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1723 A. meeting of the Board of Governors of the Federal Reserve System was held in Washington on Thursday, December 23, 1937, at 11:00 a.m. PRESENT: Mr. Eccles, Chairman Mr. McKee Mr. Davis Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman Consideration was given to each of the matters hereinafter referred to and the action stated with respect thereto was taken by the Board: Telegram to Mr. Thomas, Chairman of the Federal Reserve Bank of Kansas City, stating that the Board approves the establishment without Change by the bank today of the rates of discount and purchase in its existing schedule. Approved unanimously. Letter to Mr. Nardin, Chairman of the Federal Reserve Bank of St. Louis, reading as follows: "I have been asked to write a letter to you supplementing my wire of December 15 in regard to Mr. McConkey. The Board has recognized the long and valuable service that he has rendered to the Federal Reserve Bank of St. Louis and therefore has regretted the necessity for having to withhold its approval of payment of salary for him beyond the end of this year. Before taking this action the entire situation was reviewed carefully and especially In the light of the general policy of the system with respect to retirement of officers and employees who have passed the age of 65, it being understood that Mr. McConkey is now 68 years old. The Board appreciates the difficulties of the management problem with which you have been dealing and because of its desire to cooperate with you an unusual amount of time and thought has been given to the circumstances involved not only in Mr. M,cConkey's case but in 1724 12/23/37 "your problem as a whole. Desiring to be helpful in meeting the situation caused by Mr. McConkey's retirement, the Board asked me to communicate to you its willingness to lend you the services of one of the Board's counsel pending the selection of a permanent general counsel and if in your opinion such action would be of assistance to you the Board would be glad to be advised as to your wishes." Approved unanimously. Memorandum dated December 16, 1937, from the Division of Examinations, submitting, pursuant to the action taken at the meeting of the Board on November 4, 1937, a letter to President Hamilton of the Federal Reserve Bank of Kansas City, with respect to the application for membership in the Federal Reserve System filed with the Federal reserve bank by the Farmers State Bank, Wallace, Nebraska, and a draft of letter to the Presidents of all Federal reserve banks advising that when, in the case of an application for membership, the Federal reserve bank feels it cannot recommend favorably, the reserve bank neither so advise the applicant laor suggest that the application be withdrawn without first referring the Matter to the Board. The memorandum recommended, however, that the pro- Posed general letter to the Presidents of all Federal reserve banks be not sent for the following reasons: 1. The case with respect to the Farmers State Bank, Wallace, Nebraska, is an exception and it is believed it should properly be treated as such. 2. The procedure regarding the handling of applications which has been in effect for some years has proved generally satisfactory. 3. The proposed general instructions, although they relate only to cases where applications have been 172,5 -3- 12/23/37 filed, would undoubtedly raise questions among the officers of the reserve banks as to the desires of the Board and lead to uncertainty and confusion in discussing membership with prospective applicants. 4. The views and desires of the Board regarding applications for membership could be more effectively presented through discussion with the presidents of the reserve banks at a Presidents' Conference, and it is suggested that this be done. The recommendation contained in the memorandum was approved unanimously. The letter to President Hamilton read as follows: "Reference is made to your letter of November 16 and your previous discussion with Mr. Davis and Mr. Paulger ree, garding the application of the Farmers State Bank, Wallac Nebraska, for membership in the System. "The Board appreciates the desire of your committee to S-6, s cooperate in the program outlined in the Board' letter g situabankin g thenin with respect to a program for streng that a mergtions where such need is indicated, and the fact worked out e, Wallac er or consolidation of the two banks in ther in altoge and on a sound basis, would be most desirable It 5-6. letter the accord with the program as suggested in two the of ation appears, however, from reports of examin nce banks made by examiners for the Federal Deposit Insura m progra a such Corporation, that the examiners have discussed Prosthat and on several occasions with officers of the banks are not at all pects for such a merger, at this time at least, ments of manage bright on account of the feeling between the the two banks. earning "While it is true that the bank has had a poor your by made ation record, nevertheless the report of examin sound and liquid examiners as of May 13, 1937, reflects a ted losses asset condition with no assets classified as estima dated letter a in and and only t1,200 classified as doubtful, the that d advise was bank July 24, 1937, the president of the bank the of ment manage Reserve bank did not question that the then in a was in safe hands at that time or that the bank was cy. solven of oint satisfactory condition from the standp the Board and bank, d "The Farmers State Bank is an insure n betwee made be believes that a distinction should properly 12/23/37 -1- "applications of insured banks and applications of noninsured banks for membership in the System. A non-insured bank, upon admission to membership, automatically becomes entitled to the benefits of deposit insurance through the Federal Deposit Insurance Corporation. An insured nonmember bank, however, is already entitled to such benefits, and its admission to membership in the System, therefore, does not add to the insured risks of the Federal Deposit Insurance Corporation. In the circumstances described the Board believes that admission of the Farmers State Bank, Wallace, Nebraska, to membership in the System would not be inconsistent with the position expressed in the Board's letter 5-6. "Accordingly, on the basis of the information submitted, the Board considers the Farmers State Bank, Wallace, Nebraska, as acceptable for membership and would approve an application for membership if such an application were submitted with a favorable recommendation of your committee. It would seem, in view of the condition of the bank as reflected in the report of examination as of May 13, 1937, made by your examiners in connection with the application for membership, that such examination could serve as the basis for action on the application unless you feel that there may have been a material change in the condition of the bank since that time. The ouestion of whether another examination should be made of the bank before action is taken on its application, however, is a matter for the determination of your bank in the light of all of the circumstances. "This case has been discussed informally by a reprea sentative of the Board's Division of Examinations with Federal the of tion Examina of Division representative of the see Deposit Insurance Corporation who stated that he could the why ion Corporat the of nt no reason from the standpoi Board should not consider the application for membership. "As indicated previously, the Board concurs in the thought that a merger or consolidation on a sound basis of sound the two banks in Wallace would be in the interests of Bank banking and it is assumed that, if the Farmers State becomes a member, the desirability of such a merger or conof solidation will be kept in mind and that the influence the the Federal Reserve Bank will be joined with that of ce State Banking Department and the Federal Deposit Insuran at merger Corporation in endeavoring to bring about such a an opportune time." Approved unanimously. 1727 -5- 12/23/37 Letter to Mr. F. C. Willis, Auditor, Pilot Life Insurance Company, Greensboro, North Carolina, reading as follows: "This refers to your letter of December 9, 1937, addressed to the Attorney General of the United States regarding the statute of the State of North Carolina imposing a tax upon deposits in each bank doing business in the State and requiring the bank to pay the tax as agent for its depositors. As you were advised in the letter dated December 16, 1937, from Honorable Golden W. Bell, Assistant Solicitor General, your letter has been referred to the Board of Governors of the Federal Reserve System for consideration. "You state that it is your understanding that the relations between a bank and its depositors are of a confidential nature and you request an opinion as to the right of a State to require a member bank of the Federal Reserve System to reveal the amount of a depositor's balance and to make a deduction therefrom of a tax levied by a State act. "Since this question involves the taxing power of the State of North Carolina, it is believed that it would be inappropriate for the Board of Governors of the Federal Reserve System to express an opinion thereon at this time. However, your attention is invited to the following cases which may or may not have a bearing upon the question presented in your letter: Clement National Bank v. Vermont, 231 U. S. 120 (1913), affirming 84 Vt. 167, 78 Atl. 944 (1911); National Bank v. Commonwealth, 9 Wallace 353 (1869); First National Bank of Youngstown v. Hughes, 6 Fed. 737 (1881), appeal dismissed for lack of jurisdiction 106 U. S. 523 (1882)." Approved unanimously. Telegram to Mr. Martin, President of the Federal Reserve Bank of St. Louis, reading as follows: "By letter and telephone S. H. Mann, Vice President, National Bank of Louisville, has requested adFirst The granting of voting permits to such bank concerning vice and Trustees, The First National Bank of Louisville, (hereafter called Trust), entitling them to vote stock of First-Owensboro Bank & Trust Company. "Board understands First-Owensboro Bank & Trust Company has outstanding 4,000 shares of preferred stock and ins -6- 12/23/37 "3,000 shares of common stock; that at last election of directors all preferred stock and 2,924 shares of common stock were voted; that all preferred stock is owned by Reconstruction Finance Corporation; and that 2,904 shares of common stock are owned or controlled by Trust and by The First National Bank of Louisville. "On basis of such facts, Board is of opinion that The First National Bank of Louisville and Trust are not holding company affiliates of First-Owensboro Bank and Trust Company and that voting permits entitling them to vote stock of such bank are unnecessary. Please advise Mr. Mann at once in accordance with the foregoing unless you have further information which you believe should be brought to the Board's attention." Approved unanimously. Letter to Mr. F. Walter Bliss, President, The First National Bank of Middleburgh, Middleburg, New York, reading as follows: "This refers to your letter of October 23, 1937, relating to the status of Middleburgh Holding Corporation, Middleburg, New York, as a holding company affiliate. "The Board understands that Middleburgh Holding Corporation owns or controls 750 of the 1250 outstanding shares of stock of The First National Bank of Middleburgh, but does not own or control any stock of, or manage or control, any other bank. In view of these facts, the d, Board has determined that such corporation is not engage stock the g holdin in ss a busine directly or indirectly, as ations, of, or managing or controlling, banks, banking associ of g meanin the within savings banks, or trust companies, secby amended as 1933, of section 2(c) of the Banking Act such ingly, accord and, 1935, tion 301 of the Banking Act of purany for ate affili y compan corporation is not a holding e Reserv l Federa the of 23A poses other than those of section Act. "If Middleburgh Holding Corporation should at any time own or control a substantial portion of the stock of, or manage or control, more than one bank, this matter should The again be submitted to the Board for its determination. at nation determi r a furthe make to right Board reserves the 1729 _7_ 12/23/37 "any time on the basis of the then existing facts." Approved unanimously, together with a letter to Mr. Dillistin, Assistant Vice President of the Federal Reserve Bank of New York, reading as follows: "This refers to your letter of December 15, 1937, and its inclosures, relating to the status of Middleburgh Holding Corporation, Middleburg, New York, as a holding company affiliate under the provisions of section 2(c) of the Banking Act of 1933, as amended by section 301 of the Banking Act of 1935. "The Board has determined that Middleburgh Bolding Corporation is not engaged, directly or indirectly, as a business in holding the stock of, or managing or controlling, banks, banking associations, savings banks, or trust companies, within the meaning of section 2(c) of the Banking Act of 1933, as amended, and, accordingly, that corporation is not a holding company affiliate for any purposes other than those of section 23A of the Federal Reserve Act. Inclosed herewith is a letter to Mr. F. Walter Bliss, President, The First National Bank of Middleburgh, Middleburg, New York, advising him concerning the Board's action. Please transmit this letter to Mr. Bliss. There are also inclosed two copies of such letter, one is for your files and the other for transmittal to Middleburgh Holding Corporation. "As you will note, the Board expressly reserves the right to make a further determination of this matter at any time on the basis of the then existing facts. In this connection, it is requested that you advise the Board if, at any time, you believe this matter should again be considered by it." Memorandum dated December 23, 1937, from Mr. Foulk, Fiscal Agent, recommending that an assessment of two hundred and eighty five thousandths (n one per cent (.00285) of the total paid-in capital and surplus (Section 7 and Section 13b) of Federal reserve banks as of the close of business December 31, 1937, be levied to cover the general expenses of the Board during the first six months of 1938, and that the Federal reserve 1_730 12/23/37 -8- banks be instructed to pay in the assessment in two equal installments Ott January 3, 1938, and March 1, 1938. The following resolution levying an assessment in accordance with the Fiscal Agent's recommendation was approved unanimously: "WHEREAS, Section 10 of the Federal Reserve Act, as amended, provides, among other things, that the Board of Governors of the Federal Reserve System shall have power to levy semiannually upon the Federal reserve banks, in proportion to their capital stock and surplus, an assessment sufficient to pay its estimated expenses and the salaries of its members and employees for the half year succeeding the levying of such assessment, together with any deficit carried forward from the preceding half year, and "WHEREAS, it appears from a consideration of the estimated expenses of the Board of Governors of the Federal Reserve System that for the six months' period beginning January 1, 1938, it is necessary that a fund equal to two hundred and eighty-five thousandths of one per cent (.00285) of the total paid-in capital stock and surplus (Section 7 and Section 13b) of the Federal reserve banks be created for such purposes, exclusive of the cost of printing, issuing and redeeming Federal reserve notes; "NOV, THEREFORE, BE IT RESOLVED BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, That: "(1) There is hereby levied upon the several Federal reserve banks an assessment in an amount equal to two hundred and eighty-five thousandths of one per cent (.00285) of the total paid-in capital and surplus (Section 7 and Section 13b) of each such bank at the close of business December 31, 1937. "(2) Such assessment shall be paid by each Federal reserve bank in two equal installments on January 3, 1938, and March 1, 1938, respectively. "(3) Every Federal reserve bank except the Federal Reserve Bank of Richmond shall pay such assessment by transferring the amount thereof on the dates as above provided through the Inter-district Settlement Fund to the Federal Reserve Bank of Richmond for credit to the account of the Board of Governors of the Federal Reserve System on the 1731. 12/23/37 -9- "books of that bank, with telegraphic advice to Richmond of the purpose and amount of the credit, and the Federal Reserve Bank of Richmond shall pay its assessment by crediting the amount thereof on its books to the Board of Governors of the Federal Reserve System on the dates as above provided." There was submitted a recommendation, which had been approved by the Personnel Committee, that the Board authorize the purchase of certain miscellaneous equipment for use in the cnfeteria, waste baskets, and pen and pencil sets, and the spreading and sewing of rugs in rooms 1016 and 1030, as listed in purchase orders numbered 2459, 2593, 2617, 2710, 2711 and 2721, at a total cost of $305.57. Approved unanimously. Thereupon the meeting adjourned. . 1.--\ `1 Approved: Chairman. 1. „. Secretary.
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