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1132 lit:lutes of actions taken by the Board of Governors of the hder , kL4serve System on Thursday, August 19, 1948. The Board 4t1.144., '41e Board Room at 11:00 a.m. P4SENT: Mr. Mr. Mr. Mr. Eccles, ChairrLan pro tem. Szymczak Draper Vardaman Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Morrill, Special Adviser Thurston, Assistant to the Board Riefler, Assistant to the Chairman Leonard, Director of the Division of Examinations Mr. Baumann, Assistant General Counsel gzymczak stated that this morning he received a telefroni the Secretary of the Treasury, who referred to the l'tie115114 the Washington Times-Herald for today (an earlier ar4 h saze subject appeared in the same paper yesterday) to t4et4ct that an hitt th spokesman of the Board had reiterated official k4k ot, action in authorizing the establishment by 4merica N ational Trust and Savings Association of additional 41 ' 48 a direct violation of a definite understanding it had 4t4thetoard of k414°118 the t Pending titit °41'cl ed) that tht Governors to hold up further Bank of America apdisposition of the Clayton Act complaint filed Secretary Snyder also said, Mr. Szymczak the Treasury felt there had been compliance with the /Irklerstanding between the Board and the Comptroller of eileY) that if there as any failure to comply with the 132 8/19/48 —2— : k de"tstAding it WEIS on the part of the Board in granting authority 88-nk of America to establish foreign branches and that, therer °re) he felt the Board should issue a statement denying kt Elmo —eEtred in the press as coming from an official spokesman the toziircl, and that if the Board did not issue a statement he telt tut t'lt it t he would be compelled to do so saying that the Treasury kard 44 complied °r Governors. t44a szymezak 441N:1e tqt with any existing understanding with the also said that before the meeting he had dis- tnattAr with members of the staff and by telephone with MeeEtte) who was on vacation, and that Chairman McCabe Tre etlry.tir l'epresentives ta of the Board could sit down with the 4411,a. alld the C omptroller of the Currency for the purpose of PN, Illijag 411 the facts it would be possible to ascertain the —ftstanding of the Treasury and the Comptroller of the th respect to (1) the agreement reached in February 1942 4t fo + oft, 1'44 in the letter to Transamerica Corporation under date cy 1942, which was initialed by Comptroller of the L'u and Mr. Crowley, Chairman of the Federal Deposit Coy, the t -v°1"ation, and (2) the understanding which grew out of oeq.cit a , kti ti,i c letters of November 7, 1947, and November 24, 1947, 4kz °41Ptro1ie_.s r' reply of November 10, 1947. It was Mr. th Q 'Iki 8 VieW that, if a decision is made to send a letter to (lit1113.tr()1ler of the Currency, it should not be sent before a 8/1948 -3c°11ference with the Comptroller but might be handed to him at the tile of su ch a conference• In this connection, reference was made to a transcript which 441 beellobta ined of Secretary Snyderts press interview yesterday, q141, '.14114.1. • Delano was also present, during which the latter made th, Owing statement: timi til would like to give that gentleman one different° VII which he needs. You mentioned giving branches °Peta: 413ank of America. I want to say this, that the helri-a7".°11 that you speak of, or that this gentlemana.5rs doci n's,d13€ out from the Fed which is an operation which erisen-tk, concern AmFed giving new branches to the Bank of Which is illustrated by the fact that the of hieri; has given some branches, itself, to the Bank tlgee -4 , .1 ! In other words, there is a distinction betechrrli. L'he Tr that ans-America owned bank -- this is very 411(111 .61. but there is a distinction between kltkeh those that are granted directly to the °014th-41erica and in places where the enormous tiqe °f California has given them definite faciliI think we should state that the number we gilre4'; e4 is not out of balance to other branches or tdh Otherbanks in the State of California, to tahe United States." * Thurston stated that Mr. Delano had called him on the .rte to Say that he hoped no press statement by the Board or l'rould be necessary, and that he hoped the Board Nto°c1 the A. ulstinction that he had made between granting au°Ilty to bz„, Bank p 01 America for the establishment of de novo 'tett 'ting to Transamerica Corporation authority to -,Liks into branches, and that his office had been h 14 ifl ic---Y to the understanding growing out of the Nov- '01,4,, 1 oadence with respect to granting authority of the to Transamerica. Ia V--.4 • —4— Mr 'Eccles reviewed the consideration that had been given to t48 zatt er ---ce Since the period prior to 1942 and the circumstances ch the letter of February 14, 1942, was sent to Transamerica c)t.4ti°11 with the initialed approval of Messrs. Delano and lie also referred to discussions with representatives of then `4)taPtrou 'r of the currency, the Treasury, and the Department 8t1Ce Since that time with respect to efforts of the Federal 1.11)eriris°17 agencies to limit further expansion by the Trans— N"4. group. bilring the discussion, Mr. Szymczak was called from the : 41t° ellsuer msci krther 411 th4t the ' call from the Secretary of the Treasury on the matter latter had stated that so far as he knew there was no 11114113t4Iticling 4 ri44ti°4 the telephone and upon his return stated that he had between him and the Board with respect to the au— for t:14"z4k said domestic branches in the Transamerica group. Mr. that he responded that the understanding was between e°N)troller of the Currency, the Federal Deposit Insurance th3/411°Zlati°4, and the Board, to which the Secretary replied that e to0.11 exPlain how, in the face of such an understanding, e°11-14 authorize the establishment of foreign branches c:st Arneca, ri that the making of unauthorized statements to ti S5 15r s°11"ne in the Board's offices was con— d es apparently : 11 14'a4d that if they were not discontinue Treasury would "°I'Ll'ar them. Mr. S7ymczak also said that he told the 8448 —5— Seeret417 that 4)41 and thq in the matter was being discussed at a meeting of the that he would call him as soon as the meeting was over, response to the Secretaryts inquiry as to why the Board 4P"4414g to the press about the 44d lukl not given anything to the 41tedwilythe Board did not issue a Mr. Eccles said that it was matter, he stated that the press, whereupon the Secretary statement to that effect. unfortunate that the matter got into th papers at the all, that he did not believe it helped e 'card's case, and that it did not serve any useful purpose. this COrmection Mr. Szymczak expressed the opinion that the re- 1314t1, 41Ig PUblicity was vka leek injurious to the objectives that the Board to a ccomplish and to its relations with the Treasury. There 1ms a general discussion of the matter in the light ()t the 3.1/11:)rvi erfortRaver the past several years of the Federal bank Ory Tke -igencies to bring about corrective measures in the k4rice. grouP, during which Mr. Leonard stated that he had zt tee eiNreA 1)4i .1.1,014 of a note from Mr. Millard, Assistant Director of the zam inations, reading as follows: It f(Z5r UPham just called me on the phone to i ) stiiy that ,, ()Eti TrlY was his custom to check with us n lard Nemi'Zcations for branches in order to find o 14e might have a competing application. -1)8 hAre ; 1W ,ent on to say that in recent months he per!followingo= somewhat dilatory in o_ut that in any event he now wished t%rl ne had received an application from tok of c4 to establish a branch at Del Monte, California." 1.830 8/1948 -6Tol'Aard the conclusion of the discussion, Mr. Eccles stated gatregEtrdless of the technicalities involved or the misunderstandillg"latm4 -,ght exist with respect to agreements reached in the kst, th e Board .Trras confronted with a situation which should be toat that in an objective way, and that, therefore, he would sugtile Board authorize N. Szymczak to say to the Secretary that the 13°at 'd had decided that it should issue no press statement, 13°e-td had not authorized any statement and had had no part hott hing that might have been attributed by the press to an -yardIL°418P0keszan" and that it regretted the incident, that the i °144 11°Pe that the ,88110 Treasury would not find it necessary to pte atateraeri+ U It\1313 '44d. that 80 that the matter could be forgotten by the nothing would be gained by further press statements. tlev,: hiczak should also say, Mr. Eccles stated, that, in view of cotp : Plaellta) the Board felt it should state its views to the : tha iler Qf the Currency with respect to the authorization by ki)til0 11er of further branches of national banks in the Transk etta gra io 1/- and that it would write a letter on the matter which l'%re 0 ektativpQ -- of the Board would take to the office of the _o r r the purpose of discussing the matter with him. , Upon motion by Mr. Vardaman, Mr. Leclesi suggestion was agreed to unanimously, and it was expressly understood that none of the Board members °r the staff would discuss any phase °f the matter outside of the Board's ' sf c pf elje.s toor it!ake any comment with re- iii Szymczak then left the room to call Secretary of the SilYlier and upon his return stated that the Secretary's °trice h4c1 advised him that he had left for the day. Mr. Szym::ak he then talked to Comptroller Delano, informing him that because of the absence of the Secretary, about a matt that Secretary eta had called about earlier this morning. Mr. : e11141 8 resPonse, Mr. ,ecr Szymczak said, was that he had been in the eTarv 8 office when he called and knew about the situation. 4' 43e2a1( said he then informed Mr. Delano of the conclusions °t the toard, em phasizing that the Board had not authorized the : 111rtila tIlgti0t a-117 information to the press and regretted that the ,e1, °4 had arisen, and stating that apparently there was a misttm. att134441g °f the agreement reached by the Board and the Comp, L41 , °4 the rr Cuency in 1942. Mr. Szymczak added that the t l'°11er replied that he had no misunderstanding on that point, 44,e a re 4'the "42 gement had been abandoned by Secretary of the 'NA t4: 111‘ 71/18°4 when he took office as he did not agree with the 14 erataxidizg and had : so told Mr. Eccles (Mr. Eccles stated tth 114 1448 tot the case), after which the Comptroller of the Atagee heg'z to a uthorize the establishment of branches by Bank 190 1lLe4* With Qorre respect to the understanding growing out of the t)k.4 4 Illatler8kaldence, Mr. Szymczak said the Comptroller stated that N, N11011 8t4114ing related to the conversion by Transamerica Corpe18t1ng banks into branches, and that his office had 1 - 3:$2 8A948 —8-- 4'1aedifith that literally. 14r. Szymczak made the further state— he told the Comptroller that the Board would write a let— ter t° 441 oa the subject and that representatives of the Board 1°11cideliver the letter and discuss the matter with him. There was a further discussion of the f°1111 of the proposed letter and it was agreed that a draft would be prepared by the staff and presented for consideration at a meeting of the Board tomorrow morning. Se It was also understood that in response to the inquiry received by Mr. Millard from Mr. Upham about a branch at Del Monte, Calif— a, Mr. Upham should be informed by tele— l'"°he that the Board would be opposed to the of the branch. Prior to the meeting Mr. Szymczak had kblac ClaYton, who was visiting the Federal Reserve Inerits°- ;!! York, to acquaint him with today's develop— the meeting Mr. Clayton called Mr. Thur— °'e cliseili i ver the telephone and was kept advised of the 411gge BicYa. He had also transmitted over the wire a the cated redraft the clac'rejtroiler of the draft of proposed letter to t veetili•:. before of the Currency which he had prepared ,in accordance with the action at the ork tLL04 A tugust 17, 1948) prior to leaving for New R7:4 had asked that it be referred to next morning Morrill and Thurston. Following the meeting e tr ° Itake xpressed approval of the Board's decision ,Qaer , A a public statement but to send to the Cog— voetti °I the Currency a letter outlining the Boar s Idth respect to continued expansion of Bank • ttc1141, 14r. Morrill stated that he had just received a telephone call 114411 Leach, P resident of the Federal Reserve Bank of Richmond, in 4t41 the latter stated that the estate of the late Senator Carter 44C1 tlirned tlot the 4 lieetor over to the University of Virginia some 350,000 Senator's personal paPers, and that Mr. Stettinius, of the University as well as a Class C director of Y19/48 the Fe Federal Reserve Bank of Richmond, had discussed with the Board of Vi t 81.°118 er the University and the board of directors of the Federal Ileeerlre Bof Richmond the question of having someone go through the papers for the 114t tight Purpose of ascertaining what they consisted of and be done with them. It apparently was !lir. Stettiniusf idea, I'll'. 11°11111 Said, that the Federal Reserve Bank of Richmond might em, P1° e(Irne e°rIlPetent person to go through the material (which would 5i it' t Baha t month8 ormore at a cost of ti6,000 or $71.0°°) and make whatfmight bewith the papers. Mr. Leach he UniversitY he iliehniond Virginia board favored the idea and that board of directors were in agreement. Uvell the assignment mi.. Leach was then of carrying out this suggestion, which he was IrA4114g t° do) end his reason for calling informally about the matter that there were any objection from the Board he would like to know. th a 4: : 13 1• °11-1d very likely relate to matters in which the Federal Re- ti discussion it was suggested that, inasmuch as the bulk of Y'sterll l'10111d have little, if any, interest, there was some questhe Federal Reserve Bank of Richmond or the Board could hatitied ill ttori: to ir incurring the expense involved. Riefler suggested that the problem was one of classifica- s•Et e• c4aPetent librarian and that the question was whether the tieserv e 13821k or the Board should help the University of Vir' 44 elas,„ °J-13ring the papers and paying the cost of that operation. Ne %tt 14•that connection th4i.. Mr. Morrill said that Mr. Leach was of the the project might be treated as a function of the Research 1 V1V48 -.10413aitztent of the aktational 14°1' /"leil Bank- Mr. Riefler made the further suggestion that foundation might be the appropriate source of funds Proj it the Some of the members of the Board thought that assistance of the Federal Reserve Bank of Richmond were contitled to the giving of advice in respect to the Federal Reserve por- ti°11 or the taaterie.1 there could be no objection. It was pointed la this c onnection that it might become embarrassing if some el‘e 'l Reserve Bank or the Board were asked to do the same thing kith NPact to the papers of some other well-known personage, El1Qh 8 d --ceased President or former Senator Owen of Oklahoma, )okraple. At the conclusion of the discussion, it vas understood that Mr. Morrill would advise Mr. Leach of the views which had been expressed in the informal discusof the matter, and particularly the °Pinion that it would not be appropriate for the Federal Reserve Bank of Richmond to assume the responsibility of employing a person for the proposed project. At thi e Point Messrs. Riefler, Leonard, and Baumann left the the 11N1,_ - action taken with respect to each of the matters 'titter ''ererred to was taken by the Board: d.NI 4 Utes of actions taken by the Board of Governors of the ser76Ystem on August 18, 1948, were approved unanimously. h 14ern'tNqor -ul'anduzi dated August 17, 1948, from Mr. Young, Associate 414, c/t the rl the 4-4-vision of Research and Statistics, recommending h itti4 111 tlt teeign aulon of Miss Mary E. McDonald, a clerk-stenographer bri n, be accepted to be effective, in accordance with i if 35 8/19/48 her tequest, at the close of business August 27, 1948, with the under4411d1 rig that a lump sum payment would be made for annual leave re-143.4 to her Credit as of that date. Approved unanimously. Letter to Mr. Hill, Vice President of the Federal Reserve of phi, 'acielphia, reading as follows: lett : Ill•accordance with the request contained in your Poitij°f August 13 1948, the Board approves the apkitteni rerl ft of Charles 'H. Wigo, Jr., as an assistant exit th or the Federal Reserve Bank of Philadelphia. 1948 e appointment is not made effective September 1, "Planned, please advise us." Approved unanimously. tta Letter to 01431 the Presidents of all Federal Reserve Banks reading llel:C°/igrese has enacted, effective September 1, rat Code a copy of which is being sent o the "-e'L , f°1" Your bank. It will be noted that most of thellinlanal provisions of the banking laws contained Peal!Federal inth been rePro,r.,e' but re- Reserve Act and elsewhere have e enacted the new Code. For example, v.1.131.„ etnion 2:eating to theft, embezzlement or misappli" 1-1111C funds are contained in section 656 of ) end section 5209 of the Revised Statutes covered these matters is specifically re' 41*.t 4c)reover, section 656 makes it clear that the ees' en:,bezzlement or misapplication of bank funds in c)1'1eL°1, 400 is a felony and if the amount is $100 '43-e offense is a misdemeanor. Iqh;+ (12()rclinglY, after September 1, 1948, in determinlocal ;4iited- er or not to report misdemeanors to the considera_ report Attorney, your bank should give "cl ri igd '1'.0 question whether the making of such VO 0 1 d• esirable or undesirable in the public interest spNlic- s• erve any useful purpose in view of the iminIce-e °f the case and all of its facts and circumsti . 1°1-1r bank should then report or not report ,, me trat the exercise of sound discretion. In rasete in which such a report is not made, a cornof the facts and circumstances of the case ti 8/1948 -12"mild be preserved in the files of the Federal Reserve for uThl iew by the Board's examiners. to Procedure applies only to misdemeanors and not t the ;-"mies and the Federal Reserve Bank should report c) coz:?eal United States Attorney every case in which facts o the bank's attention from which it appears protd40,$) even though it is not entirely clear, that a violaoec- of the banking laws constituting a felony may have he aertcIn this connection, it is suggested that CounFederal Reserve Bank be consulted on doubtful epes etl°11a which may arise from time to time, both in reetit to the question whether a particular case may conaspellte a felony or a misdemeanor and in regard to other isr a of the e, rel`-'e to the matter. In every case in which a report ' local United States Attorney, whether of 1 or of a misd anor, three copies of the report shoui,°11Y Nrt. ' be forwarded to the Board in order that the Board Ihliteril , smit copies to the Attorney General of the `-ltates. "This Ilareirt lole-tter relates to the manner of reporting aperc bp_vi_etions of the criminal provisions of the FedStat ing laws which involve Federal Reserve Banks q 8110;e member banks, as well as any other violations Ported 1,Provisions which should appropriately be reel [(4.8 "Y the Federal Reserve Banks or the Board of GovtIffecti However, the letter is not to be understood as rol/i.e n1:1 the reporting of apparent violations which in4.etter-at'icrial banks, as this is covered by the Board's t4 re of F ebruary 8, 1928 (X-5072; F.R.L.S.#6501), nor 4 1301fti !'ing of bank robberies, as this is covered by '.848:1-14;\'s letters of September 24, 1934 (X-8017; F.R. k Th and March 15, 1935 (X-9147;F•P• .. L.q.#8311). 503) 46 Ecl'trd's letter of July 8, 1937 (S-12; F.R.L.S. 4's herei, 1,Y rescinded." Approved unanimously Secretary. Chairman pro tem.
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