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1-'4! A meeting of the Board of Governors of the Federal Reserve System "as held in Washington on Saturday, February 5, 1238, at 12:15 p.m. PRESENT: Mr. Eccles, Chairman Mr. Szymczak Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Eecretary Clayton, Assistant to the Chairman Consideration was given to each of the matters hereinafter reto and the action stated with respect thereto was taken by the Board: Letter to Mr. Post, Secretary of the Federal Reserve Bank of Philadel . Phia, reading as follows: a "Referring to your letter of February 3, 1938, the Board J13.13 oves the reappointment of Messrs. J. Ebert Butterworth, S. Chipman, H. W. Prentis, Jr., B. F. Mechling, and John kicEade as members of the Industrial Advisory Committee for 'Ile Third Federal Reserve District, to serve for terms of one Year each, beginning on March I., 1938." Approved unanimously. Letter to Mr. Burke, Chairman of the Federal Reserve Rank of reading as follows: "Referring to your wire of February 3, 1938, the Board apProves the reappointment of Messrs. F. A. Smythe, L. R. ravies, theC. Folsom, D. C. Swander, and Herman R. Neff as members of Industrial AdvL.sory Committee for the Fourth Federal Reserve rict, to serve for terms of one year each, beginning on 4Iarch 1, 1968." Approved unanimously. Letter to Mr. Young, Vice President of the Federal Reserve Bank Of leago, reading as follows: r-r 2/5/38 -2"Reference is made to your letter of January 18 regarding the 'State Bank of Clearing', Chicago, Illinois. "In view of the circumstances involved in this case, and your favorable recommendation, the Board extends to . V,ay 1, 1940, the time within which the State Bank of Clear-11g may increase its capital stock to ;:.200,000 as reLjuired ! 0.7 condition of membership numbered t5 applicable to the Institution. It has been noted, however, that in your per!onal opinion the capital will be increased next year, and In this connection the Board will expect the increase to be effected as soon as practicable." Approved unanimously. Letter to Mr. Evans, Vice President of the Federal Reserve Bank of Dallas, reading as follows: "This refers to your letter of January 25, l9Z8, and inclosures, requesting advice as to how member banks in Your district should classify for reserve purposes certain personal loan deposits'. "It appears from the sample account book and note form of the First National Bank, Fort tiorth, Texas, that the member bank makes loans to individuals through its personal loan department, taking in each case a promissory note payable at a specified date in the future, and requires the borr(Ther to deposit with the bank a specified sum of money each month until the total of such deposits equals the principal of the loan, at which time the accumulated deposits are apPlied in payment of the loan and the note is canceled and surrendered. It is also understood that the borrower is furnished a book in which his monthly deposits are entered and which contains the following provision: 'This book is subaay ject to the terms of signed agreement made of and has been assigned to First National Eank as collateral'. "V:e understand that the agreement referred to in the account book is the note evidencing the personal loan, which contains a provision that upon default in making the monthly deposits the note, for the full amount thereof less a credit for such deposits as have been made, shall become due and payable at the election of the payee. "It is our understanding that the borrower is not perMitted to withdraw the funds deposited under the above plan 2/5/38 -3- "and that interest is charged by the member bank on the full amount of the personal loan until maturity. "With reference to the question whether amounts dePosited by the borrower constitute deposits for reserve purposes, your attention is invited to the ruling published at page 538 of the Federal Reserve Bulletin for September, 1931, which held, on similar facts, that funds deposited in I special accounts' in order to provide for the repayment of personal loans are deposits within the meaning of section 19 of the Federal Reserve Act against which reserves must be maintained. This ruling was reaffirmed by the Board on July 11, 1936, in a letter to the Federal Reserve Bank of Cleveland. Accordingly, reserves are required to be carried against the deposits described in your letter. Since it is understood that interest is charged on the full amount of the loan until maturity, it seems clear that the monthly deposits can not be considered as partial payments on the loan. "You also ask to be advised as to how such deposits Should be classified for reserve purposes. On the basis of the facts submitted, it is our view that the deposits evidenced by the book in question should be classified as 'time deposits, open account' provided the particular contract made with the borrower provides that deposits shall be made during a period of not less than three months as required bY footnote 2 of section 1(d) of Regulation D. If a case sould arise in which the contract with the borrower provides that deposits are to be made during a period of less than three months, we will be glad to consider the question °f classification upon receipt of a full statement of the facts of the particular case." Approved unanimously. Letter to Mr. Parker, First Vice President of the Federal Reserve Bank of Atlanta, reading as follows: "This refers to your letter of January 18, 1968, with inclosure, in which you advise that section 1 of Article II of the by-laws of your bank was amended on January 14, 1938. "It is noted that under the amended by-laws the execu61-ye committee consists of three directors of the bank, including the chairman of the board, who serves as chairman of the committee. Any director who is not engaged in business .15 2/5/38 -4- "in Atlanta is to serve as an ex officio member of the committee when in Atlanta, and any two members of the committee constitute a quorum. In the absence or disability of the chei man of the board, the deputy chairman serves as chairman of the committee, and in the absence or disability of both of them the third Class C director, if present, serves Bs chairman. If no Class C director is present, either as a regular or as an ex officio member, the committee is to elect one of its members as chairman pro tem. "In response to your request, you are advised that the Board of Governors has no objection to the above amendments to Your by-laws. We will be glad to have you send to the 111?ard four copies of the by-laws as amended, in accordance with your suggestion." Approved unanimously. Letter to Mr. Logan, Vice President of the Federal Reserve Bank °t New York, reading as follow: "In response to your letter of January 22, 1938, you are advised that the Board approves payment on account of P10,000 to Covington, Burling, Rublee, Acheson & bhorb, Esqs., la connection with their employment in the case of British American Tobacco Company vs. Federal Reserve Bank of New York, nIch payment to be applied on the total fee for services in the case when such fee is determined. "However, the Board believes that it is particularly umPortent in view of the size and importance of the case that the understanding with Covington, Burling, Rublee, Acheson 6tad Shorb, Esqs., with respect to their employment and camID.ensation as authorized in the Board's wire of January 10, 936, should be confirmed in writing and therefore approval of the instant payment is conditioned accordingly. In this c°nnection, the Board would appreciate a copy of such confirmation for its files." i Approved unanimously. Memorandum dated January 26, 1938, from Mr. Morrill submitting t" ePProval by the Board a draft of entry for the policy record reby section 10 of the Federal Reserve Act to be kept by the Board 15s 2/5/38 c°111ng action taken by the Board on December 21, 1937, with respect to an amendment of Regulation F, Trust Powers of National Banks. Approved unaninrnusly. Thereupon the meeting adjourned.
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