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443 A meeting of the Board of Governors of the Federal Reserve System was held in Washington on Thursday, April 21, 1938, at 9:45 a• Ili. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szynczak McKee Davis Draper Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Clayton, Assistant to the Chairmen Consideration was given to each of the matters hereinafter referred to and the action stated with respect thereto was taken by the Board: The minutes of the meeting Of the Board of Governors of the Federal Reserve System held on April 20, 1938, were approved unani1110Usly. Letter to the board of directors of the "State Bank of Freeport", F1'eePort, Illinois, stating that, subject to conditions of membership 111111bered 1 to 6 contained in the Board's Regulation H, and the followng spacial condition, the Board approves the bank's application for rae mbership in the Federal Reserve System and for the appropriate amount Qf stock in the Federal Reserve Bank of Chicago: "7. Such bank shall make adequate provision for depreciation in its banking house and furniture and fixtures." Approved unanimously, together with a letter to Mr. Schaller, President of the Federal Reserve Bank of Chicago, reading as follows: 444 4/21/38 ,am "The Board of Governors of the Federal Reserve System approves the application of the 'State Bank of Freeport', Freeport, Illinois, for membership in the Federal Reserve System, subject to the conditions prescribed in the inclosed letter which you are requested to forward to the board of directors of the institution. Two copies of such letter are also inclosed, one of which is for your files and the other of which you are requested to forward to the Auditor of Public Accounts of the State of Illinois for his information. "In view of the fact that the examiner has reported that the estimated losses shown in the report of examination for membership were charged off during the examination, the usual condition of membership regarding the elimination of estimated losses has not been prescribed. "It has been noted that, although the bank has full trust powers and is reported to be the only corporate fiduciary in the city, it is exercising such powers only to a limited extent and no effort is being made to secure new business. The examiner states that the directors have adopted no rules and regulations, as contemplated in the by-laws of the bank, for the operation of its trust department; that there has been no formal election of a trust Officer for several years; that there is no trust committee; and that apparently no supervision of the trust department is being given by the directors. It is understood, however, that a thorough discussion regarding the department was held with the president at the close of the examination and that it was agreed that more attention should be given to tne department by the general management and the board of directors. Acceptance of trust business, no matter how anall, entails serious responsibilities, and the management Should be advised that if the bank expects to continue its trust business it will be expected to take the proper steps to bring its trust activities into conformity with approved practices. "It has been noted from the presentation memorandum accompanying the application that in the event the bank completes its membership, you will call attention to the necessity of transferring from savings deposits, certain accounts which do not conform to the provisions of the Board's Regulation Q. "It has been observed further that the Articles of Consolidation and Agreement between the State Bank of Ireeport and the Stephenson County Bank provide that the 445 4/21/39 -3- "management of the applicant bank 'shall be vested in a Board of eighteen directors', while the report of examination made in connection with the application for membership shows that at that time the bank had only thirteen directors. It is assumed that appropriate authorization was obtained to reduce the number of directors to thirteen, but it will be appreciated if you will forward advice on this point, together with a copy of any certificate which the stockholders may have executed in this connection." Letter to the board of directors of the "Shelby County State bank") Shelbyville, Illinois, stating that, subject to the conditions of membership numbered 1 to 3 contained in the Board's Regulation H, and the following special conditions, 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: "4. Such bank shall make adequate provision for depreciation in its banking house and furniture and fixtures. ”5. Such bank shall stamp, as soon as practicable, in legible form on each certificate for stock of the bank outstanding and, so long as the legend referred to below is applicable, shall stamp in legible form on each certificate issued upon transfer or in lieu of the certificates now outstanding, a legend reading substantially as follows: 'Before any dividend or distribution of any kind or character is made to stockholders as such, the outstanding deferred certificates issued by the bank to certain individuals who made voluntary contributions in 1933 must be paid.' (In the event that shareholders of the bank fail or refuse to surrender their stock certificates for the purpose of enabling the bank to place thereon the legend referred to in the foregoing condition numbered 5, this condition will be 446 4/21/38 "considered as having been complied with by the inclusion in each published statement of condition of the bank of appropriate information showing the relation of the rights of the holders of outstanding deferred certificates to the rights of stockholders.)" The letter also contained the following special comments: "In connection with condition of membership numbered 4, it is understood that the directors have agreed to reduce the carrying value of the furniture and fixtures account by %4,000 during the current year and by an additional 44,000 during 1939, after which regular periodical depreciation cnarge-offs will be made." Approved unanimously, together with a letter to Mr. Schaller, President of the , - of Chicago, reading Federal Reserve Baru as follows: "The Board of Governors of the Federal Reserve System aPProves the application of the 'Shelby County State Bank', Shelbyville, Illinois, for membership in the Federal Reserve System, subject to the conditions prescribed in the inclosed letter which you are requested to forward to the board of directors of the institution. Two copies of such letter are also inclosed, one of which is for your files and the other of which you are requested to forward to the Auditor of Public Accounts of the State of Illinois for his information. "Estimated losses, other than the loss estimated in furniture and fixtures, as shown in the report of examination for membership are reported to have been eliminated during the examination; therefore, the usual condition regarding the elimination of estimated losses has not been Prescribed." Letter to "The Montgomery National Bank", Montgomery, West Virginia, reading as follows: , "This refers to the resolution adopted on November JO) 1937, by the board of directors of your bank signifying 44:9 4/21/38 -5- "the bank's desire to surrender its right to exercise the trust powers which have heretofore been granted to it under the provisions of section 11(k) of the Federal Reserve Act, as amended. "The Board, understanding that your bank has never actually accepted or undertaken the exercise of any trust, therefore, has issued a formal certificate to your bank certifying that it is no longer authorized to exercise any Of the fiduciary powers covered by the provisions of section 11(k) of the Federal Reserve Act, as amended. This certificate is inclosed herewith. "In this connection, your attention is called to the fact that, under the provisions of section 11(k) of the Federal Reserve Act, as amended, when such a certificate has been issued by the Board of Governors of the Federal Reserve System to a national bank, such bank (1) shall no longer be subject to the provisions of section 11(k) of Federal Reserve Act or the regulations of the Board of Governors of the Federal Reserve System made pursuant thereto, (2) shall be entitled to have returned to it any securities which it may have deposited with the State or similar authorities for the protection of private or court trusts, and (3) shall not exercise any of the powers conferred by section 11(k) of the Federal Reserve Act except with the Permission of the Board of Governors of the Federal Reserve System." Approved unanimously. Letter to Mr. 'halter Lichtenstein, Secretary of the Federal Advisory Council, reading as follows: "Further reference is made to your letter of April 9 With respect to topics for discussion at the forthcoming meeting of the Federal Advisory Council on May 16-17, 1938, "The Board does not have any additional topics to suggest at this time but it is understood that, in accordance with the decision reached at the meeting of the Council with the Board on February 15, the Council will submit the conclusions reached by it with respect to the f°11°wing topics previously suggested by the Board: 1. How can the Federal Reserve System increase the value or scope of its services to member banks in practicable or desirable ways. 448 4/21/38 -6"2. (a) What is the function of the Federal Advisory Council as a part of the Federal Reserve System. (b) How essential and important is this function and how might it be Improved. 3. What types of topics should be discussed by the Council with the Board from time to time." Approved unanimously. Memorandum dated April 18, 1938, from Mr. Morrill submitting the own recommendations of the Division heads concerned, including his recommendation, that the following named employees of the Board's steel' be selected to attend the 1938 resident session of the Graduate School of Banking. at Rutgers University, with the understanding that they will be allowed the necessary additional leave with pay in addition to regular annual leave and be reimbursed for their transportation expenses from Washington to New Brunswick, New Jersey, and return: Secretary's Office - S. R. Carpenter (for the first year) Legal Division - T. C. Baumann (for the third year) Division of Examinations - C. T. Malone (for the third year), A. W. Lee (for the third year), and L. H. Jones (for the second year) Division of &Ink Operations - D. M. Kennedy (for the second year) The recommendations were approved unanimously. Memorandum dated April 18, 1938, from Mr. Vest, Assistant en'erel Counsel, recommending that there be published in the May issue the Federal Reserve Bulletin, in addition to the text of the re/1sed sUPpleMent to Regulation D adopted by the Board on April 15, 449 4/21fl -7.- 1938, a statement in the form attached to the memorandum with respect to the Board's recent ruling on the following subject: Pledged Bank Deposits as Balances Due from Other Banks in Computing Reserves. Approved unanimously. Thereupon the meeting adjourned. Secretary. Apia Chairman.
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