The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
622 A meeting of the Board of Governors of the Federal Reserve Syst, wtt S held in Washington on Friday, April 30, 1937, at 2:30 p. m. PRESENT: Mr. Mr. Mr. Mr. Szymczak, Chairman pro tern Broderick McKee Davis Mr. Morrill, Secretary Mr. Bathes, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Dreibelbis, Assistant General Counsel Mr. Cagle, Assistant Chief of the Division of Examinations Mr. Chase, Assistant Counsel Mr. Szymczak was elected Chairman pro tern of this meeting. There was then presented a draft of a letter to the Presidents Or ell Federal reserve banks, reading as follows: "In the letter X-9799 dated January 22, 1937, the Fed7 1 8.1 reserve banks, in lieu of the Federal reserve agents, belle authorized, through their presidents, to approve on rinEllf of the Board reductions of preferred stock or capital a8 or debentures by State member banks in cases where t7 the B°11rd's approval of such reduction is required under wi:ondition of membership. Such authorization was granted li'hin the limitations and subject to the conditions out' led in the Board's letter X-9048 dated December 15, 1934. allthn:Te Board has had occasion to consider whether such should be extended, and in furtherance of the poileY of decentralization of administration under general thoiVes, has decided to, and hereby does, extend the au/10t:''tY to approve reductions of Preferred stock or capital snes or debentures heretofore conferred in letters X-9048 is X-9799 to cover all cases where the Board's approval ir nuired under a condition of membership, subject only to . cpi vue condition that the Federal reserve bank is of the or ni°n that the proposed reduction is justified as a matter c,s°1-Ind banking policy and that it may be legally acc)„"Adequacy of capital, of course, is essential to a or'alu banking system, and it is expected that the maintenance aid "adequate capital structure will be the primary conretirein in passing upon applications for permission to Preferred stock or capital notes or debentures. In thi s connection the Board wisnes to call attention to, and 623 4/30/37 -2"to emphasize, the views set forth in its letter dated December 13, 1935, X-9393, regarding the general policies which it feels should govern the retirement of preferred stock end capital notes and debentures, whether held by the Reconstruction Finance Corporation or by local investors. HowOver, since the letter in question was written, the Reconstruction Finance Corporation has announced conditions under which banks may obtain a reduction of 1/2 per cent in the te on the preferred stock or capital notes or debentures held by the Reconstruction Finance Corporation. It is re cocnized that in some cases you may feel justified in perllting retirements in the minimum amount necessary to allow ,a ks to obtain the benefit of the reduced rate, whereas In the absence of this consideration you might not be so disposed. "As stated in letter X-9048 to the Federal reserve ilgents, if for any reason a Federal reserve bank is in (1 1:V) t as to the wisdom of the proposed reduction or is una to approve or disapprove an application under the -111°IlitY granted herein, the bank's application may be subatted to the Board for determination, together with curilnt information as to the condition of the applying bank, reason for desiring to effect the reduction and any .her information, including the comments and recommenda,,°ns of the Federal reserve bank, which may be of asto the Board in passing upon the application. of "It is requested that the Board be furnished with copies 0 ,all letters approving on behalf of the Board retirements "1- Preferred stock or capital notes or debentures. "It has been noted that, in a few instances, approval has a,, baen given by a Federal reserve bank or Federal reserve s7 ont on behalf of the Board to a reduction in preferred Paired°r capital notes or debentures when the bank's unimita capital and surplus was not equal to 10 per cent of rut deposits. In order that there may be no question in the re as to compliance with the condition of membership ng the Board's approval for such reductions, the 1J1.1,L hereby ratifies such approvals previously given on r r Upon motion by Mr. cKee the letter was approved unanimously. Prior to this meeting there had been furnished to each member the to erd a copy of a memorandum dated April 28, 1937, from Mr. 01 or 18 Cal1in6T attention to a certificate transmitted to the Board 624 4/30/37 by the Comptroller of the Currency under date of April 27, 1937, pur- silent to the provisions of Section 30 of the Banking Act of 1933 and l'eleting to continued violations of law and continued unsafe and un`1(3114 Practices by T. O. Morton, President and Director of The Taylor 4tiotal Bank of Campbellsville, Kentucky. Mr. Dreibelbis stated that he of the Opinion that, on the basis of the facts stated in the Colpt roller's certificate, the Board should serve notice on Mr. Morton t° ePPeer and Show cause why he should not be removed from office as President and Director of the national bank. Mr. Dreibelbis submitted lAilth hie memorandum a draft of an order for adoption by the Board and 1(31/Ited out certain legal questions requiring consideration in connection with a decision whether the procedure set forth in the order should be follov„ed. After a discussion of the suggested procedure, during which the loleMbers of the Board indicated that it met with their approval, Mr. Dreibelbis suggested that in adopting an order the Board designate Mr. .(3b14 ' c BallMenn, Assistant Counsel, to act as trial examiner for the 13111'Posee to be set forth in the order. Upon motion by Mr. McKee, the following order was adopted unanimously, with the understanding that as promptly as possible a copy thereof would be served upon Mr. Morton and the directors of the national bank: "J. F. T. O'Connor, Comptroller of the Currency of the U/lited di _ States, being of the opinion that T. O. Morton, as a ' lle ector and officer of The Taylor National Bank of CampVille, Kentucky, has continued to violate laws relating to so slich banking association and has continued unsafe or unast/nd Practices in conducting the business of such banking s"iation after having been warned by the Comptroller of 625 V30/37 -4"the Currency to discontinue such violations and such unsafe or unsound practices; and the said J. F. T. O'Connor, Comptroller of the Currency of the United States, pursuant to the provisions of section 30 of the Banking Act of 1933, having duly certified the facts to the Board of Governors Of the Federal Reserve System; "It is ordered that the said T. 0. Morton be notified to aPpear before the Board to show cause why he should not be l'emoved from office as a director and officer of said bank end that a hearinc7, on such matter as provided by section 30 of the Banking Act of 1933 aforesaid, be held beginning on the 7th day of June, 1937, at 10 o'clock, in the forenoon, the offices of the Board on the premises of the Federal Reserve Bank of St. Louis, at St. Louis, Eissouri. ,, "It is further ordered that, in accordance with section . y of the Banking Act of 1933, notice of such hearing be ;.11, - ven to the said T. O. Morton and to the several directors the said The Taylor National Bank of Campbellsville, Kentucky,bY deliverine: to each of them, as provided in said eti°n, a true cony of this order and a true copy of the aforesaid certificate of J. F. T. O'Connor, Comptroller of the Currency, annexed to the same and made a part of such notice. "It isis further ordered that John C. Baumann, be and he hereby commissioned as an officer of the Board to receive all of the testimony taken in such hearing and to report the ;eme co-mpletely to the Board, including therewith any stateent, argument or brief which may be made or filed in acWith this order. In such capacity the said John C. collmenn shall preside at such hearing and he shall, with all thnvenient speed, take the testimony in this matter and report ase seize, together with such statements, arguments and briefs Bo maY be made or filed in connection with the matter, to the for its consideration and shall have the powers and "les hereinafter specified. alo., "1. He shall preside at the taking of testimony and is r2liorized to adjourn the hearing durinf, the course thereof On time to time as may be necessary for the orderly and `inver4ient taking of the testimony. ttil mill;hall fix the times and places where he will te p%2e's at any adjournments of the hearing, which at .etes shall be within the United States, but not necessarily Place originally designated in this order. den 3. He shall receive all testimony admissible in evihej,? under the rules of law applicable to an administrative Of this kind and unless he deems testimony very clearly 'issible and injurious or confusinr, to the regular progress 626 4/30/37 -5"?f the hearing he shall take the same and return it with his report so it may receive due consideration. If any :411esti0n of evidence should arise not sufficiently covered by the foregoing instructions he shall, upon application in (171ting by any party at interest adversely affected, imme' 41atelY submit the auestion to the Board for instructions. "4. He shall at the expense of the Board employ stenographers to take the testimony and transcribe the same and 2therwise to assist in taking proof and reporting the same. Three copies shall be made of all testimony and proceedings, of which the original and one copy shall be for the use of the Board, and one copy shall be delivered to the said T. 0. Morton. "5. In transmitting the testimony which he has received to the Board he shall also transmit for its consideration any argument, brief or statement, made or filed in connection with the matter which it is hereby Provided may 4 e made or filed at any time within 20 calendar days followg the completion of the taking of testimony; provided rther, that upon written request made at the completion of , t the taking of testimony the said T. 0. Morton may, at a ime to be fixed by the Board present oral argument to the Board at its offices in Washington, District of Columbia. "6. Upon the completion of the taking of testimony, the hearing, for that purpose, shall be closed and except MaY be otherwise expressly directed by the Board no furtiler Proceedings shall be had other than the making or filing 0„arguments, briefs, or statements as permitted by this and the consideration and determination of the matter by uY the Board. "BY order of the Board of Governors of the Federal Reserv eSYstem this 30th day of April, A. D. 1937." g Mr. 7. orri11 reviewed for the information of the members of the 80 ard the 114.-1 -. ,us received on furniture and furnishings for the Board membezos? eectier,the monumental staircase, the Constitution Avenue lobby, trIcl the Private dining rooms in the Board's new building and the disciAssi °xis %hich had been had with the two lowest bidders regarding the T4e,terial tliEt which they proposed to furnish. He said that it was felt "a result of a recorsideration being made by the bidders of the iuiterl el which they will offer, the cost of acceptable furniture and 627 4/30/37 -6Would not exceed 4;565,000 and he recommended that the Person- 1141 C ornittee be authorized to approve the execution of a contract or e°taracts therefor at not to exceed that figure. Upon motion by Mr. Broderick, Mr. Uorrill's recommendation was approved unanimously. There was also a discussion of the bids received on steel equipTilett f or the file roams and steel file cases for various offices in the 4"11411ding. It was stated that equipment meeting the requirements "the sPecifications on which the bids were based would cost in the 11°164°11200d of 4;526,000, depending on the number of units purchased, that an alternate bid submitted by the General Fireproofing Company 444 ell purnishing filing equipment from the General Supply Schedule ttolitted to t16,700. After a discussion the Personnel Committee was authorized to determine which equipment should be purchased. Mr. Davis submitted the recommendation of the Personnel Committee that Mr. R. E. Sherman of El Paso, Texas, be appointed a director of the El Paso branch of the Federal Reserve Bank of Dallas for the unexpired Portion of the three-year term ending December 31, 1939, and moved that the recommendation be approved. Carried unanimously. At this 14 eta point Messrs. Dreibelbis, Cagle and Chase left the meet- consideration was then given to each of the matters hereinafter ed t° and the action stated with respect thereto was taken by the 110Eirci: 628 4/30/37 -7The minutes of the meeting of the Board of Governors of the Federal 7.ceserve System held on April 28, 1937, were approved unanimously. The minutes of the meeting of the Board of Governors of the Fedex1°- Reserve System held on April 29, 1937, were approved and the actions recorded therein were ratified unanimously. Telegrams to Messrs. Kimball and Strater, Secretaries of the 4dere-1- Reserve Banks of New York and Cleveland, respectively, stating the Board approves the establishment without change by the New 17.°11k 13%* on April 29, 1937, and by the Cleveland bank today, of the tete& or discount and purchase in their existing schedules. Approved unanimously. or /cats Letter to Mr. Familton, President of the Federal Reserve Bank 118 City, reading as follows: "This refers to your letter of April 21, advising the ;erd that your directors voted to appoint Mr. D. W. Woolley , YcYur examination department as an Assistant Cashier of ;'l211r bank, effective May 1, 1937, without change in salary. The e Board approves a salary for Mr. Woolley as Assistant 118hier at his present rate of $4,596 per annum for the Period MaY 1 to December 31, 1937. Before assuming his new 11-a bion, Mr. Woolley should, of course, submit his resig-" -°fl as Alternate Assistant Federal Reserve Agent." Approved unanimously. or New Letter to Mr. Rounds, Vice President of the Federal Reserve Bank Yo4c, reading as follows: is made to your letter of April 23 requesthe Board's approval of the continuation of the temporary ' di 46nment of the following employees to the positions ineeted without reduction in their salaries, which are in lug 629 4/3o/37 -8- excess of the maximums provided for the positions occupied: Present Form A Position Name salary Maximum occupied Iohn Snyder Sorting and Listing Clerk, Gov't. Check ,71,620 U,600 Section Franklin Knezek Page and Office Boy, Foreign Information 1,260 1,200 Div. "it is understood that, due to the approval of the revised personnel classification plan of your bank by the Board on April 21, the position occupied by Mr. Snyder is now classified as 'Junior Clerk - B', maximum salary nd that the position occupied by Mr. Knezek is now classiled as 'Messenger - A', maximum salary - 1,200. Accordthe Board approves the continuation of the temporary : asignment of Mr. John Snyder to the position of Junior ulerk _ B, Government Check Section, at his present salary Of $1,620 per annum, which is c20 in excess of the maximum Provided for this position, for a further period of six °11ths from April 16, 1937, and also approves the continuaion of the temporary assignment of Mr. Franklin Knezek to ete Position of Messenger - A, Foreign Information Division, e his present salary of :f1,260 per annum, which is F,6,0 in of the maximum provided for this position, for a period of six months from April 28, 1937." T Zetl Approved unanimously. btv4i M emorandum dated April 28, 1937, from Mr. Smead, Chief of the (111 0f Bank Operations, submitting a letter dated April 17 from 14r• WalA 'en, First Vice President of the Federal Reserve Bank of Rich' which requested approval by the Board of changes in the persontea. class ification plans of the bank end its Baltimore and Charlotte 1111"ehes to provide for the creation of the new position of "Assistant to colaxise_ 1 in the Legal Department at the head office with a maximum c't $3,600, and for a change in the title of the position "Te1eOpe rator" to "Teletype Operator" at the head office and branches 630 4/30/37 -9end a d ecrease in the maximum salary for the position to U,500 per 1111114M* The memorandum stated that Mr. Wyatt, General Counsel, had ad- 718ed that there appeared to be no objection to the creation at the Rich'auond bank of the position of "Assistant to Counsel" and recommended that the proposed changes be approved. Approved unanimously. Letter to Mr. Sargent, Vice President of the Federal Reserve Batik of San Francisco, reading as follows: "This refers to your letter of March 30, 1937, requestadvice as to whether the Board has any objections, lagal o b(Ir therwise, to Mr. L. B. Armstrong, an examiner for your cenk, obtaining a loan from the Occidental Life Insurance ,°mPanY to refinance a real estate loan now held by private -Ildividuals. In raising the question as to whether there 18 anY objection to obtaining the loan, Mr. Armstrong ates that, according to his understanding, the Occidental , fl ra Insurance Company is a wholly owned affiliate of Transft'erica Corporation, and through that corporation is affilA Eltad with the Bank of America National Trust & Savings 'Ilt.ssociation, and the Central Bank of Oakland, a state memr r bank. According to the information in the Board's : : 0 ec)rd 3, however, the life insurance company is a wholly 141ged subsidiary of Transamerica General Corporation, which pn tUrn is a wholly owned subsidiary of Transamerica Corr"ion, and in this respect occupies the same status in 6r°uP as Capital Company and California Lands, Inc., i ' tlleh the Board has previously held were not affiliates of , of America National Trust & Savings Association by ' eason of stock ownership. "The only legal provisions of the Federal Reserve Act restri se cuing loans to examiners, as such, are contained in t„"lon 22(a), and in view of the explicit provisions of section, it would appear that a loan obtained from the ticidantal Life Insurance Company would not be a violawe°11 of such section, even though the insurance company e actuaily an affiliate of a member bank. On the other ,the Board stated in a letter dated April 29, 1933, sr 4251 that it felt that members of the staffs of the Fed11.611 reserve agents engaged in audits and examinations °lad refrain from incurring any indebtedness, directly r 4 631 4/30/37 -10- indirectly, to member banks, their subsidiaries, or affiliates, or otherwise placing themselves in any position Which might result in cuestions being raised as to the indePendence of their judgment or their disinterestedness in 'phe discharge of their responsibilities with respect to such anks under the Federal Reserve Act. "It seems clear that while there is no legal objection to the loan, there is a question as to whether the obtainOf! such a loan would be consonant with the views expressed t!), the Board's letter of April 29, 1933 (1.-7425). However, lifla Board suggests that your bank consider the question in e liFht of all the facts and circumstances involved and 511c)se of the matter in its discretion. Your disposition ul the matter will be satisfactory to the Board." rf Aporoved unanimously. Letter to Remington Rand, Inc., Vlashirwton, D. C., reading as r°1101vs, 0 , "You are hereby notified that the Board of Governors 26 the Federal Reserve System accepts your bid dated April 1937) in the amount of five thousand six hundred seventy" 4 6 dollars (5 675.00) submitted pursuant to the Board's j vitation for bids dated April 20, 1937, for the construe4_t°11, delivery and placing of steel shelving ana furniture tn the buildinp now being constructed for the Board in Tashingt°11, D. C. c0r,„ "Please deliver to the Board a performance bond in acf 'tahoe with the requirements set forth in the invitation or bids.. "Please acknowledge receipt of this letter of notification on the attached carbon copy hereof." Approved unanimously. Letter to Harry Alexander, Inc., Tashington, D. C., reading as --4•01Ars: or "You are hereby notified that the Board of Governors 7 the Federal Reserve System accepts your bid dated April ru2937 in the sum of Seventeen thousand three hundred 130„:;2-five dollars ($17,395.00) submitted pursuant to the in-"ues invitation for bids dated April 21, 1937, includpj,Arlendment No. 1 thereto, for furnishing and installing u button, buzzer and annunciator system and telephone .r:telll outlets in the building being constructed for the --111rd in Washington, D. C. 632 4./30/37 -11- "The Board does not require either of the alternates covered by your bid, and the Board does not increase or decease the quantity of any article pursuant to Sec. 9 of the invitation for bids. "Please deliver to the Board a performance bond and a P€1Yraent bond in accordance with the requirements contained ln Sec. 5 of the invitation for bids. close;Please acknowledge receipt of this letter on the incopy hereof." Approved unanimously. Letter to the DeLuxe Metal Furniture Co., 'arren, Pennsylvania, readi„.. ' IS as follows: "Ior your information there is inclosed a copy of a ' li ettar dated April 30, 1937, accepting your bid for deliverand installing steel shelving in the building bej constructed for the Board in Washington, D. C. The -L Was delivered to your Washington Office and was reeel _c_iPted for on April 30, 1937, as is indicated on the bottom or the inclosed copy." Approved unanimously. Thereupon the meeting adjourned. , rManpro tem. 4,0/
@FedFRASER