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1814 A meeting of the Board of Governors of the Federal Reserve 8Y8tem was held in Washington on Friday Decemb , er 19, 1941, at 11:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Clayton, Assistant to the Chairman after The action stated with respect to each of the matters hereinreferred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Feder al Reserve System held on December 18, 1941, were approved unani14%184.. Telegra ms to Messrs. Sanford, Post, Hays, and Dillard, Secret4ries °I' the Federal Reserve Banks of New York, Philadelphia, Cleve4114 'and Chicago, respectively, Mr. Caldwell, Chairman of the Federal e Bank of Kansas City, Mr. Gilbert, President of the Federal Reeerve Bof Dallas, and Mr. Hale, Secretary of the Federal Reserve 44tik of ,an Francisco, stating that the Board approves the establish'without change by the Federal Reserve Bank of San Francisco on ember 16, by the Federal Reserve Bank of Kansas City on December bythe Federal Reserve Banks of New York, Cleveland, Chicag o, Dallas, 411(1 or rrancisco on December 18, 1941, and by the Federal Reserve Bank "elPhia today, of the rates of discount and purchase in their 1815 12/19/4i -2-- eNtisting schedules. Approved unanimously. Memorandum dated December 16, 1941, from Mr. Nelson, Assistant Secretary, recommending (1) that John N. Lyon, page, be promoted to 41, ""e position of clerk in the accounting section of the Secretary's °trice on a permanent basis and that his salary be increased to $1,440 P"411111m1, effective January 1, 1942, with the understanding that if he pe r. " )rms his duties as expected a recommendation will be submitted that „ "ls salary be increased to the rate of $1,620 per annum, (2) that Harr7 L• Edwards and George B. Newell, elevator operators, be transter,. 4. Q1 to the page force of the Secretary's Office without change in their Present temporary status and that their salaries be increased fr°Ia k)200 to $1,260 per annum, effective January 1, 1942, and (3) St that ePhen J. Smith and Dean E. Brundage be appointed on a temporary 1:114118 fOr an indefinite period as elevator operators in the Secretary's , with salaries at the rate of $1,200 per annum, effective as of thedate upon which each enters upon the performance of his duties after halrtng passed satisfactorily the usual physical examination. Approved unanimously. Memoranda dated December 15, 1941, from Mr. Paulger, Chief "the t. lvieion of Examinations, recommending that the following inet.e, t&. in salaries of employees in that Division be approved, effec41111a17 1, 1942: 12/19/41 -3- Designation Ltillard Edwin R. 'rso';111, Willis G. Bartz/ Charles H. liaYnard, Mrs. Marguerite C. Federal Reserve Examiner Federal Reserve Examiner Assistant Federal Reserve Examiner Secretary Salary- Increase From To 6,000 6,400 4,000 4,200 3,400 2,800 3,500 2,900 Approved unanimously. Letter to Mr. Peyton, President of the Federal Reserve Bank of titleaPolis, reading as follows: "In in Your accordance with the recommendation contained letter of December 9, the Board approves the apr,,sointment of Mr. Roger K. Grobel as an assistant examiner L?r the Federal Reserve Bank of Minneapolis. Please ad8e us of the effective date." Approved unanimously. Letter to Mr. Gidney, Vice President of the Federal Reserve Bank N°1"1 York, reading as follows: "Reference is made to the report of examination of 8 State : Trust Company, Plainfield, New Jersey, as of cj l !ner 20, 1941. Although Analysis Form 212 with your and recommendations has not been received, there are the lpeveral matters in connection with the condition of time.arik which appear to call for consideration at this : Qour It is observed that the bank's adjusted capital acwas 2l6,000 or 4.4 per cent of deposits of A4,945,000, oth':' continue to grow. The aggregate of fixed assets, in,t real estate and notential other real estate amount,500443,400 exceeded the book capital accounts totaling ttir_ the -t°1-1 have heretofore reported on discussions had with yolarrlagement with respect to the efforts being made by imProve the condition of the bank and it is noted M817 12/19/41 —4-- "from your letter to the bank's directors dated November 7, 1941, that you urged the directors to do all that can and should be done to effect a program to restore the bank's capital account to proper proportions. "Substantial amounts of losses have been classed in reports of examination in recent years. It does not ap— Pear that the bank has made adequate eliminations, yet, despite that situation, the bank has continued to pay dividends on the preferred stock held by the R.F.C. In Your letter of August 1, 1941, to the bank you suggested the desirability of omitting the dividend payments until 511?h time as adequate provision had been made for all losses set forth in the examination report of December usoember 3, 1940, amounting to 60,769. However, on Au— g;ist 28/ 1941, the bank wrote you stating that as it had e-Liminated all losses listed in the State report (i?23,000) it felt that the dividend payable August I had been earned, Should he paid, and had been paid. It is indeed difficult ,° understand the repeated failure of the bank to recognize tcs responsibility as a member of the System to provide or the losses estimated by the examiners for the Reserve Bank insofar as may be possible. "In view of the excessive aggregate of unsatisfactory assets the distinctly undercapitalized position of the rerl , and the 82,835 of losses reflected by the current nejrt of examination, it seems clear that the bank should ha Pay dividends on preferred stock until these conditions lie been corrected. t, It will be appreciated, therefore, if you will bring matter to the attention of The State Trust Company (s -L3cn the request that it make adequate provision for the 20,8es set forth in the report of examination of September far 1941) that this be done before the end of the year as it 4 a8 Possible and that earnings be fully conserved until no is clearly demonstrated that the condition of the bank toar°11r:er requires their retention. Please advise the ""of the action taken by the bank in this respect. th„ B It will be appreciated if you continue to Irecp erre °ard informed of your efforts to have improvements eted in the condition of the bank generally." Approved unanimously. 41tve Telegnalq to Mr. Clerk, First Vice President of the Federal Re— of San Francisco, reading as follows: 1818 12/19/41 -5"Board is of opinion that arguments presented by T ansamerica Corporation in the memorandum transmitted with est's letter of August 21, 1941, do not warrant reversal of Board's ruling to effect that on August 30, 1940, and after 1941 election of directors of Bank of Am?rica National Trust and Savings Association, Transam1ca Corporation was a holding company affiliate of such tnk by reason of fact that it owned or controlled more uan 50 per centum of the number of shares voted for the el of directors of the bank at the preceding elecl°n. As stated in Board's telegram to you of March 3, ,941, in light of such oanion it has been unnecessary 17 . ?onsider applicability of portion of definition reto 'controls in any manner'. Please advise us !? n You have advised Transamerica Corporation of Board's vlews.n 7 I Approved unanimously. Letter to Mr. Walter Kasten, Wisconsin Bankshares Corporation, 141/valikee/ vasconsin, reading as follows: before this Board is the application of the :Pending . l asconsia Bankshares Corporation for a general votPermit covering the Baraboo National Bank, Baraboo, " Isin. Action has been deferred on this application will not be taken pending a discussion of the polYour corporation, its officers and directors, in "e light of the responsibilities of the corporation cortinection with voting permits issued to it. next 'Accordingly, I would suggest that, prior to the ,annual meeting of the Baraboo National Bank, a meetpe held in this office of yourself and any other dima ,°rs cf the Vvisconsin Bankshares Corporation that you Ish to bring with you. to give you all the time that is necesadvi uo discuss these matters fully and suggest that you ee me in advance a date that will suit your group.' 4 aT willing Approved unanimously. ti Letter to Mr. Charles T. Evans, Secretary of the American NaRetail Jewelers Association, reading as follows: 1819 12/19/4i -6"This will acknowledge receipt of your letter of D? cember 13 expressing the interest of the American National Retail Jewelers Association in any change that may be made in Regulation I% which would affect the selling of jewelry on instalments. "As indicated in the Foreword to Regulation tr, there !Ill be changes from time to time in the regulation and lterlis may be added to the list of consumers' durable goods Pecified. In formulating the regulation and since then ,he Board has consulted with representatives of the in.rested trade organizations and, in view of your interest l en the matter, if the addition of jewelry or similar mer1:land1se should be given active consideration, your Association will be notified." Z Approved unanimously. M emorandum dated December 18, 1941, from Er. Smead, Chief of the kris,on of Bank Operations, submitting the requests of the Federal Reserve Banks for authority to pay the regular semi-annual dividend at the end of 1941, to make additions to reserves for estimated losses on b advances, to set up special reserves for depreciation on bU1i j g8 to make other year-end adjustments, and to transfer 414°1111t8 fr°m surpluses to reserves for contingencies. The memorandum t"'I'tect that current earnings of the Reserve Banks for 1941 would be 1)13rokiniate1y 4:J412315/000 and current expenses about A32,771,000, leav't curr ent net earnings of 0,544,000, that profits on sales of Govsecurities to December 16, 1941, amounted to P,1,193,0001 that 4cillet` n 1°-8 from current net earnings include proposed reserves of i'--1000 for l On industrial advances and special reserves of koo °n fixed machinery and equipment, that net earnings for the 1820 12/19/a -7were estimated at 91101,000, payments to the Secretary of the 181-1/7 by six Reserve Banks under the provisions of Section 13b at ab°14 $125,000, and net charges to Section 13b surplus approximately that dividends for the year would be about $8,429,000, and that "Lough total net earnings available for transfers to surplus (Section )1`r0u3,d amount to approximately $551,000, the Federal Reserve Banks (It Philadelphia, Richmond, and Dallas would have deficits totaling about t36,000. Recommendations contained in the memorandum with respect to the requests of the Federal Reserve Banks were approved unanimously as follows with the understanding that the telegrams to the Banks would state that the procedure set forth in the Board's telegram of December 29, 1936, should be followed as to any net earnings or net losses for the year on industrial advances and commitments: Each Federal Reserve Bank was authorized to pay the usual semi-annual dividend at the end of the year, estImated to amount to a total of $4,234,000. 2. 3. T he Federal Reserve Bank of New York was authorized to set aside a special reserve out of current net nines of $480,000 on fixed machinery and equipment, °al : wIlIch represent s about one-third of the total cost of 2.1r-cond1tion ing the Bank building, and the Federal t;I:eserve Bank of St. Louis was authorized to set up special reserve out of current net earnings in the :runt of $120,000 to cover a portion of the cost of -conditioning the Head Office building of that Bank. The Federal Reserve Bank of Atlanta was authorized to_ set aside a rent earnings special reserve of $25,000 out of curfor alterations of the Jacksonville branch building. 1821 12/19/41 -8- 4. The following Federal Reserve Banks were authorized to set aside reserves for estimated losses on industrial advances and commitments as shown. These reserves were in addition to charge-offs on industrial advances direct to profit and loss already made by the Federal Reserve Bank of Richmond in the amount of $400, Minneapolis in the amount of 510001 and San Francisco in the amount of $3,000, which chargeoffs were also approved: Boston New York Richmond Atlanta Dallas San Francisco Total 5. $45,000 92,000 25,000 5l000 8,000 13,000 $188,000 Three Federal Reserve Banks were authorized to transfer estimated amounts from surplus (Section 7) to reserves for contingencies as follows, the amount transferred being equal in each case to the net earnings of the Bank for the year: Atlanta Minneapolis Kansas City $47,000 21,000 59,000 Thereupon the meeting adjourned. Secretary. Chairman.
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