Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, April 25, 1935, Volume 22, Part 2

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985

A meeting of the Executive Committee of the Federal Reserve
130ard was held in Tashington on Thursday, April 25, 1935, at 11:30 a. m.
PRESENT:

Mr.
Mr.
Mr.
Mr.

Eccles, Governor
Hamlin
Miller
James

Mr. Morrill, Secretary
Mr. Bethea, Assistant Secretary
Mr. Carpenter, Assistant Secretary
The Committee acted upon the following matters:
Telegram to Mr. Sargent, Assistant Federal Reserve Agent at the
Ilecleral Reserve Bank of San Francisco, reading as follows:
"Your telegram April 24. Federal Reserve Board has been
considering question of capital impairment involved in membership annlications of Bank of Fairfield and other institutions but final decision has not yet been reached. In this
connection, section 202 of Banking Act of 1935 now under
consideration by Congress would amend section 9 of Federal
Reserve Act to authorize Board, in its discretion, to waive
requirellents relating to admission of insured nonmember banks
to membership."
Approved.
Letter dated April 24, 1935, approved by three members of the
11°ard, to "The National Spraker Bank of Canajoharie", Canajoharie, New
Icillky reading as follows:
"This refers to the resolution adopted on January 6,
1934, by the board of directors of your bank signifying the
bankts desire to surrender its right to exercise trust powers
which have been granted to it by the Federal Reserve Board.
"The Federal Reserve Board understands that your bank
43 been discharged or otherwise properly relieved in
!ccordance with the law of all of its duties as fiduciary.
ihe Board, 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.




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"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 Federal Reserve Board to a national bank, such bank (1)
shall no longer be subject to the provisions of section 11(k)
of the Federal Reserve Act or the regulations of the Federal
Reserve Board 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 covered by section 11(k) of the Federal Reserve Act
except with the permission of the Federal Reserve Board."
Approved.
Telegram dated April 24, 1935, approved by three members of the
board,
O

to Mr. Peyton, Federal Reserve Agent at the Federal Reserve Bank

lAinneapolis, reeding as follows:
"Re your letter April 13 regarding Board's letter April 11,
P35, concerning 'Security Trust and Savings Bank', Billings,
Montana. It is understood that Federal Deposit Insurance
Corporation has made arrangenents with State banking departments
Whereby Corporation will be given an opportunity to express its
views as to capital reductions of State banks which are not
members of Federal Reserve System. Letter dated March 28, 1935,
from State Banking Department to Federal Deposit Insurance
Corporation advising that Superintendent of Banks had approved
the retirement of the debentures but that bank had requested
State Banking Department to obtain the consent of Federal Deposit
Insurance Corporation to the transaction was referred to the
Board inasmuch as bank is a member bank.
"Please advise State Banking Department that its letter has
been referred by Federal Deposit Insurance Corporation to the
Board but that as previously stated by you, the bank is not
subject to provisions of law or conditions of membership regnaring the Board's approval to a capital reduction. As stated
in Board's letter April 11, 1935, current report of examination
reflects strong liquid and sound asset position. However, in
vier of present capital ratio, increase in deposits during past
year, and reported prospects for substantial increases in the
'LlAturel it would seem desirable as a matter of sound banking
!
)
.°11.oY that no reduction be made in the bank's capital at this
ime. If you agree in this conclusion, it is suggested that,
'




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"inasmuch as the bank has raised the question, you acquaint the
Superintendent of Banks or the bank with your views and the
views of the Board in the matter."
Approved.
Letter dated April 24, 1935, approved by five members of the
113ard) to Mr. O'Connor, Comptroller of the Currency, reading as follows:
"There are inclosed a copy of a letter from Robert T.
Bates of Ventura, California, to Governor Eccles, dated March
16) 1935, and conies of newspaper articles and other memoranda
Which were inclosed with his letter, all of which are selfexplanatory. Inasmuch as this appears to be a matter involving
Principally the Bank of America National Trust and Savings
Association, it is being referred to you for whatever action
You deem appropriate in the circumstances. In view of the
possibility that you may wish to consider this matter in
connection with the Board's letter to you under date of March
25) 1935, there is attached hereto the Board's file, which
includes a memorandum, prepared by the Board's Division of
Examinations. It will be appreciated if the file is returned
When it has served its purpose."
Approved.
Telegram dated April 24, 1935, approved by three members of the
113ard, to Mr. Young, Assistant Federal Reserve Agent at the Federal Res Bank of Chicago, reading as follows:
"Your letter April 22, 1935. In view of circumstances stated
Board approves your recommendation that no penalties be assessed
against Continental National Bank and Trust Company, Chicago,
Illinois, for failure to carry reserves against funds mentioned
In your letter with understanding that reserves, to extent they
may be necessary under law and regulations, will be maintained
from this time on against such funds. In absence of more detailed information as to nature of funds and conditions under
which they are held by Continental National Bank and Trust Company,
Federal Reserve Board is unable to express opinion on whether
they constitute deposits requiring reserves and it is not understood that this question is presented to the Board for consideration. In this connection, however, your attention is invited to a




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"ruling of the Board in the 1922 Federal Reserve Bulletin at
Page 572 holding that all funds received by a bank in the
course of its commercial or fiduciary business must be treated
either as deposits against which reserves must be carried or
as trust funds subject to the ordinary restrictions and safeguards imposed upon the custody and use of such funds. You
are of course aware of the provision of Regulation D that a
member bank exercising trust powers need not maintain reserves
against trust funds which it deposits in another institution
to the credit of itself as trustee."
Approved.
Memorandum dated April 20, 1935, from Mr. Smead, Chief of the
t

ion of Bank Operations, recommending approval of the following

ehallges in the inter-district time schedule for cash items, which had
been

requested by the Federal Reserve Bank of Richmond and approved by

the other Federal reserve banks affected.

The recommendation was approved

by three members of the Board on April 24, 1935:

Richmond

to
'

fl

Baltimore

It

Charlotte

if

New Orleans
Minneapolis
Kansas City
Denver
El Paso
New Orleans
El Paso
El Paso
Salt Lake City

From

To

3 days
3
3
4 It
4
3
4 It
4
5

2 days
2 "
2
3
3 II
2
3
3
4 11

Approved.
Letter dated April 24, 1935, approved by three members of the
to Governor Harrison of the Federal Reserve Bank of New York, readfollows:
"Replies to our telegram of April 15, 1935, Trans 2241,
regarding the absorption by Federal Reserve banks of shipping




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-5-

"Charges on currency and coin forwarded to nonmember banks indicate that no Federal Reserve bank other than the Federal Reserve
Bank of New York absorbs such charges.
"It will be appreciated, therefore, if you will advise the
Board how long the bank has been absorbing such charges, whether
the directors of the bank are now of the opinion that this service
Which, according to Mr. Coots wire of April 16, costs approximat3ly (42,000 per month, should continue to be given to nonmember
banks, and, if so, the reasons therefor."
Approved.
Letter to Mr. Everett V. Meeks, Professional Adviser, New Haven,
Connecticut, reading as follows:
"I have your letter of April 18 in regard to arrangements
for the examination of the drawings submitted by the competing
architects.
"As I understand from our telephone conversation that
You feel that the board room would be satisfactory and that
Your only reason for not suggesting it was the thoughtthat it
might be required for other purposes, arrangements will be
made to set aside the board room exclusively for this purpose
during the period from May 12 to May 18, inclusive.
"The packages received at the offices of the Federal
Reserve Board from the competing architects will be held unopened and will be delivered to you upon your arrival. The
board room 1111 be equipped in accordance with your suggestions,
and the keys to the board room will be turned over to you when
You arrive.
.
"Naturally, we also are very desirous that there be no
hitch or mishap of any kind, and it is the desire of the Board
that every precaution be taken to avoid any basis for criticism
Of the procedure under which the competition is conducted.
Therefore the board room and the drawings will be regarded as
being in your charge continuously from the time of your arrival
ln Washington for the purnose of opening the packages until the
competition is concluded. For this reason it is felt that you
Should remain in Washington during this period, which would
preclude your being in New Haven on Tuesday, the 14th, as
suggested in your letter.
"With this understanding, the Board will arrange with Mr.
Abell to come to Washington, and also for an assistant, to
work under your direction on May 13, 14 and 15 in the checking
Of the material submitted by the competing architects.




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"I shall be glad to carry out your suggestion that letters
be written to the members of the jury about April 25 reminding
them of the date for the meeting of the jury."
Approved, together with a letter to Mr.
E. F. Abell, Consulting Engineer, New York,
New York, reading as follows:
"As I told you over the telephone, I am advised by Mr.
Meeks that he desires to have you and one assistant aid him in
Checking the drawings submitted by the competing architects and
that he expects to have this work done on May 13, 14 and 15.
I understand that you are willing to render this service and to
arrange to have Mr. Stevens, who has assisted you and Mr. Meeks
previously, accompany you to Washington for this purpose, your
compensation to be at the rate of $20 per day, together with
actual traveling expenses, and that of Mr. Stevens to be at the
rate of $62.50 a week for the actual number of days of service
together with reimbursement for actual traveling expenses.
"The Board approves the arrangement on this basis. It
will therefore be expected that you and Mr. Stevens will arrive
at the Board's offices on Monday morning for the purpose of
assisting in the limner desired by Mr. Meeks. It will be
appreciated if you will confirm the foregoing understanding.
"A copy of this letter is being transmitted to Mr. Meeks
for his information."
Memorandum dated April 22, 1935, from Mr. Carpenter, Assistant
Seel
'
etarY, submitting a comparative statement of the bids received from
the West Publishing Company and Callaghan & Company, and of the estimate
l'eeel acl from the Government Printing Office covering the printing of a
4vised edition of the Federal Reserve Act proposed to be published upon
the
e'qournment of the present session of Congress. The memorandum stated
that

based upon the printing of 20,000 copies, the estimate submitted by

the G

overnment Printing Office is the lowest bid and that if the new

edition .
ls printed by that office the member bank mailing list maintained
bY the

Superintendent of Documents for mailing the Federal Reserve

'
° 111 may be used and a copy of the ner edition sent by that office



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direct to each member bank under a frank, thereby eliminating the
necessity for the Board sending copies to the member banks either
directly from its office or through the Federal reserve banks.
The placing of the order with the Government Printing Office for the printing of a
revised edition of the Act upon the adjournment
of the present session of Congress was approved.
Letter dated April 24, 1935, approved by three members of the
8°ard, to Mr. Curtiss, Federal Reserve Agent at the Federal Reserve Bank
Of

Boston, reading as follows:
"In its letter to you of April 6, 1935, regarding the
aPPlication of Mr. Arthur G. Shattuck under the provisions of
section 32 of the Banking Act of 1933 for a permit to be at
the same time a dealer in securities in his individual capacity
and a director of the Indian Head National Bank, Nashua, New
Hampshire, the Board stated that, on the basis of the information submitted, it was not entirely clear whether the applicant
was 'primarily engaged in the business of purchasing, selling,
O' negotiating securities' within the meaning of section 32 and
that, before taking further action in connection with the
application, the Board would afford the applicant an opportunity
of submitting additional information regarding this question.
"Mr. McRae has forwarded with his letter of April 18, 1935
a copy of a letter from Mr. Shattuck, giving additional information regarding this question. Mr. Shattuck states that his
Principal business is 'General fiduciary business, Probate work,
settling estates, acting as Trustee, Guardian etc. Appraising,
treasurer of several corporations', and that the 'investment
line is a very minor part' of his business and consists in 'executing a few occasional orders to buy or sell securities for
Others in the open markets for which' he charges 'the usual
commission'. He states that this brokerage business is carried
on merely for the accommodation of his clients, and that his
1934 were
F°ss receipts from this type of business for the year
0.88.60.
"The Board has not had the benefit of your comments or
recommendation in connection with Mr. Shattuck's letter. However, the statements which it contains would indicate that he
is not primrily engaged in the business referred to in section




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"32. Accordingly, if you do not feel that there are any further
circumstances or considerations which should be called to the
attention of the Board, please advise Mr. Shattuck that a permit covering the relationships described in the first paragraph
of this letter is not necessary.
Approved.
.Letter dated April 23, 1935, approved by four members of the
Illard, to Mr. Curtiss, Federal Reserve Agent at the Federal Reserve Bank
Of

Boston, reading as follows:
"'Your letter of March 18, 1935, raises the question whether
section 32 of the Banking Act of 1933 should be regarded as
applicable to a director of General Capital Corporation who is
a director of a member bank in view of the proposed activities
of the corporation in connection with the sale of its own shares.
"The letter from Mr. Frederick Ayer dated March 7, 1935, a
coPy of which you inclosed, states that the corporation
originally had 200,000 shares of stock outstanding but that it
has from time to time purchased in excess of 60,000 of such
Shares and that it has recently given to its shareholders a
limited right of surrendering their shares for redemption. The
corporation proposes to offer for sale the shares previously
repurchased as well as such shares as may be surrendered to it
for redemption from time to time. It appears that the actual
distribution of the shares will be made by Capital Managers,
Incorporated, which gives supervisory and management services
to General Capital Corporation, but that Capital Managers, Incorporated will not be allowed to retain any profit from the
sale of such shares.
"It appears that General Capital Corporation is engaged in
the business of holding for income and capital appreciation the
securities of other corporations, and the Board has heretofore
found that its activities in purchasing and selling securities
for its portfolio were not such as to make section 32
applicable. On the basis of the information which has been
submitted, the Board does not believe that the resale of
approximately 60,000 shares previously purchased by the corporation and the resale of redeemed shares would result in making
the corporation 'engaged primarily in the business of purchasing,
elling, or negotiating securities' within the meaning of section
32, if it does not engage in any additional transactions in
connection with its shares.




993

11

4/25/85

-9-

"In connection with Capital Managers, Incorporated, of
Which Mr. Ayer is also a director, it is noted from your letter
of April 4, 1935 and inclosures that you and counsel for your
bank are in doubt as to whether it vill be engaged primarily
in the sale of these shares within the meaning of section 32.
The information which has been submitted indicates that the sole
business of this corporation in the past year has been to act
as an investment advisor and manager for General Capital
Corporation, and that its business in the future will be the
same except that it will also act as agent for General Capital
Corporation in connection with the proposed distribution of
the shares of the latter. It also appears that Capital
Managers, Incorporated will not receive any profit from the
Proposed sale, and that the underlying purpose of the sale rill
be to prevent the gradual diminution of the corporation's
assets as a result of the redemption of its shares, referred
to above. Under the circumstances, the Board does not feel
that Capital Managers, Incorporated will be engaged primarily
in the sale of these shares rithin the meaning of section 32."
Approved.
Letter dated April 23, 1935, approved by three members of the
hoard, to Mr. Curtiss, Federal Reserve Agent at the Federal Reserve Bank
Qt Boston, reading as follows:
"In its letter of February 11, 1935, the Board stated
that, on the basis of the information thich had been submitted,
it appeared that State Street Investment Corporation was not
actively engaged in purchasing and selling securities in its
portfolio to such an extent that section 32 should be regarded
as applicable to a director of a member bank rho was serving
as a director or officer of that corporation, but stated further
that it appeared that the corporation was actively engaged in
selling its orn shares to such an extent that section 52 should
be regarded as applicable for that reason. However, in view of
the fact that it was understood that the corporation intended
to cease selling its om shares in the near future, you were
requested to obtain information as to what action, if any, the
corporation viould take in this connection.
"With your letter of February 26, 1935, you inclosed a
copy of a letter from Mr. Charles C. Cabot, of counsel for the
corporPtion, stating that the present intention of its management is to cease selling its shares when the assets of the
corporation or the number of shares outstanding reach certain
figures', and indicating that the corporation is within about




994

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-10-

n10 per cent of the goal. Of course, these statements merely
indicate that the management of the corporation does not intend
Presently to terminate the issuance and sale of such shares.
Accordingly, in view of the Board's letter of February 11, 1935,
it would appear that the four directors of the corporation who
are serving member banks are serving in violation of the provisions of section 32 of the Banking Act of 1933.
Tar. Cabot also takes the position in his letter that the
corporation is engaged in investing funds for the benefit of
its stockholders and that the sale of its on stock is not in
any sense of the word the principal business of the corporation.
He points out that 'the corporation sells (its shares) through
the State Street Research & Management Corporation as its agent
to various dealers throughout the country'. It appears from
the information in the Board's files that State Street Research
& Management Corporation has five stockholders and officers,
three of whom are the three officers of State Street Investment
Corporation, and that the Management Corporation is controlled
by the officers of the Investment Corporation. Accordingly,
althouEh it may be argued that the Investment Corporation is
not itself engaged in selling its shares to the public, it
nevertheless appears that the corporation is actively engaged
in issuing and selling its shares, and the Board, therefore,
sees no reason to reach a different conclusion in this connection from that stated in its letter of February 11, 1935.
"It will therefore be appreciated if you will advise
lAr. Cabot of the Board's views in the matter and ascertain what
steps the directors in question propose to take in order to
comply with the provisions of section 32 of the Banking Act of
1933.0
Approved.
Letter dated April 24, 1935, approved by three members of the
13°are, to an
applicant for a Clayton Act permit advising of the issuance
°f a permit by the Board as follows:
Mr. G. E. Zoller, to serve at the same time as a director and
Officer of The Capital National Bank of Sacramento, Sacramento,
California, as a director and officer of the Citizens Bank of
Sacramento, Sacramento, California, and as a director of the
First Savings Bank of Colusa, Colusa, California, for the period
ending January 14, 1936.




Approved.

995
4/25/35

-11Letter to Mr. Wood, Federal Reserve Agent at the Federal Reserve

Bank of St. Louis, reading as follows:
"You are requested to advise Mr. Larry D. Jones that his
application under the provisions of the Clayton Act for a permit to serve at the some time as officer of the Federal
intermediate Credit Bank of Louisville, Louisville, Kentucky,
and as director of the Monticello Banking Company, Monticello,
Kentucky, is receiving consideration and that he will be advlsed in due course of the action taken.
"Although the application was accompanied by your unfavorable recommendation based upon the applicant's past record,
it appears that the banks involved are not in competition and
that in view of the policy stated in the Board's letter of
January 9, 1935 (X-9082) the application might be granted.
"However, for your own information, the Board feels that
although a Federal Intermediate Credit bank may be a 'bank * * *
organized or operating under the laws of the United States'
within the meaning of section 8A of the Clayton Act, there are
now pending in Congress proposed amendments to the Clayton Act
Which would make it inapplicable to the relationships covered by
this application; and the Board has therefore decided to defer
action in connection with this application until it can be
definitely ascertained whether the proposed amendments will be
enacted at this session."
Approved.
There were then presented the follov.ing applications for changes

in stock
of Federal reserve banks:
A
b.-L-Leations for ADDITIONAL Stock:
Trust Company of Albany, Albany,
jew York.
"e Citizens National Bank in Gastonia,
14_ Gastonia, North
Cerolina.
"Home National Bank of Sutton, Sutton,
West Virginia,




Shares

560

360

1
15

16

996

ti

4/25/55

-12-

for ADDITIONAL Stock: (Contid)
ri,No. 12.
The National Bank of Tacoma, Tacoma,
Washington,

ADX.119ations for SURRFNDER of Stock:
District No 1.
The
Somerville National Bank, Somerville,
Massachusetts.
he First National Bank of Hoboken, Hoboken,
New Jersey.
4411Ws:1_22.!__L
the First National Bank of St. Maryts at
Leonardtown, Leonardtown, Marylend.
.1.rst National Bank in Henderson,
Henderson, North Carolina.
;11e. Lansing National Bank, Lansing, Michigan.
he First National Bank of Lapeer, Lapeer,
M
ichigan.

Shares

300
Total

18

18

900

900

18

1

24
Total

Thereupon the meeting adjourned.

41)PrOVed




19

120

Approved.

[I

300
676

144
1,081