Full text of Mimeograph Letters and Statements of the Board : Letter From Walter Wyatt, General Counsel, re Decision in Neoga National Bank Case, Number X-6131, Volume 29, Page 158

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

TO GOVERNORS, CHA.IRi.2EN AND COtiTtSEL OF
ALL FEDERAL RESERVE BANKS- ( E x c e p t C h i c a g o )

FEDERAL RESERVE BOARD
WASHINGTON

X-6131

September 1 2 , - 1 9 2 8 .

ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD

SUBJECT:

D e c i s i o n i n Neoga N a t i o n a l Bank: C a s e .

Dear S i r ;
T h e r e i s e n c l o s e d f o r y o u r i n f o r m a t i o n a copy of t h e r u l i n g of
t h e U n i t e d S t a t e s D i s t r i c t C o u r t f o r t h e E a s t e r n D i s t r i c t of I l l i n o i s ,
u p o n t h e m o t i o n o f t h e F e d e r a l R e s e r v e B a n k . o f Chicago t o d i s m i s s comp l a i n a n t s ' b i l l i n t h e c a s e of J . F . J a r v i s , e t a l . , v . O t t o Kepp, e t a l . ,
b e i n g a s u i t b r o u g h t by t h e d e p o s i t o r s of t h e Neoga N a t i o n a l Bank of Neoga,
I l l i n o i s , a g a i n s t t h e d i r e c t o r s a n d t h e r e c e i v e r of t h a t b a n k a n d a g a i n s t
t h e F e d e r a l R e s e r v e Bank of C h i c a g o . There i s a l s o e n c l o s e d f o r y o u r i n f o r m a t i o n , a copy o f t h e b r i e f i n s u p p o r t of t h i s m o t i o n f i l e d on b e h a l f
of t h e F e d e r a l R e s e r v e Bank of C h i c a g o .
The t h e o r y u p o n w h i c h t h e F e d e r a l r e s e r v e b a n k was j o i n e d a s a
p a r t y d e f e n d a n t i n t h i s s u i t may be summarized v e r y b r i e f l y a s f o l l o w s :
( 1 ) T h a t t h e F e d e r a l r e s e r v e bank i s c h a r g e d w i t h t h e d u t y
of s u p e r v i s i n g n a t i o n a l b a n k s a n d i s l i a b l e t o t h e d e p o s i t o r s t h e r e o f
f o r f a i l u r e t o c a u s e s u c h b a n k s t o be c l o s e d when t h e y become i n s o l v e n t ; and
( 2 ) That t h e F e d e r a l r e s e r v e bank h a d o b t a i n e d an u n l a w f u l
p r e f e r e n c e i n v i o l a t i o n of S e c t i o n 5242 of t h e R e v i s e d S t a t u t e s , b y
r e c e i v i n g a d d i t i o n a l c o l l a t e r a l f o r r e d i s c o u n t s , which enabled i t
t o c o l l e c t i t s i n d e b t e d n e s s i n f u l l when t h e d e p o s i t o r s of t h e b a n k
o n l y r e c e i v e d s i x t y c e n t s on t h e d o l l a r .
The F e d e r a l r e s e r v e b a n k f i l e d a m o t i o n p r a y i n g t h a t i t be d i s m i s s e d f r o m t h e s u i t on two g r o u n d s :
(1)
T h a t t h e b i l l o f c o m p l a i n t s t a t e d no c a u s e of a c t i o n
a g a i n s t the F e d e r a l r e s e r v e bank; and
( 2 ) T h a t t h e F e d e r a l r e s e r v e b a n k c o u l d n o t p r o p e r l y bo
j o i n e d a s a p a r t y d e f e n d a n t i n a s u i t b r o u g h t by t h e d e p o s i t o r s of
t h e member b a n k a g a i n s t t h e d i r e c t o r s of s u c h b a n k f o r l o s s e s a r i s i n g f r o m t h e a l l e g e d mismanagement of t h e member b a n k b y t h e d i r e c t o r s .
The C o u r t s u s t a i n e d t h e m o t i o n of t h e F e d e r a l r e s e r v e b a n k on b o t h
grounds and d i s m i s s e d the F e d e r a l r e s e r v e bank from t h e s u i t .


Enclosures.


Very t r u l y y o u r s ,

Walter Wyatt,
General Counsol.