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534 4'. meeting of the Federal Reserve Board was held in aashington O Friday, December 22, 1933, at 3:00 p. PRESENT: Mr. Yir. Er. Er. Er. Er. Black, Governor Hamlin Miler James Thomas Szymczak Mr. Morrill, Secretary Mr. Carpenter, Assistant Secretary Er. Bethea, Assistant Secretary The Board considered and acted upon the following matters: Letter dated December 14, 1933 (apparently intended to be dated 400/11ber 21), from lir. Sproul, Secretary of the Federal Reserve Dank of lIew York, and telegram dated December 21, 1933, from Mr. Newton, Chairof the Federal Reserve Bank of San Francisco, both advising that, 4tIlleetinEs on December 21, 1933, no changes were made in the banks' extirig schedules of rates of discount and purchase. Without objection, noted with approval. Letter to the governors of all Federal reserve banks, reading "-folio/7z: "The Governors' Conference which convened on October 10, 1933, : ; f°ted that Federal reserve banks may, with the approval of the era]. Reserve Board, continue officers or employees of the banks 011 their rolls with or without compensation, depending on the cir; umstances, in order that they may not be removed from the banks' s?sters and thereby become ineligible for the benefits of any penwhich may be adopted in the near future. 10, Attention is invited to the fact that the proposed retirement a-lan .which has been recommended by the Pension Committee of the 11°Irernors' Conference will apparently render officers or employees 4° longer actively connected with a Federal reserve bank ineligible the benefits of the plan because such benefits are rfuted to officers and employees 'in active service'; and accordit is doubtful whether the continuance of employees on the .Obtain 535 12/22/33 "rolls of Federal reserve banks after the discontinuance of their active service will effectuate the purpose which is intended. Ihere is also a question as to the advisability of permitting officers or employees who are no longer actively connected with the service of a Federal reserve bank to obtain the benefits of the retirement plan. however, the Federal Reserve Board will offer no objection to the continuance on the rolls of a Federal reserve bank of officers or employees no longer actively in its service for a reasonable period of time without payment of salary or Other compensation of any kind pending the adoption of the proPosed retirement plan in the near future and with a view to the settlement, after the retirement plan may have been adopted, of questions as to whether they should be permitted to obtain, or are elir,ible to receive, the benefits of the plan. The Board feels, . 1lowever, that a Federal reserve bank would not be justified in paying salary or other compensation to such an officer or employee 171.1° may be carried on its rolls merely in an endeavor to preserve his eligibility for the benefits of the proposed retirement plan." Approved. Letter to the board of directors of the "West Side Trust CMLewark, New Jersey, stating that, subject to the conditions preacribed in the letter, the Beard approves the institution's application tor membership in the Federal Reserve System and for the appropriate ktrle/Int of stock in the Federal Reserve Bank of New York. Approved, together with a letter to Lir. Case, Federal Reserve Agent at New York, reading as follows: "The Federal Reserve Board has considered the application of "e 'West Side Trust Company', Newark, New Jersey, for a voting 1) .1a_rmat under authority of Section 5144 of the Revised Statutes of United States, as amended, entitling such organization to vote the &took which it owns or controls in 'The South Side National 13 11.4nk and Trust Company of Newark', and 'The Peoples National Bank of elvT-ki, both of Newark, New Jersey. t. Final action on such application has not been taken at this 1, 1 1 1e• However, since a voting permit will be needed in connection E:1- ch the election of directors of the two subsidiary member banks annual meeting of stockholders in January, and in connection th "the proposed merger of the two subsidiary memLer banks with pee !Tplicant, the Board has approved the issuance of a limited rrillt t0 the applicant, subject to the admission of the applicant 536 12/22/33 "to membership in the Federal Reserve System and to the followin g additional condition: 1. Prior to the issuance to the applicant of a limited voting permit, it shall agree: (a) that, as promptly as possible after the issuance to it of the limited voting permit hereinabove mentioned, it will cause a merger to be effected of The Peoples National Bank of Newark, The South Side National Bank and Trust Company of Newark and the undersigned under the charter of the undersigned, according to a plan of merger satisfactory to and approved by the Superintendent of Banks of the State of New Jersey, the Comptroller of the Cur. roncy of the United States, and the Federal Reserve Board. "The agreement should be executed by officers of the applicant duly authorized to execute the same by an appropriate resolution of its board of director s. The form of resolution contained in Exhibit C attached to the application is broad enough to authorize the officers named therein to execute such agreement, however, and a separate resolution for this purpose will not be necessary if the agreement is executed by the officers named in Exhibit C. 'There is inclosed herewith a permit entitling the applicant to :vote the stock which it awns or controls in its subsidiary member banks for tho purposes set forth therein. As soon as the conditio ns Prescribed by the Board herein have been satisfied, you are authorzed to date this permit as of the date of issuance and to deliver same to the applicant. It is requested that you advise the IJoaf:d as soon as this has been done, and of the date of issuance. .It should be understood that in authorizing the issuance of a :Limited voting permit at this time the Board does not thereby waive lts right to require the applicant to furnish as a condition precedent to the issuance of a further permit, such addition al data and ap:eements, if any, as may be necessary in order to complete the ap!]Lication heretofore filed and to satisfy the requirements of the natute and of the Board's Regulations, or of prescribing in connec1On with the granting of a further permit such conditions as may PPr.ar to be desirable upon further consideration of the application. .'here is inclosed herewith a copy of this letter which you are re quested to deliver to the applicant." Letter to the board of directors of the "West Branch Trust ComPawl,, 4illi-amsport, Pennsylvania, stating that, subject to the conditi prez3cribed in the letter, the Board approves the institution's EIPPlien+--10n for membership in the Federal Reserve System and for the Etpprc Prlato amount of stock in the Federal Reserve Bank of Philadelphia, effective if and when the West Branch Trust Company is merged with the 537 12/22/33 -1- LY"Illiak Trust Company under the charter of the former institution and uzder the name of the West Branch Bank and Trust Company and, as such; i8 duly authorized by the Secretary of Banking of the Commonwealth to commence business. Approved. Letters to the boards of directors of the following State banks, elteh letter stating that, subject to the conditions prescribed in, the letter and to the issuance of a limited voting permit to the BancOhio C°1113c)ration; the Board approves the bank's application for membership the Federal Reserve System and for the appropriate amount of stock 14 the Federal Reserve Bank of Cleveland: "The Bank of Marysville Company", Marysville; Ohio. "The Fifth Avenue Savings Bank Company", Columbus, Ohio. "The Licking County Bank", Newark, Ohio. "The Perry County Bank", New Lexington, Ohio. Approved, together with a letter to Mr. Williams, Federal Reserve Agent at Cleveland, reading as follows: 7 he Board has considered the application ofiBancOhio Corporanon; Columbus, Ohio, for a voting permit under authority of Sec5144 of the Revised Statutes of the United States, as amended, ntitling such organization to vote the stock which it omns or conin the following banks: :The Ohio National Bank of Columbus', Columbus, Ohio, The First National Bank and Trust Company of Springfield', Springfield, Ohio, *ThLt3 First National Bank of Chillicothe, Chillicothe, Ohio, 2 1 11a Citizens National Bank in Zanesville', Zanesville, Ohio, The First National &Ink of Washington Court House; Washington Court House, Ohio, 'The Delaware County National Bank of Delaware; Delaware, Ohio, :The Union National Bank of Cadiz', Cadiz, Ohio, The Commercial National Bank of Coshocton; Coshocton, Ohio, 'The Na lonal Bank of Portsmouth, Portsmouth, Ohio; 538 12/2z/33 -5- "The Fifth Avenue Savings Bank CompanY, Columbus, Ohio, 'The Licking County Bank, Newark, Ohio, 'ihe Perry County Bank', New Lexington, Ohio, and 'The Bank of Marysville Company, Marysville, Ohio, and has authorized the issuance of a limited permit to the applicant, subject to the following conditions: A. Prior to the issuance of such limited voting permit to the applicant, there shall be furnished: 1. Evidence satisfactory to you: (a) That The Fifth Avenue Savings Bank Company, Columbus, Ohio, The Licking County Bank, Newark, Ohio, The Perry County Bank, New Lexington, Ohio, and the Bank of Marysville Company, Marysville, Ohio, respectively, have accepted and/or satisfied the conditions of membership prescribed by the Federal Reserve Board in its letters to the banks of this date so that such banks may properly be admitted to membership in the Federal Reserve System simultaneously with, or forthwith upon, the issuance of the limited voting permit authorized hereunder. ."There is inclosed herewith a permit which will entitle the apPlloant to vote the stock which it awns or controls in its subsidi.?-rY member banks for the purposes set forth therein. As soon as a c:Tditions prescribed by the Board herein have been satisfied, You authorized to date this permit as of the date of issuance and.to deliver the same to the applicant. It is requested that you advise the Board as soon as this has been done, and give the date Of issuance. "It should be understood that in authorizing the issuance of a -•7111.1.ted voting permit at this time the Board does not thereby waive !-es right to require the applicant to furnish, as a condition precedent to the issuance of a further permit, such additional data tLd agreements, if any, as may be necessary in order to complete _TaPplication heretofore filed and to satisfy the requirements the statute and of the Board's regulation s, or of prescribing il?h conditions as may appear to be desirable upon further considerof the application. re 0r0 is inclosed herewith a copy of this letter which you are Q quested to deliver to the applicant." Letters to the boards of directors of the following State banks, letter stating that, subject to the conditions prescribed in the letter, the Board approves the bank's application for membership in the e4ell e(1"al Reserve System and for the appropriate amount of stock in the ?etieral reser„ bank of the district in which the applicant is located: 539 12/22/33 Applicant Bank Federal Reserve Bank "Bank of Mount Hope", Mount Hope, West Virginia. "The Farmers State Bank of Lostant", Lostant, Illinois. .Sprague State Bank", Caledonia, Einnesota. ihorndale State Bank", Thorndale, Texas. Richmond Chicago Minneapolis Dallas Approved. Telegrams to the Federal Reserve Agents at St. Louis, Mime41/011s, and San Francisco, stating that, subjec to the t conditions preceribed in the individual telegrams, the Board approv es the applications q the following State banks for membership in the Federal Reserve SYst°111 and for the appropriate amount of stock in the Federal reserve 134:41c of the distri ct in which the applicant is located: Applicant Banki Federal Reserve Bank "Richview State Bank", Richview, Illinois, zarmers and Merchants State Bank of Springfield", Springfield, Minnesota. virs dBank a.k of St. Manes", St. Manes, I St. Louis Minneapolis San Francisco Approved. Reply on December 21, 1933, approved by six members of the Loctrd ' Q letter dated December 13 from Mr. Dillistin, Asnistant Fedoral. R eserve Agent at New York; the reply reading as follows: I._ "Receipt is acknowledged of your letter of December 13, 1933, 17sing a copy of form 83a, properly signed, which is to replace tio_-neemnlete feria 83a submitted in connection with the applicay "for membership of the Seaside Bank, -iiesthamioton Beach, New erk. 4 fie:Your request that the incomplete form be returned to your of' has been noted. You are advised, however, that since the 540 12/22/33 -7- application and all accompanying data is considered a part of the Board's permanent records, such form, even though incomplete, Will be retained in the files of this office." Approved. Letter to Er. Austin, Federal Reserve Agent at Philadelphia, res.ding as follows: "Reference is made to your letter of November 13, 1933, and to the meeting in 4ashington on December 12, at which you mre present, with regard to the reorganization plans of the Guarantee Trust Company and the Equitable Trust Company, both member banks of Atlantic City, New Jersey. "The Federal Reserve Board is now advised that, following the meeting on December 12, the possibility of organizing a new bank In Atlantic City was considered by those interested in the reorganization of the two trust companies, that the necessary funds for the common capital stock of a new institution have been raised, that a subscription by the Reconstruction Finance Corporation for preferred stock in such institution is under consideration by the orporation, and that if such bank is organized the Guarantee Trust eelany and Equitable Trust Company will be placed in liquidation. t In view of these circumstances, the Federal Reserve Board will 81:e no action in connection with your letter of November 18, 1033, Pending the outcome of the plans for the organization of the new bank.n Approved. Telegram dated December 21, 1933, to iir. Williams, Federal Resel'lre Agent at Cleveland, approved by six members of the Board, referto the application of "The Erie County Banking Company", Vermilion, Ohio, nOW knovn as the Vermilion Banking Company, for permission to withdr A -11 immediately from membership in the Federal Reserve System, and op Pe cler the C that the Board waives the usual requirement of six months' notice entlon to withdraw and that, accordingly, upon surrender of the 1 r eserve bank stock issued to The Erie County Banking Company, FedOral Reserve Bank of Cleveland is authorized to cancel such stock krld mlIke a refund thereon. '4' 12/22/33 -8Approved, together with a letter dated December 21, 1933, to the Attorney General of the United States, also approved by six members of the Board, reading as follows: "The Federal Reserve Board has received an application from the Erie County Banking Company of Vermilion, Ohio, for permission to withdraw immediately from membership in the Federal Reserve System and has approved such application. In this connection, it appears that, after the banking holiday in March, 1933, the Erie County Banking Company did not obtain a license from the Secretary of the Treasury authorizing it to reopen as a member bank under the regulations issued by the Secretary pursuant to the Act of October 6, 1917, as amended by the Act of March 9, 1933, and the Executive Order of the President issued under date of.March 10, 1933. Subsequently, another bank merged into the Erie County Banking Company, now known as the Vermilion Banking Company, under the charter of the latter institution, and the Superintendent of Banks for the State of Ohio issued a license to the institution under -nhich it reopened on August 11, 1933, with?ut obtaining a license from the Secretary of the Treasury. It is understood that this merger did not affect the membership 'Aatus of the member bank and it appears, therefore, that its reOl?ening on August 11, 1933, constituted a violation of the Executiv? Order and the regulations above referred to. 'A penalty is prescribed by Section 5(b) of the Act of October 62 1917, as amended by the Act of March 9, 1933, for a violation of any license, order, rule or regulation issued thereunder', ▪ in accordance with the Board's usual practice in connection Ifith criminal violations involving member banks, this violation is brought to your attention for such action as you consider advisable. The Federal Reserve Agent at the Federal Reserve Bank ?I Cleveland has been reque.stod to report the matter to the proper local United States Attorney." Letter to Mr. O'Connor, Comptroller of the Currency, reading as followt: /30 "In accordance with your recommendation, the Federal Reserve 4rd approves a reduction in the common capital stock of 'The forth Berwick National Bank', North Berwick, Maine, from c;75,000 25,000, pursuant to a plan which provides for the sale of nr , 2, ',000 par value preferred stock to be sold at a premium of $_" to be00 but redeemable at par, payment for such preferred stock t made by using the subordinated deposit of $125,000 which is : held by the bank, and the sale for cash of t25,000 par value f 17.eommon stock at par solely to persons or concerns who are with the condition of the bank and this plan of a 542 12/22/33 -9- recapitalization. The plan provides also for the use of the released capital funds, together with the bank's surplus and undivided profits of approximately 0.1,721 and the , 4 ;25,000 premium received from the sale of preferred stock, in eliminating substandard assets and securities depreciation in the amount of aPProximately $86,721, all as set forth in your memorandum of December 15, 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 securities of approximately $67,500 which amount is sufficient to eliminate all the common capital stock and impair the preferred stock to the extent of approximately ,17,500. It is assumed, however, that You have this condition in mind and that whenever it becomes feasible to do so, you will obtain such further corrections as may be practicable, and it is assumed also that the proper legal steps will be taken to settle any questions arising on account of the death of Director Hurd, who contributed the funds to be used in the purchase of the preferred stock." Approved. Letter to Mr. Case, Federal Reserve Agent at New York, reading 13 f011OWS . "Reference is made to Assistant Federal Reserve Agent Dillisln's letter of December 2, 1933, transmitting the request of the 'Bank of Yorktown' , iJew York, New York, for permission to reduce its capital stock from $1,500,000 to $1,000,000. In view of the recommendation of your Committee and the ap?4rently satisfactory condition of the institution as set forth ln the information submitted, the Board approves the applicati on of the Bank of Yorktown for permission to reduce its capital stock from :)1,500,0 00 to $1,000,000 provided, that none of the released capital funds are returned to the shareholders but that ▪ e entire amount of the reduction is used to remove objectionable assets or to augment the bank's surplus account, that the transaction has the approval of the New York State Banking Department, 1d that your Counsel has considered the case and is satisfied as lts legal aspects. In this connection, the Board would like .be furnished with a copy of any amendment to the bank's charter c 1?11 may be adopted for the purpose of effecting the proposed apital reduction." g Approved. Letter to idr. O'Connor, Comptroller of the Currency, reading 118 fellows I 543 12/22/-33 -10- "In accordance with your recommendation, the Federal Reserve Board approves a reduction in the common capital stock of the 'Citizens National Bank and Trust Company of Ridgewood', Ridgewood, New Jersey, from *p200,000 to ,;100,000 pursuant to a plan Which provides that the bank's capital shall be increased by the Sale at par of 000,000 par value Class 'A' preferred stock to the Reconstruction Finance Corporation, $100,000 par value of Class 'B' convertible preferred stock to stockholders or others, end '3100,000 par value of common stock to stockholders of the First National Bank and Trust Company of Ridgewood, Ridgewood, Lew Jersey, and that the funds released by the reduction in common stock shall be used to eliminate substandard assets, all as set forth in your memorandum of December 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 the remaining depreciation in securities below the four highest grades of 48,900, in addition to which there will remain in the bank depreciation in the four highest grades of securities of $176,300, doubtful assets amounting to „,440,795 and slaw assets amounting to ,e413,000. It is assumed, 1?.0Tiever, that you have these conditions in mind and that whenever becomes feasible to do so you will obtain such further correc1 '10/10 as may be practicable." Approved. Letter dated December 21,-1933, to Ur. O'Connor, Comptroller °f the Currency, approved by six members of the Board, reading as follaws3 B "In accordance with your recommendation, the Federal Reserve (1 approves a reduction in common capital stock of the 'First ,011 : Ilonal Bank in Sharon', Sharon, Pennsylvania, from ;;300,000 to ''240 n .,-00, pursuant to a plan, which provides that the released 4,4Pltal funds shall be transferred to surplus account, as set .Lorth in your memorandum of December 8, 1933." Approved, together with the following letter dated December 21, 1933, also approved by six members of the Board, to :Ir. Williams, Federal Reserve Agent at Cleveland: co "The Federal Reserve Board approves the proposed reduction in p Irull°11 capital stock of the First National Bank in Sharon, Sharon, nlasylvania, as set forth in a letter of this date to the Comptroller of the Currency, a copy of which is inclosed for your in-Lcrinatione 544 12/22/3 3 -11- "It appears that a statute recently enacted by the State of Pennsylvania makes it necessary for a bank exercising trust Powers to have a surplus account equivalent to 50% of its capital and that the applicant bank, in anticipation of submitting an application for permission to exercise trust powers, desires to reduce its capital and transfer the released capital funds to its surplus account in order to meet such requirement. "In view of the information submitted and the fact that the capital stock of the subject bank is nonassessable, the Board feels justified in approving the application for a reduction in ?apital stock under the plan submitted; however, such approval ls not to be considered as an indication of the action which the Board might take on an application of the subject bank for permission to exercise fiduciary powers. Such application, if and 'Mien submitted, will be considered solely on its merits and the action taken thereon will not be influenced by the approval of this application." Letter to jr. O'Connor, Comptroller of the Currency, reading tis f°110ws: "In accordance with your recommendation, the Federal Reserve Oard approves a reduction in the common capital stock of 'The 1?.eViitt County National Bank of Clinton', Clinton, Illinois, from 1-00,000 to :50,000, pursuant to a plan -which provides that the u4r-k's capital shall be increased by the sale at par of 20,000 Par value preferred stock to the Reconstruction Finance Corporaand the sale at par of 20,000 par value preferred stock to 0c°,1 interests, and that the funds released by the reduction in °1=m0n capital stock shall be used to eliminate, if the bank has ! 40t already done so, substandard assets in the amount of approxielY N38,715.16 and to establish a reserve for contingencies in _Ile amount of approximately 0.0,000, all as set forth in your Inez() randum of December 11, 1933." Z Approved. Letter to Er. G'Connor, Comptrolkir of the Currency, reading rollowz: "In boar accordance with your recommendation, the Federal Reserve of aPpmves the proposed reduction in the common capital stock Lational Citizens Bank of Canby', Canby, Minnesota, from ,000 to 25,000, pursuant to a plan which provides that the pnl C capital shall be increased by the sale at par of $40,000 th :erred stock to the Reconstruction Finance Corporation and that funds released by the reduction in common capital stock shall r 545 12/22/33 "be used, together with $15,000 to be raised locally, in eliminating unsatisfactory assets amounting to :J35,000 and in creating a surplus fund of $5,000, all as set forth in your memorandum of December 16, 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 Lank of White Sulphur Springs', White Sulphur Springs, Yontana, from50,000 to ,,20,000, pursuant to a plan which provides that the bank's capital shall be increased by the sale at par of 25,000 par value class 'A' preferred stock to the Reconstruction Finance Corporation and $5,000 par value class preferred stock to local interests, and that the funds released by the reduction in common capital stock, together with funds from the surplus and undivided profits accounts, shall be used to eliminate doubtful paper and securities depreciation in the amount of approximately $62,069, all as set forth in your inezorandum of December 11, 1933." Approved. Letter to hr. O'Connor, Comptroller of the Currency, reading EIS follows t B "In accordance with your recommendation, the Federal Reserve c°11rd approves a reduction in the common capital stock of 'The .entral National Bank of Columbus',, Columbus, Nebraska, from 00,000 to :50,000, pursuant to a plan which provides that the 51-01k's capital shall be increased by the sale at par of at least ,a Par value preferred stock to the Reconstruction Finance Corpor at-on, and that the funds released by the reduction in comn capital stock shall be used to eliminate unsatisfactory as: ts in the amount of approximately $40,000 and to increase the ,urplus account by approximately 0_0,000, all as set forth in Jour memorandum of December 15, 1933." e 4 9000 r Approved. Letter to Mr. C'Connor, Comptroller of the Currency, reading "i'°11017vs: "In accordance with your recommendation, the Federal Reserve 546 12/22/33 "Board approves a proposed reduction in the common capital stock Of 'The First National Bank of Wamego', Wamego, Kansas, from 75,000 to 25,000, pursuant to a plan mhich 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 provides also that a mortgage company obtain a loan for ,:40,000 from the Reconstruction Finance Corporation, the Proceeds of which are to be paid to the bank and used, together with the funds released by the capital reduction, in eliminating undesirable assets aggregating 00,000, all as set forth in your memorandum of December 13, 1933." Approved. Letter to lr. O'Connor, Comptroller of the Currency, reading 43 fOliows z "In accordance with your recommendation, the Federal Reserve Board approves the proposed reduction in the common capital stock of'The Denver National Bank', Denver, Colorado, from -)1,500,000 tO ./700,000, pursuant to a plan which provides for the surrender Of 1,000 shares of the bank's common capital stock of a par value of sa00 each, and a reduction in par value of the remaining constock from .100 to 50 per share. The plan provides also at the bank's capital shall be increased by the sale at par of 000,000 preferred stock to the Reconstruction Finance Corpora-1-on, and that the funds released by the reduction in common cap1.4 .11 stock shall be credited to undivided profits and used to f elirair late unsatisfactory assets in an equal amount, all as set orth in your memorandum of December 13, 1933." Tr Approved. Letter to Llr. O'Connor, Comptroller of the Currency, reading follows: "In accordance with your recommendation, the Federal Reserve tT1 aPproves a proposed reduction in the common capital stock .1110 First National Lank of Santa Rosa', Santa Rosa, 14w , from 50,000 to v25,000 pursuant to a plan which provides ee° that the bank's capital shall be increased by the sale at par ,000 par value preferred stock to the Reconstruction Finance co obrtP?ration, and provides also that a separate corporation is to pi 4111 a loan for approximately S10,058 from the Reconstruction 1F1Corporation; the proceeds of the loan to be used together capital stock funds released by the reduction in coon mm ellminating undesirable assets aggregating :30,058 and creating B 4 ro4 12/22/33 -14- H a surplus fund of $5,000, all as set forth in your letter of December 13, 1933." Approved. Letter to /dr. 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 b,irst National Bank of Jacksborol, Jacksboro, Texas, from 50,000 to $25,000, 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 Corporatlon, and that the funds released by the reduction in common capital stock shall be used to eliminate substandard assets in the amount of approximately $23,000 and to establish a surplus fund of 02,000, all as set forth in your letter of December 19, 1933.it Approved. Letter to Mr. O'Connor, Comptroller of the Currency, reading follows: "In accordance with your recommendation, the Federal Reserve Board approves the proposed reduction in the common capital stock :°,f 'The United States 14Ltional Bank of Galveston', Galveston, Texas, from 31,000,000 to $500,000, pursuant to a plan which provldes that the bank's capital shall be increased by the sale at 1r of 500,000 par value preferred stock to the Reconstruction .nance Corporation, and that the funds released by the reduction In cormaon capital stock shall be used to eliminate unsatisfactory sets aggregating $466,000, the balance of 334,000 to be credited ,° a special reserve for contingencies, all as set forth in your letter of December 11, 1933. considerinr the plan under mhich the reduction in common capital stock is to be effected, it was noted that your examiner, 1 Ills report of examiiation of May 26, 1933, severely criticises Policies and management of the bank, the control of which, tough r ownership of a majority of the capital stock, is held by he KeraPnor family, with two members of that family as president Vice president, respectively. Your examiner also severely ; 8 iltloises the concentration in loans to the Sugarland Industries thd its affiliates, -which are largely owned and controlled by Kenpners and states that 'It is considered important that 411 lines of ' credit now owing this bank by the above mentioned r J X 12/22/33 c tit concerns be eliminated at once, that no further advances be made by this bank to them, and if unable or unwilling to do that then the Kempners should be required to fully and completely sever all active connection with this bank.' "It is assumed, however, that you have these criticised matters in nand and that whenever it becomes feasible to do so, you will obtain such further corrections as may be practicable." Approved. Lotter to rir. O'Connor, Comptroller of the Currency, reading 8.6 follows* "In accordance with your recommendation, the Federal Reserve Board approves a reduction in the common capital stock of 'The 1rst National Bank of Waco', Waco, Texas, from 01,000,000 to 15°°,000, pursuant to a plan which provides that the bank's capital shall be increased by the sale at par of $500,000 par value Preferred stock, and that the funds released by the reduction in common capital stock shall be used to eliminate unsatisfactory assets and securities depreciation in the amount of approxinately 1410,000, and provides also for the establishment of a reserve for contingencies of approximately c;90,000, all as set forth in your letter of December 15, 1933." Approved. Telegrams to Mr. Walsh, Federal Reserve Agent at Dallas, stat- illt that the Board has considered the applications of the "Republic ..-ena.1 Bank and Trust Company of Dallas", Dallas, Texas, and the "ReIational Company", Dallas, Texas, for voting permits under 411t4ritY of section 5144 of the Revised Statutes of the United States, Et Ettle Ilded, entitling such organizations to vote the stock which they 0 r control in the "First National Bank in Honey Grove", honey Grov °' Texas, and "The First National Bank of Taco", Waco, Texas, and haz °Luthorized the issuance of limited permits to the applicants, subject tc the following condition: 1?I'ior to the issuance to the Republic National Bank and Trust 549 12/22/b3 -16- "CorApany of Dallas (and to the Republic imtional Company) of such limited voting permit, such organization shall agree (1) that the Plan involvinc; a reduction in the capital stock of The _irst National Bank of Waco, Waco, Texas, and the issuance of preferred stock of that bank to the R. c., which plan has been heretofore tibmitted to the Federal deserve Board and is referred to in the .oard's letter of December 23 to the Comptroller of the Currency Of the United States approving such reduction in capital stock, will be duly consummated in accordance with the terms thereof." and for the following purposes: "(1) To elect at annual meetins of shareholders at any time within 90 days from the date of this permit such directors of either or both of its subsidiary member banks as may be satisftletorY to the Federal Reserve agent at the Federal Reserve Bank Dallas, and to act at such meetings upon such matters of a routine nature as are ordinarily acted upon at the respective annual meetings of such banks; (2) to authorize a reduction in ?aPital stock, change in number of shares of stock and/or change 14 par value of shares of stock and the issuance to the II. F. C. ?i Preferred stock of The First National Bank of Waco, Waco, Texas, 14 accordance with the plan which has been submitted to the Federal Reserve Board and which is referred to in the Board's letter 2f this date to the Comptroller of the Currency of the United tates approvin such reduction in capital stock; and (3) To authorize such amendments to the articles of association, certifite of incorporation and/or by-laws of The First National Bank of other things, as may be necessar,, •';:aco, Texas, and to do such J in order to consummate the plan referred to in paragraph () uereor.fl /V2,proved. Letter to 1,:r. O'Connor, ComDtroller of the Currency, reading rollows: 80 "In accordance with your recommendation, the Federal Reserve aPproves a reduction in the common capital stock of 'The National Bank of Coos Bay at Larshfield', I.'arshfield, Oregon, thalal 0-00,000 to 50,000, pursuant to a plan which provides that 0 bank's capital shall be increased by the sale at par of f;j 60,'°00 par value preferred stock to the Reconstruction Finance zo-P°ration, and that the funds released by the reduction in cam01,4 eaPitul stock, together with the bank's surplus and a portion unLlivided profits, shall be used to eliminate substandard icetSin the amount of approximately :;68,334, all as set forth U. letter of December 19, 1933. 550 12/22/33 -17- "In considering the plan under which the reduction in common capital stock is to be effected it was noted that, as stated in Your letter, securities depreciation remaining in the bank after the proposed adjustments will be sufficient to impair the common capital to the extent of approximately 45,000, and it seems apparent that, unless the bank is able to effect substantial collections on its charged-off assets, further steps will have to be taken for the protection of the depositors. 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. Letter to IX. O'Connor, Comptroller of the Currency, reading "f011ovit B "In accordance with your recommendation, the Federal Reserve _°ard approves a reduction in the common capital stock of 'The 1:irst National Bank of Murray', Murray, Utah, from 3.00,000 to 'w20,000, pursuant to a plan which provides that the bank's capital shall be increased by the sale at par of 00,000 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 substandard assets and securities depreciation in the amount of approximately $60,112, to reduce the lealalalZ value of the banking house 414,500, and to increase the d profits account by approximately 1:5,388, all as set forth in your letter of December 18, 1933." Approved. Letter to /a-. Case, Federal Reserve Agent at New York, reading "The Board has considered the application of 'Xarine Eidland C°rPoration', Jersey City, New voting for permit under a rthority of Section 5144 of the Revised Statutes of the United 21tes, 4 as amended, entitling it to vote its stock of certain Subsidiary member banks. There is inclosed a limited voting Irmlt which when issued will entitle the applicant to vote its Stock of the subsidiary banks listed in the permit for the limited 1,!IT0ses therein specified. You are authorized to date and to Al:e this permit to Larine Lidland Corporation as soon as you C s atisfied that the applicant has properly executed and delivered to you three original counterparts of an agreement in the fort hereto attached marked Exhibit A. Unless the agreement is 1 551 12/22/33 -18- "executed by the officers designated in the resolution of authorization constituting Exhibit C of the application, satisfactory evidence of the authority of the signing officer should be obtained. Two of the original counterparts received by you should be forwarded to the Board. "Consideration of the applicant's request for a full permit has been deferred until such time as will permit the completion of the proposed rehabilitation program of the constituent banks. It should be made clear to the applicant that in authorizing the Issuance of a limited voting permit at this time the Board does not thereby preclude itself from requesting, as a condition of the issuance of a general permit, such additional data and agreements if any as may be necessary in order that the statute, the Board's Regulation P and the directions on the Board's printed forms of application will be fully complied with. It has been noted that the published combined statement of the banks of the Marine Midland Corporation group as of June 30, 1933 included inter-hank and inter-group balances, resulting in an overstatement of 'cash and with banks' in its assets and an o verstatement of deposits in its liabilities. The Board feels that this type of statement should not be published since it does not present a true condition. It is requested, therefore, that You call this matter to the attention of the management of the 14arine Midland Corporation with the suggestion that in all future statements the 'Due to banks and other organizations in the group' eknd the 'Due from banks and other organizations in the group' be ?laminated or segregated in such a manner as to show clearly the inter-group balances separate from other bank balances. , It has been noted that the Yarine Midland Corporation has °een making dividend disbursements since its organization. In lls connection, it is observed that, according to the examination of the Corporation as at June 30, 1933 made by a representa, ille of your office, the capital of the Corporation is impaired. J-t also appears that dividends have been paid in the past in exe5 of the actual net earnings of the Corporation. With reference to these matters, you are requested to call the attention of the Il nagement of the Corporation to its agreement with respect to ctl?ladend disbursements as set forth in Section 7 of its applica1°n for voting permit executed by the Corporation on September 30, 1933. ZI ulhere are inclosed copies of this letter and of the limited 8°t1ng Permit which you are requested to transmit to the proper 'ate banking authority." Approved. Letter to the "Hudson-Harlem Valley Corporation", Mount Kisco, New York, reading as follow: 552 12/22/33 "The Board has considered your application for a voting permit under authority of Section 5144 of the Revised Statutes of the United States, as amended, entitling you to vote the stock Which you oven or control of 'Trust Company of Northern Westchester', Mount Kisco, New York, and has authorized the issuance Of a limited permit to you. Such permit is inclosed herewith. "It should be understood that in authorizing the issuance of such limited voting permit at this time the Board does not thereby waive its right to require you to furnish, as a condition precedent to the issuance of a further permit, such additional data and agreements, if any, as may be necessary in order to complete Your application heretofore filed and to satisfy the requirements of the statute and of the Board's regulations, or of prescribing such conditions as may appear to be desirable upon further conslderation of the application." Approved. Letter to "473 Broadway Holding Corporation", Saratoga Springs, 44 York, reading as follows: "The Board has considered your application for a voting permit under authority of Section 5144 of the Revised Statutes of the fluted States, as amended, entitling you to vote the stock which s You ovin or control of 'The Adirondack Trust Company', Saratoga PrinCs, New York, and approVes the application as filed. The voting permit is sent you herewith." Approved. Telegraphic reply to a telegram dated December 20, 1033, from 'ase., Federal Reserve Agent at Tim York; the reply reading as fol4ft: "Re your telegram December 20. Upon notification by you that ipiontclair Trust Company' has fulfilled condition specified in 1?4rd's letter to it dated December 18, 1933, Board will issue ILlilted voting permit for purposes referred to in said letter p!id also to enable Montclair Trust Company to vote its stock of slrat National Bank of Cedar Grove 'to amend the articles of asof that bank and to take other action necessary to tlitthorize an issue of preferred stock and the sale and disposal lereof, all as provided by law, such stock to be in an amount d to have such incidents as may be approved by the Federal Reel-Ye Agent at the Federal Reserve Bank of New York" r Approved. 553 12/22/33 -20- Telegram to Mr. Williams, Federal Reserve Agent at Cleveland, stating that the Board has considered the application of the "Monongahela Trust Company", Homestead, Pennsylvania, for a voting permit under authority of section 5144 of the Revised Statutes of the United States, as amended, entitling such organization to vote the stock -which it owns °r controls in "The Hays National Bank", Hays, Pennsylvania, and "The First Lational Bank of Homestead", Homestead, Pennsylvania, and has 4uth0rized the issuance of a limited permit to the applicant, subject to the following condition: "That applicant deliver to you in duplicate certified copies of its charter with all amendments to date for examination and apProval by your counsel. One copy of which with your counsel's opinion should be forwarded to Board." and for the following purposes: ttf.\ ki) To elect directors of such banks at the annual meetings of sh areholders, or any adjournments thereof, at any time during the month of January, 1934, and to act at such meetings, or any d ]ournments thereof, upon such matters of a routine nature as El!'e ordinarily acted upon at the annual meetings of such banks. ( 11) To authorize the issuance by The First National Bank of Homestead, Homestead, Pennsylvania, of preferred stock of one or more ela53es in the aggregate amount of 0.50,000 and with such par lralue as shall be approved by the Comptroller of the Currency, to make such amendments to its articles of association as may 13e necessary for this purpose." Approved. Letter to the "Union Trust Company of New Castle", New Castle, 1111Y1-1.rania, reading as follows: Board has considered your application for a voting permit ;rr authority of Section 5144 of the Revised Statutes of the urated States, as amended, entitling you to vote the stock which °11 Oval or control of the 'First National Bank of Laurence County', 1?7, Castle, Pennsylvania, and has authorized the issuance of a 11111ted permit to you. Such permit is inclosed herewith. K 554 12/22/33 -21- "The Board is not at this time granting you an unlimited voting permit because it has been unable to give the full consideration thereto which such a permit requires. "It should be understood that in authorizing the issuance of such limited voting permit at this time the Board does not thereby waive its right to require you to furnish, as a condition precedent to the issuance of a further permit, such additional data and agreements, if any, as may be necessary in order to complete Your application heretofore filed and to satisfy the requirements of the statute and of the Board's regulations, or of prescribing such conditions as may appear to be desirable upon further consideration of the application." Approved. Letter to Mr. Peyton, Federal Reserve Agent at Minneapolis, re4dinz as follows: "The Board has on file the application of 'Minneapolis National Company', Minneapolis, Minnesota, for a voting permit under authority of Secbion 5144 of the Revised Statutes, as amended, entitling it to vote the stock which it owns or controls of the following member banks: 'The Third Northwestern National Bank of Minneapolis', lanneapolis, Minn. 'The Fourth Northwestern. National Bank of Minneapolis', Linneapolis, Minn. 'The Fifth Northwestern National Bank of Minneapolis', lanneapolis, Minn. , "Since receipt of the application the Board has been informed uY representatives of the applicant company that under proposed Plans involving the recapitalization and to an extent the reorganiation of certain subsidiaries of the Northwest Bancorporation, ''llfleapolis, Minnesota, it is contemplated that Minneapolis NationCompany will cease to wan or control its present shares of stock iJ ll the throe subsidiary member banks designated above before the -clme at which such stock will be voted end before that time will cease to occupy the status of a holding company affiliate. As the Pr°Posed plans are understood to make it unnecessary for Minnea; 13 33-is National Company to obtain a voting permit, the Board is deerring action upon its application. m. 4111 you please notify the applicant company accordingly." Approved. Reply to telegrams dated December 9, 1933, from Er. Young, Gove ril°r of the Federal Reserve Bank of Boston; the reply reading as 555 12/22/33 -22- f°110Ws . "Reference is made to your two telegrams of December 9, 1933, 111 regard to purchases of bills by the Federal Reserve Bank of Boston. "In one of these telegrams you stated that the Federal Reserve Bank of Boston has suggested to one of its member banks that, if it later should find it necessary to offer any bills for sale, such offer be made to the Federal Reserve Bank of Boston instead of to the New York market; that this action MS taken because of your desire to increase your earnings; and that, if such a Purchase by your bank is ultimately consummated, it will have ne material effect upon the general credit situation. In the other telegram you stated that the Federal Reserve Bank of Boston has purchased from the National Shawmut Bank of Boston indorsed bankers' bills in the amount of ,i>2,000,000, at a rate of one-half of one per cent, with maturities from eleven to fourteen days; that you purchased these bills because you desired additional earnings, because with the expanding seasonal demand your action had no effect upon the money market, and because the member bank had previously purchased some short-term Government ”eurities that were timed to meet certain maturities coming due fl the future; and that the bank offered the bills to the Federal l eserve Bank to relieve the temporary situation during the interim. this connection you stated that you made the purchase of these in accordance with paragraph 5 of section 7 of Regulation I x, "You will observe that paragraph 5 of section 7 of Regulation provides that, except with the approval of the Federal Reserve no Federal reserve bank shall engage in any open market a.nsactions (a) which are not of the customary character, (b) whlch do not occur in the ordinary course of business, (c) which e engaged in for the purpose of affecting general credit condi1°/18, or (d) which may have a material effect upon general credit : 0 1suditions; with a proviso that any Federal reserve bank may pur'i'.iase obligations for the purpose of affording relief in a situa1011 involving a specific banking institution in its district. i It is not clear, therefore, that the transactions referred to 1,1,1 Your two telegrams are of a character which may be engaged in :lthout the approval of the Federal Reserve Board before they are a°11sy11iiated and it will be appreciated if you will state more ecifically tho reasons why in your opinion they do not require 7PProval of the Federal Reserve Board under paragraph 5 of section 4., of Regulation 'M', so that the matter may be given full conside rabefore the Board rules upon the matter." Z j Approved. Reilly on December 21, 1933, approved by six members of the 556 12/22/33 -23- Hoard, to a letter dated August 11 from Mr. Horace S. Steuart, President of the Merchants National Bank of Bangor, Maine; the reply reading as follows: "Your letter of August 11, 1933, addressed to the Comptroller of the Currency, has been referred to the Federal Reserve Board for reply. You request to be advised whether national banks may Pay interest on demand deposits of mutual loan and building associations. "Az you know, Section 19 of the Federal Reserve Act as amended prohibits a member bank of the Federal Reserve System from paying any interest on any deposit which is payable on demand; but the law provides that this prohibition shall not apply to any deposit made by a mutual savings bank. 'The Board does not have sufficient information as to the nature of the organizations referred to by you to enable it to advise you efinitely whether they are mutual savings banks -within the meanlnc of this provision of the statute. It is assumed, however, :that you have in mind associations of the type known as 'loan and building associations', organized and existing in accordance with the provisions of Sections 98-122 of Chapter 52 of the Revised Statutes of the State of Maine.. It appears that such associations issue shares to their members upon either a serial or permanent Plan, and that loans are made to their members on the security ?!" such shares and of real estate mortgages. It does not appear 1 ..1at such associations have authority to receive deposits or that functions which they perform are those which are characteristic mutual savings banks. Accordingly, the Board is of the opinion 4 at loan and building associations which are subject to the staturrY provisions above mentioned cannot be considered mutual savings L'anks for the purposes of Section 19 of the Federal Reserve Act as ! Illended; and that, therefore, no interest may lawfully be paid by u- member bank on deposits of such associations which are payable on derland." Approved. Reply on December 21, 1933, approved by six members of the 80krA ", to a letter dated November 22 from :Ar. Clyde Crafts, Vice Presi4fld Cashier of The First National Bank, Saltville, Virginia ; the Y reading as follows: refers to your letter of November 22, 1933, inclosing a of certific ate of deposit m4th respect to which you request Orv"This n m 5Y/ 12/22/33 -24- "the Board's advice. "Inasmuch as the certificate inclosed by you provides that it nay be renewed at any time after six months and also that interest shall cease after twelve months 'unless renewed', it is not clear When such certificate matures; but, in view of the fact that the instrument requires 30 days' notice in writing to be given before the withdrawal of any deposit, it would appear that the certificate conforms to the definition of 'time certificates of deposit' contained in Section III(a) of the Board's Regulation Q. However, trio Board does not look with favor upon the use of certificates of deposit of this character and it is suggested that the form used by you be modified so as to eliminate any possible uncertainty with respect to the maturity of the certificate. It is noted that the certificate submitted with your letter provides that in order 'to withdraw the principal or any part thereof, thirty days' notice in writing is required by Federal law and cannot be waived'. As you will observe from the provisions of Regulation Q, a time deposit, with respect to which nctice is required to be given a certain specified period before anY withdrawal is made, may not be paid by a member bank until such required notice has been given and the specified period thereof has expired; but a time deposit payable on a certain date or t Z ir expiration of a certain specified time, not less than days after the date of the deposit, may be paid at the ma,urity thus fixed and no notice whatever is required to be given bef9re such payment. , In its letter to you under date of November 10, 1933, the bc!trd inclosed certain forms of certificates, which in the Board's °Pin• ion comply with the definition of time certificates of deposit contained in the Board's Regulation Q. In this connection, in corder that the depositors may have actual knowledge that the rate Of interest stated therein is subject to modification by the Fediral, Reserve Board, it is suggested that a provision substantially tne following form be printed or stamped upon any such certifi' 4tes used by you: lithe rate of interest payable hereunder is subject to change by the bank to such extent as may be necessary to comply with requirements of the Federal Reserve Board made from time to time Pursuant to the Federal Reserve Act." Approved. Letter dated December 21, 1933, to Y.r. Newton, Federal Reserve 4gerlt 44 litlanta, approved by six members of the Board, reading as fol- 1()1vn There are inclosed herewith copies of letters dated October 558 12/22/33 -25- '5 and October 30, 1933, received by the Board from the Assistant Vice President of The First National Bank of Birmingham, Birmingham, Alabama, in which the question is raised whether the payment by that bank of premiums on bonds given to secure deposits of funds of bankrupt estates is to be regarded as an indirect payment of interest on deposits payable on demand within the meaning of the prohibition or Section 19 of the Federal Reserve Act. The Federal Reserve Board has not been able to give this matter adequate consideration and, as you will note, the letters from The First National Bank of Birmingham do not contain sufficient information upon which to base a conclusion as to whether the payment ?f premiums on such bonds falls within the scope of the ruling of the Federal Reserve Board contained in its telegram of July 12, 1935, (X-7500). . It will be appreciated if you will communicate with The First gationul Bank of Birmingham and ascertain the facts with respect to this matter particularly with reference to the relation of the amount of the bonds and premiums thereon to the amount of the dePits in question. If, after your Counsel has considered the information thus obtained, he is of the opinion that the payment of 13?-emiums on the bonds in question does not fall within the prin.°'p1e of the Board's ruling of July 12, 1933, it is requested that ?0u advise The First National Bank of Birmingham accordingly; but If your Counsel feels that the principle of that ruling is probably ,Pplicable to this case, it will be appreciated if you will submit ../10 information obtained together with the views expressed by your ?unsel in the matter to the Federal Reserve Board for further consi deration." Approved. Reply on December 21, 1933, approved by six members of the Bokra, te a letter dated November 21 from Congressman Hatton W. Summers, 4fl1413. of the Committee on the Judiciary, House of Representatives, "hinnt ,on, D. C.; the reply reading as follows: ti "44 indicated in your letter of November 21, 1933.. a copy of : c le letter of October 27, 1933, addressed to you by Lr. trenshaw of Atlanta, Georgia, which you had forwarded to the Comp,oarde 0f the Currency, was referred to the Federal Reserve Upon consideration of the matter, however, it appeared that, Section 21 of the Banking Act of 1933 provides a penalty o 2i fine or imprisonment for a violation of its provisions, and the determination of the question whether a person should be P.r0secuted for such a violation is a matter entirely within the 553 12/22/33 jurisdiction of the Department of Justice, an expression of opinion by the Federal Reserve Board on the question whether the provisions of that section were violated in a particular case would not afford protection from criminal prosecution if the Department Of justice, upon consideration of the matter, should take the Position that there had been a violation and should feel it necessary to prosecute therefor. Accordingly, the Federal Reserve Board does not feel that it -would be appropriate for it to undertake to express opinions upon such questions. The Board understands, however, that the Comptroller of the Currency is considering referring the matter to the Department of Justice for an opinion, and it is assumed that the Comptroller of :Zrency will communicate with you again regarding Mr. Creninquiry. An extra copy of this letter is inclosed for your convenience." n Approved. Memorandum dated December 19, 1933, from the Committee on 41ari es and Expenditures with regard to the requests received fkom the Federal reserve banks for authority to make certain charge-offs (it the end of the current year, to set up certain reserves, and to pay the recular semi-annual dividend a-E the end of 1933; the Committee roc()rilltend in,r, 1, 2. That the Board request each Federal reserve bank to set aside a reserve to cover depreciation on its holdings of United States bonds and Treasury notes, maWring after 1934, equal to the excess of book value as of December 29 over market value, less such part of the premium on these securities as will be amortized in 1934, amortization charges to be at a rate which will exhaust the premium on the call date of the security on which the premium is carried. That the Board authorize Federal reserve banks to make the usual additions to their reserves for depreciation on bank buildings and fixed machinery and equipmpt; that the Lew York bank be advised that the Board has not approved the proposed special charge-off of $2,000,000 on the bank's main building and annex building as it does not believe it desirable at this time to depart from the established practice in making provision for depreciation on bank buildings, but that, inasmuch as the bank has not set aside the maximum reserve of 101;; each year on fixed machinery and equipment 560 12/22/33 -27permissible under the Board's general instructions, the Board will offer no objection to the bank increasing its reserves on fixed machinery and equipment at the end of the current year by an amount sufficient to bring the reserves up to what they would have been had the bank set aside a reserve of 10% each year since the buildings were completed; that the Federal Reserve Bank of Cleveland be authorized to make a special charge-off of 010,4.50 on the Liberty-Ninth Street building in Pittsburgh, Pennsylvania; and that the Board authorize the Federal Reserve Bank of San Francisco to make a special charge-off of 54,592.19 on its land in Los Angeles in order to reduce the book value thereof to the estimated market value of 400,000. 3. 4, 5. 6. That each Federal reserve bank be authorized to set up a reserve to cover its proportionate share of estimated probable losses on the Hungarian credit and on past due acceptances purchased from foreign correspondents. That each Federal reserve bank be authorized to charge off the amount of furniture and equipment purchased during the year. That each Federal reserve bank be authorized to pay the regular semi-annual dividend. That the Federal Reserve Banks of New York, Philadelphia, Cleveland, Atlanta and San Francisco be authorized to set UP certain reserves for probable losses on discounted bills and/or municipal warrants. In this connection the Committee also recommended that the Board amend its general instructions governing the preparation of earning and expense reports and profit and loss statements by Federal reserve brIrks by eliminating the second sentence of paragraph 2 on page 34 of such instructions which provides: "The Board will authorize a charge to surplus to cover losses on discounted bills only in case such losses have been definitely and finally determined, and the bank does not have sufficient reserves or current net earnings to cover such losses" and that all Federal reserve banks be advised of this change in the Board's instructions. 7. That the Federal Reserve Bari , of New York be authorized to increase its reserve for self-insurance by an amount equal tothe earnings on United States Government securities in l'Auch the bank's self-insurance fund is invested, provided that the net earnings of the bank remaining after making provision for all other authorized reserves and charge-offs and accrued dividends are sufficient for this purpose; and that 12/22/33 -28the Federal Reserve Bank of Minneapolis be advised that, in: " asmuch as the bank will not have sufficient net earnings to cover dividend payments and any addition to the reserve for self-insurance at the end of the current year would result in a reduction in the bank's surplus account, the Board has not approved the proposed increase in the bank's self-insurance reserve at the end of the year by an amount equal to the net earnings during 1933 on the United States securities in which the bank's self-insurance funds are invested. 8. 9. That the Federal Reserve Bank of Richmond be advised that, inasmuch as the retirement plan now under consideration, if approved, will not become effective till next year and as no other Federal reserve bank has set up a reserve for establishing a pension fund, it is requested that the Richmond bank return to its profit and loss account the saving to the bank Ofl temporary salary reducticns during 1933 amounting to 42,583.33, which had been set up as a pension reserve. That, in view of the small amount involved and of the possibility that arrangements may be made whereby the Treasury mill absorb loss resulting from abrasion on :;old coin, the Federal Reserve Bank of Minneapolis be advised that, after reviewing the bank's request for authority to set up a reserve of 25,000 to cover the estimated abrasion loss on light-height gold coin, the Board feels that it would be better not to set up a reserve for this purpose at this time. The recommendations of the Committee wore approved. ReplY to a letter dated December 6, 1933, from Mr. Walter S. -111 President of The National Shawmut Bank of Boston, L:assachueetta; the repl reading as follows: a,"Your letter of December 6, 1933, addressed to Governor Black e °3-te5 that three directors of your bank are partners in a firm rIcli aCed in dealing in securities, and raises several questions Zrdin.[!; the applicability of Section 32 of the Banking Act of Act') 4nd Section SA of the Clayton Act (Section 33 of the Banking 1933) to the service of such directors. ti lou ask first whother any distinction is made between nati°1141 banks and State member banks in connection with an applica°fon b ya director for permission to be at the sane time a partner proet.firm dealing in securities. This question relates to the ! cerZl i°11s of Section 32 of the Banking Act of 1933 which contains 41n prohibitions which are applicable to an officer or director 562 12/22/33 -29- 11 f 'any member bank'. The section therefore makes no distinction between national banks and State member barks. "Your second ouestion is whether a director of a member bank Who is a partner in a firm Which carries margin accounts for its customers may obtain a permit pursuant to the provisions of Section 32. That section authorizes the Board to issue permits, and provides that the prohibitions contained in that section shall not be aPplicable to any case in which such a permit has been issued. "However, as you indicate by your third question, the provisions of Section SA of the Clayton Act must also be taken into consideration. Your letter does not describe the exact manner in which the margin eccounLs to which you refer are carried, but if they involve the making of 'loans secured by stock or bond collateral', the service of these directors mould came within the prohibitions of Section SA also. Accordingly, a permit issued under Section 32 of the Banking Act of 1S33, although it mould take the service of these directors out of the prohibitions of Section 32, mould serve no useful purpose in such a case unless Section SA of the Clayton Act, more likewise not applicable to them. 'Section 8A of the Clayton Act is not applicable in any case in Which a permit has been issued by the Federal Reserve Board. liowever, the Board's authority to issue permits covering relations 'within the prohibitions of the Clayton Act is limited, by Section 8 of that Act, to the issuance of permits covering relationships ..etween banking organizations of certain types, with the result unless the partnership to which you refer is an organizaLlon of that kind, the Board is without authority to issue a permit e xempting the service in question from the provisions of the Clayton Act. "The principal question in your letter therefore is whether a Permit issued pursuant to the authority granted in Section 32 will 440 exempt the relationship which it covers from the provisions of the Clayton Act. . 'In considering this question, it should be noted that permits Issued by the Board under the provisions of the Clayton Act clearly !!PPly only to the prohibitions of that Act, since the provision in ?ection 8 authorizing the issuance of permits provides that 'nothing ln this Act shall prohibit' relationships of certain types 'if in flY ease there is in force a permit therefor issued by the Federal :ecer ve Board; and the Federal Reserve Board is authorized to issue —11a4 Permit' under certain circumstances. Section 32 applies to certain specified relationships, which 4re not the same as those covered by Section EA of the Clayton Act, ind renders unlawful the relationships to which it applies 'unless 4 ally such case there is a permit therefor issued by the Federal ,!serve Board; and the Board is authorized to issue such permit in its judgment it is not incompatible with the public interest'. nere is no reason to assume that the Board is authorized by this Provision in Section 32 to issue permits which will make the service 563 12/22/33 -30- in question lawful regardless of any other provision of law Nvhich might be applicable in a particular case. It is felt that an interpretation which would reach such a result would be an unwarranted extension of the authority contained in Section 32. "Accordingly, a permit issued under Section 32 would serve no useful purpose in a case where the relationship Was prohibited by the Clayton Act and no permit had been issued pursuant to the Provisions of that Act. "As you know, the phrase 'organized or operating under the laws cf the United States' in Section 8 and Section 8A of the Clayton Act is not applicable to State member banks of the Federal Reserve SYstem.11 Approved. Letter dated December 21, 1933, to Yr. Philip Lehman, hew York, 4 y °P4, approved by five members of the Board, reading as follows: "The Federal Reserve Board has given careful consideration to Your application for a permit under Section 32 of the Banking Act of 1933, covering your service as a director of the Corn Exchange Bank Trust Company, New York, New York, and as a partner of the firm_of Lehman Brothers. , "It appears from the information submitted that the firm of 14ehman Brothers is a dealer in securities and that among its other activities, it participates in the underwriting and flotation cf c securities. It appears also that the Corn Exchange Bank Trust °171Pany, pursuant to an arrangement with your firm, takes a partici° . ti0n of ten percent, with certain limitations, in the participa'lons of your firm in accounts formed to bid for State, county ara tunicipal securities. "Accordingly, it appears to the Board that the relationship c?vered by your application is precisely the type of relationship wflich it was the purpose of Section 32 of the Banking Act to ternines The Board is not unmindful of the fact that the Corn Exchange rust Company values your services and the investment advice which You are able to give to it, and the Board has no reason to believe flat YOU will not conscientiously endeavor to discharge properly .Y:)11r duties as director, notwithstanding the fact that you are also Prtner of Lehman Brothers. trr_ v is -uor, ever, in view of the declared policy of Congress, the Board ;_,not satisfied that it mould not be incompatible with the public .411erest to grant your application. Ills :In the event that you desire to submit further facts or arGu"in support of your application, the Board is prepared to n e them careful consideration. However, any suchh additional 4?ts or arguments should be submitted as promptly as possible, in lting, through the Federal Reserve Agent." 1 r r Approved. 564 12/22/133 Letter to Lr. Lewis Cass Ledyard, Jr., New York, New York, reading as follows: . "Consideration has been given to your application for permislon, pursuant to Section 32 of the Banking Act of 1933, to serve as a trustee of the United States Trust Company of New York, New York, and as a director of the Northern Finance Corporation, New York. "It appears that the Northern Finance Corporation was organized by the late Er. Oliver H. Payne for the purpose of making gifts to or trusts for certain of his nephews and nieces; that he transferred various stocks and bonds to the Corporation and received therefor the notes and stocks issued by the Corporation; that you Did United States Trust Company of New York now hold all of the outstanding notes and stock of the Corporation in trust for certain nephews and nieces of Lir. Payne; that the Corporation is emawered to buy, hold and sell property, including stocks and ends; that most of the securities now owned by it represent the 8 ! 11-f1e properties as v,ere transferred to it upon its organization, 81noe it has never been its custom to make many changes in its inthat it has purchased no securities whatever since nay, ., 925, except, on three occasions, United States Treasury short'erm certificates or notes, and except for exercising its right, stockholder, to subscribe to stock; and that, since September, 61 it has sold no securities except one comparatively small ?ek of stock which it had oined for many years, and except certain rIpts' received by it as stockholder in other corporations. ,, In view of the facts disclosed in your application, it appears -.11v.L.t Northern Finance Corporation is not a corporation 'engaged P srlmarily in the business of purchasing, selling, or negotiating or;r1ties l, within the meaning of Section 32 of the Banking Act v. t933; and that, therefore, no permit is required under the prootslons of that section covering your service as director of that -,urpor ation and as trustee of the United States Trust Company of 4317 York." T Approved. Letter to Er. Curtiss, Federal Reserve Agent at Boston, reading 14 fellows: : Consideration is being given to the application of kr. 'Valli F t :ratter, under the provisions of the Clayton Act, for permission r,%! er.lre as a director of The First Lational Bank, New Bedford, !!sachusetts, and as president of The New Bedford 1,:orris Plan New Bedford, Massachusetts. l'he condition of the national bank is unsatisfactory, but your f.4 565 12/22/33 -32- "report on Form 94 contains little information as to the character of the management of the banks, and contains no information with respect to the extent of the applicant's responsibility for the condition of the national bank. "In order that the Board may be in a position to pass upon this application, you are requested to advise the Board more fully regarding these matters. "The application asks for permission to serve as 'president' of The New Bedford Morris Plan Company, and in this connection You are requested to advise the Board whether the applicant desaxes a permit to serve as officer and director, or merely as Officer, of that Company." Approved. Letters dated December 21, 1933, approved by six members of tile -oard, to applicants for permits under the Clayton Act, advising 4PProval of their applications as follows: /1/:. Percival H. Safford, for permission to serve at the same leb le as director of the Rochester Trust Company, Rochester, New t4z1P8hire, and as officer and director of The New Public National '.4-Lnk of Rochester, Rochester, New Hampshire. 14r. Leslie P. Gnaw, for permission to serve at the same time as officer and director of the Rochester Trust Company, Rochester, nOW Hampshire, and as director of The, New Public National Bank Of Rochester, Rochester, New Hampshire. kr' Huntley N. Spaulding, for permission to serve at the same time as director of the Rochester Trust Company, Rochester, New j 1 4mPshire, and as director of The New Public National Bank of Itochester, Rochester, New Hampshire. t ax... Rolland H. Spaulding, for permission to serve at the same 11:trector and officer of the Rochester Trust Company, :,1,0 3t1: New Hampshire, and as director and officer of The Pliblic National Bank of Rochester, Rochester, New Hampshire. Levi B. Phillips, for permission to serve at the same time " lect *be dlrector and officer of The National Bank of Cambridge, Cam: 1Ce, Maryland, and as director of the Baltimore branch, Fede 5, Reserve Bank of Richmond, Baltimore, Maryland. Mr. /is H. Wood, for permission to serve at the same time as ofarid director of the American Trust Company, Charlotte, orth Carolina, as director of the Charlotte branch, Federal 566 12/22/33 -33- Reserve Bank of Richmond, Charlotte, North Carolina, and as officer and director of the American Bank and Trust Company, Monroe, North Carolina. Approved. There were then presented the following applications for orig-4441 stock, or for the surrender of stock, of Federal reserve banksz lications for ORIGINAL Stock: ulstriet N 1 4aode Island Hospital National Bank of Providence, Providence, Rhode Island Shares MN• 1111.411 • 3,000 3,000 42 42 D istrict No. 2. Ihe National Bank of Tuxedo, Tuxedo, New York Di strict No. 3. tational Bank in Birdsboro, Birdsboro, Pennsylvania 72 Total A l ications for SURRENDER of Stock: trict No. 1.-------ellesley ational Bank, Wellasley, Ilassachusetts (Decrease in capital) 18 18 660 660 270 Total 270 948 loaal Bank of Commerce, Norfolk, Virginia (2!4801idation of Virginia National Bank and ' 48 Norfolk National Bank of Commerce & Trusta) Deistriet No. 10, °Itroial National Bank, Kansas City, Kansas " rouse in capital) 72 3,114 Approved. Thereupon, the meeting adjourned. 2/1 APPrOyed: ' 66.ZA -P Governor. 40; Secretary.
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