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2854 A meeting of the Board of Governors of the Federal Reserve Systern was held in Washington on Friday, December 27, 1935, at 11:50 a. m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Thomas, Vice Chairman Hamlin Miller James Szymczak Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary The Board acted upon the following matters: Letters to Mr. Curtiss, Chairman of the Federal Reserve Bank of aoston, Mr. Sproul, Secretary of the Federal Reserve Bank of New York, and mr. Fry, Assistant Federal Reserve Agent at the Federal Reserve Bank (4' Richmond, stating that the Board approves the establishment without ch4llge by the Boston bank on December 24, by the New York bank on Decem- 23, and by the Richmond bank on December 26, 1955, of the rates of (liscolult and purchase in their existing schedules. Approved unanimously. Letter to the chairmen of all Federal reserve banks, reading ""•-‘0VIS: "At the October Governors' Conference it was voted that was desirable that meetings of the boards of directors of "le twelve Federal reserve banks be held on the same day, and that the Board of Governors of the Federal Reserve System be lisked to arrange with the several Federal reserve banks for 1114formity in this regard; the new arrangement to become effecive after February 1, 1966. This action was taken in the ht of the amendment to the Federal Reserve Act which reeach Federal reserve bank to establish rates of discount jerY fourteen days, or oftener if deemed necessary by the 'oard. as 2855 12/27/35 -2- "In this connection it may be noted that the boards of directors of six of the Federal reserve banks meet only once a month, three twice a month, two every two weeks and one each Thursday. Eliminating shifts in meeting dates because of holidays, the meetings of four of the banks are held on Thursday, three on Wednesday, three on Friday, one on Monday and One on the 7th of the month. "It is assumed that the action of the Governors' Conference has been or will be brought to the attention of the directors Of your bank and the Board will be interested in receiving advice from you as to their reaction to the suggestion of a uniform meeting date." Approved unanimously. Letter to Governor Harrison of the Federal Reserve Bank of New York, reading as follows: "The Board of Governors of the Federal Reserve System approves the continuation of the assignment of Mr. Charles E. Dlringer, whose regular position is Chief of the Coupon Collection Division, Collection Department, in directing the work of the Work Relief Checks Section for a further period Of three months from December 20, 1955." Approved unanimously. Letter to Governor Geery of the Federal Reserve Bank of Minneapolis, l'eadillg as follows: "The Board of Governors of the Federal Reserve System approves the recommendation contained in Mr. Larson's letter of ?!ecember 17 that the temporary assignment of Mr. Samuel E. millett to the position of Coin Teller, Currency and Coin Derment, at an annual salary of $2,200, which is $100 in excess _r he maximum salary provided for this position, be continued ror an additional period of six months from August 5, 1955." r Approved unanimously. Letter to Governor McKinney of the Federal Reserve Bank of Dallas, l'e4cling as follows: "The Board of Governors of the Federal Reserve System Proves the recommendation contained in Mr. Coleman's letter ap 2856 12/27/35 -6- "of December 16 that the temporary assignment of Mr. L. 0. Moore, Jr., to the position of Senior Clerk, Collection Division, Houston Branch, at an annual salary of '4,920, which is 0120 in excess of the salary range provided for the position, be continued for an additional period of six months from December 20, 1935." Approved unPnimously. Memorandum dated December 21, 1965, from Mr. James submitting a letter dated December 12 from Mr. Sailer, Deputy Governor of the Federal aeserve Bank of Hew York, which requested approval of changes in the per8onnel classifica tion plan of the bank to provide for a change in grade 414 an increase in salary range for the position of Assistant Chief in the 4ellit Division of the Credit Department, and for the creation of the new Po sitions of Statistician in the Foreign Exchange Division of the Foreign I3ePartment, and Law Clerk in the Legal Department. The memorandum stated that the proposed changes and the reasons therefor, as indicated in Mr. 4ileri5 letter, had been reviewed and recommended that they be approved. Approved unanimously. Letter to Mr. Wood, Chairman of the Federal Reserve Bank of St. Louis 2 reading as follows: "The Board of Governors of the Federal Reserve System received your letter of December 23, 1935, advising of e reappoint:Rent of Messrs. John T. Moore, W. H. Glasgow, und A. F. Bailey as Managing Directors of your Louisville, emPhis, and Little Rock branches, respectively, for the Yeart 1966, and of Messrs. Wm. R. Cobb and Willis Pope as directors each of your Louisville and Memphis branches, respectively, for a term of three years beginning January 1, 1966. "It is noted from the last paragraph of your letter that ion was deferred until after February 1, 1966 on the apc'ament of a director at your Little Rock branch for the wn'T beginning January 10 1966, in the hope that the new Board amend the provision of the regulations with respect to 'enoh directors so as to permit the reappointment of Mr. r n 2857 12/27/35 -4- "Stuart Wilson, who has already served eleven years as a director of the branch and whose term expires on December 31, 1935, and who your board of directors feels should be reappointed." Approved unanimously. Letter to the board of directors of the "American State Savings Lansing, Michigan, stating that, subject to the conditions preScribed in the letter, the Board approves the bank's application for membershiP in the Federal Reserve System and for the appropriate amount of Stock in the Federal Reserve Bank of Chicago. Approved unanimously, together with a letter to Mr. Stevens, Federal Reserve Agent at the Federal Reserve Bank of Chicago, reading as follows: "The Board of Governors of the Federal Reserve System apProves the application of the 'American State Savings Bank', ansing, Michigan, for membership in the Federal Reserve Sysem, subject to the conditions prescribed in the inclosed letter whlch you are requested to forward to the board of directors of the institution. Two copies of such letter are also inclosed, °Ile of which is for your files and the other of which you are requested to forward to the Commissioner of Banking for the State of Michigan for his informatio n. "The report of examination as of October 21, 1965, indi2ates that title to the bank building rests with the trustees or the waiving creditors, and that the bank's investment in "king house and furniture and fixtures is subject to adjustment inasmuch as a determination has not been made as to the 1Dalue 7 at which such assets will be taken over by the reorgarized The information submitted indicates that a settlement of " 118 matter will be made prior to the admission of the bank to , 41,1erabership and it is assumed that you will satisfy yourself that 7 1 values established for such assets are sound and that the yank will acquire title to the assets at not more than the alues so established. "In order that the Board's records covering the reorgani,bl°r1 of this bank may be complete, it will be appreciated if ,clu will forward a copy of the 'Voting Trust Certificate' which 8 issued to each of the stockholders of the bank who executed " 6 so-called voting trust agreement." l t j 2858 12/27/35 _5.... Letter to Mr. Ewing W. Graham, Associate, T. Harris Smith and Associates, Philadelphia, Pennsylvania, reading as follows: "This refers to your letters dated July 22nd and September 7th, 1935, and to the Board's letters of acknowledgment dated August 7th and September 11th, 1935, regarding the question whether section 19 of the Federal Reserve Act and the Board's Regulation Q make it unlawful for a member bank of the Federal Reserve System to give a free premium, such as a fountain pen, check protector, or similar item, to prospective customers as an inducement for them to open demand accounts, or to give such premiums to existing customers as an inducement for them to build up their demand deposit balances to a certain minimum. "As you know, section 19 of the Federal Reserve Act, as amended by section 324 of the Banking Act of 1935, provides that no member bank shall, directly or indirectly, by any device whatsoever, pay any interest on any deposit which is payable on demand, with certain exceptions not here material . Section 19 also authoriz es the Board to determine what shall be deemed to be a payment of interest for the purposes of such !ection, and to prescribe such rules and regulations as it may deem necessary to effectuate the purposes of the section and prevent evasions thereof. The Board has recently revised its i egulation Qs effective January 1, 1936, in order to make it con"rm to the provisions of the amended law, and, in section l(f) of such regulation has defined the term 'interest' as a payment, Credit, service or other thing of value which is made or furnished by a bank as consideration for the use of the funds constituting a deposit and which involves the payment or absorption by the bank of an out-of-pocket expense. A copy of such regulation is inclosed herewith. "In such as the opinion of the Board, the giving of a premium, a fountain pen, check protector, or similar item, for the Purpose stated in the first paragraph of this letter would be b the furnishing of a thing of value, involving the payment 4 . the bank of an out-of-pocket expense, as consideration for woe use of the funds constitu ting a deposit, and, therefore, in d constitute the payment of interest on a demand deposit violation of the prohibition contained in section 19 of the Federal Reserve Act and the recent revision of Regulation Q." Approved unanimously. Letter to Mr. W. A. Cottingham, Cashier, The Alabama National Bank, 4°Ixtgo , -erY Alabama, reading as follows: 2859 12/27/35 -6- "This refers to your letter dated December 14, 1935, in Which you request advice as to whether your bank is required by the provisions of Regulation Q, as revised effective January 1, 1936, 'to make an exchange charge to the local Farm Credit Corporation, which is an arm of the United States Government./ YOU state that the Montgomery Production Credit Corporation has advised you that it has no provision for the paying of exchange and your bank has for that reason waived such charges. "In view of the fact that neither the provisions of section 19 of the Federal Reserve Act nor the provisions of the recent revision of Regulation Q relating to the payment by member banks of interest on deposits make any exception for production credit corporations, it is the opinion of the Board that a member bank may not lawfully pay or absorb exchange or collection charges, which involve out-of-pocket expenses, for such corporations having demand deposits with such bank. "Of course, the provisions of Regulation Q1 as recently revised, do not require your bank to make an exchange or collection charge to such corporations but merely require that, if an exchange or collection charge is made by another bank, such charge shall not be paid or absorbed by your bank but instead shall be passed on to your depositor. In other words, the recent revision of Regulation Q does not deal with charges made bY your bank within the limits permitted by law (not exceeding ten cents per 0_00 or fraction thereof, based on the total of checks and drafts presented at any one time, provided that ! 1.0 such charges shall be made against a Federal Reserve bank) [°11t, instead, deals with charges imposed by other banks, and rorbids the payment or absorption by your bank of such charges. "For instance, if the Montgomery Production Credit Corpor”ion deposited in its demand deposit in your bank a check for n000 drawn on a non-par bank which imposes an exchange charge 10 of fl per cent for paying checks drawn upon it and, if forwarded such check to the drawee bank for collecl°1131 1: ,1°11, the non-par bank would remit to your bank 099 in payment the el000 check. If your bank gave the Montgomery Production Credit Corporation credit in its account for the full $1000 and Istis absorbed the $1 exchange charge, such absorption would conthe payment of interest on a demand deposit in violat4itute ' 11 of section 19 of the Federal Reserve Act and the provisions RT1lation Q, as recently revised. "If you have any further questions regarding this matter or 1411 3 1!, similar matter, please communicate with the Federal Reserve cuQ.1 ( of Atlanta, which will be glad to answer your inquiries." i Approved unanimously. 2860 12/27/35 -7- Letter to Mr. Frank Warner, Secretary, Iowa Bankers Association, 1)es Moines, Iowa, reading as follows: "This refers to your letter dated December 13, 1935, in Which you present the question, submitted to you by a member bank, as to whether the maximum rate of 1 per cent per annum Prescribed in section (3) of the supplement to Regulation Q, effective January 1, 1956, 'is the maximum rate that can be Paid on savings deposits by those banks whose savings pass books call for a 60-day withdrawal notice, although the bank itself pays interest semi-annually on those savings accounts.' "It will be noted that section (1)(A) of such supplement prescribes a maximum rate of per cent per annum which may be paid by a member bank 'on any savings deposit.' Accordingly, if the savings deposit in question conforms to the definition of the term 'savings deposit' contained in section 1(e) of the revision of Regulation Q, effective January 1, 1936, the maximum rate of interest payable by a member bank on such deposit is 2 per cent per annum. "The maximum rates prescribed in section (2) and section (3) of such supplement are applicable only to time deposits as defined in section 1(b) of such regulation and are not applicable to savings deposits as defined in section 1(e) of such regulation. "It is believed that the above information will enable you to answer the inquiry received from the member bank. If you have any further questions with regard to this matter or any 8imilar matter, it will be appreciated if you will communicate With the Federal Reserve Bank of Chicago, which will be glad to answer your inquiries." Approved unanimously. Letter to Mr. Stevens, Federal Reserve Agent at the Federal Reserve tatit Or Chicago, reading as follows: 4,1, "This refers to the voting permit application of 'Wisconsin . -shares Corporation', Milwaukee, Wisconsin, and your letter of December 13, 1955, stating that you and the Executive Committee l'rommend that a general al permit be granted, when and if the ap12cant shall have signed an agreement in form substantially 78 outlined by the Board in its letter of December by 1935 0(-9385), "In view of the problems relating to management and financial ondition of the applicant and other units in this group, the Board 2861 12/27/65 -8- "does not feel that it will have sufficient time to consider the case adequately for a general voting permit before the next annual meetings of shareholders of the subsidiary member banks, and, accordingly, hereby authorizes you to issue a limited permit to Wisconsin Bankshares Corporation, entitling it to vote the stock which it owns or controls of the following member banks: 'The First National Bank of Berlin', Berlin, Wisconsin 'The Union National Bank of Eau Claire', Eau Claire, Wisconsin 'First-Fond du Lac National Bank', Fond du Lac, Wisconsin 'The Pioneer National Bank of Ladysmith', Ladysmith, Wisconsin 'The First National Bank of Madison', Madison, Wisconsin 'Badger State Bank of Milwaukee', Milwaukee, Wisconsin 'First Wisconsin National Bank of Milwaukee', Milwaukee, Wisconsin 'The First National Bank of Monroe', Monroe, Wisconsin 'First Nationsl Bank in Oshkosh', Oshkosh, Wisconsin 'The First National Bank of Portage', Portage, Wisconsin 'The First National Bank of Rice Lake', Rice Lake, Wisconsin for the following purposes: To elect directors of such banks at the annual meetings Of shareholders, or at any adjournments thereof, at any time prior to April 1, 1936, and to act thereat upon such matters of a routine nature as are ordinarily acted uPon at the annual meetings of such banks. "The permit shall be issued only after you have received a fav orable recommendation from the Federal Reserve Agent at the !?deral Reserve Bank of Minneapolis regarding the issuance of ti_le permit with respect to the subsidiary member banks in that alstrict, and after you have received advice from the applicant, °I' other information satisfactory to you, showing: (a) that each of the applicant's subsidiary national banks has complied, in so far as in your judgment is practicable, with the recommendations or suggestions of the Comptroller of the Currency based upon the reports of exsmination of such bank made to him pursuant to authority conferred by law; (b) that each of the applicant's subsidiary State banking institutions has complied, in so far as in your judgment is practicables with the recommendations or suggestions of the appropriate State supervisory authorities based upon the reports of examination of such bank made to them pursuant to authority conferred by law; and (c) that the applicant has substantially performed any agreement or agreements heretofore executed by it as 2862 12/27/55 -9- "a condition to the issuance of a limited voting permit by the Board, or has used its best efforts to do SOS "Please have the limited voting permit authorized herein prepared by counsel for your bank in accordance with the form heretofore used. Upon the issuance of such permit please forward one copy thereof to the Federal Reserve Agent at the Federal Reserve Bank of Minneapolis and two copies to the Board for its records, together with a copy of any letter, telegram or memorandum submitted by the applicant or its subsidiary banks, or received from any other source, in response to any request which You deem necessary to make in connection with the above conditions , and advise the Board as to the facts which satisfied such conditions. "The Board has authorized the issuance of this limited voting permit on the basis of the facts contained in its files and in reports of examination and files made available by the Comptroller of the Currency and the Federal Deposit Insurance Corporation. If you are aware of any material facts or circumstances of which t!le Board has not been advised heretofore which raise any questlon as to the propriety of the issuance of the limited voting permit authorized herein, or if you feel that additional requirements should be made as a condition precedent to the issuance of !limited voting permit to the applicant, you are requested to turnish to the Board a full statement thereof and to withhold the .ssuance of the limited voting permit until you receive further instructions from the Board relative thereto." Approved unanimously. ttatit Letter to Mr. Stevens, Federal Reserve Agent at the Federal Reserve Of Chicago, reading as follows: "This refers to Mr. Young's letter dated November 7, 1955, ; 1 elating to the status of Chicago Joint Board, Amalgamated Cloth'Pg Workers of America, as a holding company affiliate under the rovisions of section 2(c) of the Banking Act of 1955, as amended Y section 501 of the Banking Act of 1965. "The Board has determined that such organization is not enga ged, directly or indirectly, as a business in holding the of, or managing or controlling, banks, banking associations, 2(4ngs banks, or trust companies, within the meaning of section "'of the Banking Act of 1935, as amended by section 301 of the 4 rtl:Ig Act of 1935, and, accordingly, such organization is not se,°;"Ling company affiliate for any purposes other than those of 23A of the Federal eserve Act. "Inclosed herewith is a letter to the organization advising t 2863 F11 12/27/35 =10- "it concerning the Board's action in this matter. If, for any reason, you believe that this matter should be reconsidered by the Board, please communicate with the Board at once. Otherwise, you are requested to transmit the inclosed letter to such organization. A copy of the letter is also inclosed for your files. "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." Approved unanimously, together with a letter to the Chicago Joint Board, Amalgamated Clothing Workers of America, Chicago, Illinois, reading as follows: "This refers to the application of your organization for a v°ting permit entitling certain trustees to vote the stock which Your organization owns or controls of Amalgamated Trust & SayBank, Chicago, Illinois, and to the general voting permit -issued to your organization on September 27, 1934. "The Board understands that Amalgamated Clothing gorkers Of America is an unincorporated labor union organized for the PUrpose of benefiting -the working classes by improving working (20!Iditi0ns, hours of labor, wages, etc. It is understood that l'illoago Joint Board, Amalgamated Clothing Workers of America, 4.8 a subordin ate organization chartered by Amalgamated Clothing Workers u of America; that said joint board was formed by the local 111°ns in Chicago and is authorized by the constitution of Amalmated Clothing Workers of America to transact all such business .0: 1 the local unions as may be provided in the by-laws of the Int board; that your organization has been and is operated nolelY for the same purposes as those stated above as the purl:1,7s of Amalgamated Clothing Workers of America; and that the con' es by your orgazat organization ion of Amalgamated Trust & Savings Bank, Stock of which the is held, directly or indirectly, by trustees for benefit of the members of your organization, is incidental to "e accomplish ment of such purposes. yon,"In view of the above facts, the Board has determined that organization is not engaged, directly or indirectly, as a ba,fless in holding the stock of, or managing or controlling, banks, th'eing associations, savings banks, or trust companies, within IA, meaning of section 2(c) of the Banking Act of 1933, as amended 0 ;setion 301 of the Banking Act of 1935, and, accordingly, your oj anlzation is not a holding company affiliate for any purposes ger than those of section 25A of the Federal Reserve Act. r ? 2864 12/27/35 "Of course, if the purposes for which your organization is Operated or the nature of its activities should at any time be substantially different from the description thereof contained in this letter, this matter should again be submitted to the Board for its determination. The Board reserves the right to make a further determination of this matter at any time on the basis of the then existing facts. "In view of the fact that your organization is no longer a holding company affiliate for any purposes other than those of section 25A of the Federal Reserve Act, the general voting permit heretofore issued to your organization is void and of no effect. If Your organization should later be determined by the Board to be a holding company affiliate subject to the provisions of law relating to voting permits, it would be necessary for your organization to obtain a new voting permit before it could lawfully vote the stock of a member bank." Letter to Mr. Curtiss, Federal Reserve Agent at the Federal Reserve 841* of Boston, reading as follows: "Reference is made to your letter of November 13, 1955, r!garding paragraph THIRD of the agreement executed under date of June 50, 1954, by the Industrial Trust Company, Providence, Rhode Island, in connection with the issuance of a limited per! 1 11, ..t to such company to vote the stock which it owns or controls Of The Mechanics National Bank of Providence, Providence, Rhode a It is understood that The Mechanics National Bank of Provihas outstanding 10,000 shares of common stock and 10,000 'rres of preferred stock; that at the last election of directors ,1 such bank 785 shares of common stock and 9,948 shares of preerred stock were voted; that Industrial Trust Company owns or 6,670 shares of the common stock of such bank; and that ttdustrial Trust Company did not vote any of its shares at the t'st election of directors of the bank. On the basis of the °rye facts, the Board is of the opinion that Industrial Trust N 1 1 1PanY is not now a holding company affiliate of The Mechacs Mechanics 2610nal Bank of Providence, and, accordingly, the agreements .executed by Industrial Trust Company in connection with the isof a limited voting permit to such company are no longer nding upon it. he Board is pleased to note that The Mechanics Natio71 Providence proposes to adopt a program of annual buildamortization charges which, if carried through to conclubulr , l, will entirely elimthate the carrying value of the bank toftding by 1978, and it is assumed that such a program will be 117pted despite the fact that the agreement above referred to is longer binding upon Industrial Trust Company." 2 Approved unanimously. 2865 12/27/35 -12- Telegram to Mr. Fletcher, Acting Federal Reserve Agent at the Federa". Reserve Bank of Cleveland, reading as follows: "This refers to copy of letter of December 17, 1935, addressed to you by C. R. Korb, Vice President of 'The Union Trust Company of Pittsburgh', Pittsburgh, Pennsylvania, requesting that paragraph lettered (D) be eliminated from the agreement prescribed In the Board's wire to you of December 9, 1935, authoriz ing the Issuance of a general voting permit to The Union Trust Company of Pittsburgh, copy of which letter was recently left at the offices of the Board by your Mr. H. B. Flinkers for consideration. The Paragraph (D) referred to was added to the prescribed agreement pursuant to suggestions of certain applicants for voting permits in order to make it entirely clear that in the event of disagreements between a holding company affiliate and any designated representative of the Board pertaining to certain matters the holding company affiliate should have a right to appeal to the Board. While it was not considered essential, it was incorporated for the protection of the holding company affiliates and was not intended to limit their rights or to give the Board any rights which it would not otherwis e have. The Board has no objection to the omission of such paragraph from the agreement and, accordingly, Ilale condition stated following the letter IC' in the Board's I'elegram of December 9, 1935, authorizing the issuance of a general v°tIolg permit to The Union Trust Company of Pittsburgh is hereby T2d1fied by adding thereto the words 'except that paragraph lettered ,‘,-)) of such agreement may be omitted if the applicant so desires'. riease advise The Union Trust Company of Pittsburgh accordingly." Approved unanimously. Letter to Mr. Ralph A. Bramhall, Treasurer, Union Safe Deposit and Company of Delaware , Portland, Maine, reading as follows: "This refers to your letter dated December 21, 1935, in .1„ich you request a permit to vote the stock which your corpora".Lon owns of The Portland National Bank, Portland, Maine. "You state that your corporat ion owns 182 shares of preterr ed class B stock and 15 shares of common stock of such bank, nd that it holds 529 shares of common stock represented by votirltrust certificates. You state that, under the terms of the r,_:Lng trust agreement, your corporation does not have the _4"grl to vote the 329 shares represen the voting trust by ted "ertaficates. l Standis understood that The Portland National Bank has out8,500 shares of common stock and 24,250 shares of pre'ed stock, and that at the last election of directors of such 2866 12/27/35 -13- "bank 7,051 shares of common stock and 25,576 shares of preferred stock were voted. On the basis of the above facts, it appears that your corporation is not a holding company affiliate of The Portland National Bank and, accordingly, no voting permit is necessary to enable your corporation to vote the stock which it owns or controls of such bank. "There is inclosed herewith a copy of the Board's Regulation P in which the term 'holding company affiliate' is defined. It will be noted from such definition that no voting permit is required to vote the stock of a nonmember bank even though the corporation or other organization in question owns all of the stock of such bank. Accordingly, no voting permit is necessary to vote the stock which your corporation owns or controls of the Rumford Falls Trust Company, which is a nonmember bank. "If you have any further question regarding this matter or anY similar matter, it will be appreciated if you will communicate With the Federal Reserve Bank of Boston, which will be glad to answer your inquiries." Approved unanimously. Letter to Mr. J. D. Thomas, Vice President, The First National Bank 41 Piedmont, Piedmont, West Virginia, reading as follows: "This refers to your letter of October 18, 1935, inclosing a ccPY of a trust agreement and inquiring whether the trustees under such agreement must obtain a voting permit in order to vote the stock which they hold of your bank. "Section 5144 of the Revised Statutes of the United States relating to , the voting of stock of national banks provides in Art as follows: 1* * * (4) shares controlled by any holding company affiliate of a national bank shall not be voted unless such holding company affiliate shall have first obtained a loting permit as hereinafter provided, which permit is in lorce at the time such shares are voted, but such holding company affiliate may, without obtaining such permit, vote in favor of placing the association in voluntary liquidation or taking any other action pertaining to the voluntary liquidation of such association.' "Section 2(c) of the Banking Act of 1933 defines the term holding company affiliate' as follows: I N The term "holding company affiliate" shall include any corporation, business trust, association, or Other similar organization -- 2867 12/27/35 -14- "1(1) Which owns or controls, directly or indirectly, either a majority of the shares of capital stock of a member bank or more than 50 per centum of the number of shares voted for the election of directors of any one bank at the preceding election, or controls in any manner the election of a majority of the directors of any one bank; or t(2) For the benefit of whose shareholders or members all or substantially all the capital stock of a member bank is held by trustees. 'Notwithstanding the foregoing, the term "holding company affiliate" shall not include (except for the purposes of section 23A of the Federal Reserve Act, as amended) any corporation all of the stock of which is owned by the United States, or any organization which is determined by the Board of Governors of the Federal Reserve System not to be engaged, directly or indirectly, as a business in holding the stock of, or managing or controlling, banks, banking associations, savings banks, or trust companies.' "It appears that the trust agreement in question was entered into in connection with the plan under which Davis National Bank was consolidated with your bank, and the depositors and creditors of such banks waived 25 per cent of their claims; that substantially all of the stock of your bank was conveyed to three trustees who are to collect the dividends thereon for the benefit of waiving depositors and creditors until such time as their claims are paid in full; that the trustees have the right to vote such stock and, subject to certain conditions, may sell the stock; and that certain undesirable assets of the two banks were conveyed to the trustees to be liquidated for the benefit of the waiving depositors and creditors. "It does not appear that, under the terms of the trust agree! ant, the trustees constitute an organization having the essen461.8.1 characteristics of a 'corporation, business trust, associaor other similar organization' which might be a holding .Company affiliate under the provisions of section 2(c) of the BankAct of 1956 quoted above. Accordingly, it is not necessary .821 L " such trustees to obtain a voting permit in order to vote the ' 4 (:)ck which they hold of your bank. For your information, there 0 4-s o_inclosed herewith a copy of the Board's Regulation PI 'Holding lnmPanY Affiliates - Voting Permits', revised effective January 1, 4-v36.71 Approved unanimously. Letter to Mr. Charles E. Henry, Cashier, The First National Bank, liEtir480 tas Texas, reading as follows: 2868 /) 12/27/55 -15- "Receipt is acknowledged of your letter of December 13, 1955, relating to the voting of 110 shares of the stock of your bank owned by The Norwood Investment Co. and requesting the Board's 'permission to get a Norwood investment proxy to vote this 110 shares in the approaching stockholders' election of the bank, under Section 601, Banking Act of 1965'. "Section 5144 of the Revised Statutes of the United States relating to the voting of stock of national banks provides in part as follows: I* * * (4) shares controlled by any holding company affiliate of a national bank shall not be voted unless such holding company affiliate shall have first obtained a voting permit as hereinafter provided, which permit is in force at the time such shares are voted, but such holding company affiliate may, nithout obtaining such permit, vote in favor of placing the association in voluntary liquidation or taking any other action pertaining to the voluntary liquidation of such association.' An organization which controls stock of a national bank need not, in order to vote such stock, obtain a voting permit unless it is a holding company affiliate of the bank. "Section 2(c) of the Banking Act of 1963 defines the term 'holding company affiliate' as follows: (c) The term 'holding company affiliate' shall include any corporation, business trust, association, or other similar organization (1) Which owns or controls, directly or indirectly, either a majority of the shares of capital stock of a member bank or more than 50 per centum of the number of shares voted for the election of directors of any one bank at the Preceding election, or controls in any manner the election of a majority of the directors of any one bank; or (2) For the benefit of whose shareholders or members all or substantially all the capital stock of a member bank is held by trustees. Notwithstanding the foregoing, the term 'holding company affiliate' shall not include (except for the purposes of of the Federal Reserve Act, as amended) any corporation all of the stock of which is owned by the United States, or any organization which is determined by the Board of Governors of the Federal Reserve System not to be engaged, directly or indirectly, as a business in holding the stock of, or managing or controlling, banks, banking associations, savings banks, or trust companies. 2( "Section 301 of the Banking Act of 1935 merely amended section ‘e) of the Banking Act of 1933 by adding thereto the last paragraph 2869 12/27/35 -16- "quoted above. There is no occasion for any action by the Board pursuant to that paragraph except with respect to an organization which would otherwise be a holding company affiliate and, While it is impossible to make a definite ruling in the absence Of further information, it appears quite improbable that The Norwood Investment Co. is a holding company affiliate of your bank under the provisions of the preceding paragraphs of section 2(c). "For your information there is inclosed herewith a copy of the Board's Regulation PI 'Holding Company Affiliates - Voting Permits', revised effective January 1, 1956. If, after consideration of the facts of your case in the light of such regulation and the statutory provisions set out in the appendix thereto, You have any further question concerning the matter, it is suggested that you communicate with the Federal Reserve Agent at the Federal Reserve Bank of Dallas. "In connection with the voting of the stock of your bank by Proxy, your attention is directed to the following provis ions Of section 5144 of the Revised Statutes of the United States: 'Shareholders may vote by proxies duly authorized in writing; but no officer, clerk, teller , or bookkeeper of such bank shall act as proxy; * * *.ln Approved unanimously. Letter to the Federal reserve agents at all Federal reserve banks, as follows: "The Board recently, upon the request of a State member excepted from the prohibitions of condition of membership ered 12, set out in the Board's letter of March 11, 1955, o„ 7656), mortgages covered by insurance under the provisions the National Housing Act. At the same time the Board granted !lmilar exceptions to all State member banks subject to such rndition of membership. In this connection, your attention is nvited to footnote 11 of the Board' Regulation s H0 revised effective January 1, 19560 in which it is provided, in the case ' 0'1, State banks admitted to membership after the effective date (8 regulation, that condition of membership numbered 5 usection (a) of section 6) does not apply to the se ! al of ti,tgages covered by insurance under the provisions of the Na' na Housing Act. bank 'Accordingly, you are requested to advise all State member 81,4 8 in your district which are subject to condition of member-1.P numbered 12, or any condition to the same general effect, bahir r mol 2870 12/27/35 -17- "that such condition does not apply to the sale of mortgages covered by insurance under the provisions of the National Housing Act." Approved unanimously. Letter to the governors of all Federal reserve banks, reeding as follows: "The Board in its letter, X-9051, of December 26, 1954, authorized the Federal Reserve banks to make a special contribution to the Retirement System for the purpose of increasing the annuity to which an employee 65 /ears of age or over may be entitled under the Rules and Regulations of the Retirement Sys! ,em to 430 a year for each year of service up to 16 years, and in its letter X-9254, of July 1, 1955, authorize d the payment of a dismissal wage to employees involuntarily separated from the service. "It is believed that a retirement allowance of i,450 a Year thus authorized in the case of an employee with 16 years of service or more is inadequate under circumstances frequently Preyailing and that a dismissal wage of up to 6 months' salary is insufficient in the case of employees with extended service. Accordingly, in cases of involuntary separatio n of employees fl'cm the service through no fault of their own where a supplementary retirement allowance or a dismissal wage is thought to be Justified, your bank is authorized, (a) to pay in its discretion a dismissal wage of % of terminal salary for each year of service up to 5 ln the case of any employee involuntarily separated from the service and in the case of an employee with at least 10 years of service and under age 55 to pay in addition 3% of terminal salary for each year of service in excess of five. Such payment may be a cash payment in a lump sum, or in not to exceed 6 monthly payments, in the case Of employees under age 65 with less than 10 years of service. In all other cases payment shall be made to the Retirement System for the purpose of providing, together with the employee's own contributions, an annuity beginning at or after age 55, except that not to exceed an amount equal to 2 months' salary may be paid to the employee as a ?ash Payment at the discretion of the Federal Reserve Bank _4 the employee is under age 55 and therefore not eligible bO receive an immediate annuity. In applying the above, he part of any salary in excess of 0_2,000 shall be disregarded and no supplemental payment shall be made in such P 2871 12/27/35 -18- "amount as to increase the retirement allowance at age 65, or its equivalent, to more than 50 percent of termi nal salary, or to give an employee under age 55 an annuity of greater actuarial value than he might be granted if he were 55 years of age, and (b) in the case of an employee involuntarily separated after attaining age 55 to make in its discretion in lieu of the additional contributions authorized in paragraph (a) above a special contribution to the Retirement System sufficient to increase the regular retirement allowance to which the employee is entitled if 65 years of age or more, or to Which he would be entitled at age 65 if under such age, to a retirement allowance on a straight life basis equal to ;r?4.50 for each month of service up to 15 years, or to the actuarial equivalent thereof under any option offered by the Retirement System that the employee may selec t. Such retirement allowance in the case of an employee under age 65 shall be deferred to age 65 or be converted into an immediate annuity of equal actuarial value, and be reduced by 5% for each year the employee may lack of having attained age 60. "In computing service for the purpose of determining the retirement allowance that may be granted at the rate of $4.50 a month for treh year of service up to 15 years, all service to date of retirebent may be counted, even though a portion of such service may not ,e creditable service as defined in Section 1 of the Rules and ReguJ-ations of the Retirement Syste m. "Auth ority conta ined Board's letters X-9051 of December the in 26 1934 and X-9254 of July 1, 1955, to make speci al contributions 1 t0'tu Retirement System for the purpose of providing supplementary Ztlrement allowances for employees retir ed at or after age 65 rla to pay dismissal wages to employees involuntarily separated ' rom the servi ce is hereby rescinded." Approved unanimously, together with a letter to Governor Norris of the Federal Reserve Bank of Philadelphia, reading as follows: "This refers to your letters of November 9 and December 5 with oy respect to the retirement of employees of your bank who are er 65 years of age. to "In the case of 8 of the 17 employees that yourban proposes or ire it appears that you wish to provide annuities in excess h ya authorized by the Rules and Regulations of the Retirelsetmassupp lemented by the additional contributions which BO ' authorized the Federal Reserve banks to make in its Te:i 2872 12/27/55 -19- "letter X-9051 of December 26, 1954, and its letter X-9251 of July 1, 1955. "With respect to your request that the bank be authorized to make additional payments direct to these 8 employees, the Board asked Mr. Rounds, Chairman of the Executive Committee of the Retirement System to inquire of Mr. Buck, Actuary, whether this would be a practical procedure. Mr. Buck feels that it would be a mistake for the Federal Reserve banks to make contributions direct to retired employees, particularly under the circumstances set forth in your letter, which contemplates changing the amounts paid direct to the retired employees upon a change in their status with respect to dependents, outside income, etc. The Board concurs in this view as expressed by Mr. Buck and is of the opinion that all payments made to retired employees should be made through the Retirement System under the conditions provided by the Rules and Regulations of the Retirement System. "A careful review has been made of the retirement allowances Provided by the Rules and Regulations of the Retirement System, suPPlemented by the additional contributions which the Board has authorized the banks to make for the purpose of increasing these retirement allowances, in the light of the facts brought out in Your letters and in the study prepared by the bank with respect the minimum amounts necessary to provide a health and decency b° uudget for one, two, three and more persons living in PhiladelPhia, a copy of which was inclosed with Mr. Sinclair's letter of November 19, 1935, to Mr. Smead. . "The Board is of the opinion that the retirement allowances provided by the Rules and Regulations of the Retirement System as augmented by authorizations heretofore granted by the Board ! t ! insufficient in the case of some of the lower paid employees has approved a plan whereby the Boards of Directors of the Federal Reserve banks are authorized, in their discretion, to ! m ke such additional contributions to the Retirement System as ZY be necessary to increase the regular retirement allowance which an employee 65 years of age or more is entitled to a rer•ement allowance on a straight life basis equal to t4.50 for rch month of service up to 15 years. This will make it possible ' 11.°r the bank to retire an employee who has attaine age d 65 with rZ?tirement allowance of 10 a year in any case where the regular .:karement allowance would be less than that amount. This is l'1:4ewhat under the maximum amount proposed in your letters of ember 9 and December 3, but under the circumstances represents t seems to be fair and reasonable." I Z Telegram to Mr. Strater, Deputy Governor of the Federal Reserve or Cleveland, reading as follows: 2873 12/27/35 -20- "Reference is made to your letter of December 20. Amount to be used as basis for determining 2% payment is total amount of funds received from Secretary of Treasury as of December 31, 1935. Amount charged surplus (Section 15b) at the end of 1954 should not be restored from 1965 earnings and such earnings should be distributed without any reference to amounts previously charged to surplus (Section 13b). Reserve for losses on industrial advances Should be deducted from earnings on industrial advances prior to determination of portion of such earnings to be treated as earnings on funds received from Secretary of Treasury. If bank desires at end of any year to provide reserve for losses on industrial advances in excess of earnings on such advances, suggest that 'Reserves for losses not elsewhere provided fort be increased sufficiently for purpose but that all losses sustained on industrial advances be handled in accordance with provisions of Board's letter, B-1120, of December 16, 1965. While no formal ruling has been made it is understood that 2 percent payments to Secretary of Treasury are not to be regarded as return of part of payments received from Secretary but as annual charges, if earned, on total Payments received from Secretary of Treasury." Approved unanimously. Telegram to Mr. Walden, Deputy Governor of the Federal Reserve Bank °f Richmond, reading as follows: , "In accordance with provisions of paragraph (a) of Section of revised Regulation DI Board approves recommendation conin your December 24 wire that the weekly reserve computation 't on period for reserve city banks in your district located out, , 84de the Federal Reserve bank and branch cities, namely, in "ashircton, D. C., end on Friday instead of Thursday as at present, such change to be effective with the report period ending Friday, January 3, 1936." Approved unanimously. Memorandum dated December 23, 1955, from Mr. Vest, Assistant General e°1111sely stating that Mr. Logan, General Counsel of the Federal Reserve Bank " II York, had called him on the telephone and stated that Governor 1141.1,40n desired to have a copy of a memorandum written by him when he was : 4 sistallt Coumel to the Federal Reserve Board regarding the right of the "kba to restrict the rediscount by Federal reserve banks of acceptances 2874 12/27/35 -21- based upon the export of munitions of war; that Mr. Logan had advised that the recent investigation of certain documents among the records of the 4cleral Reserve Bank of New York by representatives of the Senate Munitions C°11tattee had indicated that it would be desirable to have their records olathis matter as complete as possible; and that the memorandum desired by Governor Harrison was not requested by the representatives of the Committee, bilt that Governor Harrison desired to have a copy of it. The memorandum also stated that he knew of no reason why a copy of the memorandum should llot be sent as requested although it bears on its face the word "ConfidenThe memorandum also submitted a draft of a letter to Mr. Logan inelosing a copy of Mr. Harrison's memorandum. Mr. Morrill had noted on Mr. Vest's memorandum that Mr. Harrison's memorandum was included in the list q doc uments of which copies had been requested of the Board by the Senate C°41mittee, Approved unanimously. lattltit of Letter to Mr. Curtiss, Federal Reserve Agent at the Federal Reserve Boston, reading as follows: "In his letter of March 14, 1935, in response to the reest contained in the Board's telegram of March 5, 1935 (Trans. 1,22s), Mr. McRae submitted a of 'Active Clayton Act Permits' tn.Your district, and in that list he included the permit issued 4- 411". Louis Curtis, Jr., on December 6, 1923, authorizing him serve at the same time as a member of the firm of private bankers of to,rown Brothers & Company, boston, Massachusetts, and as a direcRo of the Merchants National Bank, also of Boston, Massachusetts. gaZvery it is not clear that this permit should have been reas still effective in view of the fact that the firm of 41rete bankers to which it referred had merged with another firm r 2875 12/27/35 -22- "so as to form a different organization with a different name, Which would indicate that there had been such a material change in the organization of the firm that the relationship should not be regarded as the same as that contemplated by the Board in granting its permission. "As you know, if the permit was not effective on the date of the enactment of the Banking Act of 1955, Mr. Curtis may not continue to be a director of the national bank and a partner of the firm until February 1, 1959 if, as appears to be the case, such relationships would be prohibited by the other provisions Of section 8 of the Clayton Act. "However, before the Board reaches a decision regarding the matter, it will be appreciated if you will give further consideration to the question in the light of such information as may be available to you, and furnish the Board with your comments. A 20PY of this letter has been sent to the Federal Reserve Agent at New York for his information." Approved unanimously, together with a similar letter to Mr. Case, Federal Reserve Agent at the Federal Reserve Bank of New York. Thereupon the meeting adjourned. Secretary. Chairman.
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