Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, April 8, 1935, Volume 22, Part 2

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851
A meeting of the Federal Reserve Board was held in Washington
(311 Monday,
April 3, 1935, at 11:30 a. m.
PRESENT:

Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Eccles, Governor
Thomas, Vice Governor
Hamlin
Miller
James
Szymczak

Mr. Morrill, Secretary
Mr. Bethea, Assistant Secretary
Mr. Carpenter, Assistant Secretary
The Board acted
upon the following matters:
Letter dated April 4, 1935, from Mr. Sproul, Secretary of the
Feder
,
tu Reserve
Bank of New York, and telegrams dated April 4 from Mr.
MeAdnSecretary of the Federal Reserve Bank of Kansas City, and Mr.
') Acting

Assistant Federal Reserve Agent at the Federal Reserve

Of San Francisco, all advising that, at meetings of the boards of
Ilrectors on
that date, no changes were made in the banks' existing
Ched
'4.4-es of rates of discount and purchase.
Without objection, noted with approval.
Telegram to Mr. Austin, Chairman of the Federal Reserve Bank of
Philadel
Phial reading as follows:
ita
S
4
il
at7 April 5. Board approves for your bank, effective
1 minimum rate of 1% and maximum rate of 2% per
Z--'14on commitments to make industrial advances; actual rate
80
t, be charged to
depend on length of commitment and circumallees.n
Approved.
the a

orandum dated March 28, 1935, from Mr. Morrill, recommending

PP°intment of Miss Helen Ramisch as a stenographer in the Secretary's
"ee) With

Salary at the rate of $1,500 per annum, effective as of the




852
'OYU

—2—

date upon which she enters upon the performance of her duties after
heirixig passed a satisfactory physical examination.
Approved.
Memorandum dated April 1, 1935, from the Committee on Salaries
end FicPenditures, submitting a letter dated March 26 from Mr.
17"Lington, Deputy Governor of the Federal Reserve Bank of Kansas City,
which
requested approval of a revision of the bank's personnel classi—
Iti°n plan to cover a change in the title of a position in the
411c11:ting Department from "General Clerk" to "Supervisor", and a change
the de
scriPtion of work shown for the Position of "Assistant Shipping
l'elle
"in the Currency and Coin Department. The memorandum stated that
the above changes
were made in accordance with the suggestions contained
14 the
Board's letter of March 21, 1935, and that the Committee recom—
Merld8
that they be
approved.
Approved.
Letter to Mr. Stevens, Federal Reserve Agent at the Federal Re—
a'rlTe' Bank of
Chicago, reading as follows:
"This refers to Mr. Young's letter of March 15, 1935,
mitting the application of the 'First National Bank of
it
Niles, Michigan, for permission to act as trustee.
$104aa been observed that this bank has a capital of
tha2,000 and a surplus of $10,578, and it is understood
po u Niles, the place in which the bank is located, has a
Pulation
of approximately 11,300 people.
the FA you know, under the provisions of section 11(k) of
is Federal
Reserve Act, the Board is not authorized to
whfue a permit to exercise trust powers to a national bank
et ch has a capital and surplus less than the capital and
surin-ls required by State law of State institutions exercising
co-" Powers. In this connection, it has been noted that the
thlaT2a1 for your bank has stated on the beck of Form 61(a)
lR State bank, trust company, or other corporation

Z




853
s
-3"'doing business in the city' in which the First National
Bank of Niles is located is required under the State law to
have a capital
of 1$200,000 for full trust powers' but that
he knows
of no legal reason why the permit for which the
First National Bank of Niles has applied may not be granted
in view of the fact that the 'Commissioner of Banking may
grant limited trust powers to State Banks with capital less
than minimum amount required for granting full trust powers'.
"It is understood from the latest laws of the State of
Michigan which the Board has among its records (Act No. 66,
P. A. 1929, sec.
1; Senate Bill No. 4, Fifty-Seventh
Legislature, Extra Session of 1933) that the Commissioner of
13.!a:lking of the State of Michigan may permit State banks
:
1111 !
x have the amount of capital and surplus required for
7ganization to act as executors and administrators of
estate of deceased persons and as guardians of the persons
and estates
of minors and incompetent persons. It is understood also that Michigan trust companies, which compete to
!?me extent with national banks, may act as trustee and in
all of the
other fiduciary capacities described in section
h ‘k) of the Federal Reserve Act when such trust companies
an amount of capital and surplus equal to that required
for
"
-...or their organization (Act No. 67, P. A. 1929, sec. 1, and
°ec. 22, as amended by Act No. 238, approved July 10, 1933).
"In the circumstances, it appears that the Board is
authorized
to grant only the powers of executor, administrato
r, guardian of estates and committee of estates of
to a national bank located in Michigan which has
thet capital and surplus required for the organization of a
se
in !'e bank in
the same place and to grant full trust powers,
e'uding the power to act as trustee, to such a national
bank which
has the capital and surplus required for the
a
vrganization of a trust company similarly located. It
P_Pears from the laws referred to above that for the pur,
‘
tiVes of organization a State bank in a place the size of
is required to have a capital of $50,000 and 'a
truPlus equal to twenty per cent of its capital' and that a
ea Tt company similarly located is required to have a
tal of $130,000 and 'a surplus equal to twenty per cent
its
capital'.
ealt,_ "Accordingly,
it appears that the Board does not have
Rilfl°ritY to grant permission to the First National Bank of
exicles to act as trustee with its present amount of capital
mat4surP1us and unless, upon a further consideration of the
your Counsel feels that State institutions with a
and surplus equal to that of the First National

t




854
4/8/35
-Li"Bank of Niles are authorized to act as trustee, you ale requested to advise the bank of the Board's position. Of
Course, if the bank should increase its capital and surplus
to the amount required for the organize-Lion of a trust
°mPany in the same place, the Board will be glad to give
.,urther consideration to the question whether it should be
granted permission to act as trustee.n
Approved.
Letter dated April 6, 1935, approved by five members of the
Board

to the "Merchants National Bank", Hillsboro, Ohio, reading as
follows:
"This refers to the resolution adopted on May 3, 1933,
by the board of
directors of your bank signifying the bank's
to surrender its right to exercise trust powers which
ave been granted to it by the Federal Reserve Board.
h0s"The Feder-1 Reserve Board understands that your bank
been discharged or otherwise properly relieved in
;cordance with the law of all of its duties as
fiducary.,ne
Board, therefore, has issued a formal certificate
to your
'ank csrtiryinp- that it is no longer authorized to exercise
any of
the fiduciary powers covered by the provisions of
ection
11(k) of the Federal Reserve Act, as amended. This
certificate
is inclosed herewith.
'In this connection, your attention is called to the
fact tht,
under the provisions of section 11(k) of the Fed17:al Reserve Act, as amended, when such a certificate has
srn issued by the Federal Reserve Board to a national bank,
oph bank (1) shall
no longer be subject to the provisions
ti section 11(k) of the Federal Reserve Act or the regula(, ns of the Federal Reserve Board made pursuant thereto,
1;.1 shall be entitled to have returned to it any securities
4,1 11 it may have deposited with the State or similar
ar-iflorities for the protection of private or court trusts,
shall not exercise any of the powers covered by
:
p etlon 11k(
, 1 of the Federal Reserve Act except with the
rraission of the Federal Reserve Board."

N

Approved.
84414

Letter to Mr. Case, Federal Reserve Agent at the Federal Reserve
°f 14ew York, reading as follos:




855

-5“Reference is made to the report of examination of
Fidelity Union Trust Company', Newark, New Jersey, as at
December is,
1954, your analysis thereof and the copies of
correspondPnce with the bank in connection therewith which
You
furnished.
"While the condition of the bank appears to have been
much improved through the comnlction of its program for
rehabilitation, large loans to and investments in
the
obligations of affiliates and directors' interests,
rge actual and potential holdings of other real estate and
the danger
of adverse decisions in connection with the legal
etiens pending with reference to certain trusts, arising
largely
from self dealing in the past, remain a problem and
6nould receive the unremittin attention of the management.
g
assumed that you are continuing to keep in close touch
,
71-ta the situation and will keep the Board advised as to
Llevelopments.
"Your corresnondence with reference to the payment of
interest on deeosits in violation of the requirements of
.
1t1
gulation Q has been noted. Please advise the Board as to
21e steps taken by the bank to conform to the statutory
Provisions
and the requirements of Regulation Q with respect
the payment of interest on deposits.
"Pleaoe advise, also, as to what action has been taken
With re,
denre,
,pect to the elimination of the estimated losses and
• -ciation in securities as shown in the report of examinatlon.”

Approved.
tomr.
Yorir

Letter dated April 5, 1955, approved by four members of the Board,
Case, Federal
Reserve Agent at the Federal Reserve Bank of New

'
l eading as follows:
re, "This refers to Mr. Dillistin's letter of March 27, 1955
aci llsdinc-r the Board's letter of March 21, 1955 (X-9157) which
you of the amended authorization under Regulation Q by
Which
note1
.1 member banks were permitted to pay interest at a rate
oni in excess of 7 per cent per annum on time deposits payable
,
r at offices of ;member banks located in the Republic of
che
-al and the British Crown Colony of Hong Kong.
Qs t
Dilli tinpoints out that there may be some question
bal. 1"hether or not thecities of Harbin, Mukden, and
'
l en are loceted 'dthin the 'Republic of China', and he asks




856
4/8/35
—6—
"whether this amended authorization permits the payment of
interest at this higher rate upon time deposits which are
Payable only at the offices of The National City Bank of New
York Which
are located in those cities.
"It may be stated for your information that the letters
Of February 21, 1935 and of March 5, 1955 by which The
National City Bank of New York requested this change in the
horization did
not mention the question suggested by Mr.
,
11istin, and merely requested permission to pay the higher
1;
:'e
1
on time deposits payable at offices in 'China and in
the British
Crown Colony of Honp:
"The Board understands that the terms 'China' and
'Republic of
China' may be used interchangeably. While the
Pestion whether the cities of Harbin and Mukden located in
re
territory known as Manchukuo, and the city of Dairen
?ated in the territory known as KwanE,rtunr, are situated in
lna or the Republic of China may not be entirely free from
„(3ubt, the Board feels that for the purposes of its amended
1Tthorization referred to in its letter of March 21, 1935,
rre branches
of The National City Bank in these three cities
Y be regarded as located in China or the Republic of China
:dy accordingly,
that interest may be paid at a rate not in
ateess °f 7 per cent per annum on time deposits payable only
tr„„_8.11chbranches. It
is suggested that you so advise The
°11"
-°nal City Bank of New York."

r

2

r

Approved.
Teleram dated April 5, 1935, approved by five members of the
11°e`r.cly

t0

Louis

"m. Wood, Federal Reserve Agent at the Federal Reserve Bank of
y reading as
follows:

pr ase transmit following message to Mr. Walter W. Smith:,
wilident, Federal Advisory Council: 'Mr. Lichtenstein left
me on Tuesday report of Federal Advisory Council on
11,
)rl ing Act of 1935. In accordance with procedure agreed
coT 8t meeting on November 20, 1934, Board feels that
veil;:leil should meet i_th Board in Washington on date con—
;
c lent to Council to discuss report before it is filed with
th'zillittees or given any publicity. It was also suggested
Coat such meetim: iht be in lieu of regular meeting of
Of
in May. Mr. Lichtenstein has been advised orally
,,oard's action.'"




Approved.

857
4/8/35
—7—
Letter to Mr. Peyton, Chairman of the Federal Reserve Bank of

Minne
aPolis, reading as follows:
"Receipt is acknowledged of your letter of April 1
in regard
to the decision of your board of directors that
it vould
be advisable to hold one meeting of the board of
directors
each year at the Helena Branch. While the Board
.t
77” aware of the attitude of your board of directors in
1.1s regard, through the receipt of copies of the minutes
2L the
meetins at which this matter was discussed, the
Board was
not aware that it was expected to take any action
Upon the
Board hasmatter. However, inview of your letter, the
requested me to advise you that it has no objection
to the
proposed plan."
Approved.
Letter dated April 5, 1935, approved by five members of the
Board
'to the chairmen of all Federal reserve banks except Atlanta and
reading as follows:
"Under date of October Zl, 1934, the Federal Reserve
Do-c'rd
addressed a letter to you (X-9004) with regard to the
the operation of the Agency of the Federal
Reserve
,"serve
Bank of Atlanta at Havana, Cuba. In that letter it
as
Stated that the Board indorsed the suggestion of the
0 -aeral Reserve Bank of Atlanta that the Agency be hereafter
rperated by that
bank for the account of the twelve Federal
ne
,:3erve banks and that the Board hed under consideration the
t,cessary details for that purpose. Subsequently you advised
Federal Reserve Board that your board of directors had
efsapproved
participation in the operation of the Havana Agency
suP;gested in the Board's letter.
the "There has now been prepared a form of agreement between
re, Federal Reserve Bank of Atlanta and the other Federal
ouZerve banks, copies
of which are inclosed, which carries
fe
, he suggstion
Suggestion contained in the Board's letter above re—
to and agreed to by your board of directors. The
er-eement in the form inclosed has been approved by the Fed—
ifal Reserve Board and its counsel and it will be appreciated
posYT1 will have the same executed by your bank as soon as
if sible, after submittinc it again to your board of directors
Y°1-1 feel that such resubmission is necessary.




4/8/35
-8"Please execute the agreement in triplicate, sending one
of the executed agreements to the Federal Reserve Board for
its records and
the other to to the Federal Reserve Bank of
Atlanta, which will execute one of them and return it to you.
A
"Effective as of the date upon which the operation of the
4gency at Havana, Cuba, may commence under the terms of the
reemnnt hereinbefore mentioned, the Federal Reserve Board
erebY gives its consent and approval for any Federal reserve
_an",, to carry on and conduct through such Havana Agency any
-ransaction authorized under the terms of the resolutions of
ae Federal
Reserve Board adopted January 271 19271 and
n nuarY 3, 1929, relating to the scope of the functions of the
4 avana Agency, copies of which are also inclosed for your
.Ln
formation.
"It is understood that the operation of the Agency at
Havana, Cuba, under the terms of the agreement before mentioned
Commence with the opening of business on the first day of
the month
following the month in which the agreement has been
executed by all of the Federal reserve banks.
The Fedorrl Reserve Board exoressly reserves the right
to
revoke at any time its approval of the continuance of the
110Y at Havana, Cuba, under the terms of the agreement hereefore mentioned and to require the discontinuance of such
agency.n

r

p

Approved, together with a letter also dated
April 51 19351 and approved by five members of
the Board, to Mr. Peyton, Chairmen of the Federal
Reserve Bank of Minneapolis, reading as follows:

ad

"Und ,-,r date of October'01, 19Z4, the Federal Reserve Board
,,,clressed a letter to you (X-9004) with regard to the continuee of the
operation of the Agency of the Federal Reserve
of Atlanta et Havana, Cuba. In that letter it was stated
that
Be the Board indorsed the suggestion of the Federal Reserve
10 11 of Atlanta that the Agency be hereafter operated by that
:
tbrif for the account of the twelve Federal reserve banks and
the
under consideration the necessary details
for la
13=1:.5'd
"There has now been prepared a form of agreement between
the
re Federal
Reserve Bank of Atlanta and the other Federal
theerve banks, copies of which are inclosed, which carries out
The suggeotion contained in the Board's letter above mentioned.
ped _agreement in the form inclosed has been approved by the
'Pa Reserve Board and its counsel and it will be appreci-‘4
n4.0d
you will submit it to your board of directors as soon

r




859
4/8/35
-9"as possible.
"If approved by the board of directors, please have the
agreement executed by your bank in triplicate, sending one of
the executed
agreements to the Federal Reserve Board for its
records and the other to to the Federal Reserve Bank of
Atlanta, which will execute one of them and return it to you.
"Effective as of the date upon 7,hich the operation of
the Agency
at Havana, Cuba, may commence under the terms of
the agree,
hereinbefore mentioned, the Federal Reserve
Board
hereby gives its consent and approval for any Federal
reserve bank
to carry on and conduct through such Havana
Agency
any transaction authorized under the terms of the
ebsolutions of the
Federal Reserve Board adopted January 271
1927, and
January 31 19291 relating to the scope of the
IlInctions of the Havana Agency, copies of which are also inclosed for your
information.
"It is Understood that the operation of the Agency at
Havana,
Cuba, under the terms of the agreement before mentioned
vL11 commence with the opening of business on the first day of
the month
following the month in which the agreement may be
executed by all of the Federal reserve banks.
"The Federal Reserve Board expressly reserves the right
to
revoke at any time its approval of the continuance of the
!
lAl eney at Havana, Cuba, under the terms of the agreement
mentioned, and to require the discontinuance
Of
ui such
Agency."
Botird,
of mi.

Letter dated April 5, 19351 approved by four members of the
to Mr. Peyton, Federal Reserve Agent at the Federal Reserve Bank

rineapolis, readia7 as follows:
"Receipt is acknowledged of your letters of March 13
16
th,t 4. 1 19-651 in which you called attention to the fact
en- '
he legislature of the State of South Dakota recently
un!,cted a law
authorizing State banks to establish offices
cle'
4-r certain circumstances for the purpose of receiving
:
al sits, issuing drafts and cashiers' checks, making change,
conj
aYing checks. It appears that no such office may be
cor
ed in any torn or city after an authorized banking
silel;°14 ti0n has received authority to commence business in
St,t "
)11111 or city. You requested advice as to v,hether
iz;de member banks may establish offices of the kind authorSy,teln3iyanis statute and remain members of the Federal Reserve
whether State banks which have established such
and




860

-10-

II

"offices may be admitted to membership in the Federal Reserve
SYstem assuming
that all other conditions are favorable. You
called attention to the fact that the provisions of the law
of South Dakota
in this connection are as follows:
'Any bank or trust company operating under the
lams of this state is hereby authorized, subject to
the approval of the Superintendent of Banks, to
establish an office within the county of its domicile,
or adjoining countie:', for the purpose of receiving
deposits, issuing drafts and cashier's checks, making
Change, and paying checks, and performing such other
Clerical and routine duties not inconsistent with this
act) -Provided, however, that no such office shall
make loans or discounts, and that no such office shall
be continued in any town or city after a regular
authorized banking corporttion has received authority
to commence business in such tovn or city, and provided, that no more than one office shall be established in any one tm,n or city, and, provided further,
that nothinc- in this act shall be deemed as authority
for the establishment of branch banks. Nothing in
this Section shall prohibit national banks
the privilege of this Section whenever they may be so authorized by Federal law.'
te, "It appears that this law of the State of South Dakota con011-jates that the offices which are authorized must be located
A, Bide of the cities in which the parent banks are situated.
c'ey01.1 know,
section 9 of the Federal Reserve Act contains
brrtain restrictions on the establishment and operation of
anehes by State member banks but also provides as follows:
'Provided, however, That nothing herein contained shall prevent any State member bank from
establishing
and onerr,tinr-,- branches in the United
States or any dependency or insular possession
ithereof or in any foreign country, on the same
u?rms and conditions and subject to the same
limitations and restrictions as are applicable to
the establishment
of branches by national banks.'
just You will note that, under the provisions of section 9
brane1(11°ted, a State member bank may establish and operate
sckme ;i?5 on the same tams and conditions and subject to the
estal±?-mitations and restrictions as are applicable to the
Of jlishment of branches by a national bank.
Section 5155
to
e
Rev
ised
relates
United
Statutes
the
States
which
of
rthe establishment of branches by national banks defines a
alich t of a national bank as follows:




861

—11—
"The term "branch" as used in this section
shall be held to include any branch bank, branch
Office, branch agency, additional office, or any
branch place of business * * * at rhich deposits
are received, or checks paid, or poney lent.'
"In view of the provisions of law referred to above, it
,pears that Congress intended that the definition of a
branch!
which is applicable to branch offices of national
!!anks should also
apply to branch offices of State member
uanks. Accordingly, since deposits would be received at the
roposed offices of State banks in South Dakota, it is clear
hat such
offices would be branches within the meaning of the
Provisions of the Federal statutes even though such offices
may not be in terms designa
ted as 'branches' by the pro—
visions of the State law. The Board, therefore, is of the
°Pinion that State member banks may establi
sh branch offices
the kind contemplated
by the law of the State of South
uakota above quoted
only if such State member banks comply
Withthe requirements of law applicable to the establish—
ent of branches by national banks. Similarly, a State
ank with branches which had previously been established
?der the
South Dakota law could be admitted to membership
enlY upon compliance with the requirements applicable to the
ils!:ablishment of branches by national banks. It has been
:I:Jed that a similar conclusion was reached in the opinion
eujour counsel
you forwarded to the Board and that he called
,atitention to a ruling of the Board published on page 499 of
:
t
Ile Federal Reserve
Bulletin for August 1933 in which circum—
ances similar to those to which you referred were involved.
"Section 5155 of the Revised Statutes of the United
State , as
:Ts
amended, among other things, authorizes the
a°1ishment by a national bank of branches outside of the
or''4! in which the parent bank is situated, with the approval
arid4he Comptroller of the Currency, if such establishment
s4_ 0Peration are
at the time affirmatively authorized to
'
se'Ie banks by the statute
law of the State in question.
tion lfurt
5155
esteb
her provides that no national bank shall
ea
ish such a branch unless it has a paid—in and unimpaired
a. stock
of not less than $500,0001 except that in States
With
cit4 a Population of less than 1,000,000 and which have no
located therein with a population exceeding 100,000,
the
in sapital shall not be less than $250,000, and except that
no ,,r9
,es With a population of less than 500,000 which have
the-14ies located therein with a population exceeding 50,000,
k caPital shall not be less than $100,000. Section 5155
rther provides that the aggregate capital for every national

Z




862

4/8A5
-12"bank and its branches shall not be less than the aggregate
minimum canital required by law for the establishment of an
equal number of national banks situated in the various
Places rhere such bank and its branches are situated.
"It is understood that the State of South Dakota has a
Population of more than 500,000 but less than 1,000,000 and
that there is no
city located therein having a population
exceeding 100,000 inhabitants. In the circumstances, a State
Member bank in South Dakota with a capital of $250,000 could
establish
branch offices provided, of course, it complied
with the
aggregate capital requirements of section 5155 above
referred to and
obtained the approval of the Comptroller of
the
Currency. You have heretofore been advised of the procedure follov,ed by the Board in presenting applications of
?:tate member banks for permission to establish branches to
the
Comptroller of the Currency.
"Section 202 of the bill, H.R. 5357, which has been
in
troduced in Congress, contains a proposed amendment to
ection 9 of the Federal Reserve Act which would
Itp
authorize
Board, in order to facilitate the admission of
State
banks which have obtained the benefits of insurance to mem:
r rshiP in the Federpl Reserve System, to waive the capital
relating to admission to membership. When the
Governor of
the Federal Reserve Board recently appeared be',.ere the Committee on Banking and Currency of the House of
Presentatives, he suggested that this provision of the
iL11, H.R. 5357, be modified so as to authorize the Federal
,!serve Board to waive any of the requirements of section 9
iv34 the
Federal Reserve Act relating to the admission of such
,
anks to membership. If the Governor's suggested substitute
Or
section 202 of the bill, H.R. 5357, should be enacted
1
. 0 law, the Board could
admit State banks in South Dakota
nr eh had previously established branch offices under the
'
loeevisions of the law of South Dakota herein quoted to memd4
!
shiP in the Federal Reserve System even though such banks
not have the capital required for the establishment of
'
watches by national
banks.
The Board has also given consideration to the practical
j.ioulties described in your letter of March 23, 1935. As
C!oated above, amendments to the provisions of the Federal
tin. rve Act and section 5155 of the Revised Statutes of the
ttl
ed States would be necessary in order to enable State
oirr banks and national banks lawfully to establish branch
heriees of the kind contemplated by the South Dakota law
menZin quoted without regard to the minimum capital requires aPPlicable to the establishment of branches generally.

7

g




863
4/8/35
"The Board has given careful consideration to the possibility
of obtaining
amendments to the law which would enable member banks lawfully to establish such branch offices without
?ompliance Idth such requirements but it does not feel that
lt is practicable at this time to obtain such amendments.
. "I trust that the above will give you all of the informatlon you require in this connection but, if you desire
sallY further advice in the matter, please advise."
Approved.
Letter to Mr. Case, Federal Reserv6 Agent at the Federal Reserve
of New York,
reading as follms:
, "Receipt is acknowledged of your letter of March 26,
. 9`)5, with inclosure, requesting that the Board permit you
,o furnish
copies of the two memoranda inclosed with its
-L-eter to you
of March 1, 1935, to the counsel for the
111ton Trust Company, Newark, New Jersey, the Reconstruction
,14ance Corporation, and the Federal Deposit Insurance
rrlooration,
in connection with the suit which has been
?uEht by the estate of Abraham Fischman against the
s.tinton Trust
Company involving the binding effect of the
'etute of New Jersey under which the Clinton Trust Company
reorganized upon a depositor who did not consent to the
t-11 of reorganization of that trust company.
193,"While, as indicated in the Board's letter of March 1,
di '
23 the memoranda are not in suitable form for general
cosuribution, the
Board has no objection to :our furnishing
aj
dies of the memoranda to such counsel for their information
for assistance. It has been noted that you and the counsel
Y°1-1r bank are of the opinion that there is no necessity
Your bank to participate formally in this suit and that
ur
counsel will follow the -latter closely and will give
the
ell c csistance as he can anpropriately to the counsel for
cor Clinton Trust Company, the Reconstruction Finance
It P°11'tion and the Federal Deposit Insurance Corporation.
uld seem that the handling of the matter in this way
at
7,0j"
be adeouate in the circumstances,
an
and it will be
deleciated if you will keep the Board advised of any further
e-LoPments in the case.
Stc,t, "C3n April 1, 19'6 1 the Supreme Court of the United
111311J
.- rendered an opinion in the case of Dotz v. Love
the ,
ding the validity of a bank reorganization statute of
°tate of Mississipoil which statute is comparable to the
P4undor which the Clinton Trust Company was reorganized.

g

z




864
4/8/35
-14"The case decided by the Supreme Court was known as Dunn
V. Love
when it was in the 'Aississinpi courts and was referred to in the Board's letter to you of March 1, 1955.
A coPy of the opinion of the Supreme Court is inclosed
heretith in order that it may be called to the attention
of the counsel for the Clinton Trust Company, the Reconstruction Finance Corporation and the Federal Deposit
Insurance Corporation."
Approved.
Letter to :!Ir. E. S. Burns, Cashier of the NEtional Bank of
1)etr°3-t, Detroit, Michigan
, reeding as follows:
, "Reference is made•to your letter of February 5, 1935,
addressed to the Comptrol
ler of the Currency, which has
been referred
to the Federal Reserve Board for reply. In
(our letter you ask to be advised vhether certain deposits
by the
Treasurer of the State of Michigan consisting of
1
funds
advanced by the United States Deparen
t:l t of Agriculture,
Bureau of
Public Roads, should be classified as United
States Government funds
or as public funds of States in
Y°ur bank's published statements, quarterly conditio
n rePorts, and
other reports. You also ask to be advised
vdhether such deposits should be listed as United States
,overnment denosits (line 18 of Condition Report, Treasury
"L'
cl°11:1 2130) or- as public funds
of States (line 17 of ConReport, Treasury Form 2130).
"It is understood that the deposits in question were
made under
the follo-Ang circumstances. Section 204, Title
-`) of the National Industrial Recovery Act authorizes
P'ants by the
President of the United States to the hightY departmen
ts of the several States to be expended for
t hwaY construction in accordance with the provisions of
he
Federal Highway Act of November 9, 1921. Ordinarily
Federal Government does not pay to the State authori-e anY part of the money granted under such statutes
;1c:til all
or a part of the construction has been completed.
owever' where a State was without funds to begin
tfistruction the Bureau arranged to make advances of funds
bu the
State treasurer or other custodian to be deposited
Yt1,11m in a special account entitled 'Trust Account
lit,
"nal
are to Industrial Recovery Highway Fund'. These funds
be paid out on the order of the State highway
sePa.1:tment for work performed under the provisions of
etIon 204 of the National Industrial Recovery Act.

q

Zr
C




865
4/8/35
-15"The trust fund is established under the terms of an
agreement between the Bureau of Public Roads and the State
highway department, and, in connection with such agreement,
the treasurer executes e certificate agreeing to handle the
funds in the trust account in accordance with such agreement. The Bureau of Public Roads requires the treasurer to
deposit such funds in a separate trust account which shall
be secured by a bond or collateral of market value at least
equal to the amount of the deposit. The treasurer is required to agree that the funds received h:z him will be held
in trust
for expenditures solely on orders from the State
hrhway department, that interest received on such deposits
1111 be paid
to the Federal Goverment, and that the records
o
t,-: his office pertaining to such trust fund shall at all
imes he onen to examination by representatives of the
rederal Government.
"It is contemPlated that the trust fund shall constitute
revolvirv- fund and that as soon as a portion of the work
is completed and payment therefor made by the Bureau of
. bile Roads
the treasurer will use such payment to reimburse
the trust
fund. The State highway department is required to
that all payments made by it from the trust fund shall
be
:°
..e subject to audit
by the Federal Government and that if the
.!c)/sk for which any such payment is made does not receive the
!PProval of the Bureau of Public Roads the highway departIneht shall reimburse the trust fund from its own funds.
,"On the basis of the above facts the Federal Reserve
n°!::--ra is of the opinion that the deposits in question should
10°
'be classified es United States Government funds in the
_ank's published statements, quarterly reports of condition,
'r other reports
and that such deposits should be listed as
1
1D,Ilb1ic funds of States (line 17 of Condition Report, Treasury
arm 2130) and not as United States Government funds (line
of
Condition Report, Treasury Form 2130)."
Approved.
Letter dated April 6, 193E, approved by five members of the
130e,rd
't° Mr. Curtiss, Federal Reserve Agent at the Federal Reserve
11 111k 0
f Boston, rending as follows:
19,, "Receipt is acknowledged of your letter of March 19,
), recording the application of Mr. Arthur G. Shattuck
14:;
br,cler .'l'ection 32 of the Banking Act of 1933 for a permit to
at the same time a dealer in securities in his individual




866
4/8/3s
-16"capacity and a director of the Indian Head National Bank,
Nashua, New Hampshire. You point out that on April 25, 1934
the Board wrote you stating that it appeared that section 32
was not applicable to
the relationships in question, and that
3:5)11 advised Mr.
Shattuck accordingly. You now ask whether,
44 view of the Board's letter of March 16, 1935 (X-9148), in
which the Board stated
that it believed that section 32 is
applicable to the service of individual dealers in securities
as officers or
directors of member banks, you should take the
Matter up again with Mr.
Shattuck.
...,,, "It is suggested that you advise Mr. Shattuck that,
'ter careful consideration, the Board has changed its
has been opinion respecting the question, and also that it
the policy of the Board to deny applications inv°1ving relationships which are actually within the intendment of section 32. In this connection, reference is made to the
Board,;
letter of March 7, 1934 (X-7811). However, the infor.nlon which has been submitted, particularly the applicant's
e'gwer to
question No. 2 on F.R.B. Form 99a, does not make it
irely Clear
that he is 'primarily engaged in the business
m; PI:Irchasing,
selling, or negotiating securities' within the
acial.ling of section 32; and, therefore, you are requested to
covlse the applicant that before taking further action in
„nnection with his application the Board will afford him an
Irortunity of submitting additional information regarding
wlis
question."
Approved.
Letter to Mr. McAdams, Assistant Federal Reserve Agent at the
Ilsserve Bank of Kansas City, reading as follows:
ad "Reference is made to your letter of March 23, 1935,
revIslng that Mr. Hugh C. Whiteford, Kansas City, Kansas,
quests
. an amendment to his Clayton Act permit.
to
-On June 7, 1934, Mr. Whiteford was granted permission
serve at
the same time as officer of The Commercial
di icinal Bank of Kansas City, Kansas City, Kansas, and as
txjaector of The
First National Bank of Osawatomie, Kansas;
orril't is noted that he is now serving as director as well as
re,
--er of The Commercial National Bank of Kansas City and
sluests that
his permit be amended accordingly.
th" "The Board has approved the request of Mr. Whiteford and
mit e are inclosed the original and copies of an amended percovering his present services as director and officer of




867
4/8/3s
-17-

7

h0 Comrlercial National Bank of Kansas City and as director of
jhe First National Bank of Osaratomie, for the period ending
,
anua
14, 1936, for transmittal by you to the applicant and the
two?
banks and a copy for your files.
"In vier of the Board's letter of April 9, 193/1 (X-7856),
no' is assumed that you
are satisfied that Mr. Thiteford is not
servin any organization other than those which he listed
1,,il l-tem 12 of F.P.B. Form 94 in his previous application; but it
be appreciated if you viii advise the Board regarding this
,:
rtter in
order that its files may be complete. However, if
Vthiteford is serving any organization other than those
g 8ted in his previous
application, please advise the Board re,
drding the matter and hold the permit pending further advice
from
the Board.
en the permit is sent to Mr. Whiteford and copies
there
zit
to the banks involved, please advise them that the per193,Pas been issued so as to expire at the close of January 14,
Ps there is now pending before the Congress proposed
thL,elslation for the Duroose of clarifying and otllerdse amending
Pr°visions of the Clayton Act relnting to interlockine, bank
--ec
torates."
Approved.
Let
ter to an applicant for a Clayton Act permit advising of the
4211

of a
permit by the Board as follows:
Mr. M.
Scovell
c)fficer of The Martin, to serve at the same time as an
National City Bank of Nev? York, New York, New
York, and
as an officer of the City Bank Farmers Trust Company,
New
York, New York,
for the period ending January 14, 1936.
Approved.
There were then presented the following applications for chances
ill stock of
Federal reserve banks:
A T)14_
14?atloris for
N Islet No 7
ORIGINAL Stock:
Shares
-"
aational Bank in Wyoming,
131ng,
36
36




868
4/8/35
-18A l
ications for ORIGINAL Stock: (Contid)
e N
ational Bank of Norfolk, Norfolk,
Ne
braska.
A l
ications for SURRENDER of Stock:
The
Peoples National Bank of Marlborough,
,
Marlborough, Massachusetts.
411eLWIlton National Bank, Wilton,
m, New
Hampshire.
'Ile
Clement National Bank of Rutland,
Rutland, Vermont,




Shares

72
Total

72
108

5
21
32

6

Approved.

Thereupon the meeting adjourned.

atf
Secretary.

Governor.