Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, April 2, 1941, Volume 28, Part 2

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A meeting of the Board of Governors of the Federal Reserve
System was held in Washington on Wednesday, April 2, 1941, at 11:00
a.m.
PRESENT:

Mr.
Mr.
Mr.
Mr.
Mr.

Ransom, Vice Chairman
Szymczak
McKee
Davis
Draper

Mr. Morrill, Secretary
Mr. Carpenter, Assistant Secretary
Mr. Clayton, Assistant to the Chairman
The action stated with,respect to each of the matters hereinafter referred to was taken by the Board:
The minutes of the meeting of the Board of Governors of the
Federal Reserve System held on April 1, 1941, were approved unanimously.
Memorandum dated March 28, 1941, from Mr. Wyatt, General
Counsel, recommending that, for the reason stated in the memorandum,
Eleanor F. Boylan be appointed as a stenographer in the Office of
General Counsel, with salary at the rate of ;t1,560 per annum, effective as of the date upon which she enters upon the performance of
her duties after having passed satisfactorily the usual physical examination.
Approved unanimously.
Letter to Mr. Young, President of the Federal Reserve Bank
of Chicago, reading as follows.

The letter was substantially in the

form approved at the meeting on April 1, except that the last paragraph was changed because of the receipt on April 2 of a letter from




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Mr. Young with respect to the separation allowance voted for Mr.
Snyder:
"Your letter of March 28, 1941, with which you enclosed a copy of the minutes of the meeting of the board
of directors of your bank on March 27, 1941, has been
presented at the meeting of the Board of Governors. It
is noted that your directors have approved a salary at
the rate of 30,000 per annum for you as President of
the bank and it is understood this action was taken pursuant to the statement contained in the Board's letter
of March 14, 1941, to Mr. Lewis, that the Board approves
a salary at the rate of 30,000 per annum for you for
the period from March 1, 1941 to March 31, 1942, if fixed
by your directors at that rate. The Board has also noted
the request of your directors that further consideration
be given to the previous recommendation that your salary
be fixed at :35,000 per annum. This matter was given
careful consideration by the Board before its letter of
March 14 was written and it does not believe it would
be justified in departing from the position that the salary of the President of the Federal Reserve Bank of Chicago should not exceed S30,000 per annum.
"Other salaries fixed by your directors for the
period from April 1, 1941 to March 31, 1942, inclusive,
have been approved by the Board as follows:
Salary Increase
To
From
Title
Name
Assistant Vice
Allan M. Black
S8,000
S7,000
President
8,000
7,500
Assistant Cashier
Neil B. Dawes
"The Board has also approved a salary at the rate of
15,000 per annum for Frank D. Williams as Vice President
of the bank for the period from the date of the commencement of his service as Vice President to March 31, 1942,
inclusive.
"As you know, the Balderston report will be the subject of discussion at the meeting of the Conference of
Chairmen of the Federal Reserve Banks on April 26 and 27,
1941. In order to afford the Board of Governors an opportunity to consider further salary changes at the Federal Reserve Bank of Chicago in the light of discussions
at that conference, as well as in the light of the further
recommendations to be made by you, the Board approves,




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"for the period from April 1 to May 31, 1941, salaries
at the rates now in effect for the remaining officers
of your bank if fixed by your directors at such rates
for that period. This action, of course, does not apply to the salaries of the President and First Vice President of the bank which have already been acted upon by
the Board of Governors.
"Your letter of April 1 relating to a separation
allowance for Mr. Snyder was received in the Board's offices this morning. As Mr. Szymczak indicated to you
over the telephone yesterday, the Board is not willing
to approve a payment to Mr. Snyder in an amount equal
to one-half of his annual salary, or 8,750. It will,
however, interpose no objection to the payment to him
of 6,000 if approved by your directors under the authority contained in the Board's letter of June 24,
1937 (5-7)."
Approved, Mr. Ransom pointing
out that with respect to the salary
at the rate of -15,000 per annum for
Frank D. Williams as Vice President
of the Bank he had voted "no" at the
meeting of the Board on April 1, 1941.
Letter to the board of directors of the "Fair Lawn-Radburn
Trust Company", Fair Lawn, New Jersey, stating that, subject to conditions of membership numbered 1 to 6, inclusive, contained in the
Board's Regulation H and the following special condition, the Board
approves the bank's application for membership in the Federal Reserve
System and for the appropriate amount of stock in the Federal Reserve
Bank of New York:




Prior to admission to membership, such bank, if
it has not already done so, shall charge off or
otherwise eliminate estimated losses of :t',2,629,
as shown in the report of examination of such
bank as of March 1, 1941, made by an examiner
for the Federal Reserve Bank of New York."

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The letter also contained the following special comment:
"It appears that the bank possesses certain powers
which are not being exercised and which are not necessarily required in the conduct of a banking and trust
business, such as the powers to act as surety and to
guarantee real estate titles. Attention is invited to
the fact that if the bank desires to exercise any powers
not actually exercised at the time of admission to membership, it will be necessary under condition of membership numbered 1 to obtain the permission of the Board
of Governors before exercising them. In this connection,
the Board understands that there has been no change in
the scope of the corporate powers exercised by the bank
since the date of its application for membership."
Approved unanimously for transmission through the Federal Reserve Bank of
New York.
Letter to the board of trustees of "The Commonwealth Mutual
Savings Bank", Milwaukee, Wisconsin, stating that, subject to conditions of membership numbered 1, 3, 4, 5, and 6 (standard conditions
of membership numbered 3, 4, 5, and 6 to be renumbered 21 3, 4, and 5)
contained in the Board's Regulation H and the following special condition, the Board approves the bank's application for membership in the
Federal Reserve System and for the appropriate amount of stock in the
Federal Reserve Bank of Chicago:

"6. With respect to the payment of deposits and regu-




lar dividends thereon, such bank shall be governed
by the provisions of the regulations of the Board
of Governors of the Federal Reserve System relating to the payment of deposits and interest thereon
by member banks, and no special dividends shall be
paid except with the permission of the Board of Governors."
Approved unanimously, together with
a letter to Mr. Young, President of the

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-5Federal Reserve Bank of Chicago, reading
as follows:

"The Board of Governors of the Federal Reserve System approves the application of 'The Commonwealth Mutual
Savings Bank', Milwaukee, Wisconsin, for membership in
the Federal Reserve System, subject to the conditions
prescribed in the enclosed letter which you are requested
to forward to the Board of Trustees of the institution.
Two copies of such letter are also enclosed, one of which
is for your files and the other of which you are requested
to forward to the Commissioner of Banking for the State
of Wisconsin for his information.
"Since the amount of estimated losses shown in the
report of examination for membership is relatively small,
the usual condition of membership requiring the elimination of losses has not been prescribed.
"In connection with condition of membership numbered
6, the Board authorizes your bank, through its President
to act in its behalf with respect to requests for permission to pay special dividends. The President may, if he
so desires, delegate such authority in writing to the
First Vice President or to the Vice President in charge
of examinations. The Board desires to be advised regarding action taken in its behalf under this authorization."
Letter to Mr. Fletcher, Vice President of the Federal Reserve
Bank of Cleveland, reading as follows:
"This refers to your letter of March 19, 1941, enclosing a copy of a letter dated March 15, 1941, from
Mr. R. Q. Baker, Chairman of the board of directors of
the Coshocton National Bank, Coshocton, Ohio, to Mr.
Stephen L. Newnham, Chief National Bank Examiner, inquiring whether section 22(g) of the Federal Reserve Act
would prohibit the Coshocton National Bank from making
a loan to Mr. Baker as trustee of his father's estate.
"It appears that Mr. Baker is chairman of the board
of directors of the national bank. It also appears that
he is trustee of his father's estate, in which he has a
life interest, and that the property of the estate will
upon his death vest in his two sons, one of whom is vice
president of the national bank. The trust estate consists of property with a value in excess of 11100,000 with




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"no indebtedness, the principal item being a business
block yielding approximately P,7500 per annum, and the
estate may wish to borrow about $15,000, which Mr. Baker
describes as a 'gilt-edged' loan and one 'that any bank
would obviously welcome'.
"It will be assumed that under the laws of the State
of Ohio a trustee in borrowing on behalf of the trust
may sign the instrument in such a way as to avoid any
personal liability on the obligation and that the proposed loan would be handled in this way. While the
trustee would thus have no personal liability, he would
benefit directly from the making of the loan in his capacity as life tenant of the trust estate, which would
be obligated on the note. He is interested in the loan
both in a representative capacity and in his own right.
In this connection, it is noteworthy that the law forbids
a member bank to make any loan or 'extend credit in any
other manner' to an executive officer.
"It appears that the principal purpose underlying
the enactment of section 22(g) of the Federal Reserve
Act was to prevent the exercise of undue influence by
executive officers of member banks in obtaining credit
from the banks they serve; and, while there is nothing
to suggest that any such influence would be used in this
particular instance, it is apparent that the case is one
of a type in which undue influence may readily be exercised.
"In all the circumstances, and particularly in view
of the fact that Mr. Baker is not only trustee but also
a beneficiary of the trust estate which would receive
the loan, it is the view of the Board that the making
of the loan proposed would contravene the intention of
Congress and would be inconsistent with the provisions
of the statute."
Approved unanimously.
Letter to Mr. Merritt, Chairman of the Federal Reserve Bank
of Dallas, reading as follows:
"At the completion of the examination of the Federal Reserve Bank of Dallas, made as of January 25, 1941,
by the Board's examiners, a copy of the teport of examination was left for your information and the information




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"of the directors. A copy was also furnished President
Gilbert.
"The report does not appear to contain any matters
requiring further comment at this time. The Board will
appreciate advice, however, that the report has been considered by the Board of Directors. Any comments you may
care to offer regarding discussions with respect to the
examination or as to action taken or to be taken as a
result of the examination will also be appreciated."
Approved unanimously.

Thereupon the meeting adjourned.

Approved:




Vic

Chairman.