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198 A meeting of the Executive Committee of the Federal Reserve Board 1184 404 in Washington on Thursday, April 27, 1933, at 12:15 p.m. PRESENT: Mr. Mr. Mr. Mr. Meyer, Governor Hamlin Miller James Yr. Ur. Mr. Mr.. Mr. Mr. Morrill, Secretary McClelland, Assistant Secretary Harrison, Assistant to the Governor Wyatt, General Counsel Wingfield, Assistant Counsel Slams, Federal Reserve Examiner. The Cammittee considered and acted upon the following matters: Telegram dated April 26, 1933, from Mr. McClure, Federal Reserve 4gettt et 'tenses City, stating that the board of directors, at its meeting °Atli "date, made no change in the bank's existing schedule of rates of cilecolint and purdhase. Without objection, noted with approval. Reply on April 26, 1933, approved by four members of the Board, to 11 letter 1/ealiz or dated April 20 from Mr. Newton, Chairman of the Federal Reserve Atlanta, stating that, subject to the approval of the Federal Re- "I'lre Board, the board of directors had authorized the appropriation by the 4°Etcl OrfIce and branches of the bank of a total of 4,000 to the local 11.411ter3 or the American Institute of Banking for educational purposes (1111111` the Year 1933. The reply stated that the Board has approved the 41)1/11°Priation. Approved. naPly on April 26, 1933, approved by four members of the Board, to 4 lett dated April 20 from Mr. Newton, Chairman of the Federal Reserve 11112,, 1 or Atlanta, advising of the action talmn by the board of directors in 199 4/27/33 -2- t4ing Vacation period3for the officers and employees of the head office, be.licliest and agencies of the bank during the year 1933. Ilitacilt The reply noted objection the action of the directors in this regard. Approved. Telegraphic re-1 p y to a telegram dated April 24, 1933, from Assistant l'eclel'ekl Reserve Agent Young at Chicago, requesting approval of the desigriatiall et Mr. C. T. Laibly, employed in the credit department of the head cltri°e, aad Er . C. H. F. Anderson, enployed in the credit department of the Detroit branch , to assist examiners at the head office and Detroit branch, respe ctively, in the examination of member and nonmember banks; it being ilite4aea that these employees will not be assigned permanently to the Federea 4;e8erve agent's department but will be used in examination work when 4VailablA The reply stated that the Board approves the designations. Approved. Letter to Jr. Newton, Federal Reserve Agent at Atlanta, referring to 41.8 /13Ply of April 19 to the Board's letter of April 1 with regard to 140 10,0 -44requent attendance of certain directors of branches of the Federal arlic of Atlanta at meetings of the boards of directors of their 4ive branches; Er. Newton stating that Mr. Xohn G. Farley was elected aire et°11 of the Birmingham branch on September 9, 1932, and has attended 04e4 ai rectors' meeting since that date, and suggesting that Yr. E. F. 4111410/, tor or director of the Birmingham branch, and Er. P. H. Saunders, directhe New Orleans branch, be approached on the matter of their esq4ar attendance. The reply stated that, in accordance with the agent's e/a) the Board will appreciate his discussing with Messrs. Allison 200 t) 4/27/33 -3anci a aunders the rnatter of their apparent inability to attend regularly the, - '4etirics Of the branch boards of directors, and that, if they feel that they will not be able to participate actively in the performance of the (11.1ti "of the directorates of the respective branches, it would be desirable l'(3r them to tender their resicgiations to becoine effective when the Board 413110ints their successors. Approved. Reply to a. letter dated A-oril 10, lc.k.),), from hr. Jtevens, Chairman or Sederal Reserve -3ank of jhicaL;e, quoting a letter received by him .rx.ora the• Xaraes one of the Board's appointees to the directorate of the iietroit branch, in which he raises a question as to whether his acceptOf the position of chairman. of the newly organized national Bank of tialzes Him ineligible to serve as a director of the branch. The zeillY noted that, while is. Inj-is at Present is -,ivin; all his ti_e to the Etrrairs Of the national bank, he has retained his official connection with the Alrlerican Blower Corporation and American liadiator Company, and that the 4""elit 170111d dislike very much to see his membership on the branch board clleolltinuea Q4a4Ges and stated that, in view of all the circumstances and the which are taking place in the bankinL; situation in the Detroit tezl'itery, the Board does not feel that lir. Inglis should resigi. as a direct°1 ' O. the branch and it is requested that the agent advise him accordingly. Ap-oroveth r2c/le trezai to "Ir. Wood, federal Reserve Agent at $t. Louis, referring tO the 2t131311cation of the Water Tower Bank, St. Louis, I.issouri, for per4_1 4-ur to 0 • vilthdraw immediately from mmbership in the Federal Reserve 201 4/27/33 3Ystem and stating that the Board waives the usual refauirement of six tionths notice of intention to withdraw and that, accordingly, upon surrender °f the, 'ieueral reserve bank stock issued to the Water Tower Bank, the 17ed"al reserve bank is authorized to cancel such stock and make a refund thereon. Approved. Iteply to a letter dated April 18, 193'6, fromEr. 17cC1ure, Federal . 4Cent at Kansas City, statin::, that two State banks,which are conterilPlating makinr, application for membership in the "Federal Reserve System, have 4 .411quired as to the amount which the Board would require to be char( cc. 0114 011 their deposit balances with the fidelity 'rational Bank and Trust C°111.Pany, lansas City, nissouri, Which is in the hands of a conservator; la.. elacestinc that it is believed that the elimination of 30,', of such (1e1)°aits will be a reasonable requirement in the case of any applicant for ilielliber'shiP whose condition is such that it could, if necessary, absorb some 1\lrther loss in this connection. The reply stated that the Board is not in 84fLl1 etently Villeth "the Close touch with the situation to express an opinion as to requirement of a 301,; charoe-off would be reasonable and proper; that the Ilatter has been discussed infornally with the examiner who is tile the cui,zoncy 1.,:eciure; reorganization of the bnnl- ih the office of the Comptroller of and his views in the matter coincide with those expressed by and that, in view of this fact and in the absence of further cle"1°P1ilerits which may make a change desirable, the Board will be disposed to ctppz,ove a recontivandation from the menbership committee of the federal banl: that, before beinc admitted to menbershin in the System, any 202 4/27/33 -5- b• 8iik havinc a deposit balance with the Fidelity National Dank and Tru4t • C°111Dany of Kansas City be required to charge off 30 of such balance. Appr wed. Lettez to La'. iralsh, -7ederal Reserve Agent at Dallas, stating that the Boa.rd has reviewed the condition of the Commercial State 7>an1. of iklc°e"(1°elle31 Texas, as reflected in the analysis of report of examination 43 °2 2ebruary 11, 193), and has noted the information submitted with the e1lt ts letter of April 3 from which it; appears that the transaction by willeh the member bank purchased all the assets and assumed all the liabili- ties 6:4cept those to stockholders, of the Appleby State Bank, Appleby, TOZE3.2 a nonmember, resulted in no material chance in the General character el' the assets of, or broadening in the scope of the functions exercised by, the ille*er bank within the meaning of the general condition under which it actiitted to membership in the Federal Reserve System, and that, the Boardtalm no action affectinc the membership of the Cetll''lercial State Bank by reason of the transaction. Appr oved. Letter to Ix. Homer P. Clark, Jeputy Chairman of the Federal Rei1: of ..irmeapolis, incios ;.or the information of the board of .'ll-l'ectors of the bank, a copy of a report of a special study of the fiscal e'erleYs cleia-cia-nent of the Federal Reserve Bank of ::inneapolis made by the 13c1cle2 e:caminers 1/Iztitution as t0 be • conjunction with the regulxir examination of that of 1.arch 22, 193'.J and statinu, that the Board will be pleased sed whether the recoramei_datioLs maue by the examiner in re,-,arci to l'ulle tiolls in connection with operations of the fiscal agency 203 11/27/33 -6clePextraent had been adopted, and as to What action has been taken in regard to tuprovin the forms and system of handling the operations of the fiscal agency Illsnt, which matter was discussed by the examiner with the officers of " eler the "scteral reserve bank at the time of the recent examination. Approved. Letter to 11r. dalsh, federal Reserve Agent at Dallas, inclosing a copy Of -I. a repot of a special study of the fiscal agency operations of the leciellal Reserve Bank of Dallas, which was made in conjunction with the exarr &nation of the bank and its branches as of 2ebruaxy 21, 1933; calling attention to the examiner's comments concerning subscriptions for Govern111s4t se curities by certain employees of the Federal Reserve Bank of Dallas; st tinc that the Board has noted that at an executive session of the °f directors of the bank on April 10, 1933, Governor LcKinney discussed 7l1ti1 the directors the comments and criticisms regardin; this matter which .1131'e Ilade by the floard's examiner in the regular report of examination of the bealk ana that, upon the Governor's assurance that there will be no /'eDetition of the transactions which were criticized, given after a dis1011 of the matter with Hr. T. 0. Webb, Assistant Cashier in charge of thia Department, the members of the board of directors felt thet no action on their Part was required. The letter also stated that the resla very stron ly that, as stated in its circular letter of April 12' 19316 (.:-7,107), subscriptions for Government securities filed with a -.4.01„ea reserve bank by its directors, officers or employees should be 1144cilea 111 strict accordance with Treasury instructions and in no respect lie ei e ,vorable treatment than is accorded other subscriptions of ::::s:a 84,3 and that the Board desires, therefore, that the detailed 141" rilation contained in the inclosed report be brought to the special 204 4/27/33 -7- Ettifttion of board of directors of the bank and the Federal Reserve the 13°'11rd advised as to the results of the further consideration given by the cliZectors to this information. The letter further stated Vint it is under- from the comirents made in the conuaittee report transmitted to the Peder al Reserve Board by the 7ederal reserve agent in his letter of April 13) 19R-0, that the various recommendations with respect to the operations clt the fiscal agency department of the bank and the auditing thereof, as aetollt in the inclosed report, have been adopted. Approved. Mr. Lorrill stated that a memorandum has been received from the ce of the Comptroller of the Currency recommending approval of an "4"Lti°n, submitted by the 1:ontoomery County National Bank, Rockville, LazYlem , ln connection with a plan to reorganize the bank so that it may be ed to reopen for business, for permission to reduce its common at°1c rrom a00,000 to .)50,000 and immediately thereafter to increase the °ItIc./1 stock to ‘:a00,000 by the sale of new stock of „;50 par value at ::)100 13" share, the released capital and premium on the new stock to be used to losses and depreciation; that under the plan approximately 80;" (3tt1e depositors have signed an agreement which provides that all of the tieD°aitora in the bank will waive 15,; - of their deposits for which they are a t° l'eceive an equivalent amount of preferred stock; that there are certain lttel'ences between the depositorst agreement and the amended articles of 444°Qiation,under which it is proposed that the bank shall operate,which (11.1ite likely to result in controversy and litigation and thus endanger he 44tetY of the bank; that the matter has been discussed with the office 205 4/27/33 or the -8- r! _omptroller of the Currency which has indicated to the bank that it 1141 approve the plan of reorganization; and that, therefore, the question 18 Pre8eated to the Board as to whether it will approve the application for Pe1111183i0n to reduce the common stock of the bank, as submitted, or whether It require the adjustment of the differences between the depositors' 41'"Ienent and the proposed articles of association before approving the red uction. 141, Wyatt stated that the application presents a question of policy to how much responsibility the Federal Reserve Board will accept in 41411'"I11g capital reductions of national banks; that, if the policy is t°11°Weci or Passing only upon the questions involved in a capital reduction, eti -m aPproving the reduction could be taken without considering any Other (Nestions presented by the transaction of which the capital reduction bea. Part; but that, if the Board feels that it must assune responsibil- 4 ,tro r aPProving the entire transaction, it cannot consistently take action Without vc'seing upon all the questions involved therein. He also stated thet he and Lir. Paulzer spent considerable tine with the representatives l cutgomery County National Bank discussing the proposed reorganizaa,A AAA that they feel that it would be very difficult, and would require 8Q43a tine 4. — 1 to obtain a new agreement from the depositors and that, if there la „t4z.11 ther delay in completing the reorganization, confidence in the be be lost and it may be forced to liquidate. thetoa The natter was discussed at scae length and some of the members of indicated the feeling that before acting upon a proposed reduction 14 e4Pital -- stock, the Board should take into consideration the important aspects or the pi an of which the reduction is a part, although the legal responsi- 206 4/27/33 -9bIlitY of the Board relates only to the capital stock reduction, as it aeered probable that the Board's approval of the capital stock reduction la/volved in such a 'plan would be interpreted as approval of the plan, eePecially where as in this case the reopening of the bank is dependent 4°4 the Board's action in addition to that of the Comptroller. Thereupon, tItexecutive Commdttee requested that a letter to the Acting Comptroller "the Crrency be prepared referring to the objectionable features of the Proposed plan of reorganization of the national bank and stating that the 11°"cl le willing to apprdve the reduction upon the recommendation of the C440Ptroller, when the situation as to the matters involved in the objections 4ea been clarified satisfacterily. 17x. Williann, Federal Reserve Agent at Cleveland, joined the meeting 414 reported that the run on the Cleveland Trust Company continued with less a ctivity for a short period this morning and had practically ceased later the morning, and that the banking situation in Cleveland was almost RePorts of Standing Committee dated April 27, 1933, recommending 4DProval - of the following changes in stock at Federal reserve banks: A tiat ?ations for SUM:TEND-Eli of Stock: Shares —71:8 1-a oi lirie\Tant tiioncti Bank, :1.0.allington, D. C. 41:181_ Ziet tro. 4411tie blr liational Bank, Atlantic, Iowa. (V.L.Sue. Atlantic State Bank, nonmember) ketr• Pils -let lib. ll. liati 'elt_onal Bank, Orange, Texas. (T.L.Suc. b y eIrst 4-cet rational Bank in Orange.) National Bank, Texas. (V.L.Abs. by l'a`1171ere State Bank of Rule, Texas, nonmember) Rule, 840 840 90 90 180 27 207 207 -10 licati0ns for SI.E.KILLLI of Stock: -(Cont Id) Zharek3 'ulr8,it National Bank, Milan, Idaho. (V.L•Abs. by jallace Bank and Trw_st Company, Wallace, 4E14.10 =nine:Aber.) 18 Total Approved. Thereupon the meting adjourned. 18 10155
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