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982 A meeting of the Board of Governors of the Federal Reserve System 1711a held in Washington on Wednesday, August 9, 1939, at 11:30 a.m. PRESENT: Mr. Eccles, Chairman Mr. Szymczak Mr. McKee Mr. Morrill, Secretary 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: Memorandum dated July 25, 1939, from Mr. Spurney, Building ger, recommending, with the concurrence of Mr. Morrill and for the r eas0n5 stated in the memorandum, that the Board authorize the ourOf a Dodge passenger car at a cost of $775, and that James 17i14rd Sanderson be appointed an assistant chauffeur in the Office of the Secretary, with salary at the rate of $1,200 per annum, effective 4 Of the date upon which he enters upon the performance of his duties " 'els having passed satisfactorily the usual physical examination. The recommendations were approved unanimously, with the understanding that the 1939 budget for the Secretary's Office, Furniture and Equipment Account, would be increased by an amount equal to the cost of the car. Memorandum dated August 8, 1939, from Mr. Goldenweiser, DI°f the Division of Research and Statistics, submitting the teei tion of V. Lewis Bassie as a senior economist in the Division, 411dre— 'II/lending that it be accepted effective as of the close of 1)141111e on August 7, 1939. Approved unanimously. 983 8/9/39 Memorandum dated August 9, 1939, from Mr. Morrill proposing, with the concurrence of Mr. Goldenveiser, Director of the Division of Research and Statistics, and for the reason stated in the memorandum, that Beverly A. Carter, messenger, be transferred from the office of Governor Draper to the Division of Research and Statistics, with no chan . ge In his present salary at the rate of U,720 per annum, and that 8sat0n Dyson, Boardroom messenger, be assigned to handle the messenger work of Governor Draper's office in addition to his present duties, both effective as of August 10, 1939. The proposed changes were approved unanimously. Letter to the board of directors of "The Antwerp Exchange Bank C°41P44Y", Antwerp, Ohio, stating that, subject to conditions of member81111)numbered 1 to 3 contained in the Board's Regulation H and the followija g sPecial condition, the Board approves the bank's application embership in the Federal Reserve System and for the appropriate " t ka°1111t of stock in the Federal Reserve Bank of Cleveland: "4. Such bank shall make adequate provision for depreciation in its banking house and furniture and fixtures." Approved unanimously, together with a letter to Mr. Fleming, President of the Federal Reserve Bank of Cleveland, reading as follows: "The Board of Governors of the Federal Reserve SysaPproves the application of 'The Antwerp Exchange Bank -°mPanY', Antwerp, Ohio, for membership in the Federal tem n OC) 8/9/39 -3- "Reserve System, subject to the conditions prescribed In the enclosed letter which you are requested to forward to the Board of Directors of the institution. Two copies of such letter are also enclosed, one of which ls for your files and the other of which you are requested to forward to the Superintendent of Banks for the State Of Ohio for his information. "It has been noted that the waiver agreement executed by depositors in connection with the reorganization of the bank in 1934 includes a provision that for a period of five years from the date of reopening of the bank 'any and all funds available for the payment of dividends by said bank' shall be paid to the trustees for distribution to the waiving depositors; and the latest reports of examination, including the report of examination for membership, contain statements to the effect that the net profits Of the bank for the five year period are due the waiving depositors. Since the bank reopened on July 2, 1934, the five year period expired on july 2, 1939, which was Fubsequent to the date of examination for membership. It ls assumed that you will be satisfied that prior to admission to membership the bank has taken the proper steps to fulfill its obligation under the reorganization plan With respect to transfer of earnings to the trustees for the waiving depositors." Letter to the board of directors of "The Waterville State Savings Bank Company", Waterville, Ohio, stating that, subject to e°4diti0n8 of membership numbered 1 to 3 contained in the Board's Regulation H and the following special conditions, the Board approves the is uenk's application for membership in the Federal Reserve System "d ror the appropriate amount of stock in the Federal Reserve Bank °t Cleveland: "4- Such bank shall make adequate provision for depreciation in its banking house and furniture and fixtures. "5. Prior to admission to membership, such bank, if 8/9/39 -4"it has not already done so, shall charge off or otherwise eliminate estimated losses totaling *525.29 as shown in the report of examination of such bank as of June 21, 1939, made by an examiner for the Federal Reserve Bank of Cleveland." Approved unanimously, together with a letter to Nil% Fleming, President of the Federal Reserve Bank of Cleveland, reading as follows: "The Board of Governors of the Federal Reserve System approves the application of 'The Waterville State Savings Bank Company', Waterville, Ohio, for membership in the Federal Reserve System, subject to the conditions Prescribed in the enclosed letter which you are requested to forward to the Board of Directors of the institution. Two copies of such letter are also enclosed, one of Which is for your files and the other of which you are requested to forward to the Superintendent of Banks for tne State of Ohio for his information. "It has been noted that the waiver agreement executed by depositors in connection with the reorganization of the bank in 1933 includes the following provision, among others: 'No dividends shall be paid upon the capital stock of said bank for a period of five years from and after the effective date of this agreement unless prior to that time all restrictions Upon withdrawal of deposits shall have been removed and the certificates of participation in the trust fund paid in full. During said period all earnings of the bank which otherwise would have been paid out as dividends upon its stock, shall be turned over to the Board of Trustees as part of said trust fund and from the information submitted in connection with the application there is no indication that any of the bank's earnings have been turned over to the trustees. It is asslimed) of course, that you have discussed with your counsel, Perhaps with the State Banking Department, the question Of the bank's liability to the waiving depositors for earnaccumulated during the period covered by the agreement, 986 8/9/39 -5- "and that if such a liability does exist it will be properly shown in the bank's reports of condition. However, advice on this point is requested. "The organization papers accompanying the application included a photostat of articles of association containing a provision limiting the corporate existence of the bank to thirty years, a period which has expired. This document was not mentioned in the letter transmitting the application or in your counsel's opinion, but it is understood from the information submitted that it WS not one of the documents filed with the State authorities and we have assumed that it has no effect upon the corporate existence of the bank. However, please discuss this matter with your counsel Prior to the admission of the bank." Letter to the board of directors of the "Bank of Manteca", Manteca, California, stating that, subject to conditions of membership 41111ibared 1 to 3 contained in the Board's Regulation H and the followaPecial conditions, the Board approves the bank's application for 41enthershiP in the Federal Reserve System and for the appropriate amount Of stock in the Federal Reserve Bank of San Francisco: "4. Such bank shall make adequate provision for depreciation in its banking house and furniture and fixtures. t75. Prior to admission to membership, such bank, if it has not already done so, shall charge off or otherwise eliminate depreciation in defaulted bonds, which depreciation amounted to $4,293.75 on date of examination for membership." Approved unanimously, together with a letter to Mr. Day, President of the Federal Reserve Bank of San Francisco, reading as follows: "The Board of Governors of the Federal Reserve Systern approves the application of the 'Bank of Manteca', 9E37 8/9/39 -6- "Manteca, California, for membership in the Federal Reserve SYstem, subject to the conditions prescribed in the enclosed letter which you are requested to forward to the Board of Directors of the institution. Two copies of such letter are also enclosed, one of which is for your files and the other of which you are requested to forward to the Superintendent of Banks for the State of California for his information. "It will be noted that a condition has been prescribed requiring thel bank to charge off or otherwise eliminate depreciation in defaulted bonds, although the amount of the depreciation is shown in the report of examination as being covered by a valuation reserve. According to the statement made in answer to question 8 on Page 7 of the report, the reserve which the examiner has applied to depreciation in securities, both in group 3 end in group 2, was established by the bank against bond Premiums. A reserve for amortization of premiums set up in lieu of actual charge-offs is not, of course, also aPplicable as an offset to depreciation in securities. In this connection reference is made to page 4 of the Instructions for the Preparation of Reports of Condition (Form F.R. 105a) with reference to the treatment of reserves for bond premiums. It is possible that in the ease of the Bank of Manteca the reserve for amortization °f premiums may be found upon analysis to be in excess of the actual needs and that part of it might be appropriately transferred to a valuation reserve or used to make actual charge-offs. "It has been noted that the bank's attention has been celled to the fact that under the provisions of the Federal Reserve Act deposits of a member bank with a nonmember bank are limited to 10 per cent of its own capital and surplus, and it is assumed, of course, that if the institution is admitted to membership the excessive balance in a nonmember bank will be reduced to an amount within the limits." Letter dated August 8, 1939, to "The Merchants National Bank of MithiLletown", Middletown, New York, reading as follows: "This refers to the resolution adopted on September 1) 1938, by the board of directors of your bank, signifying the bank's desire to surrender its right to exercise fiduciarY powers heretofore granted to it. 988 8/9/39 -7- "The Board understands that your bank has been discharged or otherwise properly relieved in accordance with the lav, of all of its duties as fiduciary. The Board, therefore, has issued a formal certificate to your bank certifying that it is no longer authorized to exercise anY of the fiduciary powers covered by the provisions of section 11(k) of the Federal Reserve Act, as amended. This certificate is enclosed herewith. "In this connection, your attention is called to the fact that, under the provisions of section 11(k) of the Federal Reserve Act, as amended, when such a certificate has been issued by the Board of Governors of the Federal Reserve System to a national bank, such bank (1) shall no longer be subject to the provisions of section 11(k) Of the Federal Reserve Act or the regulations of the Board Of Governors of the Federal Reserve System made pursuant thereto, (2) shall be entitled to have returned to it any securities which it may have deposited with the State or similar authorities for the protection of private or court trusts, and (3) shall not exercise any of the powers conferred by section 11(k) of the Federal Reserve Act except With the permission of the Board of Governors of the Federal Reserve System. "Since it may be necessary for you to file a certified copy of the Board's certificate with the State authorities in connection with the release of the securities which you have deposited with them, such a copy is enclosed herewith." Approved unanimously. Thereupon the meeting adjourned. 4pPrOved: Chairman.
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