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901
A meeting of the Federal Reserve Board was held in 'Washington
on Monday,
April 2, 1934, at 5:30 p.
PRESENT:
Mr.
Yr.
Ir.
Er.
Er.
Mr.
Black, Governor
Emnlin
Miller
James
Thomas
Szymczak
Mr. Morrill, Secretary
Er. Bethea, Assistant Secretary
The minutes of the meetings of the Federal Reserve Board held
°11 March 13,
17, 26, and 27, 1934, were approved.
The minutes of the meetings of the Executive Committee of the
l'ederal Reserve Board held on March 15, 20, and 23, 1934, were approved
and the
actions recorded therein were ratified unanimously.
The Board then considered and acted upon the following matters:
Letter dated March 29, 1934, from Er. Sproul, Secretary of the
4derai
Reserve Bank of New York, advising that, at a meeting of the
board
of directors on that date,
ED
charge was made in the bank's exist-
schedule of rates of discount and purchase.
Without objection, noted with approval.
Memorandum dated March 27, 1934, from Lr. horrill, recommenditt the
appointment of hr. J. Edward Kilgore as an administrative as"
;1111t in the office of the Secretary, with salary at the rate of
21°50 Per annum, effective as of the date upon which he enters upon
the Performance of his duties. The recommendation was approved by six
11114flbe
1'8 of the Board on March 50, 1934.
Approved.
Memorandum dated March 27, 1934, from Mr. Wyatt, General Counsels
J2
4/2/ 4
-2-
recommending the appointment of Mr. Joseph T. Owens as an assistant
couzsel in the legal division, with salary at the rate of $5,000 per
elullalas effective as of the date upon which he enters upon the performr
alloe of his duties.
The recommendation was approved by six members
of the Board on
March 30, 1934.
Approved.
Memorandum. dated March 27, 1934, from Mr. Wyatt, General Counrecommending the appointment of Mr. Gray Williams as an assistant
counsel in the legal division, with salary at the rate of $5,000 per
"Tillms effective as of the date upon which he enters upon the perform°e of his
duties.
The reconnaendation was approved by six members of
the Board on March 50, 1934.
Approved.
Memorandum dated March 27, 1934, from Mr. Wyatt, General Couneel
recommending the appointment of Mr. Frederic Solomon as a law
elerk in the legal division, with salary at the rate of 42,400 per
"1111114 effective as of the date upon which he enters upon the perform-
of his duties.
the
The recommendation was approved by six members of
Board on larch 30, 1934.
Approved.
Memorandum dated March 29, 1934, from Mr. Paulger, Chief of
the Division of Examinations, recommending that, in view of the cont&1„
'
4eg amount of work in the division, the temporary appointment of
kr, j
8-r1e8 F. Furbershaw as a stenographer be extended for an additional
thirt
Y days on the same terms as the previous employment. The recome-
903
4/2/34
-3-
tlendation was approved by four members of the Board on. March 31,
1934,
Approved.
Letter dated March 30, 1934, to Kr. Austin, Chairman of the
Poderal Reserve Bank of Philadelphia, prepared in accordance with the
action taken at the reetirr_, on March 28, 1934, and approved by four
zerribers of the Board, reading as follows:
"At a meetin[; since the conference which the Federal Reserve Board had with certain directors of the Federal Reserve
Bank of Philadelphia on Tuesday, larch 27, the Federal Reserve
Board reviewed the natters which were discussed with respect to
the official personnel of the bank. The Board is profoundly interested in having the highest type of management in the Federal
reserve banks, and the law- places certain very definite responsibilities upon the Federal Reserve Board in this connection. At
the sape time the Board feels keenly that the duty of securing
such management rests primarily with the board of directors of
each Federal reserve bank. The Board understands that the directors of the Federal Rcserve Bank of Philadelphia have given this
rosponcildlity serious consideration and that they have taken
steps in the direction of strengthening the management of the
bank. Nevertheless, the Board, after careful consideration of
these changes, still feels that the bank is in need of a senior
executive officer whose ability has been demonstrated in broad
commercial banking, experience of a responsible character, and it
hopes that the board of directors of the Federal Reserve Bank of
i hiladelphia will continue to give their earnest consideration to
Idlis matter.
"ith respect to the four cases involving promotions and
salary increases submitted by the board of directors of your bank
en zhich the Board had not taken favorable action, it has requested me to advise you that, effective April 1, 1934, it approves the salaries involved at the annual rates stated below:
C. A. McIlhenny,
W. J. Davis,
i. E. Donaldson,
G. K. Morris
Deputy Governor, Cashier,
and Secretary
Assistant Deputy Governor
Assistant Deputy Governor
Assistant Cashier
13,200
10,000
5,00
5,000"
Approved.
Letter dated larch 29, 1934, approved by three members of the
904
4A/34
Board, to the board of directors of the "Community Trust Company",
Sayville, New York, stating that, subject to the conditions prescribed
in the letter, the Board approves the institution's application for
membership in the Federal Reserve System and for the appropriate
kmount of stock in the Federal Reserve Bank of New York, effective
if
knd when the Community Trust Company, with the approval of the Superintendent of Banks for the State of New York, is merged with The Oyster'
lents National Bank of Sayville under the charter of the Community
TI*ust Company and under tho name of The Oystermen's Bank and Trust Corn-
Approved.
Letter dated March 30, 1934, approved by five members of the
Board, to the board of directors of "The First State Bank", Ness City,
Xallsas, stating that, subject to the conditions prescribed in the
letter, the Board approves the bank's application for membership in
the
the
Federal Reserve System and for the appropriate amount of stock in
Federal Reserve Bank of Kansas City.
Approved.
Letter dated March 30, 1934, approved by five members of the
13"rd, to the board of directors of the "Bank of Albany", Albany,
°IleM, stating that, subject to the conditions prescribed in the letter', the Board approves the bank's application for membership in the
?eriel'al Reserve System and for the appropriate amount of stock in the
'eciel'al Reserve Bank of San Fraraisco.
Approved.
905
4/2/34
-5Telegram dated March 31, 1934, approved by five members of
the Board, to Mr. Case, Federal Reserve Agent at the Federal Reserve
kak of New York, reading as follows:
"Re your letter March 27, 1934 regarding membership application of The Mount Vernon Trust Company, Mount Vernon, New York.
In view of information submitted and your recommendation Board extends to April 27, 1934, time within which bank may accomplish
its membership in the System. It is noted that State examiner
In his report of examination as of February 9, 1934, severely
criticizes operations of trust department. Prior to admission of
bank to membership you are requested to satisfy yourself that
proper steps have been taken to effect the necessary corrections
in the operations of the department and that the officers to be
ln charge are men of high standards, who, by experience, are fitted
for the responsibilities to be assumed. In his earlier discussions
With the Board's staff, President Cross advised that the trust department would be headed by a carefully selected trust officer
from the outside.
"Beard notes your comments regarding advisability of permitting bank to become a member pending an appeal from order approving reorganization and if this question arises it is requested
that before issuing stock in the Reserve Bank to the applicant,
full information regarding the developments in the litigation and
the attitude of the public be submitted to the Board, together
mith your recommendation and opinion of Counsel for the Reserve
Bank."
Approved.
Telegram dated March 30, 1934, approved by four members of the
Bo
ard, to Er. Stevens, Federal Reserve Agent at the Federal Reserve
kl* of Chicago, referring to the application of "The First State and
4.17.4
y-Llis's Bank of Holly, Michigan", for permission to withdraw immediate3* frotl membership in the Federal Reserve System, and stating that the
13(3krti Waives the usual requirement of six months' notice of intention
to vithdraw and that, accordingly, upon surrender of the Federal reserve
stock issued to The First State and Savings Bank of Holly, Michigan,
the
Federal Reserve Bank of Chicago is authorized to cancel such stock
966
4/2/34.
..
'zci make a refund thereon.
Approved.
Telegram dated Larch 29, 1934, approved by five members of
the Board, to 1Ir. Newton, Federal Reserve Agent at the Federal Reserve
Bank of San Francisco, referring to the application of the "Steiwer
&: Carpenter Bank", Fossil, Oregon, for permission to withdraw ipmediately from
membership in the Federal Reserve System, and stating that
the Board waives the usual requirement of six months' notice of intenti°11 to withdraw and that, accordingly, upon surrender of the Federal
reserve bank stock issued to the Steimer (": Carpenter Bank, the Federal
Reserve Bank of San Francisco is authorized to cancel such stock and
ke a
refund thereon.
Approved.
Letter dated Earch 30, 1934, approved by five members of the
13°11rd, to the "National Earl: of Toledo", Toledo, Ohio, reading as
ron.ovis,
"The Federal Reserve Board approves your applicaticn for
Perraissicn to act, when not in contravention of State or local
law, as trustee, executor, administrator, registrar of stocks
End bonds, guardian of estates, assignee, receiver, or in any
other fiduciary capacity in which State banks, trust companies
)_x• other corporations which come into competition with national
us‘
(111:s are permitted to act under the lam of the State of Ohio,
the exercise of all such rights to be subject to the provisions
ef the Fedoral Reserve Act and the regulations of the Federal
Reserve Board.
"This letter will be your authority to exercise fiduciary
Powers as set forth above. A formal certificate covering such
Illthorization will be forwarded to you in due course.
, "The Board feels that, if you are tendered any of the trusts
1.1c4I aold by the First National Bank of Toledo, Toledo, Ohio, you
should carefully scrutinize their condition and should not accept
anY of such trusts which, through their assumption, may be
969
4/2/34
-7-
",qetrimental to the interest of your institution."
Approved.
Letter dated March 30, 19'64, approved by four members of the
Board, to Yr. O'Connor, Comptroller of the Currency, reading as follows:
In accordance with your recommendation, the Federal Reserve Board approves a reduction in the coranon capital stock of
"Ihe Central :National Bank of New Rochelle', 1,ew Rochelle, New
York, from :)300,000 to c;150,000, pursuant to a plan which provides that the bank's capital shall be increased by 0.50,000 of
Class 'A' preferred stock to be sold to the Reconstruction Finance
Corporation and $100,000 of class 'B' preferred stock to be sold
locally, that the released capital together with ,150,000 of the
bank's surplus, undivided profits and reserves shall be used to
eliminate 300,000 of substandard assets, and that the funds received from the sale of preferred stock shall be used in reducing
the bank's liability for borrowed money, all as set forth in your
memorandum of March 21, 1934.
"In considering the plan under which the reduction in connon
capital is to be effected, it has been noted that the condition of
this bank after the proposed eliminations are effected will still
be far from satisfactory, End it seems probable that further corrections will be necessary in view of the excessive volume of
criticised assets rctmaining in the bank. It has been noted also
tfiat your examiner severely criticises the bank's management,
Tallch he regards as unsafe and almost entirely lacking in ability.
It is assumed, however, that you have these conditions in mind
End that whenever it is feasible to do so you will obtain such
further corrections as may be practicable."
Approved.
Letter dated March 29, 1934, approved by six members of the
to Mr. O'Connor, Comptroller of the Currency, reading as followc:
"In accordance with your recomlaendation, the Federal Reserve
3,0ard approves a reduction in the common capital stock of 'he
ort Greene National Dank in New York', Brooklyn,
New York, from
00,000 to ,350,000, pursuant to a plan which provides that the
,
allc's capital shall be increased by .,150,000 of preferred stock
'
0 be sold to the Reconstruction Finance Corporation, and that
least ,;125,000 of the released capital shall be used to
e
4/2/34
-8-
"eliminate unsatisfactory assets and the remainder credited to
undivided profits, surplus or a reserve for contingencies, all
as set forth in your memorandum of March 21, 1934."
Approved.
Letter dated Larch 30, 1934, approved by four members of the
'
13_ n
ward
to Mr. O'Connor, Comptroller of the Currency, reading as fol-
"In accordance with your recommendation, the Federal Reserve
Board approves a reduction in the common capital stock of 'The
liational Bank of Lake Ronkonkoma', Lake Ronkonkoma, New York,
from c;125,000 to V10,000, pursuant to a plan which pro-Ades that
the bank's capital shall be increased by :20,000 of class 'A' preferred stock to be sold to the Reconstruction Finance Corporation
and 20,000 of class 'B' preferred stock to be sold locally, that
the released capital shall be used to eliminate substandard assets
and securities depreciation, and that the funds received from the
sale of the preferred stock shall be used in retiring the bank's
liability for borrowed money, all as set forth in your memorPridum
of March 24, 1934.
"In considerin; the plan under which the reduction in common
capitol is to be effected, it was noted that securities depreciatlon remaining in the bank after the proposed adjustments will be
Sufficient to impair the common capital to the extent of approximately 9,400. It is assumed, however, that you have this condition in mind and that whenever it becomes feasible to do so you
will obtain such further corrections as may be practicable."
Approved.
Letter dated March 30, 1954, approved by five members of the
to Lir. O'Connor, Comptroller of the Currency, reading as follows:
"14)ceipt is acknowledged of your supplemental memaran6um of
,rch 21, 1934, with reference to your memorandum of February 19,
-34, in regard to a proposed reduction in the common capital of
The Milford National Bank', Milford, Ohio, from v100,000 to
NP50,000 and the sale of 50,000 of preferred stock to the Reconatruction Finance Corporation, which was approved by the Board on
1 -arch 2, 1934.
:
"You advise that the Reconstruction Finance corporation has
irlformed your office that it is unwilling to agree to purchase
1_10.r0 then 25,000 of preferred stock, and recomend that the bank
°"0 permitted to reduce its common capital as originally proposed
4/2/34
-9-
"but that the amount of preferred stock to be sold to the Reconstruction Finance Corporation be reduced from $50,000 to $25,000.
"In accordance with your recommendation, the Board approves
the amendment of the original plan to provide for the sale of
v25,000 of preferred stock to the Reconstruction Finance Corporation as stated in your memorandum of March 21, 1934, with the
understanding that the other provisions of the plan rennin unchanged."
Approved.
Letter dated Larch 30, 1934, approved by five members of the
B"rd, to Mr. O'Connor, Comptroller of the Currency, reading as folloyys I
"Reference is made to your letter of /larch 13, 1934, recommending a reduction in the common capital stock of 'The Citizens
Rational Bank of Montezuma', Montezuma, Georgia, from 4100,000 to
450,000. Mile it is not entirely clear, it appears from your
letter that upon the approval of the reduction, approximately
421,357 of the released capital funds may be immediately applied
to due and unpaid indebtedness of shareholders to the bank, and
that the remainder of the released capital funds or approximately
'28,G43 might be retained in the undivided profits account until
at a later date it is paid as a dividend to the shareholders mho
are not indebted to the bank.
"The Board is of the opinion that a distribution of the released capital funds on such a basis, in the absence of a unanimous vote of shareholders, would not be warranted under the law.
however, the Board approves the reduction in capital stock of the
above nand bank upon condition that any distribution of the released capital funds shall be on a pro rata basis to all stockholders, whether or not they are indebted to the bank, as of the
same date, and that upon such distribution the amount of approximately $21,357 thereof shall lawfully be applied to the due and
unPaid indebtedness of shareholders to the bank."
Approved.
Letter dated March 29, 1934, approved by six members of the
lkiard, tO
Mr. O'Connor, Comptroller of the Currency, reading as follovre 3
"In accordance with your recomnendation, the Federal Reserve
Board approves a reduction in the common capital stock of the
'4ational Builders Bank of Chicago', Chicago, Illinois, from
910
4/2/34
-10-
500,000 to 3250,000, pursuant to a plan which provides that
the bank's capital shall be increased by 3250,000 of preferred
stodk to be sold to the Reconstruction Finance Corporation, and
that the released capital shall be used to eliminate unsatisfactory assets, all as set forth in your memorandum of March 19,
1934."
Approved.
Letter dated March 30, 1934, approved by four members of the
13°e•rds to Mr. O'Connor, Comptroller of the Currency, reading as follows:
"In accordance with the recommendation of Acting Comptroller
Await, the Federal Reserve Board approves a reduction in the common capital stock of 'The First National Bank of Lockport', Lockport, Illinois, from $50,000 to 325,000, pursuant to a plan -which
provides that the bank's capital shall be increased by 325,000 of
Preferred stock to be sold to the Reconstruction Finance Corporaton, and that the released capital, together with a portion of
the surplus and undivided profits, shall be used to eliminate unsatisfactory assets, all as set forth in the Acting Comptroller's
memorandum of March 22, 1934."
Approved.
Letter dated March 29, 1931, approved by five members of the
"
13 4'd, to Mr. O'Connor, Comptroller of the Currency, reading as follows I
"Receipt is acknowledged of your memorandum of March 19,
1934, with reference to the proposed reduction in common capital
?f 'The Fourth National Bank of Tulsa', Tulsa, Oklahoma, from
4250,000 to $125,000, and sale of :0.75,000 of preferred stock to
the Reconstruction Finance Corporation, which VMS approved by the
Board on January 15, 1934.
"You advise that a change in the plan is contemplated mherebY a further reduction of $25,000 will be made in the common capital and an additional 325,000 of preferred stock will be sold to
the Reconstruction Finance Corporation.
"In accordance with your recommendation, the Board approves
the amendment to the original plan as set forth in your memorandum
March 19, 1934, with the understanding that the full amount of
the capital reduction will be applied to the elimination of sub3tandard assets and that the other provisions of the plan as set
911
4A/34
-11-
"forth in your memorandum of January 5, 1934, remain unchanged."
Approved.
Letter dated March 29, 1934, approved by six members of the
120ard, to Mr. O'Connor, Comptroller of the Currency, reading as follaws 2
"In accordance with your recommendation, the Federal Reserve
Board approves a reduction in the common capital stock of 'The
Seaboard National Bank of Los Angeles', Los Angeles, California,
from $2,000,000 to ;1,200,000, pursuant to a plan which provides
that the bank's capital shall be increased by (,:300,000 of preferred
stock to be sold to the Reconstruction Finance Corporation, and
that the released capital shall be used to retire 20,000 shares of
the bank's own stock ($500,000 par value) and to eliminate substandard assets and securities depreciation in the amount of approximately 382,000, all as set forth in your letter of March 10,
1931."
Approved.
Letter dated larch 31, 1934, approved by five members of the
11(3ard, to Ur. O'Connor, Comptroller of the Currency, reading as follaus:
"In accordance with your recommendation, the Federal Reserve
Board approves a reduction in the common capital stock of 'The
.
Jbited States National Bank of Eugene', Eugene, Oregon, from
0.50,000 to ,',;50,000, pursuant to a plan which provides that the
bank's capital shall be increased by .;100,000 of preferred stock
to be sold to the Reconstruction Finance Corporation, and that the
released capital shall be used to eliminate undesirable assets agFregating approximately ',;?'81,000 and to establish a reserve for
oond depreciation with the remainder of such funds, all as set
forth in your letter of December 6, 1933."
Approved.
Letter dated March 31, 1934, approved by five members of the
Bookr,
'
u to Nr. Curtiss, Federal Reserve Agent at the Federal Reserve
e44k Of Boston, reading as follows:
"The Board has considered the application of 'The Eorfolk
CorPoration of Braintree, Braintree, Massachusetts, for a general
-12..
"voting permit under authority of Section 5144 of the Revised
Statutes, as amended, entit1in7 it to vote the stock which it
awns or controls ofiThe Braintree National Bank: The Board has
approved the application, effective if and when the applicant
assumes the status of a holdinr, company as defined in Section
2(c) of the Banking Act of 1933 and subject to the following
conditions:
"(1) Prior to or simultaneously with the issuance of the
voting permit applicant shall execute and deliver to you in
triplicate an agreement in the form inclosed herewith marked
Lxhibit A and a certified copy of a resolution of its Board of
Directors specifically authorizin7 the execution thereof.
"(2) Prior to or simultaneously with the issuance of the
voting permit, there shall be delivered to the applicant by a
certain Committee constituted under a Plan and Agreement dated
August 7, 1933, formulated to further the interests of The Braintree National Bank, not less than 501 shares of the capital stock
of The Braintree National Bank and such Comlittee shall pay to
that bank not less than ;80,795 in cash as the purchase price
of the following bonds:
Par
Value
20:000
5,000
10,000
10,000
5,000
5,000
3,000
5,000
5,000
5,000
10,000
Name
Associated Gas
Electric Co.
Associated Telephone Utilities
Cons. Elec. & Gas Company
n
n
If
It
It
Rate
---1--,f1- 5
6
376
Central Public Utilities5:
;.1
Cities Service Company
5
n
if
It
5
North American Gas ,,, Elec. Co.
6
Pacific Northwest Public Service
6
Utilities Power and Light
5
1
r.Brown Compary
..);z
Due
19-4-9
1942
1937
1962
1952
1950
1969
1944
1950
1959
1950
"(3) Prior to or simultaneously with the issuance of the
v°ting permit Counsel for the Federal Reserve Bank of Boston
shall deliver to you his opinion that the agreement referred to
in (1) above has been validly executed and delivered and that the
delivery of stock and payment of cash referred to in (2) above
'
1.).ve been properly effected.
"There is inclosed a general voting permit which you are
?:uthorized to date and to issue to The Norfolk Corporation of
'Ibtraintree upon the fulfillment of the conditions specified above.
4, copy of the permit and a copy of the form of agreement referred
'() as Exhibit A are inclosed for your files.
11-ill you please advise the Board of the date of issuance
°f the permit and forward for its files two of the original counterof the agreement called for and one copy of the opinion of
()LInsel referred to in (3) above."
913
4/2/34
-13-Approved, together with a letter dated
March 31, 1934, also approved by five members
of the Board, to :a.. O'Oonnor, Comptroller of
the Currency, reading as follows:
"In accordance with your recommendation, the Federal Reserve Board approves a reduction in the common capital stock of
'The Braintree National Bank', Braintree, Massachusetts, from
U00,000 to $50,000, pursuant to a plan mhich provides that the
bank's capital shall be increased by $50,000 of preferred stock
to be sold to the Reconstruction Finance Corporation and/Or
Others, that the released capital shall be used to remove estimated losses and depreciation in bonds, and that a corporation
organized for the purpose shall purchase from the bank not less
than $80,000 of law grade bonds vhich sale shall operate to
eliminate at least $60,000 of depreciation in the bank's bond
account, all as set forth in your letter of March 8, 1934.
"In considering the plan under which the reduction in common capital stock is to be effected, it was noted that, even allowing for the use of all of the bank's remaining surplus, undivided profits and reserves for losses to eliminate depreciation
in securities, there is no provision for the elimination of such
depreciation aggregating approximately ,124,000, which, if considered as a loss, impairs the common capital stock to that extent.
There will also remain in the bank $12,312 of doubtful and
4177,291 of slow assets. It is also noted that your examiner
does not regard the bank's management as safe. It is assumed,
however, that you have these conditions in mind and that whenever
it becomes feasible to do so, you will require such further correctionz as may be practicable."
Telegram dated March 31, 1934, approved by five members of the
1343"d, to Mr. Case, Federal Reserve Agent at the Federal Reserve Bank
(If New York, stating that the Board has considered the application of
the "J. Henry Schroder Banking Corporation", New York, New York, for
8.170tin,
„
permit under the authority of section 5144 of the Revised
44tute8 of the United States, as amended, entitling such organization
to 11°te the stock which it awns or controls in the "J. Henry Schroder
Company", New York, 1;67T York, and has authorized the issuance
C4' 4
limited permit to the applicant for the following purpose:
914
4/2/34
"At any time prior to June 1, 1934, to act upon a proposal
or proposals to increase the capital stock of such trust company
from 3700,000 to ,(1,000,000 and its surplus from 350,000 to
:)400,000 by the issue of preferred and/or common stock or otherwise and to amend the certificate of incorporation of such trust
company accordinly."
The
the
telegram also authorized the agent to have prepared by counsel for
Federal reserve bank, and to issue to the J. Henry 6chroder Bank-
inC, Corporation, a limited voting permit in accordance with the teleEram.
Approved.
Telegram dated Larch 20, 1934, approved by five members of the
Loard, to
the governors of all Federal reserve banks, reading as follaws;
"Referring TRANS 1977 bank's contribution to retirement system as reported in current expense reports, Form 96, and expenses
Of retirement system as reported in new unit in functional expense
reports, Form E, should represent amounts charged to current exPenses of bank. Contributions for employees whose salaries are
not included in current expenses, whether reimbursed to bank or
charged to an account such as 'Other real estate', should be
Charged to the same account as are the salaries of such employees.
contributions for -which bank receives reimbursement, or which are
Charged to an account such as 'Other real estate', should be based
Oil the current rate only, i.e., they should not include any charge
Oil account of accrued liabilities. The Retirement Coimittee will
advise you of rate to be charged until the current rate for your
bank has been determined by actuarial computation. Until further
notice, please furnish Board monthly with statement showing total
e xpenditures account retirement system charged to: (a) Current
expenses and (b) to other accounts, whether or not reimbursable,
sPecifying the amount charged to each such account."
Approved.
Letter dated March 30, 1934, to lir. Case, Federal Rosary°
lit at the Federal Reserve Bank of Rev( York, prepared
in accordance
lth
L"e action taken at the meotin of the Executive Committee of
915
4/2/34
-15-
the Board on Larch 23, 1934, and approved by five members of the Board,
Iseading as follows:
you know, 1.1r. John W. Pole, as Special Adviser to the
Board, made a survey during December and January of banking and
Other conditions in Puerto Rico and submitted a report thereon
to the Federal Roserve Board. A copy of the report is inclosed
for your information, together with copies of the reports of examination made by :Ir. K. E. Prickett, National Bank Examiner, of
the Banco Popular de Puerto Rico and the Banco de Puerto Rico,
both of San Juan, referred to in Mr. Pole's report. Copies of the
reports of examination of the Banco de Ponce and the Credito y
Ahorro Ponceno, both of Ponce, which were mado by Messrs. J. A.
Litchell and E. F. Lamb of the Federal Reserve Bank of New York,
are already in your files.
"Mr. Pole's report has been given careful consideration by
the Federal Reserve Board, and at a recent meeting the position
waS taken that, on the basis of the report and other information
available to the Board, it mould not be desirable at the present
time and under existing conditions to extend the privileges of
membership to banks in Puerto Rico.
Pedro J. Rosaly, bianager of the Banco de Ponce, and Mr.
:Angel A. 6anz, Manager of the Credito y Ahorro Ponceno, more in
Washington on March 27, 1934, and discussed with the Recons-crucLion Finance Corporation the conditions under which the corpora0n would purchase capital debentures issued by each of the institutions, and it vas decided that the condition that the banks
become members of the Federal Reserve System would not be imposed.
Messrs. Rosaly and Sanz have advised the Board that their banks,
therefore, will not file applications for membership.
"It will be appreciated if you will inform the Banco Popular
de Puerto Rico and the Banco de Puerto Rico
of the position taken
by the Federal Reserve Board as set forth above, stating in each
caSG that if, notwithstanding the Board's position, the bank desires to file an application for membership, the application
Should be submitted throur:h your office."
Approved.
Letter dated biarch 30, 1934, approved by five members of the
8oe,rd, to Jr.
Austin, Chairman of the Federal Reserve Bank of PhilacielPhia, readinr as follows:
"fr
The Board has reviewed the report of examination of the Federal Reserve Bank of Philadelphia as of October 21, 1933,
copies
Of which wore left with you and Governor Norris.
91(4/2/34
"In the report of the preceding examination Ias of October
15, 1932) the examiner conmented on the very unsatisfactory conaition of the Credit Department, ste.tin7 that: there was insufficient information available for an appraisal of much of the paper
held. The Board is pleased to note that the examiner now reports
that on the whole there has been considerable improvement in this
respect and that, the management has stated that its efforts to
Obtain the necessary credit data would be continued.
"It has been noted (page 16) that on the date of examination
the bank was holding .;?1,000,000 tax warrants, all in default, of
the City of Atlantic City, liew Jersey, that some of the collections
of delinquent taxes had not been applied toward the payment of the
respective warrants but were used for current operations, and that
the Reserve Bank and the Central Hanover Bank, & Trust Company of
Nevi York City, which also held some of the warrants, were conteniPlating taking early action to force the City of Atlantic City to
provide proper protection for the warrants held by them. It will
be appreciated if you will advise the Board as to the present status of this situation.
'The examiner reports (page 43) that, on the date of examination, a suit was pending against the City of Ocean City, New Jersey,
in which the Reserve Bank sought to obtain payment of 4250,000 on
a tax anticipation note of the City of Ocean City, which was acquired by the Reserve Bank under repurchase agreement from the First
iTational Bank of Ocean City (suspended) and on which the City of
Ucean City has denied any liability. In a letter dated December
15, 1933, Ciovernor Norris advised that the Reserve Bank had every
expectation of being successful in the litigation and of recoverinc the bulk, if not all, of the obligation. The Board would appreciate advice as to the present status of the matter.
"The Board is pleased to note (page 27) that the recommendation of its examiner has been adopted and that audits of the Fiscal
ilzenoy Department will be enlarged in scope so as to provide for a
checking of all subscriptions received. The examiner has recommended also (page 27) that audits of the Transit Department be
occasionally enlarged in scope so as to include a control on inecizinf; mail for a period of time subsequent to the date of the
audit, and states that the Comptroller of the bank advised him
that full consideration would be given the recommendation. The
Board would like to be advised as to the conclusions reached in
this respect.
IIOn
page 20 the examiner comments on the incompleteness of
the records of the Personnel Department, as evidenced by the fact
that
,
no record is kept of absences of officers or of secretaries
,
-t0 the senior officers, and that absences of all employees in the
ju
'ank Relations Department are not reported. lie further states
due to a misunderstanding, leaves of absence in excess of
t
' hirty days in one year had been granted on account of siclaiess to
several employees without the approval of the Executive Committee.
4/2/34
-17-
"The Loard notes that it is proposed that in the future all leaves
of absence in excess of thirty days on account of illness in one
year will be submitted to the executive committee for approval
and that a proper record of all absences will be maintained hereafter. The Board's letter of December 5, 1932, contemplated that
all sick leave in excess of thirty days mould be approved by the
board of directors rather than the executive committee, and such
Procedure should be followed by your bank.
"It has been noted (page 28) that in a number of instances
Officers and employees have drawn their salaries or a portion
thereof in advance at times other than when the regular pay day
fell Within a vacation period. The Board notes with approval
that the recommendation of its examiner will be followed and that
hereafter salary advances will be made only in exceptional cases
and that no payment mill be made at any time which exceeds the
amount of accrued salary on the date of such payment.
"It has been noted (page 72) that securities were being held
in safekeeping for various receivers of closed banks, and it Will
be appreciated if you will advise the Board as to the nature of
such safekeeping accounts. In this connection, the Board feels
that, while there is no objection to retaining the securities
held in safekeeping at the time of suspension of a member bank
until the receiver has had an opportunity to make other arrange11:111te, new deposits of securities should not be accepted.
"It has been observed (page 26) that as of the date of the
examination, analyses of reports of examination of a number of
State member banks, some of which had been examined as early as
LaY and June of last year, had not been forwarded to the Board.
4n inspection of the Board's files shows that, while many of the
analyses of such reports have since been received, in most instances a considerable period of time (in some cases more than six
11311ths) elapsed between the date of the examination and the date
the analysis of such report of examination mas received. Mile
the Board is familiar with the heavy responsibilities placed upon
?xamination departments during the past year and is aware of the
nandicaps placed upon your department by reason of the illness of
the Assistant Federal Reserve Agent immediately in charge of the
examination work, it feels that every effort should be made to
complete and forward the analyses of reports of examination of
State member banks as soon as possible. The Board would apprecite advice from you as to the present status of such work in the
f-xa:mination Department and information as to what steps have been
taken to expedite the handling of the analyses.
"The examiner comments (page 29) on the large number of vault
custodians and representatives of the Audit Department who hold
aombinations to compartments containing securities, and the dif'acuity because of the large number of employees designated for
fluch duties of placing responsibility in the event of any shortage.
'he examiner states that he was advised that a study would be made
918
4/2/34
-18-
"of the situation with the view of limiting the number of persons
having access to the securities. In this connection it would apPear that, in the annual audit of the Custody Department, the
auditors mho had been assigned to custody control work during the
year (some fifteen in number) may be called upon to verify their
elm work, which is not a desirable situation. The Board would
appreciate learning the results of the study of the custody control
and the steps, if any, which have been or will be taken to improve
the situation.
"The Board's examiner has reported that he discussed with you
the advisability of strengthening the Audit Department of the bank,
and any comments you may have to make in this connection will be
appreciated.
.
"After the report and this letter have received the consideration of the board of directors of the Federal Reserve Bank, the
Board would appreciate advice from you as to mhat action has been
taken or will be taken on the matters discussed."
Approved.
Letter dated March 31, 1934, approved by five members of the
Board,
to Honorable Duncan U. Fletcher, Chairman of the Committee on
Bank
inC and Currency of the United States Senate, reading as followss
.
"This refers to the letter from the Acting Clerk of your Committee dated February 19, 1934, requesting a report to your Committee on bills S. 2370 introduced by Senator Capper on January 11
(?alendar day, January 17), 1934, S. 2642 introduced by Senator
1.1ng on February 6 (calendar day, February 7), 1934, and S. 2693
introduced by you on February 6 (calendar day, February 9), 1934.
Each of these bills contains provisions which would regulate stock
exchanges and transactions in securities thereon.
"As you will recall on Larch 23, 1934, at the invitation of
Your Committee, I appeared before it and expressed the views of
the Federal Reserve Board with reference to the bill H. R. 8720
flaw pending in the House of Representatives and entitled 'A Bill
to provide for the regulation of national securities exchanges and
Of over-counter markets operating in interstate and foreign con,merce or through the mails, and to prevent inequitable and unfair
Practices thereon, and for other purposes'.
"In the circumstances a further report with respect to the
subject of the Senate bills above mentioned would seem to be unn
ecessary."
Approved.
Letter dated March 31, 1934, approved by five members of the
4/2/34
-19-
Board, to Honorable Sam Rayburn, Chairman of the Interstate and Foreign
Commerce Committee of the House of Representatives, reading as follows:
"This refers to your letter of Larch 12, 1934, in which you
request a report on the bill H.R. 8575 entitled 'A Bill to establish a Federal Stock Exchange Commission, to provide for the licensing of stock exchanges, and for other purposes', introduced by 1/..
Bulminkle on March 10, 1934. As indicated by its title, this bill
contains provision for the licensing of stock exchanges and for the
regulation of transactions thereon.
"On March 19, 1934, however, you introduced H.R. 8720, entitled
'A Bill to provide for the regulation of National Securities Exchanges and of over-counter markets operating in interstate and
foreign comrerce or through the mails, and to prevent inequitable
and unfair practices thereon, and for other purposes'; and, as you
vill recall, on March 23, 1934, at the invitation of your Committee, I appeared before it and expressed the views of the Federal
Reserve Board with reference to the latter bill.
"In the circumstances a further report with respect to the
subject of H.R. 8575 mould seam to be unnecessary."
Approved.
Telegram dated March 29, 1934, approved by five members of the
Board$ to
Mr. Newton, Federal Reserve Agent at the Federal Reserve Bank
°f A
tlanta, reading as follows:
"Referring your March 23 letter, Board revokes approval application The Citizens /a.tional Bank in Hammond, Louisiana, for Federal Reserve bank stock granted March 14, 1934, and approves new
aPplication for 36 shares made pursuant to resolution adopted at
Ineeting of Board of Directors held on March 20, 1934, effective if
aad mhen Comptroller of the Currency authorizes bank to commence
business,"
Approved.
Letter to Mr. A. K. BUMS, Vice President of The Peoples NaJ. Bank and Trust Company of Mite Plains, New York, reading as
11°110Ws:
"Your letter of March 19, 1934, addressed to the Comptroller
?f the Currency regarding the payment of interest on dormant
°ale:aces in your trust department, has been referred to the Federal Reserve Board for reply. You state that the payment of
920
4/2/34
-20-
"interest is required under Court regulations with respect to
such funds.
"Section 19 of the Federal Reserve Act as amended forbids a
member bank, directly or indirectly, to pay interest on any deposits 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 possible consistently with
its contractual Obligations. This prohibition is applicable,
irrespective of the department of the bank in which the deposits
nay be held, and irrespective of the fact that the payment of
interest is required with respect to such deposits under court
regulations. It will be noted, however, that the prohibition is
aPplicable only to the payment of interest on deposits. Accordingly, if the dormant balances referred to in your letter are
segregated from the general assets of the bank and are otherwise
subjected to the safeguards ordinarily imposed upon the custody
and use of trust funds so that they are not properly to be classified as deposits, the prohibition here involved would not apply.
The Board does not have sufficient information, however, to enable it to determine whether the funds in question constitute
deposits and it cannot, therefore, express an opinion with respect to the question whether interest may lawfully be paid upon
such funds.
"In this connection, your attention is called to the fact
that the prohibition here in question is applicable only to dePosits 'which are payable on demand and does not prevent a member
bank from paying interest on time deposits in accordance with the
Provisions of the Board's Regulation Q.
"If you should have any further questions with respect to
this matter it is suggested that you communicate with the Federal
Reserve Agent at the Federal Reserve Bank of New York who will be
Clad to consider any such questions which you may submit."
Approved.
Letter dated Ynrch 31, 1934, approved by five members of the
'to Er. Peyton, Federal Reserve Agent at the Federal Reserve
1°41*cl
knic
of Ninneapolis, reading as follows:
"Receipt is acknowledged of Mr. Swanson's letter of February
13, 1934, with inclosures, in regard to the payment of interest
on certain time certificates of deposit issued by the Farmers
State Bank, Victor, Montana. It is understood that the precise
Issue presented is whether the bank, which it is stated was admatted to membership on December 7, 1933, may lawfully pay
921
V2/34
-21-
interest, accruing after Uctober 31, 1933, on a time deposit
at a rate in excess of 3 per cent per annum, compounded semiannually, in accordance with the terms of a valid and binding
contract entered into in good faith after June 16, 1933, but
before admission of the bank to membership in the Federal Reserve System.
"If the Farmers State Bank should refuse to discharge its
lawful obligations to pay interest on time certificates of deposit issued prior to the date of its admission to membership
because of the prohibition contained in Section III, subparagraph (c) of the Board's Regulation Q, presumably a suit would
lie at the instance of each holder of such a certificate and an
enforceable judgment would be entered against the bank which the
bank would be forced to satisfy whether or not such action would
come within the terns of the prohibition aforesaid. Furthermore,
it should be noted that the expressed intent of the statute with
respect to the payment of interest on deposits payable on demand
is that the provisions in regard thereto shall not apply to the
Payment of interest on any deposit with respect to which the payInen-k, of interest is required under the terms of a valid and binding contract entered into prior to June 16, 1933, the date the
statute became effective, and that in the Board's regulations a
similar exception is made in the case of time deposits. Since
the provisions of the Act do not becore effective with respect
to a bank applying for membership until the bank is admitted into the System, it would seem that the principle underlying the
exception aforesaid may properly be applicable in a situation
such as that under discussion.
"In view of the foregoing, the Board will offer no objection to the payment of interest by the Farmers State Bank, Victor,
T'
i snl:ana, in accordance with the terms of any contract lawfully
entered into in good faith prior to the date of, and not in contemplation of, the admission of such bank to memtership in the
8Ystem, and in force on that date, provided such contract may not
be legally terminated or modified by the bank at its option and
without liability. It should be understood that no such contract
IllaY be renewed or extended unless it be modified to conform to
the provisions of Regulation q, and that the bank will take such
action as may be necessary, as soon as possible consistently with
its contractual obligations, to bring all such contracts into
conformity with the provisions of such regulations. If the bank
Pays interest, accruing after October 31, 1933, on any such time
deposit at a rate in excess of 5 per cent per annum, compounded
semiannually, it must be prepared to show, if requested, that
such payment was made in good faith and in strict accordance
with the position taken herein."
Approved.
Tolegram dated L:arch 50, 1934, approved by four ner:lers of
922
4/2/34
-22-
the Board, to Mr. Hale, Cashier of the Federal Reserve Bank of San
Prancisco,
reading as follows:
"Re your inquiry of March 13 as to whether deposits of
funds advanced to State treasurers to be used as revolving funds
in connection with construction of public highways are deposits
'of public funds made by or on behalf of any State' within the
meaning of Section 19 of the Federal Reserve Act. Board understands that title to such funds is not vested in State, that any
excess of funds remaining after completion of project for which
such funds are to be used must be returned to Government, and
that State treasurer acts simply in capacity of disbursing officer for Government. In view of foregoing, Board concurs in
Your conclusion that such deposits are not deposits of 'public
funds made by or on behalf of any State' which would be subject
to exemption with respect to payment of interest on deposits payable on demand."
Approved.
Telegram to Mr. Ebuton, Federal Reserve Agent at the Federal
ileaerve
Bank of San Francisco, reading as follows:
"Re your inquiry whether prohibition in Act of May 24, 1926
against use of word 'Federal' applies to corporations organized
under Section 5 of Home Owners' Loan Act of 1933. In view of
fact that said Section 5 expressly provides that institutions
organized thereunder shall be known as 'Federal Savings and Loan
Associations' and that Act of May 24, 1926, specifically provides
that prohibition in question shall not apply 'to any corporation
organized under the laws of the United States', it appears that
prohibition is not applicable to Federal Savings and Loan Associations organized under Section 5 of Home Owners' Loan Act of 1933.
It is suggested that in future matters involving legal questions
be referred in first instance to counsel for Federal Reserve Bank
in order that such counsel may determine necessity or desirability
of submitting matters to Board for ruling."
Approved.
Letter dated March 29, 1934, approved by six members of the
Bottr
ds to Er. Charles A. Stone, New York, New York, reading as follows:
"The Federal Reserve Board has given consideration to your
aPPlication under Section 32 of the Banking Act of 1933 for a
Permit to serve at the same time as a director of Bank of the
(ACPel
r 0
4/2/34
-23-
I- ,
1.61annattan Company, and as officer and director of Stone & Yiebster and Blodget, Inc., a dealer in securities, both of New York
City, New York.
"The Federal Reserve Board has reached the conclusion that
it mas the intent of the Congress in enacting Section 32 to terminate all relationships of certain types between member banks
and dealers in securities, apparently because it felt that such
relationships might tend to influence the banks' credit and investment policies and their advice to their correspondent banks
and other customers respecting investments in a manner which the
Congress deemed to be incompatible with the public interest. The
Board accordingly feels that it may not properly grant permits
authorizing relationships which are actually of the kind referred
to in that section, and that its authority to issue permits should
be exercised only in exceptional cases; for example, those which
are included within the literal terms of the statute but which
are actually of a kind different from those at which its provisions were directed.
"It appears that Stone t7z Tiebster and Blodget, Inc., is
Primarily engaged in buying, selling, and dealing in investment
securities and that, therefore, the relationship covered by your
application is within the class which that section was designed
to terndnate. Accordingly, the Board is unable to find that it
would not be incompatible with the public interest as declared
by the Congress to grant your application, even though nothing
has been called to its attention which would reflect in any degree upon your desirability as a director of the bank, except
that the relationship covered by your application is within the
prohibitions of Section 32.
"In the event that you desire to submit further facts or
arguments in support of your application, the Board is prepared
to give them careful consideration. However, any such additional
facts or arguments should be submitted as promptly as possible,
ln writing, through the Federal Reserve Agent."
Approved.
Letters dated Larch 29, 1934, approved by five members of the
13(lard, to applicants for permits under the Clayton Act, advising of
4Proval of their applications as follows:
Mr. J. L. Gaddis, for permission to serve at the sane time as a
dlrector of The Jackson-State National Bank, Jackson, Mississippi,
kild as a director and officer of the Merchants & Planters Bank,
Raymond, Mississippi.
hlr. E. D. Foster, for permission to serve at the same time as a
director and officer of The First National Bank of Thomas, Thomas,
4/2/34
-24-
Oklahoma, and as a director of The Citizens-Farmers National
Bank of Chickasha, Chickasha, Oklahoma.
Mr. J. Barboglio, for permission to serve at the same time as a
director and officer of The Helper State Bank, Helper, Utah,
and as a director and officer of The First National Bank of
Price, Price, Utah.
Win. G. Reed, for permission to serve at the same time as a
director of the First National Bank of Seattle, Seattle, Washington, and as a director and officer of the First National Bank
of Shelton, Shelton, Washington.
Approved.
Letters dated March 30, 1934, approved by five members of the
Bc)ard, to applicants for permits under the Clayton Act, advising of
4PProval of their applications as follows:
hir. C. L. Pattison, for permission to serve at the sane time as a
director and officer of The Pattison National Bank of Elkland,
Elkland, Pennsylvania, and as a director and officer of The First
National Bank of Knoxville, Knoxville, Pennsylvania.
14r. William Whitridge, for permission to serve at the same time
as a director of The Western National Bank of Baltimore, Baltimore, Maryland, and as a director of The Colonial Trust Company,
Baltimoro, Maryland.
lir. Wilkins W. Jackson, for permission to serve at the same time
as a director and officer of The Albertville National Bank, Albertville, Alabama, as a director of The National Bank of Boaz,
Boaz, Alabama, and as a director of the Bank of Arab, Arab, Alabama.
Approved.
There were thon presented the following applications for original
or additional stock, or for the surrender of stock, of Federal
banks:
A
. ications for ORIGINAL Stock:
.v.strict No. 4.
11'st lational Bank in Indiana, Indiana,
T1, Pennsylvania
"First National Bank at MCKees Rocks,
licKees Rocks, Pennsylvania
Shares
153
108
r":101
,fl
Cl
4/2/34
-25-
A lications for ORIGINAL Stock: (Continued)
District No. 4.
Continued)
TriaThational Bank at Moundsville, Moundsville,
West Virginia
.
.
1.1.1i_ct
11
No. 7.
The Piii711
7i7Terchants National Bank of
Winterset, 7anterset, Iowa
Shares
66
36
Total
327
36
363
A
lieations for ADDITIONAL Stock:
-122.1tLe_t No. 4.
The Fa1'i71;7TWATIonal Bank of Somerset,
Somerset, Kentucky
The
Athens National Bank, Athens, Ohio
The First National Bank of Baltimore, Baltimore,
Ohio
Ahe First
National Bank & Trust Co. of Hamilton,
Hamilton, Ohio
111.q.IEict No. 6.
The TITG1
- -77-el-Enal Bank of Valdosta, Valdosta,
Georgia
440 Piret National Bank of Montgomery, Mont3omery,
lannesota
'he First
National Bank of Waterville, 'Cdaterville,
Linnesota
'Lae First
National Bank of Grantsburg, Grantsburg,
Wisconsin
46 First National Bank of Limon, Limon,
Th
Colorado
6 continental National Bank of Lincoln,
Lincoln,
Nebraska
tistriet Ne.
California National Bank of San
IL Francisco, San Francisco, California
Continental National Bank & Trust Company
Of Salt Lake City, Salt Lake City, Utah
24
6
30
67
3
3
3
3
3
9
5
90
95
60
180
Total
240
414
150
150
A 14
bi "4-cations for SURRENDER of Stock:
'Uni-6-377.17177Wely Haven Trust Company, 11617
1147on, Connecticut
926
4/2/34
-26-
lication.s for SURRENDER of Stock: (Continued)
No. 2.
irst National -Bank in Avon-by-the-Sea, Avon-b.ythe-Sea, New Jersey
The IT'a,--.si-,74;757-nal Bank of Fort Myers, Fort
XYers, Florida
No 7.
Drexel
-764 Bank of Chicago, Chicago, Illinois
State
First National Bank of Montour, Montour, Iowa
Approved.
Thereupon the meeting adjourned.
A
pproved*
Governor.
Shares
36
36
120
120
120
27
Total
147
453
@FedFRASER