The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
492 A, meeting of the Board of Governors of the Federal Reserve System was held in Washington on Wednesday, April 5, 1939, at 11:00 a• m• PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Davis Draper Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman The action stated with respsct to each of the matters hereinafter referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Federal Reserve System held on April 4, 1939, were approved unanimously. Bond, in the amount of $;50,000, executed under date of March 29, 1939, by Elmer F. Fricek as Alternate Assistant Federal Reserve Agent at the Federal Reserve Bank of Cleveland. Approved unanimously. Letter to the board of directors of "The Goodland State Bank in Goodland", Goodland, Kansas, stating that, subject to conditions of membership numbered 1 to 3 contained in the Board's Regulation H, and the following special condition, the Board approves the bank's application for membership in the Federal Reserve System and for the appropriate amount of stock in the Federal Reserve Bank of Kansas City: • 493 4 /39 /5 -2Such bank shall make adequate provision for depreciation in its banking house and furniture and fixtures." "4. Approved unanimously, together with a letter to Mr. Hamilton, President of the Federal Reserve Bank of Kansas City, reading as follows: "The Board of Governors of the Federal Reserve System approves the application of 'The Goodland State Bank in Goodland', Goodland, Kansas, for membership in the Federal Reserve System, subject to the conditions prescribed . in the enclosed letter which you are requested to forward to the Board of Directors of the institution. TWO copies of such letter are also enclosed, one of which is for your files and the other of which you are requested to forward to the Bank Commissioner for the State of Kansas for his information. "As is pointed out in your comments in the presentation memorandum accompanying the bank's application, the usual condition of membership regarding the elimination of estimated losses is not necessary since the losses shown in the report of examination for membership were eliminated at the close of the examination." Letter to Mr. Hitt, lirst Vice President of the Federal Reserve Bank of St. Louis, reading as follows: "Reference is made to your letter of March 25, 1939, relative to the proposed absorption of the Lafayette National Bank & Trust Company of Luxemburg by the Lemay Ferry Bank, Luxemburg, Missouri. "The Board has noted your opinion that in view of the fact that both banks have the same general character of assets and are doing the same kind of business, the transaction would not involve any change in the general character of assets of the Lemay Ferry Bank or broadening in the functions exercised by such bank within the meaning of condition numbered 3 under which the bank was admitted to membership. In the circumstances, the Board likewise does not regard the transaction as coming within 4 /39 /5 -)- "the scope of the aforementioned condition and the approval of the Board to the transaction which relieves an overbanked condition is, therefore, not required." Approved unanimously. Letter to Mr. Young, Vice President of the Federal Reserve Bank of Chicago, reading as follows: "Reference is made to the report of examination of the Citizens State Bank, bheboygan, M.sconsin, as of January 23, 1939, and to your letter of March 15, 1939, with respect to the corrections made of criticized matters shown in the report. "It has been noted that no particular comment was made in the report of examination relative to the corporate stocks and speculative bonds carried as nonbook assets. In the report of examination as of February 15, 1937, considerable criticism was made of the purchase by the bank of corporate stocks and speculative bonds with the proceeds of nonbook assets, and on August 16, 1937, you advised that such stocks and bonds would be eliminated in a few days. A comparison of the nonbook securities shown in the report of January 23, 1939, with those shown in the previous reports indicate that very little progress has been made in disposing of these criticized securities and apparently the bank has failed to comply with the assurances heretofore given with respect to the correction of this matter. "It has been noted also that the bank was again subject to criticism for failure to amortize premiums on securities as required by the Comptroller's regulation issued under the provisions of section 5136 U.S.R.S. This same criticism has been made in the last three reports of examination of the bank despite the fact that the management has repeatedly given assurances that it would comply with the provisions of the Comptroller's regulation. "The investment practices and policies of the management of the bank have been subject to considerable criticism for some time. There appears to be no excuse for the failure to comply with the assurances given with 4 /39 /5 "respect to correction of the violations of the Comptroller's regulation, and such failure and the repeated violations reflect unfavorably on the management. "It has been noted in the current report as well as in Previous reports of ex-rination that the bank has been criticized repeatedly for the lack of organization and proper supervision of its trust department, and it is reported that President Hansen has no sympathy for the fiduciary business. In the bank's letter of March 6, 1939 to the Banking Commission it is stated that arrangements have already been made whereby the board of directors will review once or twice each year all trust investments. However, it is not clear that the proposed review of trust investments will be sufficient to insure proper administration of the department. "The Board feels that the acceptance of trust business creates a responsibility which can only be satisfied if the transactions are carried out efficiently and with the best interests of the beneficiary constantly in mind, and that if a bank is not equipped to handle trust business properly it should not be accepted. One of the fundamental principles in the operation of a trust department, recognized both in the statement of principles of trust institutions approved by the Executive Council of the American Bankers Association and the Board's Regulation F pertaining to the trust powers of national banks, is that the responsibility for the administration of trusts should not be vested in an individual but in a committee composed of capable and experienced officers and directors of the institution. It is suggested, therefore, that you discuss this matter with the management of the bank with a view to bringing the operations of the trust department into conformity with recognized principles of sound fiduciary Practice, and advice as to your success in this respect will be appreciated. "The schedule of banking premises shown in the report of examination includes a property known as the Acker Building which is located across the street from the bank and is reported to have been purchased in 1926 for a future banking site. This property is also included as a part of the banking °remises in the report of condition of the bank as of December 31, 1938. Accordirs: to the instructions for the preparation of reports of condition, banking premises should only include premises 496 4 /39 /5 "actually owned and occupied by the bank and its branches and therefore the Acker property should be reported as other real estate. "In the schedule on page 4 of the report it appears that your examiner has failed to include the common stock Of 500,000 in the total of capital accounts shown for each period." Approved unanimously. Letter to Mr. Swanson, Vice President of the Federal Reserve Bank of Minneapolis, reading as follows: "This refers to your letter of March 21, 1939, and its enclosures, relating to the request by Northwest Bancorporation, Minneapolis, Minnesota, that the Board certify to the Commissioner of Internal Revenue that during 1938 such corporation devoted to the acquisition of readily marketable assets in compliance with the provisions of section 5144 of the Revised Statutes earnings or profits in the amount claimed in its income tax return as a credit pursuant to section 26(d) of the Revenue Act of 1938. "The procedure with respect to claims for such credit is governed by article 26-3 of Regulations 101 of the Bureau of Internal Revenue and follows that prescribed by article 26-3 of Regulations 94 for like claims pursuant to the Revenue Act of 1936. A copy of the pertinent provisions of Regulations 101 is enclosed herewith and it is suggested that such provisions be brought to the attention of Northwest Bancorporation. "As you will note, it is contemplated that any such claim shall be made in the holding company affiliate's tax return and supported by a supplementary statement of facts and that any certification by the Board is to be made when requested by the Commissioner of Internal Revenue subsequent to the filing of the return. The Board has not attempted to prescribe what information must be included in the supplementary statements accompanying the returns in all cases and the additional information which may be required in a particular case if the Board's certification is requested by the Commissioner 497 45 / /39 -6- "will depend upon the facts before the Board when such request is received. "In the circumstances, it does not appear that any action by the Board with respect to this matter is appropriate at this time. No opinion is expressed, of course, concerning the question whether Northwest Bancorporation is entitled to the credit claimed by it." Approved unanimously. Thereupon the meeting adjourned. Assistant Secretary. APProved: Chairman.
@FedFRASER