The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
329 A meeting of the Federal Reserve Board was held in Washington on Friday, February 1, 1935, at 3:30 p. m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Governor, Thomas, Vice Governor Hamlin Miller James Szymczak Mr. Morrill, Secretary. Governor Eccles referred to a telegram received from Mr. Burgess, Sec retarY of the Federal Open Market Committee, under date of January 26, 19353 copies of which had been handed to the appointed members of the tcard 2 stating that a telegram was being sent on that date to each member of tu_ Federal Open Market Committee requesting advice of his approval or disaPPr°val of the action taken by the executive committee of the Federal (IP" Market Committee at its meeting in Washington on January 25, 1935, in votiu g to request the members of the Federal Open Market Committee, subhet to the approval of the Federal Reserve Board, to authorize the executi e committee, Pending a meeting of the full Committee in the near future, to mflu --A.0 purchases or sales or shifts between maturities in the system ace°Unt up to a total of $250,000,000 in addition to the authorization to rnake• shifts between maturities up to 4100,000,000 voted at the meeting °I. the Federal Open Market Committee held on December 17, 1934; it being 11/iclex„stood that the additional authority is desired primarily to place the sY8tem in position to use its influence toward preventing agy posle dis turbances in the market pending a meeting of the full Committee. 7 i . ' 1 Eccles stated that Mr. Burgess had sent a second telegram on 28 advisini7 that all of the members of the Federal Open Market 411 Littee had approved the action of the executive committee, and requestIlcivice of the Board's action on the proposals referred to in the reso- 330 2/1/35 -2- lution of the executive committee. During the ensuing discussion, Mr. Miller inquired as to the attitude of the Treasury concerning the authority requested by the executive committee and Governor Eccles read from the tentative draft °f the minutes of the meeting of the executive committee held on Janus-17 25, the paragraphs which preceded the record of the action of the Committee in adopting its resolution. At the conclusion of the discussion, the authorization of the executive committee of the Federal Open Market Committee, pending a meeting of the full committee on February 5, to make purchases or sales or shifts between maturities in the System account in accordance with the resolution adopted at the meeting of the executive committee on January 25, 1935, was approved and the Secretary was requested to advise the Chairman of the Federal Open Market Committee accordingly. There was also presented the following telegram to Deputy Govertor c'ate of the Federal Reserve Bank of New York: , "Your telegram. Board approves action your directors in h°rizing officers Federal Reserve Dank of New York to open of maintain account on books of bank in name of National Bank thataragua and to carry out operations in this market for bank along substantially same general lines and subject to c_ substantially same terms and conditions as for other foreign ntral banks having accounts with you. It is noted that action Jofur directors restricts relations to be established to opening to Tls-way account. Please forward to Board copy of your letter wh4'ank of Nicaragua setting forth terms and conditions upon ' to ch account with that institution will be opened and maintained, 41:ether w ith copy of bank's acceptance of such conditions. Board mo° aPProves action your directors in authorizing officers to : el loan to National Bank of Nicaragua up to 300,000 for not to : ad four months secured by gold bars valued at .516,000 held utd be 4 earmark by you for national bank; interest on such loan to Eteo arged at your discount rate. Participation in loan and new -tint by other Federal reserve banks is approved and they are n 4 331 2/1/35 _3_ "being advised accordingly." Approved, and the Secretary was requested to send the telegram without circulating it among the members of the Board for initial. The Board then acted upon the following matters: Memorandum dated January 30, 1935, approved by five members of the Board, from Mr. Morrill, Secretary, recommending approval of the el ment of Mrs. Louise Thomason as a typist in the Secretary's office, With salary at the rate of $1,320 per annum, effective as of the date 0 11P fl which she enters upon the performance of her duties after having 13488ea a satisfactory physical examination. Approved. Telegram to Mr. Howard Kellogg, President, Spencer Kellogg & 8°11e, Inc., Buffalo, New York, reading as follows: "Federal Reserve Board has appointed you director of Buffalo branch of Federal Reserve Bank of New York for un!:.cPired portion of term ending December 31, 1937. Please wire acceptance collect." Approved. Letter to Mr. O'Connor, Comptroller of the Currency, reading 48 t°11ows: Re "In accordance with your recommendation, the Federal ateer7e Board approves a reduction in the common capital " of 'The First National Bank of Bloomingdale', Bloomin a gwile, New Jersey, from $100,000 to $50,000, pursuant to us : cIian which provides that the released capital shall be n eliminating substandard assets, such eliminations to llue all estimated losses and depreciation in lower grade see ' of , 111,ntiee, all as set forth in your supplemental memorandum -;ZrY 24, 1935. Irlie approval sunersedes the Board's approval dated l 332 -4"January 8, 1934, of a previous plan of capital reduction. "In reviewing the report of examination as of September 6, 1934, it was noted that your examiner severely criticized the bank's management. The files indicate, however, that the need for strengthening the active management has been brought to the attention of the bank's directors by your office, and it is assumed that some corrective action will be taken as soon as it is feasible to do so." Approved. Letter to Mr. O'Connor, Comptroller of the Currency, reading as ?allows: "In accordance with your recommendation, the Federal Reserve Board approves a reduction in the comron capital stock af 'The West Englewood National Bank', West Englewood, New Jersey, from $50,000 to t25,000, pursuant to a plan which Provides that the released capital shall be used in eliminat1,11g unsatisfactory assets, such eliminations to include all depreciation in lower grade securit ies, all as set forth in Your memorandum of January 19, 1935. "It is noted that the bank's capital was increased on Janun 7, 1935, through the sale of $75,000 of preferred 1." — 4 to the Reconstruction Finance Corporation and others, ,nd that the proposed plan of recapitalization does not contemplate a further increase in the bank's capital at the Present time." Approved. oliows Letter to Mr. O'Connor, Comptroller of the Currency, reading as 19, "Receipt is acknowledged of your letter of January 25, c„° ) with reference to the proposed reduction in common e:Pltal stock of the 'Albany Exchange National Bank', Albany, D °rgie, which was approved by the Federal Reserve Board on oirmber 18, 1934, pursuant to a plan which provided among th:Lthings for the sale of 35O,OOO of preferred stock to ' 4 econstruction Finance Corporation and/or others. tio "Iau now advise that the Reconstruction Finance Corporaill 4 has agreed to purchase only !!125,000 of preferred stock or,711,ead af t50,000 as originally contemplated, and that In 'r not to delay the adjustment of capital, your office will 333 -52111" tl approve the proposed reduction of $50,000 in common stock with an increase of only $75,000 of preferred stock but will make every effort to induce the bank to issue A25,000 of Class 113 'preferred stock to be sold locally. "In accordance with your recommendation, the Board amends its previous approval to provide for the sale of $25,000 of preferred stock to the Reconstruction Finance Corporation, with he understanding that the other provisions of the plan as originally approved remain unchanged. The Board is in agreement, however, with the views of your office, and the Assistant Federal Reserve Agent at Atlanta, as stated in your letter, that the sale of additional capital stock locally is desirable." Approved. Letter to Mr. O'Connor, Comptroller of the Currency, reading as roilow8, "In accordance with your recommendation, the Federal Reserve BoaA approves a reduction in the common capital stock of 'The First National Bank of Julesbure, Julesburg, Colorado, from 0,000 to $25,0001 pursuant to a plan which provides that the tank's capital shall be increased by $25,000 of preferred stock be sold to the Reconstruction Finance Corporation, and that the released capital shall be applied to the elimination of losses and other substandard assets, all as set forth in your m emorandum of January 21, 1955." V Approved. Letter to Mr. O'Connor, Comptroller of the Currency, reading as t°11ows. "In accordance with your recommendation, the Federal ReBoard approves a reduction in the common capital stock o'The First National Bank of Memphis', Memphis, Texas, from th °,000 to 40,000, pursuant to a plan which provides that ore bank's capital shall be increased by the sale of $25,000 ancreferred stock to the Reconstruction Finance Corporation, balit.Ihat the released capital, together with $10,000 of the s surplus account, shall be used to eliminate or reduce afl'esirable assets which are to remain the property of the bank, "set forth in your letter of January 26, 1935." g Approved. Letter to Mr. Sargent, Assistant Federal Reserve Agent at the 334 1 2/1/35 -6- Federal Reserve Bank of San Francisco, reading as follows: "Reference is made to Mr. Clerk's letter dated November 2, 1934, with regard to the question whether Capital Company and California Lands, Inc., are affiliates of Bank of America National Trust and Savings Association within the meaning of section 23A of the Federal Reserve Act. Inclosed with Mr. Clerk's letter was a memorandum upon this question dated November 1, 1934, from Mr. Agnew to Mr. Clerk. "It is understood that Transamerica Corporation owns all of the stock of Transamerica Bank Holding Comnany which in turn owns all of the stock of Bank of America National Trust and Savings Association. Transamerica Corporation also owns all the stock of Transamerica General Holding Company which in turn :1211 the stock of Capital Company and California "The term 'affiliate' as used in section 23A of the Federal Reserve Act is defined in section 2(h) of the Banking Act of 1953. It is understood from Mr. Agnew's memorandum that the only question involved is whether the two corporaII-one are affiliates of the bank within the meaning of sec;T11.0v2 ( 7sV(2) of the Banking Act of 1955, which provides as "Sec. 2. As used in this Act and in any provision of law amended by this Act— *** Except where otherwise specifically provided, rmlbe) the "affiliate" shall include any corporation, business trust, association, or other similar organization-*** , "(2) Of which control is held, directly or indirectthrough stock ownership or in any other manner, by the s hareholders of a member bank who own or control ther a majority of the shares of such bank or more than ,'y per centum of the number of shares voted for the election of directors of such bank at the preceding election, or by trustees for the benefit of the shareholders of any such baniq l 04 a telegram dated June 28, 1954, the Board stated that the basis cal,: of the above facts it did not appear that either tan Tal Company or California Lands, Inc. was an affiliate of Ar„ of America National Trust and Savings Association. Mr. tCw, however, states that he cannot escape the conclusion au, b the two corporations are affiliates of the bank, and has sefeeted that the question be resubmitted to the Federal Re' ve Board for further consideration. After reconsideration a 335 2/1/35 -7- "of this question and after a study of Mr. Agnew's memorandum, the Board is still of the opinion that the two corporations are not affiliates of the bank. "It has been noted that on page 4 of Mr. Agnew's memorandum, the following statement is made: 'The only shareholder of the Bank of America N. T. Se S. A. is Transamerica Corporation, and the strengt h of this statement is not altered by reason of the fact that Transamerica Bank Holding Company has been interpo sed between Transamerica Corporation and the bank'. The Federal Reserve Board is unable to agree with the correctness of the above statement. In the ()Pinion of the Board, Transamerica Corpora tion is not a shareof Bank of America National Trust and Savings Association but is a shareholder of a shareholder of such bank. In View of this fact, control of the two corporations is not held by the 'shareholders' of a member bank who own or Coneither a majority of the shares of such bank or more than 50 per centum of the number of shares voted for the election of directors of such bank at the preceding election. In his memorandum Mr. Agnew states that the construction adopted by the Board opens the door to ready evasion of !he clear intent of the Act. If, in any case, a corporation erS interposed between the shareholders of a member bank and , . suoh bank for the purpose of evading the law regarding member ;11.nks and their affiliates, the Federal Reserve Board might a different conclusion, and in some circumstances, might be Re o Justified in disregarding the intervening corporate entity. berver, in the present case it appears that the relationship t.'ween the bank and the corporations has existed for some 11_1e and there is no indication that the relationship was ca for the purpose of evading the provisions of section °r of any other applicable statute." ,,1 Approved. Le ttersdated January 31, 1955, approved by five members of the to a pplicants for permits under the Clayton Act advising of apPlc'c''4111 of their applications as follows: Mr. A. a di E. Bowers, for permission to serve at the same time as : lector of The First National Bank of Medford, Medford, Okipo as a director and officer of the Caldwell State Ba;i, Caldwell, Kansas, and as a director of the First National 14, 11 46Wichita, Wichita, Kansas, for the period ending January 336 2/1/ss -8- Mr. H. K. Lindsley, for permission to serve at the same time as a director of the First National Bank in Wichita, Wichita, Kansas, as a director of The Chandler National Bank of Lyons, Lyons, Kansas, and as a director of the Chase State Bank, Chase, Kansas, for the period ending January 14, 1936. Approved, together with a letter also dated January 31, 1935, and approved by five members of the Board, to Mr. McAdams, Assistant Federal Reserve Agent at the Federal Reserve Bank of Kansas City, reading as follows: "There are inclosed for your files copies of the Clayton Act permits issued to Mr. A. E. Bowers and Mr. H. K. Lindsley. The permits have been issued so as to expire at the close of Jsmuary. 14, 1956, pursuant to the policy stated in the Board's letter of January 9, 1935 (X-9082). "Mr. Dowers and Mr. Lindsley are both directors of The Wheeler Kelly Hagny Trust Company, Wichita, Kansas, and consideration has been given to the question whether section 52 of the Banking Act of 1933 is applicable to that trust company. "On the basis of the available information, it appears that the trust company is not at this time engaged primarily in the business of purchasing, selling, or negotiating securities within the meaning of section 32, and that therefore the Provisions of that section are not applicable to it. "However, Mr. McClure stated in his letter of July 15, 1934 that the trust company was formerly engaged actively in originating and distributing so-called 'mortgage bond issues', and) although it appears to be transacting none of this busiZess at this time, he thought it entirely probable that the might in the future again engage actively in be°mPanY a_ 411:t.41siness. c. "The information which has been submitted is not suffie11 to show definitely whether or not these mortgage bonds tci securities' within the meaning of section 32 or whether toeY are merely ordinary mortgage notes of the kind referred ro in the Board's letter of April 16, 1934 (X-7866). Therewhr,/ although it is not necessary at this time to decide ae:;her or not they are securities within the meaning of or mi°n 3P, you may think it desirable to call the attention com'r. Bowers and Mr. Lindsley to the fact that, if the trust ticrP_anY should again engage actively in the sale and distribuwhe2,0f these bonds, it might become necessary to determine 32.rer they were 'securities' within the meaning of section X Or Letters to applicants for permits under the Clayton Act advisa PPr°val of their applications as follows: 337 2/1/35 -9- Mr. Howard Adams, for permission to serve at the same time as a director of The National Marine Bank of Baltimore, Baltimore, Maryland, and as a director of the Colonial Trust Company of Baltimore, Baltimore, Nary-land, for the period ending January 14, 1936. W- J. Enos, for permission to serve at the same time as a director of The Mountain National Bank of Clifton Forge, Clifon Forge, Virginia, and as a director of the Industrial Loan U°P1P2rlY, Clifton Forge, Virginia, for the neriod ending January 14, 1936. Miss Edith I. Browning, for permission to serve at the same time as an employee of The Central National Bank of Greencastle, r eencastle, Indiana, and as an employee of The Central Trust Company Greencastle, Indiana, for the period ending January 14, 196. !1.- P. J. Reu, for permission to serve at the same time as a ;?director and officer of the First National Bank of Carthage, Carthage Illinois, and as a director of the State Bank of Burnside: Burnside, Illinois, for the period ending January 14 1936, Mr..J•S. ;directorBridwell, for permission to serve at the same time as of The First National Bank of Wichita Falls, Wichita j 1 18, Texas, and as a director of the State Trust Company, .4cIllta Falls, Texas, for the period ending January 14, 1936. Mr. R . A. , E. -J Huff, for permission to serve at the same time as a ector and officer of The First National Bank of Wichita Falls, chita Falls, Texas, and as a director and officer of the State 11.2t Company, Wichita Falls, Texas, for the period ending Jan14, 1936. ;I Mr. c • McCutchen, for permission to see serve at the same time as a.r4;44-rector and officer of The First National Bank of Wichita 0%181 Wichita Falls, Texas, as a director of the State Trust theltIlYP Wichita Falls, Texas, and as a director and officer of ja First State Bank, Megargel, Texas, for the period ending fluarY 14, 1936. Approved. Thereupon the meeting adjourned. APprove Secretary. Governor.
@FedFRASER