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4 3t4,c? A meeting of the Federal Reserve Board Was held in Washington olaWednesday, December 6, 1933, at 12:00 noon. PRESENT: Mr. Er. Mr. Mr. Nr. Mr. Mr. Black, Governor Hamlin Miller James Thomas Szymczak O'Connor Merrill, Secretary Carpenter, Assistant Secretary Bethea, Assistant Secretary Martin, Assistant to the Governor Paulger, Chief of the Division of Examinations Er. Wyatt, G-eneral Counsel Mr. aingfield, Assistant Counsel Mr. Mr. Mr. Mr. Mr. Governor Black referred to the action taken at the meeting of the B °ard on November 28, 1933, with regard to the proposed plans for the reor gtuuzation of the Equitable Trust Company and the Guarantee TrUst cam , member banks in Atlantic CiLy, New Jersey, and stated that repr esentatives of the two institutions had called on him and recruested a hearinr, before the Board on the matter. In this connection, Lir. 140 rrill stated that the letter to Mr. Austin, Federal Reserve Agent esft2 Ett ?hiladelPhia, prepared by him in accordance with the action taken 1)Y th e -"-rd at its meeting on November 28 had not yet been approved bY a„ -LI of the members of the Board. 1-..fter discussion, the Governor was requested to advise the representatives of the two institutions that the Board uill be glad to grant them a hearing ?n Tuesday, December 12, 1933, at 10:00 a. m., and it was understood that the letter to Mr. Austin, prepared by Mr. Morrill, would be held pending the outcome of the hearing. Governor Black stated that late yesterday afternoon Mr. Albert 294 12/6/33 -24. 3Prague of Chicago called on the telephone and informed him that 4. George A. Ranney had advised the committee of the board of directors Of the Continental Illinois National Bank and Trust Company, Chicago, illi4ois, which had tendered to Mr. Ranney appointment as chairman of the b°4rd of directors of the national bank, that information had ree.elled him that the Reconstruction Finance Corporation was not favor41310 to hi appointment to the position and that therefore any further "latorenoe by Mr. Ranney with the committee in regard to the matter w°111c1 be useless. Mr. Sprague also advised, Governor Black stated, that the natiomoa bank was losing between )4,000,000 and 05,000,000 a day in de41 Penits. (Figures as to deposits of the bank received and read by Gov- clack during the meeting shaved that the bank had lost a net of 000,000 of deposits from October 25 to December 5, 1933, both dates 1.elUsive; that on December 1, 2, and 3, the bank's deposits decreased 05,000,000, U,0 00,000, and 03,000,000, respectively; and that on Decembel' 5 its deposits increased 08,000,000.) Governor Black said that, fol4/411g his conversation with Mr. Sprague, he had endeavored to get in t°11ch with Mr. Leaven, president of the bank, in order to ascertain from the exact situation with regard to the bank; that Mr. Leavell was not Chicago, and he had been mrible to reach him; but that as soon as defi11'40 illformation is received from Mr. Leavell he will confer further With the oLher members of the Board as to what action should be taken Illthe event a serious situation develops as regards the bank. Governor 131e eaid that he was bringing the loss in deposits to the attention 295 12/6/33 -3... f the Board for the purpose of informing the Board as to the situation t this time confronting the bank and not in relation to the proposed la Ppointment of Mr. Ranney. Governor Black then presented the following draft of reply to S Prague's letter of Eovember 21, 1933, prepared in accordance with the action taken at the meeting of the Board on December 4, 1933: 4. "Upon my return from a holiday trip to Atlanta I presented to Z.Iir Board your letter of November 21st, in which you advised that -I Board of Directors of the Continental Illinois National Bank 011C1Trust Company had formally tendered the chairmanship of that tnk to Ni'. George A. Ranney, of Chicago, and in which you state at Ranney had asked you to ascertain whether 'his selection "metsZ with the full approval of the Federal Reserve Board or if 'lleY have any person in mind who would be more acceptable to them.' '1e assume that both 'a-. Ranney and your directors have made th18 inquiry because of the opinion expressed by the Board that e difficulties and problems of the Continental Illinois National k clearly indicate in its judgment the necessity of an improvement in the management of that bank. ar "The Board appreciates the great confidence you and Ni'. Ranney ,...2?. eh°11ing in our interest and judgment in seeking our opinion wi respect to the position of Chairman of your Board and the urtesy that has been shown us in the inquiry made. th 1i response to the last part of your inquiry, to wit: whether th !"ard has any person in mind who would be more acceptable to ar'm, I beg to advise that Li'. Ranney, your directors and yourself c_e_ doubtless aware that there is nothing in the law governing the Ry e:duct of your bank which requires the approval by the Federal °rye Board of men who are selected to manage the institution. may add that the Board has no desire to assume for itself or to ill.t ate to itself any such right. Ylhile the Board is profoundly ea_erested in the good manageme nt of the banks of the country, and of those that have membership in the Federal Reserve ra (ood ' ma it feels keenly that the responsibility of securing such b nagement rests primarily with the Board of Directors of the !i that it is their responsibility and a responsibility which etta1 I30a2 8 the duty of securing such management. The Federal Reserve tha:L' 'would be reluctant to do anything or to express any opinion ,might in any degree weaken that sense of responsibility. eaY this thus frankly and fully in order that both you and Ranney this may understand why the Board could not consistently with to — Point of view, and therefore should not, undertake to indicate 'le directors of any bank whom they should appoint in their r z 296 12/6/33 -4Imanagament or to express any preference in reference to the persorTel involved in the management. . On the other hand the Board considers it entirely proper in sac .1 of any bank to express, upon request of its directors, an the fitness of a proposed officer, and I may now /1811'81:3state with reference to the first part of your inquiry, to tc) 'whether Mr. Ranney's selection meets with the full apr°e.oyal of the Federal Reserve Board,' that those members of the Board Who know Mr. Ranney persona 1, lly or by reputation have the ;LLShest regard both for his character and his ability and feel that he is fully qualified for the position offered, and the Board is glad to give this expression in response to your specific request for an opinion." 7 Li'. Jams moved that the letter be sent to Ylr. Sprague Immediately. Carried, Messrs. Hamlin, Szymczak and O'Connor voting Mr. Hamlin stated that he had voted "no" for the reason that he felt that the Board should not interfere either directly or indirectly with the selection of the management of the bank, which he felt it would do by sending the letter. Szymczak stated that as the Board's original letter suggesting that the management of the national bank be strengthened was sent to the Comptroller of the Currency and a copy 141-'s presented by Governor Black to la.. Simpson, Deputy ChairIllan of the Federal Reserve Bank of Chicago and by the latter !Gad to the executive connittee of the national bank, he felt that the Board should remain in the background until the Reconstruction Finance Corporation and the Comptroller of the Cur:ley had expressed an opinion as to the proposed management of! , 1 0 bank, when, in response to any inquiry from the directo rs reccel .btrk, the Board could properly express an opinion with „ any individual, and that for that reason he had voted no on Mr. James' motion. 0, O'Connor stated that he had voted "no" for the reason a ressed by Iii'. hamlin and because he did not know Mr. Ranney Q had not had an opportu nity to make any investigation with regard to him. (Secretary's note: On Thursday morning, December 7, Szymczak communicated with Lhr. Leavell, President of the Continental Illinois Bank and Trust Company, by telephone, who advised that the bank's deposits had been decreasing slightly over a considerable period of time; that 297 12/6/33 in the last six or eight weeks the bank's public deposits had decreased approximately $25,000,000, which resulted in most of the decrease during the recent period; that $12,000,000 of the decrease in public deposits was in the bank's war loan account, and the balance in city and county funds; that it was expected that deposits of public funds would be increased in the near future, and that, while there had been a seepage of deposits for months past, there was nothing particularly alarming in recent days.) Governor Black stated that Mr. Frank A. Thompson of counsel or the Mercantile Commerce Bank and Trust Company of St. Louis, called O hiza in November with regard to the holding by that bank of the capi- t41 stock of the Mercantile Commerce National Bank in St. Louis, and tuader date of November 15, 1933, addressed a letter to him requesting 4 he Al.• "'lug before the Board on the matter sometime after November 30. G°Iierner Black also stated that, because of certain statements contained ill** Thompson's letter in connection with the discussion between Mr. NTA. Young, former Governor of the Board, and Mr. John Lonsdale, then -want of the Mercantile Commerce Bank and Trust Company, with regard t° th8 sellt a esta blishmant of the Mercantile Commerce National Bank, he had °°13Y of the letter to Governor Yoring at Boston, with the request that he advise exactly what occurred between him and Mr. Lonsdale and that G "ernor Young's reply dated December 4, 1933, had just been reee.tved. " LI James stated that Mr. 17. L. Hemingway, President of the Commerce Bank and Trust Company, had called on him this and at a conference at which Messrs. Morrill, Wyatt and Wing- r0 the also present, the question of the holding of the stock of 44tional bank by the Mereantile Commerce Bank and Trust Company and the iklarde s action with regard thereto were discussed in detail; that 298 12/6/33 it aPpeared from the discussion that there had been a considerable misunder standing on the part of the officers and directors of the bank regarding the matter; and that Jr. Hemingway had requested that, in order that he may be in a position to review the matter accurately with his board of directors at its meeting on December 8, 1933, he be given 411 o pportunity to see the portion of the minutes of the meeting of the • dA 1 Fe —1 ' 8-4 Reserve Board held on August 12, 1931, containing statements bY 'Governor Young and Lir. Lonsdale with regard to their discussion in 4111 '1930, of the proposed establishment of the Mercantile Commerce ihitionai Bank. After discussion, 1,:r. James was authorized to show to *. Hemingway the portion of the minutes of the meeting of the Board on August 12, 3931, referred to by him. Governor Black was also authorized to advise Li.. Tho y 111Pson, of counsel for the Mercantile Commerce Bank and rust Company, that if, after the matter is discussed at ' t4le meeting of the directors of the bank on December 8, a 12:earing on the matter is desired, the Board will be glad ' 0 grant such a hearing on Tuesday, December 12, 1933. Mr. James read a letter received by him under date of Eovamber 27 '1933, from ir. Paul Dillard inquiring whether his service at the eaulle time as a class C director of the Federal Reservo Bank of St. LQ111.0, and as President of Dillard and Coffin Company -which is primarilY engaged in the handling of cotton on consignment, the financing of e°tton in process of being marketed, the making of production loans, " 4 the operation of farm land owned by the corporation, and which at titles makes 'pans upon the security of stocks and bonds and at the Ireaellt time has two such loans outstanding, comes within the provisions °t (3Qti°11 8A of the Clayton Artitrust Act. .14r. James said that he had ' 199 12/6/33 _7- taken the matter up with Mr. Wyatt, and he read a draft of reply to to D4„ 411a1dt s letter prepared by Kr. Wyatt, stating that there seems be 110 escape from the conclusion that the statute will apply to the CO of hr. Dillard in the capacities stated if Dillard and Coffin C°111Pair 1, 1934 Inakes loans secured by stock or bond collateral after January 4.11. James also stated that if the provisions of Section 8A are t° have such a broad application, it would render ineligible for nervi "as directors of Federal reserve banks and their branches a number Of Persons now serving in such capacities. lie then moved that the Congress that Section 8A of amended as soon as possible to cases comparable to that Board recommend to the Clayton Act be so as not to apply of Lir. Dillard. A discussion ensued, at the conclusion of which rr. Jn yn --es' motion was put by the chair and carried, and Counsel requested to prepare, for the consideration of the 44)ard, drafts of letters to the Chairmen of the Banking and Currency Comnittees of the Senate and House of Representatives, in accordance therewith. It was also suggested that further consideration be given to the proposed reply to hr. Dillard's letter in the light of the discussion. Lr. Lorrill then referred to the action taken at the meeting of the Loard on Lovamber 15, 1933, in authorizing the sending to all Fed170 bankr, or copies of the memorandum prepared by the Board's icz of kc0 ,perations under date of October 23, 1933, with regard vo branch baalkin ond he stated that hr. Austin, Federal Reserve Agent .11i14delphia, called him on the telephone yesterday and advised that 4rtill Parties in Pennsylvania are contemplating the drafting of logic4t41-1 relatinc to branch banking in that State, and that he would like 1"t41( 12/6/33 -0- t° furnish them with a copy of the memorandum. Er. Yorrill also stated that he had advised Er. Austin that he would present his request to the Federal Reserve Board, and he called attention to the fact that while article had been prepared, on the basis of the memorandum, for pubhieatieri in the Federal Reserve Bulletin, the Legal Division had not had a , ePportunity to check it and it would not be printed in the forth°111-trig . issue of the Bulletin. Lr. James moved that the Secretary be requested to advise Mr. Austin that as the report vas in its nature euPplementary to the information contained in the report Of the Committee on Branch, Group and Chain Banking which had not been published by the Board, the memorandum itself had not been published by the Board, and it had been !ent to the agent and the governor of the bank solely for uheir information, it should be so treated. Carried. lir. Liner then moved that the article prepared on the .asis of the information contained in the memorandum referred to for publication in the Federal Reserve Bulletin be not published. Carried. There was then presented a telegram received by Governor Black lirlder date of December 4, 1933, from Mr. Newton, Federal Reserve Agent at the Federal Reserve Bank of San Francisco, stating that while he hoped and e xpected to be able to return to his office at an earlier (late, he requested, (1) leave of absence for ninety days, and, (2) a thElt, on account of conditions, the Board confirm his appointment of 14rI ax A. Day, deputy governor of the bank, as acting assistant 'etcleral reserve agent during his absence in order that the heavy proseltre 0f8. be promptly handled. 12/6/33 After a brief discussion, during which reference was made to the policy of the Board of requiring acting assistant Federal reserve agents to be entirely independent of the operating department of the bank and responsible solely to the Federal reserve agent, Mr. Newton's telegram vaS referred to the Committee on District No. 12 for recommendation to the Board. The minutes of the meetings of the Federal Reserve Board held 0411Ovember 11 and 15, 1933, were approved. The Board then considered and acted upon the following matters: Telegrams dated December 6, 1933, from Mr. Austin, Chairman of the p ederal Reserve Bank of Philadelphia, and Mr. Tod, Chairman of the Federal Reserve Bank of St. Louis, both advising that, at meetings Of the btlards of directors today, no changes were made in the banks' exi84-4 g schedules of rates of discount and purchase. Without objection, noted with approval. oThe by E Letter dated December 4, 1933, to the board of directors of ridgeport-City Trust Company", Bridgeport, Connecticut, approved v6 members of the Board, stating that, subject to the conditions 14lecer• 11-1-4 -al the letter, the Board approves the institution's applicatiot.f or membership in the Federal Reserve System and for the number of sharea of stock of the Federal Reserve Lank of New York to which the inStittit °II 'will be entitled upon the basis of its capital and surplus as °I' the aate upon Ithich its membership becomes effective. Approved. Letter dated December 4, 1933, to the board of directors of the Itl,:onte reY County Trust & Savings Bank", Salinas, California, apProved b Y five members of the Board, stvting that, subject to the 302 12/6/33 -10"nditions prescribed in the letter, the Board approves the bank's LIPPlication for membership in the Federal Reserve System and for st(3ek in the Federal Reserve Bank of San Francisco, effective if and vthen the Comptroller of the Currency has approved the establishment and o peration of the bank's branches at Carmel, Castroville and Monter. -Y) Ca lifornia, all of which were established subsequent to February 25, 1927. Approved, together with a letter dated December 4, 1933, to lir. O'Connor, Comptroller of the Currency, also aPProved by five members of the Board, requesting that he advise the Board if he approves of the establishment and operation of the branches of the Monterey Trust ComPany established subsequent to February 25, 1927, in the event the bank accomplishes its admission to membership. Letters dated December 5, 1933, approved by six members of the Board, to the boards of directors of the following named State banking 1.111.1ti0n5, each letter stating that, subject to the conditions prein the letter, the Board approves the institution's applicatic% for rl etbership in the Federal Reserve System and for the number Of Qlares of Federal reserve bank stock to which the institution will be entitled upon the capital and surplus as of the date Illvitich its membership effective: plicant Bank . . '"uslna.ng "ri. New Trust Company", Ossining, York. a.tizens State Bank 6; Trust Company", Goose Creek, Texas. Federal Reserve Bank New York Dallas Approved. Telegram dated December 5, 1933, to Lir. Stevens, Federal Reserve 12/6/33 -11- it€ellt at Chicago, approved by six members of the Board, referring to the aPPlication of the "Iowa State Savings Bank of Fairfield", Fairfield T —1 -Lova, for permission to withdraw imediately from membership in the Federal Reserve System, and stating that the Board waives the usual l'equirenent of six months' notice of intention to withdraw and that, r, aceordi--E-LY, upon surrender of the Federal reserve bank stock issued t° the ovia State Savings Bank of Fairfield, the Federal Reserve Bank Of chic ae° is authorized to cancel such stock and make a refund there- 0/1. Approved. Telegram dated December 5, 1933, to Er. Williams, Federal Recorir.. 4Cent at Cleveland, prepared in accordance with the action taken 11; the Illeeting on December 4, 1933, and approved by six members of the 3011rd, readinz as follows: „."Referring Board's letter November 24, 1933, regarding proposed --,ger of ginia ( Dollar Savings and Trust Company of Wheeling, West Virthat ';4 ri0n1ember bank) into Wheeling Bank and Trust Company of Y (neither bank) under charter of latter institution, Board upola ac, your request over telephone has reconsidered its objection to arttsition by member bwnk of corporate stocks from Dollar Savings ellxsj ust Company through proposed merger and in view of all liowe ances involved, withdraws its objection to such acquisition. proj el :' as indicated by one of standard conditions of membership bejakn rj- ed by Board, which prohibits purchase of stock by member funci;' 'card feels that stocks are not suitable for investment of by °f commercial banking institutions, and that stocks of acquired aer bank from Dollar Savings and Trust Company as a result Prop as it• sed merger referred to above should be disposed of as soon probabis feasible, and it is understood that you feel that this can effect4. ! ) te accomplished within period of one year after merger is Approved. Letter dated December 4, 1933, to las. Hoxton, Federal Reserve 304 12/6/33 lent 4t -12Richmond, approved by five members of the Board, reading as follows t "The Board has received a letter dated November 14, 1933, from hr. T. N. Spencer, Executive Vice President of the 'Citizens Bank and Trust Company', Concord, North Carolina, a copy of which was sent to 1,1r. Fry, requesting the Board to waive condition numbered tll'enty-tmo which reads as follows: 'Within six months from the date of its admission to membership such bank shall require that the offices of the Building and Loan Association now located in the banking quarters of such bank be removed therefrom.' "On Eovember 16, 1933, a member of the Board's Division of Exarinations discussed this letter with Lr. Fry and requested that 4 re commendation in the matter be forwarded by the Executive Cornoff the Reserve Bank. On November 17, 1933, the Citizens olpak and Trust Company became a member of the System, the board c _ directors having adopted a resolution on the previous day ac'''qing the conditions of membership. t In telephone conversation lovember 26, 1933, la.. Fry stated iat no recommendation regarding the request for a modification c conditions of members hip had been forwarded by the Lxecutive traittee of the Reserve Bank inasmuch as it was believed that 811. action of the directors in accepting the conditions of member2110",R superseded the previou request of an officer of the bank for s se'lfication of one of the conditions. However, it will be obnerved that the conditi on which the bank wished to have modified nct be complied with until six months after the bank has been ,urttjted to membership. rec,niess the Executive Committee of the Reserve Bank wishes to the ' lamend that the Board grant the request for a modification of an,cndition, it is suggest in order there may be no misthat ed, oen ,,en .,4 Q-Lon, that you advise the bank that it is the understandthat the th: ad forth in conditions have been accepted without modification as the Board's letter dated November 10, 1933, and that be : r ffice of the Building and Loan Association will accordingly comp moved from the banking quarters of the Citizens Bank and Trust tillny before may 17, 1934. adontn, this connection, it has been noted that the resolution etc4 bY the board of directors of the bank on November 16, 1933, b- _ring the conditions of membership, and which has been approved ilneel for the Federal Reserve Bank, reads in part as follows: ezity y,the Board of Directors of the Citizens Bank tEl=t Concord, N. C., accept the conditions of memterthiP in the Federal Reserve System as set forth in their let0111 of 13, 1933.' the coerlBoard,s letter approving the application and setting forth 11-iti°11s of membership was dated November 10, 1933. In order 4 305 12/6/33 17 "that the record be correct, it is suggested that you request the directors of the Citizens Bank and Trust Company to amend the esolution so as to make proper reference to the letter containing the conditions of membership aid that you forward to the board a certified copy of such amendment." Approved. Letter dated December 5, 1933, to Jr. O'Connor, Comptroller Or tho Currency, approved by six members of the Board, reading as fol- 'In accordance with the recommendation of Acting Comptroller Axalt, the Federal Reserve Board approves a reduction in the common capital stock of 'The Bendersville National Bank', Benders'v1110, Pennsylv :'A0,000 pursuant .:25,000, to ania, from to a plan Of rehabilitation which provides that the bank's capital shall ;!) increased by the sale at par of 25,000 par value preferred It is understood from the file accompanying IJr. Awalt's ;eraorandum of 1:ovember 21, 1933, that the funds released by the ° uction in common capital stock are to be used either to ininatee ase the bank's surplus in the amount of 025,000, or to eliman equal amount of securities depreciation." r Approved. the Letter dated December 4, 1933, to Lir. O'Connor, Comptroller of eurrencY, approved by six members of the Board, reading as follows: Bo un October 10, 1933, you were advised that the Federal Reserve tiard had deferred action upon the application of llhe First Nare°118-1 Bank of Bradenton', Bradenton, Florida, for permission to ulloe its capital under a plan which involved the acquisit ion of ; tkma jority of its stock by the First National Company, until it : 17 1..in a Position to determine whether it could properly grant a „11 ,g Permit to such company. coni Ihe application of the First National Company for a holding ta_PanY affiliate voting permit has since been received and given le consideration by the Board. Therefore, in accordance with red Your recommendation, the Federal Reserve Board approves a 1 rtion in the common capital stock of the First National Bank Of ; alit'pradenton, Bradenton, Florida, from $150,000 to $50,000 pursucan a plan of rehabilitation which provides that the bank's 141. 0-1. shall be increase d by the sale at par of $150,000 par Par, preferred stock and $50,000 par value new common stock at end that the funds released by the reduction in common capital 306 12/6/33 -14- 11 stock shall be used to eliminate sub-standard assets and depreciation in the amount of approximately ,:;82,000 and to increase the surplus fund in the amount of16,000, all as set forth in Your memorandum dated September 13, 1933. It is understood that provision has been or will be made in the articles of association of the bank that no preferred stock ?hail be called or purchased for retirement unless the then unimPaired capital, surplus, and undivided profits of the bank, nd the retirement funds provided for the retirement of such preerred stock (after giving effect to the issuan ce of any stock Issued to provide funds for such retirement) exceed 261,000 by amount at least equal to the sum necessary to effect such reement, or unless such retirement shall have been approved by 1° Comptroller of the Currency." r Approved. Letter dated December 4, 1933, to the "First National Compan y f Bradenton", Bradenton, Florid a, approved by five members of the Boarrl Lt, reading as follows: 19,"The Board has considered your application dated October 23, /1_", for a voting permit under author ity of Section 5144 of the trised Statut es, as amended, entitling you to vote stock of • or caT rIEN3Editli o;T ou!i.ank of Bradenton', Bradenton, Florida, owned ti The Board approves your application as filed upon the condidr that prior to the issue of the voting permit there shall be I:l) e d to the Federal Reserve Agent at Atlanta three original arts of an agreement in the form attached hereto marked. ci(; ,T3it 1 A, duly executed on your behalf by John T. Campbell, Presi! and C. A. Brooks, Secretary, the officers designated in the lution of authorization constituting Exhibit C of your application. eS re'_7) serv eoPy of this letter has been forwarded to the Federal Repent at Atlanta with instructions to notify the Board by to hTra*ra as soon as the foregoing condition has been complied with toy; 13.1 Znisfaction. Upon such notification the Board will issue voting permit applied for." Approved. Letter the dated December 4, 1933, to .1.1r. O'Connor, Comptroller of Cul‘r°110 Y, aoproved by five menbers of the Board, reading as follows: 11 A,_ '31 accordance with the recommendation of Acting Comptroller the Federa l Reserve Board approves a reduction in the common 307 12/6/33 -15- 0aPital stock of 'The First National Bank of Dodgeville', Dodgeville, Wisconsin, from 0100,000 to e50,000, pursuant to a Plan of rehabilitation which provides that the bank's capital shall be increased by the sale at par of v50,000 par value preferred stock to the Reconstruction Finance Corporation, and that the funds released by the reduction in common capital stock, toether with $25,000 of the surplus fund, shall be used to elimlnate substandard assets in the amount of $75,000, all as set forth in Idr. Awalt's memorandum of November 21, 1933." Approved. Letter dated December 4, 1933, to Lir. O'Connor, Comptroller Of the C urrency, approved by five members of the Board, reading as fclloviz; -Ln accordance with the recommendation of Acting Comptroller tTalt, the Federal Reserve Board approves a reduction in the cornstock of 'The American National Bank of Sidney', j dncY, Eebraska, from $50,000 to $25,000, subject to the condirset forth in 1,1r. Awalt's memorandum of November 16, 1933, 41cla provide that the bank's capital shall be increased by the st , 0 at Par of 00,000 par value preferred stock to the Reconb.:41!,c,tion Finance Corporation; that the 025,000 of funds released IvIj s"c reduction in common capital stock shall be used, together aPproximately ; ?2,000 from the bank's present undivided profan14 0 in eliminating substandard assets and depreciation in the maZit of approximately 27,000; and that the shareholders shall 4; .1.8- voluntary cash contribution of ,10,000 to be used in estab14C a surplus account of a corresponding amount." Approved. Letter dated December 4, 1933, to Lr. O'Connor, Comptroller ' ill rsneY, approved by five members of the Board, reading as 11-r_ ac B0444 cordance with your recommendation, the Federal Reserve aPProvos a capital stock of 'The mm reduction in the coon 0 “ rst L nal Bank of Concordia', Concordia, Kansas, from 0.00 banic: to ;50,000, pursuant to a plan which provides ti?.at the par v13,aPital c shall be increased by the sale at par of .50,000 Preferred stock to the Reconstruction Finance Corporait 111.d t01 that the funds released by the reduction in common capshall be used to eliminate substandard assets in the 308 • L/ 1 4 /33 -16- 'amount of 50,000, all as set forth in your memorandum of November 21, 1933." Approved. Letter dated December 4, 1933, to Mr. O'Connor, Comptroller of the cr," ‘4 .elleY, approved by five members of the Board, reading as fol- A "In accordance with the recommendation of Acting Comptroller the Federal Reserve Board approves a reduction in the corncapital stock of 'The First National Bank ia Ord', Ord, !lebraska, from %;60,000 to 430,000, pursuant to a plan of rehabili,aticn which provides that the bank's capital shall be increased 0 ° 1 Y the sale at par of ,)30,000 par value preferred stock to the Rei?nstructien Finance Corporation, and that the funds released by r eduction in common capital stock shall be used to eliminate Zerre spending amount of substandard assets and depreciation as 1.!rmined by your office, all as set forth in 1.1.r. Await's memo1 of November 18, 1933." L Approved. the Letter dated December 5, 1933, to Er. O'Connor, Comptroller of CurreneY, approved by six members of the Board, reading as follows: dat ' eeeipt is acknowledged of Acting Comptroller Awalt's letter IT° ed cvember 24, 1933, with reference to the Board's letter of eav linber 18, 1933 approving a proposed reduction in the common Pttal stock of The First National Bank of Omaha, Omaha, Nebraska. Awalt's letter quotes Section 8 of Article Fifth of the by .-t.;,30 amendments to the Articles of Association as submitted to je Aecenstruction Finance Corporation and requests advice as raell'j.ether the provisions of this section will meet the require'she Board's condition numbered 5 as set forth in its letter 3 °f the lir 18, 1933. to col,r1ProPosed amendment to the Articles of Association appears boardTP'Y substantially with the above mentioned condition in the beirl,a letter and may be regarded as meeting its requirements, it 11104 und erstood, of course, that any reduction in the bank's comeaPital stock mill require the approval of the Board." Approved. 153111°rl&nduni dated 001November 27, 1933, from gr. Wyatt, General suLasi, re eclillnendinz that the rulings attached to the memorandum be 12/6/33 -1 7.. Published in the law department of the Federal Reserve Bulletin for 1)°ceraber, 1933, and stating that all of the rulings are based upon rIllings heretofore made by the Board and sent to the Federal reserve 4°Ilt8 at all Federal reserve banks in mimeograph form, except the one entitled " Requests for Interpretations of Federal Reserve Act and 44rdt8 Regulations", which does not contain an interpretation of the 44but Pertains to the proper procedure in requesting such interpretati01 18. Approved. Reply on December 5, 1933, approved by six members of the 80tIrd, tO a letter dated November 14 from Mr. Walsh, Federal Reserve 4°1-It at D 11 a--,as; the reply reading as follows: "Receipt is acknowledged of your letter of 1:ovember 14, 1933, „ 1191110h you inclosed a copy of an opinion of your counsel in ref,l'e°t to the questions raised in a letter dated November 2, 1933, 4T1 (4 the President of the First National Bank of San Angelo, anrs, relative to the First Mortgage Loan Company of San Angelo, coPy of your letter of November 14, 1933, to the president of re national bank in reply to his letter of November 2. cola In general, the Board concurs in the conclusions of your , 1,,,e1 in respect to the questions presented. However, the Bon1 d°es not feel that it has sufficient information to enable our..°t.determine whether the First Mortgage Loan Company is a sef,e8 company within the purview of Section 20 of the Banking Act3" l th. ' (3 1933, or that it can undertake to pass on the question at 13 time, "The Of se question whether an affiliate comes within the provisions 11 20 does not depend upon its charter powers or the purPose illesz for vilich it was organized, but upon the nature of the busdexit 'in -which it is actually engaged. The letter from the Presithe First National Bank does not state definitely the kir gaged°r blasiness in which the First Mortgage Loan Company is enncl, in the absence of extraneous information, the Board d.008 tn that the facts are sufficient to justify a definite Zl rrionf.e question whether the loan company is a securities Y °f the kind referred to in Section 20." Approved. 310 12/6/33 -18Reply on December 4, 1933, approved by five members of the 44rd, to a letter dated November 17 from Er. Curtiss, Federal Reserve Aellt at Boston; the reply reading as follows; "aeference is made to your letter of November 17, 1933, your Inquiry 10. 38, regarding the applicability of Section 8A of the Clayton Act to the service of Mr. Philip Spalding as a member of the firm of Estabrook 6,1 Co., Boston, Massachusetts, as a director of The First National Bank of Boston, Boston, Massachusetts, and ! . 14 a director and officer of The First National Bank of Easton, aorth Easton, Massachusetts. YOU inquire, first, whether the margin accounts of Estabrook Co, should be classed as loans secured by stock or bond collatral within the meaning of Section 8A. However, in view of the fact that Mr. Spalding has already received a permit under the r°v1 0n5 of si 1? the Clayton Act covering his service of these three Institutions, and in view of the fact that permits heretofore is!Iled continue in force until revoked, as stated in the Board's , letter of September 16, 1933, X-7591, it will not be necessary for c Spalding to obtain a new permit under the Clayton Act °7:ring the services described in his present permit. 2 You inquire also whether the permit heretofore issued to Er. aTdinC Pursuant to the provisions of the Clayton Act will also vi "erize him to serve the institutions covered by that permit in eT1 of the enactment of Section 32 of the Banking Act of 1933. „ Permit heretofore issued to Ix. Spalding was issued pura u 'The virL to the provision of Section 8 of the Clayton Act which proin substance that the prohibitions contained in that Act 411 : -1.1 not be applicable if permit has been issued by the Board; coWhich authorizes the Board to issue such permits under certain to ttiti°ns. The Board's permit, therefore, was issued pursuant e authority granted by the Clayton Act and covered services of affectedii by the Clayton Act. Subsequently, however, Section 32 diffe :Banking Act of 1933 was enacted. That section relates to atld i;ent relationships than those dealt with in the Clayton Act, „ Contains a provision authorizin:, the Board to issue permits covelpermltng the relationships to which it is applicable. Accordingly, relati s issued under the authority granted by that section cover the _ -°11shiDs affected by that section; and permits issued under by authority granted by the Clayton Act cover services affected sued Provisions of the Clayton Act. Accordingly, permits isUnder the authority of the Clayton Act with respect to relawhich 1Ps to which that Act is applicable do not cover services 4re now prohibited by Section 32 of the Banking Act of 19332 a/id 4, perra Z will, therefore, be necessary for Mr. Spalding to obtain a Pursuant to the provisions of Section 32." Approved. 12/6/33 -19Reply on December 5, 1933, approved by six members of the 8°ard, to a letter dated October 13 from Er. Harris Creech, President of the Ply Cleveland Clearing House Association, Cleveland, Ohio; the re- reading as follows: "This refers to your letter of October 13, 1933, requesting a ruling of the Federal Reserve Board on the question whether that ! 1 r°v1sion of section 19 of the Federal Reserve Act, as amended by the Banking Act of 1933, which provides that, 'No member bank Shall, directly or indirectly by any device whatsoever, pay any 1.nterest on any deposit which is payable on demand', prevents )1li0 banks from continuing their present practice of absorbing °41d Paying the Ohio two mill tax upon deposits as an operating xpense of each bank. t "A ruling upon this question has been delayed by the fact )hatit bore a very close relation to another question pending 1;,?fere the Board which was of general importance and some diflcultY and which required extensive investigation and numerous eonferences before it could be disposed of; and it was felt that both questions should be considered together. b "The Board has heretofore ruled that the absorption by a memsr bank of taxes levied by the State of Kentucky upon deposits it" Paid by such bank 'for and on behalf, and as the agent', of r4 8 depositors would constitute an indirect payment of interest c;;;'llin the meaning of section 19 of the Federal Reserve Act, as since the amount of the tax paid by such member bank rePresented ilee' 4ented a fixed percentage of the depositors' balances. It was theTary for the Board to reconsider that ruling in the light of the lurtef filed by your counsel; because the practical effect of be s-entucky regarding taxes on bank deposits seems to ubstantially the same as that of the Ohio statutes on this subjeet. _ Of .0,1-1°n a careful reconsideration of this subject, in the light Aasc7e brief filed by Counsel for the Cleveland Clearing House thateiation, the Federal Reserve Board .has reached the conclusion djreeabsorption of such taxes should not be regarded as an the t Payment of interest within the moaning of section 19 of 4 eer!'4era1 Reserve Act, as amended; because such taxes represent the percentage of the funds on deposit on a single day of deposit, Year and have no relation either to the average amount on 'Which for any given period of time or to the length of time for (141d oti -e bank has the use of the money. These considerayions sorptiler considerations pointed out by your counsel make the abskleh IT1 of such taxes distinguishable from the absorption of to a f,ems as exchange and collection charges in an amount equal Ixed percentage of a deposit balance, which has been held ;t 12/6/33 -20- "by the Federal Reserve Board to be an indirect payment of interest contrary to section 19 of the Federal Reserve Act. "The Federal Reserve Board is of the opinion, therefore, that the absorption by member banks in Ohio of the Ohio two mill tax Upon deposits as an operating expense of each bank does not, in lbself and in the absence of special factors in particular cases might indicate the contrary, constitute a payment of interest by such banks and is not inconsistent with that provision of ectlon 19 of the Federal Reserve Act which forbids any member bank, directly or indirectly by any device whatsoever, to pay any interest on any deposit which is payable on demand. The Board is of the opinion that the amount of taxes so absorbed need not be e taken into consideration in determining whether member banks a PaYing interest on time deposits at a rate in excess of the prescribed by the Federal Reserve Board, pursuant to that wlat proon of section 19 of the Federal Reserve Act which requires the Federal Reserve Board from time to time to limit by reguation the rate of interest which may be paid by member banks en ;btime deposits. Kentucky and This ruling is also applicable to member banks in Other states having similar laws regarding the taxation of bank ePe3its on an ad valorem basis." Approved. Letter dated December 5, 1933, to hr. Curtiss, Federal Reserve 40/1t at Boston, approved by six members of the Board, reading as fol4Nkt "T1-the 1' ,. 4 u* re ls inclosed a copy of a report of a special study of n n.,,l_seal Agency Operations of the Federal Reserve Bank of Boston. 'e " Board desires that the detailed information contained in of S report Le brought to the attention of the Board of Directors rrial ur bank, and that the Board be advised of any action which 11,! 1 taken in connection therewith. etrae 'e Board will also appreciate advice as to whether the rocfunc iati°ns of its examiner (pages 27-29) in regard to auditing the ions with a view to maintaining a more complete control over tientassets, accounts and functions of the Fiscal k-ency Departhave been adopted." Lettra, ?ed Approved. RePly on December 4, 1933, approved by five members of the a letter dated November 18 from Yr. Geery, Governor of the eral p -eaerve 'ank of Li eapolis; the reply reading as follows: 313 12/6/33 -21- "Referring to your letter of November 18, you are correct in Your understanding that the Bureau of Engraving and Printing does not.carry surety bonds to cover losses of the character referred !°.inmy letter of November 15. While the Board was milling in ' Ills instance to suggest that the Federal Reserve banks involved absorb the loss on the twelve !;100 denomination Federal Reserve notes of your banks presented for redemption with counterfeit Seals and serial numbers, it does not admit of any liability in :onnection with these notes and its action in this case does not ,et a precedent to cover any similar situations that may arise in the future." Approved. Letter dated December 5, 1933, approved by six members of the °It to - an applicant for a permit under the Clayton Act, advising of EIPProval of the application as follows: 1 ; George C. Hollis, for permission to serve at the same time as .ector and officer of The First National Bank, Eagle Pass, Texas, and N as director of the Banco Mercantil de Monterrey, Monterrey, * L " Mexico. Approved. There were then presented the following applications for ori:: or additional stock, or for the surrender of stock, of Federal "I've banks: g0-..1on for ORIGINAL Stock: . A pi liZZ 1. Shares of Monticello, Monticello, 36 36 180 180 15 15 1?ations for ADDITIONAL Stock: Ilationarlank Lewiston, (Increase in Maine capital through issue of P,referred stock' pcsuitly offset by ,tecrsase in surpiu ib,istriet ,: itlutne aank 6: \Increase in Trust Co., Muscatine. Iona surplus) _ 314 12/6/33 -22- 4 lieations for ADDITIONAL Stock: (Continued) District No. 9 Ilt;ITE-State Bank of Chatfield, Chatfield, 140245:jinesota (Increase in surplus) .cliants State Bank, Freeman, South Dakota (Increase in surplus) Shares 4.1•111.4••••••••••01. 2 2 Total 4 199 210 210 1. for of Stock: rct1_ Firs-7 Na tional-B, Bank-, Garfield, New Jersey oint; liquidate through conservator) (pd 3. :,ew Berlin, Pennsylvania (Insolvent) "cicville National Bank, Peckville, Pennsylvania (In solvent) t District No. 7. National Bank, Marion, Indiana (Voluntary liquidation, succeeded by p• t4rien National lrs Bank of Larion, Indiana) National Bank in Ashton, Iowa c. (Insolvent) ltiizens National Bank, Belle Plaine, Iowa 01 ‘Beirlg l fleY natioiquidated through conservator) nal Ba, Bank, Hartford, CO (Insolvent) Michgandr Grove N(ttional Bank, Cedar Grove, Indiana pir(14solvent) et ( liational Bank, Wakarusa, Indiana ,Insolvent) j'rtt national Bank, Le Ears, Iowa ans olvent) 39 210 249 1481'ion 210 15 45 27 19 20 90 Total 426 885 Approved. Thereupon the meeting adjourned. A-S-12 Secretary. APProved, 41, 6 7 46/ Governor.
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