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1104 A meeting of the Board of Governors of the Federal Reserve Systelawes held in Washington on Thursday, August 5, 1937, at 11:30 a. PRESENT: Mr. Mr. Mr. Mr. M• Eccles, Chairman Szymczak McKee Davis Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman Consideration was given to each of the matters hereinafter referred to etila t he action stated with respect thereto was taken by the Board: erEa The minutes of the meeting of the Board of Governors of the FedRes el."76 System held on August 4, 1937, were approved unanimously. Telegrams to Kr. Walden, First Vice President of the Federal Peserve Bank of Richmond, and Messrs. McAdams and Sargent, Secretaries of the Federal Reserve Banks of Kansas City and San Francisco, respectively, that the Board approves the establishment without change by the biltics today of the rates of discount and purchase in their existing s. Approved unanimously. Memorandum dated August 5, 1937, from Mr. Morrill recommending tte 11?1115111tInent of Mr. Umberto F. Salvetti as a porter in the Board's quiding, With salary at the rate of ".1,080 per annum, effective as 4%4 48 his services may be required and subject to his passing satis' .017,11 the usual physical examination. Approved unanimously. Memorandum dated August 4, 1937, from Mr. Smead, Chief of the Bank Operations, recommending the appointment on a temporary 1)44 ror period of three months effective as of August 10, 1937, of 1105 8/5/37 141' 'Th°1118-s P. Cribbins as a statistical clerk in the Division, with 4-417 at the rate of(‘435 per month. Approved unanimously. Memorandum dated August 5, 1937, from Mr. Morrill recommending the t_ 4-an6fer, effective immediately, of Lafayette Washington, Rutledge Wheela r and William E. Pinn, messengers, to duty as porters and laborers 444r +1 fle building manager at the Board's new building, with no change in the PreRp + --nv salaries of Washington and Wheeler and with salary at the rate of 1- 1080 per annum for Pinn effective as of August 15, 1937. The ttleniorand also recommended the appointment of James H. Newton and Jerry t. Williams as porters and laborers in the new building, each with salthe rate of 113r be l,OO per annum, effective as soon as their services required after having passed satisfactorily the usual physical eZel7liflation. Approved unanimously. There was submitted a recommendation from Messrs. Spurney and tTano +, valet the following persons, who had been selected in accordance 14th th e authoritY Eranted by the Board on July 12, 1937, and who had P44ea satisfactory physical examinations, be appointed as charwomen in tiae "Qterd's new building, each with salary at the rate of 50V per hour, ere eetive as of the dates shown: 13earl Johnson t. L ibbie L. Spicer s. Madalena Bertolini Clara Cooke IVII%o S 4/% arah F. Corbin m ' -.41,&, Alete p Carroll ita Rucker & August 5 it ft it tt If Mrs. Mrs. Mrs. Mrs. Mrs. Mrs. Mrs. Mrs. Josephine Paradise August 5 Frances I. Miller Mary M. Diegelman Lulu Mae Griffin Eunice Lamm Mabel L. Jones Margaret L. Sargent Lillian Schroeder Approved unanimously. 1106 8/5/37 -3Letter to the board of directors of the "Citizens State Bank", C°111111bia CitY, Indiana, stating that, subject to the conditions of membersh4 "4P numbered 1 to 6 contained in the Board's Regulation H and the followi ne special conditions, the Board approves the bank's application re'rZe rthershiP in the Federal Reserve System and for the appropriate 4c)114t of stock in the Federal Reserve Bank of Chicago: SUoh bank shall make adequate provision for depreciation in its banking house and furniture and fixtures. Within one year from the date of admission to membership, such bank shall increase the aggregate of its capital and surplus by not less than $50,000. Prior to admission to membership, such bank, if it has not already done so, shall charge off or otherwise eliminate estimated losses of $1,724.65, as shown in the report of examination of such bank as Of April 12, 1937, made by an examiner for the Federal Reserve Bank of Chicago." Approved unanimously, together with a letter to Mr. Schaller, President of the Federal Reserve Bank of Chicago, reading as follows: pro "The Board of Governors of the Federal Reserve System apCitvesin the application of the 'Citizens State Bank', Columbia 811b y ' i --diana, for membership in the Federal Reserve System, maiJect to the conditions prescribed in the inclosed letter or :/1. You are requested to forward to the board of directors el0"48 institution. Two copies of such letter are also inOne of which is for your files and the other of which one Pillaers requested to forward to the Director, Department of ItatiZal Institutions of the State of Indiana for his inforlil, p )een noted that in the event the bank completes zZet s t its attention will be called to the fact of .0 ,8svings deposits which do not conform to the provisions rtiEilitt"e Board's Regulation Q should be carried in some other ttria0e, and a request will be made that within a reasonable - "he loans which are in excess of the limits prescribed 8/5/37 -4"by State laws be reduce d to within such limits. "It is understood that the laws of the State of Indiana Prohibit the bank from pledging its assets as security for !Illst funds deposit ed in its banking department and that l'ust funds so deposited are preferred claims in event of -Li quidation of the bank. Standard condition of membership l Illumbere d 6, however, has been prescribed in order that its ' sr°71-sions may be invoked at any time in the future if necessary, You are, of course, authorized to waive compliance With the condition until further notice in accordance with the „,gen erl authorization previously granted by the Board ""a which you are famili ar.” Letter to Mr. Fletcher, Vice President of the Federal Reserve 4 'taC Of C leveland, reading as follows: a "Receipt is acknowledged of your letters of July 27 prld July 29, 1937, with regard to the proposal of the Trust Company, Pittsburgh, Pennsylvania, to rno take over 51 shares of stock of the Dormont Savings and ;rust CamPany __, Pittsb urgh, Pennsylvania, from the 'Alexander • Robinson and Louis H. Gethoefer trust'. co It is understood that the Peoples-Pittsburg h Trust cZahY is the sole beneficiary of the trust, and that, exfor a few odds and ends of securities, including the 51.'" , th snares of stock of the Dormont Savings and Trust Company, th!,trlist has been fully liquidated. It is understood also eirt, the Peoples-Pittsburgh Trust Company now owns 1,553 th res of the total issue of 2,500 shares of the stock of : !!!°/rmont Savings and Trust Company, that the transfer of the be °1 shares to the Peoples-Pittsburgh Trust Company will Aotill , the nature of a liquidating dividend, and that it will ue necessary for the member bank to use any of its funds the°ner assets in order to acquire such 51 shares. Upon the iv ,asie of this understanding, it does not appear that 23A'r0130sed transaction will be in violation of section vi,or the Federa l Reserve Act or section 5136 of the Reth:eTc.1, Statutes or of any condition of membership to which " oPles-Pittsburgh Trust Company is subject. The Board, acji:f Ii e, will interpose no objection to the proposed trans- Approved unanimously. Nkt Letter to the "Ameri can Holding Corporation", Chicago, Illinois, 4 as f011OWS: 1108 8/5/37 -5- "This refers to the application of your corporation or a voting permit entitling it to vote the stock which it °Ilns or controls of 'American National Bank and Trust ComPallY of Chicago', Chicago, Illinois; to the general voting Permit issued to your corporation on January 4, 1935; and t...0 recent correspondence relating to the holding company afriliate status of your corporation. It Company _ is „ understood that American National Bank and Trust 01 Chicago has outstanding 10,000 shares of common stock and 6,500 shares of preferred stock; that 9,281 shares °r cannon stock and 6,500 shares of preferred stock were voted at the preceding election of directors; and that your ecrPoration owns or controls 6,250 shares of the cammon !_tQck. On the basis of such facts, it does not appear that ,111" corporation is now a holding company affiliate of al371.cen National Bank and Trust Company of Chicago for PUrposes under the definition contained in section 2(c) vz the Banking Act of 1933. ch " However, it is understood that, in view of proposed —TIgaa in the capital structure of American National Bank z Trust Company of Chicago which may result in your cor"ion again becoming a holding company affiliate of such b por 2.it is desired that the Board determine that your coratl°n is not engaged, directly or indirectly, as a busine, ' b 8 in holding the stock of, or managing or controlling, pa allkel banking associations, savings banks, or trust coraAc tee, within the meaning of section 2(c) of the Banking c)r 1933. In view of the fact that it is understood that , you /33423 : - corporation does not own or control any stock of, or age or control, any bank other than American National and Trust Company of Chicago, the Board has made such Irue:te ; i rm nation with respect to your corporation. If, howYour corporation should at any time own or control a mcre'ntial portion of the stock of, or manage or control, to th"lian one bank, this matter should again be submitted riehr Board for its determination. The Board reserves the t° make a further determination of the matter at any 11 the basis of the then existing facts. pro,,,,Aa You know, section 2(c) of the Banking Act of 1933 40t-!'"a that the term 'holding company affiliate' shall pedeinclude (except for the purposes of section 23A of the ai Reserve Act) any organization which is determined bY j 1311;? Board not to be engaged, directly or indirectly, as in b nks, holding the stock of, or managing or control0014m,,a banking associations, savings banks, or trust hEis s- In view of the fact that such a determination ' een made with respect to your corporation, the general g 2 1109 8/5/37 -6- voting permit heretofore issued to your corporation is no _()Iager effective. If your corporation is later determined olr the Board to be a holding company affiliate subject to the Provisions of law relating to voting permits, it will be necessary for your corporation to obtain a new voting permit before baa stock which it then owns or controls of any subsidiary member bank lawfully may be voted." Approved unanimously, for transmission through the Federal Reserve Bank of Chicago. Letter to Mr. Sargent, Vice President of the Federal Reserve Bank or San F rancisco, reading as follows: "Reference is made to your letter of July 26, 1937 with Which You inclosed a copy of a letter from. Mr. E. M. Wright, , „4 rz,,onal Bank Examiner, Portland, Oregon, presenting an inlu'lrY with reference to Regulation U. a "It is understood that the question presented involves Th,lesell that was made prior to May 1, 1936 for the purpose of : rchasing or carrying registered stocks and was secured by :uch stocks. After this date cash was substituted for an equal market value of the stock collateral, and later this ' wes drawn on the deposit of an equal market value orb with c registered stocks. The question raised is whether the cash can be considered as collateral or whether it should be preidered that the deposit of cash is the liquidation of a woT,c/h of the old loan so that the withdrawal of the cash "u constitute the making of a new loan subject to the regulation. 1"You refer to the ruling forwarded with the Board's letof& July 20, 1936 to the effect that a cashier's • to -7;' might be treated as collateral for a loan made prior aY 1) 1936 and that, therefore, securities might be subt„,• "Uted for the cashier's check without a new loan being ; tar that would be subject to the regulation. It is the : lir of the Board that the same princip le applies to the as 2. 1,1t case, and that it would be proper to treat the cash qua"-Llateral for the loan so that when the cash was subselatntlY withdrawn there would be merely a change in the color a loan originally made prior to May 1, 1936 tio• n-r than the making of a new loan subject to the regulaarta , n1A1_1 thiS connection it is to be noted, of course, that Jimendment No. 3 of Regulation U becomes effective on bar 1, 1937, loans made before May 1, 1936 will be '"Ject to the regulation and that thus the effect of treatcash altered as collateral for such a loan will be considerably If cash should be held as collateral for a loan 1110 8/5/37 -7"subject to the regulation, under the first paragraph of section 1 of the regulation the cash would obviously have a much higher loan value than stocks and, therefore, could not be withdrawn against an equal market value of stocks if the 0 tharawal would create or increase an excess of the loan " 7 the maximum loan value of the collateral." Approved unanimously. Letter to Mr. Rounds, Vice President of the Federal Reserve Bank °I' New York, reading as follows: refers to your letter of June 29, 1937 presentlflg the vue question whether member banks in New York City may, : 11 comPuting required reserve balances, deduct from their elvsa demand deposits matured bonds and coupons payable in at..,y0rk City which have been received by them and which are t441 in the process of collection. This involves the question , 1 whether such matured bonds and coupons may be considered or cash items in process of collection' within the meaning sacti°n l(g) of Regulation D so as to be deductible from --°saodemand deposits under section 2(b) of the regulation. banks Pram your letter it is understood that New York City customarily give immediate deposit credit, or one day ;ITrred deposit credit, for matured bonds and coupons payth, !in New York City whether receive over-the-count d er or Ugh the mails from their depositors and bank correspondr:' 88; that such items are customarily received from corterPcIrldent banks in cash letters; that after such cash letarea have been proved, the matured bonds and coupons therein cordsorted according to paying agents (and thereafter acti, ing to issues and denominations) preparatory to presenta.4; that where the paying agents are members of the New thr„C aaring House Association the coupons are cleared seni' ,gu the Clearing House, but the matured bonds are prenot ed over-the-counter; that where the paying agents are cout :" : hars of the Association, both the matured bonds and ; ns are presented over-the-counter; that in the case of ite 1.a0 cleared through the Clearing House the presenting bank ele ves a due bill on the day of clearing which due bill is in ilried on the following day in the check clearings; that case of items presented over-the-counter to the payin, : gent, a clearing house check is received the same day dey7Yment for the items, which check is cleared the next r1lid that the due bills given for the coupons presented , thro tor `Jh the Clearing House and the clearing house checks given he h°nds and coupons presented over-the-counter are r s/5/37 "themsel ves deductible from gross demand deposits. "It is also understood that your bank handles matured ico°11Pons forwarded by your member banks and direct sending nks as cash items, giving one day deferred deposit credit therefor, and in some instances handles matured bonds on the above basis and in other instances handles matured bonds "non-cash items. We further understand that the questio n Presented does not refer to maturing bonds and coupons. "You are advised that, after considering this matter 14 the light of the facts stated above, the Board of Cover-Jrs is of the opinion that matured bonds and coupons, to , tie extent that they are treated and handled by member banks s cash items substantially in accord with the practic : e de) may properly be included by such banks in 'such u her items in process of collection, payable immediately 2°n presentation in the United States, as are customarily irared or collect ed by banks as cash items', within the 2"anE of section 1(g)(3) of Regulation D, and deducted by ;Th banks from the amount of their gross demand deposits computing their required reserves." Approved unanimously. Thereupon the meeting adjourned. '4 ( )Pte.del,u-aA frkiLL AP Secreta rY. ADDro7o Chairman.
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