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117 A meeting of the Board of Governors of the Federal Reserve SYstem was held in Washington on Thursday, January 27, 1938, at 11:30 8.. in. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Davis Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Clayton, Assistant to the Chairman Consideration was given to each of the matters hereinafter reteed to and the action stated with respect thereto was taken by the 11°Eird: The minutes of the meeting of the Board of Governors of the Pederco 'LL Reserve System held on January 25, 1938, were approved unanittrqsly. Letter dated January 26, 1938, to Mr. Austin, Chairman of the leder41 Reserve Bank of Philadelphia, reading as follows: Bo "Referring to your letter of January 24, 1938, the erd approves a salary at the rate of 25,000 per annum 142f, Mr. J. S. Sinclair, President of the Federal Reserve ; 4114 of Philadelphia, for the calendar year 1938, which ..'"-arY is the same as that fixed by your board of direcuomn Approved unanimously. tEtak of Letter to Mr. Helm, Secretary pro tem of the Federal Reserve Kansas City, reading as follows: to "Referring to your letter of January 20, 1938, the rd approves the reappointment of Messrs. R. L. Gray, 118 1/27/38 •••• "Walter T. Berkowitz, D. Bruce Forrester, Ed. 3 ! 4c1 L. F. Rooney as members of the Industrial mittee for the Tenth Federal Reserve District terms of one year each, beginning on March 1, S. Miller, Advisory Comto serve for 1938." Approved unanimously. Letter to Mr. Fry, Vice President of the Federal Reserve Bank 0 n1_ --'"iaond, reading as follows: "This refers to your letter of December 22, 1937, to Mr• 1aulger and to the copy of s letter inclosed therein (1.: ara llir. Heyward E. Boyce, President of the Maryland Trust ' an1PanY, Baltimore, Maryland, with reference to the question whether certain repurchase agreements comply with the requirements of the regulation of the Comptroller of the Currency Roverning the purchase of investment securities. "It is understood that the Maryland Trust Company from time to time purchases on the open market bonds of the Houston Oil Company and the Houston Natural Gas CamPally at the request of the companies and pursuant to an p'eement by the companies to repurchase the bonds from 4.1,l_ e trust company on a definite date and at the cost to Ile trust company. These purchases are made in order to enable the companies to acquire bonds for retirement pur3uant to sinking fund provisions. , "It is noted that Mr. Boyce suggests that the securities were acquired for the account of the issuing companies fld not for the account of the Maryland Trust Company and, : ;"°rdinglY, that in the transactions referred to the test 4-s not the rating given by recognized rating services but rather the credit and ability of the companies to meet their repurchase obligations. However, it appears that the trust la°L1PanY used its own funds to acquire the bonds and received PaYment from the issuing companies until the time of the c Purchase by them from the trust company. In such cir, 4111stances it seems clear that the securities were purchased ' 0Tel held during such period by the trust cmpany for its tinl account. Member banks may purchase investment securivie for their own account only in accordance with the proof section 5136 of the Revised Statutes and the co'Ptrpller's regulation issued pursuant thereto and, acrdinglY, the provisions of the regulation are applicable Z _ 119 1/27/38 -3- "to the purchase of these securities by the Maryland Trust Company. ": 1 dth respect to the question whether the agreements between the trust company and the issuing companies comply with the requirements of subdivision (6) of section II of the Comptroller's regulation, it may be said that they do not appear to fall literally within the terms of any one or the three paragraphs of that subdivision. However, in aabstance though not in form they appear to comply with the provisions of paragraph (b) of subdivision (6), and accordingly no objection will be made to the use of such !greements, if the bonds are eligible for purchase by the .,rust company and the transaction otherwise complies with requirements of the regulation. This statement re-rs only to the agreements under which the issuing cornagree to repurchase the bonds at the cost to the -urast company. Mr. Boyce's letter indicated that some °f the agreements had provided that the bonds were to be rePurchased by the issuing companies at par, but it apPeers that such agreements would not comply with the repirements of the regulation unless the bonds were purchased uY the trust company at par or less. "It will be appreciated if you will advise the Maryla A Trust Company of the views expressed herein." Approved unanimously. Letter to Mr. Peyton, President of the Federal Reserve Bank of reading as follows: "In view of the statements contained in your letter Xanuary 24, with respect to the problematical value of 1,„ ue Premises now occupied by the Helena Branch, the Board r pProves the action taken by your bank in making a charge,t, ii1,999, sufficient to reduce the book value of that Property to 0.." ; Approved unanimously. Thereupon the meeting adjourned.
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