The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
161_6 A meeting of the Federal Reserve Board was held in Washington on Wednesday, July 17, 1955, at 11:50 a. m. PRESENT: Mr. lir. Mr. Mr. Yr. Mr. Eccles, Governor Thomas, Vice Governor Hamlin Miller James Szymczak Mr. Morrill, Secretary Mr. Carpenter, Assistant Secretary The Board acted upon the following matters: Letter to Mr. Stevens, Chairman of the Federal Reserve Bank Of Chicago, reading as follows: "This will acknowledge receipt of your letter of July 12 advising the Board of the reduction in salaries of E. A. Delaney, Assistant Deputy Governor, L. G. Meyer, Manager, Service Department, R. J. Hargreaves, Manager, Personnel Department, and Robert E. Coulter, Manager, Cash Custody Department. It is noted that the reduction in salary of Mr. Coulter is to be made effective September 1. It will be appreciated if you will advise the Board of the effective dates of the reductions in salaries of the other Officers named." Approved. Letter to Honorable Ernest Lundeen, House of Representatives, Pl'ePared in accordance with the action taken at the meeting of the 8°ard on July 12, 1955, and reading as follows: "Your letter of July 2, 1955, addressed to Secretary Morgenthan as Chairman of the Federal Reserve Board, and requesting advice as to the salaries of two officers and two employees at the Federal Reserve Bank of Minneapolis, has been forwarded to this Office for reply. "The annual salaries, as shown by the records of the Board, Of three of the individuals mentioned in your letter are as follows: John N. Peyton, Chairman and Federal Reserve Agent Swanson, Assistant Federal W. E. Reserve Agent W. J. Stutzman, Examiner $20,000 7,500 4,200 161 7/17/35 -2- “The fourth person referred to in your letter is listed as J. B. Johnson. Male it appears that a number of persons with the name of Johnson are employed at the Federal Reserve Bank of Minneapolis, the records of the Board do not disclose anyone whose initials are 'J. B.1 If you will furnish this office with information which will enable the Board to identify the person you have in mind, it will be pleased to advise you of the amount of his salary.” Approved. Letter to Mr. Curtiss, Chairman of the Federal Reserve Bank of B"ton, prepared in accordance with the action taken at the meeting of the Board on July 12, 1935, and reading as follows: "Reference is made to your letter of June 5, 1935, with further regard to the service of Mr. Arthur Sewall, a Class A director of your bank, as Mayor of the City of Bath, Maine. "Mien Governor Young was in Viashinzton recently he suggested that, as Yr. Sewall was not aware at the time he accepted the public office that he was acting contrary to any established policy of the Federal Reserve Beard, and as his term as Jayor of Bath would expire at the close of 1935, the Board consiaer the desirability of holding the matter in abeyance until the expiration of the term. "Governor Young's suggestion has been given careful consideration by the Federal Reserve Board and, in view of all the circumstances, the Board will interpose no objection to Mr. Sewall continuing to hold both offices until the end of his present term as Mayor of the City of Bath. It will be appreciated if you will advise him of the Board's decision." Approved. Telegram to Mr. Case, Federal Reserve Agent at the Federal Reeerve Bank of New York, reading as follows: "Refer Downs' letter July 12, 1935. Board extends to August 10,1935, time within which 'The Citizens Bank of Arcade', New York, may accomplish membership in System and within which Citizens Shareholders of Arcade, Inc., Arcade, New York, its holding company affiliate, may obtain voting permit. Please advise those at interest accordingly." Approved. 7/17/35 -5Letter to Mr. Hoxton, Federal Reserve Agent at the Federal Re- serve Bank of Richmond, reading as follows: "Reference is made to your letter of June 20, 1935, recommending that the time be extended 6 months from May 17, 1935, Within which the 'Citizens Bank and Trust Company', Concord, North Carolina, may comply with the provisions of membership condition numbered 22, which reads as follows: 22. Within six months from the date of its admission to membership such bank shR11 require that the offices of the Building and Loan Association now located in the banking quarters of such bank be removed therefrom. The bank accomplished its membership on November 17, 1953, and the Board subsequently granted the institution two extensions of time of 6 months each within which it might comply with the provisions of the condition. "Prior to the tiroP its membership was accomplished the bank had requested that condition numbered 22 be waived and in submitting the request pointed out that both of the other banks in Concord, one of which was a national bank and the other a nonmember bank, were being permitted to operate under similar circumstances and for this reason, as well as because of the loss of the income from rent, asked that the condition be waived. In Mr. Fry's letter of April 260 1934, it was stated that it might cause unfavorable comment by the public and would probably cast reflections upon the Building and Loan Association if it were required to move from the bank's quarters and, in view of this as well as other circumstances, you and your executive committee recommended that condition numbered 22 be waived until such time as the other two banks are required to remove from their banking rooms the building and loan associations occupying space therein. Mr. Fry stated in the same letter that your examiner did not find any improper relations between the bank and the Building and Loan Association and in your letter of June 20, 1935, you stated that a recent examination of the bank found conditions with respect to the two organizations unchanged. "As you were advised in its letter of May 14, 1934, the Board believes that it is not a desirable situation when the quarters of a bank are shared by another institution and has been guided by this principle in so far as possible in dealing with such situations. Careful consideration, however, has again been given the matter in so far as it affects the Citizens Bank and Trust Company, and, in view of all the circumstances and your recommendation in the matter, the Board grants an indefinite extension of the effective date for compliance with the provisions of membership condition numbered 22. Such action has been 1619 7/17/35 -4- "taken with the distinct understanding, however, that the Board specifically reserves the right to require the bank to accomplish compliance with the condition at any time within 6 months after notice to this effect shall have been given to the bank. "It is requested that you advise the bank of the Board's action in the matter." Approved. Letter dated July 16, 1935, approved by five members of the Bc)ard, to Lir. Wood, Federal Reserve Agent at the Federal Reserve Bank of -t. R Louis, reading as follows: "Reference is made to your letter of June 14, 19550 regarding the transaction effected as of March 30, 1955, whereby 'The First State Bank of Chester', Illinois, a State member bank, acquired the assets and assumed the liabilities for deposits and capital stock of The First National Bank of Percy, Illinois. "From the information submitted, including pertinent information contained in the report of examination of The First otate Bank of Chester as of April 17, 1935, it appears that the liabilities assumed by the State member bank in connection with the transaction aggregated only i58,7001 of which $45,700 was Offset by cash and the remaining 0.5,000 by assets which are apparently of sound value, and that the transaction has resulted in no material change in the general character of the assets of, or broadening in the scope of functions exercised by, the State member institution, within the meaning of the general condition under which it was admitted to membership in the Federal Reserve System, "In view of the circumstances, including your statement that Counsel for the Federal Reserve Bank of St. Louis is satisfied as to the legal aspects involved, and your recommendation, the Board will take no action affecting the membership of The First State Bank of Chester in the Federal Reserve System by reason of the transaction. "In the report of examination of The First State Bank of Chester as of April 17, 1935, the examiner listed a line of 425,000 represented by three notes of ;0,535.33, each note being endorsed by the maker of the other two notes, as being in excess of the limits prescribed by State law and stated that the proceeds of the three notes were made available to one individual. The examiner reported, however, that the management of the bank does not consider the line as excessive for the reason that each maker is considered responsible for his direct liability of as:335.33. Since the conditions of membership applicable to the institution 1620 7/17/35 -5- "provide that loans shall be maintained within the limits prescribed by State law and the amount involved is considerably in excess of such limits, it will be appreciated if you will advise Whether the State banking authorities consider the indebtedness in question as excessive and, if so, what action has been taken by the bank to make the line conform with the provisions of State law and the conditions of membership." Approved. Letter dated July 16, 1935, approved by five members of the Board,to Mr. McAdams, Assistant Federal Reserve Agent at the Federal Reserve Bank of Kansas City, reading as follows: "Reference is made to the report of examination of the 'Farmers State Bank', Scribrer, Nebraska, as of April 16, 1935, and to your letter of June 28, 1935, advising of the corrections Which have been made of the criticized matters set out in the rePort. "It is noted that on December 51, 1934, the bank paid a dividend of a0375.73 on preferred stock and that, while the records of the institution showed net earnings of a,464.10 for the period between the date of reorganization in March, 1934, and December 31, 1934, such earnings included 6438.83 of interest collected on certain issues of bonds which represented accrued Interest capitalized at the time of purchase of such bonds and should have been applied to the reduction in the carrying value of the securities, thereby reducing net earnings for the period to ;11025.27. "Condition numbered 10 prescribed at the time the bank was admitted to membership provides: 'Such bank shall not pay any dividends which will reduce its surplus below an amount equal to at least 20 per cent of its capital stock, and if at any time its surplus should be less than 20 per cent of its capital stock it shall carry to its surplus account annually, or for any shorter period covered by each closing of its books, not less than 50 per cent of its net earnings for any such period after deducting all losses and providing reserves for depreciation.' "In the report of examination it is also stated that the Nebraska banking laws provide that 20 per cent of the net profits of the bank shall be carried to surplus until the surplus shall equal 50 per cent of paid-up capital stock. Accordingly, inasmuch as the bank's surplus is only equal to 122 per cent of its capital 12t 7/17/35 -6- "stock, it appears that the bank failed to comply with the State banking laws as well as condition of membership numbered 10. tilt is noted from your letter of June 28, 1935, that the bank has advised that the comments of your examiner regarding the payment of dividends on preferred stock have been duly noted and that it will be governed thereby in the future. "In order to comply with the condition of membership numbered 10 the bank, before the payment of any further dividends on preferred stock, should transfer to surplus account, in addition to the amount required by current earnings, an amount equal to 50 per cent of its net earnings for the time that it was in operation in 1934 following its reorganization. It is requested that YOU advise the bank accordingly." Approved. Letter to Mr. Case, Federal Reserve Agent at the Federal Reserve Bank of New York, reading as follows: "This refers to Mr. Gidney's letter of May 24, 1935, with inclosures, replying to the Board's letter of March 8, 1935 (X-9143), regarding security for trust funds deposited in banking departments of member banks and trust companies in the State of New York. "It is the Board's understanding that, in the event of dissolution or liquidation of a trust company in the State of New York, any money received by the trust company as guardian, trustee, executor, administrator, committee, or depositary would be protected by a preference in all of the assets of the trust company over its general creditors, but that in the case of banks exercising fiduciary powers (as distinguished from trust companies) no such preference is accorded. On the basis of this understanding, the Board is of the opinion that it is justified in waiving compliance by member trust companies in the State of New York with the condition of membership to the effect that, if a trust company deposits trust funds in its banking department, it must deposit securities in its trust departrent to secure the payment of the trust funds to the extent that funds deposited in its banking department by a trust company are funds received by it as guardian, trustee, executor, administrator, committee, or depositary. The Board, however, expressly reserves the right to enforce full compliance with such condition if at any time, as the result of statutory changes or otherwise, it feels that such trust funds are not Otherwise adequately protected, and, of course, the Board will expect any member trust company in the State of New York, which is subject to the condition referred to, to comply with the requirements of that condition as to any funds received in a fiduciary capacity other than one of the capacities described above. 1%22 7/17/35 -7- "Accordingly, it is requested that you advise in writing any trust company in the State of New York which is a member of the Federal Reserve System and which is subject to the condition of membership referred to above that the Board waives compliance With the requirements of such condition by the member trust company in so far as the condition would otherwise be applicable to funds received by such trust company as guardian, trustee, executor, administrator, committee, or depositary and deposited in its banking department. In doing so, you should, in each case, of course, make it entirely clear that the Board reserves the right to require full compliance with such condition if at any time the Board feels that trust funds deposited in the banking departnerts of such trust companies are not afforded adequate protection. Please forward to the Board for its records a copy of the advice YOU furnish each of such trust companies in New York." Approved. Letter to Mr. Hoxton, Federal Reserve Agent at the Federal Reserve Bank of Richmond, reading as follows: "This refers to your letter of larch 25, 1955, in reply to the Board's letter of "oarch 8, 1935 (X-9145) regarding security for trust funds deposited in the banking departments of member banks, with which you inclosed an opinion of counsel for your bank regarding the laws of the respective States in your district on this subject. "It is noted, in connection with the laws of Waryland with respect to the question as to whether preferences over general creditors are provided by the laws of that State to the owners of trust funds deposited in the banking departments of trust comPanies in the event of liquidation, counsel for your bank states that preference does not apply specifically to trust funds which a trust company has received in a fiduciary capacity and has used in its own business but which appear as deposit liabilities on its books, but that it is his opinion that the Maryland statute would Of necessity include all liabilities which the condition of membership referred to by the Board is intended to protect. In this connection, you state that, in view of the fact that trust funds are not specifically preferred in the event of liquidation under the laws of Maryland, you have not taken the matter up with the Waryland Commissioner. In the circumstances, it is suggested that You take the matter up with the Bank Commissioner of Earyland with a view to determining whether he concurs with the views expressed by counsel for your bank. "It is also noted that the laws of Maryland referred to and 1623 7/17/35 -8- quoted in part by counsel for your bank relate specifically to trust companies. It will be appreciated, therefore, if you will consult with your counsel and advise the Board definitely whether preferences over general creditors in the event of liquidation are provided by the laws of Yaryland to the owners of trust funds deposited in their own banking departments by State banks exercising trust powers." " Approved. Letter to Mr. Peyton, Federal Reserve Agent at the Federal Reserve Bank of Minneapolis, reading as follows: "This refers to your letter of March 27, 1935, with inclosures, in reply to the Board's letter of March 8, 1935 (X-9143), regarding the laws of the respective States in your district with respect to security for trust funds deposited in the banking departments Of member banks. "It is noted that under the statutes of Montana all funds . 11eld by a bank in trust are given a preference over general creditors, but that the Superintendent of Banks for that State feels that the statutory preference is rather indefinite and for that reason seeks a judicial determination whenever a preference on account of trust funds is claimed. Although it is not entirely Clear, it appears doubtful that the statute in question would be applicable to trust funds deposited in the banking department of a bank. It is also noted that your counsel is of the opinion that it would be a breach of trust for State member banks in any of the States in your district to deposit trust funds in their commercial departments without security. In the circumstances, the Board feels that it would not be justified in waiving comPliance by member banks in Montana with the condition of member11.1p to the effect that if a member bank deposits trust funds in its banking department it must deposit securities in its trust department to secure the payment of the trust funds. "Counsel for your bank has expressed the view that the present condition of membership referred to above should be changed elnee it permits of the implication that trust funds may be dePosited in the banking department of a bank if security is given therefor. In this connection, the Board has taken the position that the condition referred to does not purport to confer any Powers up.)n a bank accepting such condition but merely contemplates that if the bank lawfully deposits trust funds in its own banking department under the laws of the State in which the member bank ls located, it shall deposit security to secure the trust funds so deposited. Furthermore, the Board has consistently held that 11124 7/17/35 -9- "the condition of membership referred to contemplates that any deposit of securities in the trust department of a member bank to secure trust funds deposited in its banking department or otherwise used in the conduct of its business shall result in the creation of a valid pledge for the security of such funds. If, under the laws of the State in which a particular State member bank is located, such a pledge may not lawfully be made, the bank should not deposit trust funds in its banking department or Otherwise use such funds in the conduct of its business, and, of course, if under the State law the trust funds may not lawfully be deposited in the banking department of the institution such deposit should not be made." Approved. Letter to Dar. O'Connor, Comptroller of the Currency, reading as follows: "This refers to the letter dated July 5, 1955, from Mr. Gibbs Lyons, Deputy Comptroller of the Currency, requesting advice as to whetbPr, under the New York Statute, national banks located in New York may continue to pay interest on deposits of Postal Savings funds at the rate of 22 percent per annum. "The Federal Reserve Board has been informed that on June 211 4-965, the New York State, Banking Board issued a regulation prescribing 2 percent per annum as the maximum interest rate payable by New York State banks on time and savings deposits after October 1, 1935. "The Federal Reserve Board now has under consideration the question of the effect of the recent regulation of the New York State Banking Board upon the rate of interest which may be paid la,? national banks located in New York. A ruling upon this question will be deferred for the present in order to determine whether or not the proposed Banking Act of 1955 (H.R. 7617), the provisions of which affect this matter, will be enacted at this session of Congress. You will be promptly advised as soon as the Board reaches a decision upon the question presented in Ur. Lyons' letter." Approved. Letter to Mr. G. H. Bangert, President of the First National 844k, Kenmore, New York, reading as follows: "Receipt is acknowledged of your letter of July 10, 1955, 7/17/35 -10- "in which you asked to be advised whether you may pay interest on postal savings funds at a rate in excess of 2 percent per annum after the effective date of the recent order of the State Banking Department of New York reducing the rate of interest Which may be paid on savings accounts by state banking institutions. "This question has already been presented to the Federal Reserve Board from another source for consideration and is now Pending, We will be pleased to advise you as soon as a decision is reached in the matter. However, the proposed Banking Act of 1935, now pending in Congress, contains provisions which would affect this question and, accordingly, it is unlikely that a definite answer can be given to your inquiry until it has been determined whether the proposed Act will be passed by Congress Prior to October 1, 1935." Approved. Letter to Mr. C. E. Terwilliger, President of The Lallkill Nati°nal Bank, Lallkill, New York, reading as follows: . "Receipt is acknowledged of your letter of July 9, 1935, in which you asked to be advised whether your bank may pay interest on postal savings funds at a rate in excess of 2 percent per annum after the effective date of the recent order of the State Banking Department of New York reducing the rate of interest which maY be paid on savings accounts by state banking institutions. "This question has already been presented to the Federal Reserve Board from another source for consideration and is now Pending. We will be pleased to advise you as soon as a decision iS reached in the matter. In this connection, it may be observed that the order of the State Banking Department does not take effect until October 1, 1955." Approved. Letter to Mr. Clark, Assistant Federal Reserve Agent at the Pecleral Reserve Bank of Atlanta, reading as follows: "This refers to your letter of May 28, 19350 and its inclosure, relating to the question whether A. P. Brantley Company, Blackshear, Georgia, is a holding company affiliate of The Blackshear Bank, Blackshear, Georgia. "The Board understands that A. P. Brantley Company owns or controls less than 50 percent of the outstanding shares of stock 12 7/17/55 -11- "of The Blackshear Bank; that such company owned or controlled and voted more than 50 percent of the number of shares voted for the election of directors at a meeting held on January 15, 1935, and Still owns or controls such shares; that no notice of such meeting W8.s given to the stockholders and, subsequently, pursuant to notice, second meeting for the purpose of electing directors was held on v.ay 15, 1935; and that A. P. Brantley Company did not vote the shares which it owns or controls at the latter election of directors "Clearly, on the basis of the January election of directors, A- P. Brantley Company is a holding company affiliate of The Black?hear Bank and, on the basis of the May election of directors, it ls not a holding company affiliate of the bank. Accordingly, the only question involved is which election of directors was valid. This is primarily a question of State law and, while it feels that the question is not entirely free from doubt, the Board, in the circumstances, is not disposed to take any action contrary to your Counsel's opinion to the effect that the ray, rather than the JTIuary, election should be regarded as the valid election of directors and that, accordingly, a holding company affiliate relationship does not exist." Approved. Letter dated July 16, 1935, approved by five members of the BGard, to 14,. Sargent, Assistant Federal Reserve Agent at the Federal aeserve Bank of San Francisco, reading as follows: "This refers to your letter of lay 15, 1935, relating to the application of American Investment Corporation, Ogden, Utah, fOr a voting permit authorizing it to vote the stock which it owns or controls of CommerciF1 Security Bank, Ogden, Utah, and requesting rulings by the Board as to whether Idaho Bank and Trust ComRally, Pocatello, Idaho, is a subsidiary of the American Investment L'orporation and whether that trust company is an affiliate of Comzercial Security Bank. d understands that Idaho Bank and Trust Company has 1,000 shares of preferred stock and 1,000 shares of outstMeint)ar T) Ilamon stock; that American Investment Corporation owns or con496.33 shares of the common stock; that all of the pre' erred stock is owned by the Reconstruction Finance Corporation; and that at the preceding election of directors all of the shares °f Preferred stock and 741-53/60 shares of the common stock, inthose owned or cs)ntrolled by American Investment Corporaion, were voted. 1627 7/17/35 -12- "On the basis of these facts, the Board is of the opinion that Idaho Bank and Trust Company is not now a subsidiary of American Investment Corporation or an organization owned or controlled by the applicant within the meaning of paragraph numbered 2 of the application for a voting permit (F. R. B. Form P-1) and, in view of the addithnal fact that only one of the seven directors of Idaho Bank and Trust Company is a director of Commercial Security Bank, the Board is also of the opinion that Idaho Bank and Trust Company is not an affiliate of Commercial Security Bank. In the absence of any further facts which you believe should be considered by the Board, you may advise the interested organizations accordingly. "It does not appear whether Idaho Bank and Trust Company is affiliated with American Investment Corporation by reason of interlocking directorates and it is requested that you furnish information in that connection." Approved. Letters dated July 16, 1935, approved by five members of the Board, to applicants for Clayton Act permits advising respectively of the issuance of permits by the Board as follows: Ur. Harry W. Bauer, to serve at the same time as a director and officer of The Second National Bank of Cincinnati, Cincinnati, Ohio, and as a director and officer of the Westwood Bank and Savings Company, Cincinnati, Ohio, for the period ending January 14, 1936. Mr. Harry S. Wherrett, to serve at the same time as a directorg of The Lellon National Bank of Pittsburgh, Pittsburgh, Pennsylvania, and as a director of the Pittsburgh Branch of the Federal Reserve Bank of Cleveland, for the period ending January 14, 1936. X. A. F. Garrou, to serve at the same time as a director of The First National Bank of Morganton, Morganton, North Carolina, and as a director of the Morganton Industrial Bank, Morganton, North Carolina, for the period ending January 14, 1936. Approved. Thereupon the meeting adjourned. 11-A ° Secretary. A.pproved: Governor.
@FedFRASER