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( A meeting of the Executive Committee of the Federal Reserve Board 1148 held in Washington on Monday, December 19, 1932, at 11:15 a. PEESEUT: Governor Meyer Yr. Hmnlin Er. Tames Er. Magee Er. Er. Er. Er. Mr. Morrill, Secretary McClelland, Assistant Secretary Harrison, Assistant to the Governor 7Tyatt, General Counsel Siems, Federal Reserve Examiner. The ComrAttee considered and acted upon the following matters: Letter dated December 15, 1932, from the Secretary of the Federal lie a 1'78 Bank of New York, and telegram dated December 16, 1932, from the (kai rrrIQft of the A3deral deserve k of San Francisco, both advising that ect i„ O2 their boards of directors on the dates stated no changes were kqe the banks' existing schedules of rates of discount and purchase. lithout objection, noted with approval. Tblegraphic reply, approved by five members of the Board on Decern ber17, to telegrams dated December 16, 1932, from the Governor of the ,terft, deserve Bark of Philadelphia, renuesting authority for an advance, t4 °rdance with the provisions of section 10(b) of the Federal iieserve 40t, t ° A the 7irst National Bank, Darby, Pennsylvania, in the amount of Q%000 I. P 1)elt a period of sixty days, with interest at the rate of 5 1/c and collateraled by unsecured Promissory notes totaling A9,505; to 111°1" lorris statilv, that the bank has advised that the advance is desired rneet t)a 410Le withdrawal of Christmas savings deposits. The reply stated that ‘ - 1L authorizes the advance subject to the terms and conditions recon tle4gect. Approved. 543 12119/32 72- Telegraphic reply, approved by three members of the Board on Decemht17, to a telegram dated December 16, 1932, from Deputy Governor Rourlis "the eederal Aeserve Bank of New Yolk, requesting authority for the purchase t:44xthe Bank of Nutley, New Tersey, of tax notes of the Town of Nutley, in 411 4ra0lint not to exceed :)200,000; the reply stating that the Board authorizes the PlIrchase with the understanding that the notes meet all requirements of -Lation E except that the net funded indebtedness of the municipality ll'tileede 10% of the valuation of its taxable property and that the amount of 144418 to be offered exceeds 25% of the total amount of outstanding warrants "hb municipality. Approved. Report of the Committee on Salaries and Expenditures on a letter 414teti December 9, 1932, from Ur. T. S. Walden, Controller of the eederal 4411411I'b Bank of Richmond, requesting authority for changes in the personnel 144841fication plans of the head office and Charlotte branch to provide for bet r1' 4!VartlaB lit& to be called the "Reconstruction Finance Corporation-Custodian beDez+,, wAent" and for ten positions in the department at the head office and 414,, voeitions in the department at the branch; the Board's committee recomr. 1141Airit. approval. Approved. Letters to the Federal Reserve Agents at Philadelphia, Dallas and -"maisco, approved by three members of the Board on December 17, 1932, "Igard, respectively, to the continuous reserve deficiencies of the )4et 1Tational Bank of Bangor, Pennsylvania, the First National Bank, Lockney, ttkIte and the First Savings and Trust Company, Colfax, Washington; the 14Itte 11) stating in the first two cases that the Board will take no action at 544 12/19/32 this tine with regard to the deficiencies other than to forward copies of the agents' letters to the Acting Comptroller of the Currency for the infor- icm of his office, and in the latter case, that the Tleard will defer e°r4sideration of the matter pending the receipt of additional information. Approved. Letter to the Federal Reserve Agent at Chicago, approved by three kett— ' 4"a of the Board on December 17, 1932, suggesting, in view of the infor1444°11 disclosed in the analysis of the report of examination of the Detroit 41riliCs Bank, Detroit, I:dchigan, as of September 19, 1932, that the Federal Oe agent discuss with the connissioner of the banking department of the tte of Flichin.;an the matter of a further reduction in the rate of dividends bY the member bank, and requesting that the agent advise the Board of the l'eaults of such discussion. Approved. Letter to the Federal Reserve Agent at Dallas, approved by three 4elab el'e of the Board on December 17, 1932, referring to the unsatisfactory Itimn of the Zarmers State Guaranty Bank, Valiant, Oklahoma, as disq.eae, `I by the analysis of a report of examination as of September 17, 1932, 414 etni-4 ---Lng that, although the reason for the delay of the Banking kb, 810ner of Oklahoma in taking corrective action is not apparent, the cz(tvecl 'in accordance with the agent's recommendation, will take no action in t4, -er at the present time, but requests that the agent arrange for Pation in the next exanination, and if the condition of the institution 40t been materially improved at that time, that the agent discuss with the , `g4king Comndssioner and, if necessary, with the management of the bank, ' '- 1.esti0n of obtaining the necessary financial assistance to cover all 515 "119/32 -4- eatimated losses, together with additional losses which nay develop in 4s8ets classified as doubtful. Approved. Reply, approved by three members of the 3oard on December 17, 1932, to 4 letter dated December 6, 1932, from the Federal ileserve Bank of St. al inclo3ing a notice filed by the First State Bank of Brownsville, -2see, under date of December 2, 1932, of its intention to withdraw from .4rbel*°111P in the federal Reserve System, with the request that it be perbitted to withdraw imnediately. The reply stated that, in view of the tlellteS recommendation and the reasons set out in his letter, the Board Nve, ' the usual requirement of six months notice of intention to withdraw Z0 4a to Permit the member institution to w ithdraw from membership immediate- Approved. Reply, apl)roved by three members of the Board on December 17, to a lette dated December 2, 1032, from Tx. F. G. Buckstaff, Anthony, Texas, whether the Federal Reserve Life Insurance Company of Kansas City, 44143tia 4 .1-8 connected with a Federal reserve bank. The reply stated that the 448 or the words "Federal" or "reserve" in the corporate names of institutions e () Ialected with the Federal Reserve System is misleading to the public and th4t the Federal Reserve Board is strongly opposed to such practice; that by th 'of 1,lay 24, 1926, private corporations were forbidden to use the words 44 Dortion of their corporate name; that this act is not retroactive and Ne 4 °t apply to corporations actually engaged in such business under such Aoke 0 r title prior to 1.,:ay 26, 1926; and that the company referred to, 54G I'V10/32 _5- "e°1 ' clinc; to the Board's inforraation, has been in business since several /7e&118 prio.c to that date and is not affected by the statute. Approved. The Secretary then presented a tele c;rari just received from the FedReserve Agent at Kansas City, advising of the sudden death on December le) 1932, of Er. ',Tinian Hee, one of the bank's appointees to the directorate r the Oklahoma City branch. 17:oted with regret. At this Point Lessrs.R. L. Austin, Federal Reserve Agent at l'hila(lelPhia, and James t lililadelphia • Brittain of Counsel for the Federal Reserve Bank joined the meeting. Llr. Austin stated that Governor 1:orris, upon returning from klzhi 11,-ton. after mectin',; with the Board on December 15, 1952, had advised thz.t the Board felt the -ilederal Reserve Bank of Philadelphia and, 1\11itieularly the Vederal reserve agent's office, was subject to criticism lic)t reporting promptly to the Board the facts concerning the organization --° 1.--ain Line Trust Company, Ardmore, Pennsylvania, which opened for es8 on November 15, 193, and that he had come to Washington to discus te 1114tt°r With the Board. 14 connection with the subject of the discussion there was presented (i letter received from the Governor of the Philadelphia bank under date of 1)eeel/lber 16, 19s2, referring to the organization of the Federal Reserve Bank l'11114(lelphia and stating that the operating side of the bank has had no %Ieetion with questions of admission of banks to melbership except as they eet the extension of credit, that when 1.1.r. C. S. Yewhall, :xecutive Vice (leht of the Pennsylvania Company for Insurances on Lives and Granting 12/19/32 -6presented to him the matter of the holding by the Pennsylvania CON, Of the stock of the 1, aim Line Trust Company, he had referred L. 17"4411 to 1:r. Austin; that upon reading the 3oard's letter of October 20, 4321 to ctild Austin, Governor orris felt it was re-;rettable that the Board State Banking 1)epartraent of Pennsylvania should assume diametricall7 ite views of the matter; that he called the hoard's counsel on the tele1)11°1-ba and inquired whether he thought it would be worth while to request l'ec°1los1deration, and. had concluded from .t_r, ',7yatt's reply that such a re(11 " .t would not be worth while; that shortly after, in a casual conversation With 1-r• l':ewhall, the latter had advised that the Pennsylvania Company had 114der 'llacussion with counsel a dividend to the shareholders of the company 444 the - Purchase by the stockholders of the company of the stock of the new 11, Uti°11; and that the next information he received concerning the matter Itfaa 1711en he heard read at the meeting of the Federal Reserve 'Board on beeetz ez 15, 1932, L. Austin's letter of December 14. 'Ourin:, the discussion, 1,:r. Austin stated that he felt, and in his 210111.-• with Governor l'r.orris at the tiro of the receipt of the Board's tte 4: Of October 20, 1932 had stated that the attitude expressed in that letterv 'las the correct one for the Federal Reserve Board to take in view of .1) Pese of the provisions of section 9 of the Federal Reserve Act. ;Then 14, 6 kat' attention was called to the fact that in his letter to the 11,;41z,a 0 t December 16, 1932, he recommended that the Federal Reserve Board ktlioriz e the Pennsylvania Company to acqt.lire and hold the capital stock of the 4414 me Trust Cormany of Ardmore, he stated that the recommendation was 11414° benn, --t'se of his feeling that it was desirable, in the light of the 4411 etti, existinc, locally; that the control of any bank orr,ani'z,ed in Ardmore 548 -7811°111d be in stronc; hands, and on the theory that the acquisition of the Btock would not be a violation of the letter of section 9, even though °Iltl'arY to the spirit and purpose of the provisions of that section. e His nation of this reconnendation indicated that he felt that the natter of et ce .ninc the propriety of action not contrary to the express provisions "the law was one solely for determination by the Federal Reserve Board. During the discussion it also appeared from the statements made by 114 411stin and supplemented by I:r. Brittain, that upon receipt of the 13(krd's letter of October 20, 1932, advisinj, of refusal of the Pennsylvania C(11)anY te application to purchase the stock of the bank to be organil-,ed in 4*101 ' e) rz. Hill, assistant Federal Reserve Agent at Philadelphia, sent a e°131 'Of the letter to Lir. Newhall, who requested 1-r. Hill to discuss the ktittel. - with the company's counsel, which he did; that the company's counsel 11 c1, -Presented that the arran:enent to be effected would put the ownership stock of the new bank in the hands of private individuals; that the 1°I-Itions to be adopted by the company were discussed; that the cjiestion klether the proposed action would meet the requirements of the law was not ki ed at that time, but that following his discussions with the company's 0e1 -• Hill discussed the matter with Hr. Austin. In this connection 1(31s1.1-11 stated that last week, immediately upon learning from a routine 4'4)c)rt - ceived by the Board's Division of Bank Operations that a new bank 114q he ell organized in Ardmore, 1,r. Siems had called Hr. Hill on the telephone (Ivised that the /*bin Line Trust Camnany had been organized under eJla 1-14 ' 4 -`cee of the Pennsylvania Company, that the natter had been discussed 14 the the - ederal reserve agent's office, but that it had not been reported to 'x'a at the tir for the reason that it was thought it might be I 1V19/32 -8- ellbarraosin':; to the Board. Mr. Austin stated that He believed the Pennsylvania Cormany had "ted in good faith in the ratter az:d in the belief that their action would licit be contrary to the Position taken by the Board in its letter of October 20. It was indicated to Er. Austin that the ownership by trustees for the b6rierit of shareholders of the Pennsylvania Company, of the stock of the Pain Trust Company of Ardmore would seem to be contrary to the spirit of the 131'°v1s1oris of section 9 of the ,i`ederal Reserve Act for the same reasons that 4111ect of the stock would be objectionable. It was nlso called to • 41118tin's attention that by not raising the question with the Pennsylvania Cotipaii Y as to whether its Proposed action would be in accordance with the t 8 Position, the Federal reserve agent's office may have led the bank to be, " - eve that the transaction would not be objectionable to the Board. 4 ' 18 to, connection reference was made to the Board's letter of May la, 1931, * Lewhall setting :orth the understanding of the Board, arrived at 13/71-11C. a conference with roati. r. Fewhall, that the T'ennsylvania Company would anY additional Purchases of bank stocks without first securin7 the al of the Board. I/1 response to an inquiry as to whether there had been discussion 14 the -L'ederal reserve agent's office about reporting the matter to the 4-r. Austin stated that he felt the matter would be reT)orted in due etx1,1e liow in the report of a recent examination of the Penn.sylvaria. Company which Preparation, and that he did not see that anythini could have been be4lit With regard to the action of the member bank or how the Federal reserve , '31-11(1 have prevented it inasmuch as the bank Was proceeding within its •ko /iti l'ir.thts. It was pointed out to Pr. Austin that had the information core ar50 12/19/32 _9- to tle Board before the new bank was opened for business, something might 1141te been done to obviate the situation which has developed and that the 41ber bank Probably would not have desired to proceed with the matter if tale (:)aru's position had been ascertained in advance. Governor Lieyer stated that it would appear from the information be- tice the Board that, upon receipt of the advice contained in the Board's tter of October 20, the Pennsylvania Company had undertaken to devise a 111411 the effect of which was to circumvent the Position taken by the Board by other form of holdin',; , of the stock of the new bank, and that the :-.'ederal le1"170 agent, in not reporting the 'latter pronptly to the Board or raising the cille2tion with the member institution as to whether its action would be c -ionable to the Board, had tacitly approved the merber bank's action. -4-8o stated that the Federal reserve agent should not in any circumstances hoc itate to report a matter to the Federal Reserve Board because of any /le that it might be a cause of embarrassment. At the conclusion of the discussion, 111.. Austin was advised that the Board would give further consideration to the matter and would advise hita in due course of the action to be taken. Thereupon Messrs. Austin and Brittain withdrew from the meeting. Harrison stated that during the meeting Er. Brittain had adthat, in his opinion, the Federal reserve bank was clearly in in not reportinf.; the above matter to the Board and that undoubtedly *4141 "titUde of the Federal reserve bank in the matter had been influenced its feeling that the organization of the new bank by the Pennsylvania .C(:)14141,3az Was la% desirable. *Jyatt stated that in his telephone conversation with Governor i ollowin7 the receipt of the Board's letter of October 20, referred 551 12/19/32 -10- to in the Governor's letter of December 16, Governor rorris said that he had 11°‘f discussed the natter with the Pennsylvania Company; that he inruired of as to what the Board's attitude would be with regard to trusteeirthe stock of the new bank; that he advised Governor Forris that he did 11°t 1:now what the position of the Board would be, but that his opinion was 114t the Board would object to the stock of the new institution being held that manner for the sane reasons that it objected to the direct holding the stock by the Pennsylvania Company; and that he particularly advised Qire l'nor :orris that the Governor or the Federal reserve agent should report to the Board any such proposed action of the Pennsylvania Company. Mr. Hamlin then presented a memorandum dated December 10, 10, ' e2ced to :Ir. lorrill by 1.7r. Paulger, 3hief of the Division of Examinations, 'ekl 411(itth 1„t that in the report of examination of the Continental Illinois Bank and Cora.Pany as of Tune 17, 1932, made in anticipation of action upon an %1. 'cation for conversion into a national bank, there was included a report kv.e . ' 1 14E: the Continental Yational Company, a wholly owned affiliate, among te j flvestments of which was a note signed by Alex F. Banks, C. 7. Glore and Stevens in the =mint of .1,341,772.05, secured by shares of the °(41ti1lentai Illinois Bank and Trust Company with a market value as of I.ay 31, 1321 °r %154,411, and that it is assumed that the hr. Stevens referred to is ene M. Stevens, now Federal Reserve Agent at Chicago. 13°Intea 1.7r. Hamlin out that the note may have been executed before Ir. Stevens became reaerve agent, but that as it is collateraled by bank stock the Is presented as to whether Er. Stevens has complied with the require- or the law that a class C director shall not be an officer, director, tkao ee or stocklaolder of any bank, and that in the circumstances he be- 552 1 /19/32 -11- lieved the natter should be investigated. Accordingly, upon motion of Lr. Hanlin, the matter was referred to the Committee on District for investigation Ho. 7, (T:essrs. Eagee and and report to the Board. Ileoorts of Standing Committee dated December 15 and 16, 1932, recomtacling approval of the following changes in stock at Ifederal reserve banks: A cation for ORIGINAL Stock: Shares krtners National Bank in Glasgow, Kentucky. AD 1, Catjo for ADDITIONAL Stock: 7. `Au`711 National Bank, Brazil, Indiana. Iticree.se in capital and surplus) cations for SURIENDER. of Stock: rict 1,:o. 3. illtown National. Bank, Dewningtown, Penna. (COn• of Downingtown National Bank and , Q.range National Bank of Chester County at -uowningtovm) 72 72 27 27 96 96 liatrict No. 7. Deer County- Bank, Imlay City, Lich. (Insolvent) 41 4143tr• Chi let No. 9. 118 National Bank, Houghton, Filch. (V.:I-Abs. kteulr Iioughton National Bank) 90 t liational Bank, Flandreau, S. Dak. (Insolvent) 36 4etr ro. 11. f eat Hational Bank., Fort Towson, Oklahoma. '11•L• Terminal) 17 4at b ro. 12. A tional Bank in Coeur d'Alene ,Idaho. (V.L. 4k0t3 72 'kr.zt • by American Trust Company, aorurember) —f-"Iona Bank in Aurora, Oregon. (V.L.Suc. '',Q•riby Union Bank, nonmember) 20 Total 41 126 17 92 372 Approved. upon the rrm eting adjourned. Aph Secretay.
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