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Minutes of actions taken by the Board of Governors of the ?era ral R eserve System on Monday, August 23, 1948. PRESENT: Mr. Mr. Mr. Mr. Szymczak, Chairman pro tem. Draper Vardaman Clayton Mr. Mr. Mr. Mr. utes a. Reserve Carpenter, Secretary Hammond, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board of actions taken by the Board of Governors of the System on August 20, 1948, were approved unanimously. Tele &Ill to Mr. Sproul, President of the Federal Reserve tiew yo rk, reading as follows: Of "Y°11r letter August 19, 1948, regarding service ohn H. Wurts, Assistant Vice President of Y*°11r L 01P14a, " 4., as member of Planning Board of Township Of ti wah, New Jersey. It is understood that members ric1;;'8 Board consist of certain designated town ofa four residents appointed by chairman of P Committee for purpose of considering and 11p°n Plans for development of Township, that tic% --" carries no fees, salary, or other compensa( ti 'nilivolves no political affiliation or other oblity%rlta would not interfere with work of Mr. Wurts i:ank. On this basis, Board finds no reason -r from views of your directors that service 1) et,• Vilarts as member of such Planning Board would 11,61Patible with Board's resolution of 1915, regardding of political or public office by officers 'rectors of Federal Reserve Banks." kes-V Approved unanimously. Telegr_ eln to Mr. DeMoss, Vice President of the Federal Reel' Dallas, reading as follows: t 8123148 -2- t let August16 Board extends to November 1, e time within which Empire State Bank of ' has may accomplish membership." Approved unanimously. Letter to mi.. o Sproul, President of the Federal Reserve Bank Yor reading as follows: afaim..:Reference is made to the Board's letter dated ClY 27, 1948 in pursuance of which your bank has the review of interlocking relationships in which ticz °ard or your bank has heretofore taken the posi,hat the organization involved was not affected thet-c .,,t_i°n 32 of the Banking Act of 1933 on the ground orb,''e extent to which it was engaged in the types eierit'siness described in such section was not suffimake it primarily engaged in such business. 1?ith: 0,r 4cases submitted by your bank in connection it' s review have been given careful consideration Yolir 13 appears, on the basis of the information which A411, de i.nk has submitted that there are four cases in as f strict in which the statute may be applicable, 1. rect Mr. Albert M. Austin, as President and Di°f The First National Bank of Sparkill, Praze° i rk, and as a special partner in the firm of duPont Co., New York, New York. S. M. Brewer, as a Director of the First n Bank of Herkimer, Herkimer, New York, and esen1Ploy„ in theUtica office of Carl M. Loeb, & CO., New York, New York. Mr. Robert W. Kean, as President and Director said. Zillgcton National Bank, Livingston, New Jersey, Partner of the firm of Kean, Taylor & 4.°r, New York. , r' Henry A. Colgate, as a Director of the l'1(3rr's-F14 eala , 1' -- 14n Trust Company, Morristown, New Jersey, s Ptner in the firm of Wood-Struthers & Co., t Yorkn, New York. the case involving Mr. Austin, it appears that fi Of Francis I. duPont & Co. has been active in 1 k oirD t.„" 8h3A8 -3;:.11e urderwriting and distributing business during the tlin four years, its dollar volume of such business for $1:years 1944 to 1947, inclusive, being $9,042,086, till598,796; $22,742,840; and $20,475,877, respectively; cloii the Percentage ratio of such dollar volume to the iair,ar volume of the firm's total business for the years sl:Uestion was 3.559%; 3.178%; 4.815% and 5.787%, revolicaRtlivelY; that the percentage ratio of such dollar t° the dollar volume of all underwriting engaged alad Y all firms in the country was 0.49%, 0.35%, 0.53% rirz°;46%, respectively; that the gross income of the ili gil r°111 underwriting and distributing for the years tl,i-estion was $69,758, $109,984, $167,495, and )157, or su respectively; and that the percentage ratio tz clovl_ income to the firm's total gross income was .208 843Per4,7' 2'175%, 3.297% and 4.603%, respectively. It that in 1946 the firm participated as under125"sr or d istributor in 267 separate issues and in EtitIlsorate issues during 1947. It also appears that, VIElsi,76" in its advertisements the firm does not em: self 'e underwriting or distributing, it does hold itbusin : Ilt as being in the underwriting and distributing 1.11c1 ;:ss and it does maintain a separate underwriting ,..stributing department. lan Mr. Brewer's case, the information which your lioeb,; b s submitted indicates that the firm of Carl M. ezd cu—",.°ades & Co. has been active in the underwriting d-Lributing business during the past four years, to 14 ) rt1ar volume of such business for the years 1944 inclusive being $5,386,589, $15,8o6,646, 1,eree17, ,808, and $13,095,143, respectively; that the NAlz;'age ratio of such dollar volume to the dollar of all underwriting in the country for the years i5t1°r1 was 0.29%, 0.41%, 0.56% and 0.29%, respectivei'Ntcli”: the gross income of the firm from underwriting 291 -sLributing for the years in question was $112,954, 41e l'„?,34, $509,827, and $262,593, respectively; and that Rros's'I'eentage ratio of such income to the firm's total 67%, illsome for the years in question was 2.5%, 4.3%, t5e;3%4 respectively. The firm participated as distributor in 116 separate issues in 6 . In 1945, .194 in 1946, and 112 in 1947. More1 t-- 'irm maintains a separate underwriting and k?4,-0 r, 4 Z /23/48 -4t sributing department, it holds itself out as anci being the i u in nderwriting and distributing business, ci,s advertising it and underwriting emphasizes its 4-stribut4 _ g In business. b ' "l ean, Taylor & Co., of which Mr. Robert W. Kean ' ill general partner, appears also to have been active diPe Underwriting and distributing business since such bla llg the Past four years its dollar volume of : 11ess was $4,580,836, S14,348,662, $14,817,287, 213,934, respectively. The percentage ratio of s ' rlesidollar volume to the firm's total gross busi8.J. f0r the four years in question was 4.62%, 8.95%, or s Q% and 11.5004, respectively. The percentage ratio clexliir dollar volume to the dollar volume of all unthe,—ing engaged in by all firms in the country for 0.2ar6 in question was 0.25%, 0.37%, 0.34% and 1:111"dlt:is,lirtively. The gross income of the firi!1 iting and distributing for the years in spect j °11 was $2 8,209; $85,450; $29,194; $45,918, reto th4'llalY, and the percentage ratio of such income Eirm's total income was 7.45%, 12.83%, 5.33% lillich';264, respectively. The number of issues in tribili e firm participated as underwriter or die641 66Or for the years in question were 49, 86, 101 etaphaa respectively. Although the firm does not 1/etti-sze Underwriting or distributing in its adand does not maintain a separate under1101c1 7 or distributing department, the firm does out as being in the underwriting and 7-r'uting business. t t, l 11 the case involving Mr. Colgate, it is stated 'lcipa71:: firm of Wood-Struthers & Co. 'does not par1X1 u nderwriting -- with the exception of an ?nal 'Municipal issue -- but does join selling els1bs eoi* 4 This is one of the classes of business de11)e n; ; 11 section 32. The dollar volume of this ousiness for the years 44 to 1947 is stat4077 $9, 730,000, $17,940,0009 , $15,100,000 and d respectively; the percentage ratio of (l'itilic %11 a)-`lar volume to the dollar volume of all underf-115 ,-itl 0 i, the country for the years in question was , 0.35% and 0.63%; its gross income from "ass for the years in question is stated to 4, 8/23/48 -5sH t be $64,400; $151,500; $192,300, and $160,000, reit'eetivelY, r, and that the percentage ratio of such to the firm's total gross income for the till 's in. question is 8%, 17%, 30% and 23%, respecdi # elY• The firm holds itself out as being in the s'l'ibilting business. has „, °1.1 the basis of the information which your bank it' thomitted and particularly the facts stated above, zareePears that the firms mentioned above may be Tprii 3r engaged' in the types of business described in sectl 32. It will be appreciated if your bank will te-e the concerned of the Board's tentaito lisiews With respect to their particular interlockthZ t relat4-, -onships, and. advise them also that before it wi lj c) a• expresses a definite opinion in the matter afford each of them an opportunity to present sioi:waitional information to your bank for transmisIzi tht ei° and consideration by the Board of Governors. vent any of the individuals do not wish to Nrsi),„, -! thet-t ,L1le matter further, you may suggest to them their.' .eY 1 take such steps as may be necessary to bring lte sta tr el .ocking relationships into conformity with it i, .,:lere are three situations in your district which the ;ielt should be reviewed by your bank as soon after tion ria ncl Of this calendar year as the pertinent informa!„/Decome available. These firms are Shearson, lia Co., Stillman, Maynard & Co., and A. M. Kidder Co. It Wj11 1t be noted that the dollar volume of undereach of these firms averages between $4,000,000 & 4_ Co -8 .7,°°)°0 4 0 a year and in the case of Stillman, Maynard Sbu A. M. Kidder & Co. the percentage of income from haverages 7% and. 3• a year, respectively. 1e . - 13e appreciated, therefore, if your bank will reth Cases as indicated above and submit the into the Board. "on ;Jill the basis of the information submitted by your 11. (1 the other firms in your district, it appears : 141t ° : tOf tht 4°4 3-214 i elli: fil within the prohibitions of sec- S S Approved unanimously. 8123/48 -6Letter to Mr. Gidney, President of the Federal Reserve Bank Cleve 11111:1., reading as follows: Je "Reference is made to the Board's letter dated hari silEtrY 27, 1948, in pursuance of which your bank 118.de a review of interlocking relationships in 1 11. the Board or your bank has heretofore taken the re ifti°n that the organization involved was not afby Section 32 of the Banking Act of 1933 on ilitIgir°und that the extent to which it was engaged was etYPes of business described in such section iZc .ient to make it primarily engaged in siichlluiss yola "Of the four cases which your bank has reviewed, IAL8were advised in the Board's letter of April 22, tite Ilat the statute did not apply at the present E. Webster Harrison as partner of Harrison lloost'llY) Cincinnati, Ohio, and Mr. Ceylon E. Hudson, len el') Ohio, and it appears also that the statute ) Itl,41)Plicable at this time to the services of Nyt ° 11'jert Patterson as President of Greene & Brock, /1 '24i0, and as Director of The Peoples Bank of )36.Y.t° 0CL'aYton, Ohio. ver, the information which your bank has 11.brilitt citriat: ' - 4 on the firm of Westheimer & Company, CinIlltte °hi°, is not complete enough to base a def'onclusion as to whether this firm is primarily thisged in the business described in Section 32. In ' 31encinliection, it is noted that during the past three the firm's dollar volume of underwriting 1)1Ittcl:tl'ibUting has averaged over $1,000,000 a year, information which your bank submitted did not the gross income of the firm from underwriting Illsl'rtbuting and the percentage ratio of income and distributing to total gross in1the,firm. It will be appreciated, therefore, will make another effort either through ' 104 dence or consultation to obtain this informaif 4. ELL all possible and submit it to the Board." i tlrba — years Approved unanimously. 30.8 s/23/48 -7Letter to Mr. Young, President of the Federal Reserve Bank -41go, reading as follows: Reference is made to the Board's letter of Jan: th;1 , 1948, pursuant to which your Bank reviewed the 'locking relationships under Section 32 of 4,1:1111king Act of 1933 in which the Board or your nas t. heretofore taken the position that the orlon involved was not affected by the statute ilith ground that the extent to which it was engaged nes of business described in such section was 1314i-‘klficient to make it primarily engaged in such On the basis of the information contained pe..,'2"Ilr letter of May 7, 1948, and enclosures, it ap11T that the firm of Strauss & Blosser, Chicago, blIEZ 8/ may be primarily engaged in the types of 11,6-1-'8 described in Section 32. Mr. L. A. O'Donnell 1°osa. representative of this firm in Gary, Bank InGe.r.„' and , Savings and Trust Gary director of the V) Indiana. 61,141 A:it 4!.PPear5 that the dollar volume of underwriting the Ttrlbuting engaged in by Strauss & Blosser for $5,73 : 77-Etr1.8 ,1945 to 1947, inclusive, was $3,663,598, l'erer°9 and $4,228,469, respectively; and that the toth' 4ge ratio of the dollar volume of this business e dollar volume of the firm's total business was illcora .1%, and 16.7%, respectively. That the gross 'Lr°n1. underwriting was $293,202 or 38.74% of its total ' 1..°ss income for 1945; $358,226 or 39.75% of its t ' l.088 income for 1946; and $418,220 or 61.72% of ar:;: .l1 gross income for 1947. The firm maintains a ;- Underwriting department, holds itself out as 14e-1„;T the Underwriting business, and in its advertis-rasizes its underwriting and distributing business 114z the basis of the information which your bank 1t lap-unlitted and particularly the facts stated above, ipritip e ee'rs that the firm of Strauss & Blosser may be se-Ii:1Y engaged' in the types of business described 32. It will be appreciated if your bank 8e Mr. O'Donnell of the Board's tentative -jr4 i ., ie/i8%1. e.d17.7`'il respect to his interlocking relationship, -se him also that before the Board expresses a N L -8" 0,ct /o fillite opinion in the matter it will afford him an io;,, tullitY to present any additional information to 130; -,'allk for transmission to and consideration by the of Governors. In the event Mr. O'Donnell does that _811 to pursue the matter further, you may suggest 11e take such steps as may be necessary to bring „,' interlocking relationship into conformity with the catute Joii,...4_%11 the case involving Illinois Securities Co.,of the-L"'' Illinois, it appears that the dollar volume ye '1i-delwriting and distributing of this firm. for the $25ns 4r 1944 to 1947 inclusive, was $500,000, $75,000, and $-70,Q,O respectively; and the percentage he dollar to .62' 1 the e of its underwriting business 19% volume of the firm's total business was qz,e,t7% '10% and 18% for each of the four years rea1ster-,.13\l'elY• The gross income from underwriting and cora ilig was $17 500 or 16% of its total gross inforeig ! ) 1944; $3,750 ' or 4% of its total gross income 1.946-j' 5; $12,500 or 7% of its total gross income for 1947' 811 ,rd $20,275 or 14% of its total gross income for ririn s,.f,'t is also noted that this firm is the largest rortat— its kind in Joliet. It is felt that this inis not sufficiently conclusive to enable the Resterl ' ° eXPress an opinion at this time. It is sug . a.ctil;.`i_therefore that underwriting ur bank review the your l e4ortorleras,itehseof this firm for the calendar year 1948 as Pertinent information may become available t() th thee end of this year and submit such information t%ill0seicl-• e If you wish you may advise Mr. Peyla, rlocking relationship is involved, that the isi_n°t in a position to express an opinion with et sA) his interlocking relationship at this time. Approved unanimously. th, Letters to the Honorable Preston Delano, Comptroller of relleY 'Prepared c)11 in accordance with the action taken by the 20, 1948, and reading as follows: 6kId 8123/48 -9"Governor Szymczak has told the Board of his ent co nversation with you on the subject of otrelles of Bank of America N. T. & S. A. and of Illetr national banks in the Transamerica group. tilathe co nversation Governor Szymczak promised stt, the Board would write you regarding its po1°11 and its interest in this matter. esta:The Board believes that the approval of the tam, lishment of domestic branches by any of the vC-4 of the- .Tr ,,anSaMeriCa group, reo .ardless of frot ;:r such or result offices new are branches he c Int into branches, banks existing onversion of be vhich considered incompatible with theTransamerica proceeding the Board has instituted against b '44)rat )1'0a.,11 lon under section 11 of the Clayton Act. -LY stated, the issue involved in that proceedthe legality of the expansion of the Transthat anking group in the West Coast area: l!n.”1 in%Ilsi;i7lle is decided, the Board feels that it is et,p Xlit for any Federal agency to approve further of the group in that area by any method. ecordingly the Board, while fully mindful of collci'lscretionary authority, urges that pending th 41)1,4011 .-°n of the Clayton Act proceeding you withhold 1)5- ilsile t Of the establishment of any de novo branches 114cle;"'°0-al banks in the Transamerica group, as we 4.1.443.1s ,te d You have been doing with respect to appliNza f°r the establishment of branches resulting "'e conversion of existing banks. refer the conversation with Governor Szymczak you to the matter of foreign branches of Bank i:ea N. T. & S. A. The Board believes that ' f14:reer a marked distinction between foreign and st lit. -Le branches insofar as the question of monopot4lis (c,013,rking conditions in the West Coast area of 7 7 1,'41trY is concerned. 'Icie/,s--t-e Board regrets that there has been any misillg of its position with respect to the eNbl klerie-Qument of branches by banks in the Trans,,,, °u1D) and hopes, in the interest of greater ,l' etei:vgr —Iless of Federal authority in the banking ) that agreement can be had in these matters. IT i 7 3.11_ 8123AB -10Since the Transamerica group includes insured t:einber banks, the Board is conveying its views in zatter to the Chairman of the Federal Deposit slirance Corporation." szyzenin Your recent conversations with Governor regarding the establishment of branches to: 10 11s in the Transamerica group there appeared a difference of view as to the present status the Collp„t ricIlicY agreed upon in February 1942 by the roller of the Currency, the Federal Deposit Inorjerse Co rporation, and the Board regarding expansion ' - t group. .ice "In the conversations, it appeared that your ofIrtillath4c1 assumed that the understanding had been terand that the Board was of the same view. While tile 6" has been aware of the fact that the establishranches by banks in the Transamerica group has itseis alt r°ved bed in some instances, the Board has considered 8.Qt by the understanding and will continue to !"°rdance INtb: with its terms until such time as it the t erminated or modified after consultation among ;',-.aee agencie5. kiNtla.trle are writing this letter to obviate any possible et,rstending as to the Board's position in this mat- Approved unanimously, with the - Lilderstanding that copies of the "Letters would be sent to the HonorMaple T. Earl, Chairman of the eral Deposit Insurance Corporatip 413Droii Secretary.
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