Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, December 19, 1933, Volume 20, Part 5

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

449

A meeting of the Federal Reserve Board was held in Washington
04 Tuesday,
December 19, 1933, at 4:00 P. m.
PRESENT:

Mr.
Mr.
Yr.
Mr.
Mr.
Mr.

Black, Governor
Hamlin
Miller
James
Thomas
S.Lymczak

Mr.
Mr.
Mr.
Mr.

Morrill, Secretary
Carpenter, Assistant Secretary
Bethea, Assistant Secretary
Martin, Assistant to the Governor

There were presented three telegrams dated December 19, 1933,
fliom Mr. Stevens, Chairman of the Federal Reserve Bank of Chicago, ad--is that at the
meeting of the board of directors of the bank today,
(1) Mr.
George J. Schaller was appointed acting governor of the bank
to take
office as of January 1, 1934, with salary at the rate of $35,000
Per ann-"
2, (2) the leave of absence of Mr. J. B. McDougal, Governor,
If" extended

to March 1, 1934, at full salary, and (3) Mr. Charles B.

1111111 was appointed
General Counsel of the bank to take office January
194
'
1
, with salary at the rate
of $12,000 per annum; Mr. Dunn to beCome
a direct
employee of, and to give his full time to, the Federal
l'e8erve bank.

Each of the telegrams requested approval by the Board

Of the
salaries involved in the action of the directors.
After discussion, the Secretary was requested to
advise Mr. Stevens that effective January 1, 1933, the
Board approves a salary at the rate of $35,000 per anfixed by the board of directors of the bank for
mr. Schaller as acting governor of the bank, it being
uaderstood that Mr. Schaller has disposed of the stock
of the Citizens First National Bank, Storm Lake, Iowa,
end any other bank stock held by him.




450
-2-

The Secretary was also requested to advise Mr.
Stevens that, with the understanding that Governor
McDougal is being retained only until March 1, 1934,
to assist the acting governor in becoming acquainted
with his new duties, the Board approves the payment
of full salary to Governor McDougal to March 1, 1934.
The telegram with regard to the appointment of
Mr. Dunn was referred to the Committee on District
No. 7 for recommendation to the Board.
Mr. Hamlin presented the following letter dated December
18
'1933) addressed to him as Chairman of the Committee on District
No, 15 IV Messrs. Joseph Wayne, Jr., and C. Frederick C. Stout, diI'ectors

of the Federal Reserve Bank of Philadelphia:
"In response to your suggestion that we submit
to you in writirg the purport of our interview with
Governor Black and yourself on Saturday, December
15th, we submit as follows:
"Your honorable Board has in its records copy
of a Resolution relative to the readjustment of the
Official family of the Federal Reserve Bank of
Philadelphia recommended by a special committee of
our Board and adopted by this Board on November 15th,
1933, subject to the approval of the Federal Reserve
Board at Washington.
(See Exhibit 1)
This report has been presented to your Board by
Governor Norris. These recommendations were prePared by this Special Committee after long concideration of the requirements of the Federal Reserve Bank of Philadelphia, as the Directors have
felt for some time that the senior officers of
the Bank were overworked, were attempting to take
on entirely too much responsibility and should
have relief.
"We do not feel that this Bank needs strengthening by the addition of an official who has had




451
12/19/.63

It

broad practical experience in commercial banking.
Our own observations and the reports of the examiners convince us that the business of the Bank
is handled satisfactorily at the present time,
and what we wish to accomplish is the relief of
our overburdened senior officers by the addition of an outside Deputy Governor, also the promotion to that position of our present Cashier
and further, the appointment of two new junior
Officers.
"Under date of December 15, 1933, your
Board sent a communication to Governor Norris to
the effect that your Board is prepared to give
favorable consideration to the appointment of Mr.
Sinclair and suggested that we appoint him Deputy
Governor and General Counsel, eliminating the
necessity for the retention of outside counsel on
an annual basis.
"Our objections to the employment of counsel
on full time salary basis, located in the Bank, are:
First - We desire Mr. Sinclair to participate in
the active
management of the Bank and not to devote his time to legal matter
s only.
Second - Unless he devoted himself to keeping up
With current laws
and decisions, and brought a law
library with him, he would not long be competent to
act as counsel. If he did this, he would be almost
useless to us as a Deputy Governor.
Third - Under
normal conditions, we would not have
T
enoITi
s leg:
business to occupy more than a fraction
Fourth - Our presen arrang
t
ement as to legal services is
cheap and entirely satisfactory, involving
only a
we do retaining fee of $2,500 per annum, and this
not
it would wish to alter. In other words, we think
be a distinct loss to the bank to appoint
him genera
and to attempt to get along
outside counsel that we could call
Upon when
necessary. Our expenses for legal services in
the past years have been extremely small.




(Exhibit 2)

12/19/33
—

"The Federal Reserve Bank of Philadelphia is
fourth in its number of member banks, and secoad
in capital stock, and its earnings were second in
1932 and have been third for the eleven months of
1933. Its officers' salaries have been kept at a
comparatively low figure as you will see by report
Of officers' salar
ies paid by Federal Reserve
Banks in 1932.
(Exhibit 3)
Philad
elphia is practically at the bottom of the
.3.Fit and we feel we are amply justi
fied in requestYour Board to approve the suggestions contained
in the resolution adopted
by our Board of Directors
0!1 November 15, 1933 and which
is the subject of
tais review.
.
"We feel in recommending the election of Mr.
inclair that re have secured a business lawyer who
is well verse
d in commercial banking, his firm having specialized in legal
work of this character and
he should be
a very valuable addition to the senior
staff of the Bank. We do not feel that the junio
r
°ffIcers are at all lacking
in their ability to
handle the various problems comin
g to them for considera
tion as they are all bankers of long standing.
"We would particularly like your Board to give
favorable consideration to the suggestions presented
?J. Governor Norri
s as we have a Board meeting on
qednesday, December 20th, of this week at which time
We would
like to put through the program effective
anuary first."
Some
of the members of the Board expressed the opinion that
they. would. be
inclined to approve the proposed salary at the
or

Per annum for Mr. Sinclair as deputy governor of
the

n

the annual
retainer fee for Williams, Brittain & Sinclair
e'-11/Ize1
for the
bank, they felt the Board should state to the board
%'directors its
disagreement with the opinion expressed in the above




453
12/19/33
5
letter

that the bank's official staff does not need strengthening by

the addition of an
officer who has had broad practical banking experience.
Mr. Hamlin moved that the salary at the rate of
$15,000 per annum fixed by the board of directors of the
bank for Mr. Sinclair as deputy governor be approved,
effective as of January 1, 1934, and that the Board also
approve the fee of $2,500 fixed by the directors as retainer for the firm of Williams, Brittain & Sinclair as
counsel for the bank for the year 1934.
Carried, Mr. Miller voting "no".
Mr. Hamlin then moved that the other recommendations
contained in the report of the committee of directors of
the bank dated December 1, 1933, be referred to the Committee on District No. 3, for discussion with the board
of directors of the bank and for recommendation to the
Board, and that the Committee be requested also to discuss with the directors the question of the necesity
for strengthening the bank's official staff.
Carried, with the understanding that
as soon as convenient, the Committee will go to
Philadelphia and take these matters up personally
With the board of directors of the Federal reserve
bank.
Creased

Mr. Morrill stated that, in order to take care of the in-

work in the Division of Examinations, Mr. Paulger, Chief of the
i
°11
'had requested authority to employ four stenographers, each
tclla €t Period
Ps

in the

of not to exceed thirty days, to work from five to eleven
evening, with salary at a rate not exceeding $4.50 per day.
The authority requested was granted.

ls
) 1193

There was
also
1presented the following letter dated December
from Mr. Case, Chairman of the Federal Reserve Bank of New




454
12/19/33
6

"I have reported to my board of directors that the
Federal Reserve Board has retained Mr. John W. Pole,
former Comptroller of the Currency, to make a survey
of the banking situation in Porto Rico, with particular reference to the proposed applications for membership in the Federal Reserve System of certain banks in
that insular possession, and that the loan of two or
tAree men from this bank has been requeted for the
Purposes of this investigation.
"The directors have expressed their complete willingness to cooperate in this System undertaking, and
I have designated Mr. Jacques A. Mitchell, manager of
our credit department, and Mr. Eric F. Lamb, research
assistant for Latin American affairs in our foreign
Information division, to accompany Mr. Pole. Mr.
Mitchell is thoroughly familiar with bank credit and
bank examination matters and should be able to assist
Mr. Pole in his stildy of the banking practices of
PortoRico and in reaching a judgment as to the reciprocal advantages of membership of these banks in
the System. Mr. Lamb came to this bank after three
Years service with the branch of an American bank in
Buenos Aires, Argentina, and, as a member of our foreign information division for the past three years,
he has been following banking
and economic developments in Latin American countries. His knowledge of
Spanish-speaking peoples and of the Spanish language,
as well as
of general economic conditions, Should be
helpful
the proposed survey of the situation in
Porto Rico.
"In addition to these men, if secretarial assistance will be required by Mr. Pole's investigating unit, we shall be glad to lend him another member
of cur foreign information division, Mr. John C. Albes,
who is equipped to do secretarial and stenographic
work in Spanish
as well as in English.
"I assume that Mr. Pole will arrange to obtain
the
Proper credentials for the men whom I have designated to assist
him in order that they may be most
,.elpful to him in his work. Their transportation will
arranged here and, if Mr. Pole would like us to orange his transportat
ion, we should be glad to do so.
"As to the cost of the services of the men loaned
this bank,
or at least, as to their expenditures on
to Porto Rico, I have assumed that this will
be handed
as a System matter, but I shall be glad to
be g
uided on this question by the views of your board."

j




455
12/19/:33
Mr. Morrill stated that, since the date of Mr. Case's letter,
111'. POle had discussed this matter further with Mr. Case and advised
41-Inthat he
desired only the services of Messrs. Mitchell and Lamb and
that it
had been agreed that the salaries and traveling and subsistence
e*IlBes of these employees while they are absent from the bank in conriecti°n with the trip to Puerto Rico will be paid by the Federal Re8e17.7e Bank

of New York.

Accordingly, the Secretary was requested to prepare, and hand to Mr. Pole for delivery to Messrs.
Mitchell and Lamb, letters advising them that the
Board approves their designation by the Chairman of
the Federal Reserve Bank of New York to assist Mr.
Pole, Special Adviser to the Federal Reserve Board,
in. making a study of banking and other condition in
s
Puerto Rico.
Reference was then made to the discussion at the meeting of

the B
°ard yesterdv with regard to steps which might be taken to exPedite
b

8

action on membership applications, applications by national

for permission to
reduce their capital stock, and applications
bY.114ticrial banks for fiduciary powers.
After discussion, the Secretary was authorized
until January 1, 1954, to approve, for and on behalf
of the Board, all applicati
ons of the kind referred
to, where
the Board's staff agreesthat they should be
approved and which do not involve any departure from
the
established policies of the Board with regard to
the approval
of such applications. It was understood
that the
authority granted to the Secretary does not
to disapprove any application, and
that iii
case
where there is any doubt as to whether
the in anY
approval of the application would be in accordance
the
bebe taken Board's established policy, the matter is to
up with the Board in the usual way.
It was also understoo that the approval of apd
icati°ns
in
'
l
this
manner
and
the matters approved
'V the
members of the Board on initials will be recorded each day in minutes,
to be prepared by the

f




456
12/19/33
Secretary's office, for the approval of the Board.
The Board then considered and acted upon the following

matters
Telegram dated December 19, 1933, from Mr. Stevens, Chairman
°f the Federal Reserve Bank of Chicago, advising that, at a meeting
of the board of
directors today, no change was made in the bank's
l'stinig schedule of rates of discount and purchase.
Without objection, noted with approval.
Letter dated December 18, 1933, to Mr. Austin, Chairman of
the /1_,
uteral Reserve Bank of Philadelphia, approved by five members of
the /3
oar% stating that, in accordance with the recommendation contai:led 4
-411 his letter of December 9, the Board approves a change in
the ba
Ilk's
personnel classification plan to provide for the establish-Luent of a
liquidation department and ten new positions in that

Approved.
Letters to the boards of directors of the following State
bIllIktig institutions,
each letter stating that, subject to the condiPllescribed in the letter, the Board approves the institution's
0
4Pl1ellti n for
membership in the Federal Reserve System and for the
415P1'0
tr.ictPriate
whiam
chount of stock in the Federal reserve bank of the disthe applicant is located:
Federal Reserve Bank
"Well
—
esly
Trust Company", Wellesley,
M
assachusetts.




Boston

457

12/19/33
-9

Al2.1.1,Pant

Federpl.Reserve Bank

"Peoples Savings Bank & Trust Company",
Wilmington, North Carolina.
"State Bank & Trust Company", Beeville,
Texas.
"Union State Bank", East Bernard, Texas.

Richmond
Dallas
Dallas

Approved.
bers

Telegraphic reply on December 18 ]933

approved by five mem-

of the Board,
to a telegram dated December 15 from Mr. Walsh, Federa)
.

Reserve Agent at Dallas; the reply reading as follows:
"Re your wire December 15 regarding application
for membership Bay City Bank & Trust Company,
Bay
City, Texas, Board grants extension to January 15,
1934, Within which bank may accomplish its admission
ership. In view of the uncertain circumstances
the request for extension, you are requested
to
determine the nature of the developments causing
the request
for the delay and to advise the Board fully
of the circumstances, with your
recommendation as to
Whether, in the light of later developments, the bank
should be admitted to membership upon the conditions
Previously prescribed and before accepting payment
for or
issuing stock in the Reserve Bank to the applicant you should await
further advice from the Board."

tir=

Approved.
Telegram to Mr. Curtiss, Federal Reserve Agent at Boston,
l'"e/'ritig to
the application of the "Day Trust Company", Boston, Massachusetts,
fOr
Permission to withdraw immediately from membership in the
Peciel Reserve System, and stating that the Board waives the usual reItIll
'etent of six
months notice of intention to withdraw and that, ac:7111g1 uPon
surrender of the Federal reserve bank stock issued to
"'s4y
Trust
i%
Company, the Federal Reserve Bank of Boston is authoreq to
cancel such
stock and make a refund thereon.




Approved.

458
-10-

oral

Reply to a letter dated December 5, 1933, from
Mr. McClure, FedReserve Agent
at Kansas City, the reply reading as follows:
"Receipt is acknowledged of your letter dated December 5, 1933, regarding your understanding that the office
of the Comptroller of the Currency
has recently adopted a
policy of requiring that any State bank which assume
s dePosit liabilities of a national bank shall become
a member of the Federal Reserve System.
"The Board has not been advised of the adoption of
such a policy.
However, it is understood that the Comptroller of the Currency desires to be assured that any
State bank assuming the deposi
ts of a national bank in
the hands of a conservator
is in a sound condition and
that the intere
sts of the depositors of the national
,allk
1
are not affected adversely by the transfer of their
ueposits
to the State bank. The Board understands that
whether,
Dl
this
ssurance is obtained by an examination of
t
anic by national bank examiners, by certification from the State supervi
sing authorities, by the
act that
the State bank is admitted to membership in
he System
after examination by examiners for the Federal
reserve bank, or by general information known to
the chief
national bank examiner of the district, is a
matter to
be determined in each instance."

f

Approved.
Letter to "The
First National Bank of Pittsfield", Pittsfield,
Iseading as
follows:
t,
"The Federal Reserve Board approves your applic
aol
i" for permission to act, when not in contravention
, State or
local law, as trustee, executor, administrer, registrar
of stocks and bonds, guardian of estates,
:1
c -gnee, receiver, committee of estates of lunatics,
,
tr
1T ailY other fiduciary capacity in which State banks,
c0,7,6
'
companies or other corporations which come into
141;?etit10n with national banks are permitted to act
al,er the laws
of the State of Maine, the exercise of
't such
Fedo
rights o be subject to the provisions of the
rait
il
Reserve Act and the regulations of the Federal
eserve Board.

th

s ]etter will be your authority
to exercise
t4M1;
.
111ciarY powers as set forth above. A formal cert; --a6e covering such authorization will be forwarded
You in due
course."



Approved.

459

12/19/33
-11-

Reply to a letter dated November 15, 1933, from Mr. Steven
s,
4deral

Reserve Agent at Chicago; the reply reading as follows:
"Reference is made to your letter of November 15,
1933, inclosing the application of the 'First National
Bank of Freeport', Freeport, Illinois, for permission
to act in all fiducir3rica
pacities authorized under Section 11(k) of the Federal Reserve Act.
"The Board considered a previous application of
this bank and, on October 19,
1933, advised you that
in view of the fact that the bank had been in operat
ion
Only since June
3, 1933, and current information regarding the bank's assets and operations was not availa
ble
and the furthe
r fact that the information concerning the
Past record of its cashie
r, who is one of the two active
?facers in charge of the bank's affairs, was unfavorable,
lt was unwilling at that time to approv the applic
e
ation.
"Although the recent report of examination indicates that the condit
ion of the bank since reorganization
has been
satisfactory, there does not appear to be any
new information submit
ted regarding the cashier and the
Proposed trust officer which would justify approv
al of
the
ePPlication at this time, and you are requested to
advise the institution accord
ingly."
Approved.

a.s

Letter to Mr.
O'Connor, Comptroller of the Currency, reading
f°11ow s:
"In accordance with
your recommendation, the Federal
Reserve Board approves a reduction in the common
caPital stock of
'The National Safety Bank and Trust CornPam
of New York', New York, New York, from $1,428,600
,° 014,300, pursuant to
a plan which provides that the
upa,Ilk's capital
shall be increased by the sale at par of
!
Z;3.2 parr value preferred stock
, and that the funds
iz
m
reduct
be
m
ion in
coon capital stock shall
Used to
"sed
eliminate unsatisfactory assets and depreciation
in the amount of approx
imately $435,2241 to estab,
" a specia
l reserve for losses of $100,000 and to in„ea__
oe surplus and
undivided profits accounts by 0_50,000
aPProximately $29,076, respectively, all as set forth
Ycur memorandum of
December 6, 1933.”




Approved.

460
12/19/3z
- 12 -

Letter to Mr. O'Connor, Comptroller of the Currency, readi
ng
as follows:

"In accordance with your recommendation, the Federal Reserve Board approves a reduction
in the common
capital stock of 'The Second National Bank of Hamilton',
Hamilton, Ohio, from $300,000 to 8120,000, pursunnt to
a plan which provides for a reduction in the par
value
of the present common capital stock from 8100 to $40
per share, the sale at par of 8300,
000 par value Class 'A'
Preferred stock to the Reconstruction Finance Corporation,
and the sale at par of $120,
000 par value Class 'B' preferred stock to the present stockholders or others, and
that the funds released by the reduc
tion in common capital stock, together with
the bank's total surplus and undivided profits of $215,863, shall be used in elimi
nating
substandard assets and securities depreciation in the
amount of approximately 8395,863, all as set
forth in
Your memorandum of Decem
ber 12, 1933.
"In considering the plan under which the reduction
in common capital stock is to be effected,
it was noted
that no provision was
made for the elimination of depreciation in the four highest grades of securities
amounting to approximately $99,000, in addition to which
there will remain in the bank
doubtful items aggregating
aPproximately $268,
700 and slow items amounting to approximately 8672,800. It is assumed, however, that you
p!ave.these conditions in mind and that whenever it becomes
reasible
to do so you will obtain such further corrections
a3 may be practicabl
e."
Approved.
Letter
cis r
'llows:

to Mr. O'Connor, Comptroller of the Currency, reading

"In accordance with your recommendation,
the Federal
Re
serve Board approves a reduction in the common capital
_stock ,
01 'The Franklin National Bank', Franklin, Ohio,
from $1
00,000 to $50,000, pursuant to a plan which pro1n7-ides for e reduction
in the par value of the present coma c pital stock from $100 to $50 per share
ar
and the sale
v.,. Par of $50,000 par value preferred stock to the Recon2ruction Finance Corporation, and that
the funds released
bythe
reduction in common capital stock, together with
,v,in bank's
surplus and undivided profits of approximately
'
,f40
Y°001 shall be used in eliminating substandar asset
d
s
and S
ecurities depreciation in the amount of approximately



461
-13$90,000, all as set forth in your memorandum of December
11, 1933.
"In considering the plan under which the reduction
in common capital stock is to be effected, it was
noted
that no provision was made for the elimination of the
remaining depreciation in securities of approximately
e6,740; also that the examiner in his report of examination of the bank as of November 6, 1933, stated that the
character of the investment account is such that further
depreciation is anticipated and recommended that the bank
be permitted
to reduce its present common capital stock
to $25,000 in
order to accomplish the elimination of a
larger amount of securities depreciati
on. It is assumed,
however, that you have these conditions in mind and that
whenever it becomes feasible to do so you will obtain
such further corrections as may
be practicable."
Approved.
as

Letter to Mr. O'Connor, Comptroller of the
Currency, reading
follows.

"In accordance with your recommendation the Federal
Reserve Board approves a reduction in the commo
n capital
stock of 'The Citiz
ens National Bank of Bedford', Bedford,
Inc
.
liana, from 0150,000 to $100,000, pursuant to a plan
!hich provides for the
sale to the Reconstruction Finance
Corporntion of
$75,000 par value preferred stock at par
d provides also for the
use of the released capital
together with a portion of the bank's surplus, in
-Liminating substandar
d assets of approximately $95,700,
ell as set forth in your memorandum of Decem
ber 6, 1933.11

r

Approved.
Letter to Mr. O'Connor, Comptroller
as follows:
of the Currency, reading

"In accordance with your recom
mendation, the Federal
Rese
rye Board approves the reduction
in the common capital
stock of
'The Arkansas National Bank of Hot Springs', Hot
rinEs, Arkansas, from $400,000
to $100,000 pursuant to a
'
lin which provi
des
that
the
bank'
s capital shall be increased by
the
sale
at
$200,
par
of
000 par value of class
'At
t,_ Preferred stock to the Reconstruc
tion Finance Corpora'°n and the
sale of approximately $641,000 of the bank's

a




462
12/19/33

-14tt

assets to the Fidelity Mortgage Loan Company for ”25,000
and that the funds released by the reduction in common
capital stock together with the proceeds from the sale of
the bank's assets and a portion of its surplus and undivided profits, shall be used to eliminate substandard
assets and securities depreciation in the amount of approximately $641,737, all as set forth in your memorandum,
dated December 1, 1933."
Approved.
Letter to Mr. O'Connor, Comptroller of the Currency, reading

"follows:

"In accordance with your recommendation, the Federal
Reserve Board approves a reduction in the common capital
stock of 'The First National Bank of Stromsburg', Stromsburg, Nebraska, from f')50,000 to 425,000, pursuant to a
Plan which provides that the bank's capital shall be increased by the sale at par of $25,000 par value preferred
stock to the Reconstruction Finance Corporation, and that
the funds released by the reduction in common capital stock
Shall be applied to the elimination of substandard assets
and securities depreciation, all
as set forth in your memorandum of December 6, 1933."
Approved.
Letter to Mr. O'Connor, Comptroller of the Currency, reading
"r°110VIS:

"In accordance with your recommendation, the Federal
Reserve Board approves a reduction in the common capital
stock of
Wy,oming, 'The Albany National Bank, Laramie', Laramie,
from $100,000 to e50,000, pursuant to a plan
,
which
1n
provides that the bank's capital shall be increased
7 the sale at
par of p50,000 par value preferred stock
to the
Reconstruction Finance Corporation, and that the
Is:111nds released
by the reduction in common capital stock
,_;111 be used in eliminating a corresponding amount of
'uostandard assets and securities depreciation, all as
Set.
fortu In your memorandum of December 5, 1933."
Approved.
Letter
to Mr. O'Connor, Comptroller of the Currency, reading
48 IN
401lows.




12/19/33

-15-

463

"In accordance with your recommendation, the Federal
Reserve Board approves a reduction in the common capital
stock of 'The First National Bank of Green River', Green
River, Wyoming, from 080,000 to $40,000, pursuant to a
Plan which provides that the bank's capital shall be increased by the sale at par of $40,000 par value preferred
stock to the Reconstruction Finance Corporation, and that
the funds released by the reduction in common capital
stock shall be used to eliminate a corresponding amount
Of substandard assets and securities depreciatia4 all as
set forth in your memorandum of December 5, 1933."
Approved.
Letter to Mr. O'Connor, Comptroller of the Currency, reading
as follows:
"In accordance with your recommendation, the Federal
Reserve Board approves a reduction in the common capital
stock of 'The First National Bank of Elko', Elko, Nevada,
from $100,000 to $50,000, pursuant to a plan which provides
that the bank's capital shall be increased by the sale at
Par of $100,000 par value preferred stock to the Reconstruction Finance Corporation, and that the funds released by
the reduction in common capital stock, together with $50,000
from the bank's present surplus account, shall be used to
eliminate substandard assets and securities depreciation in
the amount of approximat
ely $93,605 and to increase undivided
Profits by approximately $6,3951 all as set forth in your
letter of December 8, 1933."
Approved.
Letter to Mr. O'Connor, Comptroller of the Currency, reading

°11ows.
"In
Reserve accordance with your recommendation, the Federal
Board approves a proposed reduction in the common
e
cZPital stock of the 'Pacific National Bank of San FranSan Francisco, California, from $1,000,000 to
(3a01
Par of 0 Pursuant to a plan which provides for the sale at
500,000 par value preferred stock to the Reliance
urities ComParW and that the funds released by the re,
ductio in
11
the common capital stock shall be used to
unsatisfact
letter
,«T,ei December ory assets, all as set forth in your
1, 1933."




Approved.

464
12/19/3

-16-

Letter to Mr. O'Connor, Comptroller of the Currency, reading
48 follows:
"In accordance with your recommendation, the Federal
Reserve Board approves a reduction in the common capital
stock of 'The First National Bank of Holtvillel l Holtville,
California, from $50,000 to $25,000, pursuant to a plan
Which provides that the bank's capital shall be increased
117 the sale at par of $25,000 par value preferred stock to
the Reconstruction Finance Corporation, and that the funds
released by the reduction in common capital stock, together
With approximately $6,585 from the bank's surplus and/or
undivided profits, shall be used to eliminate substandard
assets and securities depreciation in the amount of approximately $31,585, all as set forth in your letter of December
9, 1933."
Approved.
Telegram to Mr. Newton, Federal Reserve Agent at Atlanta, reada$
fOliows:

"Referring your letter December 15 regarding East
Tennessee National Bank, Knoxville, Tennessee, whose
ioldings
of Federal reserve bank stock were canceled
'arch 3, 1933, Board approves issue of 600 shares of
stock to the bank effective if and when it is authorized by Comptroller of Currency to reopen for business."
Approved.

Reply

to a letter dated November 22, 1933, from Mr. Sailer,

Governor of the
Federal Reserve Bank of New York; the reply
a8 falOWs:

th
"In your letter of November 22 you make reference to
? Board's letter X-7640 of October
16 and review the
.
)-LicY followed by your bank with reference to the absorp__ °11 of abrasion loss on gold coin and transportation
on gold coin and bullion shipped to your bank, and
ok the Board
whether it does not agree with you that it
ab ld be preferable
for your bank to continue to absorb
an asion loss on gold coin up
to $1.00 on any one shipment
,,„_shiPPing charges on gold coin and bullion received by
w-Laz bank
from member and par remitting nonmember banks.

4
r




465
12A9/3,3

-17-

"In view of the special circumstances surrounding the
gold situation at this time and particularly of the fact
that the authority given the Treasury in the Executive Order
of April 5 to reimburse the Federal reserve banks in all
proper cases for the reasonable cost of transportation of
gold coin and bullion delivered to a Federal reserve bank
in accordance with Sections 2, 3 and 5 of the Executive
Order is not contained in the Executive Order of August 28,
Section 11 of which revoked the Executive Order of April 5,
and of the fact that the Treasury will not reimburse Federal reserve banks for abrasion on gold coin beyond the
usual limit of tolerance, the Board feels that the Federal
reserve banks should no longer be expected to absorb
abrasion loss on gold coin deposited with them or tendered
in exchange for other forms of currency or shipping charges
on gold coin or bullion.
"However, the Board has no objection to the absorption
by a Federal
reserve bank of abrasion and transportation
costs in small amounts not exceeding a total of $1.00 in
connection with any one shipment, in view of the expense
and inconvenience to the bank of obtaining reimbursement
for such small amounts."
Approved.
Letter dated December 18, 1933, to Mr. Hoxton, Federal Reserve
Agent It Riel_
amond, approved by five members of the Board, reading as fol1()ws;

"The Board has reviewed the report of examination of
the Federal Reserve Bank of Richmond as of July 29, 1933,
eQPies of which were left with you and Governor Seay.
"The Board is pleased to note that the recommendations
r its examiner (page 16) that audits of the collection and
raneit departments be enlarged in scope so as to include a
l'_?ntrol on
incoming mail for a period of time subsequent to
,
T-Lne date
of the audit, and that audits of the Fiscal Agency
'!?Partment be enlarged so as to provide for a checking of
u-11 su
bscriptions received, have been adopted. On the same
,31,1ge attention is
called to the practice of the reserve bank
I.?.cePting, without count, currency which has been paid out
44-,t, in original packages and received back with the seals
th,„ wraPPing apparently intact. The Board is in accord with
'
recommendation of its examiner that such packages should

Z




466

12/19/33

-18"be opened when received by the reserve bank and treated in
the same manner as other currency forwarded to it for deposit or exchange, and wishes to be advised as to whether
the examiner's recommendation has been adopted.
"It is noted (page 19) that compromise settlements
made on notes held as collateral to suspended banks' indebtedness have not in the past been recorded in the minutes of meetings of either the Executive Committee or the
Board of Directors and the Board is pleased to learn that
all compromises, except those of nominal amounts, will be
SO recorded in the future. On the same page the examiner
comments on the careless manner in which the minutes of the
Executive Committee meetings are kept, on the fact that the
minutes of several meetings were not signed by the secretary, or acting secretary, and that for a period
of several
days no record was kept showing who attended such meetings.
The Board desires to stress the importance of maintaining
at all times a complete and permanent record of
all meetllogs, and of submitting the minutes of each meeting to the
Board of Directors at its next succeeding meeting as provided for in the bank's by-laws. It is noted that proper
and permanent minutes will be kept in the future.
"The examiner calls attention on page 20 to the large
number of small safe deposit boxes located in the main
vault which are being used by officers and employees of the
bank and by two persons not on the institution's pay roll.
The Board
is in accord with the examiner's views that the
number of persons permitted to enter the vault should be
reduced to a minimum and that in no case should any individual other than an officer or employee of the bank be
. ven the use of such safe deposit boxes, even though
'
'
- 1c)se having access to the vault are properly covered at
1?f- tl times. The
examiner has indicated that this matter
considered further and your comments at this
t"eing
ime would
be appreciated.
bank "It is observed on page 21 of the report that the
has for some time been pledging past due paper with
Yu as
collateral to Federal reserve note issues and that
O
the date of examination such paper amounted to $329,252.94.
The
it
n erstates
of
that this matter was corrected during
the
the examination and the Board wishes to be ad8ed as to the
steps taken by you to prevent the pledging
ser'Ir/
tele
.ast due paper as collateral to Federal ree
sscLp
nfoliteuT
t

i:

Z

cen.""On Pages 127, 178 and 186 are listed unadjusted exof long standing appearing on member bank reconcile'
- s of reserve accounts with the Head Office and the




467
12/19/33
- 19 "Baltimore and Charlotte branches. It is noted that practically all of such exceptions are due to entries made at or
about the time of the national banking holiday and that requests have been made in each instance for adjustment. In
this connection the Board wishes to be advised as to the
present status of the debit of :7,000 made on March 25,
1933, to the account of the Peoples National Bank, Conway,
South Carolina (Head Office entry), and the debit
of $1,500
made on March 3, 1933, by the First National Bank,
West Jefferson, North Carolina (Charlotte Branch zone), both of
these
exceptions apparently being subjects of some controversy with
the member banks
involved.

ci

"The Board is pleased to note that negotiable securities
Pledged as subcollateral to notes held
in custody by the
Charlotte Branch for the Reconstruction Finance Corporation
Will hereafter be reflected
on the books of the Branch, under
the account
'Liability for Custodies', as recommended by the
examiner (page 186), and also that any cash hereafter received for account of the Reconstructi
on Finance Corporation
17 the branch will
be deposited direct with the receiving
teller instead of with
the Custody Division as had been the
practice.
"It is noted from the custody schedules of the
Head Ofand of the Baltimore Branch (pages 59 and 170, respectlvelY) that securities are being held in safekeeping
for the
a?count of the Bureau
of Insular Affairs, Washington, D. C.,
ltheut authority from
the Treasury Department. Such autie1'")r
should be obtained and kept on file for all securis held in
safekeeping by the bank as Fiscal Agent of the
held.°ernment. It is also noted that securities were being
n safekeeping for the account of various receivers of
,;Lcsed banks,
and it will be appreciated if you will advise
e Board as
to the nature of such safekeeping accounts.
01113,thls
the Board feels that, while there is no
8.4.J?ction to retaining the securities held in safekeeping
cf:.tshe time of suspen
sion of a member bank until the re11'
e- lver has had an opportunity to make other arrangements
,
w deposi
ts of securities should not be accepted.

Z

r

"The examiner
has commented (page 20) on the number
n_ relatives
employed by the bank and particularly in in;"-hces where
two members of one family are employed in the
pare
t department and
where an employee of the auditing dehas a relative working in a department whose acc°unmen
ts
are
,
stap,
.ubject to verification by the bank's auditing
tv,_". It
izted that consideration is being given to
advlI
isab
of transferring to another department the




468
12/19/33
-20"wife of the manager of the Fiscal Agency Department who at
Present is working under his immediate supervision, and
that consideration is also being given to the recommendation of the examiner that no employee be assigned to the
auditing staff who has a relative in any department of the
bank subject to audit. The Board will appreciate a report
from you setting forth the conclusions reached as a result
of the consideration of these matters and would also like
to have an expressi
on of your views as to the advisability
In general of employing individuals who are closely related
to other
employees of the bank.
. "The Board understands that the question of strengtheT2.ing the staff of the Auditing Department of the bank was
discussed
with you by the examiner and an expression of
Your views as to the desirability of so doing would be appreciated.
"After the report and this letter have received the
e°nsideration of the board of directors of the Federal
Reerve Bank, the Board would appreciate advice from you as
what action has been taken or will be taken on the matters discussed."
Approved.
!kboti

RePlY to a letter dated October 3, 1933, from Mr. Frederick
.1c1
'president of
the New York State National Bank, Albany, New
the
regy reading
as follows:
in r "Reference is made to your letter of October 3, 1933,
egard to the computation of interest on savings de1:.sits and the
suggestion that the Federal Reserve Board
,
be a uniform method of computing interest on such
"
escriPosits
€t "It has
been recognized by the Board that as your
p1.1jer
there are a great many methods of comha lng interest and
after careful consideration the Board
prs reached the conclusi
on that it should not undertake to
theT:ibe some IK-rf.icular method or methods and prohibit
e
Of others. Therefore, in the exercise of its au1340-"LT under
section 19 of the Federal Reserve Act the
balT1 hus provided in itL: Regulation 'Ql that no member
TaY Pay interest on time or savings deposits at a
has; In excess of
that stated therein regardless of the
ls uPori which such interest
may be computed and leaving




469

12/19/33
-21"it open to the banks to select the methods which seem
most practicable and desirable from their standpoint
Within the limit prescribed by the regulation."
Approved.
Reply to a letter dated November 10, 1933, from Mr. J. N.

Q31111n, Cashier of
The First National Bank, Hugo, California, the reply
rel4cling as
falows:
"Reference is made to your letter dated November 10,
1933, regarding time certificates of deposit issued by
You subsequent to June 16, 1933, on which you agreed to
Pay 4% interest, and inquiring whether, under the rules
of your bank governing savings deposits, a copy of which
You inclosed, your bank may pay interest on savings deposits up to December 31, 1933, at the rate of 4% per
annum.
"Section 19 of the Federal Reserve Act was amended
by the
Banking Act of 1933 so as specifically to require
the Federal Reserv
e Board to limit by regulation the rate
of interest which may be paid by member
banks on time dePosits. The Banking Act of 1933 was enacted on June 16,
1933, and it follows as a matter of law that the rate of
interest which may be paid by a member bank on a time dePosit under the terms of
any certificate or contract
issued or entered into after that date
may not exceed
"td?.e rate as limite
d by the Federal Reserve Board from
time to time
pursuant to the statute. The Board in its
ttegulat
ion Q has limited the rate which may be paid by
member bank on a time deposit for any period subsequent
to
October 31, 1933, to three per cent per annum camPounded semiannually and, accordingly,
no member bank may
PT
interest accruing after the latter date on a time det
i)
,?slty at a rate in excess of that prescribed in Regula2Tn Q, under the terms of any certificate
or contract
entered into
after June 16, 1933, even though such a
4 ertlficate or contract may provide for the payment of
interest at a rate in excess
of that stated.
"In connection
with the payment of interest on savings
deposi
ts,
subsec
tio n (c) of Section V of Regulation
Q pr
ohibits member banks from paying interest accruing
after
October 31, 1933, on any savings deposit or part
thereof at a
rate in excess of 3% per annum compounded




470

12/19/33

"semiannually, except in accordance with the terms of a
contract lawfully entered into in good faith prior to
June 16,-1933, and in force on that date and which may
not lawfully be terminated or modified by the bank
at
its option or without liability. No such contract
may
be renewed or extended unless
modified to conform to
the requirements of this regulation as
to the rate of
interest which may be paid; and a member bank is required to take such action as shall be necessary, as
soon as possible consis
tently with its contractual obligations, to bring all such contracts into conformity with
the provisions of this regula
tion. In view of the provisions of sections 9 and 19 of your saings deposit rules
Permitting your bank to return deposits or to amend the
rules upon 30 days' notice, it would appear that your
bank may lawfully modify its contract with its savings
depositors without liability upon giving the reQuired
1()ice. The Banking Act
of 1933 was enacted June 16,
1933, and Regula
tion C was adopted August 29, 1933,
thus affording
ample time to your bank to modify its
contracts
with its savings depositors before October 311
:t?'!3. Accordingly, such contracts are not of a kind
are
the exception to the prohibition above

4

"Your attention is also invited to Section 6of
Y?ur rules
governing savings deposits wherein it is proat interest will be paid from the first day of
the month on deposi
ts made on or before the fifth day
f
,
l such month. In this connection, the Board
has held
that if the
amount of interest paid by a member bank
any deposit exceed
s 3 per cent per annum, cornSemiannually, for the period during which the
ieP°Bit is actually in the bank, whether by reason
of
dnelusion in the interest period of days prior to the
:
1 e cn
which the deposit was made or days after it was
z'
etT'
elq
payment is at a rate in excess of that
by the Regulation and in violation thereof.
se:?1rery interest at a rate less than the maximum preof
'
4
3-'ed in the Regula
tion may be paid from the first day
he month
on a savings deposit which is actually reed thereafter,
provided that the amount of interest
ritts
or
, exceed three per cent per annum, compounded
for the period from the date on which the
lalcIsit was
actually received by the bank until actually
is
rules
your savings deposit
bet
nantincgil;I:Pt

Z




471
12/19/33
-23"For your further information, a copy of Regulation

Q is inclosed."

Approved.
Reply, prepared in accordance with the action taken at the
meeting
on December 13, 1933,
to a letter dated December 11 from Mr.
Chairman of the Federal Reserve Bank of Cleveland; the reply
l'eading as
follows:
"The Federal Reserve Board has received your letter
of December 11, 1933, in which you expre
ss concern over
the possible loss, becau
se of the prohibitions of Section
8A of the Clayton Act,
as amended, of the services of Mr.
George D. Crabbs as a Class B director
of your bank, and
of Messrs. C. N. Manning and Fred
A. Geier as directors
of your Cincinnati branch, all of
whom are also directors
Of industrial
concerns which make loans on stock or bond
collateral.
"The very broad language of Section 8A of the Clayton
Act has given
rise to numerous difficulties, and the Federal Reserve
Board has decided to recommend to Congress
that this section
of the law be amended as soon as posoible after Congress conve
nes in January, so as not to apPly to cases such as
those referred to in your letter.
"The statute does not take effect until January
1,
193
,
'4, and even then it will not apply in the cases referred to unless and
until the corporations of which
Messrs. Crabbs, Manning and Geier
are directors or officers make
new
loans
secur
stock
ed
by
or bond collateral,
;
as the
statute clearly applies only to corporations which
shall make' such
loans after Janury 1, 1934. There is,
therefore, a
possi
bility that the statute may be amended
So as
not to apply to the service of these directors before it
ever actually becomes applicable to such service.
"It is noted from your lette
r that the three direcare men of outstanding position and ability who have
ljndered long and
helpful service in their director relaitcTshiPs to the Federal Reserve Bank of Cleveland, and
131' ls hoped,
therefore, that an amendment to the law can
effected before it becomes necessary for them to take
n aetton which might affect their relations with your
414 or its Cincinnati
branch."
tors




Approved.

12/19/33
-24-

banks,

Letter to the Federal reserve agents at all Federal reserve
reading as follows:
"The Board has been informed that some of the directors of Federal reserve banks and their branches are
serving as directors, officers, employees or partners
of non-banking organizations which occasionally make
loans secured by stock or bond collateral,
s you know,
such services are prohibited 107 Section 8A
of the Clayton
Act, and the Federal Reserve Board is
without authority
to issue
permits in such cases, as its authority to issue
Permits with respect to the provisions of the Clayton Act
is.limited to permits covering the
service of banking inin this connection reference is made to the
Board's letter of November 10, 1933, X-7677.
"The very broad language of the statute has given
rise to numerous
difficulties; and the Board has decided
to
recommend to Congress when it convenes in January that
this
section of the law be amended as soon as possible so
as not to apply to
directors of Federal reserve banks and
their branches, and also
so as not to include organizations which
occasionally make loans secured by stock or
bond
collateral only to their own officers or employees,
and organizTtions
engaged primarily in agricultural, cornor industrial enterprises which occasionally
maxe loans secured by stock or
bond collateral only to
their
own customers.
"As you know, the statute does not take effect
until
Ja
nuarY 1, 1934, and does not apply even then unless
and
11.11til the other
organization which the Federal reserve
u,nk director is
serving shall make new loans secured by
?°ck or bond
collateral, because the statute clearly reers Only to corporations which 'shall make' such loans
after Jan
uary 1, 1934.
"In this
connection, attention is also invited to the
fact that
other sections of the Banking Act of 1933 recogrsi2e a clear
distinction between loans and other extentrns of credit; and Section 8A
refers only to organiza°ns which shall
make 'loans' secured by stock or bond
calla+
tr,„'
eral. Of course, the question whether a particular
as'usaction is a loan within the meaning of the statute,
forT-sttnguished from an extension of credit in some other
p -ar6i:! iS a question to
be decided upon the facts of each
cular case."




Approved.

473

1

12/19/33

-25-

Reply to a letter dated December 9, 1933, from Mr. J. G.
--G.Lnsmith, Secretary & Treasurer of the Pennsylvania Bankshares
Securities Corporation, Pittsburgh, Pennsylvania
; the reply readas
follows:
'Tour letter of December 9, 193$, inquires as to
the applicability of Section 32 of the Banking Act of
1933 to certain directors of Pennsylvania Bankshares
and Securities Corporation who are direct
ors and officers
Of banking institutions
. As you indicate in your letter
the question had already been submit
ted to the Federal
Reserve Board by Mr. Fletcher, Assistant Federal Reserve
Agent at Cleveland, and the matter has been under consideration.
"As you know, Section 32 has reference to the business actually transacted by a corporation, rather
than
the business
which it is authorized to transact, and although the Board has been furnished with information regarding the powers of the Corporation under its charter,
which has been submitted regarding the
busine
usines
ss
s actually transacted by the corporation is not
s
ufficiently complete to enable the Board to make a definite ruling
upon the question which you have asked.
"However, it would seem from your letter that the
!Sole business
actually transacted by the Corporation may
be that
of a mere holding company owning stock in a group
of banks.
The Board has ruled, in another connection,
that the
phrase 'engaged primarily in the business of PUTChasing, selling or negoti
ating securities' in Section 32
tis not
applic
able
corpor
to
ation whose sole business
a
is that
01 a holding company holding controlling interest
in the stock
of other corporations, and in view of the
statement contained in your letter that the stocks which
Y.°1/' corporation
now owns, with one slight exception, comprise nothing
but bank stocks which have been held for sevyears, and that your corporation is not now contemth
i:
ting the sale of any of these stocks, it would seem that
42
3 phrase
in Section 32 quoted above might likewise be
/11Dp1icab1e
to your corporation, although, as stated above,
einformation submitted is not sufficiently complete to
enable the
Board to rule definitely upon the question.

qal




474
12/19/33
- 26 -

"Incidentally, your letter refers to certain directors of your corporation who are directors and officers
of 'banking institutions', but, as you are of course aware,
Section 32 has reference only to directors and officers of
member banks of the Federal Reserve System."
Approved.
Reply to a letter dated November 16, 1933, from Mr. McClur
e,
Federal Reserve
Agent at Kansas City; the reply reading as follows:
"Receipt is acknowledged of your letter of November
16, 1933, inclosinF a letter from James E. Goodrich,
Vice-President
and General Counsel of the Commerce Trust
Company, Kansas City, Missouri, who raises the question
whether the Keystone Mortgage Investment Company, an affiliate of the Commerce Trust Company, is a securities
company within the meaning of Section 20 of the Banking
Act of 1933. As you know, Sectio
n 20 provides that after
°Yle year from June 16, 1933, no member bank shall be affiliated in any manner described in Section 2(b) of the
Act with any corporation,
etc., 'engaged principally in
th, issue,
flotation, underwriting, public sale or distribution at wholesale or retail or through syndicate
Participation of stocks, bonds, debentures, notes
or
Other securities'.
"From Mr. Goodrich's letter, it appears that the
l eystone Mortgage
Investment Company is engaged 'in serveiag outstanding mortgage loans held
by sundry investors',
including
the Commerce Trust Company, and 'in servicing
and in otherwise looking after real estate acquired by investors through foreclosure or adjustment with the borrowers of previo
usly existing loans secured by mortgages',
in addition to
looking after its own assets which consist
Principally of commis
sion notes, real estate mortgages
1c1 real estate. Mr. Goodrich states that it is customary
or
renewal obligations to be taken in the name of the
Company
c
and, upon discharge of prior mortgages, for the
_TaPanY to assign the new loans to the investors in lieu
ul the old.
It is understood that the company occasionally
egotiates a
new loan and sells the same to an investor,
but that
the gross income received from this source from
rj°vember 16, 1932, to Octobe
r 30, 1933, represented only
-third of
one per cent of the total gross income of
the ccrIPany. Apparently, the company does not guarantee
e Payment of princi
pal or interest of the mortgage
uotes which
it handles.

Z




475
12/19/33
-27-

"On the basis of the information furnished, it would
not appear that the Keystone Mortgage Investment Company
ls engaged principally in the issue, flotation, underwriting, public sale or distribution of stocks, bonds, debentures, notes or other securities, or that it is a securities company within the purview of section 20 of the
Banking Act of 1933."
Approved.
Reply to a letter dated October 31, 1933, from Mr. E. B.
ShIldden, Vice President of the Hamilto Nationa
n
l Bank, Chattanooga,
Tennessee; the
reply reading as follows:
"Receipt is acknowledged of your letter of October 31,
1933, in regard to the question whether the Bank of Spring
City, Spring City, Tennessee, is an affiliate of the Hamilton National Bank of Johnson City, Tennessee, within the
meaning of the Banking Act of 1933. You state that a majority of the stock of the national bank is owned by Hamilton National Associates of Chattanooga, Tennessee, which
also owns a majority of the stock of the Bank
of Spring
CitY, Spring City, Tennessee.
"Section 2, subparagraph (b), subdivision 2 of the
Banking Act of 1933 defines an affiliate as including any
corporation of which control is held by the shareho
lders
:ember bank who own or control a majority of the
of such bank. From. the facts presented it appears
that the Bank of Spring
City is a corporation of which
control is held by a shareholder of the national bank,
Hamilton National Associates, which owns a ma..°1.1-tY of the stock of the national bank, and, therefore,
unlit the Bank of Spring
City is an affiliate of the national bank within the meaning of the Act.

()L%

"For your information, there is inclosed herewith a
lCoPY of a ruling which will appear in the Federal Reserve
lillettn for December, 1933, and which sets forth the
basis
the Position of the Board in respect to the question involved in your
inquiry."
Approved.

RePlY
illeh„ds

to a letter dated December 9, 1933, from Mr. C. B.

°II
'Vice President of The Richardson Brothers Company, Cheyenne,




476
-28Ihriling; the
reply reading as follows:
"Receipt is acknowledged of your letter of Decembcr9, 1933, regarding your qualificatio
ns to serve as
director of a national bank.
"You state that you are a director of the Tyom
ing
National Bank of Casper, Wyoming, and that
you are also
an officer and director of The Richards
on Brothers ComPanY, a corporation, that you are a member of the
firm
of Richardson Brot
hers, a co-partnership, and that you
area director and officer of the Rich
ardson Trust Association, a comm
on law trust company, all of -which
organizations
at times make loans on collateral and
Other security
. In view of your connection with these
°rganizations,
you request to be advised whether you
tre eligible to cont
inue to serve as a director of the
"Y°mlng National Bank.
"Section 8A of the Clayton Antitrust Act as amended
Prohibits a
director of a national bank from serving
after
January 1, 1934, as a director, officer, or
em0 e of a
corporation (other than a mutual savings
ank) or as a
member of a partnership organized for any
s rPose what
Plii,.
soever which shall make loans secured by
°ck or bond
Partnership, collateral to any individual, association,
or corporation other than its own subsidiaries.
You do not state whether the organiza
tions which
""c°11 mention
make loans on the security of 'stock or bond'
211ateral. If that
is true, however, the Section above
will prevent your serv
ing as a director of the Tyoerg National
Bank after January 1, 1934 1 as long as you
arneltinue to serve as an offi
cer and director of The RichBrothers Company and as a member of the firm of
B
arothers. If the Richards
on Trust Association
corporation nor a partnership, your service
h4,,, director
and officer of that association is not pro-Llt
u ed
the section in question, even though such as2°ciation
lat
‘ihall make loans secured by stock or bond col
eral.
Alit, "Under the
provisions of Section 8 of the Clayton
Illidltrust Act, the Fede
ral Reserve Board is authorized,
sore.
;
1 certain circ
umstances, to issue permits covering
of 17..;,-er of the kinds referred
to in Section 8 and
re,,,
7ak, Act.
This authority, however, exists only with
"
he Boarto banking institutions of certain classes and
ing Boarddis without authority to issu
e permits involv'
relationship
s between national banks and non-banking




477
12/19/z3
-29It

organizations which come within the provisions of Section 8A. Accordingly, the Board could not, in the
Present case, issue a permit covering any of the relationships described in your letter.

"In the present connection, it may be noted that
Section 8A refers to any corporation which 'shall make'
loans of the kind described. There is inclosed a copy
Of the Board's Regulation
L dealing with interlocking
directoratesand other relationships under the Clayton
Antitrust Act, and your attention is directed particularly to paragraph (3) of Section IV(b).
Since the
statute does not refer to the business which may have
been transacted by a corporation or partn
ership in the
Past, but refers only to the business curre
ntly and
presently transacted, the prohibitions of Section 8A
are inapplicable to
the service of a director of a national bank as a director of a corporation or partn
ership
Which in the past has made loans
secured b7 stock or bond
collateral, if
such corporation or partnership shall make
no further
loans of that character after January 1, 1934,
the effec
tive date of Section 8A."
Approved.
Reply to a letter dated November 24, 1933,
from Mr. George P.
4ecutive Vice
President of the Bishop First National Bank of
Hawaii; the reply reading as follo
ws:
"Receipt is acknowledged of your letter of November
24, 1933, requesting that the Federal Reserve Board issue
Permits under the Clayt
on Act covering the service of several directors
of your bank as directors of certain trust
co
mpanies.

YOU point out that in view of the fact
that Section
of the Clayton
Act becomes effective January 1, 1934,
d in view of the great dista
nce between Hawaii and Washallq°n, it will be impossible to
obtain the necessary
,/213-Lication forms and have them filed
and acted upon bethe effective
date of the Act and the annual meeting
of the
°r
shareholders of your bank on January 9, 1934.
8A

T

"In
catio
, order to be in a position to act upon the appli-s of these directors, it will be necessary for the




478

12/19/33

"Board to be furnished with the information called for by
the Board's forms, and the Federal
Reserve Agent at the
Federal Reserve Bank of San Francisco is being requested
to furnish you with the
necessary forms for this purpose.
The applications should
be filed with the Federal Reserve
Agent in order that he may attach his recommendation and
forward them to the Federal Reserve Board.
"In view of the circumstances referred to in your letter, the Board will not be
disposed to take any action with a
view to requiring the resignation of the directors
involved
because of the provisions of the Clayton Act, until they
have
had an opportunity of submitting
applications in proper form.
Of course, if permits are
then granted on the basis of such
aPPlications, the service of these directors will not be
withthe prohibitions of the Clayton Act."
Approved.
Letters dated December 18, l93F, approved by
five members of
the B_
'
Iscl) to
applicants for permits under the Clayton Act, advising of
'4131)
1'0171a
Of their
applications as follows:
14r• R. G. Harte, for permission to
ser—a at the same time
as director
and officer of the Farmers & Merchants State
anky Hinckley, Minnesota, and as
officer of the First
ilational Bank, Crosby, Minnesota.

!3

Mrs R. J. McRae, for permission to
serve at the same time
"director and
officer of the First National Bank, Gracelle) Minnesot-, and as director of the
Dank
„
First National
) aheaton,
Minnesota.

n

Approved.
Ther
e were then
11q. stock
presented the following applications for origiOf Federal
reserve banks:
4.122
1.9./ap for ORIGINAL Stock:
District No:-3.
First
National Bank in New Freedom,
New
Freedom, Pennsylvania
11:1§Izict No. 4.
Flrst Nat
ionai-Bank in Bellaire,
1„.
lrstBellaire, Ohio.
National Bank at Conneaut Lake,
Conneaut Lake, Pennsylvania.



Shares

42

42

198
36

234

479
31ations for 0

AL Stock: (Continued)

Shares

ackson Nations/ Bank, Jackson Georgia.




Approved.
Thereupon the meeting adjourned.

33
Total

35
309