The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
819 A meeting of the Federal Reserve Board was held in Washington on 711esday1 April 2, 1955, at 11:30 a. m. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Governor Thomas, Vice Governor Miller James Szymczak Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary The Board acted upon the following matters: Memorandum dated March 26, 1955, from Mr. Goldenweiser, Director 14 t11e 1)4 . ' -vleion of Research and Statistics, recommending the temporary 44°14tment for a period of three months of Mrs. Ethel L. Evans, as a °:Lerk 4 that division, with salary at the rate of $1,620 per annum, effective a 8 of the date upon which she enters upon the performance of her dlltiess Approved. Memorandum dated March 27, 1935, from Mr. Goldenweiser, Director °t the N --vision of Research and Statistics, recommending that Miss Neva 4i11) wh° has been employed on a temporary basis as a stenographer in thedivi8ion since November 27, 19340 be employed on a permanent basis, Illitlis4larY at the rate of $10440 per annum, effective as of the date 11P°11 which she passes a satisfactory physical examination. Approved. thet. .Mem°randum dated March 27, 1935, from Mr. Goldenweiser, Director of .1181-°11 of Research and Statistics, recommending that Miss Mavis ' d who has been employed on a temporary basis as a clerk-stenographer the d, . 4.111sion since January 16, 1955, be employed on a permanent basis, 820 4/2/b5 -2- With salary at the rate of 0_1620 per annum, effective as of the date u-Jon Which she passes a satisfactory physical examination. Approved. Memorandum dated March 29, 1955, from Mr. Goldenweiser, Director °f the Division of Research and Statistics, recommending the Drobationary Eintment of Miss Helen G. Olmstead as a stenographer in the division, With salary at the rate of ;l,440 per annum, effective as of the date upon he enters upon the performance of her duties after having passed a 4.tisfactory physical examination. Approved. 13Ehit Letter to Mr. Case, Federal Reserve Agent at the Federal Reserve of New York, reading as follows: 19, "Reference is made to the report of examination of January 26, ' pl 5, of the 'Geneva Trust Company', Geneva, New York, and the supementarY information submitted in connection therewith. "The report indicates that after allowing for estimated losses, do 4.2 tVful assets and net depreciation in securities, all aggregating (exu)100, the bank had a net sound capital of approximately .,363,200 to eluding from consideration a secured guaranty of 440,000 given corlProtect depositors against the depreciation in securities) as baered with deposits of 781,200, an investment of 0.70,6,,00 in in house, furniture and fixtures, and an investment of 0_25,000 its " her real estate. It is observed that the bank proposes to reduce re' e°nImon capital from ';',250,000 to 0.00,000 using the 0.50,000 thus 057-lased toward the elimination of $71,700 estimated losses and ft,,,IL/00 net depreciation in lower grade securities, stocks and dere ed bonds. The bank is not subject to condition of membership the jing the approval of the Board for a reduction of capital and the ' 0ard Will interpose no objection to the proposed reduction. When you ial,)ital adjustment has been completed it will be appreciated if ,.-1 forward information showing the eliminations effected. to th In connection with the sale of $500,000 Class 'A' debentures petIr e Reconstruction Finance Corporation on November 28, 1934, it ai)-19622 thIA , $;60,000 of a $100,000 secured guaranty executed February 13, for the protection of depositors against depreciation in the bc,40, t4tt securities investments was converted into 'B' debentures and ' Who are r40,000 remaining ng represents the liability of three guarantors re deceaed. /t will be appreciated if you will advise what plans T 4/2/35 na re contemplated for the conversion of the remaining 40,000 of the guaranty. "The management of the bank is reported by the examiner to be 0IllY fair and he states that it unquestionably could be improved by a a more forceful president. He adds that the present incumbent 88umes a large part of the detail work of the bank, that he handles re ctically all credit matters but he is not physically strong nor mentally disposed to handle loan situations as they should be handled. ar Will be appreciated if you will advise the Board whether there ee any plans under consideration for strengthening the management titution. "The large amount of depreciation in the bank's investment ecount a sir . indicates the need for its close supervision and the deti,7,8 4 4.bility of improving the quality of the securities held as opporilT"ies are offered. The account also reflects- a heavy investment forst°ckss which, as you know, the Board does not feel are suitable investment of funds of member banks. the Please keep the Board advised of any improvements effected in general condition of the bank." Approved. Letter to Mr. Hoxton, Federal Reserve Agent at the Federal Reserve 1341k of Richmond, reading as follows: re "Reference is made to Mr. Fry's letter of March 21, 1935, the proposed reorganization of the 'Putnam County Bank', tc 12:canes West Virginia, a member bank which has not been licensed marchclipen on an u 1933. banking holiday of rrestricted basis since the baing terv , 4It aPPears that the proposed plan of reorganization conby e-Lates a 100% assessment against stockholders and a 50% waiver kuullsecured creditors which will provide for the elimination of prejssets classed as doubtful or loss, including substantial deOn banking house, furniture and fixtures, all depreciaother-'z securities, practically all substandard securities, and all egnit feal estate. It is understood that you consider the plan 440 and the best that can be evolved in the circumstances; corteilr ''Llat the Banking Commissioner for the State of West Virginia has n 8 in Your opinion. Further, it is assumed that your counsel that,L dered the plan, is satisfied as to its legal aspects, and the c'e Proposed reorganization will not result in any change in ship ?rP°rate existence of the bank which will affect its memberrecket!I the Federal Reserve System. The plan also provides for a t4,00en of common stock from $50,000 to $25,000 and the sale of Preferred stock to the Reconstruction Finance Corporation. t "It is understood that the matter has been referred to the ()4rd b ecanse of the length of time that the bank has been in conser- 822 It does not a)Dear that the consent of the Board for "le reduction of capital is required by law or the conditions of m embershio applicable to the bank and, in view of all the circumances, the Board will interpose no objection to the reorbaniza1°n of the bank or to the proposed reduction of capital. c . If the bank oroceeds with the reorganization, please forward i cTleo of the plan as finally adooted, of all agreements entered l'1160 between the bank, stockholders, depositors, or others incidenr1 to the reorganization, and of the certificates of participation 4s'Aled to the waivine: depositors." Approved. talik Letter to Mr. V4alsh, Federal Reserve Agent at the Federal Reserve of Dallas) reading as follows: "Reference is made to your letter of January 10, 1935, with I j ll h was transmitted a new application of the 1 Mercantile National at Dallas', Dallas, Texas, for full fiduciary powers. it "The bank's application was given careful consideration in the i.„ 11t of the report of examination of August 21, 1954, and of the vi'°rmation submitted by the bank and by yourself, and was again re28ewed subsequent to receipt of the report of examination of January r 1935, a copy of which was transmitted with your letter of FebuarY 25, 1955. coal :For your confidential information, it may be stated that the tio:PLroller of the Currency was requested to submit his recommendsthe ' l shortly after the new application was received, and again after th&treP°rt of examination of January 28, 1935 was available, and Of f at both times the Comptroller recommended against the granting the 13-1 trust powers to the applicant. In doing so, he referred to oiTi'arge volume of direct and indirect liabilities of directors, employees and corporations in which they are interested; direct ce,nt.:'.; sto affiliates; illegal real estate loans; illegal Merirtycle Building Com-oany bonds; corporate stocks which are illegal llients; two excessive loans (one to an affiliate); increase in othe' the r real estate owned, and other items of criticism enumerated in estateP°It. Attention was also directed to the large volume of real Comn,!_b°nds sold to the public by the former Mercantile Securities e=nding, and to the moral liability existing in' c7 ' 01i : le t Iilt1 Zlo grown 'le it is appreciated that the bank, since conversion, has appcire'aPidly) has materially improved its asset condition, and is eeesaontlY handling its fiduciary business, acquired from the pred: satiq , bank under the limited authority heretofore granted, in a eXatiill : °t°rY manner, the Board, in view of the criticisms of the -r and the adverse recomulendatLon of the Comptroller of the Qtr) 4/2/65 -5lieurreneY, is not prepared to authorize the institution to exercise any additional fiduciary powerei at this time, and you are, therefore, r ,equeste d to advise the Mercantile National Bank at Dallas that the Board has denied its applica tion." Approved. Letter to Mr. Luther Nelson, Assistant Treasurer, Smith, Kirkpatrick CO, T ' 2 11c., New York, New York, reading as follows: "This is in reply to your letter of March 15, 1965, in ahich Youstate that you are interested in resuscitating the First Federal icjeig4 Banking Corporation (in liquidation) and ask the Board whether would be possible to terminate the liquida tion proceedings of the °Or poration so as to permit the resumption of its operations after the con tribution of new capital. volunal 4 tholderst resolution that the corporation go into " tie liquidation and be closed was adopted in 1933 and substanin -Lleuidation has been effected. In view of the length of time Which the corporation has been in liquidation and the extent to which the liquidation has proceeded it would seem reasonable to asthat the lieuidation should be completed. In the circumstances, , r iever, the Board does not feel that a definite opinion can be exeither on the legal or prectical aspects of a proposal to f7 03:ve the activities of the corporation in the absence of a request Eejits stockholders for the consideration of such a proposal, toali ' ler with such informa tion as conside enable will Board to the r -4 ofl the factors involved. Ill the event that you may be interested in the organization of gene e ?°rPeration under section 25(a) of the Federal Reserve Act, the' ? 1 -j-15' referred to as the Edge Act, there is inclosed a copy of stat,,,n6I S Regulation K pertaining to such a corporation. As ' orga14 section VI of this regulation, no such corpora tion may be one Ilized with a capital stock of less than c,.2.2000,000. Pt least tne.,:1118-rter of this amount must be paid in before the corporation authorized to begin business and the remainder may be paid Pr r escribed in section 25(a) of the Federal Reserve Act. tion there is further information which you desire in connecthe Fwith this matter, it is suggeste that you communicate with d who w?deral Reserve Agent at the Federal Reserve Bank of New York, bezki(1 , 1 be glad to advise you further regarding the organization of Peder.: corPeretions under the provisions of section 25(a) of the --L Reserve Act." Approved. Letter to Jr.; Hoxton, Federal Reserve Agent at the Federal Reserve Betk . of Richmond, reading as fol:_ows: "Reference is made to your letter of March 8, 1955, inclosing ,,c°PY of a letter dated March 6, 1965, from the president of the nion Trust Company of Maryland', Baltimore, Maryland, requesting t°ard l s permission, in accordance with membership condition —i"Jered 7, to hold until December 511 1955, miscellaneous stocks e."ccillired by the bank in connection with debts previously contractcd g"d faith which it now holds and which may be similarly acquired 7/ it prior to July 1, 1:355. 11„, "The Board has previously granted the bank permission to hold April '60, 1955, stocks which had been acquired in connection With de s previously contracted in good faith and which had been _!-Ld bY the bank six months or more. in view of all the circumincluding your recommendation, the Board extends to Decem-11sY Ej 1 -) 1965) the time within rhich the bank may dispose of any go 045 acquired in connection with debts previously contracted in by itfaith which it now holds or which may be similarly acquired 15/lt prior to July 1, 1965. It is requested that you advise the the Board's action in the matter. Condition numbered 7 has, as you know, been prescribed for Some ind time by the Board as a standard condition of membership. As by the provisions of the condition, the Board feels that Stocks is_ are not suitable for the investment of funds of member banks atd: to 'he restrictions and provisions of the condition in regard therere intended to promote sound banking practice. It is recogitsed, however, that circumstances may arise which require that, for viou°wn Izotection, a bank acquire stocks in connection with debts preprac Y contracted in good faith and that it is often impossible or ii.redle for the bank immediately to dispose of the shares thus acther4- Under the ,,rovisions of membership condition numbered 7, zissi °re, shares so acquired may be held for six months or, if per4 iS granted by the Board, for a longer period. exteng n Order to expedite the handling of requests of banks for taambe''°ns Of time under the provisions of membership condition ! cl 7/ the Board feels that it is apropriate to authorize the reaper ot there Federal reserve agents, in their discretion, to extend btInks ' 1°50ard's behalf for specified periods the time within which ot stosubject to condition of membership numbered 7 shall dispose good aeLluired in conlection with debts previously contracted in the Board, Accordingly, you are hereby authorized on behalf of sion. to grant such extensions when, in your opinion, an exten;Lis warranted. tim it i3 requested that the Board be advised of any extension of tinv which is granted under this authorization. Of course, should ca e . Wisdom ofarle in which for any reason you are in doubt as to the granting the requested extension of time under this au- j I lybt 4/2/35 -7!thorization, the bank's re(ruest may be submitted to the Board for rtermination, together with all of the pertinent facts in the 'ase, including your comments and recommendation." Approved, together with a letter to all Federal reserve agents requesting that the procedure outlined in the above letter be followed in connection with any requests received from member banks for an extension of time within which to dispose of stocks acquired on account of debts previously contracted. Letter to Mr. McKay, Deputy Governor of the Federal Reserve Bank Ot u4to, reading as follows: "Reference is made to your letter of March 22 inquiring whether thepord has given or will give consideration to the extension 4t the authority given in its letter of March 28, 1934 (X-7856) to 0 7 Federal Reserve banks to pay traveling and subsistence expenses of rePresentatives of the banks and their employees on the Board Trustees and any committee of the Retirement System of which "eY may be members. 10"The Board's letter of March 28, 1934, was based upon a resoma;' n adopted by the Board of Trustees of the Retirement System on Resell 14) 1954, requesting the Federal Reserve banks and the Federal meztrve Board to bear the traveling and subsistence expenses of the the 7,1's of the Board of Trustees and members of committees during , se ormulative period of the Retirement System. The Federal Rethivee Board will be glad to consider any further recommendation on maY j ubjeot that the Board of Trustees of the Retirement System vw-Lsh to submit." Approved. clEtte Memorandum dated March 9, 1935, from Mr. James, submitting a letter Mal'ell 82 1935, from Mr. Sailer, Deputy Governor of the Federal Reserve ta Ilk of New York and recommending that the Board interpose no objectt, ' 11 to exeee_, :1111 expenditure by the Federal Reserve Bank of New York of not to g ;11 0 1 °O in the employment of the bank's architects, Messrs. York & 411Yers a r lad e ngineers, Messrs. Meyer, Strong & Jones, to make a survey and eD°rt 0 11 the a4_ 4.1* conditioning of the entire building of the Federal Reserve _ 826 4/2/35 -84 of New York, -vith the understanding that if the report should indicate the advisability of such installation, the whole matter will be discussed th the Federal Reserve Board. Approved, and the Secretary was authorized to address a letter to Mr. Sailer advising him accordingly. Letter to Mrs. Nellie Charles, Winslow, Arizona, reading as follows: rec„,:I,teceipt is acknowledged of your letter of March 18, 1965, deb—uing the payment before maturity of certain certificates of P°sit issued to you by the First National Bank, Winslow, Arizona. h, "Section 19 of the Federal Reserve Act prohibits the payment be,,a i member bank of the Federal Reserve System of any time deposit a t?re its maturity, and, accordingly, a member bank may not pay of 111.1e certificate of deposit, which is payable at the expiration slx months, before suchh six months' period has expired, even sta h nc interest is paid on such deposit. The language of the thol Boa,ute is explicit and does not authorize the Federal Reserve theld ,t° make an excep t ion in any case. Accordingly, assuming thade,)0-?rifcts of deposit in ,uestLon are time certificates of whIcisil as defined in Section 11.1(a) of Regulation Q, a copy of which 2.-S inclosed, the First National Bank of Winslow, Arizona, Pay sulr,":9 a member of the Federal Reserve System, may not lawfully --'n certificates before the date of maturity specified therein." Approved. Letter to Mr. Austin, Federal Reserve Agent at the Federal Reserve 41.1.1t or Philadelphia, reading as follows: x.e0.6,1„1"Recel-pt is acknowledged of your letter of March 25, 1955 1\14 j 'i% the applicatLon of Mr. Wilfrid M. Hager of Princeton, Of 19 ! 1 seY, under the provisions of section 32 of the Banking Act ; permit to serve as director of the Princeton Bank Co., Princeton, New Jersey, and as inactive partner of Shover , the Par at Co., ColorPdo Springs, Colorado. You state that the 131;: rie-rship of Shove, Hager & Co. has been dissolved and that Op., iIri-,,ness of the company is being conducted by Shove, Hager 0 -es, e which Mr. Hager is a stockholder but not an oficert.' ' 'derti tlu the circumstances the Board will take no further ac1)(311 his application. Please advise the applicant accordingly. Approved. Thereupon the meeting adjourned.
@FedFRASER