission is located shall similarly forward his recommendation and that of
the Executive Committee of the Federal reserve bank of such district.
In order to facilitate the consideration of such applications by
the Board, it is requested that all documents, including recommendations
and other papers which are submitted by the agents in connection with
such applications, be submitted in duplicate.
TO BE SENT
Very truly yours,
L. P. Bethea,
Assistant Secretary.
TO ALL FEDERAL RESERVE AGEliTS.
FEDERAL RESERVE B O A R D
fvij / >
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7615
September 26, 1933.
SUBJECT: Agreements of Holding Company
Affiliates of State Member Banks.
Dear Sirs
"Referring to the Board's telegram of September 16,
1953, there is inclosed herewith a copy of a letter which the
Board is addressing to the Federal Reserve Agent at the Federal Reserve Bank of Hew York with regard to the desirability
of communicating by telephone or telegraph with each State •
member bank known to be a subsidiary of a holding company affiliate, and of calling attention to the necessity of obtaining from its holding company affiliate an agreement that it
will be subject to the same conditions and limitations as are
applicable to holding company affiliates of national banks.
Very truly yours,
L. P« Bethea,
Assistant Secretary.
Inclosure.
X-7615-a
COPY
September 26, 1933.
Mr. J. H. Case,
Federal Reserve Agent,
Federal Reserve Bank of Hew York,
Hew York, Hew York.
Dear Mr. Case*
Receipt is acknowledged of your letter of September 19,
1933* in which you inclosed a copy of a mimeographed letter which
you state has been sent to each State member bank in your district,
advising each such bank of the necessity of obtaining from its
holding company affiliate, if any, an agreement by such holding
company affiliate that it will be subject to all applicable conditions and limitations contained in Section 5144 of the Revised
Statutes, as amended.
In view of the fact that certain of the member banks may
not realize the importance of this mimeographed circular, it would
appear desirable for you to have some one in your department communicate, either by telephone or telegraph, with each State member
bank in your district known to be a subsidiary of a holding company
affiliate, and to call the attention of each such bank to the necessity of its obtaining and filing the requisite agreement within the
time prescribed, if it has not already done so.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
X-7616
(IST2EPB$!TATICS Of BAllKING ACT OF 1933,)
£-99
Copies to be sent to all Federal reserve banks,
September 21, 1933.
Mr.
#
Dear Sir:
Further reference is made to your letter of July 3, 1933,
referred by the Comptroller of the Currency to the Federal Reserve
Board, in which you inquire whether, in view of the provisions of
Section 8A of the Clayton Antitrust Act, as amended by Section 33 of
the Banking Act of 1933, a director of a national bank may serve as a
director of a savings bank which is authorized by its charter to make
loans secured by stock or bond collateral, but which does not actually
make such loans.
Inasmuch as Section 8A of the Clayton Antitrust Act specifically applies to corporations "which shall make loans secured by
stock or bond collateral", it is the opinion of the Federal Reserve
Board that it does not apply to corporations which do not actually
make such loans, even though they have the legal power to do so. Accordingly , that section does not prohibit a director of a national
bank from serving at the same time as the director of a savings bank
which actually does not make loans secured by stock or bond collateral,
notwithstanding the fact that such loans are permitted by its charter.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
X-7617
3 0
(IUTEEPHETATION OF BANKING- ACT OP 1933)
Copies to "be sent to all Federal reserve "banks.
September 20, 1933.
Mr.
,
Dear Sirs
Reference is made to your letter of August 4, 1933, in which you
request a ruling on the question whether a corporation, a majority of
the stock of which is held by the ____________ Trust Company as executor
or trustee under a will or deed of trust for the benefit of persons
named in such instrument other than the trust company or its shareholders
is an affiliate of the member bank within the meaning of the Banking Act
of 1933.
Under date of September 7, 1933, the Attorney General of the
United States rendered an opinion to the Secretary of the Treasury, in
which he stated that "it does not seem objectionable to say that I perceive the force of your Solicitor's conclusion that ownership and control
through majority stockholding does not include a holding by a bank merely
as executor or in some other such fiduciary or representative capacity,
subject to control by a court, or by a beneficiary or a principal, and
without the incentive and opportunities which might arise from a holding
of the stock by the bank as its own property."
Pursuant to this opinion,
the Federal Reserve Board will not require a member bank to obtain and
publish a report of a corporation the majority of the stock of which is
held by the member bank as executor or trustee, provided that the member
x-7617
2-
bank holds such stock subject to control by a court, or by a beneficiary
or other principal, and that the member bank may not lawfully exercise
control of such stock independently of any order or direction of a court,
beneficiary or other principal.
For your information, there are inclosed herewith a mimeographed
copy of the opinion of the Attorney General to which reference is made
herein, and a mimeographed copy of a press release relative to the publication of reports of affiliates of member banks.
Very truly yours,
(Signed) Chester MorrillChester Morrill,
Secretary.
Inclosures.
X-7618
INTERPRETATION OF BANKING ACT OF 1933.
(Copies to "be sent to all Federal reserve banks.)
September 26, 1933.
Mr. C. A. Worthington, Deputy Governor,
Federal Reserve Bank of Kansas City,
Kansas City, Missouri.
Dear Mr. Worthington:
Reference is made to your letter of September 11, 1933, in
which you call attention to the fact that the savings pass books of
many member banks contain a provision to the effect that deposits made
on or before the fifth day of any month will draw interest from the
first of such month; and you inquire whether deposits made during the
first five business days of a month would be entitled to interest, in
accordance with such a provision in a savings pass book, from the first
day of such month at the maximum rate prescribed in the Board's Regulation Q.
As you know, the Regulation provides in Section V (c) that
"(l) No member bank shall pay interest, accruing after October 31,
1933, on any savings deposit or any part thereof at a rate in
excess of 3 per cent per annum, compounded semiannually, regardless of the basis upon which such interest may be computed,
except as provided in paragraph 2 hereof."
If the amount of interest paid by a member bank upon any deposit exceeds three per cent per annum, compounded semi-annually, for
the period during which the deposit is actually in the bank, whether
by reason of inclusion in the interest period of days prior to the date
on which the deposit was made or days after it was withdrawn, the payment is at a rate in excess of that prescribed by the Regulation and
X-7618
« S *•
in violation thereof.
tS(j
*
Of course, interest may be paid on a deposit at a
rate not exceeding the maximum prescribed in the Regulation for the period
from the date on which the deposit was actually received by the bank until
actually withdrawn.
The maximum rate of interest on savings deposits prescribed in
the Regulation, as you know, is applicable only to interest accruing after
October 31, 1933.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
X-7619
S,(
INTERPRETATION OP BANKING ACT OP 1933.
(Copies to "be sent to all Federal reserve "banks.)
September 26, 1933.
Mr*
1 President,
Bank,
Dear Sir:
Reference is made to your letter of September 21, 1933, in
which you inquire whether, under the provisions of the Federal Reserve
Board's Regulation Q, interest at the maximum rate prescribed in the Regulation may "be paid from the first day of a month on a savings deposit received by a member bank at any time during the first few days of such
month.
It is provided in Section V(c) of Regulation % that:
11
(l) No member bank shall pay interest, accruing after October 31, 1933, on any savings deposit or any part thereof at a rate in excess of
3 per cent per annum, compounded semiannually, regardless of the basis upon which such interest may
be computed, except as provided in paragraph 2 hereof."
If the amount of interest paid by a member bank upon any deposit exceeds three per cent per annum, compounded semi—annually, for
the period during which the deposit is actually in the bank, whether by
reason of inclusion in the interest period of days prior to the date on
which the deposit was made or days after it was withdrawn, the payment
is at a rate in excess of that prescribed by the Regulation and in violation thereof. However, interest at a rate less than the maximum prescribed in the Regulation may be paid from the first day of the month on
X-7619
— 2 —
a savings deposit which is actually received thereafter, provided that
the amount of interest paid does not exceed three per cent per annum,
compounded semi-annually, for the period from the date on which the
deposit was actually received by the /bank until actually withdrawn.
As you have probably noted, the maximum rate of interest on
savings deposits prescribed in the Regulation is applicable only to
interest accruing after October 31, 1933.
Very truly yours,
(Signed)
L. P. Bethea
L. P. Bethea,
Assistant Secretary.
FEDERAL RESERVE BOARD
8,
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7620
September 27, 1933•
SUBJECT:
Expense, Main Lines, Leased Wire
System, August, 1933•
Dear Sir:
Inclosed, herewith you will find two mimeographed
statements, X-7620-a and X-7620-b, covering in detail
operations of the main lines, Leased Tire System, during
the month of August, 1933•
Please credit the amount payable by your bank for
your share of the expense of the Leased Wire System, to
the Federal Reserve Bank of Richmond in your daily statement of credits through the Gold Settlement Fund for the
account of the Federal Reserve Board, and advise the
Federal Reserve Bank of Richmond by wire the amount and
purpose of the credit.
Very truly yours,
Deputy Fiscal Agent.
Inclosures.
TO GOVERNORS OF ALL F. R. BAMS.
X-7620-a
REPORT SEQWHTG CLASSIFICATION AilD KUMBSR OF TOEDS TBA3>!SIv;iTTED OVER MAIN LIKES
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR H E MOUTH OF AUGUST, 1933.
Business
reported
by banks
From
Boston
ITew York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total
Words sent by
STew York chargeable to other
F. R. Banks (1)
37,698
165,009
35,610
58,206
71,639
57,642
95,744
70,358
34,532
74,940
63,067
96,072
860,517
2,928
-
3,072
3,045
3,011
2,955
3,270
3,237
2,984
2,966
4,371
4,697
36,536
F. R. Board business
Ifet Federal
reserve
bank
business
40,626
165,009
38,682
61,251
74,650
60,597
99,014
73,595
37,516
77,906
67,438
100,769
897,053
Percent of total
bank business (*)
4,53
18.39
4.31
6.83
8.32
6.76
11.04
8.20
4.18
8.69
7.52
11.23
100.00
197.426
Reimbursable business Incoming and Outgoing
Tot?l words transmitted over rr-in lines
(*)
These percentages used in calculating the pro rata share of leased pi re expense as shown
on the accompanying statement (X-7620-b).
(l)
Number of words sent by STen York to other F. R. Banks for their sole benefit charged to
banks indicated in accordance ^ith action taken at Governors' Conference
November 2-4, 1925.
1,294,479
499 , 807
1,794,286
o
X-7 620—13
REPORT OF EXPENSE MAIH LIHES
FEDERAL EESERVE LEASED WIEE SYSTEM, AUGUST, 1933•
2Jame of Bank
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Federal Reserve Board
Total
Operators'
salaries
Operators'
overtime
$260.00
$1.00
1,284.14
6.00
225.00
306.66
190.00
270.00
4,130.42 (#) 22.00
195.00
200.00
287.00
25I.OO
380.00
—
$29.00
$7,979.22
Wire
rental
$261.00
1,290.14
225.00
306.66
420.00
230.00 (&)
—
270.00
4,152.42
195.00
—
200.00
287.00
251.00
—
380.00
15,655.30
15,655.30
$15,885.30
$23,893.52
$
Reimbursable charges:
Treasury Department
$2,64l. 4l
Reconstruction Finance Corporation . 3>465.21
Exp. Hat. 5kg. Emergency Act, 3-9-33
393*67
Federal Home Loan Bank Board . . . .
3«01
Comp. Currency Div. Insolv. Hat'l.Bks
49.20
Farm Credit Administration:
Federal Farm Loan Bureau
46.66
Federal Farm Board
56.49
Less Reimbursable Charges
.....
(&) Main line rental, Richmond-Washington.
(#) Includes salaries of Washington operators.
(*) Credit.
(a) Amount reimbursable to Chicago.
Total
expenses
~
-
Pro rata
share of
total
expenses
$780.88
3,170.04
742.95
1,177.35
1,434.19
1,165.28
1,903.06
1,413-51
720.54
1,497.97
1,296.29
1,935-si
—
$17,237.87
Credits
$261.00
1,290.14
225.00
306.66
420.00
270.00
4,152.42
195.00
200.00
287.00
251.00
380.00
—
$8,238.22
Payable to
Federal
Reserve
Board
$519.88
1,879.90
517.95
870.69
1,014.19
895.28
2,249.36 (*)
1,218.51
520.54
1,210.97
1,045.29
1,555.81
—
$11,249.01
2,249.36 (a)
$ S,999.65
$6,655.65
$17,237.87
Ca9
X-7621
(INTERPRETATION OF BANKING ACT OF 1933)
Copies to be sent to all Federal reserve banks.
September 27, 1933.
Mr. J. H. Dillard,
Deputy Governor,
Federal Reserve Bank,
Chicago, Illinois.
Dear Sir:
Reference is made to your telegram of September 21st, in
•which you raise certain questions with regard to the payment of
interest on certificates of deposit by member banks under the provisions of the Board's Regulation Q.
The Board understands that your inquiry relates to certificates of deposit with respect to which the member bank reserves
the right to require written notice of not less than thirty days
before withdrawal of the deposit. You will observe that, under the
provisions of footnote 4 of the Board's regulation, interest may
not be paid on a certificate of deposit with respect to which the
bank merely reserves the right to require notice before payment.
However, under other provisions of the regulation, a member bank
may pay interest in accordance with the terms of any certificate of
deposit which was lawfully entered into in good faith prior to
June 16, 1933, and in force on that date and which may not lawfully
be terminated or modified by such bank at its option or without liability; but no such certificate of deposit may be renewed or extended unless it be modified to conform to the provisions of the
Mr. J. H. Dillard
-2-
X-7621
regulation, and every member bank is required to take such action
as may be necessary as soon as possible consistently with its contractual obligations to bring all such certificates of deposit into
conformity with the provisions of the regulation.
The certificates of deposit which you describe appear to be
of indefinite maturity but, in the absence of a provision in such
a certificate to the contrary, it would seem to the Board that a
member bank may lawfully terminate the contract contained in the cer
tificate at any time upon paying the amount due to the depositor
after giving reasonable notice to him of its intention to terminate
the arrangement; and that, accordingly, it is the duty of such a
member bank to terminate or to modify such a certificate of deposit
as soon as possible so as to bring it into conformity with the provisions of the regulation. If a member bank terminates or modifies
its certificates of deposit of the kind described above, as soon as
possible, so as to bring them into conformity with the provisions
of the regulation, interest may be paid, in accordance with the
terms of the regulation, on such certificates which were issued
prior to June 16, 1933, and outstanding on that date, until the
date on which they are so terminated or modified, provided that the
certificates themselves require that interest be paid on such deposits until withdrawn. Ho interest accruing after such modification or termination of the certificates may be paid on any deposit
represented thereby unless the certificates then conform to the requirements of the regulation in this connection.
X-7621
Mr. J. -H. Dillard
You also inquire whether interest may be paid on certificates
of the kind described above which have been issued since June 16,
1933*
In this connection it may be noted that such certificates may
be classified as time deposits for the purpose of computing reserves
under the provisions of Regulation D; and also that the Board advised
all Federal reserve banks in a telegram dated June 21, 1933, Trans.
Ho. 1826, that member banks might continue to pay interest on time
deposits in accordance with their usual practice or existing bona
fide contracts until the Federal Reserve Board should issue regulations on the subject. In the circumstances, the Board will offer no
objection to the payment of interest by member banks in accordance
with the terms of the certificates and at a rate not in excess of that
prescribed in Regulation Q, on certificates of deposit of the kind
described which were issued after June 16, 1933, and not later than
August 29, 1933, the effective date of the regulation, provided such
member banks terminate or modify such certificates of deposit as soon
as possible so as to bring them into conformity with the provisions
of the regulation.
VJhile a number of other questions were discussed in a recent
telephone conversation between Counsel for your bank and the Board's
Assistant Counsel, the Board feels that it should not attempt to pass
upon such questions unless submitted in writing and all information
necessary to a determination of the questions is given.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
- 31
X-7622
(INTERPRETATION OF BMKIIIG ACT OF 1933)
Copies to be sent to all Federal reserve banks.
Mr* George J• Seay, Governor,
Federal Reserve Bank of Richmond,
Richmond, Virginia.
September 27, 1933.
Dear Governor Seay:
Reference is made to your letter of August 12, 1933, in which
you submit certain comments "with reference to the tentative draft of
the Board's regulation relating to payment of interest on deposits by
member banks. You state that the banks in your district have outstanding a large number of certificates of deposit which are of indefinite maturity but in which the banks have reserved the right to
require notice of thirty day or more before payment, and you inquire
whether under the terms of the Board's regulation on this subject,
which as you have been advised in a separate letter has not become effective, interest may be paid on such certificates of deposit.
It is
understood that, although the banks have the right to require notice
before payment of such certificates, it has not been their usual
practice to do so.
You will observe that, under the provisions of footnote 4 of
the Board's regulation, interest may not be paid on a certificate of
deposit with respect to which the bank merely reserves the right to
require notice before payment#
However, under other provisions of the
regulation, a member bank may pay interest in accordance with the
terms of any certificate of deposit which was lawfully entered into
in good faith prior to June 16, 1933, and in force on that date and
Mr. George J. Seay
-2-
X-7622
which may not lawfully be terminated or modified by such bank at its
option or without liability; but no such certificate of deposit may
be renewed or extended unless it be modified to conform to the provisions of the regulation, and every member bank is required to take
such action as may be necessary as soon as possible consistently with
its contractual obligations to bring all such certificates of deposit
into conformity with the provisions of the regulation.
The certificates of deposit which you describe are of indefinite maturity but, in the absence of a provision in such a certificate
to the contrary, it would seem to the Board that a member bank may lawfully terminate the contract contained in the certificate at any time
upon paying the amount due to the depositor after giving reasonable
notice to him of its intention to terminate the arrangement; and that,
accordingly, it is the duty of such a member bank to terminate or to
modify such a certificate of deposit as soon as possible so as to bring
it into conformity with the provisions of the regulation. No interest
accruing after such modification or termination of the certificate may
be paid on any deposit represented thereby, unless the certificate then
conforms to the requirements of the regulation in this connection#
Unless, therefore, there is some provision in the certificates
of deposit to which you refer which would indicate an intention of the
parties that the bank may not terminate the contract contained in such
a certificate at its option and without liability, it is suggested that
you advise member banks in your district which have such certificates
outstanding that they should terminate or modify such certificates of
Mr. George J. Seay
-3-
X-7622
deposit as above stated after giving reasonable notice to the depositors
of their intention to do so.
Very truly yours,
(Signed) L. P. Bethea
L • 1? • Bethea,
Assistant Secretary.
3.15
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7623
September 28, 1933
SUBJECT: Hew Issue Treasury Bills
Dear Sir:
In connection with telegraphic transactions
in Government securities between Federal reserve "banks,
the code word "NOXBQTJB" has been designated to cover a
new issue of Treasury Bills, dated October 4, 1933, and
maturing January 3, 1934.
This word should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental
code word "UOXEUT" on page 172.
Very truly yours
/
w r - ^
J. C. Hoell,
Assistant Secretary
TO GOVERNORS OF jxxiu x . a* jaeumo*
X-7624
(INTERPRETATION OF BASKING ACT OF 1933)
Copies to be sent to all Federal reserve banks.
September 27, 1933*
Mr.
,
Dear Sirs
Receipt is acknowledged of your letter of July 22, 1933, in
which you request to be advised (l) whether a time certificate of
deposit may be paid before its maturity, provided that no interest
is paid thereon; and (2) whether a time certificate of deposit which
provides that it is "payable six or twelve months after date" may
be paid at the expiration of only nine months from date, with interest thereon.
In regard to the first question which you raise, it is the
opinion of the Board that a time certificate of deposit may not lawfully be paid before the maturity thereof, even though no interest is
paid thereon.
In this connection, your attention is directed to Sec-
tion IV of the inclosed Regulation Q, relative to the payment of time
deposits before maturity.
Since you have not furnished the Board with a copy of the
time certificate of deposit which you state is "payable six or twelve
months after date", the Board is unable to advise you definitely at
this time whether or not such certificate may lawfully be paid nine
months after date.
It would appear, however, that if such certificate
were not paid at the expiration of six months from date, it would
automatically be renewed in accordance with its terms for an additional
3
-2-
X-7624
six months, and, accordingly, that it would then be payable at the
expiration of such additional six months period and could not lawfully
be paid before the expiration of such period, even though no interest
were paid thereon.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
Inclosure.
X-7625
(INTERPRETATION OF BANKING ACT OF 1933)
Copies to be sent to all Federal reserve banks.
September 28, 1933.
Mr. J. N. Peyton,
Federal Reserve Agent,
Federal Reserve Bank of Minneapolis,
Minneapolis, Minnesota.
Dear Mr* Peyton:
Receipt is acknowledged of your letter of September 19, 1933,
and of your letter of August 23, 1933, relative to the participation
by subsidiary member banks of the same holding company affiliate
within the same Federal reserve district in the nomination and election of directors of a Federal reserve bank.
Section 4 of the Federal Reserve Act contains tho following
provisos
* * * * * Provided, That whenever any two or more member
banks within the same Federal reserve district are affiliated with the same holding company affiliate, participation by such member banks in such nomination or election shall be confined to one of such banks, which may
be designated for the purpose by such holding company
affiliate."
In view of this provision of the law, you request to be advised
whether a holding company affiliate having one or more subsidiary member banks in each of the three groups into which member banks of each
Federal reserve district are divided for electoral purposes, may
designate one such bank in each group which may participate in the
nomination and election of the director of Class A and of the director of Class B chosen by the group of "which it is a member, or
whether it may designate only one such bank in the Federal reserve
819
Mr. J. N. Peyton
-2-.
X-7625
district which may participate in the nomination and election of the
director of Class A and the director of Class B chosen by the group
of which it is a member.
In other words, the question is presented
whether, in a case in which one or more member banks in each group are
subsidiaries of a holding company affiliate, such member banks may
lawfully have three of their number participate in the nomination and
election of Class A and Class B directors, one bank in each group
participating in the nomination and election of the Class A and the
Class B director chosen by such group; or whether in such case only
one such bank may participate in the nomination and election of directors, such bank, of course, participating only in the nomination
and election of the Class A director and the Class B director chosen
by the group of which it is a member.
Since only one director of Class A and one director of Class
B may be elected by the member banks of any one group and the terms
of office of no two Class A directors and no two Class B directors
expire in the same year, it is the Board's opinion that the nomination
and election of each Class A director and of each Class B director
are separate and distinct from the nomination and election of each
other Class A or Class B director• Accordingly, it is the Board's
view that an organization which is a holding company affiliate of one
or more subsidiary member banks in each group may designate one of
such banks in each group to participate in the nomination and election
of each Class A director and each Class B director chosen by the
group of which such bank is a member and that such member bank so
Mr, J. N. Peyton
-3'
X-7625
designated may validly participate in such nomination and election.
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary#
X-7626
(INTERPRETATION OF BANKING ACT OF 1933)
Copies to be sent to all Federal reserve banks.
September 29, 1933#
Mr# Me L» McClure,
Federal Reserve Agent,
Federal Reserve Bank of Kansas City,
Kansas City, Missouri.
Dear Mr• McClure:
Reference is made to your letter of September 8, 1933, in
•which you state that subsequent to June 16, 1933, a number of member banks continued to issue time certificates of deposit and other
time deposit contracts on the same terms and conditions as theretofore, without making any stipulation in such contracts that the
rate of interest stated therein would be subject to adjustment to
conform to such regulations as might be issued by the Federal Reserve Board*
You state that these agreements for the payment of
interest were entered into in good faith, and you present the question "whether member banks which issued such time certificates of
deposit or other time deposit contracts subsequent to June 16, 1933,
providing for payment of interest at a rate in excess of the maximum
prescribed in the Board's Regulation Q for a period extending beyond
October 31, 1933, may pay interest accruing after that date at the
rate prescribed in such certificates or contracts•
Member banks which issued certificates of deposit or other
time deposit contracts subsequent to June 16, 1933, did so presumably with knowledge of the provisions of the Banking Act of 1933
Mr. M. L. McClure
-2-
X-7626
requiring the Federal Reserve Board to limit by regulation the rate
of interest which may be paid by member banks on time deposits.
Such certificates and contracts therefore must be considered to have
been made in contemplation of this requirement of the law and with
notice that the rate of interest provided therein would be subject
to change to conform to the rate to be prescribed by the Board. Accordingly, it is the opinion of the Board that member banks may not
pay interest accruing after October 51, 1933, at a rate in excess of
that prescribed in Regulation Q, in accordance with certificates or
contracts which were entered into after June 16, 1933 although such
certificates or contracts provide for the payment of interest at a
rate in excess of that prescribed in the regulation
Very truly yours,
(Signed) L. P. Bethea
L. P. Bethea,
Assistant Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7628
October 3, 1933.
SUBJECT $
Procedure i n Connection
with Applications for
Membership.
Dear S i r s
There i s i n c l o s e d , f o r your i n f o r m a t i o n ,
a copy of a l e t t e r b e i n g a d d r e s s e d t o t h e Fede r a l Reserve Agent a t New York w i t h r e g a r d t o
procedure i n c o n n e c t i o n w i t h a p p l i c a t i o n s f o r
membership i n t h e F e d e r a l Reserve System.
Very t r u l y yours
Chester M o r r i l l
Secretary.
Inclosure.
TO ALL FEDERAL RESERVE AGENTS.
,
COPY
324
X-7628-a
October 2, 1933*
Mr® J . He Case*
F e d e r a l Reserve Agent,
F e d e r a l Reserve Bank of New York,
New York, N# Y*
Dear Mr• Case:
Reference i s made t o your l e t t e r dated September 2, 1933,
r e l a t i v e t o t h e procedure i n c o n n e c t i o n with a p p l i c a t i o n s f o r memb e r s h i p i n t h e F e d e r a l Reserve System*
The Board a g r e e s wi t h you
t h a t i t i s d e s i r a b l e t o avoid as f a r as p o s s i b l e h o l d i n g a p p l i c a t i o n s i n abeyance f o r c o n s i d e r a b l e p e r i o d s of time pending d i s c u s s i o n s r e g a r d i n g p o s s i b l e r e v i s i o n s of p l a n s of r e o r g a n i z a t i o n or
p o s s i b l e c o r r e c t i o n s of u n s a t i s f a c t o r y c o n d i t i o n s by o t h e r means•
I t i s n o t e d t h a t you b e l i e v e t h a t t h e r e would be l e s s room
f o r m i s u n d e r s t a n d i n g and p o s s i b l e c o n t r o v e r s y i f , as f a r as poss i b l e , a l l a p p l i c a t i o n s f o r membership which a r e r e c e i v e d by you
be e i t h e r ( l ) promptly forwarded t o t h e F e d e r a l Reserve Board,
whether your recommendation i s f a v o r a b l e or u n f a v o r a b l e , o r ,
(2)
d e f i n i t e l y and promptly withdrawn by t h e a p p l y i n g bank i f i t des i r e s t o do so because d i s c u s s i o n s with your o f f i c e r s have i n d i c a t e d
t o t h e o f f i c e r s and d i r e c t o r s of t h e a p p l y i n g bank t h a t t h e a p p l i c a t i o n w i l l p r o b a b l y not be g r a n t e d .
Of t h e two a l t e r n a t i v e s which you s u g g e s t , i t seems more
d e s i r a b l e t h a t t h e applying bank withdraw i t s a p p l i c a t i o n i f your
i n v e s t i g a t i o n i n d i c a t e s t h a t t h e c o n d i t i o n of t h e bank i s such t h a t
your committee would not f e e l j u s t i f i e d i n recommending t h a t t h e
Mr. J .
Case
a p p l i c a t i o n be g r a n t e d .
X-7628-a
-2-
Of course* i f i n any case t h e a p p l y i n g
bank r e q u e s t s t h a t i t s a p p l i c a t i o n be submitted t o the F e d e r a l Reserve Board, the Board w i l l be glad t o c o n s i d e r t h e a p p l i c a t i o n
upon r e c e i p t of f u l l i n f o r m a t i o n as t o a l l of t h e f a c t s i n t h e case
and t h e recommendation of t h e Federal Reserve Agent, t o g e t h e r w i t h
t h a t of t h e committee of h i s bank, as t o t h e a c t i o n which should
be taken#
Very t r u l y y o u r s ,
(Signed)
L. P. Bethea
L. P. Bethea,
Assistant Secretary.
FEDERAL RESERVE BOARD
^
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
^ 7629
THE FEDERAL RESERVE BOARD
October 5, 1933.
SUBJECT:
P e r m i s s i o n t o Member Banks i n O u t l y i n g
D i s t r i c t s of Reserve and C e n t r a l Reserve
C i t i e s t o Carry Reduced R e s e r v e s .
Dear S i r :
The Board has r e c e n t l y reviewed i t s procedure r e l a t i n g t o
t h e g r a n t i n g of p e r m i s s i o n t o member banks i n o u t l y i n g d i s t r i c t s of
c e n t r a l r e s e r v e and r e s e r v e c i t i e s t o c a r r y reduced r e s e r v e s , as
a u t h o r i z e d b y s e c t i o n 19 of t h e F e d e r a l Reserve Act, and has decided
not t o r e q u i r e (as provided i n i t s l e t t e r X-3977 of February 26,
1924) t h a t i t s h a l l be a c o n d i t i o n p r e c e d e n t t o t h e f i l i n g of an app l i c a t i o n by a member bank f o r r e d u c t i o n i n i t s r e s e r v e r e q u i r e m e n t s
t h a t t h e a p p l i c a n t s h a l l have been a member of t h e F e d e r a l Reserve
System and i n o p e r a t i o n as such f o r a p e r i o d of a t l e a s t one y e a r
p r i o r t o t h e d a t e of such a p p l i c a t i o n #
As a m a t t e r of g e n e r a l p o l i c y , t h e Board i s d i s p o s e d t o g r a n t
p e r m i s s i o n t o any member bank l o c a t e d i n an o u t l y i n g d i s t r i c t of a
c e n t r a l r e s e r v e or r e s e r v e c i t y , as d e f i n e d i n R e g u l a t i o n D, t o carryreduced r e s e r v e s , p r o v i d e d t h e c h a r a c t e r of i t s b u s i n e s s i s t y p i c a l
of banks l o c a t e d i n and s e r v i n g p r i m a r i l y o u t l y i n g communities i n
such c i t i e s .
I n s u b m i t t i n g t h e a p p l i c a t i o n of a member bank f o r p e r -
m i s s i o n t o c a r r y reduced r e s e r v e s , however, a f u l l s t a t e m e n t should
-
2 —
X-7629
be f u r n i s h e d of t h e f a c t s upon which your board or e x e c u t i v e comm i t t e e bases i t s recommendation* w i t h p a r t i c u l a r r e f e r e n c e t o t h e
l o c a t i o n of t h e bank and t o t h e c h a r a c t e r of b u s i n e s s conducted by
i t and by o t h e r banks l o c a t e d i n t h e same g e n e r a l neighborhood.
In t h e review of the s i t u a t i o n as of the end of each y e a r ,
i n accordance w i t h t h e Board*s l e t t e r X-4739 of December 4, 1926, i t
i s r e q u e s t e d t h a t , i n a d d i t i o n t o such o t h e r d a t a and comments as
t h e agent may deem i t d e s i r a b l e t o submit, t h e r e be f u r n i s h e d t h e
f o l l o w i n g i n f o r m a t i o n f o r each bank i n l i e u of t h a t s p e c i f i e d i n t h e
letter referred to:
1.
Net demand d e p o s i t s *
2*
Time d e p o s i t s *
3.
Bank d e p o s i t s (items 2 and 3 of Schedule J , item 4 i n
Schedule K and item 2 i n Schedule L, of c a l l r e p o r t ) *
4.
Total d e p o s i t s *
5.
Vault cash*
6*
Amount of d e b i t s t o i n d i v i d u a l d e p o s i t accounts f o r
t h e four-week p e r i o d ending on t h e l a s t Wednesday
i n December f o r each bank t h a t r e p o r t s d e b i t f i g u r e s
t o t h e Federal r e s e r v e bank.
7•
Whether t h e r e has been any change, s i n c e t h e p r e v i o u s
annual review, i n t h e g e n e r a l c h a r a c t e r of t h e bank* s
business*
8.
Distance of t h e bank from what i s g e n e r a l l y regarded as
t h e downtown b u s i n e s s and f i n a n c i a l d i s t r i c t of the
city.
* As of t h e l a s t c a l l date i n t h e year •
I t i s a l s o r e q u e s t e d t h a t i n t h e annual r e v i e w c o n s i d e r a t i o n
be given t o t h e q u e s t i o n whether t h e r e has been such a change i n t h e
- 3 -
X-7629
d i s t r i c t i n which any bank having p e r m i s s i o n t o c a r r y reduced r e s e r v e s
i s l o c a t e d t h a t i t might no l o n g e r be r e g a r d e d as an o u t l y i n g d i s t r i c t ,
and t h a t a p p r o p r i a t e comment t h e r e o n be i n c l u d e d i n your l e t t e r t o t h e
Board.
Very t r u l y y o u r s ,
}r)<hsu
Chester M o r r i l l ,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7630
October 6, 1933
SUBJECT:
Hew I s s u e T r e a s u r y B i l l s .
Dear S i r :
In connection with t e l e g r a p h i c t r a n s a c t i o n s
i n Government s e c u r i t i e s between F e d e r a l r e s e r v e banks,
t h e code word "NOXERT" has been d e s i g n a t e d t o cover a
new i s s u e of Treasury B i l l s , d a t e d October 11, 1933,
and m a t u r i n g January 10, 1934.
This word should be i n s e r t e d i n t h e F e d e r a l
Reserve Telegraph Code book, f o l l o w i n g t h e supplemental
code word "NOXEQUE" on page 172.
Very t r u l y y o u r s ,
J . C. tfoell,
A s s i s t a n t Secrets
TO GOVERNORS OF ALL F . R. BAMS.
( S u p e r s e d i n g X-7403)
FEDERAL RESERVE SYSTEM.
The F e d e r a l Reserve System was e s t a b l i s h e d p u r s u a n t t o a u t h o r i t y
c o n t a i n e d i n t h e Act of December 23, 1913, known as t h e F e d e r a l Reserve Act,
t h e p u r p o s e s of which, as s t a t e d i n t h e preamble, a r e "To p r o v i d e f o r t h e
e s t a b l i s h m e n t of F e d e r a l r e s e r v e banks, t o f u r n i s h an e l a s t i c c u r r e n c y , t o
a f f o r d means of r e d i s c o u n t i n g commercial p a p e r , t o e s t a b l i s h a more e f f e c t i v e s u p e r v i s i o n of banking i n the United S t a t e s , and f o r o t h e r p u r p o s e s . t r
The System comprises t h e F e d e r a l Reserve Board, which e x e r c i s e s s u p e r v i s o r y
f u n c t i o n s , t h e F e d e r a l Advisory C o u n c i l , which a c t s i n an a d v i s o r y c a p a c i t y
t o t h e F e d e r a l Reserve Board, t h e twelve F e d e r a l r e s e r v e banks s i t u a t e d i n
d i f f e r e n t s e c t i o n s of t h e United S t a t e s , t h e F e d e r a l Open Market Committee,
and the member b a n k s , which i n c l u d e a l l n a t i o n a l banks and such S t a t e banks
and t r u s t companies as have v o l u n t a r i l y a p p l i e d t o t h e F e d e r a l Reserve Board
f o r membership and have been admitted t o t h e System.
The F e d e r a l r e s e r v e banks a r e l o c a t e d i n B o s t o n , New York, P h i l a d e l p h i a , C l e v e l a n d , Richmond, A t l a n t a , Chicago, S t . L o u i s , M i n n e a p o l i s ,
Kansas C i t y , D a l l a s and San F r a n c i s c o .
There a r e a l s o i n o p e r a t i o n t w e n t y -
f i v e b r a n c h e s and two a g e n c i e s of the F e d e r a l r e s e r v e b a n k s , a l l of which
a r e l o c a t e d i n o t h e r c i t i e s of t h e United S t a t e s , except one agency i n
Havana, Cuba.
The c a p i t a l s t o c k of t h e F e d e r a l r e s e r v e banks i s e n t i r e l y owned
by t h e member banks and may not be t r a n s f e r r e d or h y p o t h e c a t e d .
Every
n a t i o n a l bank i n e x i s t e n c e a t t h e time of t h e e s t a b l i s h m e n t of t h e F e d e r a l
Reserve System was r e q u i r e d t o s u b s c r i b e t o t h e c a p i t a l s t o c k of t h e F e d e r a l
r e s e r v e bank of i t s d i s t r i c t i n an amount equal t o s i x p e r cent of t h e
s u b s c r i b i n g bank*s c a p i t a l and s u r p l u s .
A l i k e amount of F e d e r a l r e s e r v e
X-7631
3 3 1
— 2 —
bank stock must be subscribed for by every national bank organized since that
time and by every State bank or trust company (except mutual savings banks)
upon becoming a member of the Federal Reserve System; and, when a member bank
increases i t s capital or surplus, i t i s required to subscribe for additional
stock in the same proportion.
One half of each subscription must be f u l l y paid
and the remainder i s subject to c a l l by the Federal Reserve Board; but c a l l for
payment of the remainder has not been made.
A mutual savings bank which i s ad-
mitted to membership in the Federal Reserve System must subscribe for Federal
reserve bank stock i n an amount equal to s i x - t e n t h s of one per centum of i t s
t o t a l deposit l i a b i l i t i e s ; and thereafter such subscription must be adjusted
semi-annually on the same percentage b a s i s .
After a l l necessary expenses of a Federal reserve bank have been paid
or provided f o r , i t s stockholding member banks are e n t i t l e d to receive an annual
dividend of s i x per cent on the paid-in capital stock, which dividend i s cumulative.
After these dividend claims have been f u l l y met, the net earnings are
paid into the surplus fund of the Federal reserve bank.
Federal reserve banks,
including the capital stock and surplus therein and the income derived therefrom, are exempt from Federal, State and local taxation, except taxes upon real ,
estate.
The board of directors of each Federal reserve bank i s composed of
nine members, equally divided into three c l a s s e s , designated Class A, Class B
and Class C.
banks.
Directors of Class A are representative of the stockholding member
Directors of Class B must be a c t i v e l y engaged i n their d i s t r i c t i n com-
merce, agriculture or some other industrial pursuit, and may not be o f f i c e r s ,
directors or employees of any bank.
Class C directors may not oe o f f i c e r s *
directors, employees, or stockholders of any bank.
Six of the nine directors>
those of Class A and Class B, are e l e c t e d by the stockholding member banks,
- 3 w h i l e t h e F e d e r a l Reserve Board a p p o i n t s the t h r e e Class C d i r e c t o r s .
The term
of o f f i c e of each d i r e c t o r i s t h r e e y e a r s , so arranged t h a t t h e term of one d i r e c t o r of each c l a s s e x p i r e s each y e a r .
One of t h e Class C d i r e c t o r s appointed "by t h e Board i s d e s i g n a t e d as
chairman of t h e board of d i r e c t o r s of t h e F e d e r a l r e s e r v e "bank and as F e d e r a l
r e s e r v e a g e n t , and i n t h e l a t t e r c a p a c i t y he i s r e q u i r e d t o m a i n t a i n a l o c a l
o f f i c e of t h e F e d e r a l Reserve Board on the p r e m i s e s of t h e F e d e r a l r e s e r v e "bank.
Another C l a s s C d i r e c t o r i s appointed "by the F e d e r a l Reserve Board as deputy
chairman.
F e d e r a l r e s e r v e "banks are a u t h o r i z e d , among o t h e r t h i n g s , t o d i s c o u n t
f o r t h e i r member banks n o t e s , d r a f t s , b i l l s of exchange and b a n k e r s 1 a c c e p t a n c e s
of short m a t u r i t i e s a r i s i n g out of commercial, i n d u s t r i a l and a g r i c u l t u r a l t r a n s a c t i o n s , and s h o r t term paper secured by o b l i g a t i o n s of t h e United S t a t e s ; to
make advances t o t h e i r member banks upon t h e i r promissory n o t e s f o r p e r i o d s not
exceeding n i n e t y days upon the s e c u r i t y of paper e l i g i b l e f o r d i s c o u n t or p u r chase and f o r p e r i o d s not exceeding f i f t e e n days upon t h e s e c u r i t y of o b l i g a t i o n s of t h e United S t a t e s and c e r t a i n o t h e r s e c u r i t i e s i n c e r t a i n e x c e p t i o n a l
c i r c u m s t a n c e s and under c e r t a i n p r e s c r i b e d c o n d i t i o n s , t o make advances upon
o t h e r k i n d s of s e c u r i t y t o groups of member banks and, u n t i l March 3, 1934,
or f o r such a d d i t i o n a l p e r i o d not exceeding one y e a r as t h e P r e s i d e n t may
p r e s c r i b e , t o i n d i v i d u a l member banks; t o make l o a n s , u n t i l t h e P r e s i d e n t
s h a l l o t h e r w i s e d e c l a r e and i n no event a f t e r March 24, 1934, t o nonmember
banks or t r u s t companies under c e r t a i n p r e s c r i b e d c o n d i t i o n s upon s e c u r i t y
which may or may not be e l i g i b l e f o r r e d i s c o u n t ; i n unusual and e x i g e n t circums t a n c e s when a u t h o r i t y h a s been g r a n t e d by a t l e a s t f i v e members of t h e F e d e r a l
Reserve Board, t o d i s c o u n t f o r i n d i v i d u a l s , p a r t n e r s h i p s or c o r p o r a t i o n s , under
X-7631
- 4 c e r t a i n p r e s c r i b e d c o n d i t i o n s , n o t e s , d r a f t s and b i l l s of exchange of t h e k i n d s
and m a t u r i t i e s made e l i g i b l e f o r d i s c o u n t f o r member banks; t o make advances to
i n d i v i d u a l s , p a r t n e r s h i p s or c o r p o r a t i o n s upon t h e i r promissory n o t e s secured
by d i r e c t o b l i g a t i o n s of t h e United S t a t e s f o r p e r i o d s not e x c e e d i n g n i n e t y
d a y s ; t o p u r c h a s e and s e l l i n t h e open market b a n k e r s ' a c c e p t a n c e s and b i l l s
of exchange of t h e k i n d s and m a t u r i t i e s e l i g i b l e f o r d i s c o u n t , and o b l i g a t i o n s
of t h e United S t a t e s ; t o d e a l i n gold c o i n and b u l l i o n ; t o r e c e i v e and h o l d on
d e p o s i t t h e r e s e r v e b a l a n c e s of member banks; t o i s s u e F e d e r a l r e s e r v e n o t e s
and F e d e r a l r e s e r v e bank n o t e s ; t o a c t as c l e a r i n g h o u s e s and a s c o l l e c t i n g
a g e n t s f o r t h e i r member b a n k s , and under c e r t a i n c o n d i t i o n s f o r nonmember banks
i n the c o l l e c t i o n of checks and o t h e r i n s t r u m e n t s ; t o a c t as d e p o s i t a r i e s and
f i s c a l a g e n t s of t h e United S t a t e s ; and t o e x e r c i s e o t h e r b a n k i n g f u n c t i o n s
s p e c i f i e d i n t h e F e d e r a l Reserve Act.
F e d e r a l r e s e r v e n o t e s a r e a f i r s t and paramount l i e n on a l l t h e a s s e t s of t h e F e d e r a l r e s e r v e banks through which t h e y a r e i s s u e d and a r e a l s o
o b l i g a t i o n s of t h e United S t a t e s .
They a r e i s s u e d a g a i n s t t h e s e c u r i t y of
g o l d and of commercial and a g r i c u l t u r a l paper d i s c o u n t e d o r purchased by Fede r a l r e s e r v e b a n k s , and, u n t i l March 3, 1934, when a u t h o r i z e d by t h e F e d e r a l
Reserve Board, may a l s o be secured by d i r e c t o b l i g a t i o n s of t h e U n i t e d S t a t e s .
Every F e d e r a l r e s e r v e bank i s r e q u i r e d t o m a i n t a i n r e s e r v e s i n g o l d of not l e s s
t h a n 40 p e r cent a g a i n s t i t s F e d e r a l r e s e r v e n o t e s i n a c t u a l c i r c u l a t i o n and i s
a l s o r e q u i r e d t o m a i n t a i n r e s e r v e s i n gold or l a w f u l money of not l e s s t h a n 35
p e r cent a g a i n s t i t s d e p o s i t s .
F e d e r a l r e s e r v e bank n o t e s a r e t h e o b l i g a t i o n s of t h e F e d e r a l r e s e r v e
bank p r o c u r i n g them and a r e redeemable i n l a w f u l money of t h e U n i t e d S t a t e s on
p r e s e n t a t i o n at t h e United S t a t e s Treasury or a t t h e bank of i s s u e .
They a r e
i s s u e d a g a i n s t t h e s e c u r i t y of d i r e c t o b l i g a t i o n s of t h e United S t a t e s i n an
:
- 5 -
334
X-7631
amount equal t o t h e f a c e v a l u e of such o b l i g a t i o n s and a g a i n s t t h e s e c u r i t y
of n o t e s , d r a f t s , b i l l s of exchange and bankers 1 a c c e p t a n c e s i n an amount
equal t o not more t h a n n i n e t y per c e n t of t h e e s t i m a t e d v a l u e t h e r e o f .
Each F e d e r a l r e s e r v e bank m a i n t a i n s on d e p o s i t i n t h e T r e a s u r y of t h e United
S t a t e s i n l a w f u l money a redemption f u n d equal t o f i v e p e r c e n t of i t s l i a b i l i t y on F e d e r a l r e s e r v e bank n o t e s i n a c t u a l c i r c u l a t i o n , or such o t h e r
amount as may be r e q u i r e d by t h e T r e a s u r e r of t h e United S t a t e s "with t h e
approval of t h e S e c r e t a r y of t h e T r e a s u r y , and i s r e q u i r e d t o pay a t a x of
o n e - f o u r t h of one per c e n t each h a l f year upon t h e average amount of i t s
F e d e r a l r e s e r v e bank n o t e s i n c i r c u l a t i o n #
No such F e d e r a l r e s e r v e bank
n o t e s may be i s s u e d a f t e r t h e P r e s i d e n t s h a l l have d e c l a r e d by p r o c l a m a t i o n
t h a t the emergency r e c o g n i z e d by him i n h i s p r o c l a m a t i o n of March 6, 1933,
has t e r m i n a t e d , u n l e s s such n o t e s are secured by t h e d e p o s i t of bonds of t h e
United S t a t e s of c e r t a i n c l a s s e s which a r e e l i g i b l e as s e c u r i t y f o r n a t i o n a l
bank n o t e s .
Broad s u p e r v i s o r y powers are v e s t e d i n t h e F e d e r a l Reserve Board,
which has i t s o f f i c e s i n Washington.
The law d e s i g n a t e s t h e S e c r e t a r y of
t h e T r e a s u r y and t h e Comptroller of t h e Currency as e x - o f f i c i o members, and
p r o v i d e s f o r the appointment of s i x members by the P r e s i d e n t w i t h t h e advice
and c o n s e n t of t h e S e n a t e .
I n s e l e c t i n g t h e s e s i x members, t h e P r e s i d e n t
i s r e q u i r e d t o have a due r e g a r d t o a f a i r r e p r e s e n t a t i o n of t h e f i n a n c i a l ,
a g r i c u l t u r a l , i n d u s t r i a l and commercial i n t e r e s t s , and g e o g r a p h i c a l d i v i s i o n s
of t h e c o u n t r y .
No two a p p o i n t i v e members may be f r o m t h e same F e d e r a l r e -
serve d i s t r i c t .
Among t h e more i m p o r t a n t d u t i e s of t h e F e d e r a l Reserve Board a r e
t h e r e v i e w and d e t e r m i n a t i o n of d i s c o u n t r a t e s charged by t h e F e d e r a l
rg ~
woo
- 6 -
X-7631
r e s e r v e banks on t h e i r d i s c o u n t s and advances and s u p e r v i s i o n o v er t h e open
market o p e r a t i o n s of t h e F e d e r a l r e s e r v e b a n k s .
Such open market o p e r a t i o n s
a r e conducted under r e g u l a t i o n s adopted by the F e d e r a l Reserve Board w i t h a
view t o accommodating commerce and b u s i n e s s and w i t h r e g a r d t o t h e i r b e a r i n g
upon t h e g e n e r a l c r e d i t s i t u a t i o n of t h e c o u n t r y .
The Federal Open Market
Committee, which makes recommendations w i t h r e g a r d t o open market o p e r a t i o n s ,
was c r e a t e d by t h e law and c o n s i s t s of twelve members, one member being s e l e c t e d a n n u a l l y b y t h e board of d i r e c t o r s of each F e d e r a l r e s e r v e b a n k .
The
meetings of t h e Committee a r e h e l d i n Washington a t l e a s t f o u r times each
year upon t h e c a l l of t h e Governor of t h e F e d e r a l Reserve Board or a t t h e
r e q u e s t of any t h r e e members of t h e Committee.
I n c o n n e c t i o n w i t h i t s s u p e r v i s i o n of F e d e r a l r e s e r v e banks t h e
F e d e r a l Reserve Board i s a l s o a u t h o r i z e d t o make e x a m i n a t i o n s of such banks;
t o r e q u i r e s t a t e m e n t s and r e p o r t s f r o m such banks; t o r e q u i r e t h e e s t a b l i s h ment or d i s c o n t i n u a n c e of branches of such banks; t o s u p e r v i s e t h e i s s u e and
r e t i r e m e n t of F e d e r a l r e s e r v e n o t e s ; and t o e x e r c i s e s p e c i a l s u p e r v i s i o n over
a l l r e l a t i o n s h i p s and t r a n s a c t i o n s of the F e d e r a l r e s e r v e banks w i t h f o r e i g n
banks or b a n k e r s .
The F e d e r a l Reserve Board a l s o p a s s e s on t h e admission of S t a t e
banks and t r u s t companies t o membership i n t h e F e d e r a l Reserve System and on
t h e t e r m i n a t i o n of membership of such banks; i t has t h e power t o examine
member banks and t h e a f f i l i a t e s of S t a t e member banks; i t r e c e i v e s c o n d i t i o n
r e p o r t s f r o m S t a t e member banks and t h e i r a f f i l i a t e s ; i t l i m i t s by r e g u l a t i o n the r a t e of i n t e r e s t which may be p a i d by member banks on t i m e and
savings d e p o s i t s ; i t i s a u t h o r i z e d , i n i t s ' d i s c r e t i o n , t o i s s u e v o t i n g p e r m i t s t o h o l d i n g company a f f i l i a t e s of .member banks e n t i t l i n g them t o v o t e
- 7 -
836
X-7631
t h e s t o c k of such banks a t e l e c t i o n s of d i r e c t o r s and i n d e c i d i n g q u e s t i o n s
a t meetings of s h a r e h o l d e r s and t o i s s u e p e r m i t s c o v e r i n g c e r t a i n r e l a t i o n s
between member banks and o r g a n i z a t i o n s d e a l i n g i n s e c u r i t i e s ; i t has t h e
power to remove o f f i c e r s and d i r e c t o r s of member banks, f o r c o n t i n u e d v i o l a t i o n s of law or u n s a f e or unsound p r a c t i c e s i n conducting t h e b u s i n e s s of
such bank; i t may, i n i t s d i s c r e t i o n , suspend member banks f r o m t h e use of
t h e c r e d i t f a c i l i t i e s of t h e F e d e r a l Reserve System, f o r making undue use
of bank c r e d i t f o r s p e c u l a t i v e purposes or f o r any o t h e r purpose i n c o n s i s t e n t
w i t h the maintenance of sound c r e d i t c o n d i t i o n s ; i t p a s s e s on a p p l i c a t i o n s
of n a t i o n a l banks f o r a u t h o r i t y t o e x e r c i s e t r u s t powers or t o a c t i n f i d u c i a r y c a p a c i t i e s ; i t may g r a n t a u t h o r i t y t o n a t i o n a l banks t o e s t a b l i s h branches
i n f o r e i g n c o u n t r i e s or dependencies or i n s u l a r p o s s e s s i o n s of t h e United
S t a t e s , or t o i n v e s t i n t h e s t o c k of banks or c o r p o r a t i o n s engaged i n i n t e r n a t i o n a l or f o r e i g n banking; i t s u p e r v i s e s the o r g a n i z a t i o n and a c t i v i t i e s
of c o r p o r a t i o n s organized under Federal law t o engage i n i n t e r n a t i o n a l or
f o r e i g n banking; and i t i s s u e s p e r m i t s under t h e a u t h o r i t y g r a n t e d by t h e
p r o v i s i o n s of t h e Clayton A n t i t r u s t Act r e l a t i n g t o i n t e r l o c k i n g d i r e c t o r a t e s .
Another f u n c t i o n of t h e Board i s t h e o p e r a t i o n of t h e gold s e t t l e m e n t f u n d ,
by which b a l a n c e s due t o and f r o m t h e v a r i o u s F e d e r a l r e s e r v e banks a r i s i n g
out of t h e i r own t r a n s a c t i o n s or t h o s e of t h e i r member banks a r e s e t t l e d i n
Washington w i t h o u t p h y s i c a l shipments of g o l d .
I n e x o r c i s i n g i t s s u p e r v i s o r y f u n c t i o n s over t h e F e d e r a l r e s e r v e
banks and member banks, t h e F e d e r a l Reserve Board promulgates r e g u l a t i o n s ,
p u r s u a n t t o a u t h o r i t y g r a n t e d by t h e F e d e r a l Reserve Act, governing c e r t a i n
of t h e above-mentioned a c t i v i t i e s of F e d e r a l r e s e r v e banks and member b a n k s .
- 8 -
X-7631
To meet i t s expenses and t o pay t h e s a l a r i e s of i t s members and i t s employees,
t h e Board makes semi-annual assessments upon t h e F e d e r a l r e s e r v e banks i n
p r o p o r t i o n t o t h e i r c a p i t a l s t o c k and s u r p l u s .
Annual r e p o r t s of t h e o p e r a -
t i o n s of the Board a r e made t o t h e Speaker of t h e House of R e p r e s e n t a t i v e s
f o r t h e i n f o r m a t i o n of Congress as r e q u i r e d by law.
The F e d e r a l Advisory Council a c t s i n an a d v i s o r y c a p a c i t y , c o n f e r r i n g w i t h the F e d e r a l Reserve Board on g e n e r a l b u s i n e s s c o n d i t i o n s and making
recommendations concerning m a t t e r s w i t h i n t h e Board's j u r i s d i c t i o n and the
g e n e r a l a f f a i r s of the Federal Reserve System#
The Council i s composed of
twelve members, one f r o m each F e d e r a l r e s e r v e d i s t r i c t b e i n g s e l e c t e d a n n u a l l y by t h e board of d i r e c t o r s of t h e F e d e r a l r e s e r v e bank of t h e d i s t r i c t .
The Council i s r e q u i r e d t o meet i n Washington a t l e a s t f o u r times each year
and o f t e n e r i f c a l l e d by t h e F e d e r a l Reserve Board.
October 1, 1933.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7632
October 9, 1933.
SUBJECTi
Absorption by Member Banks of
C o l l e c t i o n or Exchange Charges.
Dear S i r ;
There i s i n c l o s e d , f o r your i n f o r m a t i o n ,
a copy of a l e t t e r a d d r e s s e d t o t h e F e d e r a l Res e r v e Agent a t t h e F e d e r a l Reserve Bank of A t l a n t a
under d a t e of October 7, 1933, vvith r e g a r d t o t h e
a b s o r p t i o n by member banks of exchange or c o l l e c t i o n charges.
Very t r u l y yours
Chester M o r r i l l
Secretary.
Inclosure.
TO ALL FEDERAL RESERVE AGENTS EXCEPT ATLANTA.
3 3S
8
COPY
X-7632-a
October 7, 1933.
Mr. Oscar Nevrton,
F e d e r a l Reserve Agent,
F e d e r a l Reserve Bank of A t l a n t a ,
Atlanta, Georgia.
Dear Mr. Newton:
R e f e r e n c e i s made t o your l e t t e r of September 29, 1933, i n
which you a d v i s e t h a t , on September 27, 1933, you a t t e n d e d a c o n f e r ence of bankers from a number of c i t i e s i n t h e s o u t h e a s t e r n s e c t i o n
of t h e c o u n t r y a t which one of t h e m a t t e r s d i s c u s s e d was t h e p r a c t i c e
of member banks w i t h r e s p e c t t o t h e a b s o r p t i o n of c o l l e c t i o n or exchange charges i n c o n n e c t i o n w i t h items r e c e i v e d by them on d e p o s i t .
I t i s n o t e d t h a t t h e c o n f e r e n c e , by a m a j o r i t y v o t e , adopted a r e s o l u t i o n on t h i s s u b j e c t , a copy of which you i n c l o s e d w i t h your l e t t e r .
I t i s a l s o n o t e d t h a t Mr.
, Chairman of t h e meeting,
i n a l e t t e r , a copy of which you i n c l o s e d , r e q u e s t s t h a t t h e F e d e r a l
Reserve Board i s s u e a d e f i n i t e r u l i n g as t o t h e i n t e r p r e t a t i o n of t h e
law w i t h r e s p e c t t o t h i s m a t t e r .
The F e d e r a l Reserve Board has g i v e n c a r e f u l c o n s i d e r a t i o n t o
t h i s m a t t e r b u t does n o t f e e l t h a t i t i s p o s s i b l e t o i s s u e a g e n e r a l
r u l i n g by r e f e r e n c e t o which i t could be determined d e f i n i t e l y under
t h e c i r c u m s t a n c e s of a l l c a s e s whether t h e a b s o r p t i o n of exchange or
c o l l e c t i o n c h a r g e s by member banks i s l a w f u l or u n l a w f u l •
Questions
as t o whether such an a b s o r p t i o n of charges does or does n o t c o n s t i t u t e
a payment of i n t e r e s t w i t h i n t h e meaning of S e c t i o n 19 of t h e F e d e r a l
Reserve Act, f o r b i d d i n g member banks t o pay i n t e r e s t on d e p o s i t s payable
Mr. Oscar Newton
-2-
X-7632-a
i
on demand e i t h e r d i r e c t l y or i n d i r e c t l y by any device whatsoever* must
be determined as and when t h e y a r i s e i n p a r t i c u l a r c a s e s and i n t h e
l i g h t of t h e s p e c i a l f a c t s of each such c a s e .
As p o i n t e d o u t t o you
i n t h e B o a r d ' s l e t t e r of September 21, 1933, t h e a b s o r p t i o n of exchange
or c o l l e c t i o n charges i n an amount e q u i v a l e n t t o a c e r t a i n p e r c e n t a g e
of t h e amount of t h e balance of t h e d e p o s i t o r , i n t h e B o a r d ' s o p i n i o n ,
i s c l e a r l y i n v i o l a t i o n of t h e law on t h i s s u b j e c t , and no member bank
wherever l o c a t e d may l a w f u l l y absorb exchange or c o l l e c t i o n charges on
such a b a s i s •
The Board f e e l s t h a t t h e banks and t h e c l e a r i n g house a s s o c i a t i o n s should themselves c o n s i d e r whether, i n t h e l i g h t of t h e s p i r i t
and purpose of t h e p r o h i b i t i o n of t h e s t a t u t e upon t h e payment of i n t e r e s t , t h e p r a c t i c e which t h e y wish t o f o l l o w w i t h r e s p e c t t o t h e abs o r p t i o n of exchange or c o l l e c t i o n charges i s l a w f u l •
I f i n any case
i t appears q u e s t i o n a b l e whether t h e p r a c t i c e proposed conforms t o t h e
r e q u i r e m e n t s of t h e law on t h i s s u b j e c t , t h e q u e s t i o n may be s u b m i t t e d ,
i f d e s i r e d , t o t h e F e d e r a l Reserve Bank of t h e d i s t r i c t f o r c o n s i d e r a t i o n ; and, of c o u r s e , t h e F e d e r a l Reserve Bank, i n c a s e s where i t
appears n e c e s s a r y , may p r e s e n t t h e m a t t e r t o t h e F e d e r a l Reserve Board
with a request f o r a r u l i n g .
Such a r e q u e s t should be aqcompanied by
an o p i n i o n of t h e Bank's counsel*
R e f e r r i n g t o your s u g g e s t i o n t h a t t h e s u b s t a n c e of t h e B o a r d ' s
l e t t e r t o you of September 21, 1933, be communicated t o member banks,
you a r e a d v i s e d t h a t the Board has s e n t a copy of t h a t l e t t e r t o each
Mr. Oscar Newton
-3-
X-7632-a
Federal Reserve Agent, w i t h the r e q u e s t t h a t t h e m a t t e r be t a k e n up
•with any of t h e c l e a r i n g house a s s o c i a t i o n s l o c a t e d i n h i s d i s t r i c t
which are f o l l o w i n g p r a c t i c e s i n c o n f l i c t w i t h t h e s p i r i t or t h e l e t t e r
of t h e law on t h i s s u b j e c t and t h a t he endeavor t o have any such a s s o c i a t i o n s cooperate v o l u n t a r i l y i n a m o d i f i c a t i o n or a d j u s t m e n t of
t h i s p r a c t i c e which w i l l b r i n g them i n t o conformity w i t h t h e s t a t u t e #
The Board has no o b j e c t i o n , however, t o your communicating t h e substance of i t s l e t t e r of September 21 to such member banks as you may
deem d e s i r a b l e #
Very t r u l y y o u r s ,
(Signed)
Chester M o r r i l l
Chester M o r r i l l ,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-753S
October 9, 1933.
SUBJECT:
R e l a t i o n s of F e d e r a l Reserve Banks w i t h
F o r e i g n Banks and Bankers.
Dear S i r :
S e c t i o n I I of t h e B o a r d ' s R e g u l a t i o n H, which "became e f f e c t i v e
August 10, 1933, p r o v i d e s t h a t :
"* * *each F e d e r a l Reserve "bank s h a l l promptly submit to t h e F e d e r a l Reserve Board i n w r i t i n g f u l l
i n f o r m a t i o n c o n c e r n i n g a l l e x i s t i n g r e l a t i o n s h i p s and
t r a n s a c t i o n s of any k i n d h e r e t o f o r e e n t e r e d i n t o by
such F e d e r a l Reserve "bank w i t h any f o r e i g n "bank or
"banker or w i t h any group of f o r e i g n "banks or "bankers
and c o p i e s of a l l w r i t t e n agreements "between i t and
any f o r e i g n bank or "banker or any group of f o r e i g n
"banks or "bankers which a r e now i n f o r c e , u n l e s s c o p i e s
have h e r e t o f o r e been f u r n i s h e d t o t h e Board, i n which
c a s e t h e F e d e r a l Reserve bank s h a l l inform t h e Board
a s t o t h e d a t e s upon which such c o p i e s were f u r n i s h e d . "
The Board has no r e c o r d of having r e c e i v e d a d v i c e f r o m your bank
in Compliance with t h i s p r o v i s i o n of t h e r e g u l a t i o n , and w h i l e it i s
u n d e r s t o o d t h a t , a p a r t from i t s p a r t i c i p a t i o n i n agreements e n t e r e d
i n t o by t h e F e d e r a l Reserve Bank of New York, your bank has no e x i s t i n g r e l a t i o n s h i p s , t r a n s a c t i o n s or agreements w i t h f o r e i g n banks or
b a n k e r s , i t i s f e l t t h a t , i n order t o complete t h e r e c o r d s of t h e
Board, d e f i n i t e a d v i c e should be forwarded t o i t .
Accordingly, i t w i l l
"be appreciated i f you w i l l address a l e t t e r to the Board i n accordance
with the requirement of Regulation IT above referred t o .
Very truly yours,
Chester Morrill,
Secretary.
To Governors of A l l F. R. Banks, except
New York, Richmond and Minneapolis.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
X-7634
October 11, 1135.
(iHTERPEETATICIf OF BASKING ACT OF 1933)
Oear S i r :
I n r e s p o n s e t o an i n q u i r y from t h e p r e s i d e n t of a n a t i o n a l
hank with r e s p e c t t o whether S e c t i o n 8A of whs Clayton A n t i t r u s t
Act ( S e c t i o n 13 of t h e Banking Jict of 1953) a p p l i e s t o t h e s e r v i c e
of a d i r e c t o r of a n a t i o n a l bank as a d i r e c t o r of a branch of a
F e d e r a l Reserve Bank, t h e Board made t h e f o l l o w i n g s t a t e m e n t ;
" I n view of t h e f a c t t h a i F e d e r a l r e s e r v e banks make l o a n s
secured by bonds, t h e s e r v i c e of one of ycur d i r e c t o r s as a d i r e c t o r of t h e
Branch of t h e F e d e r a l Reserve Lank of
would come w i t h i n t h e p r o v i s i o n s of S e c t i o n 8A, s i n c e such
bank, of c o u r s e , i s ' o r g a n i z e d and o p e r a t i n g under t h e laws of t h e
United S t a t e s . "
Of c o u r s e , t h i s s t a t e m e n t i s e q u a l l y a p p l i c a b l e t o a Class
A d i r e c t o r of a F e d e r a l r e s e r v e bank who i s s e r v i n g a t t h e same time
as a d i r e c t o r of a n a t i o n a l b a n k .
TO ALL FEDERAL
Very t r u l y yours
Chester M o r r i l l
Secretary.
RESERVE AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7635
October 12, 1933.
Dear S i r :
There are i n c l o s e d , f o r your i n f o r m a t i o n , copies
of t h e Board's l e t t e r of June 21 t o t h e S e c r e t a r y of t h e
Treasury and of t h e r e p l y of the A s s i s t a n t S e c r e t a r y of
t h e Treasury under date of September 18, w i t h r e g a r d t o
a b r a s i o n on gold coin, t h e holding of gold coin and gold
c e r t i f i c a t e s i n j o i n t custody f o r t h e account of t h e
Treasurer of t h e United S t a t e s , t h e c a n c e l a t i o n of and
shipment t o t h e Treasury of new and f i t gold c e r t i f i c a t e s
i n denominations of $500 or over, and t h e shipment t o t h e
Treasury of gold coin and standard s i l v e r d o l l a r s .
Very t r u l y yours
Chester M o r r i l l
Secretary.
Ir.closures.
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.
345
COPY
X-7635-a
34(3
TREASURY DEPARTMENT
WASHINGTON
September 18, 1933.
Mr. Chester Morrill,
Secretary,
The Federal Reserve Board,
Washington, D. C.
Sir:
Reference i s made to your l e t t e r of June 21, 1933, advising
that the Federal Reserve Batiks have on hand large amounts of gold
coin and gold c e r t i f i c a t e s .
You request to he advised as to
( l ) whether the Treasury w i l l permit the Federal Reserve Banks t o ship
United States gold coin to the Treasury or to the mints or assay
o f f i c e s at the Treasury's expense; (2) whether the Treasury w i l l
reimburse the Federal Reserve Banks for abrasion on gold coin deposited
since March 7; (3) whether the Federal Reserve Banks w i l l he required
to determine the amount of such abrasion before shipment to the Treasury
or Treasury o f f i c e s ; (4) whether the Treasury w i l l permit the Federal
Reserve Banks to hold a portion of their gold coin or gold c e r t i f i c a t e s ,
or both, i n j o i n t custody by the banks and agents for account of the
Treasurer of the United States; (5) whether the Federal Reserve Banks
w i l l be permitted to cancel and ship to the Treasury new and f i t gold
c e r t i f i c a t e s of denominations of $500 and over; and (6) as to what
p o l i c y the Treasury w i l l f o l l o w i n connection with the disposal of
standard s i l v e r dollars held by the Federal Reserve Banks i n excess of
their requirements and whether these dollars may be shipped to Treasury
o f f i c e s at Treasury expense.
X-7635-a
Mr. Chester Morrill - 3
Your questions are answered in the order presented,
(1)
The Treasury i s not i n a p o s i t i o n t o pay the expenses
of shipping f i t gold coin from the Federal Reserve Banks to the Treasury
the mints, or the assay o f f i c e s .
Moreover, Section 16 of the Federal
Reserve Act, as amended, provides that a l l expenses incident to the
handling of deposits of gold coin or of gold c e r t i f i c a t e s f o r credit
in the Gold Settlement Fund shall he paid "by the Federal Reserve Banks.
(2)
The Treasury has authority to assume the abrasion l o s s
on gold coin only when the weight thereof i s not below the l i m i t allowed
"by s t a t u t e , and furthermore, there are no funds a v a i l a b l e with which
the Treasury can reimburse the Federal Reserve Banks for the abrasion
l o s s on lightweight gold coin.
I t i s my understanding that the Federal
Reserve Board authorized the various Federal Reserve Banks to assume
this loss.
(3)
I t w i l l be necessary for the Federal Reserve Banks to
c l a s s i f y the gold coin as to current, uncurrent, and lightweight.
In
view of the circumstances, however, and i n order t o avoid the n e c e s s i t y
of determining the l o s s on each piece separately, the banks, upon a p p l i cation to the Treasurer of the United States i n the usual manner, w i l l
be permitted i n t h i s instance to ship the lightweight coin at a bulkweight value subject to adjustment to the mint's value when v e r i f i c a t i o n
has been made.
(4)
The Treasury w i l l not object to the establishment of
j o i n t custody accounts for a portion of the stock of gold c e r t i f i c a t e s
X-7635-a
348
Mr. Chester Morrill - 3
and current gold, coin of these hanks.
It should he understood, however,
that i f these j o i n t custody accounts are established, the expenses
involved i n the subsequent shipping of the gold coin to the Treasury
o f f i c e s w i l l be borne by the Federal Reserve Banks.
(5)
There has been no permanent p o l i c y established with
respect to the further paying out of gold c e r t i f i c a t e s .
The Treasury,
however, has no objection to the redemption, c a n c e l l a t i o n and shipment
to the Treasury i n the usual manner of the gold c e r t i f i c a t e s i n denominations of $500 and over.
(6)
The Treasury i s not i n possession of funds with which to
pay the expenses of shipping standard s i l v e r dollars t o Treasury o f f i c e s ,
and the available storage space at the mints i s exceedingly limited.
However, the s i t u a t i o n with respect to the standard s i l v e r d o l l a r s i s
somewhat d i f f e r e n t from the accumulation of gold.
Several years ago
the Treasury made an attempt to place the s i l v e r dollar i n c i r c u l a t i o n ,
and because of t h i s attempt large accumulation of s i l v e r d o l l a r s i n
the various Federal Reserve Banks r e s u l t e d .
I f e e l , therefore, that i n
due course the Treasury should pay the expenses of shipping these s i l v e r
dollars to Treasury o f f i c e s .
To r e l i e v e the Federal Reserve Banks of
dead a s s e t s i n their cash holdings, j o i n t custody accounts f o r s i l v e r
d o l l a r s were established some time ago, and 13,470,000 s i l v e r dollars
axe now held i n j o i n t custody accounts at two-thirds of the parent banks.
The t o t a l amount held i n the cash of a l l Federal Reserve Banks and
349
X-7635-a
Mr. Chester Morrill - 4
"branches i s l e s s than $5,000,000, and any surplus therein could a l s o
"be placed i n the j o i n t custody of the tanks and the agents u n t i l such
time as funds are available to pay the expense of shipping the d o l l a r s
to Treasury o f f i c e s .
Respectfully,
(Signed) Thomas Hewes
Thomas Hewes
Assistant Secretary of the Treasury
COPY
,
X-7635~b
June 21, 1933.
Honorable William H» Woo d i n ,
S e c r e t a r y of t h e Treasury,
Washington, D. C.
Dear S i r :
As a r e s u l t of r e c e n t gold movements, a l l of t h e F e d e r a l r e serve banks have on hand very l a r g e amounts of gold c o i n and gold
certificates.
At s e v e r a l of t h e banks, however, t h e p r o p o r t i o n of
t o t a l gold h o l d i n g s now maintained i n t h e form of gold s e t t l e m e n t
fund b a l a n c e s i s r e l a t i v e l y low, and t h e y a r e d e s i r o u s of i n c r e a s i n g
t h e s e b a l a n c e s i n order t o f a c i l i t a t e payments t o o t h e r F e d e r a l r e serve banks and t r a n s f e r s t o t h e F e d e r a l r e s e r v e a g e n t s and t h e United
States Treasury.
In o r d e r t o accomplish t h i s , t h e banks are c o n s i d -
e r i n g shipments of gold coin and c e r t i f i c a t e s t o t h e T r e a s u r y .
Sev-
e r a l q u e s t i o n s have been r a i s e d i n t h i s c o n n e c t i o n , as summarized
below, and r e g a r d i n g which t h e Board w i l l a p p r e c i a t e a d v i c e as t o
t h e p o s i t i o n of t h e T r e a s u r y .
1.
W i l l t h e T r e a s u r y permit t h e F e d e r a l r e s e r v e banks t o
s h i p United S t a t e s gold c o i n t o t h e T r e a s u r y , or t o the m i n t s or a s say o f f i c e s , a t t h e T r e a s u r y 1 s expense?
2.
W i l l the T r e a s u r y reimburse F e d e r a l r e s e r v e banks f o r
a b r a s i o n on gold coin d e p o s i t e d with t h e F e d e r a l r e s e r v e banks s i n c e
March 7?
3.
W i l l i t be n e c e s s a r y f o r t h e F e d e r a l r e s e r v e banks, e s -
p e c i a l l y t h o s e n o t equipped with e l e c t r i c weighing machines, t o det e r m i n e t h e amount of a b r a s i o n on g o l d c o i n b e f o r e shipment t o t h e
35
Honorable William II# Woo d i n
-2~
X-7635-b
T r e a s u r y , a m i n t , or a s s a y o f f i c e ?
4»
W i l l t h e T r e a s u r y a u t h o r i z e such F e d e r a l r e s e r v e banks
as f i n d i t d e s i r a b l e t o do so, t o s e g r e g a t e a p o r t i o n of t h e i r s t o c k
of gold c o i n , or gold c e r t i f i c a t e s , or b o t h , to be held i n j o i n t
custody by the banks and a g e n t s f o r account of t h e United S t a t e s
Treasurer?
5«
W i l l t h e F e d e r a l r e s e r v e banks be p e r m i t t e d t o c a n c e l
and s h i p t o t h e T r e a s u r y new and f i t gold c e r t i f i c a t e s i n denominat i o n s of $500 and over?
I n q u i r y has a l s o been made of t h e Board as t o t h e p o l i c y
which t h e T r e a s u r y w i l l f o l l o w i n c o n n e c t i o n w i t h t h e d i s p o s a l of
s t a n d a r d s i l v e r d o l l a r s held by F e d e r a l r e s e r v e banks i n e x c e s s of
t h e i r r e q u i r e m e n t s , and advice i s r e q u e s t e d as t o whether t h e Fede r a l r e s e r v e banks w i l l be p e r m i t t e d t o s h i p excess h o l d i n g s of
s t a n d a r d s i l v e r d o l l a r s t o t h e Treasury, a m i n t , or a s s a y o f f i c e ,
a t t h e T r e a s u r y ' s expense•
R e s p e c t f u l l y yours,
(Signed)
Chester M o r r i l l
Chester M o r r i l l ,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
X-7637
October 13, 1933
SUBJECT;
New Issue Treasury B i l l s
Dear S i r :
In connection with telegraphic transactions i n
Government s e c u r i t i e s between Federal reserve "banks, the
code word I'NOXESS" has been designated to cover a new
i s s u e of Treasury B i l l s , dated October 18, 1933, and
maturing January 17, 1934.
This word should be inserted i n the Federal
Reserve Telegraph Code book, following the supplemental
code word "HOXERT" on page 172.
Very truly yours,
J. C. IToell,
Assistant Secretary,
TO GOVERNORS OF ALL F. R. BAMS.
353
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
7638
T H E FEDERAL RESERVE BOARD
October 14, 1933.
SUBJECT:
Indebtedness of Officers and Employees.
Dear Sir:
Supplementing the Board's circular l e t t e r X-7425, dated April
29, 1933, regarding the above subject, the Board desires to point out
the d e s i r a b i l i t y of applying the principles set forth i n such l e t t e r
to the s e l e c t i o n of individuals for appointment to p o s i t i o n s on the
examining s t a f f s of the Federal reserve banks.
In view of the grow-
ing n e c e s s i t y for examiners of the Federal reserve banks t o conduct,
or p a r t i c i p a t e i n , examinations of norunombor banks i n connection with
applications for membership i n the Federal Reserve Systen or i n the
Federal Deposit Insurance Fund, or for other reasons, i t i s c l e a r l y
undesirable for employees, in the Federal reserve agent's departments
of the respective reserve banks, engaged in audits and examinations
to be indebted, d i r e c t l y or i n d i r e c t l y to any bank or banking i n s t i t u t i o n i n their respective Federal reserve d i s t r i c t s .
Attention i s c a l l e d
to the f a c t that the Board's circular l e t t e r X-7595, dated September 20,
1933, regarding "Appointment of Examiners at Federal Raserve Banks", r e quired that d e t a i l e d reports be made concerning persons recommended for
appointment including;
X~7638
2
!t
I n f o r m a t i o n as t o a p p l i c a n t ' s i n d e b t e d n e s s , i f any,
whether i n d e b t e d t o member banks, t h e i r s u b s i d i a r i e s or
a f f i l i a t e s , when indebtedness was c o n t r a c t e d , i t s o r i g i n a l
amount, p r o g r e s s made i n l i q u i d a t i o n , and whether, i f t e n dered appointment by the Federal r e s e r v e bank as an examiner,
t h e a p p l i c a n t w i l l r e s i g n any o f f i c i a l connection he may have
with o t h e r b u s i n e s s concerns and d i s c o n t i n u e any o t h e r exi s t i n g r e l a t i o n s h i p which may have an u n d e s i r a b l e e f f e c t
upon h i s s e r v i c e as an employee of the F e d e r a l r e s e r v e bank."
The Board f e e l s s t r o n g l y t h a t , i n c o n s i d e r i n g a p p l i c a n t s f o r
appointment t o p o s i t i o n s on t h e examining s t a f f s of t h e F e d e r a l r e s e r v e
banks, men should not be s e l e c t e d who a r e involved f i n a n c i a l l y , a r e
h e a v i l y i n debt or a r e indebted t o banking i n s t i t u t i o n s , p a r t i c u l a r l y
t o member banks•
Very t r u l y yours
Chester M o r r i l l ,
Secretary.
TO ALL F. R. AGENTS.
FEDERAL RESERVE BOARD
WASHINGTON
A D D R E S S OFFICIAL. C O R R E S P O N D E N C E T O
T H E FEDERAL RESERVE BOARD
X-7640
October 16, 1933.
SUBJECT:
Absorption of Abrasion Loss on
Gold Coin and Shipping Charges
on Gold Coin, Grcld B u l l i o n or
Gold C e r t i f i c a t e s .
Dear Sirs
There i s i n c l o s e d f o r your i n f o r m a t i o n a
copy of a t e l e g r a m addressed t o lor. W. W. Paddock,
Deputy Governor of t h e Federal Reserve Bank of Boston,
on October 14, 1933, with regard t o a b s o r p t i o n by
F e d e r a l r e s e r v e banks of a b r a s i o n l o s s on gold c o i n ,
and shipping charges on gold coin, gold b u l l i o n or
gold c e r t i f i c a t e s , d e l i v e r e d t o t h e F e d e r a l r e s e r v e
banks.
Very t r u l y yours,
Chester M o r r i l l ,
Secretary.
Inclosure.
TO
GOVERNORS OF ALL F. R. BANKS EXCEPT BOSTON.
COPY
X-7640-a
October 14, 1933.
Paddock - Boston
R e f e r r i n g your October 7 t e l e g r a m , S e c t i o n 6 of Executive
Order of A p r i l 5 provided t h a t t h e S e c r e t a r y of t h e T r e a s u r y would
i n a l l proper c a s e s pay t h e r e a s o n a b l e c o s t s of t r a n s p o r t a t i o n of
gold coin, gold b u l l i o n , or gold c e r t i f i c a t e s d e l i v e r e d t o a member
bank or F e d e r a l Reserve bank i n accordance w i t h S e c t i o n s 2, 3 or 5
of t h e Executive Order, i n c l u d i n g t h e c o s t of i n s u r a n c e , p r o t e c t i o n ,
and such o t h e r i n c i d e n t a l c o s t s as may be n e c e s s a r y , upon p r o d u c t i o n of s a t i s f a c t o r y evidence of such c o s t s .
This a u t h o r i z a t i o n ,
however, i s n o t c o n t a i n e d i n t h e Executive Order of August 28, Sect i o n 11 of which revokes t h e Executive Order of A p r i l 5 .
Board has
a l s o been a d v i s e d by T r e a s u r y t h a t i t w i l l not reimburse t h e F e d e r a l
Reserve banks f o r a b r a s i o n on gold c o i n beyond t h e u s u a l l i m i t of
tolerance.
In t h e c i r c u m s t a n c e s , t h e Board f e e l s t h a t t h e F e d e r a l
Reserve banks should no longer assume any a b r a s i o n l o s s on gold
c o i n d e p o s i t e d w i t h them or t e n d e r e d i n exchange f o r o t h e r forms of
c u r r e n c y o r any shipping charges on gold c o i n or gold b u l l i o n .
The
Board sees no o b j e c t i o n t o the Reserve banks assuming s h i p p i n g
charges on gold c e r t i f i c a t e s r e c e i v e d from member b a n k s .
(Signed)
Chester M o r r i l l
MORRILL
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7641
October 18, 1933.
SUBJECT:
New I s s u e of T r e a s u r y Bonds.
Dear S i r :
I n c o n n e c t i o n "with t e l e g r a p h i c t r a n s a c t i o n s b e tween F e d e r a l r e s e r v e banks covering Government s e c u r i t i e s ,
t h e f o l l o w i n g code word has been d e s i g n a t e d t o cover a
new i s s u e of Treasury Bonds:
"NOWCEDILLA" T r e a s u r y Bonds of
October 15, 1933,
1945, b e a r i n g : 4 ^ 5
October 15, 1934,
1943-45, d a t e d
due October 15,
interest to
3^2 t h e r e a f t e r .
This code word should be i n s e r t e d i n t h e Federal
Reserve T e l e g r a p h i c Code book f o l l o w i n g t h e supplemental
code word "NOWCEDED" on page 172•
http://fraser.stlouisfed.org/
T O
m
Federal Reserve Bank of St. Louis
Very t r u l y y o u r s ,
Assistant Secretary
v R s m s s
n ?
AT.T.
P
P
r a t c k s
357
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7642
October 19, 1953
Deaf S i r i
There i s a t t a c h e d h e r e t o , f o r your i n f o r m a t i o n , copy of a l e t t e r addressed by t h e
F e d e r a l Reserve Board t o counsel f o r a h o l d i n g
company a f f i l i a t e i n c o n n e c t i o n w i t h the subm i s s i o n of i t s a p p l i c a t i o n f o r a v o t i n g p e r m i t .
Very t r u l y y o u r s ,
hr)o-iA^
Chester M o r r i l l ,
Secretary.
Inclosures.
TO ALL F. R. AGENTS
858
COPY
X-7642-a
*
October 17, 19 33#
Mr.
,
Dear S i r :
R e c e i p t i s acknowledged of your l e t t e r of September 29,
1933, i n -which you r e q u e s t t o be advised ( l ) whether
may f i l e E x h i b i t s " I " and "J" on p h o t o s t a t paper 6" x 911 i n s t e a d of
8" x lOg-", and ( 2 ) whether i t i s n e c e s s a r y f o r i t t o f i l e w i t h t h e
F e d e r a l r e s e r v e agent of each d i s t r i c t i n which a s u b s i d i a r y member
bank i s l o c a t e d ( o t h e r t h a n t h e d i s t r i c t i n which t h e a p p l i c a n t 1 s
p r i n c i p a l o f f i c e i s s i t u a t e d ) , a complete copy of t h e o r i g i n a l a p p l i c a t i o n , i n c l u d i n g a l l e x h i b i t s , or whether r e p o r t s of examinations
c a l l e d f o r under E x h i b i t "111 may be omitted i n f i l i n g c o p i e s of the
a p p l i c a t i o n w i t h t h e Federal r e s e r v e a g e n t s of d i s t r i c t s o t h e r t h a n
t h a t i n which t h e a p p l i c a n t ' s p r i n c i p a l o f f i c e i s l o c a t e d .
In r e g a r d t o your f i r s t q u e s t i o n , t h e r e i s i n c l o s e d h e r e w i t h
a copy of t h e B o a r d ' s l e t t e r of October 6, 1933, t o Mr•
F e d e r a l Reserve Agent a t
,
, which r e l a t e s t o t h e s u b j e c t
of your i n q u i r y and which i s s e l f - e x p l a n a t o r y #
R e f e r r i n g t o your second q u e s t i o n , t h e o r i g i n a l and two executed c o u n t e r p a r t s of each a p p l i c a t i o n f o r a v o t i n g p e r m i t , i n c l u d i n g
a l l e x h i b i t s , must be s e n t t o the F e d e r a l r e s e r v e agent of t h e d i s t r i c t
i n which t h e a p p l i c a n t ' s p r i n c i p a l o f f i c e i s l o c a t e d , and t h e Board's
R e g u l a t i o n P contemplates t h a t a copy of each such a p p l i c a t i o n , i n c l u d ing e x h i b i t s , w i l l be f i l e d w i t h the F e d e r a l r e s e r v e a g e n t of each
*
% o
-2-
X-7642—a
o t h e r d i s t r i c t i n which a s u b s i d i a r y member bank i s l o c a t e d .
However,
i n view of t h e numerous e x h i b i t s which an a p p l i c a n t h o l d i n g company
a f f i l i a t e of a l a r g e number of s u b s i d i a r y member banks and s u b s i d i a r y
nonmember banks must f u r n i s h w i t h i t s a p p l i c a t i o n , t h e Board w i l l not
r e q u i r e t h e f i l i n g w i t h the Federal r e s e r v e a g e n t of each d i s t r i c t i n
which a s u b s i d i a r y member bank i s l o c a t e d ( o t h e r t h a n the d i s t r i c t i n
which t h e a p p l i c a n t ' s p r i n c i p a l o f f i c e i s l o c a t e d ) of a copy of each
and e v e r y e x h i b i t a t t a c h e d t o any such a p p l i c a t i o n .
I n any such c a s e ,
t h e Board w i l l deem i t s u f f i c i e n t i f t h e a p p l i c a n t sends t h e o r i g i n a l
and two executed c o u n t e r p a r t s of t h e a p p l i c a t i o n , w i t h a l l e x h i b i t s ,
t o t h e F e d e r a l r e s e r v e a g e n t of t h e d i s t r i c t i n which t h e a p p l i c a n t T s
p r i n c i p a l o f f i c e i s l o c a t e d , and f i l e s wi t h t h e F e d e r a l r e s e r v e agent
of each o t h e r d i s t r i c t i n which a s u b s i d i a r y member bank i s . l o c a t e d
a copy of t h e a p p l i c a t i o n on F.R.B. Form P - l , t o g e t h e r w i t h such exh i b i t s as may be n e c e s s a r y t o d i s c l o s e f u l l y the r e l a t i o n s between t h e
a p p l i c a n t and t h e banks i n t h e d i s t r i c t i n which such copy of t h e app l i c a t i o n i s f i l e d and t o enable t h e F e d e r a l r e s e r v e agent of t h a t
d i s t r i c t t o determine t h e e f f e c t of such r e l a t i o n s upon t h e a f f a i r s of
such b a n k s .
Accordingly, i t would seem t h a t t h e
should
f i l e w i t h each copy of t h e a p p l i c a t i o n f i l e d i n any d i s t r i c t o t h e r
t h a n t h a t i n which the a p p l i c a n t ' s p r i n c i p a l o f f i c e i s l o c a t e d t h e
r e p o r t s of examinations c a l l e d f o r by E x h i b i t I which c o n t a i n i n f o r mation p e r t a i n i n g t o t h e s u b s i d i a r y member banks l o c a t e d i n t h e d i s t r i c t i n which such copy i s f i l e d .
8
-3-
X-7642-a
I t i s understood t h a t t h e a p p l i c a n t w i l l f u r n i s h t o any such
a g e n t , upon r e q u e s t t h e r e f o r , any o t h e r i n f o r m a t i o n which i s r e q u i r e d
under P.R.B. Form P - l t o be submitted with t h e o r i g i n a l a p p l i c a t i o n .
Very t r u l y y o u r s ,
(Signed)
Chester M o r r i l l
Chester M o r r i l l ,
Secretary#
Inclosure.
X-7642-b
COPY
October 6, 1933.
Mr.
F e d e r a l Reserve Agent,
F e d e r a l Reserve Bank of
Dear Mr.
Mr*
for the
, counsel a t
9
has s u b m i t t e d t h e r e q u e s t of t h e c o r p o r a t i o n f o r p e r m i s s i o n t o submit t h e c o p i e s of r e p o r t s of examinations c a l l e d f o r as E x h i b i t s I
and J t o accompany a p p l i c a t i o n s f o r v o t i n g p e r m i t s as p h o t o s t a t
c o p i e s on paper s i x i n c h e s by n i n e i n c h e s , i n s t e a d of on p a p e r e i g h t
i n c h e s by t e n and one-half i n c h e s .
The n o t a t i o n on F.R.B. Form P - l s t a t e s t h a t i n so f a r as
p r a c t i c a b l e , a l l e x h i b i t s should be f u r n i s h e d on s h e e t s of t h e same
s i z e as t h e pages of t h e a p p l i c a t i o n form.
Such r e q u e s t , however,
was not meant t o a p p l y t o r e p o r t s of examination, as i t was contemp l a t e d t h a t a c t u a l c o p i e s of such r e p o r t s would be s u b m i t t e d .
While t h e reduced p h o t o s t a t form s u b m i t t e d by Mr.
as a sample i s l e g i b l e , i t i s q u e s t i o n a b l e whether o t h e r pages of t h e
r e p o r t c o n t a i n i n g more p r i n t e d m a t t e r and f i g u r e s more c l o s e l y spaced
could be r e a d w i t h o u t e f f o r t .
Inasmuch as t h e s e e x h i b i t s must be
reviewed by your o f f i c e , i t i s suggested t h a t you d i s c u s s t h e m a t t e r
w i t h t h e o f f i c i a l s of t h e
and s a t i s f y y o u r s e l f t h a t t h e
e x h i b i t s as s u b m i t t e d w i l l be f u l l y l e g i b l e .
I t i s not t h e d e s i r e
t o impose any u n n e c e s s a r y expense upon an a p p l i c a n t i n t h e p r e p a r a t i o n of t h e s e e x h i b i t s , b u t i t i s e s s e n t i a l , of c o u r s e , t h a t a l l
-2-
X-7642-b
:
3
e x h i b i t s submitted be f u l l y l e g i b l e and i n a form which can be r e a d
w i t h o u t undue s t r a i n .
Very t r u l y y o u r s ,
(Signed)
Chester M o r r i l l
Chester M o r r i l l ,
Secretary.
FEDERAL RESERVE BOARD
8^
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7643
STATEMENT OF BUREAU OF ENGRAVING AND PRINTING
FOR FURNISHING FEDERAL RESERVE BANK NOTES (NATIONAL CURRENCY)
SERIES 1929.
September 1-2&, 1933*
$5
New York* * * * .
-
Cleveland*, . . .
91,000
Chicago,....
80,000
*
171,000
$10
$20
Total
Sheets
Amount
87,000
44,000
131,000
#12,314*00
64,000
*?
155,000
14,570,00
V
38,000
118,000
11,092,00
151,000
82,000
404,000
$37,976.00
.
404,000 sheets, @ $94*00 per :M,
$37,976*00
FEDERAL RESERVE BOARD
365
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7644
STATEMENT OF BUREAU OF ENGRAVING AND PRINTING
FOR FURNISHING FEDERAL RESERVE NOTES
SERIES 1928, SEPTEMBER 1-26, 1933,
|5
Boston, * . . .
Philadelphia,.
Richmond,. . .
Atlanta, . . .
St. Louis, . .
Minneapolis, .
Kansas City, .
Dallas, . . .
San Francisco,
.
.
•
•
.
.
.
.
•
m
50,000
15,000
$10
$20
35,000
45,000
15,000
10,000
15,000
10,000
10,000
10,000
15,000
10,000
-
-
10,000
10,000
15,000
10,000
15,000
10,000
85,000
150,000
85,000
-
10,000
-
-
Total
Sheets
Amount
45,000
60,000
25,000
60,000
30,000
25,000
30,000
15,000
30,000
$3,982.50
5,310.00
2,212.50
5,310.00
2,655.00
2,212.50
2,655.00
1,327.50
2,655.00
320,000
$28,320.00
320,000 sheets, @ $88.50 per M, . .$28,320.00
X-7645
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For immediate r e l e a s e .
October 19, 1933*
The F e d e r a l Reserve Board announces t h a t
t h e Federal Reserve Bank of New York has e s t a b l i s h e d
a r e d i s c o u n t r a t e of 2 per cent e f f e c t i v e October 20,
1933.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7646
October 20, 1933
SUBJECT:
Hew Issue Treasury B i l l s .
Dear Sir:
In connection with telegraphic transactions i n Government s e c u r i t i e s "between Federal reserve banks, the code
word 11NOXETER" has been designated to cover a new issue of
Treasury B i l l s , dated October 25, 1933, and maturing January 24, 1934.
This word should be inserted in the Federal Reserve
Telegraph Code book, following the supplemental code word
"NOXESS" on page 172.
Very truly yours
J*. C. Noell
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
X-7647
t.s6S
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For r e l e a s e at 3:00 p. m.
October 20, 1933.
The Federal Reserve Board announces that the Federal
Reserve Bank of Cleveland has e s t a b l i s h e d a rediscount r a t e of
2 1/256, e f f e c t i v e October 21, 1933.
X-7648
36
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For r e l e a s e at 3:00 p.m.
October 20, 1933.
The Federal Reserve Board announces that the Federal
Reserve Bank of Chicago has established a rediscount rate of
2 1/2JJ, e f f e c t i v e October 21, 1933.
FEDERAL RESERVE BOARD
X-7649
WASHINGTON
October 21, 1933
ADDRESS OFFICIAL CORRESPONDENCE TO
T H E FEDERAL RESERVE BOARD
SUBJECT:
Holidays during November, 1933.
Dear Sir:
The Federal Reserve Board i s advised that the following Federal reserve "banks and "branches w i l l observe holidays during November:
Wednesday, Nov. 1
New Orleans
All Saints' Day
Tuesday,
New York
Buffalo
Philadelphia
Cleveland *
Cincinnati *
Pittsburgh
Richmond
Election Day
Nov. 7
*Will close 1:00 P.M. - E.S.T.
Will participate i n Clearings.
On Saturday, November 11, i n observance of Armistice Day,
and on Thursday, November 30, Thanksgiving Day, there w i l l be
neither t r a n s i t nor Federal reserve note clearing and the books of
the Board's Gold Settlement Fund w i l l be closed.
The o f f i c e s of the
Board and the Federal Reserve Bank of New York and i t s Buffalo Branch
w i l l be open for business on Saturday, November 11.
Please n o t i f y Branches.
TO GOVERNORS
Very truly yours
<J. C • Noell,
Assistant Secretary.
OF ALL F. R. BANKS.
X-7650
FEDERAL RESERVE BOARD
3 %
COMMITTED APPOIIITlvIMTS EFFECTIVE OCTOBER 26, 1933.
(The Governor i s e x - o f f i c i o a member of each Committee)
LAW:
Mr. Hamlin, Chairman
Mr. Miller
EXAMIM.T I PIT S;
Mr. Thomas, Chairman
Mr. James
RESEARCH AMD STATISTICS:
Mr. M i l l e r , Cliairman
Mr. Hamlin
SALARIES Aim EXPENDITURES OF
FEDERAL RESERVE BAMS:
Mr. James, Chairman
Mr. Szymczak
DISTRICT COMMITTEES:
Boston:
Mr. Hamlin, Chairman
Mr. James
Hew York:
Mr. M i l l e r , Chairman
Mr. Hamlin
Philadelphia:
Mr. Hamli n, Chai rman
Mr. Thomas
Cleveland:
Mr. Szymczak, Chairman
Mr. H i l l e r
Richmond:
Mr. Hamlin, Chairman
Mr. Szymczak
Atlanta:
Mr. J amies , Chairman
Mr. Hamlin
Chicago:
Mr. Szymczak, Chairman
Mr. K i l l e r
St. Louis:
Mr. James, Chairman
Mr. Szymczak
Minneapolis:
Mr. Thomas, Chairman
Mr. Miller
Kansas City:
Mr. Thomas , Chairman
Mr. James
Dallas:
Mr. James, Chairman
Mr. Thomas
San Francisco:
Mr. M i l l e r , Chairman
Mr. Szymczak
O / Av
X-?650-a
FEDERAL DESERVE BOAED
INDIVIDUAL APPOnTTlffillTS TO DISTRICT COMMITTEES
EFFECTIVE OCTOBER 1 7 ,
1933
(The Governor i s e x - o f f i c i o a member of each Committee)
MR. HAMLIN:
Chairman:
Member:
Boston
Philadelphia
Richmond
New York
Atlanta
MR. MILLER:
Hew York
San Francisco
Cleveland
Chicago
Minneapolis
MR. JAMBS:
Atlanta
St. Louis
Dallas
Boston
Kansas City
MR. THOMAS:
Minneapolis
Kansas City
Philadelphia
Dallas
MR. SZYMCZAK:
Cleveland
Chicago
Richmond
St. Louis
San Francisco
373
FEDERAL RESERVE BOARD
WASHINGTON
X-7651
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
October 23, 1933
SUBJECT:
Forms of Time C e r t i f i c a t e s of D e p o s i t .
Dear S i r :
Counsel f o r one of the F e d e r a l r e s e r v e banks r e c e n t l y s u b m i t t e d t o t h e F e d e r a l Reserve Board s e v e r a l forms w i t h t h e r e q u e s t t h a t
he be a d v i s e d whether t h e y conform to the r e q u i r e m e n t s of R e g u l a t i o n %
w i t h r e s p e c t t o time c e r t i f i c a t e s of d e p o s i t .
Upon c o n s i d e r a t i o n of t h e
m a t t e r , t h e Board a d v i s e d t h a t t h e forms s u b m i t t e d , w i t h c e r t a i n s u g g e s t ed changes, would appear t o comply w i t h t h e d e f i n i t i o n of time c e r t i f i c a t e s of d e p o s i t c o n t a i n e d i n the B o a r d ' s R e g u l a t i o n Q, and t h e r e i s i n c l o s e d h e r e w i t h , f o r your i n f o r m a t i o n , a copy of each of t h e forms as
m o d i f i e d i n t h e manner suggested by t h e Board.
No p a r t i c u l a r form of
time c e r t i f i c a t e of d e p o s i t i s r e q u i r e d , however, and a d e p o s i t evidenced
by any form which complies i n a l l r e s p e c t s w i t h t h e d e f i n i t i o n of time
c e r t i f i c a t e s of d e p o s i t s e t f o r t h i n R e g u l a t i o n Q, may, of c o u r s e , be t r e a t ed as a time d e p o s i t f o r t h e purposes of t h e r e g u l a t i o n .
Very t r u l y y o u r s ,
Inclosures
TO ALL FEDERAL
Chester M o r r i l l
Secretary.
RESERVE AGENTS EXCEPT CLEVELAND
X-7651-a
(Form Ho. l )
THE FIRST NATIONAL BANK OF
Place
Number
(Date)
;
h a s d e p o s i t e d not s u b j e c t t o
check
D o l l a r s ($
)
payable t o t h e o r d e r of
i n c u r r e n t f u n d s on
19
, upon
(not l e s s t h a n 30 days hence)
.surrender of t h i s c e r t i f i c a t e p r o p e r l y i n d o r s e d , w i t h i n t e r e s t a t
t h e r a t e of 3% p e r annum from d a t e t o m a t u r i t y o n l y .
(Cashier)
375
X-7651-Td
(Form Ho. 2)
THE FIRST NATIONAL BANK OF
Place
Number
(Date)
has d e p o s i t e d not s u b j e c t t o check
D o l l a r s ($
)
payable to the order of
in current funds
(Not l e s s than 30 days)
a f t e r d a t e , upon
s u r r e n d e r of t h i s c e r t i f i c a t e p r o p e r l y i n d o r s e d , w i t h i n t e r e s t a t t h e
r a t e of 3fo per annum from d a t e t o m a t u r i t y o n l y .
(Cashier)
X-7651-C
(Form Ho. 3)
THE FIRST NATIONAL BAH OF
Place _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Number
(Date)
h a s d e p o s i t e d not s u b j e c t t o check
D o l l a r s ($
p a y a b l e t o t h e o r d e r of
)
_____________
i n c u r r e n t f u n d s _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ days a f t e r n o t i c e i n
(Not l e s s t h a n 30 days)
w r i t i n g of i n t e n d e d w i t h d r a w a l s h a l l have b e e n g i v e n t o t h e bank and
upon s u r r e n d e r of t h i s c e r t i f i c a t e p r o p e r l y i n d o r s e d , w i t h i n t e r e s t
as h e r e i n provided.
I n t e r e s t p a y a b l e f o r f u l l months o n l y a t
p e r annum i f l e f t
or
$ i f l e f t more t h a n
(days o r months)
(days or months)
.
No i n t e r e s t a f t e r e x p i r a t i o n of n o t i c e of
withdrawal.
(Cashier)
$
X-7651-d
(Form Ho. 4)
THE FIRST NATIONAL BAH OF
P l a c e _______________________
Number
(Date)
,
has d e p o s i t e d not s u b j e c t t o check
D o l l a r s ($
)
payable t o t h e o r d e r of
i n c u r r e n t f u n d s only upon t h e e x p i r a t i o n of a p e r i o d of
•
(Not l e s s t h a n 30 days)
days a f t e r n o t i c e i n w r i t i n g of i n t e n d e d
withdrawal s h a l l have been g i v e n t o t h e bank and upon s u r r e n d e r of
t h i s c e r t i f i c a t e p r o p e r l y i n d o r s e d , w i t h i n t e r e s t as h e r e i n p r o vided.
I n t e r e s t payable f o r f u l l months only a t
annum i f l e f t
(days or months)
(days or months)
.
or
$ per
i f l e f t more t h a n
No i n t e r e s t a f t e r e x p i r a t i o n of n o t i c e of
withdrawal.
(Cashier)
X-7652
INTERPRETATION OF BANKING- ACT OF 1933.
Copies to "be sent to a l l Federal reserve "banks.
October 20, 1933.
Mr. M. L. McClure,
Federal Reserve Agent,
Federal Reserve Bank of Kansas City,
Kansas City, Missouri.
Dear Mr. McClure:
Receipt i s acknowledged of your l e t t e r of September 21, 1933,
i n which you requested advice as to whether an e x i s t i n g State "bank with
a capital of $25,000 which moves i t s l o c a t i o n to another town having a
population of 3,000 or l e s s inhabitants w i l l "be e l i g i b l e for admission
to membership i n the Federal Reserve System.
You c a l l e d a t t e n t i o n to the
Board's ruling of July 22, 1933, (X-7521), to the e f f e c t that under the
provisions of the Banking Act of 1933 a State bank organized on or a f t e r
June 16, 1933, i n a place with a population of 3,000 or l e s s inhabitants
with a capital of not l e s s than $25,000 i s e l i g i b l e for admission to membership i n the Federal Reserve System i f i t i s at the time e n t i t l e d to
the b e n e f i t s of insurance under Section 12B of the Federal Reserve Act.
In the circumstances, you are advised that an e x i s t i n g State
bank with a capital of not l e s s than $25,000 and located i n a town of
not exceeding 3,000 inhabitants w i l l be e l i g i b l e for admission to membership i n the Federal Reserve System a f t e r i t s removal t o another town
having a population of not exceeding 3,000 inhabitants, i f the removal
was authorized by and i n accordance with the law of the State, provided,
of course, that the bank complies with a l l other requirements for admission to membership.
If such a bank should decide to apply f o r membership
X-7652
-
2 -
i n the System while not e n t i t l e d to the b e n e f i t s of insurance -under Sect i o n 12B of the Federal Reserve Act, i t should arrange to furnish to the
Board a copy of an opinion of the Attorney General of the State, or other
State authority having j u r i s d i c t i o n of the matter, with respect to the
question whether i t was "organized" at the time of removal or at a date
prior thereto.
In any such case, the Board would also wish to "be f u l l y
informed as to the f a c t s regarding the removal with particular reference
to the question whether i t was i n contemplation of an application for membership, or for the purpose of evading the requirement that a new State
bank situated i n a town of 3,000 inhabitants or l e s s upon becoming a member of the Federal Reserve System must be e n t i t l e d to the b e n e f i t s of
insurance at the time of admission to membership unless i t has a capital
of at l e a s t $50,000.
In connection with the l a s t paragraph of your l e t t e r , the Compt r o l l e r of the Currency has been requested to advise you as to the p o s i t i o n of h i s o f f i c e with regard to the removal of a national bank to
another town.
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
X-7653
INTERPRETATION OF BANKING ACT OF 1933.
Copies to be sent to a l l Federal reserve tajiks.
October 21, 1933.
Mr.
,
,
»
•
«
Dear Sir:
Reference i s made to your l e t t e r of October 7, 1933, to Mr. ____
.
It i s understood that your bank has a branch established prior to
February 25, 1927, located beyond the l i m i t s of
the head o f f i c e of The
,
, where
Bank and Trust Company i s situated, and that
you desire to be advised whether, i f such branch i s now removed to another
town, i t w i l l i n any way a f f e c t the e l i g i b i l i t y of The
Trust Company of
,
Bank and
, for membership i n the Federal Reserve
System.
Under the provisions of Section 9 of the Federal Reserve Act, a
State bank may not r e t a i n or acquire stock i n a Federal Reserve bank except
upon the relinquishment of any branch or branches established a f t e r February
25, 1927, beyond the l i m i t s of the c i t y , town or v i l l a g e i n which the parent
bank i s situated, unless any such branch i s established and operated on the
same terms and conditions and subject to the same l i m i t a t i o n s and r e s t r i c t i o n s as are applicable to the establishment of branches by national banks.
The Federal Reserve Board has ruled that a removal of a branch from one town
to another i n which the parent bank had no branch c o n s t i t u t e s the e s t a b l i s h ment of a branch within the meaning of section 9 of the Federal Reserve Act.
Accordingly, i f your bank should at t h i s time remove i t s branch from one
town to another i n which i t has no branch, i t would r e s u l t i n the e s t a b l i s h
X-7653
g
8 1
— 2 ••
ment of a branch i n the town to which i t i s removed, and unless such "branch
should "be established and operated on the same terms and conditions and subj e c t to the same l i m i t a t i o n s and r e s t r i c t i o n s as are applicable to the establishment of "branches by national banks, the bank would not be e l i g i b l e for
admission to membership i n the Federal Reserve System so long as i t retained
and operated the same.
There i s inclosed for your information a copy of the Federal Reserve Act, and i n s e c t i o n 9 thereof you w i l l f i n d the provisions of law with
regard to branches of State member banks.
If you desire any further i n f o r -
mation i n t h i s matter i t i s suggested that you communicate with the Federal
Reserve Agent of the Federal Reserve Bank of
and he w i l l be glad
to advise you.
Very t r u l y yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
Inclosure.
FEDERAL RESERVE BOARD
^
WASHINGTON
address official correspondence t o
the federal reserve board
X-7655
October 26, 1933.
SUBJECT:
Regulation L and Forms Pertaining t o
Interlocking Directorates and Other
Relationships under Sections 8 and 8A
of the Clayton Antitrust Act, as
Amended.
Dear Sir:
There are inclosed s i x s e t s of mimeographed copies of the
Board's Regulation L and of the Board's Forms 94, 94a, and 94b,
pertaining t o the provisions of sections 8 and 8A of the Clayton
Antitrust Act, as amended.
The regulation and forms have been approved by the Federal
Reserve Board, e f f e c t i v e November 1, 1933.
O f f i c i a l copies of the regulation
and forms w i l l be
printed here; but, in view of the large number of applications
which probably w i l l have to be acted upon before the middle of
next January, and i n order to avoid delay, i t i s requested that
you have printed l o c a l l y enough copies of the regulation
and
forms to supply your immediate needs and that you make them a v a i l able as soon as possible t o your member banks and t o the o f f i c e r s ,
directors, and employees thereof desiring t o f i l e a p p l i c a t i o n s .
In having the regulation and forms printed, please exerc i s e the greatest care t o see that the t e x t of the copies inclosed
X-7655
-2-
herewith i s foilowed e x a c t l y .
Please have the forms printed on
sheets of exactly the same s i z e as forms 94, 94a, and 94b heretofore in use and have the printer f o l l o w the typographical s t y l e
of those forms as c l o s e l y as p o s s i b l e .
Instead of having the
forms printed on both sides of the page, however, please have
them printed on only one side of the page and please have each
page on a separate sheet, as was done i n the case of the forms
for use i n connection with applications for voting permits pursuant t o Regulation P.
On Form 94a, please have the complete form
f o r the bank's statement of condition printed on the f i r s t page
with the a s s e t s and l i a b i l i t i e s i n p a r a l l e l columns, i f p r a c t i c able .
If several Federal reserve banks desire to j o i n together
i n having t h i s printing done, the Board w i l l o f f e r no objection.
Very truly yours,
YY~)
Chester Morrill
Secretary.
Inclosures
http://fraser.stlouisfed.org/TO ALL
Federal Reserve Bank of St. Louis
FEDERAL RESERVE AGENTS.
X-7656
INTERPRETATION OF BANKING ACT OF 1933.
Copies to "be sent to a l l Federal reserve "banks.
October 24, 1933.
The _______ National Bank,
«
«
Dear Sir:
Reference i s made to your l e t t e r of October 9, 1933,
requesting an interpretation of Section I I I ( e ) of the Federal
Reserve Board's Regulation Q,, regarding payment of i n t e r e s t on
time deposits a f t e r maturity.
The Federal Reserve Board i s of the opinion that a
member "bank may not lawfully pay i n t e r e s t for the period i n t e r vening "between the maturity date of a c e r t i f i c a t e of deposit and
the date on which a renewal c e r t i f i c a t e of deposit i s actually
issued, even though such renewal c e r t i f i c a t e i s dated "back to
the date of maturity of the original c e r t i f i c a t e .
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
/
X-7667
October 27, 1933.
SUBJECT $ Regulation R and Forms Pertaining t o
Relationships with Dealers in S e c u r i t i e s
under Section 32 of the Banking Act of
1933.
Dear Sir:
There are inclosed s i x s e t s of mimeographed copies of the
Board's Regulation R and the Board's Forms 99a t o 99g, i n c l u s i v e ,
pertaining to the provisions of Section 32 of the Banking Act of
1933.
The regulation and forms have been approved by the Federal Reserve Board, e f f e c t i v e November 1, 1933*
O f f i c i a l copies of the regulation and forms w i l l be
printed here; but, in view of the shortness of the time remaining
before January 1# 1934, the e f f e c t i v e date of Section 32, and i n
order to avoid delay, i t i s requested that you have printed l o c a l l y enough copies of the regulation and forms to supply your immedi
ate needs and that you make them available as soon as possible t o
your member banks and t o others desiring t o f i l e a p p l i c a t i o n s .
In having the regulation and forms printed, please exerc i s e the greatest care to see that the t e x t of the copies inclosed
herewith i s followed e x a c t l y .
Please have the forms printed on
"2—
X-7657
sheets of e x a c t l y the S&lne s i z e as the Board's Forms 94, 94a, and
94b (pertaining t o the Clayton Act), heretofore i n use, and have
the printer f o l l o w the typographical s t y l e of those forms as c l o s e l y
as p o s s i b l e .
Instead of having the forms printed on both sides of
the page, however, please have them printed on only one s i d e of the
page and please have each page on a separate s h e e t , as was done i n
the case of the forms for use in connection with a p p l i c a t i o n s for
voting permits pursuant t o Regulation P.
On Forms 99b and 99c,
please have the complete form f o r the statement of condition printed
on the f i r s t page with che a s s e t s and l i a b i l i t i e s i n p a r a l l e l columns
if practicable.
If several Federal reserve banks desire t o j o i n together
i n having t h i s printing done, the Board w i l l o f f e r no o b j e c t i o n .
Very t r u l y yours,
Chester Morrill,
Secretary*
Inclosures.
http://fraser.stlouisfed.org/
TO ALL FEDERAL
Federal Reserve Bank of St. Louis
RESERVE AGENTS
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7658
October 27, 1933.
SUBJECT: New Issue Treasury B i l l s .
Dear Sir:
In connection with telegraphic transactions i n
Government s e c u r i t i e s "between Federal reserve banks, the
code word "NOXETO" has been designated to cover a new
i s s u e »f Treasury B i l l s , dated November 1, 1933, and
maturing January 31, 1934.
This word should be inserted i n the Federal Reserve Telegraph Code book, following the supplemental
code word "NOXETER" on page 172.
Very truly yours,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
388
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7659
October 27, 1933.
Dear Sir:
There i s inclosed for your information, i n the
event that a case involving comparable circumstances a r i s e s
in your d i s t r i c t , a copy of a l e t t e r the Federal Reserve
Board has addressed to one of the Federal reserve agents
with regard to an application for membership in the Federal
Reserve System by a bank reorganized under a State statute
which provided that the plan of reorganization should be
binding upon a l l depositors and creditors of the bank upon
the consent of owners of a prescribed part of the claims of
depositors and other creditors against the bank having been
obtained.
Very t r u l y yours,
Chester Morrill,
Secretary.
Inclosure.
TO ALL
FEDERAL RESERVE AGENTS
X-7659'a
COPY
October 24, 1933.
Mr.
,
Federal Reserve Agent,
Federal Reserve Bank of
Dear Mr.
,
:
This i s to advise you that the Federal Reserve Board has
approved the application of the
, _____________ f o r
membership in the Federal Reserve System subject to the conditions
contained i n the inclosed l e t t e r -which you are requested t o f o r ward t o the board of directors of that i n s t i t u t i o n .
Two copies
are also inclosed, one of which i s f o r your f i l e s and the other of
which you are requested t o forward to the Commissioner of Banks of
____________ f o r his information.
The Board has given very careful consideration t o the quest i o n s regarding the v a l i d i t y of the plan of reorganization of the
___________ Bank
, and the v a l i d i t y of the statute
under which such reorganization was e f f e c t e d .
In view of your
recommendations i n t h i s case, the f a c t that the bank has been r e opened for considerable period of time without any question being
raised with regard t o the v a l i d i t y of the plan of reorganization
and since the Board understands, i n view of a l l the circumstances
involved, that i t i s improbable that any question w i l l be raised
i n t h i s case, the Board f e l t that i t could properly approve the app l i c a t i o n of the
Bank of ______________ for membership.
However, you are requested, in each case where a bank has been
X-7659-a
reorganized under the statute under which the reorganization of
the
Bank was e f f e c t e d and applies f o r membership, t o
give p a r t i c u l a r l y careful consideration to the circumstances under
which the reorganization was e f f e c t e d , the public reception of the
reopening of the bank, whether any question has been raised as to
the v a l i d i t y of the reorganization and whether in view of a l l the
circumstances involved i t appears probable that any such question
w i l l be raised, and advise the Board i n d e t a i l i n each such case.
If i n any case you should f i n d that i t appears probable t h a t quest i o n s m i l be raised with regard to the v a l i d i t y of the organizat i o n , you should give consideration t o the a d v i s a b i l i t y of deferring
submission of the application f o r the Board's consideration u n t i l
such time has elapsed as w i l l eliminate the probability of a quest i o n being r a i s e d .
In t h i s connection your a t t e n t i o n i s called to
the Board's l e t t e r of August 21, 1933, (X-7556), which contains the
Board's views with regard t o comparable circumstances.
Very t r u l y yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
Inclosures.
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.
FEDERAL RESERVE BOARD
3 9 3
WASHINGTON
address official correspondence t o
the federal reserve board
X-7661
October 28, 1933.
SUBJECT;
Expense, Main Lines, Leased Wire
System, September, 1933.
Dear Sir:
Inclosed herewith you w i l l f i n d two mimeographed
statements, X-7661-a and X-7661-b, covering i n d e t a i l operations of the main l i n e s , Leased Wire System, during the
month of September, 1933.
Please credit the amount payable by your bank for
your share of the expense of the Leased Wire System, to the
Federal Reserve Bank of Richmond i n your d a i l y statement of
c r e d i t s through the Gold Settlement Fund for the account of
the Federal Reserve Board, and advise the Federal Reserve
Bank of Richmond by wire the amount and purpose of the c r e d i t .
Very truly yours,
Fiscal Agent.
Inclosures.
TO GOVERNORS OF ALL FEDERAL RESERVE BAMS.
x-?66l-a
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINES
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF SEPTEMBER, 1933.
Business
reported
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total
33,927
148,135
34,132
54,864
57,000
51,953
88,821
63,993
36,176
75,852
65,374
93,460
803,687
F. R. Board business
Words sent by
New York chargeable t o other
F. R. Banks ( l )
2,299
-
2,232
2,188
2,067
2,312
2,939
2,388
2,126
2,191
3,549
3,689
27,980
. . . . . . .
Net Federal
reserve
bank
business
Percent of t o t a l
bank business (*)
36,226
148,135
36,364
57,052
59,067
54,265
91,760
66,381
38,302
78,043
68,923
97,149
831,667 '
4.36
17.81
4-37
6.86
7.10
6.53
11.03
7.98
4.61
9.38
8.29
11.68
100.00
. 327,245
Reimbursable business Incoming and Outgoing
Total words transmitted over main l i n e s
(*)
These percentages used in c a l c u l a t i n g the pro rata share of l e a s e d wire expense as shown
on the accompanying statement (X-766l-b).
(l)
Number of words sent by New York to other F. R. Banks f o r t h e i r s o l e benefit charged to
banks indicated in accordance with a c t i o n taken at Governors' Conference
November 2-U, 1925.
1,158,912
439,435
i,598,3%7
CD
X-766l-b
REPORT 01 EXPENSE MAIN LIMES
FEDERAL RESERVE LEASED WIRE SYSTEM, SEPTEMBER, 1933.
Name of Bank
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco
^Federal Reserve Board
Total
Operators'
salaries
Operators'
overtime
$260.00
1,284.14
225.00
306.66
226.00
270.00
3 , 9 1 5 . 6 4 (#)
195.00
226.24
287.00
251.00
380.00
$7,826.68
$2.00
1.00
Wire
rental
-
-
230.00
-
-
1.00
-
-
—
-
-
-
-
-
-
-
-
—
15,578.97
$15,808.97
Main l i n e r e n t a l , Richmond-Washington.
Includes s a l a r i e s of Washington operators.
Credit.
Amount reimbursable to Chicago.
$262.00
1,285.14
225.00
380.00
456.00
270.00
3,916.64
195.00
226.24
287.00
251.00
38O.OO
15,576.97
$23,639.65
$17,140.38
$8,060.68
1,285.14
225.00
-
-
Credits
$747.32
3,052.70
749.03
1,175.63
1,216.97
1,119.27
1,890.58
1,367.80
790.17
1,607.77
1,420.94
2,002.00
-
Reimbursable charges:
Treasury Department
$2,006.78
Reconstruction Finance Corporation . 3>577-72
Exp. 1'Tat. Ekg. Emergency Act, 3~9 _ 33
75^*38
Federal Home Loan Bank Board . . . .
2.77
Comp. Currency Div. I n s o l v . Mat 1 1. Bks. 89.66
Farm Credit Administration:
Federal Farm Loan Bureau
21.56
Federal Farm Board
46.4o
Less reimbursable charges
(&)
(#)
(•)
(a)
$262.00
$
-
$4.00
Total
expenses
Pro rata
share of
total
expenses
I
306.66
456.00
270.00
3,916.64
195.00
226.24
287.00
251.00
306.66
Payable to
Federal
Reserve
Board
$485.32
1,767.56
524.03
869.17
760.97
849.27
2,026.06 (*)
1,172.80
563.93
1,320.77
1,169.94
1,622.00
$11,105.76
2,026.06 (a)
$ 9,079.70
$6,499.27
$17,140.38
03
ZD
Q\
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-7663
November 1, 1933.
SUBJECT:
Handling of applicat i o n s -under Clayton
Act, made on old Forms.
Dear Sir:
There i s inclosed for your information a
copy of a l e t t e r addressed to the Federal Reserve
Agent at Cleveland i n response to an inquiry as to
the proper method of handling applications made on
the Board's Forms 94, 94a, and 94b heretofore i n
use, and which have not yet been forwarded to the
Federal Reserve Board.
Very truly yours
Chester Morrill
Secretary.
Inclosure
TO ALL FEDERAL RESERVE AGENTS EXCEPT CLEVELAND.
X-7663-a
November 1, 1933.
Mr. L. B. Williams,
Federal Reserve Agent,
Federal Reserve Bank of Cleveland,
Cleveland, Ohio.
Bear Mr. Williams:
Reference i s made to Mr. Fletcher's l e t t e r of October 25,
1933, s t a t i n g that a number of applications under the provisions of
Sections 8 and 8A of the Clayton Antitrust Act are "being received,
such applications being made on the Board's Forms 94, 94a, and 94b
heretofore in use, and asking how such applications should be handled.
In view of the fact that a revised regulation and forms
have now been adopted by the Federal Reserve Board and forwarded to
a l l Federal reserve agents, i t i s f e l t that i t would be desirable i n
a l l cases to have such applications made on the new forms, because
the information c a l l e d for by the old forms would usually not be
s u f f i c i e n t to permit the Board to act upon the applications.
Accord-
ingly, the delay which would result from obtaining the additional
information by correspondence would probably be greater, in most i n stances, than the delay involved in obtaining an application on the
new forms.
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
i
398
X-7664
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
for immediate r e l e a s e .
November 1, 1933.
The Federal Reserve Board announces that the Federal
Reserve Bank of Boston has established a Rediscount rate of
2 l / 2 per cent, e f f e c t i v e November 2, 1933.
FEDERAL RESERVE BOARD
X-7665
WASHINGTON
address official correspondence t o
t h e federal reserve board
November 2, 1933
SUBJECT:
New Issue Treasury B i l l s .
Dear Sirs
In connection with telegraphic transactions in
Government s e c u r i t i e s "between Federal reserve banks, the
code word "Noxeve" has been designated to cover a new i s s u e
of Treasury B i l l s , dated November 8, 1933, and maturing
February 7, 1934.
This word should be inserted i n the Federal Reserve Telegraph Code book, following the supplemental code
word "Noxeto" on page 172.
Very truly yours,
J.' C. Noell,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS.
IETEEPEETATION OF BANKING ACT OF 1933
(Copies to be sent to a l l Federal reserve "banks)
October 30, 1933.
-
,
*
-
-
,
-
*
,
»
*
Gentlemen:
Your l e t t e r of September 13, 1933, addressed to the Comptroller
of the Currency has been referred to the Federal Reserve Board.
You ask, f i r s t , whether s e c t i o n 32 of the Banking Act of 1933
i s applicable to c e r t a i n d i r e c t o r s of the
pany of _________ who are members of the
Bank and Trust ComStock Exchange.
That
s e c t i o n i s applicable to t h e s e r v i c e of an o f f i c e r or d i r e c t o r of a member bank as "an o f f i c e r , d i r e c t o r , or manager of any corporation, partnership, or unincorporated a s s o c i a t i o n " engaged primarily i n buying, s e l l i n g ,
or n e g o t i a t i n g s e c u r i t i e s .
Since the statute r e f e r s only to an " o f f i c e r ,
director or manager" of the organizations of the kind referred t o , the
mere f a c t that the d i r e c t o r s to whom you r e f e r are members of the
Stock Exchange would not make that s e c t i o n applicable to them.
You a l s o ask whether that s e c t i o n i s applicable to d i r e c t o r s
of that bank who are partners i n firms which do a
business.
stock exchange
I t appears that the word hmanager" i n the p r o v i s i o n quoted above
includes any person who manages, controls $ or d i r e c t s the business of an
organization engaged primarily i n purchasing, s e l l i n g or n e g o t i a t i n g secur i t i e s , or who p a r t i c i p a t e s i n such management or c o n t r o l , e i t h e r at the
main o f f i c e or at a branch o f f i c e , branch, e t c . , of such organization, and
therefore includes any general partner i n a partnership p r i n c i p a l l y engaged
i n such business; and t h i s conclusion i s strengthened by the reference to
X-7666
-
2 -
"partnership" i n the words immediately following the words " o f f i c e r , d i r ector or manager".
However, i t also appears that the provision i n ques-
t i o n i s inapplicable to an inactive partner i n such a partnership who has
no voice i n the management or control of i t s business and whose l i a b i l i t y
i s limited to the amount of h i s contribution to the partnership.
You also ask whether that section i s applicable to directors of
that bank who are employed by or associat ed with a __________ stock exchange
firm.
Section 32 does not contain a reference to "employees", and unless
the persons to whom you refer may properly be classed as "directors", "off i c e r s " , or "managers" of the
stock exchange firms, the provisions
of section 32 would not be applicable to them.
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
X-7667
£ £ *1 A l t
2.® ^ E.5.1, B .
2 2 A E 2
STATEMENT FOB .THE PRESS
For r e l e a s e a t 6:00 p.m.
November 2, 1933.
Hie F e d e r a l Reserve Board announces t h a t t h e
Federal Reserve Bank of San Francisco has e s t a b l i s h e d
a r e d i s c o u n t r a t e of 2 l/Z% e f f e c t i v e November 3,
1933.
X-7668
^ 0 3
INTERPRET AT I Oil OF BANKING ACT OF 1933
(Copies to "be sent to a l l Federal reserve banks)
November 2, 1933.
Mr.
, Vice President,
National Bank,
Dear Sir:
Reference i s made to your l e t t e r of July 5, 1933, i n which you
state that your "bank's "branches i n
,
,
and
accept accounts and act as correspondents for corporations and partnerships engaged primarily i n the "business of purchasing, s e l l i n g or negot i a t i n g s e c u r i t i e s , and that such "branches, at the request of such c l i e n t s ,
direct to you orders for the purchase and sale of s e c u r i t i e s i n t h i s country.
You inquire whether the provisions of Section 32 of the Banking Act
of 1933 prohibit such functions.
You comment that your branches are i n
competition with other i n s t i t u t i o n s located i n those c i t i e s which extend
similar f a c i l i t i e s to t h e i r c l i e n t s .
Section 32 contains no exception applicable to foreign branches
of national banks.
I t i s true, as you say, that other i n s t i t u t i o n s l o -
cated i n the c i t i e s i n which your branches are located extend such f a c i l i t i e s to t h e i r c l i e n t s and w i l l not be prevented from so doing by the prov i s i o n s of the Banking Act of 1933.
The same, however, i s true of bank-
ing i n s t i t u t i o n s i n t h i s country which are not member banks of the Federal Reserve System, since such banks are not a f f e c t e d b y that s e c t i o n .
Furthermore, since the section i n question i s concerned with the e f f e c t
which c e r t a i n types of relationships may have upon member banks, the f a c t
X-7668
-2-
that the dealers i n s e c u r i t i e s are located in foreign c i t i e s would not seem
to have any conclusive bearing upon the a p p l i c a b i l i t y of the s e c t i o n to r e l a tionships with them.
However, i t i s not e n t i r e l y clear from your l e t t e r whether the
relationships to which you refer are such as to make your bank and i t s
branches a correspondent bank within the meaning of Section 32.
The Federal Reserve Board i s authorized, under certain conditions,
to grant permits covering relationships otherwise prohibited by t h i s s e c tion.
The Federal Reserve Board has recently issued i t s Regulation R i n
t h i s connection and a mimeographed copy i s inclosed for your information.
Your particular attention i s directed to the d e f i n i t i o n of the terra "correspondent bank" i n Section II of the inclosed Regulation.
In the event that you f e e l that a permit may be necessary, i t i s
suggested that you consult with- the Federal Reserve Agent at the Federal
Reserve Bank of
. who w i l l be i n a p o s i t i o n to advise you further
as to the n e c e s s i t y for obtaining permits and as to the procedure to be
followed i n applying for such permits.
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
Inclosure.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7669
November 3, 1933.
SUBJECTi
Right of National Banks t o
Establish Branches i n California,
South Carolina and Tennessee.
Dear Sir:
For your information there i s inclosed herewith
a copy of an opinion of the Acting Attorney General of
the United States, rendered under date of October 27,
1933, with respect to the right of a national banking ass o c i a t i o n located in the State of California, South Carol i n a , or Tennessee t o e s t a b l i s h branch banks beyond the
l i m i t s of the c i t y , town, or v i l l a g e in which the banking
association i s s i t u a t e d .
Very truly yours,
Chester Morrill
Secretary.
Inclosure.
TO ALL FEDERAL R3SERVE AGENTS.
X-7^70
INTERPRETATION OF BANKING ACT OF 1933.
(Copies to "be sent to a l l Federal reserve "banks)
October 21, 1933.
Mr. John N. Peyton,
Federal Reserve Agent,
Federal Reserve Bank of Minneapolis,
Minneapoli s, Minnesota.
Dear Mr. Peyton:
Receipt i s acknowledged of your l e t t e r of October 5, 1933, and
inclosures thereto, from which i t appears that the State Bank of
,
, has applied for membership in the Federal Reserve System; that
a serious question has been raised as to whether the bank i s l e g a l l y a
corporation or not; and that i t has been suggested t h a t , in order to eliminate a l l doubt on t h i s question, i t should obtain a new charter.
In view
of the fact that such new charter would be obtained a f t e r June 16, 1933,
however, the question a r i s e s whether i t would be necessary for the bank to
have a capital of at l e a s t $50,000 in order to be e l i g i b l e for membership
or whether i t might be admitted to membership with a capital of $25,000,
in view of the f a c t that
,
. has a population of only 1700
inhabitants.
As you were advised i n the Board's l e t t e r of July 22, 1933,(^-7521)
a State bank organized on or a f t e r June 16, 1933, i n a place with a populaction of not more than 3,000 inhabitants i s required to have a capital of
$50,000, i n order to be e l i g i b l e for membership i n the Federal Reserve
System, unless i t i s at the time e n t i t l e d to the b e n e f i t s of insurance under
Section 12B of the Federal Reserve Act. i n which event i t i s e l i g i b l e for
membership i f i t has a capital of not l e s s than $25,000.
X-7670
. 2 -
4 0 7
The Board -understands that, i n order to "be e n t i t l e d to the "benefits
of insurance under Section 12B of the Federal Reserve Act "between January 1,
1934, and July 1, 1934, a nonmember State "bank must have been admitted by
the Federal Deposit Insurance Corporation to the Temporary Federal Deposit
Insurance Fund, pursuant to the provisions of subsection (y) of Section 12B
and that, i n order to be e n t i t l e d to the b e n e f i t s of insurance between July 1,
1934, and July 1, 1936, a nonmember State bank must have become a member of
the Federal Deposit Insurance Corporation either by subscribing for the same
amount of Class A stock of the corporation as i t would be required to subscribe
and pay for upon becoming a member bank, or by depositing with the corporart i o n an amount equal to the amount i t would have been required to pay i n on
account of subscription to such stock, i f i t i s not permitted to subscribe for
such stock by the laws under which i t was organized.
A State bank organized after June 16, 1933, and having a capital of
only $25,000 would not be l e g a l l y e l i g i b l e for membership i n the Federal Reserve System, therefore, u n t i l i t has become e n t i t l e d to the b e n e f i t s of
insurance under the provisions of Section 12B of the Federal Reserve Act by
one of the two methods described i n the preceding paragraph.
If i t i s necessary for the State Bank of __________ to obtain a new
charter, therefore, and i f the new bank has a capital of less, than $50,000,
i t cannot be admitted t o the Federal Reserve System u n t i l i t has been admitted to the Temporary Federal Deposit Insurance Fund, which does not become e f f e c t i v e u n t i l January 1, 1934.
It could, however, submit i t s a p p l i -
cation for membership i n the Federal Reserve System and that application
X-7670
4()g
-3-
could 'be approved, e f f e c t i v e i f and when the "bank: i s admitted to the "benefits
of the Temporary Federal Deposit Insurance Fund; provided the bank i s otherwise e l i g i b l e and acceptable for membership i n the Federal Reserve System.
The question whether the ________ State Bank was "organized under
the general laws of any State" within the meaning of Section 9 of the Federal Reserve Act i s primarily a question of State law, upon which i t would
"be advisable for you to obtain a d e f i n i t e opinion from Counsel for the Federal Reserve Bank of Minneapolis.
In accordance with your request, the papers inclosed with your
l e t t e r are returned herewith, i n order that they may be forwarded to the
Board in proper form i f and when the application i s f i n a l l y submitted to
the Board.
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
Inclosures.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7671
November 6, 1933.
SUBJECT:
Withdrawals of Savings D e p o s i t s •
Bear S i r :
The F e d e r a l Reserve Board has had under c o n s i d e r a t i o n t h e
q u e s t i o n "whether, under t h e p r o v i s i o n s of S e c t i o n 19 of t h e Fede r a l Reserve Act and Section. VI of t h e Board's R e g u l a t i o n Q, a
member bank may waive n o t i c e of i n t e n d e d w i t h d r a w a l of a s p e c i f i e d
amount of a savings d e p o s i t d u r i n g any g i v e n p e r i o d provided t h a t
d u r i n g such p e r i o d i t waive n o t i c e of i n t e n d e d withdrawal of t h e
same amount of a l l o t h e r savings d e p o s i t s which a r e s u b j e c t t o t h e
same requirement*
A f t e r c a r e f u l c o n s i d e r a t i o n of t h i s q u e s t i o n , t h e F e d e r a l
Reserve Board has s t a t e d t h a t t h e word " p o r t i o n " as used i n S e c t i o n
VI of R e g u l a t i o n Q i s t o be i n t e r p r e t e d as i n c l u d i n g a s p e c i f i e d
amount and t h a t a member bank may pay any s p e c i f i e d amount of the
s a v i n g s d e p o s i t of any d e p o s i t o r w i t h o u t r e q u i r i n g n o t i c e of i n tended w i t h d r a w a l provided t h a t , upon r e q u e s t and w i t h o u t r e q u i r i n g
such n o t i c e , i t s h a l l pay t h e same s p e c i f i e d amount of t h e savings
d e p o s i t s of every o t h e r d e p o s i t o r .-which a r e s u b j e c t t o t h e same r e quirement.
The p e r i o d during which such s p e c i f i e d amount may be
-2
X-7671
withdrawn under the c o n d i t i o n s s t a t e d may be p r e s c r i b e d by t h e
bank b u t t h e r e q u i r e m e n t s of paragraphs (b) and ( c ) of S e c t i o n VI
of the r e g u l a t i o n r e l a t i n g t o changes i n the p r a c t i c e of a member
bank w i t h r e s p e c t t o t h e withdrawal of savings d e p o s i t s , as w e l l
as t h e o t h e r p r o v i s i o n s of t h i s s e c t i o n , must be o b s e r v e d .
Very t r u l y y o u r s ,
Chester M o r r i l l ,
Secretary,
TO ALL FEDERAL RESERVE AGENTS«
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7674
November 9, 1933
SUBJECT:
Report of Committee on Branch
Group and Chain Banking.
Dear Sir:
There i s inclosed, for your information, a
copy of a l e t t e r which i s "being sent to the Chairman
of the Governors' Conference today with regard to the
recommendation that the System Committee on Branch,
Group and Chain Banking "be reconstituted for the purpose of bringing up to date the report previously
submitted by i t .
Very truly yours,
XIJZaj
Chester Morrill
Secretary.
Inclosure.
TO GOVERNORS OF ALL F. R. BASKS EXCEPT SAN FRANCISCO.
<&*# 9
COPY
X-7674-a
November 9, 1933.
Mr. John U. Calkins,
Chairman, Governors' Conference,
Federal Reserve Bank of San Francisco,
San Francisco, California.
Bear Governor Calkins:
At the meeting of the Governors' Conference with the Federal Reserve
Board on October 12, 1933, you reported that the Conference had voted to
recommend to the Federal Reserve Board the r e c o n s t i t u t i n g of the Committee
on Branch, Group and Chain Banking, for the purpose of amending the report
previously submitted by the Committee in the l i g h t of events which have transpired since the report was prepared.
The Federal Reserve Board has given careful consideration to the
recommendation of the Conference, and has decided that i t should be held i n
abeyance, perhaps u n t i l a f t e r the present emergency i s passed.
Further con-
sideration w i l l be given to the matter when the Board i s i n a p o s i t i o n , i n
the l i g h t of l a t e r circumstances, to determine whether further r e v i s i o n o f ,
and addition t o , the Committee report would be desirable.
A copy of t h i s l e t t e r i s being forwarded to the governors of a l l
other Federal reserve banks.
Very truly yours,
(Signed) Chester Morrill,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7675
November 10, 1933.
SUBJECT: Hew Issue Treasury B i l l s .
Dear Sir:
In connection with telegraphic transactions
i n Government s e c u r i t i e s "between Federal reserve
banks, the code word "NOXEZE" has been designated to
cover a new i s s u e of Treasury B i l l s , dated November
15, 1933, and maturing February 14, 1934.
This word should be inserted in the Federal
Reserve Telegraph Code book, following the supplemental code word "NOXEVE" on page 172.
Very truly yours,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BAMS
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7676
November 10, 1933.
SUBJECT;
Provisions of Time C e r t i f i c a t e s
of Deposit.
Dear Sir:
Reference i s made to the Board's l e t t e r of October 23, 1933,
X-7651, i n c l o s i n g certain forms of c e r t i f i c a t e s of deposit which in
the Board's opinion constitute time c e r t i f i c a t e s of deposit as def i n e d i n Regulation Q,.
Under Section 19 of the Federal Reserve Act, the Federal
Reserve Board i s required from time to time to limit and i s authorized
to prescribe the r a t e of interest which may be paid by member banks
on time deposits and i t i s believed desirable that time c e r t i f i c a t e s
of deposit and other time deposit contracts hereafter issued or
entered i n t o by member banks should r e f e r to t h i s f a c t , i n order that
the depositors may have actual knowledge that the rate stated i n such
c e r t i f i c a t e s or contracts i s subject to such modification as may be
necessary to conform to the rate on time deposits as limited or prescribed by the Federal Reserve Board from time to time under the law.
Accordingly, i t i s suggested that, in any communications or discussions
which you may have rath member banks regarding the form of time
c e r t i f i c a t e s of deposit or other time deposit contracts which they may
X-7676
2 -
propose to u s e , you i n v i t e t h e i r a t t e n t i o n to the d e s i r a b i l i t y of
p r i n t i n g or stamping upon such c e r t i f i c a t e s of deposit or contracts
a p r o v i s i o n s u b s t a n t i a l l y in the following form:
"The r a t e of i n t e r e s t payable hereunder i s subject to
change by the bank to such extent as may be necessary to
comply with requirements of the Federal Reserve Board
made from time to time pursuant to the Federal Reserve
Act."
TO ALL F.
Very truly yours,
Chester M o r r i l l ,
Secretary.
R. AGENTS.
X-7677
i 41
IHTERPEETA.TION Or BANKING ACT OF 1933.
(Copies t o "be Sent to a l l Federal Reserve Banks)
November 10 , 1933.
Mr.
. ..
.
President,
National Bank,
Dear S i r :
Further consideration has "been given to the inquiry contained i n your l e t t e r of September 9, 1933, addressed to Mr.
,
as to whether S e c t i o n 8A of the Clayton Antitrust A c t , as amended
"by Section 33 of the Banking Act of 1933, w i l l make i t unlawful,
a f t e r January 1, 1934, for certain d i r e c t o r s of the
National Bank to serve at the same time as d i r e c t o r s , o f f i c e r s , or
employees of l o c a l manufacturing corporations which o c c a s i o n a l l y
make loans to t h e i r own employees secured by the c a p i t a l stock of
the corporation.
Section 8A applies to any corporation (other than a mutual
savings bank), "which s h a l l make loans secured by stock or bond
c o l l a t e r a l t o any i n d i v i d u a l , a s s o c i a t i o n , partnership, or corporat i o n other than i t s own s u b s i d i a r i e s . "
The wording of the p r o v i s i o n
would seem to leave no room f o r a construction which would make i t
i n a p p l i c a b l e to a corporation making loans to i t s own employees,
secured by i t s own stock, e i t h e r for the purpose of enabling such
employees t o become stockholders of the corporation or for any other
purpose.
:
417
X-7677
—— 2
Under the provisions of Section 8 of the Clayton Antitrust
Act, the Federal Reserve Board i s authorized, under certain circumstances, to i s s u e permits covering services of the kinds referred to
i n Sections 8 and 8A.
However, the provision of Section 8 which
authorizes the Board to issue permits refers only to "banking i n s t i t u tions of certain c l a s s e s and the Board i s , accordingly, without
authority to i s s u e permits involving relationships between national
hanks and non-hanking organizations which come within the provisions
of Section 8A.
You refer i n your l e t t e r to the d i f f i c u l t i e s a r i s i n g out
of a s t a t u t e forbidding the gentlemen in question to serve as directors
of your hank, but as you are of course aware, the Federal Reserve
Board i s not at l i b e r t y to construe a statute i n a way which would
c o n f l i c t with the plain meaning of the words used by Congress.
I t should be noted, however, that Section 8A r e f e r s to any
corporation which "shall make" loans of the kind described.
There i s
inclosed a mimeographed copy of the Board's regulation dealing with
interlocking directorates and other relationships under the Clayton
Antitrust Act, and your particular attention i s directed to paragraph
(3) of Section IV(b).
Since the statute does not r e f e r to the busi-
ness which may have been transacted by a corporation i n the p a s t , but
r e f e r s only to the business currently and presently transacted, the
prohibitions of Section 8A are inapplicable to the service of a direc-
418
X-7S77
— 3
tor of a national bank as a director of a manufacturing corporation
which i n the past has made loans secured by stock or bond c o l l a t e r a l ,
i f such corporation shall make no further loans of that character1
a f t e r January 1, 1934, the e f f e c t i v e date of Section 8A.
Very truly yours,
(Signed) Chester Morrill,
Chester Morrill,
Secretary.
Inclosure.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7678
November 13, 1933
SUBJECT:
Complimentary Copies of Federal
Reserve B u l l e t i n for State Bank
Examiners.
Dear Sir:
The Federal Reserve Board w i l l furnish a complimentary copy of the Federal Reserve B u l l e t i n during the
year 1934 to each State bank examiner who may desire i t .
Please send to t h i s o f f i c e , not later than December 15th,
a l i s t showing the name and address of each State bank
examiner in your d i s t r i c t who desires to receive a
complimentary copy of each i s s u e .
Very truly yours,
if. C. Noell,
Assistant Secretary
TO ALL F. R. AGENTS
X-7679
FEDERAL
RESERVE
BOARD
STATEMENT FOR THE PRESS
For r e l e a s e a t 3:00 P. M.
November 15, 1933*
The F e d e r a l Reserve Board announces t h a t t h e
F e d e r a l Reserve Bank of P h i l a d e l p h i a has e s t a b l i s h e d
a r e d i s c o u n t r a t e of 2 l/2% e f f e c t i v e November 16,
1933.
FEDERAL RESERVE BOARD
; 421
WASHINGTON
address official correspondence t o
the federal reserve board
X-7680
November 15, 1933*
SUBJECT:
Payment of I n t e r e s t on D e p o s i t s of
P u b l i c Funds by S t a t e Banks Applying
f o r Membership.
Dear S i r :
In revie wing a p p l i c a t i o n s f o r membership i n t h e F e d e r a l
Reserve System s u b m i t t e d t o t h e F e d e r a l Reserve Board, i t has been
noted t h a t i n many i n s t a n c e s t h e a p p l i c a n t bank pays i n t e r e s t on
c e r t a i n p u b l i c accounts*
As you know, s e c t i o n 19 of t h e F e d e r a l
Reserve Act, as amended by t h e Banking Act of 1933, p r o h i b i t s a
member bank, e x c e p t as s t a t e d t h e r e i n , from paying i n t e r e s t on dep o s i t s which are payable on demand#
Accordingly, i f t h e p u b l i c
accounts above r e f e r r e d t o are demand d e p o s i t s and do n o t come
w i t h i n t h e e x c e p t i o n s t o s e c t i o n 19, t h e payment of i n t e r e s t t h e r e on by a S t a t e bank a f t e r i t becomes a member of t h e F e d e r a l Reserve
System would be u n l a w f u l •
I n c e r t a i n l e t t e r s t o t h e F e d e r a l Reserve Agents a d v i s i n g
of approval of a p p l i c a t i o n s f o r membership, t h e Board has c a l l e d
a t t e n t i o n t o t h i s s i t u a t i o n and has r e q u e s t e d t h e Agent t o b r i n g
t h e m a t t e r t o t h e a t t e n t i o n of t h e management of t h e a p p l i c a n t bank.
2-
X-7680
You a r e r e q u e s t e d t o t a k e s i m i l a r a c t i o n i n a l l such c a s e s a r i s i n g
i n your d i s t r i c t .
In t h e f u t u r e , t h e r e f o r e , no comment of t h i s
n a t u r e w i l l be made i n t h e l e t t e r s t o t h e F e d e r a l Reserve Agents
a d v i s i n g of approval of a p p l i c a t i o n s f o r membership.
TO ALL FEDERAL
Very t r u l y y o u r s ,
Chester M o r r i l l ,
Secretary.
RESERVE AGENTS
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7681
November 15, 1933*
SUBJECT:
Adequacy of Bonds Carried by
Banks Admitted t o Membership.
Dear S i r :
In r e v i e w i n g a p p l i c a t i o n s f o r membership i n t h e F e d e r a l
Reserve System, i t has been noted t h a t i n many i n s t a n c e s o f f i c e r s
and employees of t h e a p p l i c a n t bank appear t o be i n a d e q u a t e l y
bonded, and t h a t i n some i n s t a n c e s c e r t a i n o f f i c e r s and employees
a r e n o t covered by any bond.
The Board f e e l s t h a t as a m a t t e r of
c o n s e r v a t i v e banking p r a c t i c e adequate s u r e t y bonds should be c a r r i e d by a l l banks•
I n c e r t a i n l e t t e r s t o t h e F e d e r a l Reserve Agents
a d v i s i n g of approval of a p p l i c a t i o n s f o r membership, t h e r e f o r e , t h e
Board has c a l l e d a t t e n t i o n t o t h e l a c k , or a p p a r e n t inadequacy, of
t h e bonds, and has suggested t h a t t h e F e d e r a l Reserve Agents r e q u e s t
t h e boards of d i r e c t o r s of t h e a p p l i c a n t banks t o give c a r e f u l cons i d e r a t i o n t o t h e a d v i s a b i l i t y of having bonds i n a d e q u a t e amount
provided f o r a l l o f f i c e r s and employees having a c c e s s t o t h e banks f
c a s h , s e c u r i t i e s , or r e c o r d s of a c c o u n t .
You a r e r e q u e s t e d t o give c a r e f u l c o n s i d e r a t i o n t o t h e
adequacy of the bonds c a r r i e d by banks a p p l y i n g f o r membership, and
2
X-7681
t o make a p p r o p r i a t e recommendation t o t h e d i r e c t o r s of an a p p l i c a n t
bank whenever i t seems necessary#
In the f u t u r e , t h e r e f o r e , no com-
ment of t h i s n a t u r e w i l l be made i n t h e l e t t e r s t o t h e Federal Reserve Agents a d v i s i n g of approval of a p p l i c a t i o n s f o r membership.
In t h i s co n n e c t i o n , i t i s assumed t h a t t h e Federal Reserve Agents
w i l l give t h e same c o n s i d e r a t i o n t o t h e adequacy of bonds c a r r i e d by
banks a l r e a d y admitted t o membership and w i l l make s i m i l a r recommendation "when deemed n e c e s s a r y .
TO ALL FEDERAL
Very t r u l y yours
Chester M o r r i l l ,
Secretary.
RESERVE AGENTS
:
4 3 5
X-7682
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal, reserve board
SUBJECT:
November 20, 1933.
Revised Forms 94cL and 94e i n
Connection with Clayton AntiTrust Act.
Dear Sir:
Reference i s made to the Board's l e t t e r of October 26, 1933
(X-7655), i n c l o s i n g mimeographed copies of the Board's Regulation L
and the Board's Forms 94, 94a, and 94b, pertaining to the provisions
of Sections 8 and 8A of the Clayton Antitrust Act, as amended.
No r e v i s i o n of the Board's Forms 94d and 94e was made at that
time since i t seemed that those forms would be so l i t t l e used as to
make such r e v i s i o n unnecessary.
However, the old forms do not c a l l
for a l l the information which i s now required in view of the enactment
of Section 8A and the r e v i s i o n of the Board's Regulation L; and, since
i t now appears that Forms 94d and 94e may be used in more than a few
instances, there are inclosed s i x mimeographed copies of the Board's
revised Forms 94d and 94e, which have been approved by the Federal Reserve Board.
It i s .requested that you have these forms printed in the same
manner as Forms 94, 94a, and 94b, referred to in the Board's l e t t e r
of October 26, 1933.
Very truly yours,
4* /> v* Morrill,
\K
4 11
Chester
Secretary.
a -v* v i
Inclosures.
TO ALL FEDERAL
RESERVE AGENTS.
X-7683
Statement of Bureau of Engraving and Printing
For Furnishing Federal Reserve Notes
Series 1928, October 2 - 31, 1933.
$10
$20
10,000
-
37,000
67,000
48,000
-
-
$5
Boston . . . .
Mew York . . .
Philadelphia .
Cleveland. . .
Richmond . . .
Atlanta. . . .
Chicago. . . .
St. Louis. . .
Minneapolis. .
Kansas City. .
Dallas . . . .
San Francisco.
-
12,000
28,000
10,000
9,000
15,000
10,000
29,000
15,000
10,000
10,000
10,000
10,000
15,000
10,000
10,000
10,000
79,000
251,000
120,000
" -
45,000
15,000
-
-
15,000
Total
Sheets
Amount
47,000
67,000
60,000
28,000
25,000
55,000
44,000
30,000
25,000
29,000
10,000
30,000
$4,159.50
5,929.50
5,310.00
2,478.00
2,212.50
4,867.50
3,894.00
2,655.00
2,212.50
2,566.50
885.00
2,655.00
450,000
$39,825.00
450,000 sheets , @ $88.50 per M, . . . $39,825.00
427
X-7684
Statement of Bureau of Engraving and Printing
f o r Furnishing Federal Reserve Bank Notes
Series 1929, October 2 - 27, 1933.
$5
New York
Philadelphia . . . .
Cleveland. . . . . . .
30,000
84,000
80,000
194,000
$10
Amount
86,000
20,000
42,000
86,000
50,000
126,000
80,000
$8,084.00
4,700.00
11,844.00
7,520.00
148,000
342,000
32,148.00
342,000 sheets. @ $94*00 per M, . r.
Total
Sheets
$32,148.00
! 438
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7685
November 17, 1933#
SUBJECT;
Hew I s s u e Treasury B i l l s #
Dear S i r :
In connection with t e l e g r a p h i c t r a n s a c t i o n s
i n Government s e c u r i t i e s between Federal r e s e r v e
banks, t h e code word "NOXFAB" has been d e s i g n a t e d t o
cover a new i s s u e of Treasury B i l l s , dated November
22, 1933, and maturing February 21, 1934*
This word should be i n s e r t e d i n t h e F e d e r a l
Reserve Telegraph Code book, f o l l o w i n g t h e supplemental code word "NOXEZB" on page 172.
TO
Very t r u l y yours,
J . Ce i f o e l l ,
Assistant Secretary
GOVERNORS OF ALL F. R. BANKS.
X-7686
(INTERPRETATION OF BANKING ACT OF 1935)
Copies t o be s e n t t o a l l Federal r e s e r v e b a n k s .
November 16, 1933.
Mr* Eugene M. S t e v e n s ,
F e d e r a l Reserve Agent,
F e d e r a l Reserve Bank of Chicago,
Chicago, I l l i n o i s .
Dear Mr. S t e v e n s :
R e f e r e n c e i s made t o your t e l e g r a m of November 1, 1933, r e g a r d ing t h e a p p l i c a b i l i t y of S e c t i o n 8A of t h e Clayton A n t i t r u s t Act t o a
d i r e c t o r of a n a t i o n a l bank s e r v i n g as an o f f i c e r or d i r e c t o r of a c o r p o r a t i o n "which i s not a bank, banking a s s o c i a t i o n , or t r u s t company and
which o c c a s i o n a l l y makes loans secured by i t s own s t o c k or which occa~
s i o n a l l y makes loans secured by stock or bond c o l l a t e r a l t h r o u g h t h e
c a l l loan market or o t h e r w i s e .
S e c t i o n 8A a p p l i e s t o any c o r p o r a t i o n ( o t h e r t h a n a mutual savings bank) "which s h a l l make loans secured by s t o c k or bond c o l l a t e r a l
t o any i n d i v i d u a l , a s s o c i a t i o n , p a r t n e r s h i p , or c o r p o r a t i o n o t h e r t h a n
i t s own s u b s i d i a r i e s " .
The wording of t h e p r o v i s i o n would seem t o l e a v e
no room f o r a c o n s t r u c t i o n which would make i t i n a p p l i c a b l e t o a c o r p o r a t i o n making l o a n s secured by i t s own s t o c k ; and, f o r t h e same r e a s o n , t h e
s e c t i o n i s a p p l i c a b l e t o a c o r p o r a t i o n making loans t h r o u g h t h e c a l l loan
market or o t h e r w i s e on stock or bond c o l l a t e r a l .
Under t h e p r o v i s i o n s of S e c t i o n 8 of t h e Clayton A n t i t r u s t Act,
t h e F e d e r a l Reserve Board i s a u t h o r i z e d , under c e r t a i n c i r c u m s t a n c e s , t o
i s s u e p e r m i t s c o v e r i n g s e r v i c e s of t h e kinds r e f e r r e d t o i n S e c t i o n s 8
-2and 8A.
X-7686
I
/t t
yh
However, t h e p r o v i s i o n of S e c t i o n 8 which a u t h o r i z e s t h e
Board t o i s s u e p e r m i t s r e f e r s only t o banking i n s t i t u t i o n s of c e r t a i n
c l a s s e s , and t h e Board i s , a c c o r d i n g l y , w i t h o u t a u t h o r i t y t o i s s u e p e r m i t s i n v o l v i n g r e l a t i o n s h i p s between n a t i o n a l banks and non-banking
o r g a n i z a t i o n s which come w i t h i n t h e p r o v i s i o n s of S e c t i o n 8A.
R e f e r e n c e has been made t o t h e p o s s i b l e broad e f f e c t of a s t a t u t e f o r b i d d i n g t h e d i r e c t o r s of a n a t i o n a l bank t o serve as d i r e c t o r s
of o t h e r c o r p o r a t i o n s making such l o a n s , b u t as you a r e of c o u r s e aware,
t h e F e d e r a l Reserve Board i s n o t a t l i b e r t y t o c o n s t r u e a s t a t u t e i n a
way which would c o n f l i c t w i t h t h e p l a i n meaning of t h e words used by
Congress»
I t should be n o t e d , however, t h a t S e c t i o n 8A r e f e r s t o any c o r p o r a t i o n which " s h a l l mate" loans of t h e kind d e s c r i b e d , and, i n t h i s
c o n n e c t i o n , your a t t e n t i o n i s d i r e c t e d t o p a r a g r a p h ( 3 ) of S e c t i o n IV(b)
of t h e B o a r d ' s R e g u l a t i o n L d e a l i n g w i t h i n t e r l o c k i n g d i r e c t o r a t e s and
o t h e r r e l a t i o n s h i p s under t h e Clayton A n t i t r u s t A c t .
The s t a t u t e does
not r e f e r t o t h e b u s i n e s s which may have been t r a n s a c t e d by a c o r p o r a t i o n i n t h e p a s t , b u t r e f e r s o n l y t o t h e b u s i n e s s c u r r e n t l y and p r e s e n t l y
t r a n s a c t e d a f t e r t h e e f f e c t i v e d a t e of t h e s e c t i o n ; and, t h e r e f o r e , t h e
p r o h i b i t i o n s of S e c t i o n 8A a r e i n a p p l i c a b l e t o a d i r e c t o r of a n a t i o n a l
bank who s h a l l s e r v e as a d i r e c t o r , o f f i c e r or employee of a c o r p o r a t i o n ,
or a s a member of a p a r t n e r s h i p , which i n t h e p a s t has made loans secured
by s t o c k or bond c o l l a t e r a l , i f such c o r p o r a t i o n or p a r t n e r s h i p s h a l l make
no loans of t h a t c h a r a c t e r a f t e r J a n u a r y 1, 1954.
Very t r u l y y o u r s ,
(Signed)
Chester M o r r i l l
Chester M o r r i l l ,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
X-7687
November 18, 1933
SUBJECT: Payment of Interest on Deposits
of Postal Savings Funds.
Dear Sir:
There i s inclosed herewith a copy of a ruling
which has "been made by the Federal Reserve Board r e l a t i n g to the payment of i n t e r e s t by member banks on
deposits of postal savings funds.
It i s requested
that you bring t h i s ruling to the a t t e n t i o n of a l l
member banks in your d i s t r i c t which you may have
reason to b e l i e v e have an i n t e r e s t i n t h i s matter.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
TO ALL F. B. AGENTS.
:
4 3 2
X-7687-a
COPY
PAYMENT OP INTEREST ON DEPOSITS OF
POSTAL SAVINGS FUNDS.
The Federal Reserve Board has received a number of i n q u i r i e s
with respect to the question whether deposits of p o s t a l savings funds,
subject to the provisions of the regulations of the Postal Savings
System governing the deposit of such funds i n banks, are deposits on
which i n t e r e s t may be paid by member banks under the provisions of Section 19 of the Federal Reserve Act.
By order of the Postmaster General, dated August 30, 1933,
paragraph 1 of Section 15 of the regulations of the Postal Savings
System on this subject was amended so as to read as f o l l o w s :
"All funds deposited prior to July 1, 1933, i n
depository banks of the Postal Savings System s h a l l be
treated as time d e p o s i t s , to remain on deposit i n such
banks for one calendar month from July 1, 1933. A l l
funds deposited a f t e r July 1, 1933, i n such banks.shall
likewise be treated as time d e p o s i t s , for the period i n cluding the calendar month next following the date of
deposit. At the expiration of such periods and i n the
event that withdrawal i s not made of the deposit at the
end of such calendar periods by the Board of Trustees of
the Postal Savings System, then such funds s h a l l be considered as having been redeposited for the succeeding
calendar month; and likewise redeposited for each and
every calendar month thereafter u n t i l withdrawal i s made.
A l l postal-savings funds held by any q u a l i f i e d depository
bank i n excess of the security value of i t s c o l l a t e r a l
s h a l l be promptly disposed of in accordance with the prov i s i o n of Section 17 of the Banking Regulations."
The Federal Reserve Board understands that, under the prov i s i o n s of the regulations amended as above quoted, the withdrawal
X-7687
2 —
of postal savings funds from "banks was authorized only on the f i r s t
day of any calendar month and funds not withdrawn on such day were
considered as having "been redeposited for another f u l l calendar
month; and a l s o that no such funds were authorized to "be withdrawn
except on the f i r s t day of any calendar month even though no i n t e r e s t
was paid on such d e p o s i t s .
I t i s the view of the Federal Reserve
Board that deposits withdrawable only under these conditions may
properly "be c l a s s i f i e d , during the period i n which the regulations
i n the form as amended August 30, 1933, were in e f f e c t , as time dep o s i t s on which i n t e r e s t may "be paid i n accordance with the provisions of the Board's Regulation Q.
I t i s understood that the paragraph of the regulations of
the Postal Savings System above quoted was further amended by order
of the Postmaster General No. 4420, under date of October 24, 1933,
so as to read as f o l l o w s :
"In compliance with rulings of the Federal Reserve Board concerning time d e p o s i t s , and to secure uniformity of procedure among a l l depository banks of the
Postal Savings System, the calendar year i s divided into
s p e c i f i c periods of not l e s s than t h i r t y days each, with
the beginning and termination dates of such periods shown,
as follows:
From
Jan.
Feb.
Mar.
Apr.
May
June
1
1
3
2
2
1
To
Jan. 31
Mar. 2
Apr. 1
May
1
May 31
June 30
No. of days
From
31
July 1
*30 or 31 Aug. 1
30
Sept.l
30
Oct. 1
30
Nov. 1
30
Dec. 1
To
July 31
Aug. 31
Sept .30
Oct. 31
Nov. 30
Dec. 31
No. of days
31
31
30
31
30
31
*30 or 31 days, according to whether or not year i s Leap Year
X-7687y|
mm 3
*•
A l l funds deposited prior to July 1, 1933, i n depository banks
of the Postal Savings System shall "be treated as time deposits,
to remain on deposit i n such "banks for the s p e c i f i e d period
"beginning July 1, 1933. A l l funds deposited a f t e r July 1, 1933,
i n such "banks s h a l l likewise "be treated as time deposits from
the date of the deposit to and including the date of termination of the s p e c i f i c period next following the period i n which
the deposit i s made, unless such deposit shall have "been made
on the f i r s t day of a period - i n other words, the i n i t i a l
time period for deposits made subsequent to July 1, 1933, w i l l
"be the period frcm and including the date of the deposit to
the expiration of the next succeeding s p e c i f i e d period, unless
such deposit s h a l l have "been made on the f i r s t day of a period
i n which case the i n i t i a l time period w i l l "be the period from
and including the date of the deposit to and including the
date of termination of the period i n which the deposit i s made.
At the expiration of such periods and in the event that withdrawal i s not made of the deposit "by the Board of Trustees of
the Postal Savings System, then such funds s h a l l "be considered
as having been redeposited for the succeeding s p e c i f i e d
period; and likewise redeposited for each and every s p e c i f i e d
period u n t i l withdrawal i s made. In accordance with the
foregoing, postal-savings funds on deposit in qualified "banks,
the f i x e d time period having expired, may "be withdrawn "by
the Board of Trustees of the Postal Savings System or r e l i n quished voluntarily "by depository "banks only on the f i r s t day
of a succeeding specified period: Provided, that a l l unsecured postal-savings funds held "by any qualified bank to
the credit of the Board of Trustees shall be subject to the
provisions of Section 17 of these regulations."
I t i s the view of the Federal Reserve Board, a f t e r careful con
sideration of the regulations of the Postal Savings System as amended on
October 24, 1933, that deposits withdrawable only at the times and under
the conditions stated i n the regulations as thus amended may be c l a s s i f i e d as time deposits on which interest may be paid in accordance with
the provisions of the Board's Regulation Q,, except as noted i n the
last paragraph hereof
4 3 5
X-7687-a
- 4 The Federal Reserve Board advised a l l Federal reserve tanks
i n a telegram dated June 21, 1933 (Trans. No. 1826) t h a t , since the
provisions regarding payment of i n t e r e s t on deposits are incorporated
i n Section 19 of the Federal Reserve Act, d e f i n i t i o n s contained i n
Section II of the Board's Regulation D should be considered i n determining what are time deposits pending the issuance of further regulations r e l a t i n g to the payment of i n t e r e s t on deposits and that member
banks might continue to pay i n t e r e s t on time deposits i n accordance
with their usual practice or e x i s t i n g bona f i d e contracts u n t i l the
Board should i s s u e regulations on the subject; and i t i s to be noted that,
under the provisions of Section II of Regulation D, deposits of postal
savings funds i n banks under the terms of the Act of June 25, 1910
as amended c o n s t i t u t e time deposits.
The Federal Reserve Board's
Regulation % r e l a t i n g to the payment of i n t e r e s t on deposits was adopted
and made e f f e c t i v e on August 29, 1933; and, as above stated, the regulations of the Postal Savings System, governing the deposits of postalsavings funds i n banks, were amended by order of the Postmaster General
dated August 30, 1933, so that deposits subject to the conditions
thereof were time deposits.
In the circumstances, the Federal Reserve
Board o f f e r s no objection to the payment by member banks of i n t e r e s t
on postal savings funds accruing during the period from June 16, 1933,
u n t i l August 30, 1933; except that no member bank, which during such
period may have lawfully terminated i t s agreement with the Postal
X-7687
:
- 5 Savings System to pay i n t e r e s t on deposits of p o s t a l savings funds
payable on demand, may pay i n t e r e s t on such deposits payable on demand which accrued a f t e r the e f f e c t i v e date of the termination of
such agreement.
I t i s to he observed that the regulations of the Postal
Savings System, as amended on October 24, 1933, contain the provision
that a l l unsecured p o s t a l savings funds held by any q u a l i f i e d bank
to the credit of the Board of Trustees s h a l l be subject to the provisions of Section 17 of the regulations, which provides that an
amount i n a q u a l i f i e d bank i n excess of the maximum balance
authorized for such bank s h a l l at once be returned i n accordance
with the procedure prescribed therein to the Board of Trustees.
A
provision similar i n e f f e c t was included in the regulations as
amended on August 30, 1933.
I t would appear that an amount i n excess
of the maximum balance authorized for any qualified bank i s not subj e c t to the conditions with respect to withdrawal to which other
deposits of postal savings funds are subject under the amended regulations.
Such excess amounts, therefore, do not conform to the r e -
quirements with respect to time deposits and must be considered dep o s i t s payable on demand upon which no i n t e r e s t may lawfully be paid
by a member bank.
November 18, 1933.
4
TO ALL FEDERAL RESERVE AGEHTS E-LCriPT DALLAS.
; 437
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
SUBJECT:
x
l n o v e m b e r
„
7 6 8 s
1 / ,
i v 66*
Employment of Trust Examiners.
Dear S i r :
In connection w i t h t h e employment by t h e F e d e r a l Reserve
Agents of t r u s t examiners, r e f e r r e d t o i n t h e Board's l e t t e r dated
August 31, 1933, X-7576, the F e d e r a l Reserve Agent a t Dallas has
raised the following questions:
1.
2#
Am I c o r r e c t i n assuming t h a t the person appointed t o
t h e p o s i t i o n of Federal r e s e r v e t r u s t examiner should
p o s s e s s a l l t h r e e of t h e f o l l o w i n g q u a l i f i c a t i o n s ?
(a)
Broad experience ( p r e f e r a b l y e x e c u t i v e ) i n
t r u s t company or t r u s t department work*
(b)
Broad and s p e c i a l i z e d experience i n examinat i o n of t r u s t companies and/or t r u s t d e p a r t ments •
(c)
Extensive l e g a l t r a i n i n g or e d u c a t i o n .
Does t h e Board d e s i r e us t o make r e g u l a r p e r i o d i c a l
examinations of the t r u s t departments of a l l member
banks i n our d i s t r i c t , or does i t p r e f e r t h a t we conf i n e t h e s e examinations t o those member banks whose
t r u s t departments we have reason t o b e l i e v e a r e i n
need of s p e c i a l a t t e n t i o n ?
There i s a t t a c h e d h e r e t o f o r your i n f o r m a t i o n a copy of a l e t t e r addressed by t h e Board t o t h e F e d e r a l Reserve Agent a t Dallas i n
reply.
http://fraser.stlouisfed.org/
Inclosure.
Federal Reserve Bank of St. Louis
Very t r u l y yours,
hr)cr\AsL£j^
Chester M o r r i l l ,
Secretary.
X-7688-a 4.88
Mr. C. C. Walsh,
Federal Reserve Agent,
Federal Reserve Bank of Dallas,
Dallas, Texas.
November 17, 1933.
Dear Mr. Walsh:
Reference i s made to your l e t t e r of October 16 i n regard to the
employment of a trust examiner at each Federal reserve bank and p a r t i c u l a r l y the q u a l i f i c a t i o n s of such an examiner and the scope of h i s duties*
Assuming that the person who may be under consideration for s e l e c t i o n as a trust examiner i s familiar with the p r i n c i p l e s of accountancy
and auditing, i t i s believed that in order to accomplish the best r e s u l t s
in trust examination work he should have the q u a l i f i c a t i o n s set out i n your
letter.
Of course, the number of men possessing a l l these q u a l i f i c a t i o n s
i s somewhat l i m i t e d , and i n the circumstances i t might be found necessary
to forego the requirement of broad experience gained as an executive i n a
trust department and to s e l e c t an individual with sound l e g a l training and
broad experience i n examining trust departments, or i t might be necessary
to s e l e c t a man who has not had a great deal of experience i n trust examination work.
In such a case, however, i t would be e s s e n t i a l to s e l e c t
one who not only possesses the q u a l i f i c a t i o n s as to l e g a l background and
experience i n operation of a trust department, but also evidences by t r a i n ing, experience and otherwise an aptitude for examination work.
The entire scope of the duties of a trust examiner, of course,
cannot be sharply defined, but i t i s the view of the Board that when an
examination i s made of a State "bank applying for membership i n the system
which has a trust department, there should be an examination of that department by a q u a l i f i e d trust examiner, and that the trust department of
every State member bank should be examined p e r i o d i c a l l y .
As to national
X—7688-a
439
banks, the r e s p o n s i b i l i t y of examining the trust departments l i e s , of course,
primarily with the Comptroller of the Currency, "but in some cases trust departments of national banks may require special a t t e n t i o n and i t may be
found mutually advantageous to have your trust examiner cooperate with the
national bank examiners.
In addition, there may be cases of national banks
applying for permits to exercise trust powers i n order that they may be able
to take over trust business previously handled by State i n s t i t u t i o n s , and i n
such instances you should arrange for examinations of the trust departments
of the State i n s t i t u t i o n s by your trust examiner, unless the necessary examinations have been made by other competent examiners whose reports are entirely satisfactory.
Aside from the question of r e s p o n s i b i l i t y for making examinations
i n the f i r s t instance, the trust examiner should be charged with the duty
of reviewing c a r e f u l l y the reports of examination of both State and national
banks which have trust powers and of f a m i l i a r i z i n g himself with the quality
of management and methods of operation of such trust departments.
He should
also draft for your consideration such reports and recommendations as should
be made by you to the Federal Reserve Board i n connection with trust matters.
I f , after these duties are performed e f f i c i e n t l y , the trust examiner has
any spare time, he should be able to render valuable assistance i n other
work of your o f f i c e , particularly that r e l a t i n g to a f f i l i a t e s and the handling of applications for voting permits.
On the whole, i t would seem that
a properly q u a l i f i e d trust examiner could be so useful i n the Federal Reserve
Agent's department in a l l of the more important phases of examination work
that h i s time would be occupied f u l l y .
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
'
X-7689
;
4 4 0
INTERPRETATION OF BANKING ACT OF 1933.
(Copies to "be sent to a l l Federal reserve "banks)
November 17, 1933.
Mr. W. B. Geery, Governor,
Federal Reserve Bank of Minneapolis,
Minneapolis, Minnesota.
Dear Governor Geery:
Reference i s made to Mr.
's l e t t e r of October 17,
1933, addressed to the Chief of the Board's D i v i s i o n of Bank Operat i o n s , r a i s i n g the question whether deposits of receivers of i n s o l vent national "banks and deposits of conservators of national "banks
may "be regarded "by a member "bank i n which such funds are deposited
as demand deposits "due to "banks" within the meaning of Section III("b)
of the Board's Regulation D.
The Board has taken the p o s i t i o n that a Federal reserve
"bank has no authority to receive deposits from a receiver of a
national "bank, on the ground that Section 6 of the Federal Reserve
Act requires a member bank, upon the appointment of a receiver, to
surrender stock held "by i t in a Federal reserve bank and that, theref o r e , a national bank for which a receiver has been appointed can no
longer be considered a member bank within the meaning of Section 13
of the Federal Reserve Act, which authorizes a Federal reserve bank
to receive deposits from i t s member banks.
I f , upon i t s insolvency,
a national bank can no longer be regarded as a member bank, i t may
be argued that i t cannot be considered a bank for any other purpose.
: 44
X-7689
— 2
—
Furthermore, the receiver of an insolvent national bank holds l e g a l
t i t l e to the a s s e t s of the bank as trustee for the b e n e f i t of the bajik's
creditors.
Accordingly, upon h i s appointment, the bank may be said to
cease to e x i s t as a going banking organization, and to e x i s t only f o r
the purpose of winding up i t s a f f a i r s .
On the other hand, a national bank in the hands of a conservator may continue to perform c h a r a c t e r i s t i c banking f u n c t i o n s .
Under
Section 206 of the Bank Conservation Act of March 9, 1933, as amended,
the conservator may, under the d i r e c t i o n of the Comptroller of the Currency, r e c e i v e deposits and allow withdrawal of d e p o s i t s on a l i m i t e d
basis.
Moreover, that act authorizes the Comptroller of the Currency,
i n h i s d i s c r e t i o n , to terminate the conservatorship and permit the bank
to resume the t r a n s a c t i o n of i t s business under the management of i t s
own o f f i c e r s .
It i s c l e a r , therefore, that the appointment of a con-
servator contemplates not the c e s s a t i o n of banking a c t i v i t i e s , but the
conservation and p r o t e c t i o n of the bank's a s s e t s , temporarily.
For the reasons above i n d i c a t e d , the Board i s of the opinion
that, while d e p o s i t s made by a conservator of a national bank may proper
l y be considered d e p o s i t s "due to banks" within the meaning of Regulat i o n B, d e p o s i t s made by a receiver of an i n s o l v e n t national bank may
not be so regarded.
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
X-7690
FEDERAL RESERVE BOARD
WASHINGTON
i^RESS OFFICIAL CORRESPONDENCE TO
ffi
FOVOmber 20, 1933.
THE FEDERAL RESERVE BOARD
SUBJECT:
Holidays during December, 1933.
Dear Sir:
The Federal Reserve Board i s advised that the f o l l o w ing holidays w i l l be observed by Federal reserve banks and branches
during December:
Thursday, Dec. 7,
Havana Agency
Tuesday,
San Francisco
Los Angeles
Dec.19,
Cuban Memorial Day
(Special Election
( i n California
Please include transit clearing credits of December 19
for San Francisco and'Los Angeles i n your c r e d i t s for December 20.
No debits covering shipments of Federal reserve notes for the Federal Reserve Bank of San Francisco should be included i n your note
clearing of Tuesday, December 19.
On Christmas Day the o f f i c e s of the Federal Reserve Board
and a l l Federal reserve banks and branches w i l l be closed.
Please n o t i f y branches.
Very truly yours,
Assistant Secretary.
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.
Digitized%for FRASER
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
SUBJECT!
X--7692
November 21, 1933
Information in Connection with Applications
Under Section 32 of the Banking Act of 1933.
Dear Sir;
In Section IV(e) of Regulation E, dealing with the provisions
of Section 32 of the Banking Act of 1933, one of the f a c t o r s which
w i l l he considered i n determining whether the issuance of a permit
w i l l "be compatible with the public i n t e r e s t i s stated as follows:
"Whether the proposed relationship w i l l have any
undesirable e f f e c t upon the member bank's f i n a n c i a l condition, i t s credit or investment p o l i c i e s ,
or i t s p o l i c i e s i n dealing with i t s other customers,"
There appears to be some likelihood that, i n answering questions numbered 1 and 4 on Form 99c, s u f f i c i e n t d e t a i l w i l l not be
given to permit the Board to determine whether or not the business
of the dealer i n s e c u r i t i e s customarily includes the underwriting,
f l o t a t i o n and d i s t r i b u t i o n of s e c u r i t i e s or p a r t i c i p a t i o n s i n such
transactions, and whether the customary business dealings
between
the member bank and the dealer involve s e c u r i t i e s i n the underwriting,
f l o t a t i o n or d i s t r i b u t i o n of which the dealer has been interested*
I t i s , accordingly, requested that, i n submitting applications to the .
Board involving Section 32, you advise the Board regarding these
matters i n each case.
Very truly yours,
TO ALL F. R. AGENTS
Chester Morrill,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
November 24, 1933.
SUBJECT:
Hew Issue Treasury B i l l s
Dear Sir:
In connection with telegraphic transactions
i n Government s e c u r i t i e s between Federal reserve
banks, the code word "NOXFEL" has been designated to
cover a new i s s u e of Treasury B i l l s , dated November
29, 1933, and maturing February 28, 1934.
This word should be inserted i n the Federal
Reserve Telegraph Code book, following the supplemental code word "NOXFAB" on page 172.
Very truly yours
\T. C. Noell,
Assistant Secretary
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.
i 445
X-7696
(INTERPRETATION OF BANKING ACT OF 1933)
Copies t o be sent t o a l l Federal reserve banks.
November 28, 1935.
Mr.
, Chairman,
The Banking' Code Committee,
,
Dear Mr.
»
:
The Federal Reserve Board has given consideration t o your
l e t t e r of November 24, 1933, i n which you inquire whether or not the
practice therein outlined would be considered contrary t o that port i o n of Section 19 of the Federal Reserve Act, as amended, which provides t h a t , "No member bank s h a l l , d i r e c t l y or i n d i r e c t l y by any
device whatsoever, pay any i n t e r e s t on any deposit which i s payable
on demand".
I t appears that Article VIII, Paragraph ( 3 ) , of the Bankers
Code of Fair Competition, as approved by the President on October 3,
1933, requires every clearing house, county a s s o c i a t i o n , county group,
or State bank association to adopt rules f i x i n g uniform service
charges t o be charged by banks whereby services rendered by banks
s h a l l be compensated for either by adequate balances carried or by a
scale of charges.
I t also appears from your l e t t e r t h a t , in order t o determine
whether the balance carried in an account i s s u f f i c i e n t t o compensate
the bank f a i r l y for services rendered, i t i s necessary t o analyze the
account? that t h i s requires the establishment of uniform rules which
X-7696
2-
must give c o n s i d e r a t i o n to the value of t h e account and proper s e r v i c e
charges a g a i n s t t h e account; and t h a t t h e s e charges a r e of two c l a s s e s :
f i r s t , g e n e r a l overhead expenses of t h e bank, and second, out of pocket
expenses, such as exchange, c o l l e c t i o n and o t h e r charges a r i s i n g out
of s p e c i f i c t r a n s a c t i o n s f o r s p e c i f i c customers and a c t u a l l y p a i d or
c r e d i t e d by t h e bank on behalf of such customers•
I t f u r t h e r appears t h a t , under t h e Code, i t i s t h e duty of t h e
Banking Code Committee t o consider t h e r u l e s which a r e being submitted
f o r approval by c l e a r i n g houses and o t h e r banking groups provided f o r
i n the Code and t h a t , b e f o r e p a s s i n g upon t h e s e r u l e s , your Committee
d e s i r e s t o know -whether i t would be c o n t r a r y t o t h a t p r o v i s i o n of t h e
F e d e r a l Reserve Act r e f e r r e d t o above f o r member banks t o t a k e i n t o
c o n s i d e r a t i o n "the reasonable value of t h e i r customers' d e p o s i t b a l ances i n a n a l y z i n g accounts i n accordance w i t h a uniform p l a n t o be
approved by t h e Banking Code Committee f o r t h e purpose of determining
whether s e r v i c e charges should be a s s e s s e d a g a i n s t t h e i r customers,
and, i f so, t h e amount t o be a s s e s s e d :
Provided, That ( l ) t h e value
of each account t o t h e bank i s computed i n accordance w i t h a uniform
p l a n approved by t h e Banking Code Committee and (2) t h e banks r e q u i r e
a c t u a l reimbursement (without deduction of i n t e r e s t or of t h e e s t i m a t e d
value of t h e customers 1 balance t o the banks) f o r exchange c h a r g e s ,
c o l l e c t i o n charges, and o t h e r charges a r i s i n g out of s p e c i f i c t r a n s a c t i o n s f o r s p e c i f i c customers and a c t u a l l y paid or c r e d i t e d by t h e bank
on behalf of such customers•"
X-7696
A f t e r c a r e f u l c o n s i d e r a t i o n , t h e F e d e r a l Reserve Board i s of
t h e o p i n i o n t h a t a p r a c t i c e such as t h a t o u t l i n e d i n your l e t t e r
would n o t be c o n t r a r y t o t h a t p r o v i s i o n of S e c t i o n 19 of t h e F e d e r a l
Reserve Act which i s quoted above.
I n r e a c h i n g t h i s c o n c l u s i o n t h e Board has t a k e n p a r t i c u l a r l y
i n t o account t h e f a c t t h a t i t i s proposed, i n p r o v i s o No. 2, among
o t h e r t h i n g s , t h a t t h e banks w i l l r e q u i r e a c t u a l reimbursement f o r
exchange and c o l l e c t i o n c h a r g e s , w i t h o u t t h e d e d u c t i o n of i n t e r e s t
or of t h e e s t i m a t e d value of t h e customers' b a l a n c e s t o t h e b a n k s .
Such a p r a c t i c e would e l i m i n a t e any q u e s t i o n of i l l e g a l i t y which might
be occasioned by the a b s o r p t i o n by a bank of exchange or c o l l e c t i o n
charges i n an amount b e a r i n g a s u b s t a n t i a l l y d i r e c t r e l a t i o n s h i p t o
t h e amount of t h e b a l a n c e .
Very t r u l y y o u r s ,
(Signed)
Chester M o r r i l l
Chester M o r r i l l ,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7697
November 29» 1933*
SUBJECT:
Expense, Main Lines, Leased Wire
System, October, 1933 •
Dear Sir:
Inclosed herewith you w i l l f i n d two mimeographed
statements, X-7697-a and X-7697-b> covering i n d e t a i l opera t i o n s of the main l i n e s , Leased Wire System, during the
month of October, 1933*
P l e a s e credit the amount payable by your bank for
your share of the expense of the Leased Wire System, to the
Federal Reserve Bank of Richmond in your d a i l y statement of
c r e d i t s through the Gold Settlement Fund f o r the account of
the Federal Reserve Board, and advise the Federal Reserve
Bank of Richmond by ? i r e the amount and purpose of the c r e d i t .
Very t r u l y yours,
F i s c a l Agent.
Inclosures.
TO GOVERNORS OF ALL F. R. BANKS.
4 4 8
x-7697-a
REPORT SHOWING CLASSIFICATION AND NUMBER OF WORDS TRANSMITTED OVER MAIN LINES
OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF OCTOBER, 1933.
Business
reported
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total
Words sent by
New York chargeable to other
F. R. Banks ( l )
37,434
152,734
35,287
56,049
59,191
54,916
88,675
63,650
36,302
76,278
63,323
96,238
820,077
2,173
—
2,403
2,222
2,221
2,136
2,066
2,664
2,194
2,259
3,062
3,977
27,377
Net Federal
reserve
bank
business
Percent of t o t a l
bank business (*)
39,607
152,734
37,690
58,271
61,412
57,052
90,741
66,314
38,496
78,537
66,385
100,215
847,454
4.67
18.02
4.45
6.88
7.25
6.73
10.71
7.82
4.54
9.27
7-83
11.83
100*00
F. R. Board business .
. 328,526
Reimbursable business Incoming & Outgoing. . . . .
. . . . . .
1,175,980
. . . . . . .
Total words transmitted over main l i n e s .
(*)
These percentages used in calculating the pro r a t a share of l e a s e d wire expense a s shown
on the accompanying statement (X~7697-"b) •
(l)
Number of words s e n t by New York to other F. R. Banks for t h e i r sole b e n e f i t charged t o
banks indicated in accordance with a c t i o n taken at Governors' Conference
November 2 - 4 , 1925•
.
658,888
1,834,868
CD
x-7697-b
REPORT OF EXFEKSE MAIN LIMES
FEDERAL RESERVE LEASED SIRE SYSTEM, OCTOBER, 1933.
Name of Bank
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Federal Reserve Board
Total
Operators'
salaries
Operators'
overtime
$260.00
$ 1,284.14
22.00
—
225.00
—
306.66
—
358.00
—
270.00
3,895.00 (#) 16.00
—
195.00
216.90
287.00
.60
251.00
380.00
—
$38.60
$7,928.70
Wire
rental
$260.00
1,306.14
225.00
306.66
588.00
230.00 (&)
270.00
3,911.00
—
195.00
—
216.90
—
287.00
251.60
—
380.00
15,670.71
15,670.71
$23,868.01
$15,900.71
$
Reimbursable charges:
Treasury Department
$3,694.68
Reconstruction Finance Corporation . 3,616.10
Exp. Hat. Ekg. Emergency Act, 3~9~33 1,015.30
Comp. Currency Div. Insolv.ITat 1 l.Bks
81.12
Department of Agriculture
22.06
2.04
Federal Home Loan Bank Board
Farzp Credit Administration:
Federal Farm Loan Bureau
17.81
Federal Farm Board
121.72
Less Reimbursable Charges
(&) Main l i n e r e n t a l , Richmond-Washington
(#) Includes s a l a r i e s of Washington operators
(*) Credit
(a) Amount reimbursable to Chicago
Total
expenses
w
.
Pro r a t a
share of
total
expenses
$714.38
2,756.55
600.72
1,052.45
1,109.04
1,029.50
1,638.33
1,196.24
694.49
1,418.05
1,197.77
1,809.66
Credits
$260.00
1,306.14
225.00
306.66
588.00
270.00
3,911.00
195.00
216.90
287.00
251.60
380.00
$454.38
1,450.41
455.72
745.79
521.04
759.50
2 , 2 7 2 . 6 7 (*)
1,001.24
477.59
1,131.05
946.17
1,429.66
-
—
$15,297.18
Payable to
Federal
Reserve
Board
$8,197.30
$9,372.55
2,272.67 (a)
$7,099.88
$8,570.83
$15,297.18
Ol
O
FEDERAL RESERVE BOARD
WASHINGTON
X-7698
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
December 1, 1933,
SUBJECT:
Code Word covering Hew
Issue of Treasury B i l l s .
Dear Sir:
In connection with telegraphic transactions
i n Government s e c u r i t i e s between Federal reserve banks,
the code word "NOXFIE" has been designated to cover a
new issue of Treasury B i l l s , dated December 6, 1933,
and maturing March 7, 1934.
This word should be inserted i n the Federal
Reserve Telegraph Code book, following the supplemental
code word "NOXFEL" on page 172.
Very truly yours,
J. C. Obeli,
Assistant Secretary
TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.
X-76-99
FEDERAL RESERVE BOARD
452
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
December 2, 1933
Analysis of customers 1 accounts by member banks for purpose of determining whether
service charges should be assessed.
SUBJECT:
De&r Sirt
You w i l l f i n d inclosed a copy of a l e t t e r dated NovetiH
ber 24 addressed to the Federal Reserve Board by Mr. Ronald Ransom*
Chairman of the Banking Code Committee of the American Bankers Ass o c i a t i o n , and a copy of the Board's reply thereto dated November
28, 1933, i n regard to the question whether member banks may take
into consideration the reasonable value of their customers 1 deposit
balances i n analyzing accounts i n accordance with a uniform plan to
be approved by the Banking Code Committee for the purpose of determining whether service charges should be assessed against their customers.
I t w i l l be appreciated i f you w i l l advise a l l member banks
i n your d i s t r i c t of the views of the Federal Reserve Board as expressed i n i t s reply to Mr. Ransom's l e t t e r .
Very truly yours,
Chester Morrill
Secretary.
Intilosures.
TO ALL FEDERAL
$
RESERVE AGENTS.
X-7699-a
i
November 28, 1933.
453
Mr. Ronald Ransom, Chairman,
The Banking Code Committee,
Atlanta, Georgia.
Dear Mr. Ransom:
The Federal Reserve Board has given consideration to your l e t t e r of
November 24, 1933, in which you inquire whether or not the practice therein outlined would he considered contrary to that portion of Section 19 of the Federal
Reserve Act, as amended, which provides that, "No member bank s h a l l , d i r e c t l y
or i n d i r e c t l y by any device whatsoever, pay any i n t e r e s t on any deposit which
i s payable on demand".
It appears that A r t i c l e VIII, Paragraph ( 3 ) , of the Bankers Code of
Fair Competition, as approved by the President on October 3, 1933, requires
every clearing house, county association, county group, or State "bank a s s o c i a tion to adopt rules f i x i n g uniform service charges to be charged by banks whereby services rendered by banks shall be compensated for either by adequate b a l ances carried or by a scale of charges.
I t also appears from your l e t t e r that, in order to determine whether
the balance carried in an account i s s u f f i c i e n t to compensate the bank f a i r l y
for services rendered, i t i s necessary to analyze the account; that t h i s r e quires the establishment of uniform rules which must give consideration to the
value of the account and proper service charges against the account; and that
these charges are of two c l a s s e s :
f i r s t , general overhead expenses of the hank,
and second, out of pocket expenses, such as exchange, c o l l e c t i o n and other
charges a r i s i n g out of s p e c i f i c transactions for s p e c i f i c customers and actually
paid or credited by the bank on behalf of such customers.
It further appears that, under the Code, i t i s the duty of the Banking Code Committee to consider the rules which are being submitted for approval
-2by clearing houses and other banking groups provided for in the Code and that,
before passing upon these r u l e s , your Committee desires to know whether i t would
be contrary to that provision of the Federal Reserve Act referred to above for
member banks to take into consideration "the reasonable value of their customers'
deposit balances i n analyzing accounts i n accordance with a uniform plan to be
approved by the Banking Code Committee for the purpose of determining whether
service charges should be assessed against their customers and, i f so, the
amount to be assessed:
Provided, That ( l ) the value of each account to the bank
i s computed in accordance with a uniform plan approved by the Banking Code Committee and (2) the banks require actual reimbursement (without deduction of i n terest or of the estimated value of the customers 1 balance to the banks) for
exchange charges, c o l l e c t i o n charges, and other charges a r i s i n g out of s p e c i f i c
transactions for s p e c i f i c customers and actually paid or credited by the bank
on behalf of such customers."
After careful consideration, the Federal Reserve Board i s of the opinion that a practice such as that outlined i n your l e t t e r would not be contrary
to that provision of Section 19 of the Federal Reserve Act which i s quoted above.
In reaching t h i s conclusion the Board has taken p a r t i c u l a r l y into account the f a c t that i t i s proposed, i n proviso Ho. 2, among other things, that
the banks w i l l require actual reimbursement for exchange and c o l l e c t i o n charges,
without the deduction of i n t e r e s t or of the estimated value of the customers'
balances to the banks.
Such a practice would eliminate any question of i l l e g a l -
i t y which might be occasioned by the absorption by a bank of exchange or c o l l e c t i o n charges i n an amount bearing a substantially d i r e c t r e l a t i o n s h i p to the
amount of the balance.
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
X-7699-t
THE AMERICAN BANKERS ASSOCIATION
; 455
22 East 40th Street
New York, N. Y.
Washington, D. C.
November 24, 1933.
The Federal Reserve Board,
Washington, D. C.
Gentlemen:
A r t i c l e VII, Paragraph (3) of the Bankers Code of Fair Competition, as
approved by the President on October 3, 1933, provides that r u l e s s h a l l be adopted by a l l Clearing Houses f i x i n g uniform service charges whereby s e r v i c e s rendered by banks s h a l l be compensated for e i t h e r by adequate balances carried or "by
a scale of charges.
In order to determine whether the "balance carried i n an account i s s u f f i c i e n t to f a i r l y compensate the bank for s e r v i c e s rendered, i t i s necessary to
analyze the account. This requires the establishment of uniform r u l e s which must
give consideration to the value of the account and proper service charges against
the account. These charges are of two c l a s s e s : f i r s t , general overhead expenses
of the bank, and second, out of pocket expenses, such as exchange, c o l l e c t i o n and
similar charges a r i s i n g out of s p e c i f i c transactions f o r s p e c i f i c customers and
a c t u a l l y paid or credited by the bank on behalf of such customers.
Under the Code i t now becomes the duty of the Banking Code Committee to
consider the r u l e s of f a i r trade p r a c t i c e s which are being submitted f o r approval
by Clearing Houses and other banking groups provided f o r i n the Code. Before
passing upon these r u l e s of f a i r trade p r a c t i c e s , the Banking Code Committee des i r e s to know whether the Federal Reserve Board w i l l object to member "banks taking
into consideration the reasonable value of t h e i r customers T deposit balances i n
analyzing accounts i n accordance with a uniform plan to be approved by the Banking Code Committee for the purpose of determining whether service charges should
be assessed against t h e i r customers and, i f so, the amount to be assessed: Provided, That ( l ) the value of each account to the bank i s computed i n accordance
with a.uniform plan approved by the Banking Code Committee and (2) the banks r e quire actual reimb-orsement (without deduction of i n t e r e s t or of the estimated
value of the customers 1 balance to the banks) f o r exchange charges, c o l l e c t i o n
charges, and other charges a r i s i n g out of s p e c i f i c transactions f o r s p e c i f i c customers and a c t u a l l y paid or credited by the bank on behalf of such customers.
In other words, we would l i k e to know whether such a p r a c t i c e would be
considered contrary to the f o l l o w i n g provisions of Section 19 of the Federal Reserve Act, as amended by the Banking Act of 1933: "No member s h a l l , d i r e c t l y or
i n d i r e c t l y by any device whatsoever, pay any i n t e r e s t on any deposit which i s payable on demand".
Very t r u l y yours,
(Signed)
Ronald Ransom
Ronald Ransom, Chairman,
The Banking Code Committee.
1-7701:
4 5 6
INTERPRETATION OF BANKING ACT OF 1933.
(Copies to be sent to a l l Federal reserve "banks.)
December 1, 1933.
Mr.
Dear Sir:
Receipt i s acknowledged of your l e t t e r of September 16, 1933,
addressed to the Governor of the Federal Reserve Board, i n which you r e quest to be advised of any ruling of the Federal Reserve Board i n respect
to the meaning of the words "bona f i d e owner i n h i s own right", as used i n
Section 31 of the Banking Act of 1933.
The Board has not issued any such
ruling, and i t does not f e e l that i t should undertake at t h i s time to def i n e i n d e t a i l the words to which you have reference.
It appears from your l e t t e r , however, that one of your subscribers
desires to know whether the provisions of Section 31 would render unlawful
the pledge by a director of a member b%nk of h i s q u a l i f y i n g shares as c o l l a t e r a l security for a loan,
I t i s the opinion of the Board that, a f t e r
one year from June 16, 1933, the e f f e c t i v e date of Section 31, a director
of a State member bank must own the required qualifying shares i n h i s own
r i g h t , and that such shares may not lawfully be hypothecated or pledged as
security for a loan or debt a f t e r that date.
This conclusion f i n d s support
i n the fact that Section 5146 of the Revised Statutes, which has been amended
i n part by s e c t i o n 31, provides that every director of a national bank must
"own i n h i s own right" qualifying shares i n stated amounts, and that Section
X-7701
-2-
5147 of the Revised S t a t u t e s , which i s i n f u l l force and e f f e c t , requires
each director of a national bank to take an oath that he i s the "owner i n
good f a i t h , and i n h i s own r i g h t , of a number of shares of stock required by
t h i s t i t l e , subscribed by him, or standing i n h i s name on the books of the
association, and that the same i s not hypothecated, or i n any way pledged,
as security for any loan or debt".
The underscored portion of Section 5147
indicates that Congress considered the words "own i n h i s own right", as used
i n Section 5146, to mean that qualifying shares of a director of a national
bank should be unpledged and unhypothecated, and there does not appear to be
any reason why the words "owner in h i s own right", as used in Section 31 of
the Banking Act of 1933, should be construed d i f f e r e n t l y .
Very truly yours,
(Signed)
' Chester Morrill
Chester Morrill,
Secretary.
458
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-7702
December 7, 1933*
SUBJECT;
Examination of State Member Banks i n
Connection with the Required C e r t i f i c a t i o n
to the Federal Deposit Insurance Corporation*
Dear Sir:
Under the provisions of subsection (e) of Section 12B of
the Federal Reserve Act, every State member bank must become a
class A stockholder of the Federal Deposit Insurance Corporation
on or before July 1, 1934, or i t s membership in the Federal Reserve
System must be terminated#
Upon receipt by the Federal Deposit In-
surance Corporation of an application by a State member bank for
class A stock i n the Corporation, the Federal Reserve Board w i l l
be required under the law "to c e r t i f y upon the basis of a thorough
examination of such bank whether or not the a s s e t s of the applying
bank are adequate to enable i t to meet a l l of i t s l i a b i l i t i e s t o
depositors and other creditors as shown by the books of the bank."
This i s called to your attention at t h i s time i n order that
you may make arrangements to have current examinations made of a l l
of the State member banks in your d i s t r i c t on the basis of which the
Board may discharge the duties imposed by law.
A copy of the report
of each such examination together with an analysis thereof and your
recommendation as to the action t o be taken should then be forwarded
X-7702
-2-
to the Board as soon as possible in order that the Board may have
adequate opportunity to consider each case and t o execute prior t o
July 1, 19 34, an appropriate c e r t i f i c a t e with respect to each State
member bank.
In view of the importance of t h i s matter and the limited
time in which the work must be accomplished, i t w i l l be appreciated
i f you w i l l advise the Board as t o your plans in t h i s r e s p e c t .
Very t r u l y yours,
fr)
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
cnyu-t^
FEDERAL RESERVE BOARD
WASHINGTON
A D D R E S S OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
X-7703
December 8, 1933
Dear Sir:
There i s inclosed herewith a copy of a l e t t e r
addressed by the Board on December 5, 1933, to Mr. Harris
Creech, President of the Cleveland Clearing House Associat i o n , Cleveland, Ohio, with regard to the absorption by
member banks i n Ohio of the tax levied by the State on
deposits i n such banks.
It w i l l be noted that the ruling
set f o r t h i n the l e t t e r i s applicable a l s o to member banks
i n Kentucky and other States having similar laws regarding
the taxation of bank deposits on an ad valorem b a s i s , and
that i t supersedes the ruling contained i n X-7602, dated
September 21, 1933.
Very truly yours
Chester Morrill
Secretary.
Inclosure
TO ALL TOERAL RESERVE AGENTS
COPY
X-7703-
December 5, 1933.
Mr. Harris Creech, President,
Cleveland Clearing House Association,
706 Federal Beserve Bank Building,
Cleveland, Ohio.
Dear Mr. Creech:
This refers to your l e t t e r of October 13, 1933,
requesting a ruling of the Federal Reserve Board on the quest i o n whether that provision of section 19 of the Federal Reserve Act, as amended by the Banking Act of 1933, which provides
t h a t , "No member bank s h a l l , d i r e c t l y or i n d i r e c t l y by any dev i c e whatsoever, pay any i n t e r e s t on any deposit which i s payable
on demand", prevents Ohio banks from continuing their present
practice of absorbing and paying the Ohio two mill tax upon dep o s i t s as an operating expense of each bank.
A ruling upon this question has been delayed by
the f a c t that i t bore a very close r e l a t i o n to another question
pending before the Board which was of general importance and some
d i f f i c u l t y and which required extensive i n v e s t i g a t i o n and numerous conferences before i t could be disposed of; and i t was f e l t
that both questions should be considered together.
The Board has heretofore ruled that the absorption
by a member bank of taxes levied by the State of Kentucky upon dep o s i t s and paid by such bank "for and on b e h a l f , and as the agent",
X-7703-a
Mr. Harris Creech - 2
of i t s depositors would constitute an indirect payment of i n t e r e s t
within the meaning of section 19 of the Federal Reserve Act, as amended,
since the amount of the tax paid "by such member hank represented a f i x e d
percentage of the depositors' balances.
It was necessary for the Board
to reconsider that ruling in the l i g h t of the "brief f i l e d by your counsel
"because the p r a c t i c a l e f f e c t of the Kentucky s t a t u t e s regarding taxes on
"bank deposits seems to "be s u b s tantially the same as that of the Ohio
statutes on t h i s subject.
Upon a careful reconsideration of t h i s subject, i n the
l i g h t of the brief f i l e d by Counsel for the Cleveland Clearing House
Association, the Federal Reserve Board has rcached the conclusion that
the absorption of such taxes should not be regarded as an indirect
payment of i n t e r e s t within the meaning of s e c t i o n 19 of the Federal
Reserve Act, as amended; because such taxes represent a certain percentage of the funds on deposit on a s i n g l e day of the tax year and
have no r e l a t i o n either to the average amount on deposit for any given
period of time or to the length of time for which the bank has the use
of the money.
These considerations and other considerations pointed
out by your counsel make the absorption of such taxes distinguishable
from the absorption of such items as exchange and c o l l e c t i o n charges
i n an amount equal to a f i x e d percentage of a deposit balance, which
has been held by the Federal Reserve Board to be an indirect payment
of i n t e r e s t contrary to section 19 of the Federal Reserve Act.
4 6.3
X-7703-a
Mr. Harris Creech - 3
The Federal Reserve Board i s of the opinion, therefore,
that the absorption by member banks i n Ohio of the Ohio two m i l l tax
upon deposits as an operating expense of each "bank does not, i n i t s e l f
and i n the absence of s p e c i a l factors i n particular cases which might
indicate the contrary, constitute a payment of i n t e r e s t by such banks
and i s not inconsistent with that provision of s e c t i o n 19 of the
Federal Reserve Act which forbids any member bank, d i r e c t l y or i n d i r e c t l y by any device whatsoever, to pay any i n t e r e s t on any deposit
which i s payable on-demand.
The Board i s a l s o of the opinion that the
amount of taxes so absorbed need not be taken into consideration i n
determining whether member banks are paying i n t e r e s t on time deposits
at a rate i n excess of
the limitations prescribed by the Federal
Reserve Board, pursuant to that provision of s e c t i o n 19 of the Federal
Reserve Act which requires the Federal Reserve Board from time to time
to limit by regulation the rate of i n t e r e s t which may be paid by
member banks on time deposits.
This ruling i s also applicable to member banks i n
Kentucky and other s t a t e s having similar laws regarding the taxation
of bank deposits on an ad valorem b a s i s .
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7704
December 9, 1933.
SUBJECT:
Code Word Covering New Issue of
Treasury C e r t i f i c a t e s of Indebtedness .
Dear Sir:
In connection with telegraphic transactions
"between Federal reserve banks covering Government
s e c u r i t i e s , the following code word has been d e s i g nated to cover a new issue of Treasury C e r t i f i c a t e s
of Indebtedness:
"NOWHOBO" 24$ Treasury C e r t i f i c a t e s of
Indebtedness, Series TD-1934,
to be dated December 15, 1933,
and to mature December 15, 1934.
This code word should be inserted i n the
Federal Reserve Telegraph Code book, following the
supplemental code word "NOWHOBIER" on page 172.
sy truly yours,
J" • C • Noel 1,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7705
December 9, 1933.
SUBJECT:
General Policy of Treating Appreciat i o n and Depreciation i n S e c u r i t i e s
i n Connection with Applications for
Membership.
Dear Sir:
There i s inclosed for your information, a copy
of a l e t t e r which the Board has addressed to the Federal Reserve Agent at the Federal Reserve Bank of
Dallas
with regard to the general policy of treating
appreciation and depreciation i n s e c u r i t i e s i n connect i o n with applications for membership.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
TO ALL F. R. AGENTS EXCEPT DALLAS.
:
f:Ob
X-7705-a
COPY
December 9, 1933.
Mr. C. C. Walsh,
Federal Reserve Agent,
Federal Reserve Bank of D a l l a s ,
D a l l a s , Texas.
Dear Mr. Walsh:
Reference i s made to your l e t t e r of October 21, 1933, i n which
you r e f e r to the Board's l e t t e r of September 11, 1933, X-7581, containing a statement of general p o l i c y with respect to membership applications
and ask f o r advice as to what extent appreciation i n s e c u r i t i e s may be
deducted from the depreciation i n other s e c u r i t i e s .
Among the p r i n c i p a l s
set f o r t h i n the c i r c u l a r l e t t e r X-7581 was the f o l l o w i n g :
"All depreciation on stocks and defaulted s e c u r i t i e s and
a l l dep'-N e i a t i o n on other s e c u r i t i e s not i n the four
highest grades should be eliminated prior to admission
to membership."
You ask s p e c i f i c a l l y whether, i n computing the amount of dep r e c i a t i o n which must be eliminated prior to admission to membership, i t
i s permissible to deduct from the depreciation i n s t o c k s , d e f a u l t e d
s e c u r i t i e s and i n other s e c u r i t i e s not i n the four highest grades, (1)
appreciation i n s e c u r i t i e s within the four highest grades , and (2) app r e c i a t i o n i n stocks and such bond i s s u e s as are not rated within the
four highest grades.
While no general p o l i c y applicable to every case can be
e s t a b l i s h e d , i t has "been the general p o l i c y to d i v i d e s e c u r i t i e s i n t o
the f o l l o w i n g groups and to t r e a t the net depreciation i n each group as
a unit:
4&D
X-7705-a
Mr. C. C. Walsh - (2)
Group 1.
(a) Issues of the United States Government.
("b) Issues of Federal Land and Intermediate Credit
Banks.
(c) I s s u e s , not i n default and considered of good
standing, of States and municipalities i n the
United States.
(d) Miscellaneous i s s u e s i n the four highest grades
as c l a s s i f i e d "by a recognized investment
service organization regularly engaged i n the
"business of rating or grading s e c u r i t i e s .
Group 2.
(a) Miscellaneous i s s u e s "below
grades as c l a s s i f i e d "by a
ment service organization
the "business of rating or
("b) Issues of Joint Stock Land
(c) Other issues not rated.
the four highest
recognized i n v e s t regularly engaged i n
grading s e c u r i t i e s ,
Banks.
Group 3.
Defaulted i s s u e s , including defaulted i s s u e s of
States ana municipalities in the United States,
Group 4,
Stocks,
As a condition of membership, net depreciation i n groups 2, 3,
and 4 must "be charged off or otherwise eliminated prior to admission to
membership and net depreciation i n group 1 must at l e a s t "be covered "by
surplus, undivided p r o f i t s , and applicable reserves,
Net appreciation i n group 1 may "be deducted from the depreciation
to "be charged o f f i n the other groups.
Net appreciation in either group
2, 3 or 4, a f t e r f u l l y providing for any depreciation e x i s t i n g i n group 1,
may "be deducted from the depreciation to "be charged o f f i n other groups.
4 6 8
X-7705-a
Mr, C. C. Walsh - (3)
It w i l l be noted that issues of States and municipalities ( i n *
eluding various p o l i t i c a l subdivisions) i n the United States may "be
included in group 1 i f not i n d e f a u l t , even though such i s s u e s may not
be rated by a recognized investment service organization.
>
Whether a
particular i s s u e should be included i n group 1(c) or i n group 2(c) depends upon the circumstances involved and the determination by the
Federal Reserve Agents and their examiners whether the security i s of
;
a nature which the bank should be permitted to carry at book value, or
whether i t i s of a character which should require that i t be written
down.
Very truly yours,
i
(Signed) Chester Morrill
Chester Morrill,
Secretary.
X-7706
INTERPRETATION OF BANKING ACT OF 1933
(Copies to be sent to a l l Federal Reserve Banks)
December 6, 1933.
Mr. J. H. Case,
Federal Reserve Agent,
Federal Reserve Bank of Hew York,
New York, New York.
Dear Mr. Case:
Reference
i s made to your l e t t e r of November 17, 1933,
transmitting a copy of a l e t t e r dated November 15, 1933, from
Messrs.
,
,
and
client,
asking whether their
, a member bank, i s to be r e -
garded as a "correspondent bank" of a certain dealer i n s e c u r i t i e s
within the meaning of Section 32 of the Barking Act of 1933, and
of the Board's Regulation R.
The l e t t e r from Messrs.
,
,
and
s t a t e s t h a t , among the other transactions which i t has with the
dealer, the
extends credit accommoda-
tions to the dealer by purchasing high-grade municipal bonds from the
dealer under ordinary repurchase agreements, such bonds having been
acquired by the dealer with the approval of the bank, either by
purchase on the market or, i n the case of new i s s u e s , from the munic i p a l i t y which i s s u e s them.
The doaler i s to keep these bonds "marked
to the market" by making cash payments to the bank equal i n amount
to any decrease i n the market value of the bonds so purchased.
As
X-7706
:
41%)
Mr. J. H. Case — 2
part of i t s compensation for these s e r v i c e s , the bank receives the i n t e r e s t on the "bonds held under the repurchase agreement; and a percentage
of the d e a l e r ' s net p r o f i t on a r e s a l e of the "bonds "by the dealer.
The
l e t t e r s t a t e s that the "bank i s not l i a b l e for any l o s s e s i n connection
with such transactions and suggests that, under these circumstances,
the transactions may be regarded as the performance of ordinary banking
functions.
I t would seem, however, that these transactions involve more
than the performance of ordinary banking functions on behalf of the
dealer, that the bank i s "regularly associated with" the dealer i n
connection with the purchase and sale of such bonds and possibly in
connection with the underwriting and f l o t a t i o n thereof, and that,
therefore, the bank i s a "correspondent bank" within the d e f i n i t i o n
of that term i n the Board's Regulation R.
Of course, as you know, Section 32 has reference only to
business transacted a f t e r January 1, 1934, and no permit would be
required i f the bank should only perform ordinary banking functions
for the dealer a f t e r that date.
An extra copy of this l e t t e r i s inclosed i n case you desire
to transmit i t to Messrs.
Inclosure.
,
_,
and
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
.
X-7710
:
4 7
INTERPRETAT I ON OF BANKING ACT OF 1933
(Copies to "be sent to a l l Federal Reserve Banks)
December 7, 1933.
Mr.
,
Dear Sir:
Reference i s made to your l e t t e r s of October 13 and
October 18, 1933, i n which you inquire whether 'a national "bank
may adopt a form of c e r t i f i c a t e of deposit which w i l l mature at
the end of s i x or twelve months and which w i l l give the holder
the right to reduce the term of the c e r t i f i c a t e to an earlier
maturity upon giving 30 days' notice, in which event the c e r t i f i cate would be paid on such e a r l i e r date but without i n t e r e s t .
The Board does not look with favor upon the use of c e r t i f i c a t e s of deposit of t h i s character.
However, since i t ap-
pears that, under the terms of the c e r t i f i c a t e i t s e l f the deposit
cannot be withdrawn u n t i l a f t e r t h i r t y days from ths date of the
deposit, the Board i s of the opinion that i t must be regarded as
a time c e r t i f i c a t e of deposit within the meaning of Section 19 of
the Federal Reserve Act and within the meaning of Regulation Q,.
While i t may be withdrawn at any time upon the expiration of
t h i r t y days' written notice actually given by the depositor', i t
would appear that, i f such notice i s not given, the deposit could
not be withdrawn except upon the expiration of s i x months from the
date of the c e r t i f i c a t e or upon the expiration of twelve months
X-7710
4 7a P
•~ w "
Mr.
-
2 -
from the date of the c e r t i f i c a t e ; so that i t roust "be regarded either
as a deposit payable only after t h i r t y days' written notice or as a
deposit payable at the expiration of a certain s p e c i f i e d time, which
i s not l e s s than t h i r t y days subsequent to the date of the c e r t i f i c a t e .
Very truly yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary.
X-7711
:
4 7 3
INTERPRETATION OF BANKING ACT OF 1933.
(Copies to be sent to a l l Federal Reserve Banks)
December 11, 1933.
Mr. Xi. B. Williams,
Federal Reserve Agent,
Federal Reserve Bank of Cleveland,
Cleveland, Ohio.
Dear Mr. Williams:
This refers to your l e t t e r of September 12, 1933,
i n c l o s i n g a copy of a form of notice of intention to withdraw savings
deposits from the
'
Trust Company of
,
•
You s t a t e that i t i s proposed to reprint t h i s form so as to include
therein a statement to the e f f e c t that, i f the intended withdrawal i s
not accomplished within a s p e c i f i e d period a f t e r the date of maturity,
the funds are to be reinstated as savings deposits to the credit of
the depositor's account; and you request to be advised, whether, i n
the opinion of the Board, a notice of intention to withdraw such dep o s i t s containing such a provision would be in harmony with Section
V(f) of the Board's Regulation Q,.
As you know, the above-mentioned s e c t i o n of Regulat i o n Q, provides t h a t , a f t e r the expiration of the period of notice
given with respect to the intended withdrawal of a savings deposit,
such deposit becomes a deposit payable on demand; but that the owner
of such deposit may advise the bank i n writing that the deposit w i l l
not be withdrawn or that i t w i l l again be subject to the requirements
applicable to savings deposits, i n which event such deposit again
c o n s t i t u t e s a savings deposit a f t e r the date upon which such advice
i s received by the bank.
I t i s not required that such written notice
; 474
X-7711
Mr. L. B. Williams - 2
rzith respect to the depositor's intention not to withdraw the deposit
must be given a f t e r the expiration of the period of notice of h i s
intention to withdraw the deposit.
After careful consideration of this matter, the Board i s
of the opinion that the provision proposed to "be added to the inclosed
form of notice of intention to withdraw savings deposits would cons t i t u t e written notice within the meaning of the s e c t i o n i n question,
and t h a t , i f the deposit i s not withdrawn within the period s p e c i f i e d ,
i t would again "become a savings deposit " i t h i n the meaning of Regulat i o n Q, upon the expiration of such period.
It should "be noted, however, that no i n t e r e s t may be paid
by the bank for the period intervening between the date of the
expiration of the period of notice with respect to intended withdrawal and the date on which the deposit again becomes a savings
deposit,
I t should also be noted that, i f the provision here under
consideration be adopted by the bank, the requirements of Section VI
of Regulation Q,, r e l a t i n g to the withdrawal of savings d e p o s i t s , must
be observed.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
# CO
X-7712
IITTEEPEBTATIOU OF BASKING ACT OF 1933
(Copies to be sent to a l l Federal Reserve Banks)
December 8, 1933.
Mr. C. A. Worthington,
Deputy Governor,
Federal Reserve Bank of Kansas City,
Kansas City, Missouri.
Dear Mr. Worthington:
This i s i n reply to your l e t t e r s of September 5
and December 1, 1933, inquiring as to the proper c l a s s i f i c a t i o n
for reserve purposes of savings deposits with respect to which
the requirement of notice of intended withdrawal has been waived.
It i s the opinion of the Federal Reserve Board that the
payment by a member bank of a l l or a part of a savings deposit without required n o t i c e of intended withdrawal does not a f f e c t the
c l a s s i f i c a t i o n of other deposits i n the bank and accordingly that
i t does not convert savings deposits into deposits payable on demand.
Deposits which constitute savings accounts within the mean-
ing of Regulation D, therefore, remain savings accounts notwithstanding such a waiver of notice of intended withdrawal and are subj e c t to a corresponding reserve requirement.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
X-7713
INTERPRETATION 0? BAHKIUG- ACT OF 1933.
476
(Copies to "be sent to a l l Federal Reserve Banks)
December 11, 1933.
Mr. George W. Morris, Governor,
Federal Reserve Bank of Philadelphia,
Philadelphia, Pennsylvania.
Dear Governor Norris;
Receipt i s acknowledged of your l e t t e r s of November 8
and November 21, 1933, regarding the withdrawal of savings d e p o s i t s .
You s t a t e that i t i s the practice of some hanks i n
to
permit withdrawals from savings deposits without n o t i c e , i n cases of
emergency, of an amount s u f f i c i e n t to meet the emergency, and inquire
i f , a f t e r a statement of the emergency and approval "by an o f f i c e r of
the hank, the depositor i s allowed to withdraw a s p e c i f i e d sum of h i s
savings deposit without n o t i c e , the bank must permit the withdrawal
of the same s p e c i f i e d sum by a l l depositors without n o t i c e .
Under the provisions of subsection (a) of Section VI,
Regulation Q,, the payment by a member bank of any portion or percentage
of the savings deposits of any depositor without requiring notice of
intended withdrawal can only be made on condition t h a t , upon request
and without requiring such n o t i c e , i t s h a l l pay the same portion or
percentage of the savings deposits of every other depositor which are
subject to the same requirement,
As indicated i n the Board's l e t t e r of
November 6, 1933, (X-7671), the word "portion", as here used, i s to be
interpreted as including a s p e c i f i e d amount.
The Board i s of the opin-
i o n , therefore, that i f a member bank pay any s p e c i f i e d sum of a savings
X-7713
Mr. George W. Horris - 2
deposit of a depositor "because of an emergency or for any other reason
without requiring n o t i c e of intended "dthdravral, such "bank would "be
required to pay the same s p e c i f i e d amount of the savings d e p o s i t s of
every other depositor which are subject to the same requirement regardl e s s of the purpose for ~rhich the withdrawals are made.
The f a c t that
an emergency e x i s t s which j u s t i f i e s the withdrawal of the deposit cannot
"be regarded as a "requirement" to which such deposit i s subject within
the meaning of the r e g u l a t i o n .
Very truly yours,
(Signed) Chester Morrill
Chester M o r r i l l ,
Secretary.
X-7714
INTERPRETATION OF BANKING- ACT OF 1933
(Copies to be sent to a l l Federal Reserve Banks)
December 9, 1933,
Dear Mr.
This i s i n reply to your l e t t e r of November 8, 1933, with
enclosures, i n which you request' a ruling upon the question whether
the absorption by member banks of the Federal Reserve System of the
tax imposed upon bank deposits by the laws of Indiana i s i n v i o l a t i o n
of the provision of Section 19 of the Federal Reserve Act which f o r bids a member bank to pay i n t e r e s t , d i r e c t l y or i n d i r e c t l y by any
device whatsoever, on any deposit "hich i s payable on demand.
Under the Indiana Intangibles Tax Acts, a copy of which was
inclosed with your l e t t e r , i t appears that the deposits of every bank
in Indiana are assessed to the respective owners thereof and taxed at
the rate of 25^ per annuo* upon each $100 or f r a c t i o n a l part thereof
and that such taxes are computed according to the amounts on deposit
i n such banks on the l a s t day of each month i n each year.
Each bank,
at i t s e l e c t i o n , may pay the taxes assessed against i t s depositors or,
i f i t e l e c t s not to pay such taxes, i s required to deduct the amount
thereof from the deposits against which such taxes are assessed or
from i n t e r e s t thereon and to pay the amount so deducted to the county
treasurer.
I t i s understood that such taxes represent a c e r t a i n per-
X-7714
4.71
____________________ — 2
centage of the funds on deposit on the l a s t day of each month and
have no r e l a t i o n either to the average amount on deposit for any given
period of time or to the length of time for which the "bank has the use
of the money.
After consideration of the matter, the Federal Reserve Board
i s of the opinion that the absorption "by member banks bf the Indiana
tax on deposits as an operating expense of each "bank does not, i n
i t s e l f and i n the absence of special factors in particular cases which
might indicate the contrary, c o n s t i t u t e a payment of i n t e r e s t "by such
tanks and i s not i n c o n s i s t e n t with that provision of Section 19 of the
Federal Reserve Act which forbids any member "bank, d i r e c t l y or i n d i r e c t l y "by any device whatsoever, to pay any i n t e r e s t on any deposit
which ispayable on demand.
The Board i s also of the opinion that the
amount of such taxes so absorbed need not "be taken i n t o consideration
i n determining whether member "banks are paying i n t e r e s t on time dep o s i t s at a rate i n excess of the limitations prescribed "by the Federal
Reserve Board pursuant to that provision of Section 19 of the Federal
Reserve Act which requires the Board from time to time to limit "by
regulation the r a t e of i n t e r e s t which may "be paid "by member banks on
time d e p o s i t s .
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
X-7715
December 13, 1933.
The following telegram was sent to a l l Federal Beserve
Agents, under date of December 12, 1933:
TRAITS 1921.
In advising Board of payments on subscriptions
to Federal reserve bank stock by organizing national banks
please show number of shares applied for and date applicat i o n was forwarded to Board.
For t h i s purpose the meaning
of code word "1TARRATEDLY" on page 166 of Federal Reserve
Telegraph Code book i s changed e f f e c t i v e immediately to read
as follows:
"(Maine and location of national bank) has today
made required payment on account of subscription to (number
of shares) of stock of t h i s bank, application for which was
forwarded to Federal Reserve Board on (date) with recommendat i o n that the stock be a l l o t t e d " .
FEDERAL RESERVE BOARD
WASHINGTON
a d d r e s s o f f i c i a l c o r r e s p o n d e n c e TO
the federal reserve board
X-7716
December 14, 1933,
Dear Sir:
In the Board's l e t t e r X-7499 of July 15, 1933, on the subject
"Interpretations of Banking Act of 1933" reference was made to the
arrangement under which l e t t e r s and telegrams containing interpretations of the Banking Act of 1933 are mimeographed and sent to a l l
Federal reserve agents, each such mimeographed communication being
given an X number, and the statement being made that "* * * unless
otherwise indicated, the communications received from the Board i n
t h i s form are not for distribution outside of the Federal reserve
bank".
It has been assumed that i t was generally understood that
the same rule applied to other X l e t t e r s , but i t has come to the
a t t e n t i o n of the Board that X l e t t e r s have been made a v a i l a b l e to
persons outside the Federal reserve banks without prior permission
from the Board, For example, in a recent hearing before the Board
a representative of a bank applying for membership referred to an
X l e t t e r by number, date, and name of the Federal reserve agent to
whom the l e t t e r i n i t s original form had been addressed, and quoted
from i t .
In addition, several service organizations have requested
that they be placed on the Board's mailing l i s t s for copies of X
X-7716
4
2 *•
letters.
Such requests, of course, have not "been granted.
In the circumstances, the Board w i l l appreciate i t i f
you w i l l see that appropriate instructions are issued to a l l
members of your s t a f f and a l l o f f i c e r s and employees of the
Federal reserve bank that, while the information contained in
X l e t t e r s may he u t i l i z e d to the extent that may he appropriate
according to circumstances i n answering inquiries and otherwise
i n performing their duties, such communications, unless otherwise
indicated therein or subsequently authorized "by the Board, are
not to he used for d i s t r i b u t i o n or made available to persons
outside of the Federal reserve bank.
Very truly yours,
Chester Morrill,
Secretary.
TO ALL F. R. AGEHTS.
FEDERAL RESERVE BOARD
4^3
WASHINGTON
address official correspondence t o
the federal reserve board
X-7718
December 15, 1933.
SUBJECT:
Code Word Covering New Issue
of Treasury B i l l s .
Dear Sir:
In connection with telegraphic transactions i n
Government s e c u r i t i e s "between Federal reserve "banks,
the code word "UOXFOX" has been designated to cover a
new i s s u e of Treasury B i l l s , dated December 20, 1933,
and maturing March 21, 1934.
This word should be inserted i n the Federal
Reserve Telegraph Code book, following the supplemental
code word "UOXFIE" on page 172.
Very truly yours,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BAiTKS.
X-7719
4 8 4
niTEREBETATIOM OF BANKING ACT OF 1933
(Copies to "be sent to a l l Federal Reserve Banks)
December 16, 1933»
Mr. E. R. Woodson, Vice President,
The Railroad Credit Corporation,
805 Transportation Building,
Washington, D. C.
Dear Mr, Woodson:
Receipt i s acknowledged of your l e t t e r of December 4, 1933,
i n which you ask whether Section 8k .of the Clayton Act applies to d i r ectors, o f f i c e r s or employees of "banks "organized or operating under
the laws of the United States" who are serving at the same time as d i r e c t o r s , o f f i c e r s or employees of the Railroad Credit Corporation.
I t i s understood that pursuant to an understanding reached
by a number of railroads and the Interstate Commerce Commission, funds
were made a v a i l a b l e to the Railroad Credit Corporation by c e r t a i n r a i l roads i n order that that Corporation might advance such funds to other
railroads which were i n need of a s s i s t a n c e .
The Corporation i s prohibited
from making any loans a f t e r May 31, 1933, but, i n order to provide for
the orderly l i q u i d a t i o n of loans previously made, the Corporation i s
authorized to extend the time within which loans must be repaid.
It is
understood that such extensions sometimes take the form of an agreement
extending the time, and sometimes take the form of a "renewal" of the
obligation.
You s t a t e that the loans are being reduced from time to time
and that renewals are never for an amount greater than the amount then
outstanding.
X-7719
485
Mr. E. E. Woodson - 2
Section 8A. applies to a corporation which "shall 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, the e f f e c t i v e
date of that s e c t i o n .
The lender i n the present case does not propose
to make any ttnew" loans i n the sense of loans to new "borrowers or further
loans to e x i s t i n g "borrowers.
Therefore the question now presented i s
whether the f a c t that the lender gives to the "borrower additional
time to repay a loan previously made "brings the lender within the
I
provisions of Section 8A. I t appears that t h i s question should "be
answered i n the negative.
If the extension of time i s accomplished merely "by allowing the e x i s t i n g obligation to "be past due, i t would seem that there
could "be no question "but that Section 8A would "be inapplicable, and
the same would apparently he true i f there were merely an extension
of time within which the e x i s t i n g debt might be paid.
A question
a r i s e s when the transaction by which such an extension of time i s
given takes the form of the delivery of a new note i n place of the
old note, since such a transaction i s i n form the making of a new
loan.
In substance, however, the loan i s the same loan and the bor-
rower has merely been given more time to repay i t .
I t would seem
that Section 8A, which was designed to prevent the undue use of bank
credit for the speculative carrying of or trading i n s e c u r i t i e s , should
not be construed so as to prevent the orderly l i q u i d a t i o n of loans
previously made, particularly in view of the f a c t that the s e c t i o n has
reference only to loans made a f t e r the end of the year 1933, and, theref o r e , obviously has reference to future loans and not loans a c t u a l l y
made i n the p a s t .
Accordingly, i t appears that the s t a t u t e should not
X-7719
Mr. E. R. Woodson - 3
be construed as applying to transactions which, in substance, are merely
the extension of time within which loans previously made may he repaid,
even though i n some instances the form of the transaction granting such
an extension of time may take the form of a renewal note.
Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.
X-7720
IETERPHETATIOH OF BANKBTG- ACT OF 1933
4>
(Copies t o "be sent to a l l Federal Reserve Banks)
Dec erab er 7 , 1933.
Mr.
, President,
Corporation,
v
*
Dear S i r :
Receipt i s acknowledged of your l e t t e r of November 29,
1933, i n which you ask whether Section 32 of the Banking Act of
1933 i s a p p l i c a b l e to a director of a member bank of the Federal
Reserve System who i s a l s o serving as a director of your corporation.
You s t a t e that the s o l e business of your corporation i s
the holding f o r investment of the majority of the c a p i t a l stock
of a trust company i n
County, the majority of the cap-
i t a l stock of a t i t l e and mortgage company, and the majority of
the c a p i t a l stock of an investment company, and that your corporat i o n i s , t h e r e f o r e , only a holding company which holds the control
of three operating companies.
I t does not appear that t h e phrase "engaged primarily i n
the business of purchasing, s e l l i n g , or n e g o t i a t i n g s e c u r i t i e s " i n
»
Section 32 i s a p p l i c a b l e to a corporation whose s o l e b u s i n e s s i s
that of a holding company.
Accordingly, Section 32 would not be
a p p l i c a b l e to the s e r v i c e of a d i r e c t o r of a member bank under the
circumstances described above.
Very t r u l y yours,
(Signed) Chester Morrill
Chester M o r r i l l ,
Secretary.
FEDERAL RESERVE BOARD
488
WASHINGTON
address official correspondence t o
the federal reserve board
X-7721
December 19, 1933.
SUBJECT:
D i r e c t o r s , o f F e d e r a l Reserve Banks
and Branches A f f e c t e d by S e c t i o n 8A
of t h e Clayton A n t i t r u s t A c t .
Dear S i r :
The Board has been informed t h a t some of t h e d i r e c t o r s of
F e d e r a l r e s e r v e banks and t h e i r branches a r e s e r v i n g as d i r e c t o r s ,
o f f i c e r s , employees or p a r t n e r s of non-banking o r g a n i z a t i o n s which
o c c a s i o n a l l y make loans secured by s t o c k or bond c o l l a t e r a l .
As you
know, such s e r v i c e s a r e p r o h i b i t e d by S e c t i o n 8A of t h e Clayton Act,
and t h e F e d e r a l Reserve Board i s w i t h o u t a u t h o r i t y t o i s s u e p e r m i t s
i n such c a s e s , as i t s a u t h o r i t y t o i s s u e p e r m i t s w i t h r e s p e c t t o t h e
p r o v i s i o n s of t h e Clayton Act i s l i m i t e d t o p e r m i t s c o v e r i n g t h e s e r v i c e of banking i n s t i t u t i o n s .
In t h i s connection r e f e r e n c e i s made
t o t h e B o a r d ' s l e t t e r of November 10, 1933, X-7677.
The v e r y broad language of t h e s t a t u t e has given r i s e t o
numerous d i f f i c u l t i e s ; and t h e Board has decided t o recommend t o Cong r e s s when i t convenes i n January t h a t t h i s s e c t i o n of t h e law be
amended as soon as p o s s i b l e so as n o t t o apply t o d i r e c t o r s of Fede r a l r e s e r v e banks and t h e i r b r a n c h e s , and a l s o so as n o t t o i n c l u d e
o r g a n i z a t i o n s which o c c a s i o n a l l y make loans secured by s t o c k or bond
c o l l a t e r a l only t o t h e i r own o f f i c e r s or employees, and o r g a n i z a t i o n s
engaged p r i m a r i l y i n a g r i c u l t u r a l , commercial or i n d u s t r i a l e n t e r p r i s e s
-2
X-7721
489
which o c c a s i o n a l l y make loans secured by s t o c k or bond c o l l a t e r a l only
t o t h e i r own c u s t o m e r s .
As you know, t h e s t a t u t e does not t a k e e f f e c t u n t i l J a n u a r y 1,
1934, and does n o t apply even t h e n u n l e s s and u n t i l t h e o t h e r o r g a n i z a t i o n which t h e F e d e r a l r e s e r v e bank d i r e c t o r i s s e r v i n g s h a l l make new
loans s e c u r e d by s t o c k or bond c o l l a t e r a l , because t h e s t a t u t e c l e a r l y
r e f e r s only t o c o r p o r a t i o n s which
11
s h a l l make1' such l o a n s a f t e r J a n u a r y
1, 1934.
In t h i s connection, a t t e n t i o n i s a l s o i n v i t e d t o the f a c t t h a t
o t h e r s e c t i o n s of t h e Banking Act of 1933 r e c o g n i z e a c l e a r d i s t i n c t i o n
between loans and o t h e r e x t e n s i o n s of c r e d i t ; and S e c t i o n 8A r e f e r s
only t o o r g a n i z a t i o n s which s h a l l make " l o a n s " secured by s t o c k or bond
collateral.
Of c o u r s e , t h e q u e s t i o n whether a p a r t i c u l a r t r a n s a c t i o n
i s a l o a n w i t h i n t h e meaning of t h e s t a t u t e , as d i s t i n g u i s h e d from an
e x t e n s i o n of c r e d i t i n some o t h e r form, i s a q u e s t i o n t o be decided upon
t h e f a c t s of each p a r t i c u l a r c a s e .
Very t r u l y y o u r s ,
Chester M o r r i l l ,
Secretary.
TO ALL FEDERAL RESERVE AGENTS.
X-7722
INTERPRETATION OF UAIJKIIG ACT OF IS33
(Copies to be sent to a l l Federal reserve banks)
December 6, 1933•
Ivlr.
The
, Vice-President,
National Bank
,
Dear Sirs
Receipt i s acknowledged of your l e t t e r of November 29, 1933,
i n "which you ask "whether Section 32 of the Banking Act of 1933 w i l l
be applicable t o the service of certain o f f i c e r s and directors of
your bank as o f f i c e r s and directors of ____________ Security Company,
an a f f i l i a t e of your bank, i n view of the f a c t that
_____
Security Company was placed in d i s s o l u t i o n on November 28, 19 33.
You state t h a t , under the laws of the State of New York, no
business of any kind, except liquidation of the a s s e t s held at the
date of d i s s o l u t i o n , payment of debts and expenses, and d i s t r i b u t i o n
of the remainder to the stockholders, may henceforth be conducted by
the company.
As i s indicated by the footnote on page 1 of the Federal Reserve Board's Regulation R, Section 32 has reference only t o the business presently transacted by the organization i n question and not
to the business which may have been transacted by i t i n the p a s t .
Al-
though i t i s not e n t i r e l y clear from your l e t t e r -what transactions may
be involved i n a liquidation of the assets now held by
..
Security Company, i t would appear t h a t , i f such l i q u i d a t i o n involves
merely the sale of these a s s e t s and does not involve the participation
X-7722
-2-
i n any new b u s i n e s s i n c o n n e c t i o n w i t h such l i q u i d a t i o n , S e c t i o n 32
would n o t be a p p l i c a b l e t o t h e s e r v i c e of t h e d i r e c t o r s and o f f i c e r
r e f e r r e d t o i n your l e t t e r .
Very t r u l y y o u r s ,
(Signed)
Chester M o r r i l l
Chester M o r r i l l ,
Secretary*
FEDERAL RESERVE BOARD
X-7723
WASHINGTON
December 19, 1933
address official correspondence t o
the federal reserve board
SUBJECT: Holidays during January, 1934
Dear Sir:
On New Year's Day the o f f i c e s of the Federal Reserve Board and
a l l Federal reserve "banks and "branches w i l l "be closed.
The Board i s advised that the following holidays w i l l a l s o "be
observed "by Federal reserve "banks and "branches during the month of
January;
Monday, January
8
Hew Orleans
Friday, January 19
Richmond
Charlotte
Anniversary of B a t t l e
of New Orleans
Anniversary of Birthday
of General Robert E. Lee
Atlanta
Birmingham
Nashville
Jacksonville
Louisville
Memphi s
Dallas
El Paso
Houston
San Antonio
On the dates given the o f f i c e s mentioned w i l l not p a r t i c i p a t e i n
either the t r a n s i t or the Federal reserve note clearing through the
Gold Settlement Fund. Please include tr ansit clearing credits for the
o f f i c e s a f f e c t e d on each of the holidays with your c r e d i t s for the f o l lowing "business day. No debits covering shipments of Federal reserve
notes for the head o f f i c e s concerned should "be included i n your note
clearing of Friday, January 19.
Please n o t i f y "branches.
/-Very truly yours,
J . C. Hoe 11,
Assistant Secretary
TO GOVERNORS OF ALL F. R. BANKS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7724
December 19, 1933+
SUBJECT:
Absorption of Abrasion Loss on
Gold Coin and Shipping Charges
on Gold Coin and Gold B u l l i o n .
Dear S i r :
There i s i n c l o s e d f o r your i n f o r m a t i o n a
copy of a l e t t e r addressed t o Mr. L. F. S a i l e r , Depu t y Governor of t h e F e d e r a l Reserve Bank of New York,
on December 19, 1933, w i t h r e g a r d t o a b s o r p t i o n by
F e d e r a l Reserve banks of a b r a s i o n l o s s on gold c o i n
and s h i p p i n g charges on gold c o i n and gold b u l l i o n
d e l i v e r e d t o t h e F e d e r a l Reserve b a n k s .
Very t r u l y yours
Chester M o r r i l l
Secretary.
Inclosure
TO AIL FEDERAL kESERVE AGEHTS EXCEPT HEW YORK.
COPY
X—7724-a
December 19, 1933,
Mr. L. Fe S a i l e r , Deputy Governor,
Federal Reserve Bank of Hew York,
New York, N. Y.
Dear l l r . S a i l e r :
In your l e t t e r of November 22 you make r e f e r e n c e t o t h e Board's
l e t t e r X-7640 of October 16 and review t h e p o l i c y f o l l o w e d by your
bank with r e f e r e n c e t o t h e a b s o r p t i o n of a b r a s i o n l o s s on gold c o i n
and t r a n s p o r t a t i o n c o s t s on gold coin and b u l l i o n shipped t o your
bank, and ask t h e Board whether i t does not agree with you t h a t i t
would be p r e f e r a b l e f o r your bank t o continue t o absorb a b r a s i o n l o s s
on gold coin up t o $1.00 on any one shipment and s h i p p i n g charges on
gold coin and b u l l i o n r e c e i v e d by your bank from member and par r e m i t t i n g nonmember banks.
In view of t h e s p e c i a l circumstances surrounding t h e gold s i t u a t i o n a t t h i s time and p a r t i c u l a r l y of t h e f a c t t h a t t h e a u t h o r i t y
given t h e Treasury i n t h e Executive Order of A p r i l 5 t o reimburse
t h e Federal Reserve banks i n a l l proper cases f o r t h e r e a s o n a b l e c o s t
of t r a n s p o r t a t i o n of gold coin and b u l l i o n d e l i v e r e d t o a F e d e r a l Reserve bank i n accordance with Sections 2, 3 and 5 of t h e Executive
Order i s not contained i n t h e Executive Order of August 28, S e c t i o n 11
of which revoked t h e Executive Order of A p r i l 5, and of t h e f a c t t h a t
t h e Treasury w i l l not reimburse F e d e r a l Reserve banks f o r a b r a s i o n on
gold coin beyond t h e usual l i m i t of t o l e r a n c e , t h e Board f e e l s t h a t
t h e F e d e r a l Reserve "banks should no longer be expected t o absorb
X-7724-a
Mr* L. F. S a i l e r
a b r a s i o n l o s s on gold coin d e p o s i t e d w i t h them or t e n d e r e d i n exchange f o r o t h e r forms of c u r r e n c y or shipping charges on gold c o i n
or b u l l i o n *
However, t h e Board has no o b j e c t i o n t o t h e a b s o r p t i o n by a Fede r a l r e s e r v e bank of a b r a s i o n and t r a n s p o r t a t i o n c o s t s i n s m a l l
amounts not exceeding a t o t a l of vl*00 i n c o n n e c t i o n w i t h any one
shipment, i n view of t h e expense and inconvenience t o t h e bank of
o b t a i n i n g reimbursement f o r such small amounts•
Very t r u l y y o u r s ,
(Signed)
Chester M o r r i l l
Chester M o r r i l l ,
Secretary.
December 20, 1933.
X-7725
PROFESSOR SPRAGUE1S CRITICISM OF FEDIIRAL RESERVE BOARD
Answers.
P r o f e s s o r Sprague, i n A r t i c l e ^4 published i n t h e New York Times
of December 8 t h , s t a t e d among other t h i n g s :
u
Heavy r e s p o n s i b i l i t y r e s t s upon those conducting t h e
F e d e r a l Reserve System f o r f a i l u r e t o e f f e c t needed r e s t r a i n t
d u r i n g the two years preceding t h e c o l l a p s e of 1929."
In another p l a c e i n t h i s a r t i c l e , he c r i t i c i s e s t h o s e
economists who preached t h e New Era as being i n p a r t r e s p o n s i b l e f o r t h e c o l l a p s e of 1929.
In t h i s c o n n e c t i o n , t h e f o l l o w i n g statement of f a c t s may be found
interesting:
-I-
The Board gave very s e r i o u s c o n s i d e r a t i o n i n 1928 t o i t s respons i b i l i t y and duty w i t h r e g a r d t o the c o n t r o l of s p e c u l a t i o n i n s e c u r i t i e s , based m a t e r i a l l y on b r o k e r s ' l o a n s , and e a r l y i n March r e q u e s t e d
P r o f e s s o r Sprague, as an economist, t o come t o Washington and advise
t h e Board as t o whether, i n h i s opinion, d i s c o u n t r a t e s should be i n creased and Government s e c u r i t i e s sold t o check t h i s s p e c u l a t i v e movement.
In response t o t h i s r e q u e s t , P r o f e s s o r Sprague came b e f o r e t h e
Board, or c e r t a i n members of t h e Board, on March 7, 1928. He was p r e sent f o r about two days, and r e c e i v e d an e x p e r t f e e f o r h i s a d v i c e .
He advised members of t h e Board n o t t o i n c r e a s e d i s c o u n t r a t e s ,
nor t o s e l l Government s e c u r i t i e s , s t a t i n g t h a t he was p e r f e c t l y s a t i s f i e d w i t h what t h e Board was doing, and t h a t by slow, c o n s t a n t p r e s s u r e , i t was doing a l l t h a t could be done.
L a t e r , on t h a t day, P r o f e s s o r Sprague appeared b e f o r e t h e Senate
Banking and Currency Committee and d i s c u s s e d t h e whole s u b j e c t of
brokers 11 l o a n s . He t o l d t h e Committee t h a t t h e s e loans could be cont r o l l e d by i n c r e a s i n g d i s c o u n t r a t e s , and s e l l i n g Government s e c u r i t i e s
b u t t h a t such a course would have a r e a c t i o n on commercial l o a n s , and
i f p e r s i s t e d i n would be more severe on l e g i t i m a t e b u s i n e s s t h a n on
brokers l o a n s .
497
-2-
X-7725
He further made the surprising statement that brokers loans are
a minor e v i l , and t h e i r expansion i s a matter of secondary s i g n i f i cance; that i t i s not too high a price to pay for the strengthening
of the gold standard on the other side, and for stimulation of our
export trade.
Sc. bk. 179, p. 15.
At (54) (55) ( 6 2 ) .
Such was the advice Professor Sprague gave to the Board on
March 7, 1928.
-IIIn s t a r t l i n g contrast t o this advice, Proffessor Sprague published an a r t i c l e in The Annalist of April 20, 1928, - only 6 weeks
later - in which he took the p o s i t i o n that brokers T loans were dangerous and that the Federal reserve banks were considerably respons i b l e for the s i t u a t i o n . He advised sharp and drastic action to
correct the s i t u a t i o n in the security market, and stated that even i f
such drastic measures should precipitate a spectacular collapse in
the security market, the consequences might well prove far l e s s damaging than those which may be anticipated i f the market continues in
i t s present mood u n t i l i t collapses from i t s own weakness and excess.
In t h i s a r t i c l e he further stated that i f , i n the l a t t e r part of
February or early i n March, the reserve banks had sold rapidly 100
or even 200 millions of Governments, an immediate advance in c a l l
money to 6% might have been brought about; that an abrupt advance of
t h i s extent would have exerted a far greater influence upon the
speculative temper of the community than the gradual advance that has
been experienced.
He also stated that an advance in the discount rate t o 4j0o in
March might further have been advisable as a means of emphasizing the
p o l i c y of e f f e c t i v e control.
He further stated that had measures along these l i n e s been f o l lowed, i t i s reasonable t o believe that the s i t u a t i o n would now be far
more s a t i s f a c t o r y from every standpoint#
Comparing brokers loans and security prices on the above date,
April 20, 1928, with the date March 7, 1928, on which Professor Sprague
gave the above advice t o the Federal Reserve Board, we f i n d t h a t
brokers f loans had increased, taking 1926 as 100, from 136.1 on or
about March 7, to 152.0 on or about April 20, while s e c u r i t y prices
had increased from 135.8 on March 7, to 145.3 on or about April 20,
1928.
. 4.98
X-7725
These advances were r e l a t i v e l y s l i g h t as compared with the very
great increase which occurred l a t e r .
In other words, Professor Sprague, on April 20, 1928, c r i t i c i z e d
the Board for not having done the very things he advised them not
to do on March 7, 1928, - j u s t 6 weeks before 1
-IIIProfessor Sprague, in the above a r t i c l e in the New York Times,
also c r i t i c i z e d those economists who endorsed the New Era, s o - c a l l e d ,
and stated that they were i n part responsible for the crash of 1929.
He does not disclose the f a c t that he was one of those economists.
On may 29, 1929, Professor Sprague published an a r t i c l e i n "Trust
Companies" taking the p o s i t i o n that the discount rate should be increased to 6%, and used the following s i g n i f i c a n t language:
"Now you may say that a 6% rate would create a panic.
Those who think that must b e l i e v e that the s e c u r i t y prices
are t o o ' h i g h . Well I do not know that they are too high;
in f a c t , I rather doubt i f they are, and so I do not a n t i c ipate that there would be a panic."
Sc. bk. 193, p. 31.
On the date t h i s a r t i c l e was published, May 29, 1929, security
prices had increased from 145.3 on or about April 20, 1928, t o 180.2
on May 29, 1929.
On April 20, 1928, he pointed out the danger of the security
market collapsing from i t s own weakness and excess, and y e t , a f t e r the
s t a r t l i n g increase up t o May 29, 1929, he expresses the opinion that
he doubts whether security prices are too high.
-IVTo sum up:
Professor Sprague, on March 7, 1928, advised against increasing
discount r a t e s , and against sale of Government s e c u r i t i e s .
4 9 9
X-7725
On April 20, 1928, he had s h i f t e d his ground, and advocated
both an increase in discount rates and sales of Government s e c u r i t i e s ,
c r i t i c i z i n g the Board for not having done t h i s i n March.
On April 20, 1928, he advocated sharp and d r a s t i c action to cont r o l brokers' loans, and stated that even i f i t caused a spectacular
collapse i n the security market, i t would be no worse than the c o l lapse which may be anticipated i f the market continues i n i t s present
mood u n t i l i t collapses from i t s own weakness and e x c e s s .
On May 20, 1929, he makes the inconsistent statement that he
does not know that security prices are too high; t h a t , i n f a c t , he
rather doubts whether they are too high.
-VThe above would seem*to show that any r e s p o n s i b i l i t y upon the
Federal Reserve Board f o r , t o quote Professor Sprague's words, "failure t o e f f e c t needed restraint during the two years preceding
the collapse of 1929", must be shared in material measure by Professor
Sprague himself.
C. S. HAMLIN
499
X-7727
Statement of Bureau of Engraving.and Printing
for furnishing Federal Reserve Bank Notes
(National Currency) Series 1929,
November 1-22, 1933.
$5
Philadelphia,. . . . 85,000
168,000
Total
Sheets
Amount
20,000
• 105,000
. $9,870.00
42,000
.125,000
11,750.00
62,000
230,000
$21,620.00
$10
.
230,000 sheets, @ $94.00 M, . •. $21,620.00
X-7728
Statement of Bureau of Engraving and Printing
for furnishing Federal Reserve Notes
Series 1928, November 1-29, 1933.
New York,. . .
Philadelphia,.
Richmond,. . .
Atlanta, . . .
St. Louis, . .
Minneapolis, .
Kansas City, .
San Francisco,
Total
Sheets
Amount
12,000
10,000
10,000
55,000
184,000
60,000
25,000
52,000
107,000
30,000
22,000
20,000
30,000
$4,867.50
16,284.00
5,310.00
2,212.50
4,602.00
9,469.50
2,655.00
1,947.00
1,770.00
2,655.00
134,000
585,000
$51,772.50
$5
$10
$20
10,000
10,000
34,000
12,000
10,000
10,000
35,000
150,000
48,000
15,000
10,000
60,000
15,000
10,000
10,000
10,000
88,000
363,000
-»
42,000
11,000
15,000
-
-
36,000
-
585,000 sheets, @ $88.50 M, . . . $51,772.50
X-7729
INTERPRETATION OF BANKING ACT OF 1933
(Copies to be sent t o a l l Federal reserve banks*)
December 16, 1933.
Mr* We B. Geery, Governor,
Federal Reserve Bank of Minneapolis,
Minneapolis, Minnesota.
Dear Governor Geery:
In your l e t t e r of September 11, 1933, you inquire whether Sect i o n 21 of the Banking Act of 1933 i s applicable to a large corporat i o n i n your d i s t r i c t which has been permitting i t s employees to
leave funds with the corporation, upon which i t has paid such employee
i n t e r e s t at a higher rate than savings banks would pay, and which has
permitted withdrawals of such funds on demand, the plan having been
adopted f o r the purpose of encouraging t h r i f t among the employees of
the corporation.
The applicable portion of Section 21 provides i n substance that
a f t e r June 16, 1934 i t shall be unlawful for any corporation other
than a f i n a n c i a l i n s t i t u t i o n or private banker subject to examination
and regulation under State or federal law t o engage to any extent what
ever i n the business of receiving deposits subject to check or t o repayment upon presentation of a passbook, c e r t i f i c a t e of deposit or
other evidence of debt, or upon request of the depositor, unless such
corporation s h a l l submit t o periodic examination by the Comptroller of
the Currency or by the Federal Reserve Bank of the d i s t r i c t and shall
publish periodic reports of condition.
I t w i l l be noted that the section does not give t o the Federal
Mr. W. B. Geery
~2-
X-7729
Reserve Board any j u r i s d i c t i o n or d i s c r e t i o n regarding the matters
with which i t deals•
The provision excepting corporations which
s h a l l submit t o periodic examination by the Comptroller or Federal Reserve Bank of the d i s t r i c t r e l a t e s t o corporations which
11
s h a l l sub-
mit" to such examination, and does not give t o the Comptroller, the
Federal Reserve Bank, or the Federal Reserve Board any d i s c r e t i o n or
power t o require a corporation t o submit to examination or to determine
"what corporations should submit to examination*
On the other hand, the section provides a penalty of f i n e or
imprisonment for any v i o l a t i o n of i t s provisions and the determination
of the question whether a person should be prosecuted f o r such v i o l a t i o n i s a matter e n t i r e l y within the j u r i s d i c t i o n of the Department of
Justice•
In view of these circumstances, an expression of opinion by the
Federal Reserve Board on the question whether the s e c t i o n i s violated
would not afford protection from prosecution i f the Department of
Justice upon consideration of the matter should take the p o s i t i o n t h a t
a corporation had violated the statute and should f e e l i t necessary to
prosecute for such violation#
Accordingly, the Federal Reserve Board does not f e e l that i t
would be appropriate for i t t o undertake to express opinions upon quest i o n s of t h i s kind.
Very t r u l y yours,
(Signed)
Chester Morrill
Chester Morrill,
Secretary#
FEDERAL RESERVE BOARD
;
508
WASHINGTON
address official correspondence t o
the federal reserve board
X-7730.
December 21, 1933.
SUBJECT:
Issuance of Limited Voting Permits to Holding
Company A f f i l i a t e s .
Dear Sir:
There are pending "before the Federal Reserve Board
numerous applications for voting permits "by holding company a f f i l i a t e s of member banks and by holding companies of State banks
applying for membership in the Federal Reserve System, and i t i s
apparent that f i n a l action on many of such applications cannot
be taken before the annual meetings which ordinarily take place
i n January.
However, since voting permits w i l l be needed i n
connection with the e l e c t i o n of directors of subsidiary member
banks at the annual meetings of stockholders in January, and i n
many cases in connection with the immediate issuance of preferred
stock and the reduction of common stock, and similar matters of
an urgent nature, the Board has adopted a procedure designed to
expedite the issuance of limited voting permits i n time to meet
the emergencies which e x i s t .
The Board w i l l issue limited permits e n t i t l i n g the app l i c a n t s to vote the stock which they own or control i n their
subsidiary member banks i n cases i n which the granting of such
X-7730. „„
:
-
cb
2 -
permits appears to be i n the public i n t e r e s t and the applicants have
complied, with the requirements of Section 5144 of the Revised
Statute^*
Such permits w i l l e n t i t l e the applicants to vote only
for the purposes set forth therein.
I t i s anticipated that i t
w i l l "be necessary to authorize the granting of the majority of such
permits subject to certain conditions, and in each case the conditions prescribed w i l l be set forth in a l e t t e r or telegram which
the Board w i l l send direct to the Federal Reserve Agent.
Ordinarily, one of the conditions prescribed "by the Board
in approving the issuance of a limited voting permit w i l l be that,
before the permit i s issued, the applicant f i l e with the Federal
Reserve Agent a duly executed agreement to take certain actions.
The clauses set f o r t h i n the Board's l e t t e r or telegram prescribing
the matters to be agreed to should be incorporated verbatim i n
written agreements drawn by your counsel in accordance with a form
inclosed herewith.
I t i s expected that your counsel w i l l also
examine the agreements when they have been executed and w i l l be
s a t i s f i e d that they have been properly executed and that each
agreement i s the valid and binding obligation of the organization
executing the same.
Each agreement should be executed by o f f i c e r s
of the applicant duly authorized to execute the same by an appropriate r e s o l u t i o n of the board of directors of the applicant.
The
form of r e s o l u t i o n contained in Exhibit C attached to each a p p l i cation i s broad enough to authorize the o f f i c e r s named t h e r e i n to
X-7730.
3execute such agreements, however, and a separate r e s o l u t i o n for
t h i s purpose w i l l not be necessary i f the agreement i s executed
by the o f f i c e r s named i n Exhibit C.
In each case a limited permit w i l l be forwarded to the
Federal Reserve Agent with instructions to issue the same as soon
as a l l requirements prescribed by the Board have been complied with.
Such permit w i l l be undated and before delivery to the applicant the
Federal Reserve Agent should date i t as of the date of issuance.
The Federal Reserve Agent should advise the Board as soon as the
permit has been issued and give the date of issuance.
When the Federal Reserve Agent advises the Board of the
issuance of the voting permit, he should forward a copy of the agreement executed by the applicant, together with an opinion of counsel
for the Federal Reserve Bank that the agreement i s the v a l i d and
binding o b l i g a t i o n of the applicant i n accordance with i t s terms,
and a copy of any resolution (other than Exhibit C), adopted by
the board of directors of the applicant authorizing the execution
of the agreement aforesaid.
In any case i n which a State bank i s involved either as
applicant or as subsidiary, you are requested to advise the proper
State banking authority of the issue of the limited permit and to
furnish him with such other information with respect thereto as
may be of i n t e r e s t to him.
X-7730.
506
4-
If i n any cage i t i s necessary to advise a Federal Reserve Agent by telegraph of the approval of an application for a
limited permit, the code word "AitCIGAR" w i l l be used and w i l l mean:
u
The Board has considered the application
of the holding company a f f i l i a t e named "below
a f t e r the l e t t e r TA! for a voting permit under
authority of Section 5144 of the Revised Statutes
of the United States, as amended, e n t i t l i n g such
organization to vote the stock wnicli i t owns or
controls i n the "banks named "below after the l e t t e r
1
and has authorized the issuance of a limited
permit to the applicant, subject to the conditions
stated herein after the l e t t e r 1C1 • The permit
authorized hereunder i s for the sole purpose
stated a f t e r the l e t t e r ?D'. Please proceed i n
accordance with instructions contained i n Board*s
l e t t e r of December 21, 1933 (X~7730),f •
When such a telegram i s sent, the permit w i l l "be mailed
to the Federal Reserve Agent with a confirmation of the telegram;
"but ordinarily no covering l e t t e r w i l l he written.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
To a l l Federal Reserve Agents.
X-7730-a.
AGREEMENT
'
50T
In consideration of the granting "by the Federal Reserve Board,
under authority of Section 5144 of the Revised Statutes of the United
States, as amended, and pursuant to an application heretofore f i l e d
with the Board, "by the undersigned, of a limited voting permit for the
sole purpose of e n t i t l i n g the undersigned to vote each share of stock
which i t owns or controls of i t s subsidiary member "banks for the purposes s p e c i f i e d i n the limited voting permit aforesaid, the undersigned
hereby represents, undertakes, and agrees as follows:
(Here insert clauses prescribing matters to be
agreed to i n exact language prescribed by Board)
The undersigned understands and agrees t h a t , i n authorizing
the issuance of the limited voting permit aforesaid, the Federal Reserve Board shall not be deemed to have waived i t s right to require
the applicant to furnish, as a condition precedent to the issuance of
any further permit, such additional data and agreements, i f any, as may
be necessary i n order to complete the application heretofore f i l e d and.
to s a t i s f y the requirements of the statute and of the Board's Regulat i o n s , or to prescribe i n connection with the granting of any further
permit such conditions as may appear to be desirable upon further consideration of the application aforesaid.
This agreement i s executed i n t r i p l i c a t e .
Dat ed:
(SEAL)
ATTEST:
Secretary.
By.
FEDERAL RESERVE BOARD
WASHINGTON
X—7731
ADDRESS OFFICIAL C O R R E S P O N D E N C E T O
T H E FEDERAL RESERVE BOARD
December 21, 1933.
SUBJECT: Annual Review of Outstanding Clayton Act Permits.
Dear Sir:
The l a s t paragraph of the Board's l e t t e r of May 1, 1933,
X-7426, on the subject of procedure with regard to v i o l a t i o n s of
the Clayton Act, reads as follows:
"The Board suggests 'diet each Federal Reserve
Agent adopt the practice of making a review during
the course of each year of the outstanding Clayton
Act permits issued to applicants in his d i s t r i c t ;
and of submitting to the Board his recommendation
i n each case in which in h i s opinion the public
interest requires the revocation of a permit e f f e c t i v e either immediately or at the time of the next
annual e l e c t i o n of directors, together with h i s
recommendation in each case in which he f e e l s that
there i s ground for doubt under the Board's instructions as t o the action which should be taken. n
I t w i l l be appreciated i f you w i l l advise what procedure
you have adopted and rrhat progress you Lave made i n carrying out
the Board's suggestion.
Very truly yours,
%
xMLlte-V Z D
Chester Morrill,
Secretary.
TO ALL P. R. AG-ESJTS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7732
December 21, 1933
SUBJECT:
Code Word Covering Hew Issue
of Treasury B i l l s .
Dear Sir:
In connection with telegraphic transactions i n Government s e c u r i t i e s "between Federal reserve banks, the code word
"HOXFUH" has been designated to cover a new issue of Treasury
B i l l s , dated December 27, 1933, and maturing March 28, 1934.'
This word should be inserted i n the Federal Reserve
Telegraph Code book, following the supplemental code word
"HOXFOX" on page 172.
Very truly yours,
J. C. Hoell,
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BAiTKS
! 510
X-7734
INTEKPRETATION OF BANKING ACT OF 1933
(Copies to be sent to a l l Federal Reserve Banks)
December 22, 1933
Mr.
, President,
»
Dear Sir:
Your l e t t e r of December 6, 1933, addressed to Governor Black
s t a t e s that three directors of your bank are partners i n a firm engaged
in dealing in s e c u r i t i e s , and r a i s e s several questions regarding the
a p p l i c a b i l i t y of Section 32 of the Banking Act of 1933 and Section 8A
of the Clayton Act (Section 33 of the Banking Act of 1933) to the serv i c e of such d i r e c t o r s .
You ask f i r s t whether any d i s t i n c t i o n i s made between national
banks and State member banks i n connection with an application by a
director for permission to be at the same time a partner of a firm
dealing i n s e c u r i t i e s .
This question r e l a t e s to the provisions of
Section 32 of the Banking Act of 1933 which contains c e r t a i n prohibitions which are applicable to an o f f i c e r or director of " any member
bank".
The s e c t i o n therefore makes no d i s t i n c t i o n between national
banks and State member banks.
Your second question i s whether a director of a member bank
who i s a partner i n a firm which carries margin accounts for i t s customers may obtain a permit pursuant to the provisions of Section 32.
That s e c t i o n authorizes the Board to issue permits, and provides that
X-7734
~
2
-
the prohibitions contained, in that section shall not be applicable to any
case i n which such a permit has been issued.
However, as you indicate by your third question, the provisions
of Section 8A of the Clayton Act must also be taken into consideration.
Your l e t t e r does not describe the exact manner i n which the margin account
to which you refer are carried, but i f they involve the making of "loans
secured by stock or bond c o l l a t e r a l " , the service of these directors would
come within the prohibitions of Section 8A a l s o .
Accordingly, a permit
issued under Section 32 of the Banking Act of 1933, although i t would take
the service of these directors out of the prohibitions of Section 32,
would serve no useful purpose i n such a case unless Section 8A of the
Clayton Act were likewise not applicable to them.
Section 8A of the Clayton Act i s not applicable in any case i n
which a permit has been issued by the Federal Reserve Board.
However,
the Board's authority to issue permits covering r e l a t i o n s within the proh i b i t i o n s of the Clayton Act i s limited, by Section 8 of that Act, to
the issuance of permits covering relationships between banking organizations of certain types, with the result that, unless the partnership to
which you refer i s an organization of that kind, the Board i s without
authority to issue a permit exempting the service i n question from the
provisions of the Clayton Act.
The principal question i n your l e t t e r therefore i s whether
a permit issued pursuant to the authority granted i n Section 32 w i l l
also exempt the r e l a t i o n s h i p which i t covers from the provisions of
the Clayton Act.
r 512
X-7734
- 3 In considering t h i s question, i t should he noted that permits
i s su ed "by the Board under the provisions of the Clayton Act c l e a r l y apply
only to the p r o h i b i t i o n s of that Act, since the p r o v i s i o n i n Section 8
authorizing the issuance of permits provides that "nothing i n t h i s Act
s h a l l prohibit" r e l a t i o n s h i p s of c e r t a i n types "if i n any case there i s
i n force a permit therefor issued by the Federal Reserve Board; and the
Federal Reserve Board i s authorized to i s s u e such permits" under c e r t a i n
circumstances.
Section 32 applies to c e r t a i n s p e c i f i e d r e l a t i o n s h i p s , which
are not the same as those covered by Section 814 of the Clayton Act, and
renders unlawful the r e l a t i o n s h i p s to which i t a p p l i e s "unless i n any
case there i s a permit therefor issued by the Federal Reserve Board;
and the Board i s authorized to i s s u e such permit i f i n i t s judgment i t
i s not incompatible with the public i n t e r e s t " .
There i s no reason to
assume that the Board i s authorized by t h i s p r o v i s i o n i n S e c t i o n 32 to
i s s u e permits which w i l l make the s e r v i c e i n question lawful regardless
of any other p r o v i s i o n of law which might be applicable i n a p a r t i c u l a r
case.
I t i s f e l t that an i n t e r p r e t a t i o n which would reach such a r e s u l t
would be an unwarranted extension of the authority contained i n Section
32.
Accordingly, a permit issued under S e c t i o n 32 would serve no
u s e f u l purpose i n a case where the r e l a t i o n s h i p was prohibited by the
Clayton Act and no permit had been issued pursuant to the p r o v i s i o n s
of that Act.
513
X-7734
As you know, the phrase "organized or operating under the laws
of the United States" i n Section 8 and Section 8A of the Clayton Act i s
not applicable to State member banks of the Federal Reserve System.
Very t r u l y yours,
(Signed) Chester Morrill,
Chester Morrill,
Secretary.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7735
December 22, 1933*
SUBJECT:
Exnense^ Main Lines, l e a s e d Wire
Systejr., November, 1933.
Dear Sir:
Inclosed herewith you r i l l f i n d two mimeographed
statements, X~7735~ a and X-7735-^3> covering in d e t a i l opera t i o n s of the main l i n e s , Leased Tire System, during the
month of November, 1933•
Please credit the amount payable by your bank for
your share of the expense of the Leased T"ire System, to the
Federal Beserve Bank of Richmond in your d a i l y statement of
c r e d i t s through the Gold Settlement Fund for the accoimt of
the Federal Reserve Board, and. advise the Federal Reserve
Bank of Richmond by wire the amount and purpose of the c r e d i t .
Very t r u l y yours,
F i s c a l Agent.
Inclosures.
TO GOVERNORS OF ALL F. R. BAIHCS."
514
y
A
*
A.
X7735-a
REPORT SH'TilKG CLASSIFICATION Al-TD NUMBER OF 70RDS TRANSMITTED OVER MAIN LI5ES
OF 'THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF NOVEMBER, 1933.
Business
reported
by banks
From
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total
34,485
140,27%
33,718
54,801
56,582
50,161
84,359
61,790
39,765
67,989
59,161
91,998
775,083
F. R. Board business
Words sent by
New York chargeable to other
F. R. Banks ( l )
2,307
2,328
2,148
2,387
2,439
2,229
2,612
2,432
2,593
3,763
4,001
29,239
Met Federal
reserve
bank
business
Percent of t o t a l
Bank business (*)
36,792
140,274
36,046
56,949
58,969
52,600
86,588
64,402
42,197
70,582
62,924
95,999
804,322
4.57
17.44
4.48
7.08
7.33
6.54
IO.76
8.01
5.25
8.78
7.82
11.94
100.00
318,795
Reimbursable business Incoming & Outgoing
Total vords transmitted over main l i n e s
(*)
These percentages used in c a l c u l a t i n g the pro rata share of leased wire expense as shown
on the accompanying statement (X-7735~b)•
(l)
Number of words sent by Hew York to other F. R. Banks for t h e i r sole b e n e f i t charged to
banks indicated in accordance " i t h action taken at Governors' Conference
November 2 - 4 , 1925.
1,123,117
515>326
1,638,443
ox
Ol
X-7735-b
REPORT OF EXPETSE MAIN LUTES
FEDERAL RESERVE LEASED TERE SYSTEM, NOVEMBER, 1933<
Operators'
overtime
$260.00
1,284.14
225.00
306.66
232.00
270.00
3,955-20 (#)
195.00
200.00
287.00
251.00
380.00
—
$7,846.00
$
-
Wire
rental
$260.00
1,284.14
225.00
306.66
(&)
462.00
—
270.00
3,956.20
—
197.25
200.00
287.00
251.00
380.00
15,609.78
15, 609.78
$23,689.03
$15,839.78
$
-
1.00
2.25
—•
$ 3.25
Heimbursable charges:
Treasury Department
$2, 2 6 6 . 4 4
Reconstruction Finance Corporation . 4, 250.94
Exp. Hat. Ekg. Emergency Act, 3 - 9 - 3 3
713.63
Federal Home Loan Bank Board . . . .
4.55
Department of Agriculture
S.12
Federal Deposit Insurance Corporation
1.84
C i v i l Works Administration
20.00
Comp. Currency Div. Insolv.Hat.Bks .
85.85
Farm Credit Administration:
Federal Farm Loan Bureau . . . . .
18.23
78.12
Federal Farm Board
Less Reimbursable charges
.
Total
exnenses
ro
0
0
0
Boston
He™ York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Federal Reserve Board
Total
Operators'
salaries
V4
Mame of Bank
$7,450.72
$16,238.31
Pro rata
share of
total
expenses
$742.09
2,831.96
727.48
1,149.67
1,190.27
1,061.99
1,747.24
1,300.69
852.51
1,425.72
1,269.84
1,938.85
Credits
$260.00
1,284.14
225.00
306.66
462.00
270.00
3,956.20
197.25
200.00
287.00
251.00
380.00
Payable to
Federal
Reserve
Board
$482.09
1,547.82
502.48
843.01
728.27
791.99
2,208.96 (*)
1,103.44
652.51
1,138.72
1,018.84
1,558.85
—
$16,238.31
(&)
(#)
(*)
(a)
$8,079.25
$10,368.02
2,208.96 (a)
$ 8,159.06
Main l i n e r e n t a l , Richir ond-Vashington
Includes s a l a r i e s of Washington operator
Credit
Amount reimbursable to Chic aero
oi
517
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
X-7736
December 22, 1933
SUBJECT: Assessment for General Expenses of the
Federal Reserve Board, January 1 - June
30, 1934.
Dear Sir:
There i s inclosed herewith a copy of a r e s o l u t i o n adopted "by
the Federal Reserve Board levying an assessment upon the various
Federal reserve "banks in an amount equal to one hundred f i f t y - s i x
thousandths of one per cent (.00156) of the t o t a l paid-in c a p i t a l
stock and paid-in surplus of the Federal reserve "banks as of the
c l o s e of "business November 30, 1933, to defray the estimated expenses
and s a l a r i e s of the members and employees of the Board from January
1 to June 30, 1934.
The r e s o l u t i o n s p e c i f i e s the manner i n which the assessment
s h a l l "be deposited with the Federal Reserve Bank of Richmond, the
procedure being the same as that adopted "by the Board with respect
to the assessment for the period from July 1 to December 31, 1933,
as set forth i n the Board's l e t t e r of June 23, 1933, X-7464.
Very truly yours,
0. E. Foulk,
Fiscal Agent
Inclosure
TO CHA.IRMEN
OF ALL F. R. BAMS
X-7736~a
518
RESOLUTION LEVYING ASSES SI SOT.
WHEREA.S, under Section 10 of the act approved December 23, 1913 ,
and known as the Federal Reserve Act, the Federal Reserve Board i s empowered to levy semi-annually upon the Federal reserve banks, i n proportion to
t h e i r c a p i t a l stock and surplus, an assessment s u f f i c i e n t to pay i t s e s t i mated expenses, including the s a l a r i e s of i t s members, a s s i s t a n t s , a t t o r n e y s ,
experts and employees, for the half year succeeding the levying of such
assessment, together with any d e f i c i t carried forward from the preceding
half year;
WHEREAS, Section 10 of the Federal Reserve Act, as amended by the
Banking Act of 1933, contains the, f o l l o w i n g p r o v i s i o n ;
"The Board s h a l l determine and prescribe the manner
i n which i t s o b l i g a t i o n s s h a l l be incurred and i t s disbursements and expenses allowed and paid, and may leave on dep o s i t i n the Federal reserve banks the proceeds of a s s e s s ments l e v i e d upon them t o defray i t s estimated expenses and
the s a l a r i e s of i t s members and employees, * * * and funds
derived from such assessments s h a l l not be construed t o be
Government funds or appropriated moneys."
TiHEREAS, i t appears from estimates submitted to and considered
by the Federal Reserve Board that i t i s necessary that a fund equal to one
hundred f i f t y - s i x thousandths of one per cent (.00156) of the t o t a l p a i d - i n
c a p i t a l stock and surplus of the Federal reserve banks be created f o r the
purpose hereinbefore described, e x c l u s i v e of the cost of engraving and
p r i n t i n g of Federal reserve notes;
NOW, THEREFORE, BE IT RESOLVED BY THE FEDERAL RESERVE BOARD, That:
(1) There i s hereby l e v i e d upon the several Federal reserve
banks an assessment i n an amount equal to one hundred f i f t y - s i x thousandths
of one per cent (.00156) of the t o t a l p a i d - i n c a p i t a l and surplus of each
such bank a t the c l o s e of business on November 30, 1933;
(2) Such assessment s h a l l be paid by each Federal reserve bank
i n two equal i n s t a l l m e n t s on January 2, 1934, and March 1, 1934, r e s p e c t i v e l y
(3) Every Federal reserve bank except the Federal Reserve Bank of
Richmond s h a l l pay such assessment by t r a n s f e r r i n g the amount thereof on the
dates s t a t e d above through the Gold Settlement Fund to the Federal Reserve
Bank of Richmond f o r c r e d i t to the account of the Federal Reserve Board on
the books of that bank, with telegraphic advice to Richmond of the purpose
and amount of the c r e d i t , and the Federal Reserve Bank of Richmond s h a l l pay
i t s assessment by c r e d i t i n g the amount thereof on i t s books to the Federal
Reserve Board on the dates s t a t e d above.
519
FEDERAL RESERVE BOARD
WASHINGTON
a d d r e s s o f f i c i a l c o r r e s p o n d e n c e to>
t h e federal reserve b o a r d
X-7737
December 22, 1933
SUBJECT:
Continuance of employees on r o l l s
of Federal reserve banks a f t e r
termination of active service.
Dear Mr.
The Governors' Conference which convened on October 10,
1933, voted that Federal reserve "banks may, with the approval of the
Federal Reserve Board, continue o f f i c e r s or employees of the "banks
on their r o l l s with or without compensation, depending on the circumstances, i n order that they may not "be removed from the "banks' rosters
and thereby become i n e l i g i b l e for the b e n e f i t s of any pension plan
which may be adopted i n the near future.
Attention i s invited to the fact that the proposed
retirement plan which has been recommended by the Pension Committee of
the Governors' Conference w i l l apparently render o f f i c e r s or employees
no longer a c t i v e l y connected with a Federal reserve bank i n e l i g i b l e to
obtain the b e n e f i t s of the plan because such b e n e f i t s are limited to
o f f i c e r s and employees "in active service"; and accordingly, i t i s
doubtful whether the continuance of employees on the r o l l s of Federal
reserve banks after the discontinuance of their active service w i l l
e f f e c t u a t e the purpose which i s intended.
There i s also a question as
X-7737
-
2
-
to the a d v i s a b i l i t y of permitting o f f i c e r s or employees who are no longer
a c t i v e l y connected with the service of a Federal reserve bank to obtain
the b e n e f i t s of the retirement plan.
However, the Federal Reserve
Board w i l l o f f e r no objection to the continuance on the r o l l s of a
Federal reserve bank of o f f i c e r s or employees no longer a c t i v e l y i n i t s
service for a reasonable period of time without payment of salary or
other compensation of any kind pending the adoption of the proposed
retirement plan i n the near future and with a view to the settlement,
a f t e r the retirement plan may have been adopted, of questions as to
whether they should be permitted to obtain, or are e l i g i b l e to r e c e i v e ,
the b e n e f i t s of the plan.
The Board f e e l s , however, that a Federal
reserve bank would not be j u s t i f i e d i n paying salary or other compensa^t i o n to such an o f f i c e r or employee who may be carried on i t s r o l l s
merely i n an endeavor to preserve h i s e l i g i b i l i t y for the b e n e f i t s of
the proposed retirement plan.
Very truly yours,
Chester l a o r r m
Secretary.
To Governors of a l l Federal Reserve Banks.
FEDERAL RESERVE BOARD
5 8
WASHINGTON
ADDRESS OFFICIAL C O R R E S P O N D E N C E W
T H E FEDERAL R E S E R V E HTl«Br»
X-7738
December 28, 1933
SUBJECT:
Code Word. Covering Hew Issue
of Treasury B i l l s .
Dear Sir:
In connection with telegraphic transactions in Government s e c u r i t i e s between Federal reserve banks, the code word
"HOXG-AT" has been designated to cover a new issue of Treasury
B i l l s , dated January 3, 1934, and maturing April 4, 1934.
This word should be inserted i n the Federal Reserve
Telegraph Code book, following the supplemental code word
"NOXFUU" on page 172.
Very truly your
Assistant Secretary.
TO GOVERNORS OF ALL F. R. BAHS.
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
Novenib er 28, 1933 •
B-S13.
SUBJECT:
Functional Expenses,
F i r s t Half, 1933.
Dear Sir:
There are enclosed herewith
copies of the consolidated Functional Expense
Exhibit for the h a l f year ending June 30, 1933•
A cony of the exhibit i s a l s o being mailed to the
Governor of the bank.
Very truly youl* s
E. L. Smead, Chief,
D i v i s i o n of Bank Operations,
Enclosure.
LETTER TO CHAIRMAN OF EACH FEEJ3RAL RESERVE BANK*
FEDERAL RESERVE BOARD
533
WASHINGTON
July 12, 1933
B-905
address official correspondence to
the federal reserve board
SUBJECT:
Safekeeping of s e c u r i t i e s 'byFederal reserve banks
Dear S i r :
As questions have arisen regarding the extent and cost of service
rendered "by Federal reserve "banks to member banks and others in the s a f e keeping of s e c u r i t i e s , the Board w i l l appreciate i t i f you w i l l submit
the f o l l o w i n g information pertaining thereto as of July 31, 1933. t h i s
date being s e l e c t e d w i t h a view to allowing ample time f o r the preparation
of the desired data:
1. Number of member banks in d i s t r i c t f o r which s e c u r i t i e s are held
in safekeeping, showing separately the number l o c a t e d i n each Federal reserve bank and branch c i t y and the number outside such c i t i e s .
2 . Amount of s e c u r i t i e s held in safekeeping f o r member banks, showing separately the amounts held f o r banks located in each Federal reserve
bank and branch c i t y and for benks located outside such c i t i e s .
3 . Number of outstanding individual vault custody r e c e i p t s issued
to member banks, or acknowledgements when no formal r e c e i p t s are issued,
covering s e c u r i t i e s held in safekeeping, showing separately f i g u r e s f o r
banks located in each Federal reserve bank and branch c i t y and f o r banks
located outside such c i t i e s .
Figures i n paragraphs 1, 2 and 3 should be e x c l u s i v e of s e c u r i t i e s
held as c o l l a t e r a l to loans and to public d e p o s i t s .
- 2 4.
B-905
Statement of bank's p o l i c y with respect to acceptance of se-
c u r i t i e s from member banks f o r safekeeping, with separate comment on such
s e r v i c e , i f any, rendered member banks in Federal reserve bank and branch
c i t i e s , and with p a r t i c u l a r reference to precautions taken to prevent the
d e p o s i t , f o r safekeeping, of s e c u r i t i e s which are the property of customers
I
of member banks.
5. Copy of l a t e s t general c i r c u l a r furnished member banks covering
the safekeeping of s e c u r i t i e s , and a l l supplements thereto.
6. Statement showing amount of s e c u r i t i e s held in safekeeping f o r
others than member banks, including s e c u r i t i e s of member banks, i f any,
held i n escrow to secure public d e p o s i t s , g i v i n g in each case name and
address of party f o r whom held, amount held in each account and number of
individual vault custody r e c e i p t s outstanding; and statement of p o l i c y
with respect to acceptance of such s e c u r i t i e s f o r safekeeping.
7. Percentage increase i n current holdings of cash and s e c u r i t i e s
(cubic contents, not d o l l a r value) that can be accommodated i n vaults at
head o f f i c e and at each of your branches, i f any.
In addition, the Board d e s i r e s an estimate of cost, prepared in
accordance with the attached form, of the various operations performed in
the S e c u r i t i e s f u n c t i o n at the head o f f i c e and at each branch, i f any,
during 1932, and your opinion as to whether there has been any substantial
change in such c o s t s since l a s t year.
Very t r u l y yours,
Chester Morrill,
Secretary.
TO GOVERNOR OE EACH FEDERAL RESERVE BAH*
FEDERAL RESERVE BOARD
525
WASHINGTON
address official correspondence t o
thefederalreserveb
°a r d
July 7, 1933
3-907
SUBJECT:
Change in instructions re personnel
c l a s s i f i c a t i o n plans.
Dear Sir:
In view of e x i s t i n g conditions, the Federal Reserve Board,
in accordance with a suggestion received from one of the Federal
reserve fcfjiks, has amended paragraph 5 of the instructions governing the operation of the personnel c l a s s i f i c a t i o n plans of the
Federal reserve banks so as to increase from three to s i x months
the period for which, without the approve! of the Board, an employee
may "bo temporarily assigned without a reduction in salary to a
p o s i t i o n calling: for a lower maximum salary then he i s r e c e i v i n g .
Very truly yours,
Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS*
J?'
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence to
the federal reserve board
*
SUBJECT:
July 15 > 1933
B - 909
L i s t of S t a t e Bank Members Published i n
Connection with Par L i s t .
Dear S i r :
Beginning with the forthcoming July 1, 1933, i s s u e of t h e Par L i s t ,
i t i s proposed to l i m i t the l i s t o f S t a t e bank members appearing at the
end of the par l i s t to t h o s e banks which have been l i c e n s e d by the Secr e t a r y of the Treasury to conduct normal banking o p e r a t i o n s .
The proof
copy of the l i s t of State bank members h a s , t h e r e f o r e , been r e v i s e d to
exclude n o n - l i c e n s e d banks, but b e f o r e the r e v i s e d l i s t i s published we
should l i k e to have i t checked by the Federal r e s e r v e banks.
i
Accordingly,
a r e v i s e d copy of that part of t h e proof of the July 1 par l i s t which
contains a l i s t of the l i c e n s e d S t a t e bank members i n your d i s t r i c t i s
i n c l o s e d , and i t w i l l be appreciated i f you w i l l check the l i s t promptly
and a d v i s e the Board not l a t e r than Wednesday morning, July 19, by t e l e graph i f necessary, what changes, i f any, should be made t h e r e i n i n order
that i t may agree with your r e c o r d s .
Very t r u l y yours,
IB. L. Smead, Chief,
D i v i s i o n of Bank Operations .
Inclosure
TO ALL FEDERAL RESERVE AGENTS*
FEDERAL RESERVE BOARD
527
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
August 18, 1933
B-906
T H E FEDERAL RESERVE BOARD
»
SUBJECT:
Compensation of e x e c u t i v e o f f i c e r s and.
d i r e c t o r s of Federal reserve and
member 'banks.
Dear S i r :
Senate r e s o l u t i o n 75, adopted during the f i r s t s e s s i o n of the
73rd Congress, reads i n part as f o l l o w s :
"Resolved, That the Federal Reserve Board i s requested
t o prepare and transmit to the Senate, as soon as
p r a c t i c a b l e , a report showing tfxe salary schedule
of the e x e c u t i v e o f f i c e r s mid d i r e c t o r s of each
Federal reserve bank and member bank of the Federal
Reserve System." x x x "For the purposes of t h i s
r e s o l u t i o n , the term ' s a l a r y ' i n c l u d e s any compens a t i o n , f e e , bonus, commission, or other payment,
d i r e c t or i n d i r e c t , i n money or otherwise, f o r
persons! s e r v i c e s . "
In order that the Federal Reserve Board mry comply with t h i s
r e s o l u t i o n , i t i s reouested that you submit a report t o the Board
g i v i n g the information c a l l e d f o r by the attached form B-906-a.
The d i r e c t o r s of the bank should be l i s t e d f i r s t , f o l l o w e d by the
l i s t of the executive o f f i c e r s .
The Chairman of the Board of your
bank and the managing d i r e c t o r of each branch ( i f any) should be
l i s t e d among both d i r e c t o r s end o f f i c e r s , with an appropriate note
c a l l i n g a t t e n t i o n to the f a c t .
- 2 -
B-906
c
There i s also attached, a copy of i- l e t t e r which yon are requested to send to each National and S t a t e member bank in your
d i s t r i c t which, on June 30, 19331 was operating under a l i c e n s e
issued by the Secretary of the Treasury, c a l l i n g f o r a similar r e port i n d u p l i c a t e on form B-906-c covering i t s d i r e c t o r s and execut i v e o f f i c e r s , both copies of which should be forwarded by you to
the Federal Reserve Board.
Please have each report examined to see
that the names of a l l d i r e c t o r s given i n Schedule A of the June 30,
1933# c o n d i t i o n report of the bank are shown on form B-906-c, and
that the report as a whole appears to be properly prepared.
A
supply of the form has been sent you under separate cover and an
adequate number of copies thereof should be furnished to each
l i c e n s e d member bank.
Very t r u l y yours,
Chester Morrill,
Secretary.
Inclosures
TO BACH
FEDERAL RESERVE AGENT*
COMPENSATION OF EXECUTIVE OFFICERS MD DIRECTORS
B-*906—a
of F. R. Bank of
(Executive o f f i c e r s and d i r e c t o r s of each branch should be shown separately
under the name of the branch)
Name of each d i r e c t o r
and of each executive
o f f i c e r of bank on
June 30, 1933
Amount of salary and/or any other Exact perSalary compensation received from bank
iod of
rate per during year ended June 30, 1933, s e r v i c e
covered by
f o r personal s e r v i c e s
annum i n
Fees, bonuses, comOfficial effect
payments
1
on
title
jmissions,or other pay- 1 shown in
Salary jments (except salary), two preJune 30,
d i r e c t or i n d i r e c t , i n ceding
1933
money or otherwise
columns*
(Signed)
Heme
*If s e r v i c e covers f u l l year i n d i c a t e by "One year."
than f u l l year i n d i c a t e by "Service began
Title
If s e r v i c e covers l e s s
B-906-b
Dear S i r :
In order to enable the Federal Reserve Board to f u r n i s h the
Senate the information regarding compensation of e x e c u t i v e o f f i c e r s
and d i r e c t o r s of each member bank requested i n Senate r e s o l u t i o n 75.
which was adopted during the f i r s t s e s s i o n of the 73rd Congress and
reads i n part as f o l l o w s :
"Resolved, That the Federal Reserve Board i s requested
to prepare and transmit to the Senate, as soon as
p r a c t i c a b l e , a report showing the salary schedule of
the e x e c u t i v e o f f i c e r s end d i r e c t o r s of each Federal
reserve bank and member bank of the Federal Reserve
System." x x x "For the purposes of t h i s r e s o l u t i o n ,
the term ' s a l a r y 1 includes any compensation, f e e ,
bonus, commission, or other peyment, d i r e c t or i n d i r e c t , i n money or otherwise, f o r personal s e r v i c e s , "
you are requested, at the d i r e c t i o n of the Federal Reserve Board, to
submit a report i n d u p l i c a t e t o t h i s o f f i c e , g i v i n g the information
c e l l e d f o r by the attached form.
The d i r e c t o r s of the bank should be
l i s t e d f i r s t , followed by the l i s t of the executive o f f i c e r s .
If a
d i r e c t o r i s a l s o an e x e c u t i v e o f f i c e r of the bank he should be l i s t e d
among both d i r e c t o r s end o f f i c e r s , with en appropriate note c a l l i n g
a t t e n t i o n to the f a c t .
Very t r u l y yours,
Federal Reserve Agent.
Inclosure.
531
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
August 5 , 1933
B-911
SUBJECT:
Audit of Reserve Stock of Incomplete
Federal Reserve Notes and Federal
Reserve Bank Notes
Dear Sir:
For your Information there i s i n c l o s e d a copy of the r e c a p i t u l a t i o n s of an audit of the stock of incomplete Federal r e serve notes and Federal r e s e r v e bank notes held at the Bureau of
Engraving and P r i n t i n g as of c l o s e of b u s i n e s s June 30, 1933.
forwarded to the Secretary of the Treasury "by Mr. H. M. Pearson,
Acting Chief, D i v i s i o n of Public Debt Accounts and Audit.
In h i s l e t t e r forwarding the report of the audit to the
Secretary of the Treasury, Mr. Pearson s t a t e d t h r t :
"The audit
extended from J u l y 1 to 12, i n c l u s i v e , and c o n s i s t e d of a p i e c e
count of the e n t i r e stock of f a c e s of both c l a s s e s and a package
count of the uniform backs a l l o c a t e d to Federal reserve n o t e s .
In view of the f a c t that a recent p i e c e count has been made by
t h i s o f f i c e of the e n t i r e stock of each denomination of uniform
backs on hand i n the Bureau, a package count and i n s p e c t i o n of
*» 2
B-911
the uniform backs allocated to Federal reserve notes was deemed
s u f f i c i e n t at t h i s time.
The t o t a l sheets of Federal reserve notes
f a c e s and "backs, were found to be in excess of the required reserve
of 4,250,000 sheets, as authorized in the l e t t e r of the Governor of
the Federal Reserve Board to the Under Secretary of the Treasury
dated December 2, 1929."
Very truly yours,
J . R. Van Fossen, Assistant Chief,
Division of Bank Operations.
Inclosures
TO ALL FEDERAL RESERVE AGENTS*
5 3 3
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
September 6, 1933
B-914
SUBJECT:
Condition of licensed, member banks
Dear Sir:
There i s inclosed, f o r use pending the p r i n t i n g of Member
Bank Call Report No. 58, a statement showing the resources and
l i a b i l i t i e s and a c l a s s i f i c a t i o n of loans, investments, d e p o s i t s and borrowings, on June 30, 1933, of a l l l i c e n s e d member
banks, together with corresponding data by Federal Reserve
d i s t r i c t s and by c l a s s e s of banks.
Very truly yours,
A
S
"
'
/ " 7
„
O / v ' nrw-A
E, L. Smeaa, Chief,
Division of Bank Operations,
Inclosure
TO AIL GOVERNORS AMD F. R, AGENTS*
•
5 3 4
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
September i g f 1933.
B-915
SUBJECT:
Changes in Instructions governing the
preparation of Earnings end Expense reports and P r o f i t and Loss stptements.
Dear Sir:
There are i n c l o s e d the f o l l o w i n g pages of the "Instructions
governing the preparation of earnings end expense reports and p r o f i t
and l o s s statements" which have been revised to take care of the
recent changes in the Federal Reserve Act, p r i n c i p a l l y that r e l a t i n g
to the payment of a franchise tax by the Federal Reserve banks:
Page 27
" 27-a
"
28
" 32
Table of contents
Page 33
» 34
Page 38
« 3'Q
»
35
11
"
36
" 4i
Uo
I t w i l l be noted that former page 38 headed "Franchise t a x
c e r t i f i c a t i o n " has been omitted and the succeeding pages renumbered.
Very truly yours,
H T k a a ^
Chester Morrill,
Secretary.
Inclosures
TO ALL uO VERMES*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
September 26, 1933
B-917
SUBJECT:
Changes in Manual of I n s t r u c t i o n s , Form E.
Dear Sir:
There are inclosed
copies of each of the f o l l o w i n g pages
of the Manual of Instructions governing the preparation of functional
expense reports which have been revised e f f e c t i v e as of J u l y 1, 1933•'
Pages
»
"
1-2
2-a
5-7
9
"
17
"
29
Table of contents
Page
"
it
11
"
«
Pages
31
35
63
63-ft
67
7 0—&
71
73-76
47
54
60
6l
The necessary changes w i l l be made in Form E when reprinted.
Very truly yours,
V
r
w
u
E. L. Smead, Chief,
Division of Bank Operations.
Inclosures
TO ALL GOVERNORS*
j
l
_
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
September 25, 1933»
B-920.
SUBJECT:
Member Bank Call Report
for June JO, 1933*
Dear Sir
We sure forwarding to you under separate cover
copies of the Board's Member Bank Call Report
ITo. 5^) showing the condition of l i c e n s e d member
hanks on June JO,
1933.
Please forward a copy to
each member bank i n your d i s t r i c t that has expressed
a d e s i r e to r e c e i v e c o p i e s of c a l l reports as i s s u e d .
Very truly yours
E. L, Snead, Chief
Division of Bank Operations,
TO ALL FEDERAL RESERVE AGENTS*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
October 26, 1933.
3-923.
SUBJECT:
Call condition reports of State bank
members and their a f f i l i a t e s .
Dear Sir:
There have been forwarded to you today under separate cover
the indicated number of copies of the eight forms and schedules
attached h e r e t o , for the use of State bank members and t h e i r a f f i l i a t e s i n submitting reports as of the next c a l l date:
"Jumber of
copies
Form
Form 105, Report of condition of State bank member.
Schedule "0", Loans and advances to a f f i l i a t e s and
investments i n and loans secured by o b l i g a t i o n s of
affiliates.
Schedule " P R a t e s of i n t e r e s t paid on d e p o s i t s .
Schedule "Q", >ftmaber of depositors and amount of
deposits.
Form lO^e, Instructions for preparation of Schedule
"q".
Form 220, Report of a f f i l i a t e or holding company
affiliate.
Form 220a, P u b l i s h e r ' s copy of report of a f f i l i a t e
or holding company a f f i l i a t e .
Form 220b, Instructions for preparation of reports
of a f f i l i a t e s and holding company a f f i l i a t e s .
Kindly n a i l an appropriate number of copies of these forms and
schedules, "based on the number required at the time of the l a s t c a l l
for reports, to each State bank member that has not been formally
placed i n liquidation or receivership, or possession of which has not
been taken by a conservator or other State o f f i c i a l , with the request
that the forms and accompanying schedules be held pending a , c a l l for
condition reports.
In sending the forms to the banks, please c a l l attention to the
changes made in items 9 and 14-18 on the face of form 105 and to those
in Schedules I, K and L, a l l of which are self-explanatory.
Attention
should also be c a l l e d to the f a c t that changes have been made in the
forms to be used by a f f i l i a t e s .
One single form (Form 220), to be
used by both a f f i l i a t e s and holding company a f f i l i a t e s , has been subs t i t u t e d for two separate forms, usad at the time of the l a s t c a l l ,
and instructions for the preparation of the reports have been amplified
Please incorporate in your l e t t e r transmitting the blank forms
the s i x paragraphs contained in the attached sheets, B- 923 - a , p e r taining to reports of a f f i l i a t e s and to Schedules 0, P and Q,. You
w i l l note therefrom that State bank members are to ask your o f f i c e
for such additional copies of Forms 220 and 220a as may be needed for
use i n preparing the required reports of a f f i l i a t e s , and that, i f i t
i s not practicable for them to obtain and transmit the reports of
a f f i l i a t e s at the same time as they transmit their own condition r e ports, they are to make prompt requests to the Federal Reserve Board,
through yourbank, for extensions of time, such requests to set f o r t h
the additional time required and the s p e c i f i c reasons wliy additional
time i s necessary.
If you are s a t i s f i e d that additional time i s
needed for the preparation of the report of an a f f i l i a t e , you are
authorized on "behalf of the Federal Reserve Board to grant an extension not to exceed 20 days, in addition to the original period
of 10 days from the receipt by the member "bank of the c a l l for the
reports,
please furnish the Board with a copy of each l e t t e r
granting an extension of the time within which such reports must
be submitted.
If an extension exceeding 20 days i s desired, kindly
transmit the request to the Board promptly with your recommendation.
The publishers' c e r t i f i c a t e s covering reports of a f f i l i a t e s should
be forwarded to the Board.
In order that the Board nay have s t a t i s t i c a l data regarding
the aggregate loans and investments, deposits, e t c . , of State bank
members in the hands of conservators or other similar State o f f i c i a l s , pending a decision on the question whether they should be
reopened, reorganized or liquidated but which have not been f o r mally placed in liquidation or receivership, p l e a s e also forward
three copies of Form 105 to each of such banks with the reouest
that the conservator, or other State o f f i c i a l in charge of the bank,
f i l l in the data c a l l e d for by the form (upon receipt of a c a l l
therefor) and mail the report to your bank in duplicate.
Please r e -
quest the o f f i c i a l s i n charge of such banks to i n t e r l i n e the amount
of special or segregated deposits, subject to unrestricted withdrawal, against the caption "Unrestricted deposits" following the
items a f f e c t e d in Schedules J, K and L, and to i n t e r l i n e a s s e t s
-
4
54.0
segregated against such deposits opposite appropriate captions on the face
of the report and in Schedule I .
O f f i c i a l s in charge of such "banks should
not, however, be asked to furnish the data c a l l e d for by Schedules "0",
and »Q», nor to have the reports a t t e s t e d by any of the directors of the
banks.
Since we have never considered that the law requires reports from
banks in the hands of State o f f i c i a l s and since we do not require at this
time s t a t i s t i c a l information regarding the a f f i l i a t e s of such banks, i t
w i l l not be necessary to obtain reports from such a f f i l i a t e s .
I t i s requested that as promptly as p o s s i b l e a f t e r the issue of the
c a l l you inform the Board, with respect to each State whose capital c i t y
l i e s in your d i s t r i c t , (a) inhether or not State a u t h o r i t i e s issued c a l l s
for condition reports as of the same date as the c a l l issued by the Board,
and, i f not, the date of the nearest c a l l thereto issued by the State
authorities; and (b) whether or not and under what conditions reports of
condition made to State authorities are required to be published (1) by
State law or (2) by regulations of the banking department.
Very truly yours,
Chester Morrill,
Secretary.
Jnclosures.
TO AIL FEDERAL RESERVE AGENTS*
PARAGRAPHS TO BE INCLUDED IN THE LETTER TO BE SETT BY THE FEDERAL RESERVE AGENTS
TO STATE BANK MEMBERS TRANSMITTING FORMS FOR CONDITION REPORTS AND
REPORTS OF AFFILIATES
At the direction of the Federal Reserve Board, you are requested to obtain
and transmit to t h i s "bank at the same time you submit the condition report of
your "bank on form 105 and as of the same date as the condition report of your
tank, a report oti form 220 covering each of your a f f i l i a t e s and holding company
a f f i l i a t e s , i f any, as defined in section 2(b) and (c) of the Banking Act of 1933•
Instructions regarding the preparation of the forms, together with extracts from
the law, are printed on a separate sheet accompanying the forms.
The original
and one copy of form 220 are to "be sent to this bank; the second and third copies
are to be retained by the a f f i l i a t e or holding company a f f i l i a t e and the member
bank.
If i t i s not practicable for you to obtain and transmit to t h i s bank the
reports of your a f f i l i a t e s and holding company a f f i l i a t e s , i f any, at the same
time you transmit the condition report of your bank, i . e . , within ten days from
receipt
of the c a l l for such report, prompt request should be made to the Federal
Reserve Board through this bank for an extension of the time within which to
transmit such reports.
Such requests should set f o r t h the additional time r e -
quired and the s p e c i f i c reasons why additional time i s necessary.
Form 220-a i s to be used in preparing reports of a f f i l i a t e s and holding
company a f f i l i a t e s for publication and i n furnishing proof of publication to. the
Federal Reserve bank i f such reports are required to be published under the
conditions set f o r t h on the reverse side of the form.
Schedule 0 covering loans and advances to a f f i l i a t e s and holding company
a f f i l i a t e s of your bank as well as investments by your bank in, and loans made
by your bank on the security o f , obligations of such a f f i l i a t e s and holding company a f f i l i a t e s should be prepared in t r i p l i c a t e ; the original and one copy are
t6
to
"be
submitted
to
t
h
i
s
"bank
and./
third copy i s to "be retained for your f i l e s .
5 4 2
B-923-a
-
2
-
Every a f f i l i a t e and holding company a f f i l i a t e must be l i s t e d on t h i s
schedule.
If your bank has 110 a f f i l i a t e s or holding company a f f i l i a t e s
under the terms of the Banking Act of 1933 > the f o l l o w i n g statement
should be written across the schedule and signed:
"This bank has no a f f i l i a t e or holding company
a f f i l i a t e within the meaning of the Banking
Act of 1933".
If the number of forms to be used in preparing the reports of
a f f i l i a t e s of your bank i n c l o s e d herewith i s not s u f f i c i e n t to cover
your requirements additional copies should be obtained promptly from
t h i s bank.
You are also requested to prepare three copies of Schedule P,
showing i n t e r e s t r a t e s paid, and three copies of Schedule Q, showing
the number of depositors and the amount of d e p o s i t s , by s i z e and c l a s s
of deposit b a l a n c e s .
The o r i g i n a l and one copy of each of these
schedules should be forwarded to t h i s bank along with the condition
report submitted on form 105 and one copy should be retained for
your f i l e s .
are i n c l o s e d .
Instructions r e l a t i n g to the preparation of Schedule Q
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
November 1$, 1933#
B-929.
Dear Sir
For your information there are i n c l o s e d c o p i e s
of correspondence with the Treasury Department with
reference to the redemption of twelve $100 Federal
Reserve n o t e s of the Federal Reserve Bank of Minnea p o l i s which disappeared from the Bureau of Engraving and P r i n t i n g on March 11 and which are now being
presented for redemption with c o u n t e r f e i t s e a l s and
s e r i a l numbers.
Very truly yours,
L« P , Bethea, ~
A s s i s t a n t Secretary,
Inclosures.
TO GOVERNORS OF ALL F. R. BANKS EXCEPT MINNEAPOLIS*
543
TREASURY DEPARTMENT
544
Washington
Movent) er 2, 1933
Mr, L, ? , Bothea,
A s s i s t a n t Secretary,
Federal Reserve Board,
Sir:
Receipt i s acknowledged of your l e t t e r of September 27, 1933* addressed to the Under Secretary concerning c e r t a i n incomplete Federal
Reserve notes for the Federal Reserve Bank of Minneapolis, of the $100
denomination, with c o u n t e r f e i t s e a l s and s e r i a l numbers, which have
been honored by the Federal Reserve Banks of Hew York and Minneapolis.
You c a l l a t t e n t i o n to the f a c t that the incomplete notes d i s appeared from the Bureau of Engraving and p r i n t i n g , and suggest that
l i a b i l i t y for their redemption devolves upon that Bureau, The only
manner i n which the Bureau can s a t i s f y that l i a b i l i t y i s by p l a c i n g
an assessment on the employees of the s e c t i o n from which t h i s sheet of
notes disappeared. Many of these employees can i l l a f f o r d to pay such
an assessment, and the Department i s r e l u c t a n t to impose such a penalty
on innocent employees,
I understand that some question was r a i s e d i n the Mew York bank
concerning the v a l i d i t y of the four notes f i r s t submitted by that bank
to the Treasury for redemption, or at l e a s t concerning the v a l i d i t y of the
f i r s t one presented, and that even a f t e r the Federal Reserve Banks were
apprised of the s i t u a t i o n , two notes from t h i s sheet were forwarded for
redemption by the Federal Reserve Banks of Hew York and Minneapolis,
Under those circumstances i t would appear that the p r e s e n t i n g banks
might properly be h e l d responsible f o r those s i x n o t e s .
The Department w i l l r e l y upon your judgment i n t h i s matter, and i f
you s t i l l f e e l that the Bureau should be h e l d r e s p o n s i b l e f o r these
n o t e s , the Department w i l l take steps to have the amount involved c o l l e c t e d from employees i n the manner o u t l i n e d above, f o r the r e l i e f of
the Federal Reserve Banks concerned.
Respectfully,
(Signed)
Thomas Hewes
Thomas Hewes
Assistant Secretary of the Treasury,
t'
545
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
November 15, 1933 •
3-929b
>
Honorable Thomas Hewes,
A s s i s t a n t Secretary of the Treasury)
Treasury Department^
Washington, D, C*
Dear Mr, Hewes:
Your l e t t e r of November 2, r e l a t i n g to incomplete Federal
Reserve n o t e s of the Federal Reserve Bank of Minneapolis, of
the $100 denomination, with c o u n t e r f e i t s e a l s and s e r i a l num>
b e r s , has been c a r e f u l l y considered by the Board.
In view of
the statements contained i n your l e t t e r the Board w i l l suggest
to the Federal Reserve banks that in the circumstances they
absorb the l o s s on these n o t e s .
The Board f e e l s , however,
that any l i a b i l i t y i n connection with the c i r c u l a t i o n of i n complete notes should be assumed by the Treasury Department
and hopes that the Treasury w i l l carry out the i n t e n t i o n expressed i n A s s i s t a n t Secretary Dewey's l e t t e r of July 7* 1925*
of asking r e l i e f from Congress for incomplete Federal Reserve
notes which get i n t o c i r c u l a t i o n and are subsequently presented
for redemption.
Very truly yours,
I . P . Bethea,
Assistant Secretary,
FEDERAL RESERVE BOARD
546
WASHINGTON
address official correspondence t o
the federal reserve board
November 23, 1933
3-930.
Dear S i r :
There i s i n c l o s e d f o r your i n f o r m a t i o n a
copy of a memorandum r e c e n t l y p r e p a r e d i n t h e
B o a r d ' s D i v i s i o n of Bank O p e r a t i o n s - w i t h r e g a r d to b r a n c h "banking i n the U n i t e d S t a t e s .
A copy of t h i s memorandum i s a l s o b e i n g f u r n i s h e d to the governor of your b a n k .
Very t r u l y yours
Chester M o r r i l l ,
Secretary.
Enclosures
TO ALL FEDERAL RESERVE AC-E*~TS* (Copy f o r Governors of a l l
F e d e r a l Reserve Banks)
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
THE FEDERAL RESERVE BOARD
November 27, 1933
B-931
SUBJECT:
Federal Reserve Bank Balance Sheet,
Form 34, f o r use during 193^.
Dear Sir:
There i s i n c l o s e d , f o r your information, an
unruled proof copy of the 193^ e d i t i o n of the d a i l y
balance s h e e t , Form 3^,
Your bank's supply of the
form f o r use during 193*+ w i l l be forwarded to you
by r e g i s t e r e d mail as soon as received from the
printer.
Very truly yours,
E. L. Smead, Chief,
D i v i s i o n of Bank Operations.
Incl@su.re.
TO ALL GOVERNORS*
547
548
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
November 29,
1933
B-933
SUBJECT:
D a t a f o r 1933 Annual R e p o r t
the Federal Reserve Board.
of
Dear Sir:
It
will
us with the
2.
if
you w i l l
following data for use
coming annual
1.
be appreciated
in
the
kindly
furnish
Board's forth-
report:
C l a s s i f i c a t i o n of U. S.Government s e c u r i t i e s
h e l d "by y o u r b a n k ( l ) u n d e r r e p u r c h a s e a g r e e m e n t a n d ( 2 ) i n own i n v e s t m e n t a c c o u n t , a s a t
c l o s e of b u s i n e s s December 3 1 , 1933, g i v i n g
the kind of s e c u r i t i e s , i n t e r e s t rate, maturity
d a t e , and par v a l u e .
The t o t a l o n l y n e e d b e
shown f o r t h e b a n k ' s p a r t i c i p a t i o n i n s e c u r i t i e s held in Special Investment Account.
S t a t e m e n t s h o w i n g t h e number o f member b a n k s i n
e a c h S t a t e ( o r p a r t of S t a t e i n t h e d i s t r i c t )
accommodated through the d i s c o u n t of paper d u r i n g
the calendar year 1933.
y
yours,
E . ET S m e a d , C h i e f ,
D i v i s i o n of Bank O p e r a t i o n s .
TO GOVERNGao OF AIL FEDERAL RESERVE BANKS EXCEPT NEW YORK*
FEDERAL RESERVE BOARD
549
WASHINGTON
a d d r e s s o f f i c i a l c o r r e s p o n d e n c e to
the federal reserve board
SUBJECT:
"December 2, 1933
B-934
S a l a r i e s of employees of
Federal Reserve "banks.
Dear Sir:
Will you kindly f u r n i s h the Board as e a r l y in January
as practicable with a statement showing the name of each employee
of your bank and i t s "branches ( i f any) on January 1, 193^» and
the salary paid to each as of January 1, 1933 and January 1, 193^.
The l i s t should be prepared in accordance with the sample form
attached in order to f a c i l i t a t e checking with the approved per/ ."vV'
sonnel c l a s s i f i c a t i o n plan f o r your bwik on f i l e with the Federal
, C/ '
Reserve Board.
As in the past the schedules should cover a l l employees
on the bank's payroll including those whose s a l a r i e s are reimbursed to the bank in whole or in part.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure
I'O CH.JEMM OF EACH FEDERAL B#3RV# BASK*
AND ITS
EMPLOYEES OF THE FEDERAL RESERVE BAM OF
550
BRANCHES (IF ANY) ON JANUARY 1, 1934
Name of employee
NOTE:
Classification
symbol
T i t l e of job
Salery
range
Salary on Jan. 1
1933*
193%
Employees should be l i s t e d by f u n c t i o n s or departments end the p o s i t i o n s
or .jobs arranged in the same order as they e-ppear i n the -personnel c l a s s i f i c a t i o n plan. Form A. on f i l e w i t h the Fgderal Reserve Board. The t o t a l
number of employees including employees whose s a l a r i e s are reimbursed to
the bank in whole or in part and the t o t a l s a l a r i e s paid should be shown
for each f u n c t i o n or department. Extra help or temporary employees should
be l i s t e d with the regular employees of the bank and designated by the
l e t t e r "T" a f t e r the c l a s s i f i c a t i o n symbol. In case of employees on a
per diem or hourly b a s i s , the estimated t o t a l annual compensation should
a l s o be shown.
*If h i r e d during 1933. please show the i n i t i a l s a l a r y .
B-934a
FEDERAL RESERVE BOARD
551
WASHINGTON
address official correspondence t o
the federal reserve board
December 2, 1933
B-935
SUBJECT:
S a l a r i e s of o f f i c e r s of
Federal Reserve banks.
Dear Sir:
In accordance with the usual p r a c t i c e , a statement showing the 1934 salary provided by your Board of Directors at i t s
f i r s t meeting i n January f o r each o f f i c e r of your bank and
branches, i f any, subject to the a-prrovel of the Federal Reserve
Board, should be forwarded to the Board as early in January as
practicable.
Please l i s t the o f f i c e r s end t h e i r s a l a r i e s i n
the manner indicated in the attached form.
In case the bank's
counsel i s not an. o f f i c e r of the bank h i s annual r e t a i n e r f e e
and any additional compensation for clerk h i r e should be shown
separately.
Very truly yours
•
f
e
i
©
hr)ovu<i^
Chester Morrill,
Secretary.
Inclosure
TO CHAIRMAN OF EACH FEDERAL RESERVE BA1'-K*
Oi i'lCSRS1 SALARIES FOR 1934 AT THE FEDERAL RESERVE BAM OF
-
AI'ID ITS BRANCHES, IF ANY, AS PROVIDED BY THE BOARD OF DIRECTORS
SUBJECT TO APPROVAL BY THE FEDERAL RESERVE BOARD
Name
Departments or
functions supervised (Form A
classification)
Title
Total,
Annual Salary
Dec. 31, 193%, for
approval of
1933
F. RjBoard
officers
B-935a
553
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
December 2,
B-936
SUBJECT:
1933
1934 Budget, for S t a t i s t i c a l
and Analytical Viork.
Dear Sir;
In accordance with your usual p r a c t i c e , a statement
of the budget for the S t a t i s t i c a l and Analytical f u n c t i o n
of your "bank (including branches, i f any), f o r the c a l e n dar year 193^ should "be forwarded to the Federal Reserve
Board as soon a f t e r January 1 as p r a c t i c a b l e .
The budget
should be prepared in accordance with the attached form.
Very truly yours,
) y V v U
Chester Morrill,
Secretary.
Inclosure
TO ALL FEDERAL RESERVE AtiEi-iTS*
B 936a
"
FEDERAL RESERVE BAM OF
554
(Including branches)
Proposed budget for the S t a t i s t i c a l and Analytical f u n c t i o n (as d e f i n e d in
the Manual of I n s t r u c t i o n s covering functional expense reports, Form E)
(All f i g u r e s to be shown to the nearest d o l l a r , cents omitted)
BUDGET
for
_1221_
EXPENSES
during
1933
BUDGET
for
1934
ADMINISTRATION:
Salaries - o f f i c e r s
S a l a r i e s - employees
Traveling expenses
Printing & stationery & other supplies
Telephone and telegraph
All other*
TOTAL
STATISTICAL:
S a l a r i e s - employees
Traveling expenses
Printing & stationery & other supplies
Telephone and telegraph
Postage
All other*
TOTAL
MONTHLY LETTER:
Printing and s t a t i o n e r y
Postage
TOTAL
LIBRARY:
S a l a r i e s - employees
Traveling expenses
Printing & stationery & other s u p p l i e s
Telephone and telegraph
Hews s e r v i c e - subscriptions to
periodicals, etc.
Books
All other*
TOTAL
:
GRAND TOTAL
MEMORANDA:
Number of copies of monthly l e t t e r printed, December 1933
Receipts from monthly l e t t e r s sold:
Estimated,
• C l a s s i f y , i f in excess of $100.
Year 1933
Year 1934
$
$
Do not deduct from
expenses
555
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
the federal reserve board
SUBJECT:
December 2,
B-937
1933
Summary Statement of Federal Reserve
Bank Personnel
Dear S i r :
In accordance with the usual p r a c t i c e , p l e a s e f u r n i s h the
Board with a summary statement showing the number and s a l a r i e s of
the o f f i c e r s and employees of your bank ( i n c l u d i n g branches, i f any)
as of December 31, 1933• and January 1, 193^» made out i n accordance
with the attached form.
The f i g u r e s f o r December 31. 1933, which
should not include any changes i n e i t h e r the number or s a l a r i e s of
o f f i c e r s or employees t h a t become e f f e c t i v e on January 1, 193^,
w i l l be published in the Board's 1933 annual retiort.
The f i g u r e s
f o r January 1, 193^, should represent the number and annual s a l a r i e s
of o f f i c e r s end employees a f t e r a l l changes e f f e c t i v e as of January
1 have been made.
Very truly yours,
Chester M o r r i l l ,
Secretary.
Inclosure.
LETTER TO ALL CHaIRMEN*
$56
NUMBER AI1D SALARIES OF OFFICERS AM) EMPLOYEES OF THE
FEDERAL RESERVE BAH OF
(INCLUDING- BRANCHES)
Dec. 51. 1933
Jan. 1. 1934
Annual salary of Chairman and Federal Reserve Agent
$
$_
Governor
$
$_
*
*
Other o f f i c e r s :
Number
Annuel s a l a r i e s
Employees, both permanent and temporary,
(except those whose s a l a r i e s ere
reimbursed to bank):
Number
Annual s a l a r i e s
Employees, both permanent and temporary,
whose s a l a r i e s are reimbursed to
brnk:
Number
Annual sal f • r i e s
B-937a
557
FEDERAL RESERVE BOARD
WASHINGTON
*j)jP'Cemb 6T 2,
address official correspondence t o
the federal reserve board
^
SUBJECT:
1933
9 3 3
193^ Budget for Federal Reserve Bank.
Dear Sir:
I t w i l l be appreciated i f you w i l l forward to the Board,
as soon a f t e r January 1 as practicable, a statement of the budget
approved for the head o f f i c e and each of i t s branches, i f any,
f o r the calendar year 193^ with separate f i g u r e s for the f i r s t
half and the second half of the year.
If any material changes
are subsequently made in the budget for the second half of the
year the Board should be advised of sufch changes on or about
July 1 , 1934.
The budget statement as submitted to the Board should be
prepared in accordance with the scrapie form attached and fehotild
show t o t a l s for each separate linit (department, function; d i v i sion* section or expense u n i t ) for which separate f i g u r e s are
shown in the budget approved by the bank's budget committee.
Very truly yours,
Chester Morrill,
Secretary.
Inclosure.
TO
CHAIRMEN OF THE FEDERAL RESERVE BANKS*
558
FEDERAL RESERVE BOARD
WASHINGTON
address official correspondence t o
t h e federal reserve board
December 29, 1933*
3-941.
SUBJECT: Fiscal Agency and Depositary Expenses.
Dear Sir:
The October 1933 Governors' Conference considered Under Secretary
of the Treasury Ache son's l e t t e r of August 21, 1933» suggesting that the
Treasury hereafter reimburse the Federal Reserve "banks only for f i s c a l
agency expenses which represent direct additional expenses, such as
printing and postage, incurred s o l e l y on account of now i s s u e s of secur i t i e s at the time of i s s u e , and appointed a committee of throe governors to confer with the Federal Reserve Board and the Treasury with a
view to arriving at some equitable basis for reimbursement.
Following
a conference with t h i s committee, consisting of Governors Fancher,
Martin and McKinney, the Board requested the Division of Bank Operations
to work out a uniform formula for use in determining f i s c a l agency expenses, to assemble data showing the amount of such expenses absorbed
by each Federal Reserve bank, and to obtain an estimate of the additional
amount which each bank would be required to absorb i f the suggestion
contained in the Under Secretary's l e t t e r of August 21 were adopted*
Inasmuch as the question of reimbursement for f i s c a l agency expenses has arisen on several occasions in the past and as to comply
559
— 2
—
with the request of the Under Secretary of the Treasury would r e s u l t in
the Federal Reserve banks assuming a large proportion of the c o s t of
new i s s u e s of s e c u r i t i e s i n a d d i t i o n to the c o s t of a l l other s e r v i c e s
rendered the Treasury, i t i s f e l t that complete information should be
a v a i l a b l e as to the c o s t of the various c l a s s e s of operations performed
by the Federal Reserve banks f o r the Treasury i n the s e v e r a l c a p a c i t i e s
of f i s c a l agent, d e p o s i t a r y , and custodian, and p a r t i c u l a r l y t h e i r o u t o f - p o c k e t expenses in t h i s connection.
Such f i g u r e s are not now a v a i l -
able.
Accordingly, we have prepared the attached forms on which i t i s
requested that the Federal Reserve banks report t h e i r expenses during
the l a s t h a l f of 1933 i n connection with t h e i r f i s c a l agency and d e p o s i tary o p e r a t i o n s .
Forms are a l s o included covering s e r v i c e s performed
for the Reconstruction Finance Corporation and the Farm Credit Administ r a t i o n i n order that v/e may have data s i m i l a r l y compiled covering a l l
f i s c a l agency and depositary s e r v i c e s performed f o r the Government and
a l l i t s agencies.
The c o s t of s e r v i c e s , i f any, performed f o r Government
agencies not s p e c i f i c a l l y mentioned should be reported on the i n c l o s e d
blank forms.
I t w i l l bo noted that the expenses are c l a s s i f i e d i n accor-
dance with B u l l e t i n Ho. 1 of the General Accounting O f f i c e and are subdivided i n t o reimbursable expenses and expenses not reimbursable; a l s o
that in a d d i t i o n there i s to be shown the p a r t of the t o t a l expenses
r e p r e s e n t i n g d i r e c t , or o u t - o f - p o c k e t expenses, such as s a l a r i e s of
employees r e g u l a r l y a s s i g n e d , compensation p a i d e x t r a h e l p , supper money,
t r a v e l expenses, p r i n t i n g , p o s t a g e , e t c . , which wuuld not be incurred in
connection with other a c t i v i t i e s of the banks.
I t i s hoped to obtain f i g u r e s for the l a s t h a l f of 1933, based on
careful estimates where actual f i g u r e s are not a v a i l a b l e , covering the
t o t a l expense to the Federal Eeserve banks of a l l s e r v i c e s performed for
the Treasury and for other Governmental agencies, and to have t h i s i n formation compiled on as nearly a uniform b a s i s as p r a c t i c a b l e .
Accord-
i n g l y , i t i s requested that in preparing the information c a l l e d for in
the attached forms s p e c i a l a t t e n t i o n be given to the description at the
top of each form of the operations, the cost of which i s to be included
in the r e p o r t .
Attention i s i n v i t e d to the f a c t that while some of the
operations are i d e n t i c a l with those included in c e r t a i n "expense u n i t s "
of Form E, the t o t a l expense w i l l not agree with Form E f i g u r e s because
of the i n c l u s i o n in the attached forms of c e r t a i n expenses that are not
d i s t r i b u t e d i n Form E reports*
As i t has been the p o l i c y of the Treasury Department for a number
of years to reimburse the Federal Reserve banks f o r expenses incurred in
connection with new i s s u e s only, your comment i s p a r t i c u l a r l y i n v i t e d
on Exhibit A defining the operations which for present purposes are to
be regarded as being connected with new i s s u e s .
P l e a s e i n d i c a t e any
amendment of t h i s exhibit that you would recommend for any future comp i l a t i o n of expenses connected with new i s s u e s and also the extent, i f
any, to which the operations described therein d i f f e r from the operations
which you have included heretofore in determining
the cost of new i s s u e s
for the purpose of obtaining reimbursement from the Treasury.
It i s b e l i e v e d that a l l of the items on the attached forms except
those commented on s p e c i f i c a l l y below are s e l f - e x p l a n a t o r y .
Salaries
of bank o f f i c e r s should include an appropriate part of the salary of any
o f f i c e r v/lio devotes an appreciable amount of time to supervision
- 4 of the operations covered in any given statement.
The items "Furnish-
ing of heat, l i g h t , power, water and e l e c t r i c i t y " and "Furnishing of
j a n i t o r , elevator and cleaning service" should "be shown f o r a l l operations to which d e f i n i t e space has been assigned and in most instances
w i l l represent an estimated part of the t o t a l expenses of the Federal
Reserve bank for such purposes.
I t i s contemplated that the expense reports submitted on the
attached forms s h a l l show combined f i g u r e s for the head o f f i c e and
branches, i f any.
As regards the statement on space u t i l i z e d , however,
i t i s requested that a separate report be submitted for the head
o f f i c e and for each branch, i f any.
Special a t t e n t i o n i s c a l l e d to
the footnote on t h i s form providing that rent received s h a l l include
any expenses incurred by the bank for heat, l i g h t , power, water and
e l e c t r i c i t y and for j a n i t o r , elevator and cleaning s e r v i c e , the cost
of which i s reimbursed to the Federal Reserve bank.
Very truly yours,
E. L. Snead, Chief,
Division of Bank Operations.
Inclosures.
COPY TO ALL GOVERNORS*
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL C O R R E S P O N D E N C E T O
T H E FEDERAL RESERVE BOARD
December 20, 1933
B-942.
SUBJECT:
Earnings and dividends reports of State
tank members, Form 107.
Dear Sir;
There have been forwarded to you today under separate
cover
copies of Form 10% to be used by State bank
members i n submitting t h e i r reports of earnings and dividends
f o r the s i x months ending December 3.1, 1933 «
I t i s requested that reports on t h i s form be obtained
not only from State bank members l i c e n s e d by the Secretary
of the Treasury to conduct normal banking operations but
also from those which, although not so l i c e n s e d , have not
been formally placed in l i q u i d a t i o n or r e c e i v e r s h i p .
Very truly yours
Chester Morrill,
Secretary,
TO ALL FEDERAL RESERVE AGENTS*
FEDERAL RESERVE BOARD
563
WASHINGTON
December 20, 1933
3 - 9^3
address official correspondence t o
t h e federal reserve board
SUBJECT:
Federal Reserve Exchange and. Transfer D r a f t s .
Dear Sir:
The Federal Reserve Board concurs in the action taken
by the Governors of the Federal Reserve banks at the confe re nc e held in Washington on October 10, 11 and 12, 1933»
in voting that the use of Federal Reserve t r a n s f e r d r a f t s be
abolished, and f i x e s January 1, 193^, as the e f f e c t i v e d a t e .
The Board a l s o concurs in the view expressed by the Governors
that the use of Federal Reserve exchange d r a f t s should be
continued, with no change in form or procedure, pending
further consideration at a future conference.
Very truly yours
Chester M o r r i l l ,
Secretary.
TO GOVERNORS OF ALL FEDERAL RESERVE BASKS*
FEDERAL RESERVE BOARD
WASHINGTON
Decoitiber 2<S, 1933 •
A D D R E S S OFFICIAL. C O R R E S P O N D E N C E T O
T H E FEDERAL RESERVE BOARD
SUBJECT:
Call Condition Reports of State Bank Members
and their A f f i l i a t e s ,
Dear Sir:
There have been forwarded to you today under separate cover the
indicated number of copies of the s i x forms and schedules attached
hereto, for the use of State bank members and their a f f i l i a t e s in
submitting reports as of the next c a l l date:
Number of
copies
Form
Form 105, Report of condition of State bank member.
Schedule "0", Loans and advances to a f f i l i a t e s and
investments in and loans secured by obligations
of a f f i l i a t e s .
Schedule "P", Rates of i n t e r e s t paid on d e p o s i t s .
Form 220, Report of a f f i l i a t e or holding company
affiliate.
Form 220a, Publisher*s copy of report of a f f i l i a t e
or holding company a f f i l i a t e .
Form 220b, Instructions f o r preparation of reports
of a f f i l i a t e s and holding company a f f a i l i a t e s .
Kindly mail an appropriate number of copies of these forms and
schedules, based on the number required at the time of the l a s t c a l l
for reports, to each State bank member that has not been formall; r
-
2 -
565
placed, in l i q u i d a t i o n or receivership, or possession of which has not
been taken by a conservator or other State o f f i c i a l , with the request
that the forms and accompanying schedules be held pending a c a l l for
condition r e p o r t s .
Your l e t t e r transmitting the blank forms should
include general instructions with respect to the preparation of the
reports, similar to those given the banks in connection with the l a s t c a l l
for . reports.
Please also incorporate in your l e t t e r the two f o l l o w -
ing paragraphs:
"Payments made to the Temporary Federal Deposit
Insurance Fund should be included in 'Other a s s e t s ' ,
Item 13 on the face of Form 105, and shown separately
as 'Payment to Temporary Federal Deposit Insurance
Fund' in Schedule M.
"Outstanding capital notes or capital debentures,
i f any, sold to the Reconstruction Finance Corporation,
should be included in 'Capital account', I t era 28 on the
face of Form 105, and reported separately against the
caption 'Capital notes' or 'Capital debentures', as the
case may be, immediately a f t e r the sub-item 'Common
stock'".
You are authorized to grant extensions of time for the preparation of reports of a f f i l i a t e s under the same terms and conditions as
you were authorised to grant such extensions at the time of the l a s t
c a l l for such reports.
- 3 In order that the Board nay have s t a t i s t i c a l data regarding the
aggregate loans and investments, deposits, e t c . , of State "bank members
in the hands of conservators or other similar State o f f i c i a l s pending
a decision of the question whether they should "be reopened, reorganized or liquidated, but which have not been formally placed i n l i q u i d a tion or receivership, please also forward three copies of Porn 105 to
each of such banks with the request that the conservator, or other
State o f f i c i a l in charge of the bank, f i l l in the data c a l l e d for by
the form (upon receipt of a c a l l therefor) and mail the report to your
bank in duplicate.
Please request the o f f i c i a l s in charge of such
banks to i n t e r l i n e the amount of special or segregated deposits, subj e c t to u n r e s t r i c t e d withdrawal, against the Caption "Unrestricted
deposits" following the items a f f e c t e d in Schedules J, IC and L, and
to i n t e r l i n e a s s e t s segregated against such deposits ppposite approp r i a t e captions on the face of the report and in Schedule I .
Officials
in charge of such banks should not be asked to furnish the data
c a l l e d for in Schedules 0 and p, nor to have the reports a t t e s t e d by
any of the directors of the banks.
Since we have never considered
that the law requires reports from banks in the hands of State o f f i c i a l s and since we do not require at t h i s tine s t a t i s t i c a l information regarding the a f f i l i a t e s of such banks, i t w i l l not be necessary
to obtain reports from such a f f i l i a t e s .
It i s requested that as promptly as p o s s i b l e a f t e r the issue of
the c a l l you inform the Board, with respect to each
State whose capi-
tal c i t y l i e s in your d i s t r i c t , whether or not State authorities issued
a c a l l for condition reports as of the same date as the c a l l issued
by the Board, and, i f not, the date of the nearest c a l l thereto issued
567
-
4
~
by the State a u t h o r i t i e s .
I t i s further requested that you obtain and furnish the Board
a l i s t showing, as of the date of the c a l l made by State a u t h o r i t i e s
nearest to the Board's c a l l date, the name, location and t o t a l deposits
of every banking i n s t i t u t i o n under State supervision, whether member or
nonmember, located in each State whose c a p i t a l c i t y l i e s in your d i s trict.
This l i s t should be subdivided into (1) banks operating without
r e s t r i c t i o n s , and (2) banks operating under Restrictions or not in operation but not formally placed in liquidation or r e c e i v e r s h i p .
In the
case of States embraced partly in other d i s t r i c t s , p l e a s e designate
the banks located either in your d i s t r i c t or in the other d i s t r i c t s .
Very truly yours,
)T)pta^
Chester Morrill,
Secretary.
TO ALL FEDERAL BESESVE AGENTS*
FEDERAL RESERVE BOARD
568
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
November 9 * 1^33
B- 976
SUBJECT:
Forms f o r use during 1934.
Dear Sir:
I t w i l l be appreciated, i f you w i l l advise the Board the number of
copies of the forms l i s t e d below that w i l l be feouired by your bank
(including branches, i f any) during the calendar year 1933.
Form
34
Title
Daily balance sheet. (Please s t a t e the number required
f o r the head o f f i c e and each branch separately, and
indicate any special punching that may be d e s i r e d ) .
F.R.A.-5
Federal Reserve notes - Daily statement of Federal Reserve
Agent.
F.R.A.-6
Federal Reserve Bank notes - Daily statement of Federal
Reserve Agent.
38
C l a s s i f i c a t i o n of discounted and purchased b i l l s held at
the end of the month.
44
Monthly report of Federal Reserve notes shoring the number
of each denomination and aggregate amount received, i s s u e d
to bank, and returned to the Cqmotrplltr of the Currency.
95
Monthly report of earnings.
96
Monthly report of current expenses.
l60
Monthly report of r e c e i p t s and payments of paper currency.
569
-
2 -
B-9?6
Porn
Titie
194
Monthly report of Federal Reserve notes received and
issued; also stock on hand at "beginning and end of
month. (Also please s t a t e the number of form I9U,
old s e r i e s , required for use in submitting reports
on Federal Reserve bank n o t e s ) ,
2
Semi-annual functional expense report.
Please show separately the number of copies of each form,
except forms 3^ and F.R.A.-6, required i f revised and the number
i f not r e v i s e d .
Very truly yours,
E. L. Suead, Chief,
Division of Bank Operations,
TO ALL FEDERAL RESERVE AGENTS*
@FedFRASER