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A meetin(T, of the Federal Reserve Board was held in the office of the federal ieserve 73oard on Tuesday, January 3, 1931, at 11.:15 a. ra. PRESENT: Gover:lor Iiiller Kr. James Kr. fole Kr. .i_cClelland, Assistant Secretary. .leport of -xecutive Committee on letter dated January 2nd from the federal lieserve Agent at Kansas City, recommending approval of the a-3plication Of the Oklahoma National Bank, Oklahoma City, Oklahoma, an outlying institution for a reduction in its reserve requirements from 10 deposits, tIi to 7:3 of demand oard's Connittee also recommending approval. Unanimously approved. Memorandum from Counsel dated I,ovember 18th, with further reference to the or:Anization, under Section 25(a) of the federal Keserve Act, of the Proposed American lankin; and Industrial Corporation of the iear approval of which was recommended by the 'ederal dis- userve ar;ent at Mew Mork for reasons stated in a letter addressed by him to the ioard under date of i.ovenber 7th and ordered circulated among the members of the Board at the meeting on :.ovember 10th; Counsel submittin.7, in accordance with a request Made by the Governor, draft of a resolution for adontion by the Board in the event it decides not to approve the organization papers of the proposed corporation nor to issue to it a permit to commence business. After discussion, upon motion, the resolution submitted with Counsel's memorandum was adopted as follows: 13 1/6/31 William 2ellowes Morgan, William S. Ladd, JHEREAS, Albert W. Staub, Henry Herberman, F. H. Schall, Joseph B. Cotton, Frank E. Hagemeyer, David A. Himadi, Fayad H. Tabara, W. F. Southirt, Charles A. Moser and Henry C. Ulen, have, as organizers, submitted for the approval of the Federal Reserve Board the articles of association and organization certificate of a corporation proposed to be organized under the provisions of Section 25(a) of the Federal Reserve Act under the name of 'American Banking and Industrial Corporation for the 1;ear East.' wWHEREAS, the Federal Reserve Board, after having caused an investigation to be made as to the character and financial responsibility of the organizers of the proposed corporation and as to their qualifications for the operation of such a corporation and after having made inquiry as to the reasonable chances for the successful operation of such a corporation in accordance with the proposal of the organizers, has given careful and impartial consideration to the question whether the articles of association and organization certificate of the proposed corporation should be approved and a permit for it to begin business should be issued, in the light of all the information obtained through such investigation and inquiry and all the information submitted by the organizers of this proposed corporation; 'ralMREAS, it is intended that this proposed corporation would transact the ordinary business of a bank of discount and deposit and at the same time would invest a substantial amount of its funds in the stock of subsidiary conpanies, which would be controlled by the corporation and which would engage in the development of a variety of enterprises including public utility, real estate, and industrial projects, in a number of foreign countries at a great distance from the United States of America; r/HEREAS, such a combination of the business of a bank of discount and deposit with that of a holding company of the stock of corporations engaged in various enterprises would in the judgment of the Federal Reserve Board be inconsistent with the best interests of the depositors of the bank; "WEEREAS, under the conditions described a close supervision by the Federal Reserve Board over the activities and condition of the proposed corporation and its subsidiary comanies would be extremely difficult, if not actually impossible; flUEDEREAS, it appears from the information received by the Board that the Board of Directors of the proposed corporation in this country would act principally in an advisory capacity and would have little to do with the actual administration of the affairs of the corporation in the foreign countries; warEREAS, upon inquiry the Federal Reserve Board has received information from which it appears that while the organizers of the Proposed corporation are men of character and standing only a few of them have had experience in international banking or finance or possess qualifications which would make them especially valuable in managing a corporation of this kind; that there is r- 14 -3"no assurance of a sufficiently colapetent and experienced management for the propdsed corporation; and that accordingly the successful conduct of the business of the proposed corporation would be doubtful; "WHEREAS, it is Proposed that one of the organizers of the corporation would receive a promotion fee of 400,000 to be paid out of a fund provided for the purpose by the sale of the capital stock at an amount in excess of its Par value; and "ViliEREAS, in view of these and other considerations, it is the opinion of the Vederal Reserve Board that the entire project is so hazardous and its chances of success so dubious that it would not be in the Public interest for the Board to approve the proposed articles of association and organization certificate of the proposed American Banking and Industrial Corporation or the Lear East; "FO?!, THIPREFORE, ILii IT RESOLVED by the 2ederal Reserve Board that the articles of association and the organization certificate of the proposed hmerican Banking and Industrial Corporation for the Lear East be not approved. "BE IT gUliTELR iZESOL/ED, that a permit for such a cor-)oration to bein business be not issued." Upon motion, it was also voted to a().prove a letter, submitted with Counsel's memorandum, to the organizers of the Proposed American Banking and Industrial Coruoration for the Lear Last, advising of the Board's action. Bond in the amount of ,:100,000, executed by Er. Eugene Li. Stevens as - ederal ,eserve Agent of the ]2ederal ieserve Bank of Chicago, under date of a-anuary 2, 1931. Approved. Liemorandum from Counsel dated :Tanuary 5th, recowending that his office be authorized to prepare and have published a new edition of the federal Ileserve Ect as amended 1.11) to and including Larch 4, 1931. Upon recommendation of the Law Comittee, the authority requested by Counsel was granted. lemorandum from Counsel dated ::anuary 3rd submittin- draft of rePly to letter dated December 30th from the .:,ssistant federal Leserve Lent at Chicago, advisin-; that the first Jterling'ational Sank of Jterli:12, Illinois, has not yet applied to the federal Aeserve Board for the surrender of its trust 15 1/6/31 -4- Powers, nor has it obtained a certificate certifyint: that it is no loner authorized to exercise trust powers; the letter also su-gestinc that the bank and the Auditor of 'ublic Accounts of the 3-bate of Illinois be advised that if the bank desires to surrender its trust Powers, it should proceed in the Inanner prescribed in the last paragra-di of section 11(k) of the ederal -e- serve ."ct and in accordance with the orovisions of 2ection Y.IV of the Board's Regulation Upon recommendation of the Law Committee, the proposed letter was approved. nenorandum from Counsel dated January 2nd, submitting draft of re)ly to a letter dated 13ecenber 26th from the Office of the .;Pecial Assistant to the :3eeretary of the ?reasury with regard to the elimination, as obsolete, from the united states ) - ode, of 3ections 201 and 284 of Title 12 thereof (representin'; portions of iection 2 of 'the federal iieserve Act dealin'; with the "..-Pital of federal heserve banks at the time of organization); the Proposed IbeDly aLvising that the ederal ,eserve Board has no objection to the elimina- tion o: the two sections referred to. Upon recommendation of the Law Committee, the proposed rePly submitted with Counsel's memorandum was approved. 4:lemorandum from Counsel dated January 5th, submitting, draft of reply to letter dated Decenber 30th from the Ohio rational 3ank of Columbus, raising the cuestion whether the )rovision of section 11(k) of the Federal ieserve t, authorizing certain officers of a national bank to take oaths and ezecute affidavits on 'oe Lalf of the bank, is mandatory, or whether the bank IlaY continue to follow the ,:rovisions of 3ection 710-163 of the General Code of Ohio; the proposed reply stating that the section of the Ohio Code referred to applies only to trust ca.)anies and not to national banks; and -5_ 16 that while the provisions of Section 11(k) could not be said to be mandatory, in the absence of a state law soecifically authorizing an officer of a national bank to take oaths and execute affidavits re.-uired by state law, the safer course would be for the officers specified in the Federal deserve Act to take such oaths and execute such affidavits, since they are the only ol?ficers expressly authorized to do so. U.)on recommendation of the Law Committee, the proposed letter was approved., Lemnrandum from Counsel dated J'anuary 2nd with regard to communications received from the assistant F - ederal deserve Agent at Chicago, with reference to the L:e::bershiT) of the dent State Bank, ientland, Indiana; the ::ssistant 2ederal deserve agent advising that it is understood that the charter issued ( , li to tilis bank has expired and that a new charter has been issued in the name Qf "The Kent State Bank", inquiring whether membership has not been automatically terminated and reeuesting a ruling with regard to the Federal l'eserve Bank's position in dealing with the institution which is indebted to the Federal deserve bank; ,Counsel stating that the Assistant Federal deserve Agent at Chicago has been advised, over the signature of the Governor, that (1) • '"ere the charter of a State member bank expires and its business is taken Qver by a newly organized bank, such new bank is not automatically a member of the Federal deserve System but must a-Tly for and obtain membership in the sakle manner as any other nonmember State bank; (2) where the charter of a State lalerflber bank is extended upon expiration without the creation of any new bellk, such bank remains a member of the System and continues to be entitled to all privileges of membership; and (3) if an emerency exists, the Federal reserve bank should consult its own counsel and use its own judgment. 17 *WO 1/6/31 The memorandum further suggested the desirability of Federal Reserve banks maintaining records showing the date of expiration of the charters of all state banks, and outlined a suggested procedure to be followed in maintaintag' such a record, and in dealing with state member banks with expiring charters. Upon recomendation of the Law Committee, a letter to the Governor of the Federal Reserve Bank of Chicago, conveying the suggestions outlined by Counsel as to the proper procedure to be followed; a letter to the iissistant Federal Reserve Agent at Chicago more definitely answering, his question, and a circular letter to all Federal Reserve banks, suggesting that they set up a record showing the date of expiration of the charters of all state member banks in their respective districts, and outlining the procedure suggested by Counsel, which letters were submitted with Counsel's memorandum, were approved and ordered transmitted. 9 Memorandum from Counsel dated October 22nd with regard to a request l*eoeived from the Federal Reserve Bank of I:ew York for the opinion of the 80ard on the question of the classification as deposits for reserve purposes or liabilities arising from transactions whereby foreign currency is paid into an account maintained by a member bank with a foreign correspondent, the amount being repayable by the member bank in foreign currency with interest on a specified later date; the memorandum submitting draft of letter to the Deputy Governor of the Federal Reserve Bank of Eew York advising that the opinion of the Board a liability arising in the manner described Mast under the law be regarded as a deposit liability and subject to the corresponding reserves. Upon recommendation of the Law Committee, the proposed letter was approved and ordered transmitted. -7_ 1/6/31 Lemorandum from the Examiner in Chare dated December 29th, submitting report of examination of the international Acceptance Bank, Inc., 7ew York7 City, 7Jew York, as at the close of business :oveMber 6, 1930. Ordered circulated. The minutes of the meetins of the Executive Ooranittee of the - ederal deserve board held on 2,ecenber 29, 1930 and ,Tanuary 2, 1931 were read and - :ere ratified. aDProved and the actions recorded therein , The minutes of the meetings of the Executive Corviittee of the federal deserve Board held on Jecember 31, 1930 and ‘i-anuary o, 1931 were read and aPproved as amended, and the actions recorded therein were ratified. 'deference was then made to the memorandum submitted by the Governor at the meeting of the Executive Committee on January 2nd, in which he reported that he had advised the Deputy Governor of the few 'fork Bank that he felt, in the li:ht -o2 all circumstances, that the Board would not object to the PlIrchase of approximately ;,15,000,000 of Government securities acr;uired from the :-anufacturers Trust Company and the l'ublic lational Bank, both of : ew York jity, or to the purchase of .,132,000,000 of Government securities recently made 'by the , pen :_arket Miley Conference for iysteri Account because of banklXlf and credit strain over the :-ear-end period. Mien motion, it was voted to approve the action of the Governer in so advisirc the few 7ork Bank. The meeting adjourned at 12:15 p. m. Zil Pl,ferati Assistant Secretary APProved: Governoi.
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