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481 A meeting of the Federal Reserve Board was held in °11 Thursda _, ashinL:ton :iebruary 8, 193,, at 3:50 p.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Black, Governor Hamlin Thomas Szymczak Mr. Morrill, Secretary Mr. Carpenter, .ilssistant 3ecretary Bethea, Assistant Secretary Mr. Martin, Assistant to the Governor Mr. Vest, Assistant Jounsel The minutes of the meeting of the Federal Reserve Board held °II F ebruary 1, 1934, were approved. The 3oard then considered and acted upon the following matters: Telegraphic reply, sent on February 7, 1934, with the approval °r five members of the Board, to a telecram of the same date from Mr. krti— Chairman of the 1,-edera1 Reserve Bank of Boston, statin; that the vs uoard of directors of the bank, at its meeting on that date, voted to es, . ablish a rediscount rate of 22,; on rediscounts of eli:ible paper for, 'ember banks and advances to member banks under the provisions of secti°11e ra and 13(a) of the Federal Reserve act, as amended, effective the first business day followin that on which approved by the Federal Ileeerve Board. The reply stated that the Board approved for the Feder- Reserve Bank of Boston the rate of 2, effective i:ebruary 8, 1934. Approved. Telegraphic reply, sent with the approval of three members of the to a telegram dated February 8, 1934, from Er. Hoxton, Chair- 444 of the Feder1 Reserve Bank of Richmond, stating that the board of ' d lr'e et cileeolta of the bank, at its meetin. ; today, voted to establish a re- t rate of 31, on rediscounts of eligible paper for member bans 482 2/8/34 and -2- advances to member banks under the provisions of sections 13 and 13(a) °I* the Federal Reserve Act, as amended, effective iebruary 9, 1934. The /‘e1)1.Y stated that the Board approved for the Federal Reserve Bank of kehMond the rate of 3%, effective February 9, 1934. Approved. Telegraphic reply, sent on February 7, 1934, with the approval °t rive members of the Board, to a telegram of the same date from Er. 11-°°c1) Chairman of the Federal Reserve Bank of St. Louis, stating that the b°41*d of directors of the bank, at its meeting on that date, voted to establi3.11 a rediscount rate of 2 1/2-i; on rediscounts of eligible paper t°1 ' ember banks and advances to member banks under the provisions of aeetimla 13 and 13(a) of the Federal Reserve Act, as amended, effective the ,Irst business day following that on which approved by the Federal 4,4 Re8erve Board. The reply stated that the board approved for the Federal Reserve Bank of St. Louis the rate of 2 1/2, effective February 8, 1934. Approved. Telegram, sent with the approval of four members of the Board, to • 14cClure, Chairman of the lederal Reserve Bank of Kansas City, 4131nap. to a telegram dated February 8, 1934, from ir. EcAdams, Secretary, 0. 1 the Federal Reserve Bank of Kansas City, stating that the board or air ectora of the bank, at its meeting today, voted to establish a redisc— Ilt rate of 3% on rediscounts of eligible paper for member banks " lith4 46414°es to member banks under the provisions of sections 13 and 13(a) °t the eederal Reserve Act, as amended, effective the first business dal? that on which approved by the Federal Reserve Board. The 41 ")11°Wing 4134' stated that the Board approved for the Federal Reserve Bank of 483 2i8/34 -3ICalleas City the rate of 3, effective February 9, 1934. Approved. Telegraphic reply, sent on February 7, 1934, with the approval °I' five members of the Board, to a telegram of the same date fram r. 41eh, chairman of the 2ederal Reserve Bank of Dallas, stating that the board of directors of the bank, at its meeting on that date, voted t° establish a rediscount rate of 3';,6 on rediscounts of eligible paper tor Member banks and advances to member banks under the provisions of Ons 13 and 13(a) of the JJ'ederal Reserve ,ict, as amended, effective the first business day following that on which approved by the Federal leeerve Board. The reply stated that the Board approved for the Federal Reserve Bank of Dallas the rate of 3, effective February 8, 1934. Approved. Memorandum dated February 7, 1934, from C°11aksel, tetVozary 1924' r. Vest, Assistant referring to the Board's approval on January 6, 1934, of the appointment for a period of thirty days beginning January 8, Dorothy IV,. Heathington as a stenographer in the legal i81011) With salary at the rate of ç130 a month, and recommending thilt the a ppointment be continued until the close of business on February 1934, at the same salary rate. The recammendation was approved by te taembers of the Board on February 7, 1934. Approved. Telegram to 1.:r. Walsh, Federal Reserve Agent at the Federal Reaerve zian c)f Dallas, reading as follows: "Your letter February third. Board approves designation of Z. G, Hudel as Examiner in Federal Reserve Agent's department your 484 2/6/34 -4"bank without change in present salary as division chief. advise date commissioned as examiner." Please Approved. Telegram dated February 7, 1934, approved by five members of he Board, to Ur. Newton, Federal Reserve Agent at the Federal Reserve 1.81 k ()f San Francisco, reading as follows: "Mr. Sargent's letter February first. Board approves temporary aPPointment Carl,A. Reinholdt as Examiner in Federal Reserve Agent's dePartment your bank at salary rate of ' 1_,3,600 per annum effective UPon assuming duties as such. Please advise effective date." Approved. Telegram dated February 7, 1934, approved by five members of the toodto 1/1/.. Newton, Federal Reserve Agent at the Federal Reserve Bank "San Francisco, reading as follows: telegram February 3 re application 'Kalama State Bank', Kalama, Washington, Board grants extension of time to 11411'ch 9, 1934 within which bank may comply with conditions of Zem bership." Approved. Telegram to Mr. Newton, Federal Reserve Agent at the Federal Bank of San Francisco, reading as follows: c "Refer Sargent's telegram February 5 re application Monterey e°untIr Trust & Savings Bank, Salinas, California. Board grants !..tension of time to February 14, 1934, within which bank may canWith conditions of membership." Approved. Letter dated February 71 1934, approved by four members of the 11°4111 to 1„Lr. Stevens, Federal Reserve Agent at the Federal Reserve Bank °t Chicago, reading as follows: Balak "Reference is made to the application of The First National Or Tl-gin, Elvin, Illinois, for full fiduciary powers under 485 2/8/34 -5- "Section 11 N of the Federal Reserve Act. "The Board has noted that although the condition of the applicant appears satisfactory and its management capable, a consolidation with its affiliated institution, the Elgin City Banking Company, is contemplated and an application for permission to consolidate the tWO institutions under the charter and name of the national bank has been filed with the Comptroller of the Currency, out no report of examination of the state bank by a national bank examiner has yet oeen received. "Inasmuch as it will, no doubt, be the desire of the consolidated bank to acquire the present trust business of the Elgin City Banking ?ampany, the Beard feels that full information relative to the condi6ion of the Elgin City Banking Company, the character of its assets :n.(1 the nature of the business handled by its trust department, should oe available before fiduciary powers arc granted. "This is to advise, therefore, that action upon the application full fiduciary powers has been deferred pending an examination of fle Elgin City Bankin,s' Company by a national bank examiner incident :co the consolidati on of the two institutions. When such examination has been completed, and a report thereof is available, the Board will cllisider the pendia; application, at which time it will De glad to J• ave the benefit of any further recommendation you may wish to make the premises. The Board would like to receive a copy of any conact or a.reament entered into between the . vio banks, and to be adWhether the institution has desinated a trust committee to , 1 nervise the activities of the proposed trust department and if it .tha services of competent legal counsel experienced in 1sIse t.1=4 4., "Please advise the applicant bank as to the Board's position in 'he 'natter of its application." Approved. Or Tele'j;ram to LIr. Johns, i.cting Governor of the Federal :Reserve Bank Atlanta readin as follows: not "Your telegram 7 re exchange by Havana agency of Federal reserve antr f°1 ' Cold certificates. Until further action by Board agency is not-°r1zed to make direct exchanges in like amounts of Federal reserve 'United States gold certificates without charging the usual co.„!? f°1 ' lesion of ul per 1,000 for such exchanges." Approved. Letter serve Ban,k °r toCurtiss, iiederal 1.eserve Anent at the Federal Re- Boston, reading as follows: 2/8/34 "This refers to your letters of September 29, 1933, October 111 1933, and January 5, 1934, together with their inclosures, reCardinz your inquiry No. 35 with respect to whether the payment of. a tax by national banks in accordance with the provisions of certain statutes of the State of Connecticut constitutes a payment of interest within the meanirr4 of Section 19 of the Federal Reserve I,ct as amended. "It appears that Section 1285 of the Connecticut Statutes requires the payment by State savings banks of an annual tax on their corporate franchises, which is computed on the basis of the ?.Mount of their deposits as of the first day of January, after al1°wing for certain specified exemptions. Section 1289 provides that a national bank may elect to pay the tax on its savings dePosits required to be paid by savings banks except that the tax in such case is to be based on the amount of interest-bearing deposits in the savings department on the first day of October; and in the event of the election by a national bank to pay such tax, the deP°sitors in the savings department of such bank are not required to ,ticlude in their tax lists the amount of their savings deposits. ;Lt is understood that the question presented is whether the payment by a national bank of such tax constitutes a payment of interest in determining the amount of interest paid by the bank on its savis deposits. "Pram a consideration of the statutory provisions here involved, in the light of the opinion of your counsel with respect to this ratter, it is the opinion of the Board that this case is governed by the rulinP contained in the Board's letter of Docemoer 8, 1933 ' ,,:-7703) and that, therefore, the amount of the tax so paid by a national bank need not be taken into consideration in determining Whether the bank is paying interest on its savings deposits at a L'ate in excess of the limitations prescribed by the Federal Reserve ,,°4rd, pursuant to that provision of Section 19 of the Federal Re.rrve Act which requires the Federal Reserve Board from time to to limit by regulation the rate of interest which may be paid DY member bunks on time deposits." Approved. Let,er dated February 7, 1934, approved by four members of the 13ctallcl, to Ilonorab le Jesse H. Tones, Chailyman of the Reconstruction Finance e°1 ' 13°z'ation, reading as follows: re_ "I have your letter of January 26, 1934, in regard to a conro; ence held at the offices of the Reconstruction Finance Corporation pli the purpose of considering the procedure in connection with apof State member banks for assistance from the Reconstruc: atle tio Corporation. "I believe it will be helpful as a basis for the Board's respoa to Your inquiry to set forth briefly a resume of the matters 489 2/8/34 -7- "diacussed at the conference to which you refer, as reported to me by Messrs. Martin, Paulger and Morrill. The conference was requested by the examining division of the corporation, it was understood, for the purpose of discussing informally how the organizations represented could cooperate with the corporation in order to assist it in passing upon pending applications. In addition to Senator Blaine, Sheehan, McKee, and j. Talley, representing the cdrporation, there were Present Mr. Bennett of the Federal Deposit Insurance Corporation, 14:re Lyons and Mr. Folger, representing the office of the Comptroller, and Messrs. Martin, Paulger and Morrill, of the staff of the Federal Reserve Board. "Mr. Sheehan indicated that it was the intention of the corporation immediately to suspend for the time being consideration of pendaPplications from State member and national banks, except that Senator Blaine said that there were cases as to which the corporation had already made commitments which it was felt should be carried out. Mr. Sheehan said that it was felt that with the exceptions referred to no further applications should be approved until it could be ascertained whether the Comptroller of the Currency or the .ederal Reserve Board as the case might require would make the certificate to the Federal Deposit Insurance Corporation called for by section 12B Of the Federal Reserve Act and a report of a current examination became available to the Reconstruction Finance Corporation. In this connection, reference was made to State banks which are not members Of the Federal reserve system, as to which it was understood that ,ction upon their applications also would be suspended until it could be ascertained whether the Federal Deposit Insurance Corporation WoUld admit them to the benefits of the insurance fund. "It was stated by the members of the staff of the l'ederal Reserve 1308,rd that it had, on December 7, 1936, issued instructions to all Federal reserve scents to formulate and carry out plans for examining all State member banks prior to June, 1934, as a basis for the issuance :) .r the Federal ileserve Board of the certificates contemplated by sec011 3213 of the Federal Reserve Act and that the Federal reserve agents .d 4 ''Q begun to carry out such plans, so that some of the examinations ,'13011 which the Board might base its certificates were instituted in '-)ecember, i.e., prior to the date, January 1, 1934, referred to in :agraph 5(a) of your letter. It was also stated that the Federal 7erve agents generally were giving first attention to the banks which it was believed on the basis of existing information might ree cri, qu11 : financial assistance, so that as much time as possible would be taV-Lable before June, 1934, in which to work out plans of rehabilin_7104) either through the assistance of the Reconstruction Finance -vrP%ation or otherwise. tor 1, It was further pointed out that under the procedure provided whi by section I2B of the Federal Reserve Act with respect to banks 1.9„4Va are members of the Federal reserve system on or before July 1, -t, each bank must make an application to the Federal Deposit InsuranceCorPoion for stock; upon receipt of such application the zmration shall request the Federal Reserve Board in the case of a 4 2/8N -8"State member bank or the Comptroller of the Currency in the case Of a national bank to certify upon the basis of a thorough examination of such bank whether or not the assets of the applying bank are adequate to enable it to meet its liabilities to depositors and Other creditors as shown by the books of the bank; and the Federal eeserve Board or the Comptroller of the Currency shall make such certification as soon as possible. Attention was called to the fact that no recuest had been received by either the Comptroller of the Currency or the Federal Reserve Board from the Federal Deposit Insurance Corporation for any such certification and r. Bennett said that he would take up that matter imm3dietely. Reference was made also to the fact that, so far as the certificate required by section 12D of the Federal Reserve Act was concerned, it 17as only necessary that the applying bank have 'assets adequate to enable it to meet all of its liabilities to depositors and other creditors as shown by its books' and consequently that, for this Purpose alone, the Comptroller of the Currency and the Federal Reserve Board were not required to approve the capital structure of the bank. "It was stated by the members of the staffs of the Comptroller and the Federal Reserve Board, in view of all the circumstanc es, that it would not be possible for them to commit the Comptroller of the Currency or the Federal lieserve Board, respectively, in advance ?•s to whether or not any particular certificate would be issued, but that, in the interest of expediting the consideration of applictIons received by the corporation and in order to be of as much assistance as possible to the corporation, the chief national bank examiner or the chief of the division of examinations of the Board, would be willing to indicate upon request of the corporation what recommendat ion he would make as to the certificate Itin this connection, in response to an inquiry by 1:.r. Sheehan, it ,as stated that the Board's division of examinations would be willctni, to check over a list which would be furnished by r. Sheehan Pendin applications and indicate the cases in which current 1v3xamination reports which would be regarded as satisfactory had , 2 e 4 received and to neke such re,ports available to the corporation :t7etner with any other information which the division of examinations might have that would be helpful to the corporation in deterWhat action it should take, as well as to indicate, if pos,4 „.°1e at that time, what recommendation would be made as to the '311, ance of a certificate . Since then a list of applications with 'the o Rec nstruction Finance Corporation, presumably the one to which , byu refer in paragraph numbered (1) in your letter, has ueen received °11r division of exarinations. There have also been received a nurat st,er of letters, some from the examining division of the Reconla; eti°n ]iinance Corporation and some from r. Cooksey, each rethe application of a particular State bank and these 4,ers have been referred to the division of examinations for 489 2/6/34 -9"In the light of the foregoing resume, therefore, the following observations are made upon the numbered paragraphs in your letter. "(1) Mr. Pauler will advise the examining division of your corporation as to each bank named in the list received from the corporation and in subsequent inquiries whether a report of examination has been received which is considered to be adecuate as a basis for the certification required by section 1213 of the Federal Reserve .ct acl will make such report available for inspection by your examining cavision if desired. "(2) (3) In many instances a change in the capital structure Of a State member bank does not involve the necessity for action by the Federal Reserve Board under any applicable provision of law or condition of membership, while in other cases there may be provisions of law or conditions of membership that must be considered. In this r,?sPect the situation with respect to the Federal Reserve Board differs materially from that of the Comptroller who, it is underStood, must pass upon any increase or decrease of capital structure °f a national bank. Therefore, it was not understood that the Federal Reserve Board or its division of examinations would be called upon in every case to approve or disapprove the program as such under Which the corporation may authorize a purchase or loan or to approve or ulsaPProve the particular purchase or loan, although it was ?sumed ty.'' that the Board's division of examinations would be at liberto offer suggestions or comments for your consideration. If, ncllever, the corporation's program in any particular case will inv°1ve the necessity for action by the Federal Reserve Board, under a condition of membership or provision of the Federal Deserve Act applicable to the State member bank, and if the necessary informa-°11 ls available, your examining division will be advised as to j Whether the Board's division of examinations is prepared to recom1,nd that the Board consent to or approve such part or parts of the ti ram as LaY require its action. The Board's division of examina,_:ns will also advise you what recommendation it is prepared to ,14e 0 regarding the certificate to the Federal Deposit Insurance esrPoration unless a satisfactor raoort of examination or other y , a J 3ential information is lacking. If in any case the required in7mation is not available, your examining division will be advised c,s°°11 as possible after the receipt of the information as to what re'°111Tflendation the Board's division of examinations will make. ca_ "It seams to the Board, in this connection, that there maybe up7s in which a delay in the action of the corporation in passing aPplication for the purpose of rehabilitating the capital e"Ire of a bank might be unnecessary and even disadvantageous : bee of conditions Conditions peculiar to the particular bank or to the local Or situation arpi especially in cases where s.ction in the nature ' r reorganization, reeuirinif, na±,otiations and the effectuation Of a tas1 0r1flal legal stops, may be required in order to complete the ro ; before .Tuly 1, 1934. For these reasons the .13oard suggests Your consideration the question whether it is advisable in all 7 490 2/a/34 -10- "eases to suspend entirely the consideration of pendin,4 applications solely for the purpose of awaiting advice as to whether or not the Board's division of examinations will recommend the issuance of the certificate required by section 123 of the I,ederal aeserve act, provided of course the corporation has available to it a satisfactory report of examination and such other information as may be necessary. "(4) No comment upon this paragraph seems necessary. " (5) AS previously stated, the examination program of the Federal reserve agents was initiated by the Board's letter of instruction of December 7, 1933, and consequently, examinations made in 13ecember may be used by the Board as a basis for its certification. In this connection, there may be same situations which will require consideration of the advisability of acceptin examinations instituted at an earlier date and it would seem desirable not to Preclude the consideration of such cases. The Federal reserve agent, of course, will be glad to cooperate with your agency manager in every way possible. For your infomation it may be stated, however, that there are likely to be cases involving readjustments of capital structure in State member banks which do not require approval bY the Federal Reserve Board, but the Federal reserve agent 171-11 be in position to advise your agency manager as to whether or " t the Board's approval is required in such cases. "In conclusion I may say that it is the Board's desire that its organization shall cooperate with that of your corporation in everY way possible in facilitating the program of rehabilitation ?f the capital structures of State member banks and, as stated dux.111 the course of the conference previously mentioned, it is assumejl that the corporation will give as prompt and liberal considera1°11 as circumstances justify to applications of State member banks c_le it has already given to applications of nonmember State banks. this connection, however, a communication has just been received am one of the Federal reserve agents in which he states that ere has been a mnrked chance in the requirements of the corporaSince the first of January and that conditions are now being apparently upon a different basis than the one upon Which tIP"ed me Federal reserve agents and the local agencies of the heconruction winance Corporation have formerly cooperated. He points ut that before submitting recorraden,j'ations to the corporation the P°ssibilities of obtaining local capital were explored in every ! ase and that in most instances where the Washington office, withknowledge of local conditions, has seemingly arbitrarily im1)0sed requirements for local inrticipation, the banks will be !!lable to meet them. It will be appreciated if you will let me wl-ether there has been a chance in policy as this report would J r Approved. 491 2/8/24 -11Memorandum dated February 8, 1934, from Mr. Smead, Chief of the Division of Bank Operations, stating that, while the reduction in the gold content of the dollar from 25-8/10 to 15-5/21 grains took 1314 "on Wednesday, January 31, the Treasury closed its books for that day at 3 o'clock or shortly before devaluation took place, and that the titst Page of today's Federal reserve bank condition statement, there" t 1, will show the monetary gold stock on the new basis for the first tu ne Which stock will include only gold held by the United States '4"4u171 and recommending that the following text (figures in which " 5 SUbjeet to slight corrections) be used in the weekly Federal reserve beuak statement to be issued at 4 o'clock today: "The daily average volume of Federal Reserve bank credit outstanding for the week ended February 7, as reported by the Federal Reserve banks, was ::)2,616,000,000, a decrease of .A4,000,000 camPared with the preceding week and an increase of 547,000,000 camPared with the corresponding week in 1933. "On January 24 total reserve bank credit amounted to 02,606,000,000, a decrease of .-;.24,000,000 for the week. This decrease is accounted ro'or largely by changes resulting from the reduction in the weight f the gold dollar, and increases of .;:,35,000,000 in money in cir• lati°n, c;84,000,000 in member bank reserve balances and 113,000,000 nonmember deposits and other Federal Reserve accounts. The monetary gold stock shown below as c?7,035,000,000 reprets the gold holdings of the United States Treasury valued at cul Ian ounce. United States gold coin previously reported in eiron (0287,000,000 on January 31, 1934) has been deducted from th „t3 figures of monetary gold stock and money in circulation for last "ek,and for February 8, 1933. "Bills discounted declined $4,000,000 at the Federal Reserve New York and c10,000,000 at all Federal Reserve banks. The QYstenits holdings of bills bought in open market declined ',14,000,000 of United States bonds 2,000,000, while holdings of United State s Treasury notes and of Treasury certificates and bills were Practically unchanged." M Approved. At this point Mr. O'Connor joined the meeting. 2/8/34 -12Governor Black stated that the directors of the Federal Deposit 11/8111‘ance Corporation had submitted to him a proposed bill amending secti011 12B of the Federal Reserve Act with regard to the insurance of bank Ciell"its, and had requested that they be advised whether the Board would bewil„ 4""ang to approve the proposed bill. The bill provided, Governor Black stated, 1. For continuing the insurance of deposits up to 2,500 under the temporary insurance fund until July 1, 1935, deferring until then the time when the permanent insurance plan would become effective. 2. That subscriptions by member banks to Class A stock in the Federal Deposit Insurance Corporation would not be required to be paid before July 1, 1935,• and that, in effect, the certification of national banks by the Comptroller of the Currency and of State member banks by the Federal Reserve Board to the corporation would be deferred one year. 3. That each member of the temporary fund would be required to file on December 15, 1934, instead of June 15, 1934, a second statement of its deposits for the purpose of determining the amount which it should pay to the corporation by reason of any increase in its deposits. 4. That the provisions authorizing the appointment of the Federal Deposit Insurance Corporation as receiver of closed member banks would be made applicable also to members of the temporary fund. 5- That members of the fund would have the right to with4t El:herefrom on July 1, 1934, upon giving thirty days' and subject to regulations prescribed by the corpora! ion, and banks withdrawing at that time would be entitled 6°. a refund of their proportionate share of any estimated balance in the fund. G. That the Federal Deposit Insurance uorporation would be ! utborized, with the approval of the Secretary of the Treasury, 4°.135ue obligations which would be guaranteed, both as to Pl'Incipal and interest by the United States. f 7; 1. 7: 1111.:t such obligations of the corporation would be eligible count or purchase by any Federal reserve bunk. Governor Black added that he had discussed the proposed bill 493 2/s/34 -13- With the directors of the Federal Deposit Insurance Corporation, repretatives of the Treasury Department, and Messrs. Morrill and Vest of the Board's staff, and that he felt that the purposes sought to be ace°111Plished by the amendment are desirable, but that there should be added to the bill (1) a provision requiring that capital notes and debeAtures purchased by the Reconstruction Finance Corporation from State member banks shall be considered as having the same status as e4Pital stock for the purposes of admission to membership in the Federal Reserve System and (2) a provision to the effect that liabilities to h°1ders of capital notes and debentures and to persons whose deposits "e subject to subordination agreements shall not be considered as ClUded tn the term "liabilities to depositors and other creditors" in e°111leetionWith such certification. Ur. O'Connor stated as the reasons of the Federal Deposit Insur1111" Corporation for proposing the bill: (1) There are some States where State kitlaics are not authorized by law to purchase the stock of the carprovided under the permanent insurance plan and such banks Would be unable to qualify as stockholders in the corporation on July 1, 194; (2) Iblited ninety-seven Per cent of the individual depositors in the States are protected under the temporary insurance fund and 31% °T all d eposits, and there is a strong feeling that the additional in814Y614ce Provided under the permanent plan will not be necessary; (3) menhave no serious objection to the insurance of deposits up to bt or to the liability imposed upon them under the temporary fund, theY do object strongly to the permanent insurance plan. t 494 2/8/34 -14A general discussion followed, at the conclusion Of which all of the members present expressed approval of the proposed bill with the additions thereto suggested by Governor Black, and it was understood that Counsel would prepare a letter to the Federal Deposit Insurance Corporation stating that the Board approves the proposed bill with such additions. Governor Black referred to the discussion at the meeting a eday With regard to the extension of credit to industry, and 1341/icularly to the suggestion that there be established intermediate erfe kilt banks for industry, and he presented the following memorandum tor consideration of the members of the board: "1. Establish in each of the twelve Federal reserve districts an Intermediate Credit Bank for Industry which shall be organized in accordance with and be subject to regulations of the Federal Reserve Board. "2. The United States Government shall subscribe for and . Pa yin capital and surplus of each bank in amounts to be deter',tuned from time to time by the Federal Reserve Board on the oasis of the prospective needs of such bank, within an aggregate not exceeding 4300,000,000 for the twelve banks, any part Or all of the paid-in capital and surplus of any bank to be retuned to the Government when in the judgment of the Federal eserve Board it is no longer needed for the purposes of the " Ialk, but the funds so returned to be available, if deemed ad1383310 by the Federal Reserve Board, for capital or surplus of ; ' 41 slime or any other Intermediate Credit Bank for Industry. "3. Each Intermediate Credit Bank for Industry shall be authorized to discount for and purchase from banks, trust cornPlies, mortgage commies, credit corporations for industry, or Other financing institutions obligations having maturities rt e xceedingfive years, representing loans or advances to 5.=0 ,17ide for working requirements and capital needs of existing trastrial enterprises; and to make advances to such institu°Ila. on the security of such obligations. tr.. Each such financing institution shall become liable, trugh indorsement, guaranty, or pledge of collateral security, obl he extent of not less than 20% of the total amount of the .acquired from it by the Intermediate Credit Bank l t liX; of a pri "5. In exceptional circumstances when an industrial enter. "i8 unable to obtain adequate financial assistance on a re " 4030nable basis from other institutions whose facilities rortnallY might be available to it, the Intermediate Credit Bank r Industry for the district in which such industrial enter- 495 2/8/34 -15- "prise is located may make advances temporarily for working requirements or capital purposes of such enterprise, when the application therefor and the terms and conditions under which such advances are to be made are also approved by the board of directors of the Federal reserve bank of such district. "6. Each Intermediate Credit Bank for Industry, with the approval of the Federal Reserve Board, shall be authorized to issue, severally or jointly with other such banks, notes, debentures, bonds, or other such obligations, for the repayment of which all of the twelve banks shall be jointly liable; the amount of any one bank's issues outstanding at any one time not to exceed five times the bank is aggregate capital and surplus; such obligations to be fully aid unconditionally guaranteed both as to principal and interest by the United States Government; and such obligations to be exempt from all Federal, State, and local taxation, except surtaxes, estate, inheritance, and gift taxes. Such banks, including all their assets, Shall be exempt fram Federal, State, and local taxation, except taxes upon real estate. "7. The Federal reserve banks shall have authority to purchase and sell the obligations issued by the intermediate credit panks for industry and to accept them as collateral for fifteendaY notes of member banks. "8. Each Intermediate Credit Bank for Industry shall have Power to rediscount obligations accepted by any other such bank, to LAW and sell obligations issued by any such bank, and to pay off and retire before maturity any obligations issued by it, subject to the aPProval of the Federal Reserve Board, and the Board shall have the P"er to require such action by any such bank. "9. All interest and discount rates shall be subject to revi w e- and determination by the Federal Reserve Board." The memorandum was briefly discussed and it was understood that the members of the Board individually would give consideration to the memorandum and that the matter referred to therein would be discussed further at a meeting of the Board to be held on Tuesday, February 13, 1934. Letters dated February 7, 1934, approved by five members of the 1104rd, to ePPlieants for permits under the Clayton Act, advising of apprOval of their applications as follows: Cl W. Bell, for permission to serve at the same time director and officer of The First-Stamford National Bank Trust 7,.. ta H Co_vany, Stamford, Connecticut, and as a director ome mp The Bank et Trust Company of Darien, Darien, Connecticut. !!sa 496 2/8/34 -16- M. Coogan, for permission to serve at the same time as a director and officer of The Second National Bank of Phillipsburg, Phillipsburg, New Jersey, as a director of The First National Bank of Belvidere, Belvidere, New Jersey, and as a director of The First National Bank of Washington, Washington, New jersey. 11r. Ben Branch, for permission to serve at the same time as a director of The First National Bank of Nesquehoning, Nesquehoning, Pennsylvania, and as a director of the Mauch Chunk Trust Company, Mauch Chunk, Pennsylvania. C. V. Henry, for permission to serve at the same time as a " 14 director and officer of The Annville National Bank, Annville, :71 1 =1:=:, and as a director and officer of the Lebanon NaLebanon, Pennsylvania. 1121* X. B. Pearson, for permission to serve at the same time as e director and officer of the First State Bank, Hulbert, Oklah°1138., and as a director and officer of The First National Bank Of Tahlequah, Tahlequah, Oklahoma. Approved. Letter to an applicant for a permit under the Clayton Act, ad713j: Of approval of the application as follows: 0. Pattison, for permission to serve at the same time as a director and officer of The First National Bank of Knoxville, oxville, Pennsylvania, and as a director and officer of The 14atti30n National Bank of Elkland, Elkland, Pennsylvania. Approved. There were then presented the followine, applications for orig- 1441 stock of Federal reserve banks: A 1 T17a for ORIGINAL Stock: The Union National Bank of Rockwood, Rockwood, Pennsylvania bz!atrict No. 5. '44t ilational Bank of Oak Hill, Oak Hill, West Virginia Shares 36 36 36 36 2/8/34 -17- lications for ORIGINAL Stock: (Continued) Shares District No. 7. nrst National Bank in De Kalb, , De Kalb, 90 Illinois -irst National Bank in Council Bluffs, Council Bluffs, Iowa 72 liedamty Valley National Bank of Villisca, Iowa 36 Vilsca,The lqational Bank of Eaton Rapids, Eaton Rapids, Michigan 36 .11.1X1.2.1__No. 10. Secta ltiTanna Bank of Superior, S uperior, Nebraska District No. 11. Pirst National Bank in Breckenridge, -Br eckenridge, Texas ThePirst National Bank in Durant, Durant, Oklahoma 30 234 30 90 72 Total 162 498 Approved. Thereupon the meeting adjourned. 0-uu-SZ_ 2 Secretary.
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