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FEDERAL RESERVE BOARD WASHINGTON ADDRESS O FFIC IA L CORRESPONDENCE TO TH E FEDERAL RESERVE BOARD X-9125 February 12, 1935. Dear Sir: The Board has "been advised that the Reconstruction Finance Cor poration has adopted the policy of requiring the written approval of the various supervisory authorities at interest "before the directors of the Reconstruction Finance Corporation consider requests for ap proval of capital reductions submitted "by "banks in which the Corporation has a financial interest. It is understood that the various Loan Agencies have "been advised "by the Reconstruction Finance Corporation that in the case of State member "banks the instructions have reference to approvals of the plans "by the State Banking Departments and the Federal Reserve Board. The procedure to "be followed in order to expedite the handling of such cases has "been discussed with the Reconstruction Finance Cor poration and for your information and guidance there is inclosed a copy of a letter sent today to the Federal Reserve Agent at ITew York with regard to such procedure. Very truly yours, Inclosuro. TO ALL FEDERAL RESERVE AGSFTS. Chester Morrill, Secretary. X -9125-a February 12, 1935. Mr. J. H. Case, Federal Reserve Agent, Federal Reserve Bank of Hew York, Hew York, H. Y. Dear Mr. Case: Reference is made to your letter of January 28, 1935, re garding the procedure to be followed in advising the Reconstruction Finance Corporation of the approval or disapproval by the Federal Reserve Board of plans for reduction in capital submitted by State member banks which are subject to a condition of membership requir ing the Board's approval of a reduction in capital. In accordance with a request from the Reconstruction Finance Corporation, the Corporation has been advised which of the State mem ber banks in which the Corporation has an investment or is committed to make an investment are subject to a condition of membership re quiring the Board*s approval of a capital reduction. It is understood that the Reconstruction Finance Corporation will advise each of its Loan Agencies of the names of such banks in the respective districts and that the Reconstruction Finance Corporation will refer to the Board for approval of proposed reductions in capital only plans of banks subject to a condition of membership requiring the Board's ap proval of a reduction. It is understood, also, that in order to ex pedite the consideration of such plans of capital reduction of State M r• J • H • Case — 2. X-9125-a member banks requiring the Board’s approval, the Reconstruction Finance Corporation will advise its Loan Agencies that all such plans submitted to the Loan Agencies should be promptly submitted to the Federal Reserve Agents and that plans submitted to the Re construction Finance Corporation at Washington will likewise be sub mitted to the Federal Reserve Agents. The Reconstruction Finance Corporation has also been advised that the Federal Reserve Agents have been authorized in the circum stances and within the limitations described in the Board’s letter dated December 15, 1934, (X-9048) to approve on behalf of the Board reductions of capital notes or debentures or preferred stock issued by State member banks in any case where the Board's approval of such reduction is required. In order to expedite the handling of requests for approval of capital reductions of State member banks in which the Reconstruc tion Finance Corporation has an interest and which are subject to a condition of membership requiring the Board's approval of a re duction in capital, it is suggested that the following procedure be followed in all cases, whether the requests are received from the banks concerned or are transmitted through the Loan Agencies of the Reconstruction Finance Corporation: In cases where you are authorized under the pro visions of the Board's letter X-9048 to act on behalf of Mr. J. H. Case - 3. X-9125-a the Board, it is suggested that you advise the Reconstruction Finance Corporation of your action in the matter, sending the original of your letter to the Reconstruction Finance Corporation at Washington and a copy to the Loan Agency. In cases where you are not authorized under the provisions of the Board's letter X-9048 to act on Behalf of the Board, it is suggested that you forward the request outlining the plan to the Board, together with your recommendation in the matter. You will, of course, Be advised of the Board's action in the matter and, in accordance with the suggestion of the Recon struction Finance Corporation, advice of the Board's action in the matter will also Be transmitted to the Reconstruction Finance Corporation at Washington rather than to the Loan Agency of the Corporation. Although the procedure outlined above contemplates that formal approval will Be given only in case of Banks subject to the condition of membership requiring the Board's approval of the capital reduction, it is expected, as requested in the Board's letter of December 15, 1934 (X-9048), that you will endeavor to keep yourself informed as to any proposed reductions in the capital stock or capital notes or debentures of State member banks, whether the Board's approval is re quired in such cases or not, and-to take such action as may be appro priate in any case where the proposed reduction would'not be to the % 1' Hr. J. H. Case - 4. X-9125-a "best interests of the "bank. Very truly yours, (Signed) Chester Morrill Chester Morrill, Secretary.
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