Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, July 22, 1933, Volume 20, Part 3

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70
A meeting of the Federal Reserve Board was held in Washington
oa Saturday, ,Tuly 22, 1933, at 11:45 a.m.
PRESET:

Mr.
Mr.
Mr.
Mr.
Mr.

Black, Governor
Hamlin
James
Thomas
Szymezak

Mr. Morrill, Secretary
Mr. Carpenter, Assistant Secretary
The minutes of the meetings of the Federal Reserve Board held
°n July 7, 10, and 11, 1933, were approved.
The Board then considered and acted upon the following matters:
Telegraphic reply on Tilly 12, 1933, approved by four members
Of the Board, to a telegram of that date from Er. Curtiss, Chairman
of the Federal Reserve Bank of Boston, advising that the board of directors of the bank had established, effective as of the date upon which
aPProved by the wederal Reserve Board, a rate of et% per annum on adto member banks under section 10(b) of the Federal Reserve Act,
as Emended by the Act of March 9, 1933, and on advances to nonmember
banks and trust companies under section 404 of the Act of rarch 9, 1933,
a8 amended; no other chance having been made in the bank's existing
schedule of rates of discount and purchase.

The reply stated that the

aderal Reserve Board approves the rate referred to, effective Day 12,
1933,
Approved, and, there being no objection, the
action of the directors in making no other change
in the bank's existing schedule of rates of discount
and purchase was noted with approval.
Telegraphic reply on July 13, 19330 approved by six members of
the

Board, to a telegram of that date from Er. Tewton, Chairman of the

edaral Reserve Bank of San Francisco, advising that, subject to the




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approval of the Federal Reserve Board, the board of directors of the
bank had adopted a rate of 4i70 per annum on advances to member banks
under section 10(b) of the Federal Peserve Act, as amended by the Act
Of Larch 9, 1933, and on advances to nonmember banks and trust companies under section 404 of the Act of Yarch 9, 1933, as amended.

The

reply stated that the Federal i-ieserve Board approves the rate referred
tos effective July 14, 1933.
Approved.
Telegraphic replies on July 14, 1933, approved by five members
of the Board, to telegrams of that date from the Chairmen of the Federal Reserve Banks of Atlanta and Chicago, advising of the establishment at the banks of rates of

per annum on advances to member banks

tinder section 10(b) of the Federal i.ieserve Act, as amended by the Act of
Llarch 9, 1933, and on advances to nonmember banks and trust companies
Under section 404 of the Act of Larch 9, 1933, as amended; effective
the first business day following that on which approved by the Federal
Ileserve Board; the telegram from the Federal reserve agent at Atlanta
al30
schedstating that no other change was made in the bank's existing
Of rates of discount and purchase.

The replies stated that the Fed-

eral 1;eserve Board approves the rates referred to, effective July 15, 1933.
Approved, and, there being no objection,
the action of the directors of the Atlanta bank
in making no other change in the bank's existing schedule of rates of discount and purchase
was noted with approval.
Lettersdated July 13 and 20, 1933, from Er. Sproul, Secretary of
the

1933,
Federal Reserve Bnnk of New York, and telegrams dated July 13,
July 18,
aaton, Chairman of the Federal Reserve Bank of Richmond;




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1933, from Mr. Wood, Chairman of the Federal Reserve Bank of St. Louis;
sInlY 19, 1933, from Lr. Austin, Chairman of the Federal Reserve Bank of
Philadelphia; and July 20, 1933, from 7:1r. McClure, Chairman of the Federal Reserve Bank of Kansas City, all advising that, at meetings of the
boards of directors on the dates stated, no changes were made in the banks'
existing schedules of rates of discount and purchase.
..lithout objection, noted with approval.
Telegram dated July 20, 1933, from 1:r. Newton, Chairman of the
Federal Reserve Bank of San Francisco, advising that, because of the absence of a quorum, the regular meeting of the board of directors of the
bank was not held on that date, and that accordingly no change was made
in the bank's existing schedule of rates of discount and purchase.
Noted.
Lbmorandum dated July 14, 1933, from, Mr. Morrill recommending
that, in order to take care of the increase in the volume of work and
•
to -pl-ovid
e for necessary assistance during vacations for secretaries to
13°ard members and stenographers in his office, lass D. Jeanne Krieger
be

appointed as a stenographer in the Secretary's office, with salary

"the rate of ::;1,560 per annum, effective as of the date upon which
she assumes her duties; the recommendation having been approved by five
laletabers of the Board on July 17, 1933.
Approved.
Memorandum dated July 15, 1933, from T:r. Thomas, stating that

he has selected 'Ass Margaret E. Farrar as his private secretary, and
liecuMmending her appointment with salary at the rate of .)3,000 per an411111, effective August 1, 1933.




The appointment of lass Farrar was

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approved by four other members of the Board on July 17.
Approved.
Renewal bond, in the amount of $50,000, executed on July 10, 1933,
byLr, X. Frank Rehfuss as Acting Assistant Federal Reserve Agent at the
Federal Reserve Bank of Philadelphia.
Approved.
Telegraphic reply on July 14, 1933, approved by six members of the
Board, to a telegram dated July 12 from lir. Curtiss, Chairman of the Fed"al Reserve Bank of Boston, stating that the board of directors of the
bank had voted, in accordance with the suggestion contained in the Board's
resolution transmitted with its letter of June 23, 1933, and subject to the
aPProval of the Board, that the reduction of 5% made on January 1, 1933, in
the salaries of all officers and employees of the bank whose salaries on
December 31, 1932, were at the rate of .A,000 or more per annum, be termlitated, effective July 1, 1933.

The reply stated that the Board approres

the salary payments involved in the action of the directors, and that the
reduction in the agent's basic salary and the reductions in the basic salof assistant Federal reserve agents which were made effective on
1-1:111arY 1, 1933, are discontinued as of the close of business on June 30, 1933.
'
Approved.
Reply on July 11, 1933, appraTed by six members of the Board, to
11 letter dated July 7 from Gorernor Harrison of the Federal Reserve Bank
°r New York advising of a resolution adopted by the board of directors of

the bank in regard to the discontinuance of the share-the-work plan which
has been in effect at the Federal Reserve Bank of New York.

The reply

40ted that, subject to approval of the Federal Reserve Board, the reduction




71

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7/22/33

.1;; in the basic salaries of officers and employees of the bank was
abrogated, effective Iuly 1, 1933; that, in connection with this action,
the reduction in the working time of one-half day each week, or its
e quivalent, is also discontinued, at least for the duration of the summer
vacation period and subject to subsequent reconsideration, and that all
employees who were employed on a temporary basis under the share-the-work
Plan are to be retained on a regular basis subject to the same rules and
regulations as other employees of the bank.

The reply also stated that

the Board infers from the resolution that the employees who heretofore
have been regarded as having solely a temporary status are now to be treated
48 regular employees in the same sense as other employees of the bank who

ii

Were not taken on for the purposes of the share-the-work plan; but that,
14 view of Governor Harrison's statement that the number retained will be
lao. excess of the bank's needs, although part of them will be eliminated by
the normal turnover of employees and another part will be absorbed by the
increase in volume of work, there may be a part of the employees temporarily taken on under the share-the-work plan for wham there is no work or
need for the retention of their services, and that, consequently, the
18°ard is left in

some

doubt as to the exact facts of the situation and the

hatification for the retention of the surplus employees, and for this
conIlee'son, the Board will appreciate further advice as to the employment
ditions involved in the retention, as regular employees, of the persons
Who Were taken on temporarily under the share-the-work plan.
atIlted further that

The reply

pending further action, the Board approves the salary

13 YMents resulting from the abolition of the reduction of 4,S in, and the
1%3toration of, the basic salaries of all officers and employees at both




75

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the head office and the Buffalo branch of the Federal Reserve Bank of New
York.
Approved.
In connection with the above letter, there was also presented a
telegram dated Tuly 14, 1933, to 1,:r. Case, Federal Reserve Agent at New
York, approved by six members of the Board, stating that, pending further
action, the reduction in the agent's basic salary and the reductions in
the basic salaries of assistnnt Federal reserve agents and members of the
staff of the agent's department, which were made effective on November 16,
1932, are discontinued as of the close of business on Tune 30, 1933.
Approved.
Telegraphic reply on Tuly 14, 1933, approved by six members of
111

the Board, to a telegrnm dated Tuly 13 from L. Austin, Chairman of the
l
'ederal deserve Bank of Philadelphia, stating that at the meeting of the
e4eeutive committee of the bank on Tune 28, 1933, a resolution was adopted
Drovidin,; that the share-the-work plan put into effect on December 1, 1932,
be terminated on Tune 30, 1933.

The reply stated that the Board infers

rl
'
°:31 the resolution of the executive committee that employees who heretohave been regarded as having solely a temporary status are now to be
treated as regular employees; but that, in view of the recommendation of

the executive conaittee that extra employees taken on under the plan be
retained

during the vacation period and gradually substituted, where found

8atisfactory, in place of employees dying or resigning, it appears that
here may be part of the employees temporarily taken on under the sharethe-work plan for whom there is no work nor need for the retention of

their services; and that, consequently, the Board is left in doubt as to




76
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the exact facts of the situation and the justification for the retention
of the surplus employees and requests advice as to the employment conditions involved in the retention as regular employees of persons who were
taken on temporarily under the share-the-work plan.

The reply also stated

that, pending further action, the Board approves the salary payments resulting from the abolition of percentage reductions in, and the restoration
(n, the basic salaries of officers and employees of the bank, effective
3.111Y 1, 1933, and that the reduction in the agent's basic salary and redtttions in the basic salaries of assistant Federal reserve agents and
Members of the staff of the agent's department which were made effective
°11 December 1, 1932, are discontinued as of the close of business on
j'une 30, 1933.
Approved.
Reply on July 18, 1933, approved by six members of the "Board, to
letter dated July 10 from

Alliams, Chairman of the Federal Reserve

and
8aak of Cleveland, referring to the Board's letter of Tune 23, 1933,
Stating that the board of directors of the bnnk, at its meeting on July 7,
determined to terminate, as of July 160 1933, the reductions in salaries
the
officers and employees which have been in effect at the bank under
848.re-the-work plan, it being contemplated that persons temporarily emilloYed by the bank in accordance with the plan who have proven to be capable
be
411d for wham there is necessary work in the bank's organization, will
lietained on the permanent rolls of the bank under the appropriate classifiea.tions provided in the bank's personnel classification plan.

The reply

action
stated that the Board approves the salary payments involved in the
1933, the reduction
t°'kell by the directors, and discontinues, as of July 16,




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ia the Federal reserve agent's basic salary and the reductions in the basic
salaries of the assistant Federal reserve agents and other nembers of the
Staff of the agent's department which were made effective in accordance
With the share-the-work plan.
Approved.
2eDly on July 18, 1933, approved by six members of the Board, to
4 letter dated Tuly 13 from Lr. Hoxton, Chairman of the Federal Reserve
arl.k of Richmond, advising that at the meeting of the board of directors
°f the bank on that date, following consideration of the resolution inclosed in the Board's letter of Tune 23, with regard to salaries of officers and employees at the Federal reserve banks, a resolution was adopted
Pl'oviding that, effective as of August 1, 1933, the salaries of the officers and employees of the Federal Reserve Bank of Richmond shall be reStored to the basis of 1932, with such exceptions in the salaries at' emPloYees as any condition in their employment justifies.

The reply stated

that it is assumed that this action of the directors contemplates that
the salaries which were in effect at the bank on December 31, 1932, will
be reestablished, except in certain cases where it is felt that circumetaaces exist which do not justify an increase in the salary to the rate
Which was in effect on that date; that, on this basis, the Board approves
the salary payments involved in the action taken by the directors of the

be'llc; but that it is requested that the Board be advised as to the exceptcases above referred to and as to the conditions which it is felt
1Q4ke special salary adjustments desirable in such cases.

The reply stated

I'll-rther that the Board also discontinues, as of August 1, 1933, the rein the
illetion in the Federal reserve agent's salary and the reductions
411aries of the assistant Federal reserve agent and other members of the



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78

-9-

staff of the agent's department which were made effective on January 1, 1933.
Approved.
Telegraphic reply on Tuly 14, 1933, approved by six members of the
Board, to a telegram dated July 12 from Mr. Stevens, Chairman of the Federal Reserve Bank of Chicago, referring to the Board's telegram of July 7
and inquiring whether the restoration of the 5% reduction in the salaries
Of officers must be submitted to the Board for approval before they became
effective, or whether it is intended that the bank submit only cases where
44 increase in excess of the 55 reduction is given.

The reply stated that

the Board's telegram of July 7 contemplated submission to it for specific
aPProval only the salaries of officers, if any, which, after abolishing
the 5% reduction in effect prior to July 1, 1933, will be at rates higher
than the rates on which such 5% deduction was based; and that, as to amPloYees, salaries should be submitted to the Board for approval only in
celses where the rates actually to be paid beginning July 1 will be in excess of nyfrimum rates for their respective grades under applicable proof the personnel classification plan or where such employees occupy
4PPraised positions and the rates actually to be paid beginning July 1 will
be higher than the rates on which the 5% reduction was based.

The reply

4180 stated that the reduction in the agent's basic salary and the reducti°As in the basic salaries of assistant Federal reserve agents and
"
11 8

ICBM-

of the staff of the agent's department which were made effective on

.ktiltlarY 1, 1933, are discontinued as of the close of business on Tune 30,
3.933,
Approved,
Reply on July 18, 1933, approved by six members of the Board, to




79
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a letter dated July 10 from idr. Walsh, Chairman of the Federal Deserve
Bank of Dallas, stating that at the meeting of the board of directors of
the bank on ally 7, 1033, following consideration of the resolution inclosed in the Board's letter of Tune 23, a resolution was adopted terminating, as of the close of business on July 31, 1933, the share-the-work
Plan in effect at the bank and providing that the basic salaries of officers and employees as fixed at the meeting of the directors on January 12
be reestablished as of August 1, 1933, and continued for the remainder of
the current year.

The reply noted that the resolution also instructs the

c)fricers to take steps at once to establish the personnel of the bank on
the usual full time and permanent basis, and stated that it is assumed that
these instructions contemplate that employees placed temporarily on the
1.°11s of the bank, in accordance with the share-the-work plan, who have
Proven to be capable and for whom there is necessary work in the bank's
°1'eanization will be retained on the permanent rolls of the bank under the
4143roPriate classifications provided in the bank's personnel classification
131an.

The reply also stated that, on this basis, the Board approves the

341arY payments involved in the action taken by the directors, and discontialues,

as of August 1, 1933, the reduction in the Federal reserve agent's

salary and the reductions in the basic salaries of the assistant Fedreserve agents and other members of the staff of the agent's departIllent which were made effective on January 1, 1933, in accordance with the
ehare-the-work plan.
Approved.
Telegram dated Ally 14, 1933, to Mr. Newton, Federal Reserve Agent
It

-an Francisco, approved by six members of the Board, referring to the

8°11rd's telegram of July 8 with regard to the discontinuance of the share


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the-work plan at the bank, and stating that the reduction in the agent's
basic salary and the reductions in the basic salaries of assistant Fedoral reserve agents and members of the staff of the agent's department
Which were made effective on January 1, 1933, are discontinued as of the
Close of business on Tune 30, 1933.
Approved.
Reply on ally 11, 1933, prepared in accordance with the action
taken at the meeting of the Board on July 7, and approved by six members
(n the Board, to Governor Harrison's letter of July 6 to Governor Black
regard to proposed increases in the salaries of Llr. Tay B. Crane, Deputy
Governor, and Lr. Jalter S. Logan, Deputy Governor and General Counsel.
The reply stated that Governor Harrison's letter was discussed at a meetof the Board; that the Board has had the feeling for some time past
that, as Governor Harrison's letter indicates, there are inconsistencies
in the scale of salaries now paid to senior officers of the l_ederal Beserve Bank of Hew York; that it is understood that the board of directors

°r

the bank has been giving serious thought to the advisability Of readjustwhich, in Some instances, might involve lowering particular salaries,

ee

though in others, such as those above mentioned, the directors might

feel that salaries should be raised; and that, in the circumstances, the
13°8.rd suggests that the salaries of all senior officers of the bank be reviewed carefully by the board of directors in the light of the varying
responsibilities of these officers and the quality and extent of services
that each individual is now rendering in his particular capacity.

The

NaY also stated that, when this has been done, the Board will be glad




81
7/22/33

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to receive and consider a schedule setting forth the adjustments which
would be appropriate and reasonable in the judgment of the board of directors, and that, in the meantime, therefore, the Board will hold in abey41oe the consideration of the action referred to in Governor Harrison's
letter of July 6.
Approved.
Telegraphic reply on Ally 20, 1933, approved by seven members
Of the Board, to a letter dated Tilly 17 from1.1r#. Newton, Federal Reserve
Agent at Atlanta, stating that, subject to the approval of the Board, he
had appointed Er. L. N. Clark as assistant Federal reserve agent at the
beldc, with salary at the rate of ;:7,500 per annum.

The reply stated that

the Board approves the appointment with salary at the rate stated.
Approved.
Reply on July 13, 1933, approved by seven members of the Board,
t° a letter dated July 5 from Er. William, Federal Reserve Agent at
Cleveland, advising that, effective Tuly 3, Er. Howard B. Pretzer was
ell1P101red as an examiner in the Federal reserve agent's department of the
1/44k, with salary at the rate of :3,600 per annum.

The reply stated that

the Board approves the designation of Mr. Pretzer as an examiner at the
BelerY named.

The reply also stated that, in this connection, authority

1748 granted to the agent by the Board in March of this year to employ
811011 examiners as might be required as soon as suitable men could be
t°114d, with the understanding that prompt telegraphic advice of such
41°Pointments would be forwarded to the Board; that inasmuch as, under
the provisions of the Federal Reserve ;Let, appointments of examiners




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82

are subject to the approval of the Federal Reserve Board, it is the
desire of the Board that whenever possible its approval of an appointDlent of an examiner be obtained prior to the date on which such examiner
enters upon his duties; and that, upon receipt of detailed information

as to any prospective appointee, either by wire or letter, the Board
Will give prompt attention to the matter.
Approved.
Telegram dated Tuly 18, 1933, to Mr. Williams, Federal Reserve
Agent at Cleveland, approved by five members of the Board, replying to
488istant Federal Reserve Agent Fletcher's letter of July 15 requesting

the Board's approval of the appointment of Mr. Sherman Shull as an exin the Federal reserve agent's department of the bank, with salary
"the rate of C4,000 per annum, effective August 1, 1933. The reply
stated that the Board approves the appointment with salary at the rate
stated,
Approved.
Telegraphic reply on Tuly 15, 1933, approved by four members at
the Board, to a telegram dated July 13 from Mr. Newton, Federal Reserve
4get at San Francisco, stating that, subject to the approval of the
4deral Reserve Board, he had appointed Mr. S. L. Stewart as an examiner
the Federal reserve agent's department of the bank, with salary at
the rate of (300.00 per month, effective July 17, 1933, with the underthat his employment is to continue as long as there is need
r" his services.

The reply advised that the Board approves the appoint-

ellt referred to with salary at the rate stated in accordance with the
/411derstanding outlined in the agent's telegram.




Approved.

7/22/33

-14Telegraphic reply on July 20, 1933, approved by six members of

the Board, to a letter dated July 14 from Er. Newton, 2ederal Reserve
Aeent at San Francisco, requesting the Doard's approval of the appointMent on a permanent basis of El.. Charles P. ':;eiand as an examiner in
the Federal reserve agent's department of the bank, with salary at the
zate of :4,200 per annum, effective July 1, 1933; La.. Weigand having been
elnployed previously on a temporary basis, with salary at the rate of
,600 per annum.

The reply stated that the Board approves the appoint-

et with salary at the rate stated.
Approved.
Telegraphic reply on Tuly 15, 1933, approved by five members of
the Board, to a letter dated Tuly 10 from

jr.L

Walsh, Chairman of the Fed-

el l Reserve Bank of Dallas, requesting approval by the Board of an in• ease fram2,160 to .2,400 per annum in the basic salary of IAss Clifford
• p

arli.s, a nurse in the service department of the bank, effective July 1,

1933

The reply stated that the Board approves the salary as recommended.
Approved.
Reply on Tuly 18, 1933, approved by six members of the Board, to

• letter dated Tuly 11 from T.Lr. Austin, Federal Reserve Agent at 7hilaclelphia, transmitting reports of indebtedness and outside interests of

the Federal Reserve Agent at Philadelphia and the members of his staff.
The reply stated that among the statements attached to the agent's letter
it

has been noted that an indebtedness of Er. Z. G. Fenner, an employee

14 bank examination work, was incurred to buy securities; that it will be
41)IDI'eciated if the agent will advise whether any of these securities inthose of banking institutions or their affiliates or subsidiaries;




7/22/33
that there is also noted an indebtedness of Lir. Arthur E. Post to the
Pennsylvania Company of Philadelphia, on which the balance due is

970.08,

Upon which Mr. Post is the indorser and which he expects to pay; and that
the Board desires further information regarding this indebtedness and
Wishes to know whether the Pennsylvania Company referred to is The Penn-

sYlvania Company for Insurances on Lives and Grantin
member of the Federal Reserve System.

Annuities, which is

The reply also stated that on the

laent's statement there is noted a list of outside business connections
which he holds, including that of director of the Insurance Company of the
State of Pennsylvania; director of the Philadelphia Bourse; director of

the Theodore Presser Company; trustee of the Presser Foundation; and Treasuof the Philadelphia Chamber of Commerce; that it is understood that
"
lb
the Insurance Company of the State of Pennsylvania is actively engaged
14 fire, marine and other insurance business to a considerable extent,

that the Philadelphia Bourse is the stock exchange of Philadelphia, that
the Theodore Presser Company is actively engaged in the business of a music
134blishing house, and that the Presser Foundation is an endowment fund
charitable purposes; that it is assumed that the position of Treasul'eln of the Philadelphia Chamber of Commerce involves the responsibility
tclr its funds and the proper disposition thereof; and that, if this infor44ti°n is correct, it is the view of the Board that the agent's official
e°11nection with these activities in the capacities stated is inconsistent
with the views expressed by the Board in its circular letter of Eay
1924) and the reference thereto in its circular of April 29, 1933, with
the

Poasible exception of the Presser Foundation, as to which the Board




/22/33
would Wish
wish to be more fully advised.

The reply stated further that when

the agent has considered the matter further, the Board desires to be advised as to what steps he decides to take with respect to the continuance
Of these relationships.
Approved.
Reply on july 12, 1933, approved by seven members of the Board,
t° a letter dated july 5 from ijr. Williams, Federal Reserve Agent at
Cleveland, tranamitting reports, as of July 1, 1933, of indebtedness
44d of outside business connections of members of the staff of the Federal
Reserve Agent's Department of the Federal Reserve Bank of Cleveland.

The

'
zepllr noted that the agent has also forwarded to the Board similar reports
"
/Irering the personnel of the auditing department of the bank, and stated
that it appears from the agent's letter of L:ay 6, 1933, that arrangements
11417e been made to submit to the board of directors of the bank reports on
the indebtedness of officers, heads of departments and other employees
"
° 1117ying responsible positions in the operating departments of the bank,
'
41.11c1 that since the auditing department reports directly to the chairman

or

the board of directors rather than to the Federal reserve agent, it is

411Cested that copies of the reports of indebtedness of members of the
111cl1t1ng staff be brought to the attention of the directors at the time
'
lePorts covering the officers and employees in the other departments of
the bank are submitted to the directors.
Approved.
Reply on July 18, 1933, approved by six members of the Board to
4 letter dated July 14 from Mr. Williams, Federal Reserve Agent at




7/22/33

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Cleveland, requesting that the reports of indebtedness of members of the
auditing staff of the bank which were inclosed with his letter of July 5
be returned to him for photostating and submission to the board of directors
14 accordance with the suggestion contained in the Board's latter of July 12.
The reply inclosed the reports referred to and stated that it will not be
Aecessary to return them to the Board, as a transcript of the information
with regard to outside business connections of such employees had been taken
froM the reports.

The reply also noted fram the agent's letter that, with

the exception of one officer of the bank, who is affiliated with a small
el°eed family corporation which is now in liquidation, none of the officers
(31' employees holding responsible positions in the operating depar Lients of
the bank and its branches has any outside business affiliations.
Approved.
:Reply on July 22, 1933, approved by seven members of the Board, to
a letter dated July 18 from Acting Governor Johns of th

Federal Teserve

Of Atlanta in regard to outside business interests of officers, heads
Of departments and other em,)loyees holdin7, responsible positions in the
?ecleral iZeserve Bank of Atlanta.
James

The reply stated that it is noted that

Goethe, Assistant Eanager of the L,avannah Agency, has an in-

ter"t in a produce store and that his time, after his banking work is
(317er, is given to a limited amount of work in connection with that business;
that it is assumed that Acting Jovernor Johns has satisfied himself that
tilts

Particular activity does not conflict with L. Goethe's services to

the b

ank nor in any way impair his efficiency and that the business carried

other relations
°4 hY the produce store does not involve any financial or




87
7/22/33

-18-

that might be embarrassinc to the Federal reserve bank; but that it will
be appreciated if Acting Governor Johns will confirm this assumption.
Approved.
Reply on July 20, 1933, approved by seven members of the Board,
to a letter dated July 10 from Mr. Stevens, Federal Reserve Agent at
Chicago, with regard to outside business affiliations of officers and
eMPloyees of the Federal Reserve Bank of Chicago.

The reply noted that

Members of the family of Assistant Deputy Governor Netterstram own a
third interest in the American Flange and Manufacturing Company of Chi°ego and that he represents them as a director, and stated that the
4gent's letter does not contain any information regarding the business
"tivities of this company and the Board does not have available to it
Other means of information as to this concern, but that it appears that
it falls within the purview of the Board's letter of May 7 , 1924; and,
th"efore, the Board feels that Mr. Netterstram should consider the pmeibility of terminating his connection as a director of the company.

The

also stated that the agent's letter contains the statement that
4seietant Deputy Governor Buss is President of the City National Company
Florida, and Treasurer of the M. F. Comer Bridge and Foundation
oillpelaY of the same city; that these positions appear clearly to be withthe scope of the Board's letter; that, inasmuch as Mr. Buss is not
actively in either capacity, there would seem to be no reason

w14. the

connections should not be discontinued; and that it will be ap-

14160iated if the agent will advise the Board as to the action taken by
4831%. Netterstrom and Buss with a vim to the discontinuance of the




7/22/33

-19--

affiliations referred to.

The reply added that the Board also notes

from the agent's letter that, if the employment of Er. A. H. Vogt, Chief
Clerk at the Detroit branch, is placed on a continuing basis, he will
dispose of his interest in Roswell-Cook Company of Detroit, rind that the
Board assumes that this question will be determined in the near future
and wishes to be advised as to the action taken.
Approved.
Reply on July 13, 1933, approved by seven members of the Board,
to a letter dated Tune 30 from Jr.1

Wood, Federal Reserve Ardent at St.

L°11is, inclosing an excerpt from the minutes of the meeting of the directors held on Tune 23 with regard to indebtedness of officers and emof the bank.

The reply noted from the excerpt that following a

ecnsideration of the Board's letters of April 29 and Eay 16, 1933, GovL:artin was requested to instruct all officers and employees of the
bank and its branches that they should refrain from incurring any indebtClneSs

to others except for legitimate and necessary purposes, and that

Whenever any such indebtedness is incurred by them, other than current
bills for ordinary personal and household expenses, there should be a
131'°.. mpt disclosure of all the facts to the board of directors of the bank.
reply also stated that, while the last paragraph of the excerpt indie4tes that an informal report was made to the executive con_mittee at some
title

Prior to the meeting of the directors, it is not clear whether such

Ilec)rt covered outside business connections in addition to existing inebtedness, and whether a report of outside business connections of offie"e, heads of departments and employees occupying responsible
1)°8itions in the bank, as well as the Federal reserve agent and members
°I' hie staff, will be submitted to the Board, and that it will be appreciated



89
7/22/33

-20--

ir the agent will advise the Board more fully as to these matters.
Approved.
Reply on July 13, 1933, approved by seven members of the Board,
to a letter dated July 1 fromMr.
Peyton, Federal Reserve Arent at Linnea13°11-s, inclosing reparts of indebtedness of employees on his staff.

The

'
leplY stated that among the reparts submitted it has been noted that Harry C.
3'°4es, an examiner, apparently has been indebted to the Federal Reserve Pack
°r lanneapolis for OM since May 16, 1931, as an advance for traveling exandthat it will be appreciated if the agent will advise the Board

as to the reasons why this advance has been carried in an unpaid status for
8° lomg a time without indication of repayment upon the submission of travel142., expense accounts.
Approved.
Reply on July 20, 1933, approved by seven members of the Board, to
letter dated July 12 from Mr. Walsh, Federal Reserve Agent at Dallas,
tranamitting reports, as of July 1, 1933

of indebtedness of members of

the staff of the Federal reserve agent's deparLment of the Federal Reserve
Of Dallas, together with similar reports covering the personnel of
the auditing department of the bank.

The reply referred to the agent's

letter of July 9, 1933, advising that arrangements were being made to place
before the board of directors of the bank reports showing the indebtedness
or c'ffieers and employees occupying responsible positions in the operating
clePartments of the bank, and stated that, as the auditing department redirectly to the chairman of the board of directors rather than to
the

Federal reserve agent, it is suggested that the information with reto the indebtedness of members of the agent's auditing staff also be

h''"Ileht to the attention of the directors.



The reply also noted particular-

7/22/33

-21-

1Y the analysis of the indebtedness of la-. C. C. Hall, Assistant Federal
Reserve Agent; that there has been no reduction in any of it since it was
incurred; that it includes an indebtedness to the First National Bank in
Dallas incurred on December 1, 1924, in the amount of ;;21200, for "tempol'arY needs, and investmentsnland stated that, although the statement is
Made that it is in progress of liquidation by quarterly payments, it appears that the unpaid balance is the same as the original indebtedness;
that it also appears that among the collateral held as security for the
indebtedness are twenty shares of stock of the Idabel National Bank of
Idabel, Oklahoma; that, as indicated in the Board's letter of April 29,
1933, the Board feels that it is advisable for officers of Federal re3erve banks to refrain from acquirinil, or holding any interest in member
banks which might result in any questions being raised as to the independ"of their judgment or their disinterestedness in the discharge of
ell
their responsibilities to the Federal reserve bank; that these views apply
With Particular force to members of the staff of the Federal reserve agent,
14 View of their special functions in relation to member banks; and that
the

Board will appreciate it, therefore, if the agent will take the matter

UP with Lr. Hall and request that he give careful consideration to the
1)"eibility of disposing or the shares of stock of the Idabel 1;ational
861nic and any other stock that he may hold in any other bank, as well as
the early liquidation of his indebtedness to the First National Bank in
Dali

The reply stated further that, upon reviewing the reports of in-

debtdn
e--ess of other members of the staff of the Federal reserve agent, it
Was

noted that there were several cases of loans made by the Federal 2,eserve

2avi,_
1103 and Investment Association for the purchase of automobiles; that
'




91
7/22/33

-22-

it will be appreciated if the agent will submit to the Board a statement
Of the loan policies of the association
with special reference to the use
tlf proceeds of such loans for purposes of this character; that the Board
4180 noted several other cases of indebtedness on the part of members of
the staff of the Federal reserve agent to banks which are members of the
Federal Reserve System, and the comment in the agent's letter upon this
class of cases; and that the Board feels that it would be desirable for
the agent to give special attention to them with the view of ascertaining
the Practicability of liquidation of such indebtedness within a reasonable
time,
Approved.
Telegraphic reply on July 18, 1933, approved by five members of
the Board, to a telegram addressed to Governor Black on that date by Gov".or Norris of the Federal Reserve Bank of Philadelphia, who was in Welch)O°1, New
Brunswick, on vacation, stating that Deputy Governor Hutt had
41/47ised him of the meeting of the Federal Open Market Committee on July 20,
19331 and had expressed doubt as to whether the Board would permit representation

of the Federal reserve banks by alternates, that it would be impossible

"
t him to attend the meeting of the Federal Open Market Committee on July 20,
1933, and that he felt confident that the Board would permit Deputy Gov6111-Or Hutt of the Federal Reserve Bank of Philadelphia to represent the
1184k as an alternate. The reply stated that since Governor Norris stated
that
it would be impossible for him to attend the meeting referred to, the
had no objection to the attendance of Deputy Governor Hutt, and that
"
18o

his
status as an alternate would be discussed at that time.




Approved.

92
7/22/33

-23Letter dated July 12, 1933, to Mr. Viilliams, Chairman of the

Federal Reserve Bank of Cleveland, approved by seven members of the
Board, stating that the Federal Reserve Board notes from his letter of
hlY

8,

1933, that the board of directors of the bank, at its meeting

011 July 7, selected Er. B. R. Fancher, Governor of the Federal Reserve
Bahk Of Cleveland, as a member of the Federal Open Market Committee representing the Fourth Federal Reserve District for the balance of the curyear.
Approved.
Letter dated Tilly 19, 1933, to Mr. Hoxton, Chairman of the Federal
Reserve Bank of Richmond, approved by seven members of the Board, stating

that the Board notes from his letter of July 13 that at the meeting of tba
boeird of directors on that date the governor of the Federal Reserve Bank

Of Richmond was appointed as a member of the Federal Open Market Committee
rep

esenting the Fifth Federal Reserve District, and that the senior deputy

ecrvernor was appointed to serve in the absence of the governor.
Approved.
Letter dated Tuly 18, 1933, to Mr. Newton, Chairman of the Federal
Reserve Bank of Atlanta, approved by six members of the Board, stating
t44t the Board notes from his letter of Tuly 11, 1933, that the board of
q -rectors of the benk, at its meeting on that date, selected Acting GovJobs of the Federal Reserve Bank of Atlanta as a member of the
l'ederal Open Market Committee representing the Sixth Federal Reserve
4striet,
Approved.

4

.

Letter dated Tuly 21, 1933, to Mr. Wood, Chairman of the Federal

Ileaerve Bank of St. Louis, approved by seven members of the Board, stating




7/22/33

-24-

that the Board notes from his telegram of July 19 that the board of directors of the bank had selected 1::r. William

Llartin, Governor of the

Federal Reserve Bank of St. Louis, as a member of the Federal Open Market
ColuMittee representing the Eighth Federal 'Reserve District for the balance
Or

the current year.
Approved.
Federal
Letter dated July 10, 1933, to Jr. McClure, Chairman of the

eserve Bank of Kansas City, approved by six members of the Board, stating

that the Board notes from his telegrams of july 11 and 14 that the executive
ecYnamittee of the Federal Reserve Bank of Kansas City had designated Governor
liemilton as a member of the Federal Open Market Committee representing the
Tenth

be formally
Federal Reserve District, and that his selection would

tified at the meeting of the board of directors of the bank on July 20,
.
1933
Approved.
of the Federal
Letter dated July 18, 1933, to 1,:r. allsh, Chairman
Board, stating that
ileserve Bank of Dallas, approved by five members of the
copy
the Board notes from his letter of July 14, with which he inclosed a
directors of the bank
"the minutes of the special meeting of the board of
McKinney
held on that date, that the directors have selected Governor B. A.

or the

the Federal Open liarFederal Reserve Bank of Dallas as a member of

ket Committee representing the ideventh Federal Reserve District to serve
be held
44til the next regular annual meeting of the board of directors to
14 3-al1uarY, 1934.

Approved.

Chairman of the Federal
Letter dated July 19, 1933, to Er. Newton,
members of tip Board,
ae8erve Bank of San Francisco, approTed by seven




7/22/33

-25-

stating that the Board notes from his telegram of July 13 that the board
Of directors of the bank, at its meeting on that date, selected Governor
Calkins of the Federal Reserve Bank of San Francisco as a member of the
Federal Open Market Committee representing the Twelfth Federal Reserve
District and Deputy Governor Day as alternate for Governor Calkins.
Approved.
Telegraphic reply on July 13, 1933, approved by six members of
the Board, to a telegram dated Tuly 11 from 1r. Stevens, Chairman of the
Federal Reserve Bank of Chicago, stating that the executive committee, at
its meeting on July 14, would designate a representative of the bank as
4 member of the Federal Open Market Committee, who would attend the meet-

of the Cammittee on Tuly 20, 1933.

The reply stated that it is not

believed that the designation by the executive committee at the bank of
4 Person to represent the bank as a member of the Federal Open lairket

a°Millittee would comply technically with the statutory requirement that
atich representative be elected by the board of directors, until such
"tion has been ratified formally bzr the board of directors; that this
w°11d not
seem to be of great practical importance, however, because
l'eecautions of the Open Market Committee have no binding legal effect;
61L4d that there would seem to be no objection to the bank's representative
e.ttellding meetings pending his formal election, provided the chairman
ers with all of the directors who can be reached and obtains the conalll'rence of a majority of the entire board.

The reply also stated that

the selection of the representative, in any event, should be ratified at
the next succeeding meeting of the board of directors.




Approved.

95
7/22/33

-26Telegraphic reply on July 13, 1933, approved by six members af

the Board, to a telegram dated Tuly 11 from Lr. 7a1sii, Chairman of the
Federal

eserve Bank of Dallas, inquiring whether a poll of the members

Of the board of directors by wire for the purpose of selecting a representof the bank as a member of the Federal Open 1,:arket Committee would
meet the requirements of section 12A of the Federal Reserve Act, as amended
bY the Banking Act of 1933.

The reply stated that technically the bank's

l'ePresentative would have no legal status as a member of the Federal Open
l al'Icet Committee until he had been duly elected by the board of directors
14 accordance with the provisions of section 12A of the Federal Reserve
'et; that a mere poll of the directors, without a meeting, would not techsatisfy this requirement; that this would not seam to be of great
Dl'actical importance, however, because resolutions of the Committee have
o

b inding legal effect; and that there would seem to be no objection to

his attendance at meetings of the Committee pending a formal election.
The

reply also stated that the selection of a representative, in any event,

8110111d be ratified at the next succeedinL, meeting of the board of directors.
Approved.
Letters dated July 12, 1933, to the boards of directors of the
13/14aewater Trust Company of Bridgewater, Lassachusetts, and the Tuscola
the Board,
Stte Bank, Tuscola, Illinois, approved by seven members of
at"t4e; that, subject to the conditions set forth in the individual Jettile Board approves the applications of the institutions for member1 the Federal i.eserve System and for the number of shares of stock
Of

,
t
'e Federal 1ieserve Brinks of Boston and Chicago, respectively, to which

eael,
" °f the applicants will be entitled upon the basis of its capital and




96
7/22/33

-27-

sUrPlus as of the date upon which its membership becomes effective.
Approved.
Letter dated Xuly 13, 1933, to the board of directors of the
West Side Bank of Milwaukee, Wisconsin, approved by seven members of
the Board, stating that, subject to the conditions prescribed in the
letter, the Board approves the bank's application for membership in the
Federal Reserve System and for the number of shares of stock of the Fed"al Reserve Bank of Chicago to which the bank will be entitled upon the
basis of its capital and surplus as of the date upon which its membership
becomes effective.
Approved.
Letters dated Tilly 17, 1933, to the boards of directors of the
Eand County State Bank, Miller, South Dakota, and the Sylvan State Bank,
SYlvan arove, Kansas, approved by six members of the Board, stating that,
allbiect to the conditions prescribed in the individual letters, the Board
4131/1'°ves the banks, applications for membership in the Federal Reserve
SYstem and for the number of shares of stock of the Federal Reserve Banks
Of Ilinmapolis and Kansas City, respectively, to which each of the appli°a4te will be entitled upon the basis of its capital and surplus as of
the date upon which its membership becomes effective.
Approved.
Letter dated July 18, 1933, to the board of directors of the
%ette State Savings Bank, Fayette, Ohio, approved by five memoers of
the Board, stating that, subject to the conditions prescribed in the
14ttsx's the Board approves the bank's application for membership in the
l'ecial'al Reserve System and for the number of shares of stock of the




97
7/22/33

-28-

Federal Reserve Bank of Cleveland to which the bank will be entitled
UPon the basis of its capital and surplus as of the date upon which its
Membership becomes effective.
Approved.
Letter dated July 17, 1933, to Er. Williams, Federal Reserve
Agent at Cleveland, approved by six members of the Board, replying to
Aaeistant Federal Reserve Agent Fletcher's letter of June 5 forwarding
the application of the Farmers and MerChants Trust Company, Greenville,
PeanaYlvania, for membership in the Federal Reserve System.

The reply

referred to the apparent speculative and unsound banking practices of
the trust company's mAnagement; stated that, in view of this situation
411d the other unsatisfactory features of the institution's position, inits extended condition and the lack of credit data, the Board
is Unwilling to give favorable consideration to the bank's application
or

Membership at this time; and requested that the agent communicate

111th the bank and suggest the withdrawal of its application.

The reply

Sleo stated that the Board will be pleased to consider a new application
rc'r Membership when a complete examination of the bank, including detailed
14t°rMation as to the condition of its trust department, made independently
Or

'or in cooperation with, State examiners, discloses that the affairs

°t the institution are being conducted in accordance with accepted banking
131'actioes and the institution has effected a correction of, or a material
1111131
'"
.e1 ent in, the criticized features of its condition, including the
1411*06 t10n of satisfactory management.




Approved.

98
7/22/33

-29Reply on July 17, 1933, approved by six members of the Board, to

a letter dated lune 30 from Mr. Hoxton, Federal 1.?eserve Agent at Richmond,
With which he returned the Board's letter of Tune 17, 1933, addressed to the
Traders Trust and Banking Company, Spencer, West Virginia, advising the
bank that its application for membership in the Federal Reserve System had
been approved subject to certain conditions.

The reply noted the agent's

Ob jections to the comment made in the above mentioned letter to the bank
l'elative to the concentration of its funds on deposit with the Hrinawha
Valley Bank, Charleston, ,;est Virginia, and stated that, in view of all
the

amended
circumstances, the Board has deleted this comment and that the

letter was inclosed for dispatch to the bank.
Approved.
to
Reply on July 15, 1933, approved by six members of the Board,
a letter dated July 8, 1933, from Mr. Newton, Federal Reserve Agent at
Ittlenta, recommending approval of the request of the Truckers Exchange
Banks Crystal Springs, Mississippi, for an extension to November 1, 1933,
Or the time within which it may accomplish its admission to membership in
the Federal Reserve System in the manner described and subject to the conof June 23,
Contained in the Board's letter to the bank under date
1933•

The reply observed that, although Mr. Breland, the president of the

that he
b811k1 has asked for an extension until November 1, 1933, in order
414Y Place as many as possible of the additional shares of stock required
t° be issued in order to provide the minimum required capital stock, he
18 Prepared to acquire the total increase in capital stock for his own acle amount
e°114t, if necessary, and stated that, in view of the considerab
Of
the
tilne that might elapse since the last examination of the bank if




7/22/33

-30-

bank were to avail itself of the full period of the extension recuested
and the possibility that the additional capital stock can be raised in a
Much shorter time, the Board feels that it is preferable to limit to a
Shorter period the time within which the conditions of membership may be
complied with and, therefore, grants an extension until August 22, 1933,
in the belief that such an extension should afford an adequate opportunity
for Lir. Breland to accomplish the purpose he has in view.
Approved.
Telegram dated July 17, 1933, to Er. Stevens, Federal Reserve
44Cent at Chicago, approved by five members of the Board, replying to
44s1stant Federal Reserve Agent Young's letter of July 7, requesting
that the Board grant an extension of the time within which the Citizens
inC Conmany, Anderson, Indiana, may accept the conditions of nem')

prescribed by the Board.

The reply stated that the Board grants

extension of thirty days from July 3, 1933, of the time in which the
bellk maY complete its membership.
Approved.
Telegraphic reply on July 17, 1933, approved by five members
or the hoard, to a letter dated July 11 from Er. Peyton, Federal Re8eI
've Agent at :.inneapolis, requesting that the Board grant an extension
or time within which the Litate Bank of Terry, 1,:ontana, may comply with
the

condition of membership requiring that it increase its capital to

440 on,
' uu prior to admission to membership in the Federal Reserve System.
The

r'1).1Y stated that the Board grants an extension of thirty days from
2?) 1933, of the time in which the bank may complete its membership.




Approved.

7/22/33

-31Reply on July 18, 1933, approved by six members of the Board, to

a letter dated Tuve 28 from Jr.l

Williams, Federal Reserve Agent at Cleve-

land, recommending approval of the application of the Homewood Bank at
Pittsburgh, Pennsylvania, for permission to carry a reserve of 7% against
its demand deposits instead of 10, under the provisions of section 19
Of the Federal Reserve Act and the Board's Regulation D.

The reply stated

that the Poard grants permission to the member bank, effective with the
senli-monthly reserve computation period beginning on July 16, 1933, to
'1ntain a reserve with the Federal 2eserve Bank of Cleveland equal to
1141
not less than 7% of the aggregate amount of its demand deposits and 3%
Or the aggregate amount of its time deposits.
Unanimously approved.
Telegram dated July 13, 1933, to the governors of all Federal re8erve banks, approved by five members of the Board, referring to the Board's
letter of February 1, 1933, (B-875), on the subject of reports of defielelleies in reserves of member banks, and requesting that the report for
the first half of 1933 cover the months of January, February, April, May
444

J'une only, omitting figures for the month of I.:arch, during part of

Whleh no penalties were assessed.

The telegram also stated that for the

111°11ths of April, izy and Tune the report should relate to licensed member
barrA..
and should include figures only for the period during which they
17el'e In actual operation, and that the headings on the form of report
4°111d be changed in accordance with the above instructions.
Approved.
Lemoraudum dated Tune 8, 1933, from Er. Smead, Chief of the




7/22/33

-32-

the Division of Bank Operations, transmitting reports submitted by the
Federal reserve agents at the respective Federal reserve banks as of
December 31, 1932, in campliAnce with the Board's letter of December 4,
1926, (X-4739), covering each member bank located in outlying sections
Of central reserve And reserve cities, except f- lew York City, which has
been authorized by the Federal Reserve Board to carry reduced reserves,
ahd stating that all of the Federal reserve agents recommend that present
reserve requirements in the case of these banks be continued.

The memo-

also stated that it is believed that these banks should continue
t0 have such permission, inasmuch as they are not only outlying banks but
the character of their business appears to correspond with that af country

be llks rather than with that of city banks, and that, accordingly, it is
'
recatamended that the Federal reserve agents be advised that no change will

be 4ade at this time in the list of banks authorized to carry reduced re-

Unanimously approved.
Letter dated July 13, 1933, to Br. Stevens, Federal Reserve Agent
ChicaCo, approved by six members of the Board, replying to Assistant
eral Reserve ligent Young's letter of Tune 5 inquiring whether there may
be

ahY laodification or exception made to the ruling referred to in the

1111/1(1t e latter of February 26, 1924 (X-3977), that it shall be a condition
131.ecedent to the filing of an application by a member bank for a reduction
14 its reserve requirements that the applicant shall have been a member af
the,
xederal Reserve System and in operation as such for a period of at least
this ques()Ile Ye`lr Prior to the date of such application, and stating that
tion
located in outlying
has been
Presented by a number of new member banks
eetions of .;hicago.



The reply referred to the review made annually by the

102
7/22/33

-33-

Federal reserve banks of the situation with respect to member banks which
have been granted permission to carry reduced reserves, which affords an
0Pportunity for an annual review of the Board's authorization with a view
t° revocation of the permit should the character of the district in which
the bank is located or of its business be so changed as to warrant such

actio4, and stated that the Board feels it is not necessary, in all cases,
t°r a bank to be a member of the Federal ;eserve System for a period of at
le4at one year before filinL; an application for a reduction in its reserve
l'eglAirements; and that, accordin:ly, if, after careful consideration of the
1°eation and the character of business of a member bank located in an outdistrict of a reserve or central reserve city, the executive commit*

tee of the Federal reserve bank is willinE to recommend approTal of its
IDI3lication for a reduction in reserve requirements on demand deposits,
the Board will not refuse to consider the application because the bank has
11c)t been a member of the System and in operation as such for at least one
' The reply also requested that, in submitting the application to the
it will be appreciated if the agent will include in his letter a full
8tater2ent of the facts upon which the recommendation of the executive comrat
ttee is based.
Approved.

L

Letter to Er. Austin, Federal P,eserve Agent at Philadelphia, reply111 t° a letter dated July 17, 1933, from Er. Post, Assistant Federal Re4;ent at Philadelphia, in regard to the revised list of licensed
r6t4t..„
- Member banks to be issued as of July 10 1933. The reply referred
'Ile statement contained in Lir. Post's letter that: "We have gone over
the
i8t and find that you have omitted the Berks County Trust Company of




4L1\J9
7/22/33

-34-

Reading, Pennsylvania; otherwise the list is correct"; and stated that
this statement is somewhat surprising to the Board in view of the disellesions and correspondence which have taken place concerning the application of that bank for admission to membership in the Federal Reserve
SIrstem, and that it will be appreciated if the agent will advise the Board
as to the exact understanding which exists in the Federal Reserve Bank of
l'hiladelphia as to the status of the bunk.
Approved.
Letter dated Yuly 11, 1933, to Mr. 'Wood, Federal Reserve Agent at
8t, Louis, approved by six members of the Board, stating that the Board
haft reviewed its files with respect to the acquisition by the MercantileC°11314eroe Bank and Trust Company of St. Louis, Missouri, of all of the stock
°t the Mercantile-Commerce National Bank in St. Louis, except directors'
gelifYing shares, and the successive steps in the consideration of the
'1.01ation of the condition of membership of the State bank which required
it to apply for and receive the permission of the Federal Reserve Board
ber°re acquiring an interest in any other bank or trust company through
the Purchase of stock thereof, and that, after careful consideration, the
.311I'd feels that the agent should advise the Mercantile-Commerce Bank and
bust Company of St. Louis definitely of the Board's disapproval of the
°°11tinued holding of the stock of the national bank in view of the vio14t104 of the condition of membership applicable thereto, and that it feels
that

the trust company should begin immediately the consideration of steps

1° which it will dispose of all the stock of the national bank now held by
it

4_

such a mAnner that it will retain no interest therein, and that such

41811°B1tion should be accomplished completely not later than December 15, 1933.




101
7/22/33

-35-

The letter also stated that it will be appreciated if the agent will advise the Board as to the steps he takes in this connection and keep it
informed from time to time of the developments in this matter.
Approved.
Telegram dated Tuly 13, 1933, to Er. Wood, Federal Reserve Agent
St. Louis, prepared in accordance with the action taken at the meeting
OrtXuly

11, and approved by seven members of the Board, stating that follow-

14g a meeting on July 10 of the Board with representatives of the proposed
ScUth Side Bank and Trust Company of St. Louis, Eissouri, the Board gave
tUrtaler consideration to the question whether the institution might prope*Y be admitted to membership in the Federal Reserve System while holding
ce,Pital stock of the South Side National Bank; and that, in view of the
circumstances involved, the Board feels as a matter of policy that it could
lacIt Properly permit the new South Side Bank and Trust Company to became a
XeZber of the System while retaining stock of the national bank.
e

The tel-

ma also stated that substantially the same considerations apply to the

'
letention by the new bank of stock in the South Side National Company, the
14tEklrette South Side Investment Company, and the Infayette South Side InCompany; and that the Board understands from Mr. Shepley and other
l'ePreeentatives of the proposed new institution that, in the event the South
44e Bank and Trust Company is admitted to membership, the stock of these
°°1710Tations and any other stock which a member bank could not lawfully
IllIzehase under the provisions of section 9 of the Federal Reserve Act, as
4111e11ded by the Banking Act of 1933, will be eliminated prior to admission.
IlePly stated further that it is understood that the elimination of the
at00,
Of

the national bank will result in material changes in the proposed




105
7/22/33
J/

-36-

Plan of reorganization of the Lafayette South Side Bank and Trust Company
wilich representatives of the new bank feel will substantially improve the
financial condition of such bank as compared with its financial condition
Wider the plan of reorganization which has heretofore been presented to the
b3ard; that, accordingly, the Board has not at this time attempted to consider what will be the financial condition of the new bank, but will pass
°4 this question when the proposed new plan of reorganization is presented
to the Board, that it is assumed that the agent will keep in touch with
this matter and, when the new plan is submitted, will give the Board full
blformation regarding the finsncial condition of the new bank, and definite
ilatormation as to the personnel and the character of its proposed manageUnder such plan and a firm recommendation of the membership committee
°t the Federal reserve bank as to the action which should be taken by the
8°8-rd, together with an opinion of counsel regarding the legal aspects of
the

lasw plan, and that information as to the financial condition of the new

bellk should include a classification of all of the assets to be acquired as
4 l'ssult of the reorganization.
Approved.
Telegram dated July 19, 1933, to Mr. Curtiss, Federal Reserve Agent
4't 130ston, approved by seven members of the Board, referring to the appli41ti°11 of the lerchants Trust Company, Lawrence, Massachusetts, for per141.831-on to withdraw immediately from membership in the Federal Reserve
S/r8t6II, and stating that the Board waives the usual requirement of six
41(311the notice of intention to withdraw and that, accordingly, upon sur1144
"of the Federal reserve bank stock issued to the Merchants Trust
01014,,_
the Federal Reserve Bank of Boston is authorized to cancel such




7/22/33

-37-

106

stock and make a refund thereon.
Approved.
Telegram dated July 17, 1933, to Mr. Stevens, Federal Reserve
Agent at Chicago, approved by five members of the Board, referring to
the application of the Ludington State Bank, Ludington, Michigan, for
Permission to withdraw immediately from membership in the Federal Re8erve System, and stating that the Board waives the usual requirement

or

EliX

months notice of intention to withdraw and that

accordingly,

Upon surrender of the Federal reserve bank stock issued to the Ludington
State Bank, the Federal Reserve Bank of Chicago is authorized to cancel
sUch stock and make a refund thereon.
Approved.
Letter to 71±. Curtiss, Federal Reserve Agent at Boston, stating
that

the Board approves the application of the First National Bank, Bruns-

Wick, Maine, for 30 additional shares of stock of the Federal Reserve Bank
r Boston and revokes its approval, granted on March 14, 1933, of the applieatlon previously submitted by the national bank for 15 additional shares,
whIch stock was not issued for the reason that the bank was placed in the
b444e of a conservator at the end of the banking holiday and did not reopen
141til Xune 2, 1933, at which time it issued preferred stock, partly offset
/5 a decrease in surplus, entitling it to 30 additional shrives of Federal
Iseserve bank stock.
Approved.
Letter dated Tuly 14, 1933, to Mr. Case, Federal Reserve Agent at
York, approved by seven members of the Board, replying to Assistant
Niella Reserve Agent Dillistints letter of Tune 29 relative to the pro-




107
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-38-

Priety of further dividend disbursements by the Northern Westchester Bank
of Katonah, New York.

The reply referred to the action of the board of

directors of the member bank in declaring a dividend payable Tune 30, 1933,
44d stated that, for the reason set forth in the reply, the Board feels
that the condition of the institution is still not such as to warrant the
PaYment of further dividends, and that, inasmuch as the agent's discussion
the matter with the bsnk directly has not produced the desired result,
it is requested that he consider the advisability of enlisting the aid of
the Superintendent of Banks of the State of New York in an effort to obtain
the bankts assurance of a suspension of dividends until a material improvetent has been effected in its condition.

The reply also stated that the

13(lard will be pleased to be advised of any action which the bank may take
14 regard to its future dividend policy.
Approved.
Letter dated July 17, 1933, to Mr. Case, Federal Reserve Agent at
146/7 York, approved by six members of the Board, referring to the analysis
"report of examination as of October 22, 1932, of the Endicott Trust Cam1)44Y, Endicott, New York, and, particularly to the institution's investment
°r 0136,000 in corporate stocks, and to the desirability of its compliance
with the
recommendation of the Superintendent of Banks of the State of New
that dividends be discontinued until further notice, and of an increase
ill the bank's capital in order to furnish an adequate relationship of capital

accounts to its total deposit liabilities.

that

the agent furnish the Board with further information with regard to

The letter also requested

the
'e matters, together with advice of any improvement which may have been
ettacted in the generally unsatisfactory condition of the trust company as
1'611-acted by the report of examination referred to above.



Approved.

apo

7/22/33
Letter dated Tuly 18, 1933, to Mr. Case, Federal Reserve Agent
at New York, approved by six members of the Board, replying to Assistant
Federal Reserve Agent Dillistin's letter of Tune 15 advising of the reorMnization, based upon issues of preferred stock sold at a premium, and
the reopening on an unrestricted basis, of the Perth Amboy Trust Company
and the Raritan Trust Company, both of Perth Amboy, New Tersey, the licenses being issued by the Secretary of the Treasury through the Federal
Reserve Bank of New York as of Tune 5, 1933.

The reply stated that, since

these companies were reorganized, the Board in its letter of Tune 20, 1933
(X-7455), has made known its views regarding reorunization plans involving
essential characteristics of the ones in accordance with which these two
b44ke reopened and it is assumed that similar plans received by the New

YQ1'k bank in the future will be considered in the light thereof. The reply
41so stated that, although but one of the banks has reopened with total
eaPital less than it had previously, the Board considers that any reduction
eaPital stock, whether or not accompanied by the sale of stock increasta

the capital to its original amount, or more, is within the purview of

the condition of membership requiring the Board's prior approval of reducti°48 in capital stock, to which each of the institutions is subject, and
ref,
'illested that the agent ascertain and advise the Board why its consent to
the respective capital stock reductions was not obtained prior to giving
effect thereto, together with his recommendation as to what action should
bete
'
ken by the Board in the matter.
Approved.
Letter dated July 20, 1933, to Mr. Case, Federal Reserve Agent at
17ew

—A-1 approved by seven members of the Board, referring to the analysis




109
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-40-

of report of examination as of December 21, 1932, of the Ontario County
Trust Company, Canandaigua, New York, and stating that it has been noted
that on the date of the examination referred to the institution was carrYbag forty shares of its own stock in its investment account, which were
acquired on February 25, 1932, in protection of debts previously contracted,
4ad which it wished to continue to carry until it had acquired certain
Other shares in a similar manner.

The reply also stated that the Board

is not authorized to grant permission for the holding by the trust company
• the shares of its own stock longer than the period of six months from
the date of acquisition thereof allowed under the provisions of section 9
• the Federal Reserve Act when acquired to prevent loss on a debt procontracted in good faith, and that it is requested, therefore, in
the event the trust company has not disposed of the shares of stock referred
t°
'that the agent call the provisions of the law to its attention and ad•

It that the Board will insist that such stock be disposed of at the

tirst practicable
opportunity.
Approved.
Letter dated Tilly 18, 1933, to Mr. Hoxton, Federal Reserve Agent
at Richmond, approved by six members of the Board, replying to Assistant
Pederal Reserve Agent Fry's letter of July 3 inclosing copies of corres15°4dence with the Carolina Savings Bank, Charleston, South Carolina, in
cobizection with the charge-off of certain assets classified as losses in
the
report of examination of that institution as of Tune 7, 1933. The reMY stated that the analysis of the report of examination of the member
shows estimated losses of 092,757, including depreciation in defaulted
b°44e and stocks, and other depreciation in bonds below the four highest




110

7/22/33

-41-

grades aggregating

44,454; that it appears from the member bank's letter

Xune 29, 1933, that no action has been taken to correct this condition,
Other than to apply a reduction of its surplus in the amount of :50,000
equallY to loans classed as doubtful or loss and depreciation in securities
investments; and requested that the agent call to the bank's attention the
attitude of the Board with regard to the elimination of losses ,and depreciation in securities investments below the four highest grades, and that he
suggest to it the desirability of conforming as far as possible to this
'
l equirement, advising the Board of any action taken by the bank in the
Pl'emises.

The reply also observed that about 88-,J of the estimated losses

811°1711 in the current report of examination of the bank represents depreciation in stocks; called attention to the regular condition of membership reg41'ding the purchase of stocks by member banks and to section 5(c) of the
13&11kinC Act of 1933 prohibiting the purchase of stocks by member banks; and
fated that it would seen to be appropriate for the Carolina Savings Bank
.43 dispose of its holdings of stocks at the first reasonable opportunity.
Approved.
Letter dated July 20, 1933, to the Comptroller of the Currency,
413131'oved by seven members of the Board, replying to his memorandum of
3111Y 8 recommending approval of the application of the Union National
8alik
of Carnegie, Pennsylvania, for permission to reduce its common capital stock from :100,000 to 150,000 under the terms of a proposed plan
Which also provides for the sale of !)50,000 of preferred stock at par
t° 3tockholders and depositors, the released capital in the amount of
C360 nn

together with the bank's present surplus of 025,000 and ::24,768.15

°t the undivided profits account, to be used to eliminate unacceptable
"et8

and depreciation on securities and furniture and fixtures in the




111
7/22/33

-42-

amount of '99,768.15.

The reply stated that the Board approves the pro-

Posed reduction under the plan submitted, subject to the conditions set

forth in the reply.
Approved.
Reply to a memorandum dated Tune 27, 1933, from the Comptroller
(3f the Currency, recommending approval of the application of the Philson
144t1onal Bank of Berlin, Pennsylvania, for permission to reduce its capital
Stook from ,)60,000 to 350,000, under the terms of a proposed plan which
Provides for the surrender of the present capital stock outstanding in the
414°11nt of 360,000, and the resale thereof to the extent of 350,000 par
value for

62,500, of which the premium of 42,500 will constitute the

1)11108 surplus upon the completion of the proposed readjustment; the released capital stock in the amount of ,)60,000, together with the bank's

Pl'esent surplus and undivided profits amounting to $69,389.26 and funds
1-11 the amount of approximately 3239,081.16 made available by the waiver
Of 45%

1-11

Of unsecured deposits, to be used to eliminate unacceptable assets

the amount of 3368,233.69, such assets to be trusteed for the benefit

or waiving
depositors. The reply stated that the Board approves the proreduction under the plan submitted, subject to the conditions set
forth in the reply, and that the Board feels that special consideration
hoUld be given to the advisability of requiring that an assessment on
Pl'eaent Shareholders be made so as to reduce correspondingly the amount
u
Which
the depositors may be called upon to waive.
Approved.
Telegram dated July 15, 1933, to Ir. Curtiss, Federal Reserve
1eezrt at
Boston, approved by five members of the Board, requesting that
edvise the First National Bank at Portland, Elaine, that the Federal




112
7/22/33

-43-

Reserve Board approves its application to act, when not in contravention
of State or local law, as trustee, executor, administrator, registrar of
stocks and bonds, guardian of estates, assignee, receiver, or in any other
riduoiarY capacity in which State banks, trust companies or other corporations which

COMB

into competition with national banks are permitted to act

Uader the laws of the State of Yaine, the exercise of all such rights being
subject to the provisions of the Federal Reserve Act and the regulations of
the Federal Reserve Board.
Approved.
Letter dated Tuly 15, 1933, to the Windsor County National Bank,
Viiildsor, Vermont, approved by five members of the Board, stating that the
Peclenal Reserve Board approves the bank's application for permission to
acts when not in contravention of State or local law, as trustee, executor,
4cli11ni8trator, guardian of estates, assignee, receiver, committee of estates
on lUnatics, or in any other fiduciary capacity in which State banks, trust
eQqanies, or other corporations which

COMB

into competition with national

bellks are permitted to act under the laws of the State of Vermont, the exerels° of all such rights being subject to the provisions of the Federal ReAct and the regulations of the Federal Reserve Board.
Approved.
Letter dated July 15, 1933, to the National Bank of Commerce of
Chall-eston, West Virginia, approved by five members of the Board, stating
that the Federal Reserve Board approves the bank's application for perrats ai
on to act, when not in contravention of State or local law, as trustee,
elcee„
`"(5r, administrator, registrar of stocks and bonds, guardian of estates,
et"illse, receiver, committee of estates of lunatics, or in any other




113
7/22/33

-44-

tichlciary capacity in which State banks, trust companies or other corparations which come into competition with national banks are permitted to act
Under the laws of the State of West Virginia, the exercise of all such rights
being subject to the provisions of the Federal Reserve Act and the regulations of the Federal Reserve Board.
Approved.
Letter dated July 17, 1933, to the Capital National Bank in Jackson,
Mississippi, approved by five members of the Board, stating that the Board
hes considered the bank's application for permission to exercise fiduciary
11°71ers under the provisions of section 11(k) of the Federal Reserve Act,
Shd authorizes the bank to act, when not in contravention of State or local
411,9 as trustee, executor, administrator, registrar of stocks and bonds,
ellardian of estates, assignee, receiver, committee of estates of lunatics,
01
'ill any other fiduciary capacity in which State banks, trust companies or
Other corporations which come into competition with national banks are perlaitted to act under the laws of the State of /Assissippi, only in the specitic trusts in which the Capital National Bank of Tackson, lAssissippi, had
been appointed and was acting on the date when the Capital National Bank in
3-116ks°n was authorized to commence business by the Comptroller of the CurlielicY and as trustee in connection with an issue of bonds of the Hattiesbuz,,
sompress Company, the exercise of all such rights to be subject to

the pr°17isions of the Federal Reserve Act and the regulations of the FedReserve Board; and that action has been deferred on the bank's applie4t1°4 for full fiduciary powers until the institution has been in operaet least six months and a report of an examination made subsequent
to the
- expiration of that period has been received.




The letter also noted

114
7/22/33

-45-

that the operations of the trust department of the Capital National Bank
Of Jackson were unprofitable, and suggested that the new bank accept only
sUch trusts from the Capital National Bank of Jackson as are of a desirable
nature and which will not result in any injury to the new bank.
Approved.
Letter dated July 22, 1933, to the l'irst National Bank in Marion,
illdianas approved by seven members of the Board, stating that the Federal
Reserve Board has approved the application of the organizers on behalf of

the national bank for pernission to act, when not in contravention of State
local law, as trustee, executor, administrator, registrar of stocks and
bo8, guardian of estates, assignee, receiver, committee of estates of
111411tice, or in any other fiduciary capacity in which State banks, trust
C°111Penice or other corporations which come into competition with national
baill
"are permitted to act under the laws of the State of Indiana, the exel'clse of all such rights being subject to the provisions of the Federal
ReesITe Act and the regulations of the Federal Reserve Board.
Approved.
Letter dated July 12, 1933, to Er. Stevens, Federal Reserve Agent
Chicago, prepared in accordance with the action taken at the meeting on
1933, and approved by seven members of the Board, stating that the
11)131teetion of the National Boulevard Bank of Chicago, Illinois, for permis34)4 to act in all fiduciary capacities authorized under section 11(k) of
the y
cderal Reserve Act, has been carefully considered and was discussed at
Iljaeetillg of the Board; that, among other things, the Board noted that, when
the tInlet department of the old Boulevard Bridge Bank of Chicago was examined

Ets Of,
'
1arch 27, 1933, by a national bank examiner, the examiner stated that




115
7/22/33

-46-

the amount of trust business developed since the department was organized
tn 1925 had been snail; that there were no indications that any great amount
er future business would be developed; that the trust department was being
°Perated at a loss which amounted to 31,400 in 1931 and 39,500 in 1932; and
that it was recommended that the trust department be liquidated and not taken
t4t0 the new bank.

The letter also stated that the Board was advised that

the department holds a considerable number of accounts under trust agreements
c°vering real estate of bank borrowers; that lir. Young, Assistant Federal Re8erve Agent at Chicago, stated in a conversation on Tune 30 that these trusts
eliould not be taken over; that the Board also noted that in a wire of the
36°04 date hr. Young said that he had talked with the president of the applibank, who stated that it was not intended to take over real estate trusts
171iich were not absolutely clean and desirable and that new trusts of a char"ter Which had been criticized would not be taken into the applicant bank;
th") in

this connection, it was observed that the new trust department would

be Under the management of Lr. Charles F. Meyer, who had conducted the trust
tie4rtment of the old Boulevard Bridge Bank since 1926; and that it also ap1)s4red that, although there has been a substantial amount of new cash paid
111t0 the bank and a large amount of deposits of

i1liam Wrigley, Jr., Company,

1143 subordinated, approximately 31,200,000 of assets in the slow classifica-

t ola

end approxtmAtely $1,100,000 of assets classified as doubtful and loss

l'el11414 in the new bank.
"ter

The letter stated further that, after discussing the

the Board is not prepared at this time to grant the application of

the n
ational bank for trust powers.




Approved.

116

7/22/33

-47Letter dated July 21, 1933, to Mr. Williams, Federal Reserve Agent

at Cleveland, approved by seven members of the Board, replying to Assistant
Federal Reserve Agent Fletcher's letter of Tune 15 requesting advice as to
whether conditions of membership numbered 15, 16 and 17, with regard to the
administration of trusts by State member banks, set out in the Board's letOf March 11, 1933 (K-7356), are applicable to banks admitted to memberPrior to March 11.

The reply stated that conditions of membership

Pl'escribed by the Board are applicable only to State institutions for which
they are prescribed at the time of admission to membership and that, accordOnly the State member banks and trust companies for which conditions
411Mbered 15, 161 and 17 were prescribed at the time of their admission
to
4184hership are subject to the requirements of these conditions.

The reply

also stated, however, that in the agent's contacts with any member trust
0a4PanY or State bank exercising trust powers, it would be appropriate for
44 to call attention to the Board's views as indicated by the conditions
tnaabered 15, 16 and 17 and to suggest that such institution comply with the
°vi8ions of these conditions in the administration of its trust department
131
'
"'ell though these conditions were not prescribed when it was admitted to
IlleMbership.

Approved.
Reply on Ally 20, 1933, approved by seven members of the Board, to
4 letter

dated June 14 from Mr. McClure, Chairman of the Federal Reserve

88I* °f Kansas City, replying to the Board's letter of May 10, 1933, with
l
'eeard to the
examination of the Federal Reserve Bank of Kansas City, made
131 the Board's examiners as of January 4, 1933.

The Board's reply contained

1\4"blier caMments with regard to the pledging of ineligible collateral as
e"ilritY for issues of Federal reserve notes, and with regard to the safe-




117
7/22/33

-48-

kasPing of securities for mamber banks, State, county and municipal officials, and receivers of closed banks.
Approved.
Telegraphic reply on July 17, 1933, approved by six members of the
Board, to a telegram of that date from Governor Harrison of the Federal Reserve Bank of New York, referring to a letter addressed by him to the Board
°11 'Ally 13, with regard to participation by the Federal Reserve Bank of New
Ycric in a renewal of the central bank credits to the National Bank of Hungary,
sLad stating that advice has been received from the Bank for InternationAl
Settlements that until negotiations with respect to a longer term renewal
°t the credits are completed, and beginning at the maturity of the present
relaewals on July 18, 1933, it is proposed by common consent to renew the
credits on a day to day basis, subject to all existing terms and conditions.
The telegram also stated that it is the view of the New York bank that it
Oho
Uld assent to this proposal and requested the Board's approval so that a
l'elQY could be transmitted to the Bank for International Settlements on
3'1111r 17

The reply stated that, pending the completion of negotiations

roll a longer term renewal of the credits to the National Bank of Hungary,
ths Federal Reserve Board offers no objection to the Federal Reserve Bank
°r Now York, if authorized by its executive committee, renewing its partic1134ti°7a ill the credits on a day to day basis beginning July 18, 1933, subOct to
all existing terms and conditions and provided all other participants
111'ea to do likewise.
Approved.
Telegraphic reply on July 21, 1933, approved by seven members of
the 13°e'rds to Governor Harrison's letter of July 13 in which a resolution
adopted by
the board of directors of the bank on that date with regard to




get

7/22/33

-49-

the renewal of the bank's participation in the central bank credits to the
National Bank of Hungary.

The reply stated that the Board offers no objec-

tion to the acceptance of partial repayment of the bank's participation of
Proximately 04,000,000 in the credits to the National Bank of Hungary, in
accordance with the resolution adopted by the board of directors on July 13,
and the renewal for a period not to exceed three years of the remaining unPaid balance of such participation, after such partial repayment has been
D)ade, by the purchase of an equivalent amount of prime commercial bills indorsed or guaranteed by the National Bank of Hungary, with the understanding
that the other principal participants in the credits will renew the unpaid
balance of their participations for the same period of time as the Federal
reserve bank renews its participation, and that the terms of the credits
With respect to the bank's participation therein will be the same as heretotore

except that the first syndicate credit will bear no interest and the

136e°14 eYndicate credit will bear interest at the rate of 1% per annum plus
411 amortization payment at the rate of 2,; per annum.

The reply also reques-

ted that, if and when the credits are renewed in accordance with the resoluti04 referred to, the Board be advised as to the exact dollar amount of
repayments on the credits received by the bank in connection with
the renewal of the unpaid balance.
Approved.
Repl,y. on July 17, 1933, approved by five members of the Board, to
a 1A-1-‘
-"sr dated July 13 from Governor Harrison of the Federal Reserve Bank
Or
°W

York, referring to the relationships and transactions of Federal re-

‘g banks with foreign banks or bankers under the terms of section 14(g)
or
1 he Federal Reserve Act, as amended by section 10 of the Banking Act of
C14
'alld stating that it is the unaerstanding of the bank that it will be




119

7/22/33

-50-

areeable to the Board for the Federal Reserve Bank of New York to continue
eXistin

relationships which have been established, with the approval of the

lederal Reserve Board, with foreign banks and to continue, as in the past,
the normal transactions incidental to such relationships.

Governor Harrison's

letter also referred to the Board's letter of July 6, 1933, on this subject
t() the governor of the Federal Reserve Bank of Boston, and stated that the
Ilew York bank will be E lad to discuss the whole subject with the Board at
QnY time find to cooperate to the fullest extent in following such procedure
as the Board may approve in connection with the relationships and transactiorls of the New York bank with foreign banks and bankers.

The reply stated

that there are in course of preparation tentative regulations for the con31deration of the Board with respect to such relationships and transactions
14 connection with the proposed regulations governing open market operations,
411d that, pending the issuance of such regulations, Governor Harrison's underas stated above, is correct.

The reply also stated that the Board

1/11reciates the expression contained in his letter of the New York bank's
dew,
4-0e to cooperate in the relationships and transactions of the bank with
-e4.(g). banks or bankers.
Approved.
Letter received from Governor I:arrison of the Federal Reserve Bank
(11'
or

ew York, under date of July 8, 1933, and circulated among the members
the Board, containing a report of discussions in London in which he par-

tieiDated from June 11 to June 16, 1933, separately with representatives
or

the Bof England and the Bank of France and jointly with represent-

-3 of the Treasury Department of the United States, the British and
'4tIve'
the 1?rench
treasuries.




Noted.

120
7/22/33

-51Reply on July 18, 1933, approved by six members of the Board, to

a letter dated July 10 from Er. Walsh, Chairman of the Federal Reserve Bank
Of Dallas, advising of the amendment of Article V of the by-laws of the El
l'aso brunch so as to make the appointment of an assistant cashier at the
branch optional with the directors of the Federal Reserve Bank of Dallas.
The reply stated that, in accordance with the request contained in the
chairman's letter, the Board approves the amendment referred to.
Approved.
Letter dated July 14, 1933, to the chairmen and governors of all
Federal reserve banks, approved by seven members of the Board, stating

that the authority granted by the Board to all Federal reserve banks in its
(11rcular of July 26, 1932 (X-7215a), as amended by its letter of January
' 1933 (X-7329), to discount eligible notes, drafts and bills of exchange
23
' Individuals, partnerships and corporations, subject to the provisions
rol
Of the law, the Board's regulations, and that circular, will expire at the
el°8e of business on July 31, 1933; and that the Board has decided to
extend such authorization for an additional six months, and, accordingly,
11Els further amended section II of its circular of July 26, 1932 (X-7215a),
to read as follows:
"AUTHORIZATION BY THE FEDERAL 111,SERVE BOARD.
The Federal Reserve Board, pursuant to the power conferred upon it by the amendment hereinbefore (mated, hereby
authorizes all Federal reserve banks, for a period ending at
the close of business on January 31, 1934, to discount eligible
notes, drafts and bills of exchange for individuals, partnerships and corporations, subject to the provisions of the law,
the Board's regulations, and this circular."




Approved.

7/22/33

-52Letters dated July 18, 1933, approved by six members of the Board,

to The Chase Bank, New York City, an Edge Act corporation, and to the
French American Banking Corporation and the International Banking Corporation, both State foreign banking corporations of New York City operating
411der agreement with the Federal Reserve Board, requesting that they
r4r11ish the Board with the infonnation asked for in a memorandum inclosed
With each letter.

The letters requested that the corporations arrange to

tile the report of their head offices and domestic branches, if any, as
aeon as possible, and reports of foreign branches, agencies, offices,
affiliated institutions and subsidiaries, if any, as soon as received.
The letters also stated that it will be appreciated if, after these reports
have been received from all of the foreign branches, agencies, offices,
eIrriliated institutions and subsidiaries, if each corporation will prepare

elld send to the Board, a consolidated statement of the corporation.
Approved.
Telegraphic reply on July 13, 1933, approved by seven members of
the Board, to a telegram addressed to Governor Black under date of July
II by Governor EcKinney of the Federal Reserve Bank of Dallas requesting
the Board's views on the suggestion that the bank rediscount paper for the
ilei°nal Agricultural Credit Corporation at Forth Worth, Texas, rather than
1341-tied-Date in purchases of Government securities for System account.

The

ePlY stated that flr. George L. Brennan, Acting Emergency Credit Commissioner,
Who 111.u.s supervision of the regional agricultural credit corporations, says
that
there has been no change in the general policy with respect to redishandled
e°11nting Paper of the corporations, although they plan to have it




122
7/22/33
t3

-53-

some extent by intermediate credit banks, and that they do not contem-

Plate submitting any such paper to the Federal reserve banks.

The reply

also stated that with respect to the effect of the bsnk discounting such
Paper instead of participating in open market purchases of Government
securities for System account, it should be borne in mind that it would be
necessary for the other Federal reserve bfinks to take over the share of the
Federal Reserve Bank of Dallas in case it did not participate, and that the
Other Federal reserve banks have their own local problems.
Approved.
Letter dated July 12, 1933, to Governor Harrison of the Federal
Reserve Bank of New York, approved by seven members of the Board, stating
that the Board has noted certain statements in New York papers, particularly
the 'Journal of Commerce and The New York Times of July 8, based upon an
eZnouncement issued by the Superintendent of Banks in New York concerning
the formation of the Savings Banks Trust Company and particularly the
Portion of the newspaper comment to the effect that "The Federal Reserve
8414k of New York has indicated its willingness to extend facilities up to
k00,000,000".

The letter also stated that it will be appreciated if

el°vernor Harrison will advise the Board as to the developments in this
1Qatter 111) to date, including Particularly the basis, if any, upon which the
?eclel'al Reserve Bank of New York has entered into any commitment regarding
the extension of credit facilities to the new institution.
Approved.
Memorandum dated July 15, 1933, from Mr. Smead, Chief of the
biviaien of Bank Operations, stating that the general caption "RESOURCES",




7/22/33

-54.-

h eretofore appearing above the detailed statement of assets in the forms
Used by member banks in submitting quarterly condition reports, was
Changed to "ASSETS" in both the Comptroller's And the Board's forms to be
Used by member banks in submitting their reports as of June 30, 1933, and
reeomending that the same change be made in the weekly press statements
sh°Wing the condition of Federal reserve banks.

The recommendation was

EIPProved by seven members of the Board on July 21, 1963.
Approved.
Letter dated July 20, 1933, to lir. .foodin, Secretary of the
a letter reTI'eaaurY, approved by seven members of the Board, inclosing
ceived by the Board from the Uovernor of the State of Ohio, under date of
30, and a copy of the Board's proposed reply thereto, also approved
by aoven members of the Board, with regard to the question raised in
G°verner .4hite's letter as to whether a nonmember State bank which has
Obtained agreements from its depositors restricting their right to withtheir deposits would be ineligible for admission to membership in the
:2eclaral Reserve System.

The letter to the Secretary of the Treasury re-

to section 9 of the Federal Reserve Act which requires the Board,
111 acting upon the application of any State bank for membership in the Federal Reserve System, to consider, among other things, the financial con-

clition of
t of April
the applying bank; to a ruling of the Treasury Departmen
33 1933,
reopen; and to
with regard to licenses granted to member banks to
Treasury
a st
atement contained in a telegram which the Secretary of the
sent to
1933, with
State banking authorities in each State on March 11,
ard to the licensing of member banks; and stated that the Board does




7/22/35

-55-

not wish to approve any applications of State banks for membership in the
federal Reserve System under circumstances which nay later subject such
banks to the revocation of the licenses granted by the Treasury Department
at the time of their admission to membership, and that it will be
aPPreciated if the Secretary of the Treasury will give consideration to
the

Proposed letter to the Governor of the State of Ohio and give the

Bc)ard any suggestions he may have with regard thereto.

The proposed letter

to the Governor of Ohio stated that the Board has taken the position that

the fact that there are in existence agreements of depositors waiving
their right to demand payment of a portion of their deposits for a spedPeriod of time does not make a bank ineligible for membership in the
'Federal Reserve System, and the Board, in a few instances of this kind,
hes admitted banks to membership in the System where their condition was
c'therwise satisfactory, but that in some cases involving so-called
171-vers of deposits which have come to the Board's attention, it has been
r°414 that, although depositors waived their right to demand inmediate
Pe,Ynlent of their deposits, the bank remained liable to repay such deposits
t soze future time and, when such liability was taken into consideration
the bank's capital was impaired or wiped out, in which case the bank was
11(3t eligible for membership in the Federal Reserve System.

In response to

the reference in Governor White's letter to the form of agreement which
it E4)Pears was exacted from depositors by the Commercial Savings and Trust
C°111PanY of Ashtabula, Ohio, the proposed reply stated that it is noted that

'
till
agreement places in the hands of the officers of the bank the power
ither to pay or to withhold any amount due any depositor within the




7/22/33

-56-

restriction, since the statement is made that "the bank reserves the
absolute ric;ht to withhold payment of any check and to refuse any withdrawal of funds, * * * *

when the officers of the bank, in their sole

judgment, determine that such action is in the best interest of the bank
and its depositors"; that the existence of such an agreement in the case
(31* a bank in sound condition and otherwise able to meet all of the requireof admission to membership in the Federal Reserve System would raise
e 8orious question as to the justification for vesting solely in the discretion of the officers of the bank a power to discriminate among
depositors which might be exercised unfairly and arbitrarily and which
W°uld leave not only the drawers of such checks but also the subsequent
holders in due course in uncertainty as to whether payment might be refused
"anY time, and that this would be of especial concern to the Federal ree"ve banks in view of the fact that they handle for collection practically

all Checks drawn on member banks and deposited with banks in other cities.
reply further noted that the agreement referred to involves an agreerile" by the stockholders of the bank authorizing the payment of any
dividends on their stock to depositors who have released the bank from
liebility for 20,3 of their deposits until such depositors have been repaid
the amount so released, and that it appears that, in these circumstances,
standpoint
the stock of the bank will have little, if any, value from the
and accordingly will not
r "rnings of the bank for a considerable period
be ,„,...
4- dzketable, and stated that it is questionable whether on such basis
"
the

People of the community will retain confidence in a bank so as to

ellEtble it to maintain or increase its deposits.




The reply also called

7/22/33

-57-

attention to the fact that all applications of State banks in Ohio for
adlaission to membership must be filed with the Federal reserve agent at
the Federal Reserve Bank of Cleveland, and suggested that Governor White
‘efer any bank, which may be interested in submitting an application, to
l
41's L. B. Williams, Federal Reserve Agent at Cleveland.
Approved.
Reply on July 20, 1933, approved by seven members of the Board, to
e. letter dated July 11 from Er. Newton, Chairman of the Federal Reserve
13ank of Atlanta, reporting the results of an investigation conducted by
htm •
in accordance with the request contained in the Board's letter of June
201 1933, in connection with certain allegations contained in a letter
841clressed to the Secretary of the Treasury under date of May 15, 1933, by
"H. H. Harper of New Orleans, Louisiana, regarding the Hibernia Bank
n
elld Trust Company of New Orleans, Kohn, Weil & Simon, Incorporated, of
Ne17 Orleans, Rnd Ir. Leon C. Simon, a Class B director of the Federal
Reaerve Bank of Atlanta.

The reply stated that a copy of Er. Newton's

letter is being sent to the Secretary of the Treasury for his information,
elicl that, in the absence of advice from that office, no further action
Will be taken in the matter.
The letter to Mr. Newton was approved, together with a letter dated ally 20 to the Secretary
of the Treasury in accordance therewith, also
approved by seven meMbers of the Board.
Letter dated July 13, 1933, to

La..

Wilbur Stiers, President of the

-44-1.0 National Bank of Rushville, Indiana, approved by seven members
°t the Board, stating that his letter of June 30, 1933, addressed to
€1°1e James H. Douglas, former Assistant Secretary of the Treasury,




127
7/22/33

-56-

W1th regard to the sale of Government bonds executed by the Federal Reserve
Bank of Chicago on ir_arch 14, 1933, for account of the Rushville National
Bank, has been referred to the Federal Reserve Board, as was the letter
which

Stiers addressed to the Secretary of the Treasury under date of

APril 29, 1933.

The letter also stated that the facts in the case, and the

Poeition of the Federal Reserve Bank of Chicago, as explained in the corresPoudence which that institution has had with 1r. Stiers regardinf_; the
tliansaction, have been reviewed, and that since the sale was handled by
the Federal
reserve bank in the sane manner as all purchases and sales of
()Irernnent securities for account of member banks are customarily handled,
there does not appear to be any justification for a change in the views
eZPressed in the letter which was addressed to Ia.. Stiers by the Board
lInclar date of April 25, 1933.
Approved.
Letter dated July 21, 1933, to the Federal liolne Loan Bank Board,
aPProved by seven members of the Board, stating that the attention of the
eral Reserve Board has been called to the fact that an institution which
18 a Llember of the Federal Home Loan Bank System is using in its advertising
4 elrbol consisting of a rectangle on which is superimposed a diamond
2°4taining the words "Member Federal Home Loan Bank System"; that it
a*I)eare that the symbol is very similar in appearance to one which has
been
Used extensively by member banks of the Federal Reserve System, the
'
(141Y difference being that the wording of the latter is "Member Federal
ae8"ve System"; that, in view of the circun8tances set forth in the
letter, the matter is respectfully called to the attention of the Federal




7/22/33

-59-

Loan Bank Board since it appears that there is a danger that the use
°f

the symbol referred to by a bank which is a member of the Federal Hone

Loan Bank System nay result in confusion in the minds of the public; and
that it is felt that the Federal Hoare Loan Bank Board will agree that
sUch a result would be undesirable, regardless of whether the provisions
°2 Section 3 of the Act of Lay 24, 1926, are applicable.

The letter also

stated that the Board is without information as to the origin of the use
elf the symbol by the member of the Federal Home Loan Bank System, nor has
it information as to the extent to which such symbol is used by other
b4aks, but that it is respectfully requested that the Board be advised as
to whether the use of the symbol has received the approval of the Federal
lic)me Loan Bank Board.
Approved.
Reply on July 20, 1933, approved by seven members of the Board, to
410 letters dated June 22 from the Banco de Ilexico, S. A., Mexico City,
'
14e4ieos requesting information as to the rediscount by Federal reserve
of acceptances issued in favor of central banks in South American
c°11tl'ies, and Inquiring as to whether the Board would approve an arrangeUnder which acceptances drawn in favor of the Banco de Mexico by the
."80ciated banks of the D3xican Banking System would be eligible for redise°11nt or purchase by Federal reserve banks.

The reply stated that the

?ecielbal reserve banks are not accepting institutions and do not accept
cll'Etft8 drawn upon them; that national banks and State banks which are mem:_
or the Federal Reserve System are authorized, subject to certain
'
"lons and limitations, to accept drafts or bills of exchange drawn




7/22/33

-60-

uPon them; and that acceptances so created are eligible for discount, or
tor purchase in the open riPirket, by the Federal reserve banks if they meet
the applicable requirements contained in the Federal Reserve Act and in
the regulations of the Federal Reserve Board.

The reply also stated that

the information given with respect to the acceptances drawn in favor of the
Banco de Lexico is not sufficiently complete to enable the Board to advise
Whether they may be eligible for discount or purchase by a Federal reserve
be.nk in any case, and inclosed copies of the Board's Regulations A, B and
C containing the requirements as to the acceptance of drafts or bills of
e4eheilge by member banks and as to the discount and purchase of bankers'
"oeptances by Federal reserve banks.

The reply stated further that,

4141er certain conditions, member banks are authorized to accept drafts or
bills of exchange having not more than three months sight to run, drawn
bY banks or bankers in certain foreign countries for the purpose of furnishing
cl°11ar exchange required by the usages of trade in such countries; that such
"eePtances may be eligible for discount or purchase by Federal reserve
b4411ce; and that the eligibility for discount or purchase of particular
"eePtances under the law and the regulations of the Board, and their
"eePtability from a credit standpoint, are matters that must necessarily

be deteini
.ined in each case by the Federal reserve bank to which such
"eePtances may be offered.
Approved.
Letter dated July 15, 1933, to the Federal reserve agents at all
'4(lel'al reserve banks, approved by six members of the Board, stating that,
0
ler that the Federal reserve banks nay be advised as promptly as pose of the interpretations of the Banking Act of 1933 sent out by the




7/22/33

-61-

Board in response to inquiries received by it, arrangements have been made
to have the letters and telegram containing such interpretations mimeograPhed with the following notation at the top:
Act of 1933.

"Interpretation of Banking

Copies to be sent to all Federal reserve banks"; that each

coMmunication will be given an 2:number and one copy thereof will be sent
to the Governor and one copy to the Federal reserve agent at each federal
reserve bank; and that the same number of additional copies will be forwerded to the respective banks as are sent in the case of the regular
letters of the Board bearing X numbers.

The letter also stated that these

interpretations are being sent to the banks in order that the information
e°fltained therein will be available to them in answering inquiries received
tn. regard to the Banking Act of 1933, and that, unless otherwise indicated,
the colmunications received from the Board in this form are not for distriblItion outside of the Federal reserve bank.
Approved.
Letter dated July 22, 1933, to the Federal reserve agents at all
Elcleral reserve banks, approved by seven members of the Board, referringt0 the Board's letter of July 11, 1933 (X-7493), with which was inclosed
Et coPY of a letter addressed by the Board to Acting Governor Johns of the
''Elderal Reserve Bank of Atlanta with respect to the question who is to be
(3nesidered an "executive officer" of a member bank within the meaning of
"ction 22(g) of the Federal Reserve Act, as amended by the Banking Act
or 1933, and stating that it should be understocd that examiners of member

babie

Will be expected to call attention in their reports of examination

to .„
"4-L cases discovered by them where the positions or duties of the




7/22/33

-62-

officers involved are such as to make it appear to the examiners that
there has been a violation of the provisions of section 22(g) of the Federal
Reserve Act, as amended, and that Federal reserve agents are requested to
report the facts of any such case coming to their attention to the local
United States District Attorney and to send a full report of the matter to
the Board in triplicate, as requested in the Board's letters of April 4,
1923 (X-3683), and September 1, 1927 (X-4939), in cases of violations of
Other criminal statutes.
Approved.
Reply on July 14, 1933, approved by five members of the Board, to
4 laeMOralidum dated ally 1 from Deputy Comptroller of the Currency Await,

stating that The Bankers Trust Company of Hartford, Connecticut, and the
rtford National Bank and Trust Company of the same city, proposed to
e°11801idate under the Act of November 7, 1918, as amended; that all of the
2,500 shares of stock of The Bankers Trust Company, except 100 shares held
h/r the directors to qualify them for office, are awned by The Hartford
174tion5l Company; and that all of the shares of The Hartford liationAl
C43)11.PculY are held by trustees for the benefit of the shareholders of the
liSlitford National Bank and Trust Company, the stock of which is divided
400,000 shares, large blocks being held by insurance companies and
°ther corporations, the largest number of shares held by any one corporat104 being 56,730 shares held by the Aetna Life Insurance Company.

The

1"ter also requested advice as to whether it will be necessary for any
°r the corporations referred to to secure a permit from the Board before
'°Iing on the question of approval of the consolidation agreement.




The

7/22/33

-63-

reply stated that, for the reasons outlined in the letter, and on the
basis of the facts presented, it does not appear that the corporations are
holding company affiliates and that it will not be necessary for them, or
811Y one of them, to obtain voting permits from the Board pursuant to the
Provisions of the Banking Act of 1933.
Approved.
Letter to Governor Young of the Federal Reserve Bank of Boston,
14 reply to a letter dated June 28, 1933, from Mr. Carrick, Secretary of
the Federal Reserve Bank of Boston, requesting the Board's opinion on the
Tlestion whether the Mutual Savings Central Fund, Inc., of Massachusetts,
ehould be considered as a "bank" within the meaning of section 404 of the
Act of ',arch 9, 1933, as amended, and stating that, if loans may be made
to the Fund under that section, the Fund would have a considerable amount
°I* assets eligible as security, but that, if it were restricted to loans
Under section 13 of the Federal Reserve Act, as amended by the Acts of
111-Y 21, 1932, and March 9, 1933, it -would have comparatively little
4a8ets which would be eligible as collateral security for advances.

The

/%6PlY referred to the Board's letter of May 4, 1932, advising that the
Was not to be considered a bank fcw the purpose of commuting
l'eserves of miner banks, and stated that, for the reasons outlined in the
letter) it is the opinion of the Board that the Fund is not properly to
be
onsidered a State bank or trust company within the meaning of section
'(241 Of the Act of March 9, 1933, as amended by the Act of March 24, 1933.




Approved.

133
7/22/33

-64Reply to a letter dated Tune 27, 1933, from Governor Young of the

Federal Reserve Bank of Boston, requesting advice as to whether a member
bank may pay interest on certain funds deposited in the bank in connection
With the reopening of the bank in March of this year.

It appeared that

the funds so deposited were subordinated to all other deposits in the bank,
that they were subject to such restrictions as to withdrawal and rate of
Interest as might be determined by the directors of the bank, under the
authority of the Comptroller of the Currency, and that, as the directors
Of the bank have taken no action in respect to the withdrawal of the sub°Ildinated deposits, they are not at this time subject to withdrawal on any
tel'ms.

The reply stated that, on the basis of the facts presented, it does

nct aPpear that such subordinated deposits are "deposits payable on demand"
Within the meaninc of section 19 of the Federal Reserve Act, as amended by
section 11(b) of the Banking Act of 1933, or that payment of interest on
10)a. subordinated deposits would cone within the prohibitions of section
19 so long as such deposits retain a deferred status and are not converted
h/T the directors of the bank, with the approval of the Comptroller of the
C\I'll eneY, into "deposits payable on demand"; but that, in the absence of
sllY information as to the action which the directors of the bank propose
to telke, and of an opportunity to examine a copy of the folm of certificate
issued by
the bank to the subordinating depositors, the Board is unable to
4°11Tise definitely whether the inhibitions of section 19, as amended, are
Ell)Plicaole in the instant situation, and cannot undertake to rule on the
cIlleetion presented.

The reply suggested that Governor Young submit the

rittOr to counsel for the Federal reserve bank for an expression of




134
7/22/33

-65-

0Pinion, and stated, in regard to the bank's contention that the subordinating
depositors are in the same position as if they held preferred stock of the
bank, and that such depositors are entitled to receive interest on the subordinated deposits at a cumulative rate of 6,3 per annum, that the Board is
110t in position to rule on this point until it has full information as to
the nature or character of the subordinated deposits in the particular
bank to which the inquiry relates, including the terms of the agreement
g°verning such subordination, and that it would be helpful to have the
views of counsel for the Federal reserve bank in this connection.
Approved.
Reply on July 17, 1933, approved by six members of the Board, to
4 letter dated June 30 from Deputy Governor Rounds of the Federal Reserve
Bank of New York, inclosing a copy of his letter of the same date to lir.
4 H. Cowie, Counsel for the First Trust and Deposit Company, Syracuse,
'
York.
N
"

The reply stated that it appears that Lr. Cowie contends that,

since the laws of New York do not require publication of reports of conof affiliates of a trust company in that State, the publication of
reports is not required under section 9 of the Federal Reserve Act,
"amended by section 5(c) of the Banking Act of 1933.

The reply also

etted that, after providing that each State bank or trust co4)any which
14 &I Inember of the Federal Reserve System shall obtain from each of its
4tr1liates other than member banks, and furnish to the Federal reserve bank
°e its district and to the Federal Reserve Board, not less than three
l*eports durinr, each year, section 9 of the Federal Reserve Act, as amended

by

8

ection 5(c) of the Banking Act of 1933, provides that "the reports of




135
7/22/33

-56-

"such affiliates shall be published by the bank under the same conditions

as govern its own condition reports"; that, in view of the fact that the
Federal Reserve Act does not rec,uire the publication of reports submitted
to the Board and the Federal reserve barks by State nenber banks, the only
reasonable construction that can be given to the requirement quoted above
is that reports of affiliates of State menber banks must be published if
the State law requires such State banks to publish their own reports, even
though the State law nay not require the publication of reports of
4rriliates of State banks.

The reply stated further that the conditions

eWerninL: the method and frequency of publishing such reports depend upon
the Provisions of the State law regarding the method and frequency of the
1)11blication of reports of the State banks; and that, therefore, it is not
entirely accurate to say that the reports of such affiliates must be

PUblished whenever the Federal Reserve Board calls for reports of condition

or

State menber banks.
Approved.
Reply on July 17, 196', approved by six members of the Board, to
letter dated July 11 from L:r. Hox ton, Federal Reserve Agent at Richmond,

14closin3. a copy of a letter from the Commissioner of Insurance and
Ilallking of the State of Virginia with reference to the operation of branches
bY State member banks of the Federal Reserve System.

The reply stated that,

1113Parently, the Comndssioner wishes to be advised as to whether a State
Which has a paid-in and unimpaired capital stock of less than
„
v500 0
) Qu, may become a menber of the Federal Reserve System and continue
to °Perate, outside of the city in which the parent bank is situated,




136
7/22/33

-67-

(nrices or receiving stations whose functions would be limited to receiving
clePosits and cashing checks.

The reply also reviewed the provisions of

aection 9 of the Federal Reserve Act, as amended by the Banking Act of
1933) with regard to the establishment of branches by State banks, and the
Provisions of section 5155 of the Revised Statutes, as amended by section
23 of the Banking Act of 1933, with regard to the establishment of branches
by national banks, and stated that the Board is of the opinion that an office
°I* receiving station of a State bank at which deposits are received and
Ilecks are cashed must be considered a branch within the meaning of the
kovision of section 9 of the Federal Reserve Act, as amended, and that,
'
eec°rdinZlY, it is the Board's view that a State bank located in the State
or Illrginia, which has a population of more than 1,000,000 inhabitants, may
Aot become
or remain a menber of the System and continue to operate such an
or receiving station established after February 25, 1927, beyond the
4111its of the city in which the parent bank is situated, unless such bank
444 a. Paid-up and unimpaired capital stock of not less than ::500,000 and
4°111131'
les with the other requirements applicable to the establishment and
°Peration of branches by a national bank beyond the limits of the city in
Idlich such bank is situated.
Approved.
Reply on July 17, 1933, anuroved by six members of the Board, to a
41tte
-r

dated July 12 from Er. Hoxton, Federal Reserve Agent at Richmond,
.
Lacia
81ng a copy of a letter from 1,1r. Thomas B. LcAdams, Executive Lanager

°r

the

State-Planters Bank and Trust Company of Richmond, Virginia,

1%11,4
.k

..ng whether the provisions of section 23A of the Federal Reserve Act,




,

7/22/33
et8

-68-

amended by section 13 of the Banking Act of 1933, are retroactive.

The

reply stated that it appears from Er. I.:cAdams' letter that the StatePlanters Bank and Trust Company has two affiliates and that the investments
Which it had made in the capital stock of such affiliates, prior to Tune,
19331 exceed the limits prescribed by section 23A; that to conform to other
Pllovisions of the Banking Act of 1933 these affiliates are now being
liquidated; but that, during the period of liquidation, they desire to
b°rrow reasonable sums for expenses and other purposes; and that the bank
e12Tarently desires to know whether it may make loans to these affiliates.
Th€1 reply also stated that it is clear that the provisions of section 23A
(1° not require a member bank to dispose of any such loans to or investments
14 the capital stock, etc., of affiliates acquired prior to Tune 16, 1933;
bIlt that they forbid a member bank to make additional loans or investments
' this character, if the addition of the amount of such new loans or
°I
ilivestments to the amount of those previously existing will increase the
LII*gl'egate to an amount exceeding 105 of the capital and surplus of such
Illelnher bank, in the case of any one affiliate, or 20ç 7 of the capital and
8111'plus of such member bank, in the case of all affiliates of such bank.
reply stated further that, since the inves ments made by the StateBank and Trust Company in the capital stock of its affiliates,
to Tune 16, 1933, exceed the limits prescribed by the law, the
itat
itution may not lawfully maim loans to such affiliates while it holds
411eh investments.




Approved.

7/22/33

-69Reply on July 12, 1933, approved by six members of the Board, to

a letter dated June 27 and a telegram dated June 28 from Acting Governor
J.°1ans of the Federal Reserve Bank of Atlanta inquiring as to whether a
laMnber bank, in view of the provisions of section 19 of the Federal Reserve
Itet, as amended by section 11(b) of the Banking Act of 1933, prohibiting
the Payment of interest by member banks on deposits payable on demand, may
absorb exchange or collection charges in connection with checks and other
items

received by such bank for credit to the account of a correspondent
The reply stated that the Board understands that, unless a sufficient

bel.ance is maintained by the correspondent bank to recompense the member
bk4k

for the absorption of such charges, a charge will be assessed against

correspondent bank; that presumably, however, there is no fixed ratio
between the amount of such charges so absorbed by the member bank and the
cell°14/1t of the balance maintained by the correspondent; that the amount of
elle'rgss absorbed is not based upon the amount oC such deposit balance, but
lePends rather upon the number of items received in the correspondent's
4ce°11nt, the time necessary to collect them and the manner of collection
11"eesrY; and that, moreover, it is understood when the amount of such
4P0sit balance is above the minimum required for the absorption of such
Qh4r
there is no corresponding increase in the cost of the account to
the
IleMber bank or in the benefits to the correspondent bank. The reply
kis°

stated that, upon consideration of the matter, it is the Board's
°D141 n
0- that the absorption of such collection or exchange charges in the
eil,cuats
tances described is not to be regarded as payment of interest




7/22/33

..70.

directly or indirectly within the meaning of section 19 of the Federal
Reserve Act, as amended.
Approved.
Telegraphic reply on July 13, 1933, approved by seven members of
the Board, to a telegram dated July 1 from Lir. Walsh, Federal Reserve Agent
e't Dallas, inquiring whether a verbal agreement to pay interest on demand
dePosits for a fixed period is a "contract" within the meanin
graP113 B and C of the Board's telegram of June 21, 1933.

of para-

The reply stated

that the determinative factor is not whether the agreement to pay interest
18

written or oral, but whether the particular bank is under a binding

°bligation to pay interest on a denand deposit in accordance with a bona
ride agreement, whether oral or written; that, accordingly, if an oral
111-1.eement to pay interest on demand deposits, which was entered into in
(3(3c1 faith and in force on June 16, 1933, is a valid and binding obligation
°r the bank, interest may be paid in accordance with the terms thereof; and
that
2

conversely, if a contract in respect to the payment of interest on

cleroand deposits, whether oral or written, is subject to cancellation at
the oPtion of the bank and without liability on the part of the bank, it
1134
"be canceled as soon as possible.

The reply also stated that it seems

pltibable, however, that, in most instances of an alleged oral contract,

the agreement or understanding to allow interest would not be sufficiently
der.
lhite in respect to the interest period, the amount of interest, and
°III
"essentials to constitute it a valid and binding contract; that,

thezr,.

in any case in which interest on deposits payable on demand is

°Wea under an alleged oral contract, the bank so allowing interest, if




•

".

••••-•,.

7/22/33

-71-

requested to do so, must be able to show clearly to the satisfaction of
the examiner duly authorized to examine such bank, or to the Federal Reserve Board, or to any other duly constituted authority that such agreement could not have been terminated legally by such bank at its option and
Without liability; and that no such contract may be renewed or extended
Without eliminating the provisions for the payment of interest.
Approved.
Letter dated July 17, 1933, to Acting Governor Johns of the Fedel'al Reserve Bank of Atlanta, approved by six members of the Board,
Plying to his letter of June 22 and containing the same information with
l'egard to the payment of interest on demand deposits in accordance with an
(31"al contract as that set forth in the above telegram to Li'. Walsh, and

the additional statement that the proviso regarding the payment of interest
piaccordance with the terms of any * * * contract heretofore entered into
G°0d faith" which was in force on June 16, 1933, does not authorize
PaYllient of interest until the end of a customary interest period unless

there was a definite contract to that effect.
Approved.
Reply on July 18, 1933, approved by six members of the Board, to
4 letter dated July 8 from 1.Ir. Newton, Federal Reserve Agent at San Fran13e0) with regard to the capital stock which State member banks located
„
—urtein states of the Twelfth Federal Reserve District are rec.uired to
have
in order that they may establish out-of-town branches under the provital
°I18 of section 9 of the Federal Reserve Act, as amended by the Banking
41 t Of
1933.




The reply reviewed the provisions of section 9 of the Federal

7/22t3,

-72-

Reserve Act, as amended, with regard to the establishment of branches by
State member banks and the provisions of section 5155 of the Revised
Statutes, as amended, with regard to the establishment of branches by
Ile.tional banks, and stated that a State bank, located in a State with a
c°13u1ation of one million or r.ore inhabitants, may not become or remain a
luenther of the Federal Reserve System and operate a branch established after
'ebruary 25, 1927, beyond the limits of the city, town or village in which
the Parent bank is situated, unless such bank has a paid-up and unimpaired
caPital stock of not less than ,500,000, the amount renuired of national
betnks in such cases; and that a State bank, located in a State having a
130Pulation of less than one million and having no cities with a population
'eetieding one hundred thousand, or located in a State having a population

°r lesa

than one-half million and having no cities with a population exceed-

fifty thousand, must likewise have an amount of capital equal to that
roan

for national banks in those States, or

250,000 and ,100,000,

• Pectively, in order to become or remain a member of the Federal Reserve
1r4tera and
operate a branch established after February 25, 1927, beyond
the

lirnits of the city, tom, or village in which the parent bank is

it

•

baw-

The reply also stated that, in any such case, a State member

tiust comply with the other renuirenents applicable to the establish-

ille4t all A

elty

operation of branches by a national bank beyond the limits of the

town, or village in which such bank is situated, including the re-

clilletient that the aggregate capital. of such bank and its branches shall

•

b,

- -Less than the aggregate minimum capital required by law for the
e tEtbl,
-,JAhment of an equal number of national banks situated in the various
13141.
where such bank and its branches are situated.




Approved.

7/22/33

_73
Letter dated July 21, 1933, to I.Lr. O'Connor, Comptroller of the

CtIrrency, approved by six members of the Board, replying to Deputy
CoMptroller Awalt's memorandum of July 6 stating that it is proposed to
consolidate the Baldwin Bank, a territorial banking institution on the
Island of Lad, T. H., and the Bishop First I:ational Bank of Honolulu,
under the Act of Eovember 7, 1918, as amended; that the Bishop
°° PanY, Ltd., owns substantially all of the stock of both of these banks;
fInd that the executive vice President of the national bank desires to know
what steps the company

Must

take in order to obtain from the Board a per-

rilit to vote the stock of the national bank in connection with the proposed
eensolidation.

The reply stated tlat, as neither of the banks is a member

.°1' the Federal Reserve System, it will not be necessary, for the reasons
8te.ted in the reply, for the Bishop Company to obtain a permit in order
tc) vote the stock of the banks.

Ii

Approved.
Reply on July 12, 1936, approved by seven members of the Board,
t° 4 letter, addressed under date of June 26 by Lir. J. H.Emley, President
Of
the

the Citizens National Bank of Wisner, Nebraska, to the Comptroller of
Currency and referred to the Federal Reserve Board for reply, inquir-

ing whether his bank may issue new tine certificates of deposit and agree
to PaY interest thereon pending the issuance of regulations by the Federal
Ileaerve Board limiting the rates of interest which menber banks nay pay
t"B

tions

deposits.

The reply stated that, pending the issuance of regula-

On this subject by the Federal Reserve Board, there is no legal

teElzso_
" Why the national bank may not issue time certificates of deposit




43
7/22/33

-74-

and agree to pay interest thereon at the customary and usual rate, provided that such certificates comply strictly with the definition of time
certificates of deposit contained in the Board's Regulation D.

The reply

also stated that, in order to avoid any misunderstanding with the bank's
depositors, however, it would be advisable to place on each time certificate issued since Tune 16, 1933, a notation to the effect that the rate

Or

interest payable on the deposit represented thereby is subject to ad-

jtIstment in accordance with such regulations as the Federal Reserve Board
IllaY issue, pursuant to the provisions of section 19 of the Federal Reserve
4ct, as amended by the Banking Act of 1955.
Approved.
Telegram dated ally 12, 1953, to Mr. Olson, Managing Director of
tile Denver Branch of the Federal Reserve Bank of Kansas City, approved by
414c Members of the Board, stating that Mr. James Ringold, President of the
Ifillted States lationnl Bank of Denver, Colorado, discussed with Governor
on July 7 the question of the payment by a member bank of the
1/1'elaium en bonds securing deposits of public funds and left with him a
e°DY of a letter addressed to 1.r. Olson by the Denver Clearing House
4ea°ciation, dated June 27, on this subject; that the Board understands

that the amount of the premium paid by the member bank on such a bond is
4

rtain prescribed percentage of the average amount of such funds on

cle13°1-t with such bank over the period covered by the bond with provision
toz.
a.
Minimum premium where the average amount is less than a certain
Irn4)1411t fixed in advance; and that, in view of the fact that the amount
1)ctici by the member bank in the form of a premium on such bond in the usual
Elae „s
4 a fixed percentage of the amount of such funds on deposit in the




A

7/22/33

-.75-

it is the Boardts opinion that the payment of such premium constitutes an indirect payment of interest on such deposit within the meaning
or the provision of section 19 of the Federal Reserve Act, as amended by
section 11(b) of the Banking Act of 1933, prohibiting the payment of
interest on deposits payable on demand.

The telegram also called attention

to the fact that the provision in question does not apply to any deposit
Of Public
funds made by or on behalf of any State, county, school district
°r other subdivision or municipality, with respect to which the payment
Of

interest is required under State law.
Approved.
Reply on July 13, 1933, approved by seven members of the Board, to

4 letter dated June 29 from Er. Fichael L. Carmody, Attorney at Law,

Chicaco, Illinois, requesting advice as to whether a national bank is
entitled to assistance if
engaed in the investment business as well as
e°4ductinr, that of a national bank".

The reply stated that the statement

c) recta contained in the letter is not sufficiently full and complete to
ell4kble the Board to answer the Questions presented, and that, in the
seilce of more complete infonaation as to the facts of the case, the

130.„
does not feel that it can properly undertake to express an opinion.
rePlY also inclosed a copy of the Banking Act of 1933; called attention
to eections 21, 32 and 33 thereof as being pertinent to the inquiry, and

PS

tlIted that, as none of the provisions of these sections are yet in effect,
t4e,
€1rrangament referred to by Lir. Carmody is not at this time in violation

or th

e Provisions of such sections.

The reply stated further that the

hae no authority in law to require the national bank in question to




k

7/22/33

-76-

furnish ;r. Carmody with a list of the bondholders referred to in his
letter.
Approved.
Reply on Suly 17, 1933, approved by six members of the Board, to a
letter dated July 3 from Lir. Leland Scrogin, Vice President of the First
National Bank in Pratt, Kansas, setting forth a form of certificate of
dePosit which the national bank has been using and requesting advice as
tO

whether this form complies with the requirements of the Federal Reserve

13°erd's regulations on this subject, and with the provisions of the
84eking Act of 1933.

The reply stated that it is the opinion of the Board

that the form of certificate of deposit set forth in Er. Scrogin's letter
e°r1210lies with the requirements of the Board's Regulation D, Series of
1933, but that the Board has issued no regulations on this subject since
the enactment of the Banking Act of 1933, and may change the requirements
17hich have been made heretofore, if such action appears to be desirable
Ill'ter further study of the Banking Act of 1933.

In response to

inquiry, the reply also stated that section 19 of the federal
Re8erve Act, as amended by section 11(b) of the Banking Act of 1933,
ellthori
zes the Board "to limit by regulation the rate of interest which
111'. be Paid by member banks on time deposits"; that this section empowers
the
'Joard to fix a maximum interest rate which may not be exceeded by
raeiribe
r banks, but does not contemplate that neliber banks will be required
to
Pay auch
maximum rate, and they may pay lower rates at their option;
that 11-e Board has not yet fixed such a rate, but regulations on this subhet

ere now in the course of preparation, and will be promulgated as soon




146
7/2E/33

-77-

48 Practicable; and that, until the Board issues regulations on the subject, member banks may continue to pay interest on time de,Josits in
accordance with their usual practice or existing bona fide contracts.
Approved.
Reply on Tuly 17, 1933, approved by six members of the Board, to
4 letter, addressed under date of June 26 by Honorable Julian Gunn, Judge
c'r the Circuit Court of the City of Richmond, Virginia, to the Secretary
(3t the Treasury and referred to the Board for reply, inquiring whether,
4nder section 19 of the Federal Reserve Act, as amended by section 11(b)
011 the Banking Act of 1933, a member bank of the Federal Reserve System
1114Y Pay interest on funds deposited to the credit of the court in various
84its or actions at law pending final disposition.

The reply reviewed the

151
'
°vieiona of section 19 of the Federal Reserve Act, as amended, and stated
that

1-G appears that a member bank is forbidden by law to pay interest on

clePoeits of the court of the kind mentioned which are payable on demand,
e40ePt
in accordance with a contract entered into in good faith before
3.411e 161 1933, and existing on that date, and that such a contract must be
111°(li1 ied by the bank as soon as possible to eliminate any provision for
the =Payment of interest.
Approved.
Telegraphic reply on July 18, 1933, approved by four members of

the 8
°4rd, to a letter dated July 15 from la.
. Gardner B. Perry, Vice
1111a1
-4
'ent
of the Northwest Bancorporation, Linneapolis, Liruiesota, in-

-4e

whether the Board will accept statements of condition of sub-

a
zember banks as of Tune 50, 1933, in connection with an application




147
7/22/33

-70-

of the Northwest Bancorporation for a voting permit under the provisions
of the Banking Act of 1933.

The rway stated that the holding company

affiliate may furnish a statement of financial condition of each subsidiary
laelther bank as of June 30, 1933, provided the application is filed before
September 1, 1933; that, in addition, the applicant should furnish a staterent of financial condition of each other subsidiary
as of the same date;
that final folin of the Board's regulation and form of application with
'
legard to voting permits for holding company affiliates are in the course
Of Preparation and copies will be forwarded direct to la*. Perry as soon
48 they are ready for distribution; and that the Board will consider
113Plications for a voting permit at any time, but, in the absence of an
8511611gency, prefers that holding comany affiliates withhold their applicati°fla until an application farm is approved by the Board and applications
ea4 be filed on such forms.
Approved.
Reply on July 20, 1933, approved by seven members of the Board,

t° a letter dated July 18 from Er. Huston Thompson, Washington, D. C.,
171'itten on behalf of the Central National Bank and Trust Company of
84ttle Creek, 1.1iChian, and inquiring whether on the basis of the circum,
t:44CeS outlined, and in view of the provisions of section 11(b) of the
1
'
.4nG Act of 1933, the national bank may recall its present 90-day
17ith

awa1 notice on savings deposits and agree to pay all time and savings

cle°81-tors a unifora percentage of their deposits with the condition that
dePositers shall agree to an additional 90-day withdrawal notice for

l'emainder of their deposits.




The reply stated that, in view of the

7/22/33

-79-

aMergency confronting the Central Ditional Bank and Trust Connany and in
view of the fact that the proposed arrangement appears to be in substantial compliance with the puroose of the law, the Board will interpose
110 objection to the bank and other national banks in Battle Creek similarly
situated proceeding during the present emergency in the manner outlined
With, respect to their savings deposits, if every reasonable precaution is
taken to see that all savings deposits are treated exactly alike; that,
la view of the fact that the banks involved are national banks, the reply
has been submitted to the Comptroller of the Currency and he likewise
c)ffers no objection to the proposed arrangement, with the understanding
s
tated; and that this is not intended as an official ruling reflecting the
tinal opinion of the Board or the Comptroller as to the exact legal
flea'fl1Tig of the provision of law referred to above and is not to be conal
"lered as a precedent.
(141

The reply also stated that the above pertains

to savings deposits; that the provision of law referred to makes a

ele
ar distinction between savings deposits and other time deposits and
14'ovides that no member bank shall pay any time de-posit before its
1/1a
t4ritY; and that, if the bank has any time deposits having a definite
14tIlritY, it may not lawfully pay any portion of such deposits before
tIleir maturity.
Approved.
The Governor then presented a letter addressed to him under date
ne 9, 1933, by i.lr. George S. Harris of Atlanta, Georgia, stating that
XIlly 1, 1933, his legal residence will be in Charlotte, lorth
Cekr°Iina, and that, for that reason, he was tendering his resignation as
le4s C director of the -?ederal Reserve Bank of Atlanta.




Governor Black

149
7/22/33

-80-

stated that he had held the letter for a discussion of Mr. Harris, resignation with the Chairman of the Atlanta bank and that when he was in
Atlanta recently he had talked with lir. Eewton about it.
The resignation was accepted, effective
immediately.
Mr. James, as Chairnan of the Committee on District ITo. 6, presented a memorandum dated July 21, 1933, recommending the appointment of
11x. Tames P. Allen of Atlanta, Georgia, as a Class C director of the reders1 Reserve Bank of Atlanta for the unexpired portion of the term ending
Ipscember 31, 1933, to succeed Mr. Harris.
Approved.
Governor Black then presented a telegram dated July 21, 1933, from
11. LI. Langworthy stating that the organization of the Union National
ilank in Kansas City in connection with plans for the reorganization of the
'141slity National Bank and Trust Company has progressed sufficiently so
that

the opening of the new bank on July 24, 1933, seems assured; that, as

e Plained to Governor Black on tiednesday of this week, the situation has
aeveloped in such a way that lir. Lanaporthy feels a strong sense of duty
to

esPond to the urgent reauest of the reorganization committee to become

et ai
rector of the new bank; that this would necessarily disqualify him as
• Cl

C director of a Aderal reserve bank; and, therefore, that he is

to
'
eine: his resignation as Class C director and Deputy Chairnan of the
ara1 Reserve Bank of Kansas City.

Governor Black stated that, as

1144_
J-uated in ilr. Langworthy's telegram, he had discussed with Fr.
ta,4
CWorthy the situation referred to in his telegram, and that La.. Lang11°rthv
- -ad stated that his efforts to assist in the reorganization of the




150
7/22/33

-81-

laationa1 bank had so associated him with the new institution that he feels
he has no other alternative than to become a director.

Governor Black

added that he had stated to Mr. Langworthy that he would regret to see him
resign as a Class C director but that Mr. Langworthy should feel no embarrassment in taking such action should he feel that is the desirable
course to pursue.
Nr. Langworthy's resignation as a Class C
director of the Federal Reserve Bank of Kansas
City was accepted, effective immediately.
After a brief discussion as to the appointment of a successor to
Langworthy, LIr.Thomas was appointed a provisional member, to serve
With Mr. Tames, on the Committee on District No. 10, and there was referred
to that Committee for recommendation to the Board the matter of the
1acti0n of a successor to Ma.. Langworthy.
"

It was understood that, if

the
4"essary, Mr. Tames would visit Kansas City in connection with
eelsction of a person for the position.
Reports of Standing Committee dated July 11, 12, 13, 17, 18, 20
21, 1933, recomiliending approval of the following changes in stock at
4cleral reserve banks:
Shares
lications for ORIGINAL Stock:
;
,
No6
.
;Lstrict
.
.̀4.1r National Bank of Baton Rouge, Baton Rouge, La. 396

396

Di
1,..str12t No. 7
'
ional Bank of Jackson, Eichigan.

210

210

18

18

1,500

1,500

Itistrict
No. 8.
44Xst National Bank of larissa, Illinois.
ket
Ty------V_____-e'_.tlicilL•
41°4 National Bank in Kansas City, Missouri.




151
7/22/3:D

-82-

4cations for ORIGINAL Stock: (Cont,d)
A22.2
.
District No. 11.
First National Bank in Cameron, Texas.

Shares
36
Total

36
2,160

135

135

District No 4•
Ilirst National Bank, Warren, Pennsylvania.
(Increase in capital, preferred, partly offset by
decrease in surplus)

30

30

°Ilemical State Savings Bank, Midland, Michigan.
(Increase in capital)

30

30

21

21

2

2

bist 1
4aLii_22_1•!!
44.4) Analo (alif6rnia National Bank of San Francisco,
3,000
California. (Increase in capital, preferred)
Total

3,000
3,218

AZAA2L4ions for

ADDITIONAL Stock:
District No. 1.
l!irst National Bank, Portsmouth, New Hampshire.
(Increase in capital, preferred, partly
offset by decrease in surplus)

t
9,•
st National Bank, Wakefield, Michigan. (Increase
in capital, preferred, partly offset by decrease
in surplus)

00 State Bank, Wahoo, Nebraska. (Increase in
surplus)

1„41ications for SURRENDE2 of Stock:
"t411:o. 2.
National Bank, Sodus, New "York. (Insolvent)

''Ilzens National Bank, Richmond, Kentucky.
(Insolvent)
t National Bank, Camden, Ohio. (Decrease in
surplus)
Il!rict No. -Q1-Lanae
°"e National Bank, Tampa, Florida. (Decrease
it
surplus)
eeabtzra State Bank and Trust Company, Leesburg,
Florida. (Insolvent)




60

60

90
16

106

150
90

240

C1^

7/a2/3b

-83-

Aallap:Iions for SIN= of Stock: (Cont'd)
District Po• 7.
Lincoln National Bank 6.: Trust Company, Fort Wayne,
Indiana. (Decrease in surplus)
Cedar Falls National Bank, Cedar Falls, Iowa. (V.L.
Suc. by Cedar Falls Trust a?, Savings Bank,
nonmember)
Pirst National Bank, Muscatine, Iowa. (V.L.Suc. by
First Trust & Savings Bank, nonrember)
First National Bank, New London, 'Asconsin. (V.L.Abs.
by Farmers State Bank under title of First
State Bank, nonmember)
District No. 10.
Stockyards National Bank, South Omaha, Nebraska.
(Decrease in surplus)

irst National Bank, Lott, Texas. (V.L.Suc. by First
National Bank in Lott)
Firet Rational Bank, Houston, Texas. (V.L.Suc. by
, First National Bank in Houston, Texas.)
'irst National Bank, Silverton, Texas. (Insolvent)
"Ix‘st National Bank, Memphis, Texas. (Cons. of Hall
County National Bank and First National Bank)

Bank -Oelleedsport, Reedsport, Oregon.
(Insolvent)

Approved.

Thereupon the meeting adjourned.

411131'0yed:




Shares

180

75
180

60

495

300

300

60
2,160
45
69

2,334

18
Total

18
3,553