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995 A meeting of the Board of Governors of the Federal Reserve System was held in Washington on Friday, August 11, 1939, at 11:30 a.m. PRESENT: Mr. Eccles, Chairman Mr. Szymczak Mr. Draper Mr. Morrill, Secretaty Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary The action stated with respect to each of the matters hereinreferred to was taken by the Board: Telegrams to Mr. Leach, President of the Federal Reserve Bank of Ili. chmond, Mr. McLarin, Vice President of the Federal Reserve Bank Atlants., Mr. Dillard, Secretary of the Federal Reserve Bank of Ohica Mr. Ziemer, Vice President of the Federal Reserve Bank of 8 EP°1i , Mr. Gilbert, President of the Federal Reserve Bank of 8, and Mr. Hale, Secretary of the Federal Reserve Bank of San Fran- Stating that the Board approves the establishment without change bYthe the Federal Reserve Bank of San Francisco on August 8, 1939, and by p ederal Reserve Banks of Richmond, Atlanta, Chicago, Minneapolis and klatts today, of the rates of discount and purchase in their existing Nickles. Approved unanimously. Letter to "The Security National Bank of Reno'', Reno, Nevada, as follows: ha "The Board of Governors of the Federal Reserve System pos given consideration to your application for fiduciary vew:rs, and grants you authority to act, when not in contra1.'''r0n of State or local law, as trustee, executor, adminator, registrar of stocks and bonds, guardian of estates, 996 8/11/39 -2rta, eignee, receiver, committee of estates of lunatics, or in anY other fiduciary capacity in which State banks, trust °?mpanies or other corporations which come into competition with national banks are permitted to act under the laws of he State of Nevada, the exercise of all such rights to be Subject to the provisions of the Federal Reserve Act and the regulations of the Board of Governors of the Federal Reserve System. . "This letter will be your authority to exercise the iary powers granted by the Board pending the preparation Of a formal certificate covering Each authorization, which will be forwarded to you in due course." Fiduc Approved unanimously. Letter to Mr. Sihler, Assistant Vice President of the Federal Reeerve Bank of Chicago, reading as follows: "Reference is made to your letter of July 29, 1939, reeeting a ruling with respect to section 6(c) of the Board's -egulation T) which section relates to guaranteed accounts. "Section F(b) of Regulation T provides that when all of transactions on any day in a customer's general account, ,°111bined, have the effect of creating or increasing an excess Of the adjusted debit balance of the account over the maximum innn value of the securities in the account, the creditor ;:LiLst obtain the deposit of a certain amount of cash or securica?8* Section 6(c) permits certain deductions in the ' culation of the adjusted debit balance of a general account „ that is guaranteed by another customer, so that transactions 17Y be effected therein without creating or increasing such ' 11 excess. "rhe pertinent provisions of section 6(c) are as follows: 'In case a general account maintained by a creditor for one customer is guaranteed in writing by another customer for whom the creditor maintains a general account, the adjusted debit balance of the guaranteed account may, at the option of the creditor, be computed by deducting from the sum of the items specified in section 3(d) an amount not greater than the excess of the maximum loan 'ialue of the securities in the guarantor's general account over the adjusted debit balance of such guarantor's aocount calculated without the addition thereto prescribed by the following paragraph, provided (1) the guarantor is not a creditor, (2) a duplicate original of P 997 -3"'the guarantee has been filed with the secretary of a national securities exchange of which the creditor is a member or through which his transactions are effected, and (3) the guarantee permits the creditor to use funds and securities in the guarantor's account to carry the guaranteed account Without restriction, except that the guarantee may be limited to a specified amount and in that event the deduction shall not exceed such amount. 'In case a guarantee has served to permit in the guaranteed account any transaction which could not otherwise have been effected in accordance with this regulation: (A) the adjusted debit balance of the guarantor's account shall be computed by adding to the sum of the items specified in section 3(d) an amount equal to the deduction made pursuant to the Preceding paragraph; * * "The question which you have presented relates to the following set of circumstances: Customer A, not a creditor, , 1140 executed a guarantee of the general account of Customer and a duplicate original of the guarantee is properly on With the secretary of a national securities exchange. l'etomer B, also not a creditor, has executed a guarantee of the general account of Customer C and a duplicate original of the guarantee is likewise filed with the secretary of a securities exchange. Neither of the guarantees is res triceds as to amount. "The maximum loan value of the securities in the general ace thecunt of Customer exceeds the adjusted debit balance of ya, account by an amount greater than $400. The maximum loan , i -Lue of the securities in the general account of Customer B equals the adjusted debit balance of the account. The '07Xlmum loan value of the securities in the general account C is less than the adjusted debit balance of the account. e__ "The question is whether the creditor may utilize the loan value in the general account of Customer A in effecting re for the general account of Customer C a purchase of glstered nonexempted securities at a total cost of $1,000. unu "While the use of such indirect guarantees is rather the Board is of the opinion that the answer to the glia estion is in the affirmative provided the terms of the gej antee executed by Customer A are such that, as a matter of cleeral law and without regard to Regulation T, the guarantee than covers Customer C's account and provided, of course, , all other requirements of section 6(c) are met. The of S41°n whether Customer A's guarantee extends, as a matter deprneral law, to Customer C's account would, of course, nd upon the temsof the particular guarantee. 998 8/11/39 -4- "If the necessary requirements are met, the creditor may first deduct $400 from the sum of the other items used in comPuting the adjuted debit balance of Customer B's general account and then make the same deduction in Customer C's general account. Under the present provisions of the supplement to Regulation T the $1,000 of securities purchased would have a maximum loan value of $600, and there would be no increase in the excess of the adjusted debit balance of Customer C's Pneral account over the maximum loan value of the securities 11.3n the account. After these transactions, the adjusted debit palances in the general accounts of both Customer A and ' llet°msr B would be computed by adding $400 to the sum of the other items included, although in the case of Customer B's lecount the $400 addition would be offset by the equal deduction resulting, as indicated above, from Customer A's guarantee." Approved unanimously. Telegram to Mr. Clerk, First Vice President of the Federal Reserve 4141.4 of San Francisco, reading as follows: "Retel August 10, since time schedules of some Reserve banks are based in part on calendar days, it is not believed advisable to have second paragraph Board's proPosed press release, R-514a, refer to business days." Approved unanimously. Letter to Mr. Harrison, President of the Federal Reserve Bank Of ew York, reading as follows: "There was forwarded to you with the Board's letter of Ju lY 24 197,9 R-511, a copy of a letter dated July 18 which the B ' a oard received from the Treasury Department transmitting ore°1DY of House Report No. 1066 with respect to the destruction certain fiscal agency and depositary records. Ir. In the Board's letter to you of December 14, 1953, it ' ro's stated that after the destruction of the above-mentioned 1,1118 had been approved, the Treasury Department planned to such forms on a 'Standard list of forms to be destroyed Pert odicallyt; that once having been compiled, the 'Standard by thof forms to be destroyed periodically' will be duplicated Treasury Department and used each year by the Departmerit : it in making recommendations for the disposition of useless Pere; that it will be necessary for the Department to re- 999 MJ/39 -5- ceive advice annually only as regards to the elimination of forms that have become obsolete and to the addition of new forms; and that the forms included on this list should not be destroyed by the Federal Reserve banks until the printed report of the Joint Congressional Committee recommending that the records be destroyed has been received. "Since your bank, in response to the Board's letter of December 14, 1938, submitted the consolidated list of fiscal agency and depositary records recommended for destruction and is,therefore, familiar with the procedure followed, it will be , , 143Preciated if you will submit annually to the Board as of uctober 1 a list of the fiscal agency and depositary forms previously reported on Treasury Department Form A which have become obsolete, showing the date they were discontinued, and a list on Treasury Department Form A of any additional forms which is felt should be added to the 'Standard list of forms to be destroyed periodically', showing the date the forms °riginated. "The list on Form A submitted as of October 1, 1939 should include any records which have now been held for the minimum o retention period recommended in the report of the Committee .n D estruction of Records, dated June 11, 1936, which were not 1 .,-ncluded in the list of records submitted with Mr. Rice's JaTtter of January 11, 1939, for the reason that they had not at time been held for the required period. It appears that such records comprise Treasury Department forms 6601, 'Qu5 and 6606, listed in Schedule G of the Committee's report. "As heretofore, the original and four conies of Form A, t°gether with a sample of each item marked with the appropri.? item number, should be submitted to the Board. The Board ..t.7:0titehinezri :;rd the original and three copies of this list Department." n Approved unanimously. Letter to Mr. McCabe, Federal Reserve Agent at the Federal Reserve BELIA Of Philadelphia, reading as follows: 28 "Referring to the third paragraph of your letter of July 7d1,1939, in reply to the Board's letter of June 20, 3-1651 respect to the destruction of records accumulated by 'eral l'aPReserv e Agents, you are correct in assuming that mimeo1g1_ hed statements ised issued by the Board, such as B-812 and 812-a, may be destroyed in your discretion." 1000 vain —6— Thereupon the meeting adjourned. CAO. 05 e retary.
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