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1589 A meeting of the Board of Governors of the :rederal Reserve 4ftem was held in Washington on Monday, December 18, 1939, at 11:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Szymczak McKee Davis Draper Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman The action stated with respect to each of the matters hereIlietttar referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the -4-4-1 Reserve System held on December 16, 1939, were approved un- Telegram to Owen D. Young, Chairman, General Electric Com, New York, New 'York, reading as follows: "Confirming Chairman Eccles' telephone conversation with YOU this afternoon, Board has designated you as Chairand. Pederal Reserve Agent at Federal Reserve Bank of New York for year 1940 and has fixed your compensation as leh on same basis as approved for 1939. It will be appreciated if you will advise by collect wire of your acceptance." Approved Unanimously. Telegram to Beardsley Ruml, Treasurer, R. H. Macy & Co., Inc. 4" "cp New York, reading as follows: "Board of Governors has appointed you deputy chairman %"4 Federal Reserve Bank of New York for year 1940 and will 1590 12/18/39 -2- "be pleased to have your acceptance by collect telegram." Approved unanimously. Letter to Mr. Logan, Vice President and General Counsel of thePederal Reserve Bank of New York, reading as follows: "Receipt is acknowledged of your letter of December 1, 1939, enclosing the bill of Covington, Burling, Rublee, Acheson & Shorb for 0,500 for legal services rendered from December 1, 1938 to October 6, 1939, in final disPosition of the case of British-American Tobacco Company, Ltd. v. Federal Reserve Bank of New York. There is also 1/.1cluded in the bill an additional amount of 030.08 for dlsbursements incurred in connection with the case. "The fee bill is accompanied by a summary of the na,Ure of the work in connection with the appellate proceed41ag8 in the Circuit Court of Appeals and brief in opposition to certiorari in the Supreme Court of the United States. "It is understood that the board of directors and General Counsel of the Federal Reserve Bank of New have "Proved the bill and request its approval by the Board of varnors of the Federal Reserve System. "You are advised that the Board approves the payment ' lequested of a fee of 0,500 and reimbursement of expenses °f 40730.08. "The fee herein approved, together with the fees hereItiZr e:,aui rzed for payment to the same firm in the same , the total of fees payable and approved in this eesa to the sum of ;-;;65,175." Approved unanimously. Letter to Mr. Clerk, iirst Vice President of the Federal Re41.1r; 1 t auk of San Francisco, reading as follows: "On page 16-(a) of the report of examination of the Tr ' 10Y Loan and Trust Company, Salt Lake City, Utah, are list d a number of liability accounts which were included 1, t e-J.: Other Liabilities' of the bank's condition report for lle 30, 1939, but which the examiner concluded should : 11 been reported as 'demand deposits'. As indicated on 1-(b) of the report of examination, the examiner classed the accounts as demand deposits in his statement of C 1591 12/18/39 assets and liabilities on page 1 of the examination report. "On reference to the condition report of the subject bank submitted as of October 2, 1939, the first call date following the examination, it is noted that the bank apparently reported all of the items in question as demand dePosits except an item designated as 'Accrued brokerage' on Page 16-(a) of the examination report which in the October 2 '1939, condition report is designated as 'Accrued insurance brokerage (not due)' and is included in 'Other liabilities'. It is eUggested that the bank be advised to include the account in demand deposits in future reports, in accordance with the examiner's classification, unless information now !vailable indicates that that is not the proper classifica"mn, in which case your advice and recommendations will be appreciated. "In this connection, it is noted that the bank includes la 'Other liabilities' of its condition reports an item desas 'Uncompleted building loans', amounting on October '1939 to 423,193.23. The examiner also included this item n°ng 'Other liabilities' in his statement of assets and liaFi: io l Ityon 1 of the report of examination. In a letter 1939 addressed to Mr. Sonne, a copy of which has "furnished the Board, the bank described this account as fol Ulows:NCOUPLETED LOANS bee"This is the largest heading in the liability schedule „ ause it has to do with building loans, which are now in ' 4e most active season of the year. Loans for building pur?ses are usually completed before any work is commenced and Proceeds paid only as the building progresses. Showing cois as a liability provides a more thorough control of the : .vancements on building loans, although in this case it !?'eates a fund which would ordinarily not be found in a bank :tatement. Another method, which we would not consider as a:fe in operating this account, would be to only enter the thebUal payments on construction loans into the loan account, sbY eliminating this uncompleted loan account. The matilltY of these loans are Federal Housing Title II construemortgages which we have made on a brokerage basis at tocu a small unprofitable margin that we would not be inclined a continue such business if this were technically regarded as dePosit. Ito "The above quoted description of the account in question ' ' t eates that the bank has not actually credited the borrowern - accounts with the full amounts of the building loans, and p 1592 12/18/38 "Presumably the borrowers are not required to pay interest on the unadvanced portion of such loans. If so, it would seem that the unadvanced portion should, in so far as condition rePorts are concerned, be deducted from the face amounts of the notes and only the amounts actually advanced included in 1°ans. In so far as its own books are concerned, it is, of course, entirely proper for the bank to record the transactions in the manner it is now doing. It is suggested, t .herefore, that the bank be advised to show such loans net 1 1311 condition reports, unless in your opinion there appears to e SO]ne objection therete, in which case your advice and rocorziendation will be appreciated." Jvproved unanimously. Letter to "The Midland National Bank", Midland, Texas, read- "This refers to the resolution adopted on October 27, by the board of directors of your bank, signifyink; the "ankt e desire to surrender its right tb exercise fiduciary P°wers heretofore granted to it. "The Board, understanding that your bank has never actuni, accepted or undertaken the exercise of any trust, i;e issued a formal certificate to your bank certifying that 130.18 no longer authorized to exercise any of the fiduciary piel's covered by the provisions of section 11(k) of the jwaral Reserve Act, as amended. This certificate is enclosed 4erewith. 1 this connection, your attention is called to the fact that," under the provisions of section 11(k) of the Federal sillrve Act, as amended, when such a certificate has been ist, ' e IV the Board of Governors of the Federal Reserve System ' t01 a national bank, such bank (1) shall no longer be subject 01, the provisions of section 11(k) of the Federal Reserve Act the regulations of the Board of Governors of the Federal to-rye System made pursuant thereto, (2) shall be entitled 1108 11.7e returned to it any securities which it may have detiolted with the State or similar authorities for the protecIf private or court trusts, and (3) shall not exercise at , 4( the powers conferred by section 11(k) of the Federal errIrve Act, except with the permission of the Board of GovOf the Federal Reserve System." Approved unanimously. 1593 12/18/39 _r_ Memorandum dated November 25, 1939, from Governor McKee l*eadiag as follows: . "At its meeting April 22, 1938, the Board requested that I review the conditions of membership then being prescribed by the Board and submit to the Board a recommendatimn as to revisions which I felt should be made therein. "This action followed a decision to modify the policy With respect to the requirement for eliminations of deii securities (so as to make the policy consistent rith the proposals which the Board had under consideration with respect to a revision of examination policy) and Was in accordance with my suggestion that such a general review be made. "In the recent revision of Regulation H, standard conmembership numbered 4 was amended to conform with e comparable requirements contained in Regulation F re14ting to trust powers of national banks, and I now recommend that no further action be taken with respect to a 1 4:rision of the standard conditions of membership and that : 14e matter be removed from the monthly statement of unfinlshed business. "It will be recalled that in the fall of 1935 the standconditions of membership were greatly simplified and relueed from 15 to 3 in number, with 3 additional conditions 11 ease of banks exercising trust powers. "Representatives of the Division of Examinations and of s,,Lsells Office have considered a further revision, but it 117.1s their consensus that it would be preferable to have proi leions of a number of conditions of membership incorporated the law, but that until such legislation could be enacted, the Present standard conditions should be retained. so "The only two conditions which might be considered by 2 1e as unduly restrictive are condition numbered 3, which °hibits a bank from engaging in the sale of real estate ()tans (mortgages covered by insurance under the provisions th.the National Housing Act are specifically exempted from 13a Prohibition), and condition numbered 6, which requires "which deposit trust funds in the banking department tou e,,seoure such deposits in the same manner and to the same s : t"ent as is required of national banks. I am not prepared tilis time to recommend modification of either condition." r Z Approved unanimously. Thereupon the meeting adjourned.
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