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943 Ameeting of the Federal Reserve Board was held in Washington Qav:ednesday, April 17, 1C35, at 11:00 a. in. PRESENT: Lr. ,Lr. Lr. Li.. hr. L;ccles, Governor Thomas, Vice Governor Hamlin hiller Szymczak :r. i„orrill, Secretary Bethea, Assistant Secretary Er. Carpenter, Assistant Secretary The Board acted upon the folloming matters: Telegrams dated April 17, 1935, from Lr. Willett, Cashier of th°Pederal Reserve Bank of Boston, and Dr. Austin, Chairman of the ?ederal Reserve Lank of Philadelphia, both advising that, at meetings or the boards of directors on that date, no changes were made in the existing schedules of ra-_es of discount and purchase. Without objection, noted with approval. 1,:emorandum dated Ipri1 11, 1935, from Lr. Goldenmeiser, Liroet r of the Division of Research and Statistics, recommending apProval of the appointment of Lr. LAxwell R. Conklin, of the staff of ' the •, ullasion of Analysis and Research of the Federal Reserve .Lank of - ue.z. ealciseo, as a junior research assistant in the Board's Division Of 1, 4Q5earch and Statistics, with salary at the rate of : ;3,400 per 8,41, $ effective as of the date upon which he enters upon the perfortion 11 "of his duties as an employee of the Federal Reserve Doard, tbaga Ilth the understanding that it mill not be necessary for Li'. Co 11 to take the usual physical examination inasmuch as ho is at T$ ‘; 944 4/17/35 -2- Present a member of the retirement system. Approved. Letter to the board of directors of the "elymer State Bank", or,i;ew York, staling that, subject to the conditions proscribed it the letter, the Loard approves the bank's application for member111-1) in the Federal Reserve System and for the appropriate amount of stock in the Federal Reserve Bank of New York. 4preved. Letter to "The United Rational Lank of Gliffside Park", 411fside Park, New Jersey, reading as follows: "The Federal Reserve Leard has given consideration to Your application for pc/mission to exercise fiduciary powers, and grants you authority to act, when not in contravention of State or local law, as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, recoivor, committee of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies or Other corporations which come into competition with national .,blarl1=8 are permitted to act under the laws of the State of New °I‘Goy, the exercise of all such rights to be subject to the Provisions of the Federal Reserve Act and the regulations of the Federal Reserve Board. "This letter will be your authority to exercise the fiduiarY Powers granted by the Beard. A formal certificate cover-1.11Z; such authorization will be forwarded to you in due course." A-:Droved. Telegram dated April 16, 1035, approved by three merbers of the Board, to ix. Peyton, Federal Reserve Agent at the Federal ReP.ank of Linneapolis, authorizing him to issue a limited voting Perzit to the "First Lank Stock Corporation", Minneapolis, Minnesota, irig such organization to vote the stock -which it owns or controls 945 V17/35 in le First I:ational Bank o ol1a", Rolla, North Dakota, and "The Fir8t Lational hank of Leola", Leola, South Dakota, for the purposes set forth in the telegram. inc telegram also stated that inforra- tien received from the office of the Comptroller of the Currency indicates that the shares of The First National Lank of Rolla owned tY the applicant were voted at the annual election of directors on jarluarY 5, 1935, that since there was no voting pernit in force on that date authorizing the applicant to vote for the election of directora of such bank and to act on matters of a routine nature, authority hild been included in the telegram permitting the applicant to vote its to ratify the action taken at that meeting which may have been illegal because voting of the stock owned or controlled by the applicallb lgas not authorized by a proper voting permit. Approved. Letter to Lr. Case, Federal Reserve Agent at the Federal ReBank of. 1:ew York, readlig as follows: "Reference is made to the memorandum of Larch 21, 1935, fUrnshed to the Board by your office with reference to the apication of 'Perth Amboy Truri Company', Perth Amboy, New erseY, for a voting permit authorizing it to vote the stock lich it owns or controls of 'The Raritan Trust Company of rerth Amboy', Dew Jersey. "The board understands that Raritan Trust Company has 5,000 Shares of preferred stock and 2,000 shares of common stock outstanding; that Perth Amboy Trust Company owns 1630 shares of the "ninon stock; that at the 1935 annual meeting of the stockholders Raritan Trust Company, 3120 shares were voted; that Perth 71130Y Trust Company did not vote the shares which it owns at the ' 935 annual meeting and did not control the manner in which any ef the other shares were voted. "Cu the basis of these facts it appears that Perth AmLoy Lruct Company is not a holding company affiliate of Raritan r 946 4 /17/35 -4- "Trust Company and that it is not necessary for it to secure a voting permit. Accordingly, the Board assumes that Perth Amboy Irust Company does not desire the Board to give further consideration to its application and, in the absence of furthor word from you, the file will be closed." Approved. Letter dated April 16, 1935, approved by five members of the Ec3ard, to L4r. Stevens, Federal Reserve Agent at the Federal Reserve 13041.17. of Chicago, reading as follows: "There are inclosed for your confidential information copies of a letter dated April 3, 1935, addressed to the Loard cy Mr. h. J. Klossner, Assistant Chief, Examining Division, Reconstruction Finance Corporation, and of tho report of the Review Committee of the Corporation, both relating to the apPlication made by the Bank of Sturgeon Bay, sturgeon Bay, Vascensin, to sell ,i100,000 capital debentures to the Corporation. "In view of the complications resulting from the transfers Of assets between the bank and the trust created for the benefit of raiving depositors, it is thought that by affording a background for tho conditions imposed by the Corporation in connection with its commitment, the inclosures may be helpful to you ln your efforts to have the bank complete its recapitalization prop-sm.*, Approved. Letter dated April 16, 1935, and approved by five members of the Board, to Jr. Stevens, Chairman of the Federal Reserve Lark of 'aCo, reading as follows: "Your letter of April 3 informing the Board about the proPosal made by the Executive committee of the Federal Reserve Bank of Chicago with respect to discontinuing the publication . c_f the monthly review of business conditions in the Seventh Federal Reserve District has been received. "Az you know, the Federvl Reserve Board is at the present .. Lime engaged in a careful survey of the statistical divisions of the Federal Reserve banks, their functions, personnel, the extent to which they are used, and the use that is made of the monthly letters. In view of the fact that this investigation 947 4/17/35 -5- n. is in progress, the Federal Reserve Board has deferred action en the proposal of your Board of Directors until the investigation has been completed and a general policy in the matter has been adopted." Approved. Letter to Lr. Charles R. Grant, Vice President of The ;lash- Loan and Trust Company, Mlshington, D. C., reading as follows: "Receipt is acknowledged of your letter of April 11, 1935, addressed to L.r. Paulger, Chief of the Board's Division of txozlinations, requesting advice as to whether a sale to the lentgomery County Rational Bank of Rockville, 1.1aryland, of a Y0,000 real estate note now held by The Washington Loan and Trust Company would be considered as a violation of membership condition numbered 12 to which your bank is subject. It is understood that the Lontgomery County National Bank holds a Junior lien on the property and desires to purchase the real estate note referred to in order to protect its interests. "Condition numbered 12 provides that, except with the permission of the Federal Reserve Board, The V;ashington Loan and irust Company shall not engage in the business of issuing or selling, either directly or indirectly, notes, bonds, mortgages, certificates or other evidences of indebtedness representing real estate loans or participations therein. It does not appear that, by reason of the transaction described in your letter, The l ashingtan Loan and Trust Company should be considered as engaging in the business of issuing or selling notes or other evidences of indebtedness representing real estate loans, and accordingly the Board does not feel that such a transaction would be in violation of condition of membership numbered 12." Approved. Letter dated April 16, 1935, approved by five members of the Board, to Lr. Case, Federal Reserve Agent at the Federal Reserve of New York, reading as follows: "Further consideration has been given to the application Of Lr. Joseph S. Laxmll under the provisions of section 32 of Banking Act of 1933 for a permit to serve as an officer of The New York Trust Company and as a director of the Reliance 1=anacement Corporation, both of New York, Now York. 948 4/17/35 -6- "It appears that Reliance i..anagement Corporation is a socalled 'investment trust'; that it has never engaged in undermriting or distributing securities and is not a dealer in securities; and that, although purchases for the five years ending December 31, 1933 averaged 85 per cent of the value of the portfolio and sales averaged 66 per cent, such purchases for the year ending December 31, 1934 amounted to 57.3 per cent Of the value of the portfolio and sales amounted to 56.7 per cent. The i3oard has considered the reasons which have been given for the activity in the portfolio in prior years, including the necessity of guarding against a technical default in the bonds of the corporation which were outstanding, and has noted that the corporation is operated under the sane nanagenent and Policies as the 2,o1iance International Corporation, which the Board has heretofore found does not engage in the business referred to in section 32. The Board has accordingly concluded that the activity in the corporation's portfolio was the result Of circumstances not connected with the investment policies of its management, and that the corporation should be regarded as engaged merely in the business of investing its funds rather than in the kind of business referred to in section 32. "Accordingly, a permit under the proviAons of section 32 covering the relationships described in the first paragraph of this letter is not necessary, and it will be appreciated if you mill advise Er. Maxwell accordingly. "Of course, what has been said above applies equally to the application of Mr. Matthew S. Sloan for a permit to serve as director of Irving Trust Company, Kew York, New York, and as director of Reliance Management Corporation." Approved. Letter to Mr. ease, Pederal Reserve Agent at the 7ederal Re41 ' ' 1 0 Bank of New York, reading as follows: "Consideration has been given to the information submitted vlith your letter of March 25, 1935 in connection with the application of Mr. Gustav A. Schwenk under the pm -visions of section 02 of the Bankinr- Act of 1933 for a permit to serve as director of 1,ational Bank of Yorkville in New York, Mew York, New York, and as director and officer of R. II. Securities Corporation, 'almington, Delaware. It is noted that you and counsel for your be.nh are of the opinion that the provisions of section 32 are not applicable to the relationships involved. "It appears that R. H. Securities Corporation was formed in 1927 and that it received certain shares of stock from an 949 V17/35 -7- 11. individual in exchange for all of the stock of R. H. Securities Corporation. Hone of the shares or other securities of if. Securities Corporation have ever been in the hands of the Public. Although a relatively small amount of securities wore Purchased and sold by the corporation in 1931 and 1932, it aPpears that, as of December 31, 1934, all of the securities in the corporation's portfolio had been held for at least two years. It further appears that the corporation has never Participated in the underwriting, flotation, or distribution Of securities. . "In view of this information, the hoard believes that section 32 is not applicable to the relationships described in the irst paragraph of this letter, and you are requested to advise Schwenk accordingly." • F Approved. Letter dated April 16, 1935, approved by five members of the c'ard, to Lr. Case, Federal Reserve Agent at the Federal Reserve Bank of Lew York, reading as follows: "Careful consideration has been given to your letter of February 1, 1935 and inclosures with further reference to the Stetson under the provisions of application of Ir. Eugene section 32 of the Banking Act of 1933 for a permit to serve -" A. Harriman Securities Corporation and Guaranty Trust ComPany, both of New York, 1:evr York. "After further careful consideration, on the basis of all the information which has been submitted, the Board is of the °Pinion that W. A. Harriman Securities Corporation is not enCaged in the business referred to in section 32 and that the relationships in question are not relationships of a kind which that section .was intended to terminate. In reaching this conthat it appears from the clusion, the Board noted particularly fuller statement contained in the letter from Jr. Stokes which You inclosed with your letter of February 1, 1035, that the activities of the corporation arc directed primarily torards 40ePini, its funds invested in securities which have relatively the best prospects; that purchases and sales of securities by the corporation are made in the open market on stock exchanges and that the corporation is therefore not a dealer in securities in the sense in which that term is commonly used; and that the 17°11me of purchases and sales by the corporation in relation to its total assets was less than that of any similar orsanization 17hjoh the Board has held to be primarily engaged in the business 950 4/17/35 -8- "referred to in section 32 in the absence of other facts Clearly so indicating. Therefore, a permit covering the relationships described above is not necessary, and it will be appreciated if you will advise kr. Stetson accordingly. "Of course, what has been said above applies equally to Mr. A. Harriman and Lr. Uharles A. aunroe, who are serving that corporation and certain member banks. "Your letter also refers to the possible applicability of section 32 to Mr. W. A. harriman's services to Merchantoterling Corporation and Lrama Securities corporation. "In connection with both of these corporations, it appears from the information which has been submitted tht 50 Per cent of the total outstanding shares is owned by Mr. 4arriman, the balance being mined by his brother, i. I. liarriran; that neither corporation has issued any bonds or securities other than such shares; that such shares have never been Offered, sold or distributed to the public; that both corporations are engaged in the business of managing the funds of certain members of the liarriman family; and that neither corporation has participated in transactions involving the issue, underwriting and distribution of securities. 4In connection with both corporations, it appcars that Purchases and sales of securities during the past five years have averaged less than 20 per cent of total assets per year; and that in the case of Merchant-Sterling Corporation 85 per cent of its portfolio as of 1,ovember 1, 1934 had been held for over two years, and in the case of Ormma Securities Uorporation ever 70 por cent of its portfolio had been so held. "Cm the basis of the information which has been submitted, the Board agrees with the conclusion reached by you and your counsel that section 32 of the Banking Act of 1933 is not apPlicable to Mr. Harriman because of his relationships to these two corporations, and it will be appreciated if you will advise him accordingly." Approved. Letter dated April 16, 1935, approved by five members of th0 zoard, to La'. Peyton, Federal aeserve Agent at the Federal heer0 Bank of Minneapolis, reading as follows: "The Board has given further consideration to the application of Mr. Thomas Barden under the provisions of section 32 of the Banking Act of 1033 for a permit to serve as chairman cif the board and director of Ihe -Union National Lank of Ashland, 951 V17/35 -9- "Ashland, Wisconsin, and as president and director of Lining Shares Corporation, 1;ew York, I:ew York. As you know, the Board expressed the opinion, on the basis of the information Previously submitted, that it appeared that the company was engaged in the business of purchasing, selling and negotiating securities within the meaning of section 32. "however, the matter has been reconsidered on the basis of the additional information contained in the applican t's letter of January 8, 1935, a copy of which you have forwarded lo the hoard. It appears that Limning Shares Corporation is a small organization located in hey, York City, having less than a dozen stockholders and total assets of less than ,50,000; that the corporation does no underwriting or distributing and ls not a dealer in securities; and that it is engaged in purchasing securities of mining companies for the purpose of obtaining income and capital appreciation, purchases and sales of such securities being made in the open market through brokers; that the corporation is located over 1500 miles from the national bank; and that there have been no transactions of any kind between the bank and the corporation. "The application was originally submitted with your favorable recommendation, based upon the absence of any transactions between the bank and the corporation and upon your belief that -uhe applicant's services are of value to the bank. "Upon further consideration, the Board is of the opinion that the relationships involved are not of a kind which section 32 was designed to terminate and that that section is not apPlicable to them. Therefore, it appears that no permit is necessary covering the relationships described in the first paragraph of this letter, and it will be appreciated if you will advise Lr. Barden accordingly." Approved. There were then presented the following applications for liell,ges in stock of Federal reserve banks: A 1,14 u.r .,.J.eations for ADDITION AL Stock: Oto.6. "'rational bank of Commerce in 1:evr Orleans, Now Orleans, Louisiana Ho. 7. sAforth Banking Company, 714shi1.gten, Illinois Shares 9 9 6 6 952 V17/35 -10- :1-112.12.1L2vtions for ADDITIONAL Stock: L1-8-7— 4,1e First 7777TT* 1It.onal Bank of Filer, Filer, Idaho larltah State Bank, Vernal, Utah (Continued) Shares 66 1 Total 67 82 lications for SURRENDER of Stock: 2. Trust Ra'11711a-pany, Rahwa,, J ersev 0, 40flesee Valley 'iational Bank and Trust Company of Goneso, Geneseo, 1:017 York Ilohavk National hank of Schenectady, Schenectady, New York D,istrict 3. 4seurity Trust Company, 1fl'.1aton, Delaware ;tctro. 7. First National Bank of Denison, Denison, Iowa 60 60 4 124 899 690 9 Total 9 1,032 Approved. Thereupon the meeting adjourned. Socrevar,• Governor.
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