Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, April 4, 1934, Volume 21, Part 2

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A meeting of the Executive Committee of the Federal Reserve
Board was held in Washington on Wednesday, April 4, 1934, at 3:45
P. m.
PRESENT:

Mr.
Mr.
Er.
Mr.

Black, Governor
James
Thomas
Szymczak

Mr. Morrill, Secretary
Mr. Carpenter, Assistant Secretary
Mr. Bethea, Assistant Secretary
The Comnittee considered and acted upon the following natters:
Telegrams dated April 4, 1934, from Va.. Curtiss, Chairman of
the

Federal Reserve Bank of Boston, and Er. Wood, Chairman of the Fed-

eral Reserve
Bank of St. Louis, both advising that, at meetings of
the
boards of directors today, no changes were made in the banks'
eZiatirig schedules of rates of discount and purchase.
Without objection, noted with approval.
Memorandum dated April 2, 1934, from Mr. Morrill stating that,
ill accordance with the action taken at the meeting of the Board on
laaroh 28,
1934, when Messrs. James and O'Connor were appointed a cam114
ttee to look into the matter of the three employees from the Issue
Cl R
edemption Division of the Board who were detailed to the National
Issue Division of the Comptroller's office, the cornmittee recantleilcles and arrangements have been made to take care of the three emes, as follows:
lass Janet Oliphant, to be returned to the Board's Division
of Issue and Redemptions
*e. Mary Nhite, to be transferred to the Board's Diyision
of Research and Statistics,




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Irs. Irma Smoot, to be taken off the payroll of the Federal
Reserve Board, and transferred to the Office of the
Comptroller of the Currency,
411 of the above changes to be effective as of April 3, 1934.

The

recommendations of the committee were approved by six members of the
Board on April 3, 1934.
Approved.
Telegram dated April 2, 1934, approved by six members of the
80ard, to Ur. Stevens, Federal Reserve Agent at the Federal Reserve
8411k of Chicago, referring to the application of the "Citizens Savings Bank", Gilman, Iowa, for permission to withdraw immediately from
Membership in the Federal Reserve System, and stating that
the Board
/14ives the usual requirement of six months' notice of intention to
Vtthdraw
and that, accordingly, upon surrender of the Federal reserve
bknk stock issued
to the Citizens Savings Bank, the Federal Reserve
441.1c of Chicago is authorized to cancel such stock and make a refund
t
hereon.
Approved.
Letter dated April 3, 1934, approved by six members of the
1304rd, to Mr. O'Connor, Comptroller of the Currency, reading
as fol10083
"In accordance with your recommendation, the Federal Reserve
Board approves a reduction in the common capital stock of the
'American National Bank of Portsmouth', Portsmouth, Virginia,
from $500,000 to $250,000, pursuant to a plan mhich provides that
the bank's capital shall be increased by 15250,000 of preferred
stock to be sold to the Reconstruction Finance Corporation, and
that the released capital shall be credited to a reserve fund to
charge off doubtful assets, all as set forth in your letter of
Idarch 23, 1934."




Approved.

9,-4/4/34

-3..
Letter dated April 3, 1934, approved by six members of the

Board, to Li-. O'Connor, Comptroller of the Currency, reading as follows:
"In accordance with your recommendation, the Federal Reserve Board approves a reduction in the common capital stock of
'The First National Bank of Traer', Traer, Iowa, from $100,000
to $50,000 pursuant tt a plan which provides for a reduction in
surplus from 432,000 to 425,000 and that the released capital
and surplus shall be used to eliminate slow and doubtful assets
totaling approximately 439,735, and that the residuary balance
of the released funds shall be returned to the shareholders, all
as set forth in your memorandum of March 23, 1934."
Approved.
Telegram dated April 2, 1934, approved by six members of the
80.1.1 rd, to Mr. Case, Federal Reserve Agent at the Federal Reserve Bank
of New York, stating that the Board has considered the application of
the "First National of Elmira Corporation", Elmira, New York, for a
11.0t11 g

permit under the authority of section 5144 of the Revised Stat-

Iltes of the United States, as amended, entitling such organization to
ir°te the stock which it owns or controls in the "Southside National
of Elmira", Elmira, New York, and has authorized the issuance of
4 limited permit to the applicant for the following purpose:

"At any time prior to July 1, 1934, to act upon a proposal
to place such bank in voluntary liquidation and to do all things
necessary to effect such liquidation."
tle +-vlegram also authorized the agent to have prepared by counsel for
the
Federal reserve bank, and to issue to the First National of Elmira
eQqloration, a limited voting permit in
accordance with the telegram.
Approved.
In connection with the above there was presented a second




4/4/34

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telegram dated April 2, 1934, approved by six members of the Board,
to Mr. Case, Federal Reserve Agent at the Federal Reserve Bank of
Ilevi York, stating that the Board has considered the application of
the "First National of Elmira Corporation", Elmira, Now York, for a
7°ting permit under the authority of section 5144 of the Revised Statutes of the United States, as amended, entitling such organization to
vote the stock which it owns or controls in "The First National Bank
of Horseheads", Horseheads, New York, and has authorized the issuance
of a limited permit to the applicant for the following purpose:
"At any time prior to June 1, 1934, to act upon a proposal
to increase the capital stock of such bank in the amount of approximately ;325,000 by the issuance of preferred and/Or common
stock or otherwise and to amend the articles of association of
such bank accordingly, provided that such proposal shall be approved by the Comptroller of the Currency."
Tho telegram also authorized the agent to have prepared by counsel for
the Federal reserve bank, and to issue to the First National of Elmira
CerPoration, a limited voting permit in accordance with the telegram.
Approved.
Letter dated April 3, 1934, approved by six members of the
130ard, to kir. Paddock, Deputy Governor of the Federal Reserve Bank
Of

Boston, reading as follows:
"I regret that the pressure of other matters of urgent imPortance arisinp; under the Balking Act of 1933 has prevented an
earlier reply to your letter of October 25, 1933, containing your
14quiry number 36 with reference to the question whether anticiPated acceptance accounts are subject to the provision of Section
9 of the Federal Reserve Act which prohibits the payment of
1-terest upon deposits which are payable on demand. In this conyou inclose a letter received by you from the Industrial
Trust Company of Providence, Rhode Island under date of October
18, 1933.
"There is inclosed herewith a copy of a ruling recently made




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"by the Federal Reserve Board in which a question similar to
that submitted by you is discussed. The information you have
furnished, however, is not sufficient to enable the Board to
determine under which of the categories referred to in the last
Paragraph of the said ruling the situation to which you refer
would fall, and accordingly, the Board cannot advise you at this
time whether anticipated acceptance accounts should be considered deposits within the meaning of the provision of Section 19
of the Federal Reserve Act here in question. It is suggested
that you consider the matter with the advice of counsel and that
You advise the member bank in accordance with your conclusions
unless there is doubt as to the matter and you consider it advisable for the Board to pass on the question. In the latter
event, it will be appreciated if you will submit such information as will be necessary to enable the Board to determine the
question, together with an opinion of your counsel thereon.
"In considering the question, it is suggested that particular consideration be given to the ruling of the Board in regard
to reserves against deposits received by member banks in connection with 'personal loans' (Federal Reserve Bulletin for September, 1931, page 536), and to the Board's rulinr, in regard to
reserves against liabilities resulting from receipt and use of
trust funds (Federal Reserve Bulletin for May, 1922, page 572)."
Approved.
Letter dated April 3, 1934, approved by six members of the
8°41'd, to Messrs. Moorman e: Sterling, Attorneys and Counselors at
Law,

llew York, New York, reading as follows:
"This refers to your letters of August 4, 1933, October 2,
1933, and January 23, 1934, regarding the question whether allowances made by a member bank to a customer in connection with the
discharge of his obligation with respect to a banker's acceptance
constitutes a payment of interest directly or indirectly on a dePosit which is payable on demand in violation of Section 19 of
the Federal Reserve Act as amended.
"You state that, in consideration of the bank's agreeing to
accept time drafts, the customers of the bank agree, expressly
or impliedly, to pay to the bank or its successors or assigns
the amount of each such acceptance on the last business day before its maturity or on demand at any time prior thereto, together
With the amount of the bank's commission and the amount of all
charges and expenses incurred by the bank in connection with the
transaction. You further state that it sometimes happens that
the customer desires to discharge his obligation before the last
business day before the maturity of the acceptance, and that, in




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-6-

"order to encourage such desire, the bank accepts payments at a
discount rate based upon the number of days yet to run until the
maturity, thus making an allowance for the unexpired period durine; which the customer, in the absence of a demand from the bank,
might have retained his funds.
"If the funds Paid to the bank by the customer in such circumstances are not credited to his deposit account on the books
of the bank but are applied imiTdiately to the discharge of his
Obligation to place the bank in funds to retire the acceptances,
lt would seem that such funds do not constitute deposits and that,
therefore, the prohibition upon the payment of interest on deposits payable on demand is not applicable. If, however, the funds
are credited to the customer's deposit account and are not applied
in discharge of the customer's obligation until the date of maturity of the acceptance, it is the view of the Board that a deposit
azises. If such deposit is to be used to discharge the customer's
ocaigation within 30 days or is otherwise payable within 30 days,
it constitutes a demand deposit and an allowance or discount in
connection with such deposit calculated accordinc to the number
Of days remaining before maturity of the acceptance must be considered an indirect payment of interest in violationof the prohibition of Section 19 of the Federal Reserve Act upon the payment
of interest on any deposit which is payable on demand."
4proved.
Letter dated April 3, 1934, approvud by six mellbers of the
13°4rd, to Lr. Austin, Chairman of the Federal Reserve Bank of FhilacielPhia, reading as follows:
"This refers to your letter of Larch 12, 1934, inclosing a
i?opy of a letter from the Ninors National Bank of Valkes-Barre,
...11kes-Barre, Pennsylvania, dated Larch 7, 1934, in regard to the
issuance by the Federal Reserve Board of a special regulation relating to the payment before maturity of Christmas Club accounts.
"If he Christmas Club accounts here in question constitute
t,i.me deposits as defined by the Federal Reserve Board Regulation
C6 such deposits may not lawfully be paid before maturity even
tho I1 no interest is paid thereon. If, on the other hand, such
accounts constitute sav-Ins deposits, as defined in. the Regulation,
such deposits may be Paid only in accordance with the provisions
°f Section VI of the Regulation. The Federal Reserve Board is
not authorized to issue a Regulation authorizing the payment of
such accounts, which are time or savin;s deposits, except in accordance with the provisions of the law.
".itith reference to the suggestion made by the member bank in
-tv) letter that a ruling be issued allowing the making of loans
la necessitous cases on Christmas Club accounts, attention is




933
4/4/34
"Called to the provisions of footnote 7 and footnote 10 of the
Regulation Q, relating to loans by member banks to the owners
Of time and savings deposits. The Board believes that the provisions of the footnotes mentioned are in accordance 'with the
intention of the statute and it would not be possible for the
Board to make exceptions to the requirements prescribed as suggested with respect to Christmas Club accounts."
Approved.
Letter dated April 3, 1934, approved by six members of the
Board, to Honorable Tam ConnAllyi United States Senator, reading as

"In a letter dated February 21, 1934, you requested the
Board's reaction to an inquiry contained in a letter to you from
Woodson, President of The First National Bank of Waco,
taco, Texas, dated February 2, 1934, with respect to the enact11101± of legislation requiring Federal reserve banks to accept
from member banks and to hold in safekeeping securities pledged
by member banks to secure the deposits of State Treasurers of
the various States. The inquiry refers specifically to the refusal of the Federal Reserve Bank of Dallas to accept securities
Pledged to secure deposits of the State Treasurer of the State
of Texas and in a letter dated February 28, 1934, written in rePly to your letter, the Board stated that the natter would be
taken up with the Federal Reserve Bank of Dallas for the purpose
of obtaining a complete statement of the bank's views on the
Tlestion. The Board has new been informed by letter from Yr.
lialsh, Federal Reserve Agent at the Federal Reserve Bank of Dallas, that the bank has declined to act in the manner referred to
;
1 11' Lr. Woodson because of doubts as to the power of the boric
legally to hold securities in safekeeping in such circumstances.
"There is now in preparation by the staff of the Federal
Reserve Board a report on the exercise of safekeeping functions
bY the Federal reserve banks which has reference to the general
situation which prompted Mr. 7ioodson's inquiry, and should a
study of this report when presented convince the Board that the
law with respect to the power of Federal reserve banks to accept
and retain in safekeeping securities pledged by member banks to
secure public deposits should be amended, the Board will, after
Consultation with the Federal reserve banks, take steps to submit
for consideration by Congress a draft of an amendment to the
law
011 this subject."
Approved.
Letter dated April 3, 1934, approved by six members of the




934
4A/34
Board, to Mr. N. C. Patton, Editor, Federal Reserve and Bank Law
Service, Commerce Clearing House, Inc., Chicago, Illinois, reading
O8

follows:
"Receipt is acknowledged of your letter of March 5, 1934,
regarding the question whether a Federal Savings and Loan Association organized under the provisions of the Home Owners' Loan Act
of 1933, may be considered a 'bank' within the meaning of Section
19 of the Federal Reserve Act.
"Section 5 of the Home Owners' Loan Act of 1933 provides
for thc organization of Federal Savings and Loan Associations
'in order to provide local mutual thrift institutions in which
people may invest their flInds and in order to provide for the
financing of homes.' Such associations are authorized to raise
their capital 'only in the form of payments on such shares as
are authorized in their charter, -which shares maybe retired as
is therein provided' and to lend their funds 'only on the security of their shares or on the security of first liens upon homes
or combination of homes and business property within fifty miles
of their home office.' They are expressly prohibited from accepting deposits and from issuing certificates of indebtedness
except for such borrowed money as may be authorized by regulations of the Federal Home Loan Bank Board.
"In the circumstances, the Federal Reserve Board is of the
()Pinion that Federal Savings and Loan Associations are not to be
considered banks within the moaning of those provisions of Seciom
of the Federal Reserve Act thich relate to the computation of reserves."
Approved.
Telegram dated Aprll 3, 1934, approved by six members of the

kard, to Mr. Wood, Federal Reserve Agent at the Federal Reserve Bank
Ofb

St. Louis, reading as follows:
"Your letter March 28 relating to right of Union Planters
lational Dank and Trust Company of Lien-phis, Tennessee, to pay
Interest on deposits of funds of City of Memphis, which are payable on demand. It appears that Chapter 338 of Tennessee Private
Acts for 1917 confers upon Board of Commissioners of City of hemPhis merely permissive authority to provide in contracts for payment of interest on deposits of City of Memphis and Board thereore is of opinion that this statute does not require payment of
interest with respect to such funds within meaning of Section 19
Of Federal Reserve Act as amended."




Approved.

4

935
0./34
Letter dated April 3, 1934, approved by six members of the
Board, to jr. C. W. Barnett, Arknnsas Dry Goods Company, Batesville,
Arkansas, reading as follows:
"This refers to your letter of March 10, 1934, addressed to
the Comptroller of the Currency, in which you request to be advised whether, under the Banking Act of 1933, the Arkansas Dry
Goods Company, Batesville, Arkansas, may borrow its funds, up to
the legal limit, from the Citizens Bank and Trust Company of the
same place.
"It is assumed that the Arkansas Dry Goods Company is not
an affiliate or a holding company affiliate of the Citizens Bank
and Trust Company, and if that assumption is correct, it does
not appear that any of the provisions of the Banking Act of 1933
would prohibit the Company from borrowing funds for seasonal requirements from the Citizens Bank and Trust Company within the
limits permitted by law. For your information, there is inclosed
herewith a copy of the Banking Act of 1933 and your attention is
directed particularly to Section 12 (relating to loans and extensions of credit to executive officers of nenber banks), to Section
13 (relating to transactions between a member bank and its affiliates), and to Section 14 (relating to transactions between a member bank and any corporation holding the premises of the bank)."
Approved.
Letter dated April 2, 1934, approved by five members of the
13°6-rd, to Ijr. McClure, Federal Reserve
Agent at the Federal Reserve
Bezik
of Kansas City, reading as follows:
"In jr. IcAdams' letter of January 25 it was stated with resPect to the reports of affiliates of the International Trust
Company, Denver, Colorado, as of December 30, 1933, that the member bank contemplated publishing these reports at the time of publication of the next reports submitted to the Colorado Banking
Department, the circumstances being that the Colorado Banking Department had made a call as of November 25, 1933, but no call
coincident with the Board's call of December 30, 1933. It was
also stated that other State members in Colorado had published
reports of their affiliates as submitted in response to the
Board's call of December 30.
"Our understanding from Mr. McAdams' letter of January 25,
and from previous reports, is that the Colorado Banking DepartMent issued a call coincident with the Board's call of June 30,
1933, that it issued no call coincident with the Board's call of
October 25, 1933, and no call coincident with the Board's call




936
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"Of December 30, 1933, the only call by State authorities since
June 50, 1933, being a call as of November 25, 1933, which of
course was not coincident with any call by the Board.
"Under these circumstances the reports of affiliates sulmitted to the Board as of June 30, 1933, and October 25, 1933,
by State member banks in Colorado should have been published,
and our records show that they were; but the reports submitted
as of December 30, 1933, need not have been published, unless
State authorities made a call between December 30, 1933, and
Larch 5, 1934, the date of the current call by the Board.
"In the last paragraph of Yr. MaAdams' letter of January
25 the question is asked whether reports of affiliates which
mere published subsequent to the Board's call of December 30
should be republished later at the time reports of condition
mere submitted by the banks concerned to the Colorado Banking
Department. In the absence of information to the contrary it is
assumed that there was no call by State authorities between Decomber 30 and March 5, but if there were such a call republication of reports already published under the circumstances described in Er. YcAdams' letter mould not ordinarily be required.
If there were no call by State authorities between December 30
and March 5 the question of publication of the December 30, 1933,
affiliates' reports is of course settled by
Board's current
call as of Vnrch 5."
Approved.
Letter dated April 3, 1934, approved by six members of the
80ard, to /Jr. Hermann Frederick Clarke, Boston, Yassachusetts, reading
as
follows:
"The Federal Reserve Board has given consideration to your
aPplication under Section 32 of the Banking Act of 1933 for a
Permit to serve at the same time as director of the State Street
Trust Company and as a partner in the firm of Estabrook 6: Company,
a dealer in securities, both of Boston, Massachusetts.
"The Federal Reserve Board has reached the conclusion that
was the intent of the Congress in enacting Section 32 to ternanate all relationships of certain types between member banks and
dealers in securities, apparently because it felt that such relationships might tend to influence the banks' credit and investment
P°1icies and their advice to their correspondent banks and other
customers respecting investments in a manner 'which the Congress
deemed to be incompatible with the public interest. The Board accordingly feels that it may not properly grant permits authorizing
relationships which are actually of the kind referred to in that
section and that its authority to issue permits should be exercised




937
4/4/34

-11-

'only in exceptional cases; for example, those which are included within the literal terms of the statute but which are
actually of a kind different from those at which its provisions
were directed.
"It appears that Estabrook
Company is primarily engaged
in the underwriting, purchasing, and selling of securities and
that, therefore, the relationship covered by your application
Is within the class which that section was designed to terminate.
Accordingly, the Board is unable to find that it would not be
incompatible with the public interest as declared by the Conxecs
to grant your application, even though nothing has been called
to its attention which would reflect in any degree upon your desirability as director of the bank, except that the relationship
covered by your application is within the prohibitions of Section
32.
"In the event you desire to submit further facts or arr:uifients in support of your application, the board is prepared to
give them careful consideration. however, any such additional
facts or arguments should be submitted, in writing, through the
ederal Reserve A.7ent at the Federal Reserve Dank of Boston."
Approved.
Letter dated April 3, 1930x, approved by six merbers of the
Board, to irx.
Qs

1... Penrose Hallowell, Boston, L:assachusetts, reeding

f011OWS:

"The Federal Reserve Board has given consideration to your
application under Section 32 of the Banking Act of 1933 for a
Permit to serve at the same time as director of The Yerchants
hational Bank of Boston, and as officer of Lee, HinGinson Corporation, a dealer in securities, both of Boston, I:assachusetts.
"The Federal Reserve Board has reached the conclusion that
it was the intent of the Congress in enacting Section 32 to terminate all relationships of certain types between menber banks
and dealers in securities, apparently because it felt that such
relationships might
tend to influence the banks' credit and investment policies and their advice to their correspondent banks
alid other customers respecting investments in a manner which
the
Congress deemed to be incompatible with the
public interest. The
board accordingly feels that it may not properly groat permits
!
,uthorizini; relationships which are actually of the kind referred
0 in that section and that its authority to issue permits should
be exercised only in exceptional cases; for example, those which
are iLeluded within the literal terms of the statute but
which
arO actually of a kind different from those at which its
provilcns were directed.




938
4/4/3o.,

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"It appears that Lee, Higginson CorporLtion is primarily
engaged in the underwriting and distributing of securities and
that, therefore, the relationship covered by your application
is within the class which that section was designed to terminate.
Accordingly, the Board is unable to find that it would not be
incompatible with the public interest as declared by the Congress
130 grant your appliccition, even though nothing has been called to
its attention which would reflect in any degree upon your desirability as a director of the bank, except that the relationship
covered by your application is within the prohibitions of Section
32.
Company is in"The Board understands that Lee, Higginson
active and that it does not contemplate any now business, and
will confine its activities to the liquidation of its assets.
"AZ is indicated by the footnote 1 of the Federal Reserve
Board's Regulation R, Section 32 has reference only to the business presently transacted by the organization in question and not
to the business which may have been transacted by it in the past.
Although it is not entirely clear from your application are accompanying papers that transactions may be involved in the liouidation of the assets held by bee, iligginson e: Company, it would appear that, if such liquidation involves merely the sale of those
assets and does not involve the engaging in any new business in
connection with such liouidation, Section 32 mould not be applicable
to your service as a partner therein.
"In the event that you desire to submit further facts or arguments in support of your application, the board is prepared to
Give then careful consideration. However, any such addi-donal
facts cr arguments should be submitted as promptly as possible,
in writing, through the Federal .Heserve Agent.
"Your attention is called to the fact that Section 8A of the
Clayton Act makes it unlawful for any director, officer, or emPloyee of any bank, banking association, or trust company ore:enized
or operating under the la= of the United States to serve at the
StIre tine as a director, officer, employee, or partner of any orP;anization (oilier than a mutual savings bank) making loans secured
by stock or bond collateral other than to its ern subsidiaries.
ihe Board is authorized to issue permits under certain circumstances covering relationships of the kinds described in that section. However, the provision of Section 8 which authorizes the
board to issue permits refers only to bankinT, institutions of certain classes, and the board is, therefore, without authority to
issue permits involving relationships between national banks and
ore;anizations which are not banking institutions of the classes
referred to. Therefore, if Lee, Higginson Corporation makes
loans secured by stock or bond collateral, whether in connection
l'ath the carrying of margin accounts or otherwise, and if it is
llot a banking institution of one of the kinds referred to in Section 8, the Board mould be without authority to issue a permit




939
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-13-

under the provisions of the Clayton Act. In such a case, it
muld serve no useful purpose for it to issue a permit under the
provisions of Section 32 of the Banking Act of 1933, since such
a permit mould not have the effect of making the prohibitions
Of Section CA of the Clayton Act inapplicable to the service in
question."
Approved.
Letter dated April 3, 193-1, approvcd by six menbers of the
Board, to Mr. John j. IICKeon, raw Haven, Connecticut, reading as
follous
"The Federal Reserve Board has given consideration to your
application under Section 32 of the Banking Act of 1933 for a
Permit to serve at the same time as director of the First I;atienal
Bank and Trust Company of New Haven, and as partner in the firm
Of Chas. V. Scranton & Company, a dealer in securities, both of
140m- haven, Connecticut.
"The Yederal Reserve Board has reached the conclusion that
it was the intent of the Congress in enacting Section 32 to terminate all relationships of certain types between member banks and
eealers in securities, apparently because it felt that such relationships might tend to influence the banks' credit and investment
Policies and their advice to their correspondent banks and other
customers respectin investments in a mnner which the Congress
deemed to be incompatible with the public interest. The Board accordinrjy feels that it may not properly grant permits authorizing
relationships which are actually of the kind referred to in that
section, and that its authority to issue permits should be exercised only in exceptional cases; for example, those which are included within the literal terms of the statute but which are actually of a kind different from those at which its provisions were
directed.
It appears that Chas. '6. ScranLon c•: Company is primarily enCaged in underwriting and dealirg in securities, and that therefore, the relationship covered by your application is within the
Class which that section was designed to terminate. Accordingly,
the Board is unable to find that it would not be incompatible with
the public interest as declared by the Con-ress to grant your apPlieation, even though nothing has been called to its attention
14hich would reflect in any degree upon your desirability as a diroctor of the bank, except that the relationship covered by your
aPPlication is .within the prohibitions of Section 32.
"In the event that you desire to submit further facts or arNments in support of your application, the Board is prepared to
give them careful consideration. However, any such additional




4/4/34
facts or argumems should be submitted as promptly as possible,
in writing, throurh the Federal Reserve Agent.
Your attention is called to the fact that Section 8A of
the Clayton Act makes it unlawful for any director, officer, or
employee of any bank, banking association, or trust company organized or oporatin- under the laws of the United States to serve
at the same time as a director, officer, employee, or partner of
any organization other than a mutual savins bank) making loans
secured by stock or bond collateral other than to its own subsidiuries. The Beard is authorized to issue permits under certain
circumstances coverin-; relationships of the kinds described in
that section. However, the provision of Section 8 which authorizes the Board to issue permits refers only to banking institutions of certain classes, and the Board, is, therefore, without
authority to issue permits involving relationships between national banks and organizations which are not banking institutions
of the classes referred to. Therefore, if Chas. i. Scranton &
Company makes loans secured by stock or bond collateral, wiether
i i connection with the carrying of margin accounts or otherwise,
and if it is not a banking institution of one of the kinds referred
to in Section 8, the Board tould be without authority to issue a
Permit under the provisions of the Clayton Act. In such a case,
it would serve no useful purpose for it to issue a permit under
Che provisions of Section 32 of the Banking Act of 19:53, since
such a permit would not have the effect of making the prohilitions
of Section 8A of the Clayton Act inapplicable to the service in
question."
Approved.
Letter dated April 3, 1934, approved by six members of the
,
IO 1.Ir.

Lewis H. Parsons, Philadelphia, Pennsylvania, reading

'43 follows;
"The Federal heserve Board has given consideration to your
application under Section 32 of the Banking Act of 1933 for a
Permit to serve at the same time as a director of Tradesmens haOil Bank and Trust co. and as a partner in the firm of Graham,
Parsons & Co., both of Philadelphia, Pennsylvania.
"The Federal Reserve Board has reached the conclusion that
it was the intent of the Congress in enacting Section 32 to terrlinate all relationships of certain types between member banks
and dealers in securities, apparently because it felt that such
relationships might tend to influence the banks' credit and investment policies and their advice to their correspondent banks
and other customers respecting investments in a manner which the
Congress doomed to be incompatible with the public interest. The
Board accordin-ly feels that it may not properly -rfnt permits




941
44

4/4/34

p

authorizing relationships which are actually of the kind referred to in that section, and that its authority to issue permits should be exercised only in exceptional cases; for example,
those which are included within the literal terms of the statute but which are actually of a kind different from those at
which its provisions were directed.
"It appears that Graham, Parsons (2:
, Co. is engaged in the
underwriting, purchasing, and selling of securities and that
therefore the relationship covered by your application is within
the class which that section was designed to terminate. Accordingly, the Board is unable to find that it would not be incompatible with the public interest as declared by the Congress to
Brent your application, even though nothing has been called to
its attention which would reflect in any degree upon your desirability as a director of the bank, except that the relationship
covered by your application is within the prohibitions of Section
32.
"In the event that you desire to submit further facts or arguments in support of your application, the Board is prepared to
give them careful consideration. However, any such additional
facts or arguments should be submitted as promptly as possible,
in writing, through the Federal Reserve Agent."
Approved.
Letter dated April 3, 1934, approved by six members of the
13ce•rds to Mr. Alfred Hoel, President of the Western National Bank,
13/11uth: Minnesota, reading as follows:
"Receipt is acknowledged of your letter of lat.rch 19, 1954,
in which you ask whether an individual, who is licensed to act as
a broker and who is an executive officer of a national bank, may
act as broker for customers of the bank in connection with the
Purchase and sale of securities, in view of the provisions of
Section 32 of the Banking Act of 1933.
'The applicable portion of Section 32 is as follows: 'MD
officer or director of any member bank shall be an officer, director, or manager of any corporation, partnership, or unincorporated association engaged primarily in the business of purchasing, selling, or negotiating securities'. Since the statute refers only to an 'officer, director, or manager' of an organization
of the kind described, the mere fact that an officer or director
Of a member bank, who is not connected with any organization of
the kind described in Section 32, acts as broker in his individual
capacity would not make that section applicable to him. In this
connection, your attention is called to the Federal Reserve Bulletin for December, 1933, pages 770 - 771.
"The question whether an individual, who is licensed to act




942
4/4/34

-16-

"as broker and who is an ex.)cutivo officer of a member bank,
may appoini, an agent or agents to act for him, would appear to
be a question depending upon local law and it is assumed that
you do not desire a ruling by the Federal Reserve Board on this
question."
Approved.
Letters dated April 3, 1934, approved by six members of the
44rd, to applicants for permits under the Clayton Act, advising of
4PProval of their applications as follows:
Li-. R. L. Gallaher, for permission to servo at the same time as
a director and officer of the First State Bank, Garyville, Tennessee, end as a director and officer of The First National Bank
of Coal Creek, Coal Creek, Tennessee.
Mr. Y.. O. Grangaard, for permission to serve at the same time as
au officer of the First National Bank and Trust Company of Llinneapolis, Minneapolis, linnesoba, as a director and officer of
The Security National Bank of illmar, Wilimar, Minnesota, and
as a director of the Federal Reserve Bank of Minneapolis, Minneapolis, Iinnesota.
W. h. Dressler, for permission to servo at the same time as
a director and officer of the Stock Yards National Bank of South
Omaha, Omaha, Nebraska, and as a director of the South Omaha
Savings Bank, Omaha, Nebraska.
Jas. B. Owen, for permission to serve at the same time as a
director and officer of the Stock Yards National Bank of South
Omaha, Omaha, Nebraska, and as a director of the South Omaha Savings Bank, Omaha, Nebraska.
Mr. W. A. Savtell, for permission to servo at the sane time as a
director and officer of the Stock Yards National Bank of South
Omaha, Omaha, Nebraska, and as a director of the South Omaha
Savin73 Bank, Omaha, Nebraska.
lipproved.
There wore then presented the following applications for orig&lug

or additional stock, or for the surrender of stock, of Federal

l'eeerve banks:




043
4/4/34

-17-

lications for ORIGINAL Stock:
bistrict No. 4.
First rational Bank in Charleroi, Charleroi
:
Pennsylvania
District
No. 11.
First Eational Bank in Groveton, Groveton,
Texas
4s1ze11 Lational Bank, Haskell, Texas

Allalaltions for ADDITIONAL Stock:
111/1.41/1c_t
1.
No. 7.
The InjgGia-TZTIonal Bank of Indianapolis:
Indianapolis,
Indiana
The W
ashiiiF.TZ-National Bank of Ellensburg:
Ellensburg, Washington
The
Commercial Bank of Spanish Fork, Spanish
Pork, Utah

Shares

72

72

66
33
Total

99
171

150

150

5
6
Total

11
161

84

84

pi
strict No. S.
146 First 1ati3na1 Bank of Wilsonville,
Wilsonville, Illinois

18

18

bistrict No, 10.
The
Lyons iational Bank, Lyons, Kansas

36

36

33

33

A 1;

h
Cations for SURRENDER of Stock:
4Z.1..q.E.LN0*
3
'
the FirSi
-I;TI-O7nal Bank of Hegins, Hegins,
Pennsylvania

ne,Gougor National Bank of Robstown, Robstown:
xexas
k
strict No. 12.
he irst National Bank of
Tonasket: Tonasket,
Washington

29
Total

29
200

Approved.
Thereupon the meeting adjourned.

ecretar.
.

411131'0Ved:




Governor