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361 A meeting of the Federal Reserve Board was held in Washington 011 Saturday, January 27, 1934, at 12:00 noon. PRESENT: Mr. Black, Governor Mr. Mr. Mr. Er. Hamlin Miller Thomas Szymczak Mr. Morrill, Secretary Mr. Carpenter, Assistant Secretary Mr. Bethea, Assistant Secretary The Board considered and acted upon the following matters: Letter dated Tunuary 18, 1934, (apparently intended to be dated 411uary 25), from Er. Sproul, Secretary of the Federal Reserve Bank of liew York, and telegram dated Tanuary 26, 1934, from Er. Stevens, Chairman Of the Federal Reserve Bank of Chicago, both advising that, at meetings Of the boards of directors on January 25 and 26, 1934, respectively, 110 changes were made in the banks, existing schedules of rates of discount and purchase. Without objection, noted with approval. Memorandum dated January 24, 1934, fram Mr. Paulger, Chief of the Division of Examinations, referring to the authority granted at the meeting on December 19, 1933, under which Mrs. Nancy R. Porter was emP10Yed temporarily as a stenographer in the division, and recammending that in view of the continued amount of vork in the division, the tel4113°rarY appointment of Mrs. Porter be extended for an additional thirty 441 ' 8 on the same terns as the previous appointnent. The recommendation W48 approved by five members of the Board on January 26, 1934. Approved. Telegram dated January 26, 1934, approved by four members of the Board, to Mr. Austin, Federal Reserve :,.gent at the Federal Reserve 362 1/27/34 9 Bank of Philadelphia, reading as follows: "Your letter January 24. Board approves temporary appointment Timothy A. Lurkin, Jr. as Examiner in Federal Reserve Agent's department your bank at salary rate of 0,008 per annum effective „upon assuming duties. Please advise effective date." Approved. Telegram dated January 26, 1934, approved by four members of the 80ard, to Ex. McClure, Federal Reserve Agent at the Federal Reserve Bank or Kansas City, reading as follows: "Your letter January 22. Board approves transfer of D. W. Woolley from temporary to permanent status as examiner in Federal Reserve Agent's department your bank at salary rate of 0,300 per ennui. Please advise effective date." Approved. Telegram dated January 26, 1934, approved by five members of the B°ard, to LT,r. Williams, Federal Reserve Agent at the Federal Reserve Bank c't Cleveland, reading as follows: "Re Fletcher's wire January 20, 1934 re application of The Peoples Bank and Savings Company, Cincinnati, Ohio. Board grants extension of time to February 20, 1934 within which applicant may accomplish admission to membership." Approved. Telegram dated January 26, 1934, approved by four members of the I3c3ard, to Mr. Peyton, Federal Reserve Agent at the Federal Reserve Bank Of Minneapolis, reading as follows: "Refer your wire January 23, 1934 re amended condition of membership of the Farmers and Ilerchants State Bank of Sacred Heart, Minnesota. Board amends condition numbered 17 prescribed in connection with application of the Farmers and Lerchants State Bank of Sacred Heart, Minnesota, for membership to read as follows: "Prior to admission to membership, such bank, if it has not already done so, shall charge off or otherwise eliminate loans ags:regating 01,895.31 classified as doubtful in the report of examination of such bank as of August 26, 1933, made by an 363 • 1/27/34 -3- "examiner for the Federal leserve Bank of LinneaPolis, and likewise prior to admission to membership, such bank, without and with. impairing or reducing its present capital of .35,000 out reducing its surplus of ,7,000, shall establish a reserve of at least for the purpose of removing any losses which may develop in any of its assets, such reserve to be used for no other purpose except with the permission of the Federal Reserve Board, and shall sell for cash at least ,:'15,000 in'capital debentures which Shall be subordinate to the claims of depositors and other creditors. Please advise the bank accordingly." Approved. Letter dated January 23, 1934, approved by four members of the Board, to Li'. Hoxton, Federal Reserve Agent at the Federal Reserve Bank (3f Richond, reading as follows: "Reference is made to Ell.. Fry's letter of January 18, 1934, inclosing a letter from the president of 'The Citizens National Bank of Hampton', Hampton, Virginia, in regard to the application of that bank for full fiduciary powers, limited powers having been granted it by the Board on January 8, 1934. "The principal features which influenced the action taken by the Board upon this application were the limited operations in the trust department of the Bank of Hampton, the large amount of the lower grade securities in investaent accounts of the Bank of Hampton and First National Bank in, which there was an unusually high Percentage of depreciation, and the involved financial condition of the trust officer, who is also president of the institution. "In his comments concerning the trust department of the Bank Of Hampton, the national bank examiner states that only in a few Instances has it been necessary for the bank to make any investments. it would appear, therefore, that the bank has had little opportunity to demonstrate its ability to operate a trust department successfully, at least insofar as its investments are concerned. The classification of criticized assets of the old institutions, Dade by a national bank examiner, shows that their principal trouble resulted from e:zcessive securities depreciation. This naturally gives rise to a question as to the advisability of granting permission to a bank to make investments for others when the past performances of the same management in the investment field have proven unsatisfactory. "The examination reports show also that the president and trust officer was indebted to both the predecessor banks and that a substantial portion of his loans is classified as doubtful. The Board feels that any officer, director or employee whose affairs are so invelved as to cause embarrassment to his bank seriously impairs 364 1/27/34 -4- "his usefulness to the institution he serves and that this is Particularly criticizable in the case of an executive officer or a trust officer. "It is the view of the Board that before acting upon the application for full fiduciary powers sufficient time should have elapsed to determine the investment policy of the bank, which could be taken as some indication as to the policy it would pursue in the selection of investments for trust funds, and also to determine the attitude of the president and trust officer toward his involved financial affairs. The Board feels, therefore, that action should be deferred upon the application for full fiduciary Powers until the institution has been in operation at least one Year and a report of examination made subsequent to the expiration of that period, together with detailed information concerning the features herein referred to, has oeen received." Approved. Letter dated January 26, 1934, approved by five members of the Boa rd, to 1:r. O'Connor, Comptroller of the Currency, reading as follows: "In accordance with your recommendation, the Federal Reserve Board approves a reduction in the common capital stock of 'The Paterson National Bank', Paterson, New Jersey, from :J,200,000 to :600,000, pursuant to a plan which provides that the bank's capital shall be increased by the sale at par of :q,000,000 par value preferred stock to the iieconstruction Finance Corporation, that the funds released by the reduction in common capital stock shall be used to eliminate substandard assets, and that a reserve for deprec tation and losses shall be established in such amount and in such manner as may be required by you, all as set forth in your memorandum of January 16, 1934." Approved. Letter to I:1T. ,ustin, Federal Reserve Agent at the Federal Reserve 8811k of Philadelphia, reading as follows: "Receipt is acknowledged of your letter of January 17, 1934, ad:rising of the proposed reduction in the common capital stock of the r Tample State Bank Temple, Pennsylvania, from f;75,000 to 645,000 and sale of :,25,000 to :35,000 of preferred stock to the Reconstruction Finance Corporation, and recommending that the reduction in eoTmon capital stock and issuance of preferred stock be approved. "Since it appears from the information submitted that none of the funds released by the proposed reduction in common capital will be returned to the shareholders, but will be credited to the ban's surplus account, and that the transaction will result in a material 365 1/27/34 -5- "strengthening of the condition of the bank, and since the Board's consent to the reduction in capital is not required by law or the conditions of membership applicable to the bank, the Board offers no objection to the reduction ,in capital in the amount indicated or to the issuance of preferred stock, with the understanding, of course, that your counsel has considered the case and is satisfied as to its legal aspects, that such reduction in the common capital stock and the sale of preferred stock will not result in any change in the corporate existence of the bank which will effect its membership in the Federal Reserve System, and that the transaction has the approval of the Secretary of Banking for the Commonwealth of Pennsylvania." Approved. Letter to ET. O'Connor,- Comptroller of the Currency, reading as follows: "The Federal Reserve Board approves a reduction in the common capital stock of'The First ITational Bank of I:_ontc:omery; Montgomery, Alabama, from .:;1,000,000 to750,000, pursuant to a plan which provides that the bank's capital shall be increased by the sale at par of 3750,000 par value preferred stock to the Reconstruction Finance Corporation, and that the funds released by the reduction in common capital stock shall be used to eliminate an equal amount of substandard assets, all as set forth in your letter of January 24, 1934. ' "In considering the plan under which the reduction in common capital stock is to.be effected it was noted that, based upon a Classification of assets by the Reconstruction Finance Corporation as of November 27, 1933, securities depreciation remaining in the bank after the proposed adjustments are effected is sufficient to impair the bank's common capital to the extent of approximately $116,000, in addition to which there will also remain 373,000 of doubtful assets and .3,245,000 of slow assets, of which ::1,440,000 comprises the bank's investment in its banking house. "The bank's close affiliation with the First Finance 'Corporation and the First Joint Stock Land Bank of Montgomery, both of which appear to be in very serious financial difficulties, was also noted. It is assumed, however, that you have these conditions in mind and that when it becomes feasible to do so you will require such further corrections as may be practicable." ) it Approved. ' 13o t - Letter dated January 26, 1934, approved by five members of the to 1:r. O'Connor, Comptroller of the Currency, reading as follows: "In accordance with your recommendation, the Federal Reserve Board approves a reduction in the common capital stock of 'The First cbee 1/27/34 -6- "ITational Bank of Genoa', Genoa, Nebraska, from '0,000 to :)25,000, Pursuant to a plan which provides that the bank's capital shall be increased by the sale at par of :')30,000 par value preferred stock to the fleconstruction Finance Corporation, and that of the funds released by the reduction in common capital stock $24,361.20 shall be used to eliminate unsatisfactory assets and '638.80 shall be transferred to surplus, all as set forth in your memorandum of January 13, 1934.0 Approved. Letter dated January 26, 1934, approved by five members of the 1138.rd, to Lii. O'Connor, Comptroller of the Currency, reading as follows: "In accordance with your recommendation, the Federal Aeserve Board approves a reduction in the common capital stock of 'The Fremont National Bank', Fremont, Nebraska, from $150,000 to :,:;75,000, pursuant to a plan which provides that the bank's capital shall be increased by the sale at par of ..75,000 par value preferred stock to the lieconstruction Finance Corporation, and that the funds released by the reduction in common capital stock together with a portion of the bank's surplus and undivided profits shall be used to eliminate substandard assets and securities depreciation in the amount of approximately $122,000, all as set forth in your memorandum of January 16, 1934.,t Approved. Letter dated January 26, 1934, approved by four members of the Board, to Ni. Case, Federal 2eserve izent at the Federal Reserve Bank of New York, readin as follows: "This is in reply to your letter of January 18, 1934, with respect to the applications for voting permits of First National of Elmira Corporation and First National Bank & Trust Company of Elmira, both of Elmira, New York. The Board understands that since December 20, 193 , the date of its telegrams to you with respect to the issuance of a limited voting permit to each of the above named companies, proceedins have ueen taken to dissolve the trust created by a certain trust agreement, dated 2:nril 21, 1920, under which stock of the First National of Elmira Corporation was held for the. benefit of stockholders Of the First National Bank Trust Company of Elmira and that the questions now arise as to whether the latter company is still a holdino; company affiliate and whether a limited votin7 permit may not now be issued to First national of Elmira Corporation without the necessity of the issuance to First National 3ank N Trust Company or Elmira of a similar limited voting permit with respect to the 369 1/27/34 -7- "stock of the same subsidiary member banks. "Because the validity of the termination of such a trust is Presumably to be determined in the light of local law and the status of a particular coupany as a holding company affiliate depends upon the extent to which, as a nuestion of fact, it exercises control over the stock of a subsidiary menber bank or over the election of directors of such bank, it has been the practice of the Board to be Cuided in such a case as this by the opinion of counsel to the Federal reserve banks. There would seem to be no reason in the instmt case for departing from this practice and there is accordingly returned to you herewith one set of the documents listed in your letter of January 18 and sent to the Board therewith. In this connection it is appropriate to note that in the opinion of the Board, the First National Bank Trust Company of Elmira is not necessarily a holding company affiliate because of the fact that, for the present, the ownership of stock of First National of Elmira Corporation and Of First National Bank h Trust Company of Elmira will be substantiallY identical, as the First National Bank & Trust Company of Elmira must be considered an entity separate and apart from its stockholders. It is also appropriate to note that if the aforesaid trust has been validly terminated, the applications and documents submitted to the Board do not indicate that the First National Bank & Trust Company is now a holding company affiliate, although, as suggested above, the question depends upon all of the material facts and is one as to Which it is deemed advisable to procure the opinion of counsel to the Federal Reserve Bank of New York. "When you have received the opinion of counsel to the Federal Reserve Bank of New York to the effect (1) that the aforesaid trust for the benefit of stockholders of the First National Bank & Trust Company of Elmira has been validly terminated and (2) that First National Bank & Trust Company of Elmira is not a holding company affiliate of any one of the subsidiary member banks of the First National of Elmira Corporation within the definition in Section 2(c) Of the BanIzing Act of 1933, you are authorized: "1. To disregard the Board's telegram to you dated December 29, 1933, beginning with the words ',VNCIG_IR A. First National Bank and Trust Company of Elmira' and relating to the issuance of a limited voting permit to First National Bank & Trust Company of Elmira and you are requested to return to the Board unissued the limited votint7 permit sent to you on that date and referred to in the said telegram; "2. To issue to First National of Elmira Corporation the limited voting permit referred to in the Board's telegram to you dated December 29, 1933, beginning with the words 'AECIGI',11 A. First National of Elmira Corporation', upon the conditions set forth in said telegram except that you are authorized to disregard the condition set forth in 'C Third' of said telegram requiring the simultaneous issuance of a limited voting permit to First National Bank Trust Company of Aimira; 368 1/27/34 :iith respect to the Board's teles-rnm to you dated '2ecember 29, 1933, referring to the application for membership in the Federal ..:eserve System of The Dank of Elmira Heights, Elmira Heights, N. 7., to disreard the unnumbered condition that a limited voting pemit be issued to First National Bank P Trust Company of Elmira. "4. Pith respect to the Board's telegram to you dated December 29, 1933, referring to the a:liplication for rnembershir in the f - ederal ,-- eserve System of Watkins State Bank, .:atkins Glen, New York, to disregard the unnumbered condition that a limited voting permit be issued to First National Bank P Trust Company of Elmira. "5. To notify The bank of Elmira Heights, Elmira Heights, New York, that the time limit within which its admission to membership in the Federal Reserve ystem may be accomplished is extended from the period of 30 days from December 20, 1933, as specified in the Board's letter to the Board of Directors of that bank dated _;ecamber 29, 1933, to a period of 60 days from December 20, 1933; "6. TO notify the 'iatkins State Bank, ; - :atkins Glen, New York, that the time limit within which its admission to membership in the Federal Reserve System may be accomplished is extended from the period of 30 days from December 29, 1933, as specified in the Board's letter to the Board of Directors of that bank dated December 29, 1933, to a period of 60 days from December 29, 1933. "Will you please advise First National of Elmira Corporation, First National Bank H Trust Company of lamira, and the Superintendent Of Banks of the State of New York of such of the contents of this letter as may be of interest to each. Pill you also forward for the Board's files one copy of any relevant opinion of counsel to the Federal Reserve Bank of New York which may be received by you." "3. Approved. Telegram to Hr. Austin, Federal Reserve Agent at the Federal Reserve a4Ilk of Philadelphia, stating that the Board has considered the applicati°4 of the "First Camden Corporation", Camden, New Jersey, for a voting 'Delimit under authority of section 5144 of the evised Statutes of the 1341ted States, as amended, entitling such organization to vote the stock 17hi eh it owns or controls in "The First National Bank of Haddon Heights", 111344°n ilei,;hts, Hew Jersey, and has authorized the issuance of a limited 13"mit to the al)olicant, subject to the followilv; condition: 369 1/27/34 -9- "Simultaneously with the issuance of the limited voting permit hereby authorized there shall be issued to First Canden National Bank and Trust Company, Camden, New Jersey, the limited voting permit authorized in the Board's telegram to you of this date." attd for the following purposes: "At any meeting of shareholders of such think or at any adjournment thereof, at any time prior to April 1, 1934, "(1) To approve the sale of the real and personal assets of The First National Bank of Haddon Heights to the First :;150,000 1 Camden National Bank and Trust Company for the sum of : and the assumption by the First Caaden National Bank and Trust Company of the deposits and liabilities of The First National Bank of Haddon Neihts; "(2) To liouidate The First National Bank of Haddon Heights and surrender its charter, in case of the approval of the sale of all of its assets and the assumption of its deposits and liabilities, as aforesaid." The telegram also authorized the agent to have prepared by counsel for the Federal reserve bank, and to issue to the First Camden Corporation, 4 1J:ratted voting permit in accordance with the telegram. Approved. In connection with the above there was presented a second teleto 1,:r. Austin, Federal Reserve Agent at the Federal Reserve Bank of l'hiladelphia, stating that the Board has considered the application of the "First Camden National Bank and Trust Company", Cnmden, New Jersey, t°11 a voting permit under authority of section 5144 of the Revised St4tUtes of the United States, as amended, entitling such organization t° vote the stock which it owns or controls in "The First National Bank or Iladdon Heights", Haddon Heights, New jersey, and has authorized the 4811,- of a limited permit to the applicant, subject to the following e°11d1ti0n: "Simultaneously with the issuance of the limited voting Permit hereby authorized there shall be issued to First Camden 370 1/27/34 -10- "Corporation, Camden, New Jersc.y, the limited voting remit authoized in the Board's telegram to you of this date." alld for the following purposes: "At any meeting of shareholders of such bank or at any adjournhient thereof, at any time prior to April 1, 1934, "(1) To approve the sale of the real and personal assets of The First Ilational Bank of Haddon Heights to the First Camden ::ational Bank and Trust Company for the sum of :J50,000 and the assumption by the First Camden Uational Bank and Trust Company of the depositS and liabilities of The First National flank of Haddon Heights; "(2) To liouidate The First National Bank of Haddon Heights and surrender its charter, in case of the approval of the sale of all of its assets and the assumption of its deposits and liabilities, as aforesaid." The telegram also authorized the agent to have prepared by counsel for the xederal reserve bank, and to issue to the First Camden ::ational Bank Trust Company, a limited voting permit in accordance with the telegram. 4proved. Telegram to Er. Newton, Federal Reserve Agent at the Federal Re3el've Bank of Atlanta, stating that the Board has considered the application Of the "Florida :ational Group, Inc.", Jacksonville, Florida, for a l'°tinC permit under authority of section 5144 of the Revised Statutes of the United States, as amended, entitling such organization to vote the 3t0ck which it owns or controls in the following banks: "The Florida National Bank of Jacksonville", Jacksonville, Florida. "The Florida National Bank at Bartow", Bartow, Florida. "The Florida National Bank at Lakeland", Lakeland, Florida. "The Florida National Bank and Trust Company at Eiami", Florida. Bank at St. Petersburg", National "The Florida Florida. Petersburg, St. cIld has authorized the issuance of a limited permit to the apl)licant, 371 1/27/34 -11- subject to the following conditions: "First. Prior to the issuance of the limited voting permit hereby authorized applicant shall agree "(1) That within such time as shall be fixed by the Federal Reserve Agent at the Federal Reserve Bank of Atlanta, and in any event prior to Lay 1, 1934, the undersigned will cause its subsidiary member and nonmember banks to rehabilitate their respective capital structures by means of voluntary contributions and/or issuance of new common stock and/or preferred stock or otherwise, in such manner and in such respective aggregate amounts as shall be approved by the appropriate supervisory * authorities and shall be satisfactory to the Federal Reserve Agent at the Federal Reserve Bank of Atlanta, and will cause such subsidiary banks to charge off or otherwise eliminate (a) esbimated losses in loans and discounts, (b) depreciation in stocks and defaulted securities, (c) depreciation in securities not of the four highest grades as classified by an investment service organization regularly engaged in the business of rating or grading securities, and (d) all other losses, such charge-offs or eliminations to be based on current examinations or credit investigations, and to be of such nature and extent, and in accordance with such plan or plam for the rehabilitation of such subsidiary banks, as shall be approved by the appropriate supervisory authorities and shall be satisfactory to the Federal Reserve Agent at the Federal Reserve Bank of Atlanta; "(2) That all assets of its subsidiary member and'nonmember banks which may be charged off or otherwise eliminated pursuant to the foregoing clause numbered (1) of this agreement, will remain the property of such subsidiary banks respectively and will not be distributed to the shareholders of the undersigned or of any of such subsidiary banks or otherwise released in any manner whatsoever, "(3) That it will cause its subsidiary member banks to correct all items, operating practices, policies and matters relating to their respective financial conditions which have been criticized by the appropriate supervisory authorities or by the Federal Reserve Agent at the Federal Reserve Bank of Atlanta; "(4) That it will cause its subsidiary member and nonmember banks to eliminate, or to initiate the reduction pursuant to a program calling for the regular periodic retirement in substantial amounts of, all loans and advances made by each such bank to the undersigned and/or to any of its subsidiaries or Other affiliated organizations, and also all loans and advances secured by, and all investments in, stocks or obligations of the undersigned and/or any of its subsidiaries or other affiliated organizations. "Second. Prior to the issuance of the limited voting permit herebY authorized applicant shall supplement its voting permit ap, to you in triplicate plication heretofore filed by deliverin:, 372 1/27/34 "Exhibit N duly executed by applicant with the consent T)roperly indorsed thereon of each of the five national banks listed after B above. "Third. Simultaneously with the issuance of the limited voting permit hereby authorized there shall be issued to Almours Securities, Inc. the limited voting permit authorized in the Board's telegram of this date to the Federal Reserve Agent at the Federal Reserve Bank of Atlanta." and for the following purposes: "1. To elect directors of such banks at any meeting of their respective shareholders, or at any adjournments thereof, at any time prior to May 1, 1934, and to act thereat upon such matters of a routine nature as are ordinarily acted upon at the respective annual meetings of such banks. "2. At any time prior to May 1, 1934, to act upon a proposal or proposals to authorize and effect an increase in the capital funds of each of such banks nnd to do all things necessary for such purpose, provided that such proposal or proposals Shall be in accordance with a plan or plans which shall be approved by the appropriate supervisory authorities and shall be satisfactory to the Federal Reserve Agent at the Federal Reserve ,Bank of Atlanta." The telegram stated also that consideration of the issuance of a voting Perlait with respect to stock of the Florida Bank at Orlando, Florida, will be undertaken at the time when that bank's application for member8114 is given consideration. The telegram also authorized the agent to Ilave prepared by counsel for the Federal reserve bank, and to issue to the Florida National Group, Inc., a limited voting permit in accordance //lth the telegram when the conditions prescribed therein have been cornWith, Approved. In connection, with the above there was presented a second teleto Mr. Newton, Federal Reserve Agent at the Federal Reserve Bank of 4tlanta, stating that the Board has considered the applicatiOn of "Almours 373 1/27/34 -13- "Securities, Incorporated", Jacksonville, Florida, for a voting permit Under authority of section 5144 of the Revised Statutes of the United States, as amended, entitling such organization to vote the stock which it owns or controls in the following banks: "The Florida National Bank of Jacksonville", Jacksonville, Florida. "The Florida National Bank at Bartow", Bartow, Florida. "The Florida National Bank at Lakeland", Lakeland, Florida. "The Florida National Bank and Trust Company at Miami", Miami, Florida. "The Florida National Bank at St. Petersburg", St. Petersburg, Florida. etad has authorized the issuance of a limited permit to the applicant, 811-bject to the following conditions: "First. Prior to the issuance of the limited voting permit hereby authorized applicant shall agree "(1) That within such time as shall be fixed by the Federal Reserve Agent at the Federal Reserve Bank of Atlanta, and in any event prior to May 1, 1934, the •flidersigned will cause its . subsidiary member and nonmember banks to rehabilitate their respective capital structures by means of voluntary contributions and/or issuance of new common stock and/or preferred stock or Otherwise, in such manner and in such respective aggregate amounts as shall be approved by the appropriate supervisory authorities and shall be satisfactory to the Federal Reserve Agent at the Federal Reserve Bank of Atlanta, and will cause such subsidiary banks to charge off or otherwise eliminate (a) estimated losses in loans and discounts, (b) depreciation in stocks and defaulted securities, (c) depreciation in securities not of the four highest grades as classified by an investment service organization regularly engaged in the business of rating or grading securities, and (d) all other losses, such charge-offs or eliminations to be based on current examinations or credit investigations, and to be of such nature and extent, and in accordance With such plan or plans for the rehabilitation of such subsidiary banks, as shall be approved by the appropriate supervisory authorities and shall be satisfactory to the Federal Reserve Agent at the Federal Reserve Bank of Atlanta, "(2) That all assets of its subsidiary member and nonmember banks which may be charged off or otherwise eliminated pursuant to the foregoing clause numbered (1) of this agreement, Will remain the property of such subsidiary banks respectively and will not be distributed to the shareholders of the under- 374 fi 1/27/34 -14- "signed or of any of such subsidiary banks or otherwise released in any manner whatsoever; "(3) That it will cause its subsidiary member banks to correct all items, operating practices, policies and matters relating to their respective financial conditions which have been criticized by the appropriate supervisory authorities or by the Federal Reserve Agent at the Federal Reserve Bank of Atlanta; "(4) That it will cause its subsidiary member and nonmember banks to eliminate, or to initiate the reduction pursuant to a program calling for the regular periodic retirement in substantial amounts of, all loans and advances made by each such bank to the undersigned and/or to any of its subsidiaries or other affiliated organizations, and also all loans and advances secured by, and all investments in, stocks or obligations of the undersigned and/or any .of its subsidiaries or other affiliated organizations. "Second. Prior to the issuance of the limited voting permit hereby authorized applicant shall supplement its voting penmit application heretofore filed by delivering to you in triplicate Exhibit Q properly executed by it with respect to Florida Bank at Orlando, Orlando, Florida. "Third. Simultaneously with the issuance of the limited voting permit hereby authorized there shall be issued to Florida National Group, Inc. the limited voting pennit authorized in the Board's telegram of this date to the Federal Reserve Agent at the Federal Reserve Bank of Atlanta. azid for the following purposes: "1. To elect directors of such banks at any Lleeting of their respective shareholders, or at any adjournments thereof, at any time prior to Lay 1, 1934, and to act thereat upon such matters Of a routine nature as are ordinarily acted upon at the respective annual meetings of such banks. "2. At any time prior to I.ay 1, 1934, to act upon a proposal or proposals to authorize and effect an increase in the capital funds of each of such banks and to do all things necessary for such Purpose, provided that such proposal or proposals shall be in accordance with a plan or plans which shall be aporoved by the appropriate supervisory authorities and shall be satisfactory to the Federal Reserve Agent at the Federal Reserve Bank of Atlanta." The the telegram also authorized the agent to have prepared by counsel for Pederal reserve bank and to issue to Almours Securities, Incorporated, litaited voting pennit in accordance with the telegram when the condi- 375 1/27/34 -15- prescribed therein have been complied with. Approved. Telegram dated January 26, 1934, approved by five members of the Board, to Mr. Edward Ball, Vice President of Almours Securities, Inc., heksonville, Florida, reading as follows: "Referring your letters January 22 to Federal Reserve Board and Governor Black with respect to necessity of publishing statements of certain corporations, Board is not at this time requiring Publication agreed to by Almours Securities, Inc., and Florida National Group, Inc., as part of Form P-1 of their respective voting permit applications and there is accordingly no necessity now of determining organizations whose statements would have to be published under such agreements. question whether publication of reports of corporations named is necessary under statutory provisions requiring publication of reports of affiliates of national banks is Within jurisdiction of Comptroller of the Currency and copies of Your letters and of organization chart have therefore been furnished him for his attention." Approved. Telegram dated January 26, 1934, approved by four members of the Bo arct, to Y.r. Newton, Federal Reserve Agent at the Federal Reserve Bank et San Francisco, stating that the Board has considered the application °t the "Union 3ond &: Mortgage Company", Port Angeles, Washington, for a permit under authority of section 5144 of the Revised' Statutes °t the United States, as amended, entitling such organization to vote the stock which it owns or controls in the "First Notional Bank in Port 44,geles", Port Angeles, 'ashington, and has authorized the issuance of limited permit to the applicant for the followinF, purposes: "To elect directors at any raeetin7 of the shareholders of ,,uch bank, or at any adjournment thereof, at any time prior to ljril 1, 1934, and to act thereat upon such matters of a routine slaitellilatIre ordinarily acted upon at the annual meetings of Approved. 376 1/27/34 -16Letter to Lir. Curtiss, Chairman of the Federal Reserve Bank of Boston, reading as follows: "The Board has reviewed the report of examination of the Federal Reserve Bank of Boston asibf October 7, 1033, copies of which were left with you and Governor young. "The Board is pleased to observe that the recoanendation of its examiner (pace 14) that the amount of cash or negotiable securities under sin;Ele control be materially reduced has been adopted. In this connection, it is felt that from time to time the officers of the bank should review the holdings of cash or securities and satisfy themselves that no unduly large amounts are held under single control. "At the time of the previous examination as of Auc,7ust 13, 1032, the examiner recamended that the accounting procedure in connection with claims account closed banks be chanced so as to reflect on Form 34 the net amount of such claims. The report indicates (page 14), however, that through a misunderstanding of instructions the recommendation of the examiner was not adopted, but that the ratter would now be corrected. The Board wishes to be advised if this has been done. "The report indicates (page 14) that on several occasions subsequent to April 14, 1033, penalties for deficiencies in reServes had not been assessed in accordance with the Board's letter of April 14, 1933 (X-7411). While the amounts in each such instance were small, penalties should be assessed and waivers made in accordance with the Board's letter of Anril 14, 1933. "The examiner calls attention (page 15) to an apparent abuse by a member bank at Newtoa, nassachusetts,- of the privilege of Bank at the expense Shipping money to and fram the Federal ,-eserve of the eserve Bank. The examiner reported that the frequency and amounts of such shipments appeared to be entirely out of line with the size of the member bank. Abuse of the privilege of shipping money at the expense of the Federal Reserve Bank or of any other privilege extended member banks should not be permitted, and it is reqiested that the management, if it has not already done SO, investigate this matter and take such corrective action as may be necessary. Your comments in this respect will be appreciated. "It is observed (page 16) that a review of the files in conlection with the examinations of State member banks in thc: district Indicated that the Bank Examination Department depended almost entirely upon the State banking departments to obtain corrections of criticised matters reflected in the ret:orts of examinations of ,.).*tate member banks, and that the Board's examiner was informed that a plan would be devised providing for closer supervision and follow41) of matters of criticism listed in reports of examination of State 131:ember banks and for obtaining corrections of such matters. The 1,3,0ard feels that it is desirable to work in cooperation with the otate supervising authorities and that the initiative in obtaining corrections in the condition of State member banks may properly be 377 1/27/34 -17- "left to the State authorities. If such procedure, however, does not result in the desired corrections, the Federal l'oserve through direct approach to the State member banks, should undertake to effect necessary corrections. "On page 16 of the report the examiner comments on the fact that certain essential information in connection with the condition and management of State member banks is not furnished in the reports of examination of such banks made by examiners for the Federal Reserve Dank, and that in several instances the files do not contain records of nersonal interviews or telephone conversations with the State supervising authorities or officers of the member banks regarding corrections of such matters. The reports of examination should contain sufficient information for an adec_uate appraisal of the bank's condition and management, and the files of the Bank ExaminatLon Department should contain memoranda covering the interviews and conversations held in connection with obtaining corrections of the member banks. The Board is pleased to note that the examiner's recommendations regarding these matters will be adopted. "The examiner comiaents (page 17) on the fact that, due in Part to unusual circumstances, the auditing department was considerably behind in its schedule of audits and reports that he had been advised that efforts would be made to maintain the schedule in the future. The Board will aporeciate advice as to whether audits of the various departments are now being made in accordance With the schedule. "It is noted that the recommendations of the Board's examiner (page 17) have been adopted, and that hereafter audits of the Collection and Transit Departments will be enlarged in scope so as to include a control on incoming mail for a Period of time subsequent to the date of the audit, and that audits of the Fiscal Agency Department will be enlarged in scope so as to provide for a chocking of all subscriptions received. "In the report of the previous examination, as of August 13, 1932, the examiner recommended that the Credit Department obtain more operating data, to supplement financial statements supporting commercial lines, and stated that he had been advised that consideration would be given to the recommendation. In the report of examination as of October 7, 1933, the examiner again recommends (page 17) that more operating data be obtained to support commercial lines, and, in addition, recommends that in all cases sufficient information be obtained relative to receivables or to any unusual items in the statements when such information is necessary to establish the worth of the statement as a basis of credit. It is noted that the management has stated that these matters would be given attention, and the Board would like to be advised as to what action, if any, has since been taken in this respect. "On pa7,e 18 of the report the examiner comments on the difficulty experienced, because of the inadequate records and controls, in balancing the accounts of the custodies held for the Reconstruction Finance Corporation. The Board is Pleased to note that 378 1/27/34 -18- "the recommendation of its examiner that proper records and controls be established has been adopted. "As a matter of information, the Board would be interested in learning whether the arrangement effected in September, 1931, whereby the bank's cafeteria is operated by an individual for his own account and financial risk has proven satisfactory. In particular, the Board would like to be advised as to whether the cost to the employees is higher under the present arrangement than it was when the cafeteria was operated by the bank, and how the percentage of the cost of the cafeteria absprbed by the bank under the present arrangement because of light, heat, and other incidentals furnished the operator without cost compares with the expense absorbed when the cafeteria was operated by the bank. Please also advise the Board of the proportion of the baak's employees that was patronizing the cafeteria when it was operated by the bank and the proportion that has been patronizing it since it has been operated by an individual for his own account. "After the report and this letter have received the consideration of the board of directors of the Federal Reserve Bank, the Board would appreciate advice from you as to what action has been taken, or will be taken, on the matters discussed." Approved. Letter dated January 26, 19311, approved by five members of the 8°11rd, to i.r. L. R. Rounds, Chairman of the Pension Committee, New York, Ilew York, reading as follows: "Receipt is acknowledged of your letter of January 22 in regard to the plan for a retirement system for the Federal reserve banks. The Board is advised that in addition to the eight banks listed in your letter the plan has now been a7)proved by the Federal Reserve Bank of Boston and that it will be acted upon by the remaining three banks, Atlanta, Chicago, and Kansas City, at their next meetings of their boards of directors. "As stated in the Board's letter of January 3, the Board i3 prepared to approve the plan and the rules and regulations of the retirement system in the form submitted with your letter of lovember 22, 1933, if and when modified in the respects mentioned in that letter and approved by the Federal reserve banks. It is now understood that the plan and the rules and regulations were modified in the respects outlined in that letter and that the approvals of the nine banks which have acted up to this time have been upon the basis of the plan and the rules and regulations as thus modified. "In view of the circumstances indicated in your letter and since, in order to expedite the operation of the plan, it is necessary under its terms for the Chairman of the Governors' Conference, 1/27/34 -19- "Governor Calkins, to appoint an organization committee, the Board is advising Governor Calkins that it has no objection to his proceeding at once to ai,00int the committee without waiting until the Board is advised of the action of the remaining three banks, with the understanding that the actions taken by the organization committee will be subject to the possibility that one or more of the remaining three banks might fail to approve the plan for reasons not now known to the Board which would cause the Board to withhold its final approval." Approved, together with a telegram dated January 26, 1934, also approved by five members of the Board, to Fr. Calkins, Chairman of the Governors' Conference, in accordance with the letter to lir. Bounds. Letter dated January 20, 1934, aproved by four members of the &38.rd, to lIr. Cailer, Deputy'Jovernor of the Federal .Feserve Bank of Lew Yf3rk, reading as follows: "With respect to your letter of December 20, 1033, concerning certain incomplete ,100 Federal Be serve notes of the Federal Beserve Bank of Linnea-,)olis with counterfeit seals and serial numbers, and telephone conversation yesterday with Fr. nead, after discussing this matter further with the Treasury Department, it is suggested that you advise the Treasury that if it will turn such notes over to the Federal leserve Board's Division of issue and Redemption, obtain that Division's receipt therefor in duplicate and furnish one copy to the Federal leserve Board and one copy to the Federal Reserve Bank Of Few York, the Federal Reserve Lank of Few York will, upon receiving the such receipt, credit the Treasury',.: ':;eneral “ccount with amount involved. "In this connection you are advised that the question of aSkinC; Congress for relief for incomplete Federal Reserve notes which get into circulation and are subsequently presented for redemption ls now receiving considel-ation by the Treasury Department." Approved. Letter dated January 20, 1934, approved by four members of the re, to T. Falter Lichtenstein, Secretary of the Federal Advisory Conneil, , .;hica,-o, Illinois, reL,dinr., as follows: "Receipt is acknowledged of your letter of January 10, 1934, enclosing a list of the members of the Federal Advisory , that the nert meeting of the Council for the year 1934 and statin, 380 1/27/34 -20- "Council will be held in washington on Tuesday, February 20, 1934. You will be advised in due course of any to)ics which the Federal Reserve Board desires the Council to discuss at that meeting." Approved. Letter dated January 26, 1934, approved by four members of the Board, to Er. G. H. Wagner, Assistant Cashier of the Federal Reserve Balik of Cleveland, reading as follows: "Referring to your letter of January 20, the Federal Reserve Board has not ruled on the question as to whether Federal Reserve banks should compute penalties for deficiencies in reserves of member banks on a 360-day basis or on a 365-day basis. It would appear, however, that in order to assess such penalties 'at a basic rate of 2 percent per annum above the Federal Reserve bank discount rate on 90-day commercial paper', in accordance with the provisions Of Section IV, Paragraph (4) of Regulation D, the Reserve banks Should compute the penalties on a 365-day basis since the discount Charged on bills discounted is computed by them on that basis." Approved. Memorandum dated January 23, 1934, from Er. Vest, Assistant CoUnsel, recommending that the statements attached to the memorandum With regard to certain rulings Which the Federal Reserve Board has IleeentiY made interpreting the Banking 2ct of 1933, and which are believed to be of general interest, be published in the next issue of the l'ederal Reserve Bulletin. bet. The recommendation was approved by five mm- of the Board on January 26, 1934. Approved. Letters dated January 26, 1934, approved by four members of the '4°111 ' (1 3 to applicants for permits under the Clayton Act, advising of apIllval of their applications as follows: 121:* X. S. NeGill, for permission to serve at the same time as a director and officer of the First -rational Bank e.7. Trust Company lam Grove, Elm Grove, west Virginia, and as a director and °I'ficer of the leoples National Bank, West Alexander, Pennsylvania. 381 1/27/34 -21- Thomas L. Orr, for permission to serve at the same time as an Officer of the :Tenon ::ational Bank, i'ittsbursh, Pennsylvania, and as a director of the ';iilkinsburg Dank, ,:ilkinsburg, Pennsylvania. Franz C. Groos, for permission to serve at the same time as a director and officer of The Groos 1.7ational Bank, San Antonio, Texas, and as a director of the San Antonio branch, Federal Reserve Bank of Dallas, San Antonio, Texas. Approved. Letters dated Tanuary 23, 1934, a..::roved by five members of the 130ard, to aplicants for permits under the Clayton act, advisin of ap- proval of their applications as follows: L. Sadler, for permission to serve at the same time as a director and officer of the First 7Tational Bank, Harriman, Tennessee, and as a director and officer of the First 2-7ational Bank, Oneida, Tennessee. B. LT. C. Lynn, for permission to serve at the same time as a director and officer of the First "Tational Bank, Lake "'ark, Iowa, as a director and officer of the Security State Bank, Sutherland, Iowa, and as a director and officer of the Security State Bank, Hartley, Iowa. Approved. Letters to applicants for permits under the Clayton Act, adIriSine; of a-,n-oval of their applications as follows: LT. W. B. Kaye, for permission to serve at the same time as a director of the Citizens Union 7ational Bank, Louisville, Kentucky, Columbia Trust Company, Louisand as a director of the Fidelity ville, Kentucky. 'Jr. G. K. Fillard, for permission to serve at the sane tine as curector and officer of the First 3ational Bank, International 1.innesot'l, and as director and officer of the :tate Bank of Littlefork, Littlefork, Einnesota. There were then presented the followinE, applications for original tocIz of Federal reserve banks: 1/27/34 -22- for OTRIGIKZ_L Stock: District No. 3. The KinL-;ston National Dank, Elinp;ston, Pennsylvania First National Bank in Freeland, Freeland, Pennsylvania The Citizens National Bank of Collingswood, Collin:swood, New Tersey Shares 720 75 90 885 District No. 7. Decatur County National Bank of Greensburg, Greensburg, Indiana 36 36 District TIo. 10. l'irst National Bank in Boulder, Boulder, Colorado 72 72 36 Total 36 1,029 Di3triot No. 12. Ftyst National Bank in Clatskanie, Clatskanie, Oregon Approved. Thereupon the meeting adjourned. Secretary. A Pproved: Governor.
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