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198 A meeting of the Board of Governors of the Federal Reserve 8Ystem wa$ held in Washington on Saturday, February 3, 1940, at 10:00 PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chainman (latter part of meeting) Ransom, Vice Chairman Szymc7ak McKee Davis Draper Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, _Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Thurston, Special Assistant to the Chairman Mr. Wyatt, General Counsel Mr. Paulger, Chief of the Division of Examinations Mr. Cagle, Assistant Chief of the Division of Examinations Mr. Ire Clerk, First Vice President of the Federal Reserve Bank of San Francisco Mr. Morrill stated that, upon the invitation of Under Secretary / 1 41, Chliillnan Eccles and he went to the Treasury yesterday to attend c°11ference with respect to the Bank of America National Trust & lqllgs A ssocietion at which there were also in attendance Mr. Bell, Mr. belato, C°1111)tro11er of the Currency, Mr. Upham, Deputy Comptroller of the Mr. FolEer, Chief National Bank Examiner, 11r. Crowley, 0411:ma 11 of the Federal Deposit Insurance Corporation, Mr. Foley, General 004441 the Treasury Department (1/kho came in late), two assistant tc'r the Treasury Department, Messrs. John K. Ottley and Tom K. &Oa 4 '"eJ-81 Advisers to the Secretary of the Treasury, Dean Garrison Me.8 Greenbaum, Cohen (who cane in late), and Seymour, Special 199 2/3/40 -2C°1111sel to the Secretary of the Treasury, and Mr. Jenks, Assistant Gete CO for the Securities and ExchanFe Commission. Mr. Morrill said that Mr. Bell opened the meeting by distributl 1R ' co Pies of a memorand entitled "Comptroller's Requirements with l'esPect imdnk of America N.T.&S.A-" which he stated they desired to With the representatives of the Board for the purpose of ascertnininc? - whether they had any suggestions or comments to make. The Ztillorand • read as follows: .2LPILE.g .,. The capital must be increased immediately bY not less than '-'35,000,000. If the capital is secured by the issuance of preferred stock, the Preferred stock must not be retired without a coin.dental increase in common stock of at least 5,000,000, thus achieving en ultimate common c,Pital of at least75,000,000. 111-Z11.22.1t1s. Dividends on common stock shall not be Paid out of presently existing undivided profits or reserves. /uture earnings, exclusive of bond Pl'°fits, to the extent necessary must first he used to charge off future losses and to establish reserves ispe required by the Comptroller of the Currency. All (Ind Profits must be Placed in a special reserve account to take care of Possible depreciation in the 113. ond account. g=Zalall-Pg Practices. Accounting practices must ilsclose the true nature of all transactions. Loss items must not be disposed of to other parties excePt under bona fide sales agreements. All practices ! ending unduly to favor Transamerica, its affiliated subsidiary companies or allied interests, must Le di scontinued. Losses set UD by the examiners in the last --,nort of examination must be charged off immediately e reasonable rate of depreciation must be taken the future on all banking: houses, furniture and fixtures. V 200 2/3/40 Illegally held bank stock. The Bank must dispose of all stock of the National City Bank which it acquired in violation of Section 5136 of the Revised Statutes. LLTZ.9__Ilat.s_. The orderly reduction of the Transamerica and A. 0. Stewart large lines must be continued by the Bank at 6 rate at least equal to that made during the pest year. Teal estate concentration. There must be a definite accelerated progress of liquidation of real estate holdinFs, especially future and former banking Premises held by Merchants National Realty Corporaand the contracts with Capital Company and California Lands, Inc. All real estate acquired or carried in violation of Section 5137 of the Revised Statutes must be disposed of as soon as possible. The licuidation of real estate loans which do not conform to section 24 of the Federal Reserve Act must be accelerated. Self-Insurance Reserve. The Bank must take immediate steps to obtain the balance of its selfinsurance reserve fund from Transamerica General Corporation." t117 Mr. tht Morrill stated further that the memorandum was discussed, ChEdrmat Eccles referred to the absence of Mr. McKee and stated It would be necessary for the Board and its staff to go over the rtattortina 3 and that it was agreed that the Board's representatives eturn to the Treasury on the afternoon of r:ednesday, February 7, Nrth °Ile'40111d ) 1 eci„, erconference. It was understood In.. Morrill said that no make reference on the outside to the existence of a possible 13z1-or to the meeting on February 7 and that although Mr. Cushing, °01insel for the Bank of America, had an appointment to confer tl, -,e Com ptroller of the Currency on February 6, the possibility 201 2/3/40 - " 1311°grem Would not be discussed with him at least until after the m eetinc, on FebruarY 7. A more detailed memorandum of the disc114ion et the Treasury yesterday afternoon has been placed in the 4)cl's files. It was agreed that Messrs. Eccles and McKee should prepare a recommendation for consideration by the Board as a basis for the position to be taken by the representatives of the Board at the meeting at the Treasury on February 7. Thereupon the meeting adjourned. Secretary. Chairman.
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