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4029 A meeting of the Federal Reserve Board was held in Washing— ton on Wednesday, December 26, 1934, at 11:00 a. m. PRESENT: Mr. Mr. Ir. Mr. Mr. Mr. Eccles, Governor Thomas, Vice Governor Hamlin Miller James Szymczak Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Smead, Chief of the Division of Bank Operations Goldenweiser, Director of the Division of Research and Statistics Paulger„ Chief of the Division of Examinations Wyatt, General Counsel Vest, Assistant Counsel Wingfield, Assistant Counsel Chase, Assistant Counsel Cherry, Assistant Counsel Owens, Assistant Counsel Cagle, Federal Reserve Examiner Governor Eccles submitted a letter received by him under kte December 19, 1934, from Mr. J. F. T. 0/Connor, Comptroller of the N— crenc.71 reading as follows: "On October 24th, Acting Governor J. J. Thomas of the Federal Reserve Board advised me that the Board 11,ad passed a resolution tendering me the appointment of .tederal Reserve Agent and Chairman of the Federal Re— serve Board in the Twelfth District. I replied to Mr. Thomas on October 26th and advised him that I would give the matter careful consideration. A decision of this sort is extremely difficult to make as it may change the entire course of one's life. I have given the matter 8eriou5 thought and have sought the advice of some of my ?losest friends, both here and in California. I feel that in the circumstances I must decline the position °ffered to me by the Federal Reserve Board. 4030 12/26/34 —2— "Permit me to say that I have never enjoyed azy work more than that with the members of the Federal Reserve Board during the past nineteen months. When one considers the important matters passed upon by the Board and its wide powers, and then recalls that there has never been one single unpleasant incident -- that is a memory to be always cherished. "Will you please convey to each and every member Of the Federal Reserve Board my deep appreciation of the compliment paid by the offer of this position, and my °111,7 hope is that I shall continue to be worthy of their confidence." Governor Eccles then referred to the letter addressed to Mr. 118411/1 by Senator Carter Glass under date of December 18, 1934, with Ilegard to the action taken by the Federal Reserve Board and the Federal tePo 8-'t Insurance Corporation in reducing the maximum rate of interest that naY be paid on time and savings deposits, and stated that, in view thp - newspaper comments which had been made in connection with the lett el"' he felt that it was desirable that the Board issue a statement to th e Press clarifying its position in the matter. He read a proposed Pres '1 statement prepared by him in consultation with members of the 8 kro, staff on December 24, which formed a basis for the ensuing dis— Nestone At the conclusion of the discussion, upon motion by Mr. James, the matter of issuing a press statement was referred to a committee consisting of Governor Eccles and Mr. Miller, with the understanding that if the committee agreed on a form of press statement it would be issued by the Governor, and that otherwise the matter would be referred back to the Board for further consideration. 4031 12/26/34 —3— Governor Eccles then read a letter dated December 241 19341 Ilhich had been handed to him by Mr. Hnmlin, addressed to Mr. Hamlin by Serlator Glass, as follows: "The Washington Post and other newspapers, learn— ing I had written a member of the Reserve Board a letter on deposits payments, asked leave to publish same, and on Saturday night my office here was instructed to forward copies accordingly, as I could see no reason why thousands of banks should, from my point of view, rest under the mis— taken notion that they would be bound to obey an illicit order of the Federal Deposit Insurance Corporation. "However, I feel prompted to disclaim all responsi— bility for newspaper conjectures which misinterpret my letter to you as an attack on Mr. Eccles in any sense or degree beyond what I regard as an unfortunate announcement by the Reserve Board. The nomination or confirmation of Mr. Eccles did not enter into my mind in writing the letter. Of course know the Reserve Board has a right under the statute to fix, from time to time, interest payments on time and savings de— Posits; hence talk on this line does not meet the issue. I do not concede that Congress intended that the Board should make the charges uniform throughout the country. This it clearly did not intend. "I note you are quoted in The New York Times as say— YOU had not read my letter. From your acknowledgement of December 20th, I assumed you had read it; and from a com— ment to—day credited to Mr. Eccles by the Associated Press I !la convinced he has not read my letter; otherwise he would not ascribe to me something I did not say in order to contradict Governor Eccles called attention to the number of Clayton Act 1111Plications pending before the Board and the short period of time left to act upon such applications before the January meetings of the —‹s involved, and recommended, as a basis for discussion, that the Board loPt the policy that it will not issue a Clayton Act permit to an indi— 11.111.1 to serve at the same time as a director of two or more competing 11414 the same comnunitY, except in cases where the banks involved 12/26/34 4032 -4- Itl'a controlled and managed by the same intere sts. Governor Eccles' teecnimendation was discussed and Mr. James suggested that, in order to meet the situation over the year-end period, and in view of the possibilitY of an early amendment to section SA of the Clayton Act at the " 1 session of Congress, the Board might advise the Federal reserve 8°I1 5 t that in any case in which an applic ation has been filed with the Boa1,1 or with the Federal reserv e agent covering a relationship of the ki4d as to which the Board is author ized to issue a Clayton Act permit, the card will not object to the continuance of the relati onship pending e.etiori by it on the application. After a detailed discussion, upon motion by Mr. Szymczak, Messrs. Thomas and Hamlin were appointed a committee to formulate a policy for consideration by the Board. Mr. Hamlin referred to the applications for voting permits tile bi coin,' the "Transamerica Corporation" and the "Transamerica Bank Hold both of San Francisco, California, and"The First National e°1°P(*aticri of Portland", San Francisco, California. He stated that the 4PPlicatio115 are being given active consideration by the Board's staff €41(1) Pending decision on a number of import ant matters which are being 4tliclied in connection with the issuance of general voting permits, he (141red to recommend the issuance by the Bourdof limited permits to the tIlre e holding company affiliates authorizing them to vote the stock -Dteci °r controlled by them in the subsidiary banks at the forthcoming 441likti lestings of shareholders. 4033 12/26/34 -5Upon motion by Mr. Hamlin, telegrams were approved to Mr. Sargent, Assistant Federal Reserve Agent at the Federal Reserve Bank of San Francisco, authorizing him, subject to the conditions prescribed in the respective telegrams, to issue limited voting permits to the Transamerica Corporation and the Transamerica Bank Holding Company, entitling each of such organizations to vote the stock which it owns or controls in the "Bank of America National Trust and Savings Association", San Francisco, California; "The First National Bank of Portland", Portland, Oregon; and ”First National Bank in Reno", Reno, Nevada; and to The First National Corporation of Portland, entitling it to vote the stock which it owns or controls in "The First National Bank of Portland", Portland, Oregon, for the purpose of electing directors of such banks at the annual meetings of shareholders, or at arly adjournment thereof, at any time prior to April 1, 1935, and to act thereat upon such matters of a routine nature as are ordinarily acted upon at the annual meetings of such banks. There was then presented a draft of a letter to Mr. W. L. 6`71V-, President of the Mercantile-Commerce Bank and Trust Company, s'us, Missouri, reading as follows: "This refers to a letter of November 27, 1934, addressed by Mr. Frank A. Thompson of counsel for the MercantileCommerce Bank and Trust Company, St. Louis, Missouri, to Mr. Wingfield, en assistant counsel of the Federal Reserve Board, and to previous correspondence between the Board and the (1.1?reantile-Commerce Bank and Trust Company with regard to the .1sPosition of stock of the Mercantile-Commerce National Bank ln St. Louis. "You will recall that on December 12, 1935, the Board advised you that it had granted the Mercantile-Commerce Bank „8nd_Trust Company a period of six months from December 15, t?4, within which to dispose of all the stock of the Mercan63 10-Commerce National Bank in St. Louis which it held, in ' ' uch a manner that it will retain no interest therein, and , that on July 17, 1934, after a careful consideration of a ?Ilan of disposition of the stock of the national bank which ad been put into effect, the Board advised you that it did A, feel that the Mercantile-Commerce Bank and Trust Company 4,T-Ild properly be considered to have disposed of the stock of 'le Mercantile-Commerce National Bank in St. Louis in such a Z 4034 12/26/34 It —6— manner that it retained no interest therein. The Board stated, however, that it was prepared to raise no objection to the dis— position which had been made of the stock of the national bank Provided that the option retained by the Mercantile—Commerce Bank and Trust Company to repurchase the stock of the national bank was eliminated and that the voting rights in the stock of the national bank were vested in the holders of the certifi— cates representing beneficial interest in the stock of the na— tional bank rather than in the trustees as provided in the plan Of disposition of the stock. "On August 15, 1934, counsel for the Mercantile—Com— merce Bank and Trust Company submitted a written argument to the effect that the Board should modify its position in this matter, and, after a careful consideration of the arguments advanced by the bank's counsel, the Board, on September 12) 1934, reiterated its view that the Mercantile—Commerce Bank and Trust Company had not disposed of the stock of the Mercan— tile—Commerce National Bank in St. Louis in such a manner that it retained no interest therein. The Board understands that subsequently you discussed the matter with Mr. James, a member Of the Federal Reserve Board, upon the occasion of his visit to the city of St. Louis, and requested an opportunity to further discuss the matter upon your contemplated visit to Washington at the time of the meeting of the American Bankers Association. It appears that on October 24, 1934, you had further discussions of this matter with Mr. James and an as— sistant counsel of the Board and stated that you desired that Your attorney should be present at the discussions but that he had been called back to St. Louis. It was understood that he would return to Washington in a few days and discuss the matter further with the assistant counsel of the Board. On 120vember 9, 1934, Mr. Thompson, of counsel for the Mercantile— uommerce Bank and Trust Company, called upon the assistant counsel of the Board and stated that he was not prepared at time to discuss the matter, but merely called to advise "•Ilat he would be back in about ten days prepared to discuss In his letter of November 27, 1934, referred to in the 'lrst paragraph of this letter, Mr. Thompson advised the Board's assistant counsel that it had been necessary for him to defer ; ls return to Washington on account of a bereavement in his ,a141-17 and that it would be necessary for him to defer further urn to Washington until after December 11, 1934, on account 'I- a business engagement. "In view of the very careful consideration which has bee n given to this matter by the Board and of all the circum— uances described above, the Board has reauested me to advise ?u i that it does not feel that the request for a further defer— ent is warranted, and, in view of the fact that the Board has 4035 12/26/34 T1 already considered the written arguments of counsel for your bank, it does not appear to the Board that further discussion between counsel for your bank and counsel for the Board is necessary. The Board, accordingly, requests that you advise at your earliest convenience what disposition will be made of this matter by the Mercantile—Commerce Bank and Trust Company." Upon motion by Mr. James, the letter was approved, Mr. Thomas voting "no" for the reasons stated in a memorandum written by him under date of December 22, 1934, which was attached to the file, and Governor Eccles not voting as he was not familiar with the circumstances involved in the case. The Board then acted upon the following matters: Telegram dated December 26, 1934, from Mr. Curtiss, Chairman of +1, 'ue Federal Reserve Bank of Boston, advising that, at a meeting of the of directors today, no change was made in the bank's existing Chedle of rates of discount and purchase. Without objection, noted with approval. Letter to the governors of all Federal reserve banks, reading 4"oilows: "Requests have been received from two Federal Reserve bnro for authority to grant retirement allowances to certain emPloyees, who have attained age 65, in excess of the allow— ances to which they are entitled under the provisions of Sub— .section 1 of Section 3 of the Rules and Regulations governing he Retirement System of the Federal Reserve banks. "The Board is impressed with the desirability of en— abling the Federal Reserve banks to make provision for mini— U111 retirement allowances, somewhat in excess of those pro— tilLed for in Subsection 1 of Section 3, whenever in the judg— cnt of their directors, after taking into consideration the ' 1'cl-instances and conditions affecting the personnel of their respectve banks, it is desirable to do so, and recognize the , act that a minimum allowance that may be deemed satisfactory or one bank may not be so for another bank. "In the circumstances and in order to allow sufficient flexibility in this matter without the necessity of action by 4036 12/26/34 -8- "the Federal Reserve Board separately for each Federal Reserve bank, the Board hereby authorizes your bank to make such additional contributions to cover the cost of allowances granted in accordance with the last paragraph of Section 9 of the Rules and Regulations of the Retirement System as may be necessarY to bring the minimum retirement allowance, under the regular cash refund annuity plan, to employees retiring at or after age 65 up to such amount as the board of directors of your bank may allow, but not to exceed M) per annum for each year's service to a maximum of 16 years, or the actuarial equivalent thereof in one of the optional forms that the member may select under Subsection 6 of Section 3 of the Rules and Regulations. In determining length of service for this purpose any service rendered up to the time of retirement may be counted, even though a portion of such service may not be creditable service as defined in Section 1 of the Rules and Regulations." Approved. Letter to Mr. Sailer, Deputy Governor of the Federal Reserve Bank Or New York, reading as follows: "Reference is made to your letter of November 28 in regard to a proposed new contributory group life insurance Policy. "The Board will interpose no objection to the proposed ., 1:Quip life insurance contract which, it is understood, on 'ne basis of anticipated dividends will cost the Federal eserve bank approximately 1.2380 a year. The Board feels, rwever, that the situation should be reviewed and the mat'? brought to its attention in ample time for further concleration before the expiration of the new contract if it -48 desired to continue in force the same contract or to substitute a new one." Approved. Telegram to Mr. Case, Federal Reserve Agent at the Federal Reliel*te 44k of New York, authorizing him to issue a limited voting permit tl5the "Rackensack Securities Company", Hackensack, New Jersey, entitling Itell°1‘gallization to vote the stock which it owns or controls in the 4037 12/26/34 -9Park Trust Company", Ridgefield Park, New Jersey, for the Purposes set forth in the telegram. The telegram stated also that the 13c)artlis ANCIGAP telegram to the agent dated December 221 1934, with regIrd to the Hackensack Securities Company is amended by eliminating tilelaetrom all words in sections D(2) and D(3) of such telegram. Approved. Telegram to Mr. Case, Federal Reserve Agent at the Federal Re8e17e Dank of New York, authorizing him to issue a limited voting permit to the "Marine Midland Corporation", Jersey City, New Jersey, entitling " 1 organization to vote the stock which it owns or controls in "The Mar ine Trust Company of Buffalo", Buffalo, New York, and the "Lackawanna Natio nal Bank", Lackawanna, New York, for the purposes set forth in the telegram. Approved. Letter to Mr. Peyton, Federal Reserve Agent at the Federal ite Eery e Bank of Minneapolis, authorizing him, subject to the conditions 13et °rth in the letter, to issue a limited voting permit to the "First Stock Corporation", Minneapolis, Minnesota, entitling such organi- zation to vote, for the purposes set forth in the letter, the stock which ov , or controls in the following banks: %era Preebeen National Bank & Trust Company", Aberdeen, South Dakota FC :1 County National Bank of Albert Lea", Albert Lea, Minnesota 4Q mers National Bank in Alexandria", Alexandria, Minnesota thm 4R Pirs. National Bank of Austin", Austin, Minnesota NriL e Nat'l 1‘4,,-onal Bank of Benson", Benson, Minnesota "The land National Bank of Billings", Billings, Montana -' National Bank of Bismarck", Bismarck, North Dakota 4038 12/26/34 -10- The First National Bank of Blooming Prairie", Blooming Prairie, Minnesota 'r irst and Farmers National Bank of Blue Earth", Blue Earth, Minnesota : First National Bank of Brainerd", Brainerd, Minnesota tiletals Bank & Trust Company", Butte, Montana ,,The First National Bank of Cando", Cando, North Dakota The Merchants National Bank of Cavalier", Cavalier, North Dakota itThe Clark County National Bank of Clark", Clark, South Dakota Ze First National Bank in Cooperstown", Cooperstown, North Dakota he Minnesota National Bank of East Grand Forks", East Grand Forks, Minnesota Nyn., 14* First National Bank of Fairmont", Fairmont, Minnesota The Merchants National Bank and Trust Company of Fargo", Fargo, North Dakota npner County National Bank of Gettysburg", Gettysburg, South Dakota n i-1"St The National Bank in Glen Ullin", Glen Ullin, North Dakota nio First National Bank of Graceville", Graceville, Minnesota ,c1 River National Bank of Grand Forks", Grand Forks, North Dakota ft:Ze First National Bank of Great Falls", Great Falls, Montana The, tie National Metals Bank of Hancock", Hancock, Michigan First National Bank of Harvey", Harvey, North Dakota he "The National Bank of Havre", Havre, Montana wpi .,irst First National Bank of Hebron", Hebron, North Dakota t1Thrst National Bank & Trust Company of Helena", Helena, Montana nThe First National Bank of Heron Lake", Heron Lake, Minnesota ftThe First National Bank of Highmore", Highmore, South Dakota hpa :Security National Bank of Huron", Huron, South Dakota & Merchants National Bank in Ivanhoe", Ivanhoe, Minnesota tpi-rational Bank of Jamestown", Jamestown, North Dakota tITh,' National Bank in Lemmon", Lemmon, South Dakota First National Bank of Leola", Leola, South Dakota ITireillational Bank of Lewistown", Lewistown, Montana ' ftThe National Bank in Lidgerwood", Lidgerwood, North Dakota 6',Ineric5n National Bank in Little Falls", Little Falls, Minnesota tiThcl Illiational Park Bank in Livingston", Livingston, Montana 't Firstu'verrie National Bank", Luverne, Minnesota National Bank of Mankato", Mankato, Minnesota hT.17., National Bank in Miles City", Miles City, Montana N3loorirst National Bank of Miller", Miller, South Dakota "Pirsngton-Lake National Bank of Minneapolis", Minneapolis, Minnesota -ational Bank and Trust Company of Minneapolis", Minneapolis, Minnesota "The —a National Bank of Minneapolis", Minneapolis, Minnesota The 4armers tr,„ Unio„ and Merchants National Bank of Minneota", Minneota, Minnesota " ational Bank in Minot", Minot, North Dakota nllae i?sterNationaln Montana National Bank of flissoula", Missoula, Montana rtrst National Bank of Neche", Neche, North Dakota %rt3irst National Bank of New Rockford", New Rockford, North Dakota ield National Bank and Trust Company", Northfield, Minnesota 4 NrCe 4039 12/26/34 -11-- NM First National Bank of Owatonna", Owatonna, Minnesota Commercial National Bank of Bozeman", Bozeman, Montana First National Bank of Park River", Park River, North Dakota j..rst National Bank in Paynesville", Paynesville, Minnesota Pipestone National Bank", Pipestone, Minnesota tIZe Red Wing National Bank and Trust Company", Red Wing, Minnesota n Zte First National Bank of Rochester", Rochester, Minnesota g,le First National Bank of St. Paul", St. Paul, Minnesota Merchants National Bank of Sauk Centre", Sauk Center, Minnesota izens National Bank and Trust Company of Sioux Falls", Sioux Falls, South Dakota First National Bank of Spring Valley", Spring Valley, Minnesota 17.r5t National Bank of Valley City", Valley City, North Dakota qfst National Bank in Vermillion", Vermillion, South Dakota Farmers National Bank of Waseca", Waseca, Minnesota :1‘st National Bank in Wheaton", Wheaton, Minnesota e Security National Bank of Willmar", WillmArl Minnesota The First National Bank of Windom", Windom, Minnesota Approved. Telegram to Mr. Walsh, Federal Reserve Agent at the Federal Re16ank of Dallas, authorizing him, subject to the conditions pre- acl'ibed in • the telegram, to issue a limited voting permit to wH. Kempner", 41.1re, 8" ) /11 Texas, entitling such organization to vote the stock which it (11" °r controls in "The United States National Bank of Galveston", Gall'eato lis Texas, for the purposes set forth in the telegram. Approved, together with a letter to Mr. Walsh, Federal Reserve Agent at the Federal Reserve Bank of Dallas, reading as follows: "This refers to your letter dated September 19, 1934, regardt_ J-Jag the letter to you from Mr. F. Lee Kempner, dated _Ptember 14, 1934, in which Mr. Kempner requested a release or the previous commitments of H. Kempner Trust made for the purpose of obtaining a limited voting permit for such trust vote the stock which it owns or controls in the United tat oatates National Bank, Galveston, Texas. In your letter you ask be advised whether H. Kempner Trust is now a holding , °InParlY affiliate of the United States National Bank, and if ' 4 ' 1,, whether such trust is entitled to be released from its 12/26/34 r1 4040 —12— agreement executed for the purpose of obtaining a limited voting permit. "You state that on sheet 12 of the report of ex— amination of H. Kempner Trust, as of July 26, 1934, the national bank examiner states: 'The United States National Bank, Galveston, was formerly an affiliate of the H. Kempner Trust but the bank recently sold 10,000 shares preferred stock to the RFC, thereby increasing the voting shares to 20,000. The H. Kempner Trust owns only 5,872 common shares, therefore, cannot, at present, control the election of the directors of the United States National Bank.' "The office of the Comptroller of the Currency has advised the Board that at the last election of directors of the United States National Bank, held on January 9, 1934, the number of shares voted was 6,407. As noted above, H. Kempner Trust owns or controls 5,872 shares of the stock of the bank, Which were voted at the last election of the bank's directors, and it appears that the trust is a holding company affiliate of the bank within the definition contained in section 2(c)(1) of the Banking Act of 1933, which provides that the term 'hold— ing company affiliate' shall include any corporation 'which owns or controls, directly or indirectly, * 4fif more than fifty per centum of the number of shares voted for the election of di— rectors of any one bank at the preceding election.' "In view of the fact that H. Kempner Trust is now a holding company affiliate of the United States National Bank, it will be necessary for the trust to obtain a voting permit in order to vote its shares at the next meeting of share— holders of the bank. Whether or not the trust will continue, after the next election of directors, to be a holding company affiliate of the bank within the above quoted provision of ?ection 2(c)(1) of the Banking Act of 1933 will depend upon 'the number of shares voted at such election. If none of the shares owned by the Reconstruction Finance Corporation are ..7°460c1 at the next election, the trust will presumably con— flue to be a holding company affiliate of the bank. Fven if Shares owned by the Reconstruction Finance Corporation td g at the next election, the trust will continue to be : 11Tcd company affiliate if it controls the manner in which sol1ch shares are voted. This possibility is mentioned because the fact that in certain cases the Reconstruction Finance ,L;(3rporation has given a proxy. to other shareholders of a bank r vote the shares owned by the finance corporation and in such SeS it may be determined that the shareholder holding a proxy fro m the finance corporation controls the shares owned by such corporation. "With reference to the other question stated in your letter the Federal Reserve Board is of the opinion that as soon 4041 12/26/34 -13- 11 as H. Xempner Trust ceases to be a holding company affiliate of a member bank, the agreements contained in its application for a voting permit and the agreements executed by it as a condition to the issuance of a limited voting permit will cease to be binding upon the trust. "It will be appreciated if you will advise H. Kempner Trust and the United States National Bank of the Board's views regarding this matter." Memoranda dated December 19 and 24, 1934, from Mr. James with I'egard to the requests received from the Federal reserve banks for authorto make certain charge-offs at the end of the current year, to set up reserves, and to pay the regular semi-annual dividend at the end °t 19r4. The memoranda recommended that: 1. 2. 3. In view of the very substantial excess of market value over book value of United States Government securities held by the Federal reserve banks and of the substantial reserves they now hold on such securities, no additions to these reserves be authorized at the end of 1934. The Federal reserve banks be authorized to charge off, at the end of the year, the amount of furniture and equipment purchased during 1934. The Federal reserve banks be authorized to set aside the usual 2% reserve on bank buildings and 10% reserve on fixed machinery and equipment; that the Federal Reserve Bank of Chicago be authorized to charge off 7.2500,000 on the head office premises and $700,000 on the Detroit branch provided such charge-offs are approved by the board of directors of the Federal Reserve Bank of Chicago and the book value of the land at the head office and at the branch is not reduced to an amount below estimated market value; that the request of the Federal Reserve Bank of Atlanta for authority to set up a reserve of fp150,000 for improvements, repairs and alterations to banking houses, be not approved, but that, in lieu thereof, the Atlanta bank be authorized to transfer an additional A150,000 to reserves for other losses, at the end of the current year, if approved by the board of directors Of the Federal Reserve Bank of Atlanta; and, that the Federal Reserve Bank of St. Louis be authorized to charge off 12/26/34 -14- $321,830.90 at the end of the year in order to reduce the book value of the land at the head office and branches to estimated market value. 4. Each Federal reserve bank be authorized to pay the usual semi-annual dividend at the close of the year. 5. The Federal Reserve Banks of New York, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, and Kansas City, be authorized to set up the reserves requested to cover their proportionate share of estimated probable losses on the Hungarian credit, and that the other Federal reserve banks be advised of the proposed action by the banks referred to and asked to give consideration to the desirability of setting up a reserve to cover their portion of the credit. 6. All of the Federal reserve banks except St. Louis and Kansas City be authorized to transfer their profits on sales of United States Government securities from the System Special Investment Account to "Reserves for other lossed, provided that the amount so transferred shall not exceed the net earnings remaining after setting aside other reserves authorized and the payment of dividends; that the Federal Reserve Bank of New York be authorized to transfer to such reserves profits on sales of Government securities from its own portfolio; and that the Federal reserve banks be instructed to show the net increase or net reduction Only, in reserves for losses in all published statements. 7. 8. S. The Federal Reserve Bank of St. Louis be authorized to set aside an additional reserve of $8,471 for losses on discounted bills. That the reserves requested by the Federal Reserve Bank of St. Louis, other than those referred to above, be not authorized. The Federal Reserve Bank of New York be authorized to set aside an additional reserve of approximately ' ;1 57,000 for self-insurance, representing the amount of the income during 1934 on its present self-insurance reserve; that the Federal Reserve Bank of Atlanta be authorized to increase its self-insurance reserve by $237,750; that the Federal Reserve Bank of Chicago be authorized to add A1,000,000 to its present self-insurance reserve; and that the Federal Reserve Bank of Kansas City be authorized to add any earnings remaining after the payment of expenses, dividends and making the usual charge-offs, to its present selfreserve. 4043 12/26/34 -15-- 10. The Federal Reserve Banks of Richmond and Cleveland be authorized to charge off net expense connected with other real estate, the charge-off at the Cleveland bank to include $8,423.08 of the present book value of the old branch bank building at Pittsburgh. 11. In order to determine the Federal reserve banks' net earnings on funds received from the Secretary of the Treasury in accordance with the provisions of section 13b of the Federal Reserve Act, the Federal reserve banks be advised as follows: "In order to determine the amount, if any, payable to the United States on the amount received by the Federal Reserve banks from the Secretary of the Treasury under Section 13b, net earnings under Section 13b determined in the manner prescribed by Form B-23 should be allocated to earnings on funds received from the Secretary of the Treasury in the proportion that the average daily amount of funds received from the Secretary of the Treasury bears to the average daily amount of industrial advances and commitments outstanding. The foregoing calculation may be effected by multiplying net earnings, or net loss, by the average daily amount of funds received from the Secretary of the Treasury and dividing the product by the average daily amount of industrial advances and commitments outstanding. "If the bank has any net earnings from funds received from the Secretary of the Treasury, as above calculated, such net earnings up to 2 percent of the total payments received from the Secretary should be paid to the Treasurer of the United States and the remainder, if any, should be credited to surplus Section 13b. If the bank has a net loss, as thus calculated, on funds received from the Secretary of the Treasury such net loss should be charged to surplus, Section 13h, as shown on the books of the Federal Reserve bank and in published statements. Any amount paid the Treasurer of the United States under Section 13b should be shown in published profit and loss statements following the item 'Dividends paid' against the caption 'Section 13b earnings paid the United States', and any earnings (or loss) transferred to Section 13b surplus should be shown against the caption 'Transferred to (or withdrawn from) surplus (Section 13b)'." The recommendations were approved. 4O44 —16_ 12/26/34 Letter to the Federal reserve agents at all Federal reserve ballks, transmitting forms to be used at the time of the next call for corldition reports of State member banks and their affiliates. Approved. Letter dated December 24, 1934, approved by five members of the Board, to Mr. Case, Federal Reserve Agent at the Federal Reserve talik of New York, reading as follows: "This refers to your letter of October 16, 19342 submitting information with regard to loans by member banks to their own officers. You state that it appears highly Probable that it will be impossible for many of these bank Officers to arrange for payment of these obligations by June 16, 1935, and that a problem of serious importance will then have to be met. In this connection you called at— tention to the provision of section 22(g) of the Federal Re— serve Act to the effect that loans made by a member bank to its own executive officers prior to the enactment of sec— tion 22(g) on June 16, 1933, may not be renewed or extended more than two years from June 16, 1933, and you suggested that consideration be given to the question of whether an officer whose loan has not been paid by June 16, 1935, will be subject to the penalties, fine or iillprisonment, pres— cribed for violations of the provisions of section 22(g). "Since a violator of the provisions of section 22(g) of the Federal Reserve Act is subject to a penalty fine or imprisonment, the Board, as you know, feels that he question of what constitutes a violation of the provi7,i'ns of that section is a matter entirely within the juris— utction of the Attorney General of the United States and the . 30ard does not attempt to determine questions arising under uhat section. Accordingly, the Board has forwarded a copy ?I' Your letter and inclosure to the Attorney General with the request that he furnish the Board with such advice with r?gard to your inquiry as he feels that he can properly fur— nish in the circumstances. m,. "You will note, from the inclosed copy of the letter 7"ich the Board has addressed to the Attorney General, that, tn view of the circumstances involved, the Board is giving c o°nsideration to the question whether it is desirable to 1tain an amendment to the provisions of section 22(g) and, waen a reply is received from the Attorney General, further 2 4045 12/26/34 -17- "consideration will be given to that question. In the meantime, the Board will be glad to receive any further information or comments which you desire to submit with regard to Whether it is desirable to suggest to Congress that an amendment be made to the provisions of section 22(g) in this connection." Approved, together with a letter to the Attorney General in accordance therewith. Telegram dated December 240 1934, approved by five members of to Mr. Stevens, Federal Reserve Agent at the Federal Reserve the B Batik of Chicago, reading as follows: "Your wire December 18 regarding differences between Regulation Q and regulations of FDIC with respect to the requirements relative to time deposits. FDIC has made a reduction in the maximum rate that may be paid by State banks and trust companies which are insured by the Corporation from 3 per cent to 2 per cent and is expected to issue its new regulation on the subject at an early date. You will observe that Board's Regulation Q as amended provides that the maximum rate of interest effective February 1, 1935, shall be 27,' per cent per annum 'compounded quarterly' instead of 'compounded semi-annually as heretofore. Board is not advised whether FDIC contemplates mnking changes in its regulations with respect to the requirements applicable to time and savings deposits which will bring them into harmony with provisions of law and Regulation Q relating to member banks." Approved, together with a letter, also dated December 24, 1934, and approved by five members of the Board, to the Federal Deposit Insurance Corporation, reading as follows: "There are inclosed herewith for your information a .,c))7 ) of a telegram received by the Federal Reserve Board from ? Federal Reserve Agent at the Federal Reserve Bank of h1cago, , and a copy of the Bor-d's reply thereto, with regard _60 the differences between the Board's Regulation Q and the : 1 egulations of your Corporation relating to the payment of t i.ltere z st on deposits. There are also inclosed for your informa14rn a copy of a letter on this subject received from the Federal j 4 serve Agent at the Federal Reserve Bank of St. Louis and a ollY of its inclosure." r (1046 12/26/34 —18— Letter to Mr. Case, Federal Reserve Agent at the Federal ile ve Bank of New York, reading as follows: "The Board has reconsidered the application of Mr. William C. Feathers, Troy, New York, for permission under the provisions of the Clayton Act to serve at the same time as director and officer of 'The Manufacturers National Bank of Tray', Troy, New York, and as director and officer of Taconic Valley Bank, Berlin, New York, and Upon the basis of the information now before it, includ— ing that submitted with your letter of November 51 19341 and with Assistant Federal Reserve Agent Gidney's letter of November 71 19341 has approved the application. There are inclosed the original and copies of the permit granted to Mr. Feathers for transmittal by you to the applicant and the banks involved. A copy of the permit is also in— closed for your files. "When you submit your recommendation as a result your annual review of this permit it will be appreciated lf you will reuort fully as to the condition and manage— ment of the banks involved, as to the status of the appli— cant's borrowings and as to the progress made in correcting Other matters criticized by the examiners in recent reports of examination." of Approved. Letter to Mr. Newton, Federal Reserve Agent at the Federal Reserv e Bank of Atlanta, reading as follows: "Reference is made to the Clayton Act permit granted by the Board on August 291 19341 to Mr. Arthur Wellborn, Anniston, Alabama, to serve at the same time as director and officer of 'The Commercial National Bank Anniston', Anniston, and 'The First National Bank of P iedmont', Piedmont, both of Alabama, and to your letter °f October 251 1934, relative thereto. "In his application dated February 7, 1934, Mr. Wellbo'n reouested permission to serve also as director officer of 'The First National Bank of Jacksonville', tulIcksonville, Alabama. However, in view of the fact that 04.is bank was placed in receivership subsequent to the date the application, the permit granted to Mr. Wellborn did rt include his services as a director and officer of that 1-nstitution. !:!. 404,7 12/26/34 -19- "It is noted from your letter of October 251 19341 that The First National Bank of Jacksonville has been released from receivership and resumed business on October 181 19341 and that Mr. Wellborn now requests permission to serve as director of the bank in addition to the services covered by the Permit granted on August 291 1934. "The files indicate that The First National Bank of Jacksonville is now in very good condition, its reorganization having been accomplished by means of the surrender of the bank's capitel stock and its resale at a 20% premium; additional cash of a51000 obtained through a loan secured by the pledge of unacceptable assets and the indorsement of the new directors; and the waiver of 40% of unsecured claims by depositors and other creditors. The applicant surrendered $101450 par value of old capital stock and purchased 30 shares of new stock at a cost of $3,600. He reports that he is the largest stockholder of the institution. Although The First National Bank of Piedmont was reported to be in a most unsatisfactory condition as of March 30, 19341 and The First National Bank of Jacksonville was insolvent and forced to reorganize, it was noted that the applicant and his family were large stockholders in these banks, have come to their relief in a financial way on several occasions) apparently have not made undue use of the banks' credit, appear to be influential in the section served by these banks, and that the applicant's services as a director of the reorganized Jacksonville bank were approved by the Comptroller of the Currency and the Chief National Bank Examiner prior to the resumption of business. "In all the circumstances, the Board has approved the apPlication and there are inclosed the original and copies of the Permit covering Mr. Wellborn's present services as director and °fficer of The Commercial National Bank of Anniston, as director .1nd officer of The First National Bank of Piedmont, and as direcrr of The First National Bank of Jacksonville, all of Alabama, transmittal by you to the applicant and the banks involved. .1 ' ?e Board recuests, however, that you endeavor, in cooperation ;1th the appropriate supervisory authorities, to bring about a rengthening of the management and a correction of the condi0ls with resoect to The First National Bank of Piedmont which "av'e given rise to the examiner's criticisms. "The Board also desires that when you submit your recommen dation as a result of your annual review of this permit, you ; 1a:Port fully as to the progress made in bringing about an improvein the management and condition of The First National Bank 4 Piedmont, Alabama." 1 j Approved. 4048 12/26/54 —20— Letters to applicants for permits under the Clayton Act, advising °f approval or their applications as follows: Mr. William H. Bassett, for permission to serve at the same time as a director of the Bridgewater Trust Company, Bridgewater, Massachusetts, and as a director of The Home National Bank of Brockton, Brockton, Massachusetts. Mr, John S. Kent, for permission to serve at the same time as a director of The Home National Bank of Brockton, Brockton, Massa— and as a director and officer of The Brockton Morris Plan Company, Brockton, Massachusetts. 11r. Clarence C. Reed, for permission to serve at the same time as a director of The Brockton National Bank, Brockton, Massa— chusetts, and as a director of The Brockton Morris Plan Company, Brockton, Massachusetts. Approved. There were then presented the following applications for changes Sto of Federal reserve banks: , ications for SURRETTER of Stock: irtorict No. 4. 7ational Bank of Paintsville, rain tsville, Kentucky Zstrict No. 7. "le St. s National Bank, Charle St. C harles, Illinois ti r„,"ntrict No. 9. gle D. t-L'lrst National Bank of Bison, 'isan, South Dakota tict No. 12 r1Vir3t National Bank of Nephi, L'ePhi, Utah 4 Shares 50 50 12 12 18 18 69 Total 69 129 Approved. Thereupon the meeting adjourned. ilitA Secretary. Governor.
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