Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, July 29, 1935, Volume 22, Part 4

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A meeting of the Executive Committee of the Federal Reserve Board
was held in Washington on Monday, July 29, 1935, at 11:30 a. m.
PRESENT:

Mr.
Mr.
Mr.
Mr.

Eccles, Governor
Thomas, Vice Governor
Hamlin
James

Mr. Morrill, Secretary
Mr. Carpenter, Assistant Secretary
The Committee acted upon the following matters:
Memorandum dated July 26, 1935, from Mr. Smead, Chief of the
Division of Bank Operations, recommending that the Board authorize an
absence on annnal leave with pay for Miss Tressa Brown, a stenographer
14 the division, for the period from July 19 to July 29, 1935, inclusive,
even though all of such leave had not yet been earned.
Approved.
Letter to the board of directors of the "Gonzales State Bank",
G°42ales, Texas, 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 appropriate amount of stock in
the
Federal Reserve Bank of Dallas.
Approved.
Telegram to Mr. Case, Federal Reserve Agent at the Federal Reael've Bank of New York, referring to the application of the East Orange
Trust Company, Est Orange, New Jersey, for permission to withdraw
1.1713.
-Luately from membership in the Federal Reserve System, and stating
that the Board waives the usual requirement of six months' notice of inteat
ton to withdraw, and that, accordingly, upon surrender of the Federal
l'eserve bank stock issued to the East Orange Trust Company, the Federal




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Reserve Bank of New York is authorized to cancel such stock and make a
refund thereon.
Approved.
Letter to Mr. Case, Federal Reserve Agent at the Federal Reserve
of New York, readins, as follows:
"This refers to your letter of June 17, 1935, with inclosures, and to your letter of July 19, 1935, submitting
additional information, regarding the proposal of the Bank of
the Manhattan Company to apply certain dividends on shares of
stock of the Berliner Handelsgesellschaft to the acquisition
of additional shares of that corporation.
"It is the Board's understanding that, prior to the adof the Bank of the Manhattan Company to membership in
the Federal Reserve System, it had acquired approximately 18
percent of the outstanding shares of the Berliner Handelsgesellschaft, a German banking corporation with limited liability,
and that it has continued to '1old these shares since that time,
the shares having been lodged in Germany. It further appears
that under new restrictions imposed by German law the conversion
of the March 9, 1935 dividend coupons on shares of the Berliner
Handelsgesellschaft into dollars or into any free foreign
currency or into any values removable from Germany is prohibited
and that the bank may only retain the dividend coupons uncashed,
convert them into 3 percent bonds of the Konversionskasse
maturing in 1945, or, under a special permit granted by German
authorities, convert them into 'German securities, particularly
Berliner Handelsgesellschaft shares'.
"The Board has also noted the statement of the bank that
the Konversionskasse bonds are only available in theory, and
the reasons why it prefers to convert the coupons in question
into additional shares of Berliner Handelsgesellschaft rather
than into other German securities. It has also been noted that
tt is definitely the policy of the bank to dispose of all of
its holdings of Berliner Handelsgesellschaft shares at the
earliest favorable opportunity and that the bank has already
succeeded in disposing of a part of the coupons in question to
persons outside of Germany who desired to acquire marks in
Germany.
"In the circumstances, the Board Till raise no objection
to the conversion of the dividend coupons referred to into
additional shares of the Berliner Handelsgesellschaft and you
are requested to advise the Bank of the Manhattan Company
accordingly."




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-3Approved.
Letter to Mr. Case, Federal Reserve Agent at the Federal Reserve

Bank of New York, reading as follows:
"Reference is made to your letter of May 17, 1935, regardinz certain bank stocks which may have been acquired by
the 'Ogdensburg Trust Company', OLdensburg, New York, from
its affiliate, The Oswegatchie Securities Corporation, in
violation of Section 9 of the Federal Reserve Act and of conof membership numbered 6, which reads as follows:
Except after applying for and receiving the permission of the Federal Reserve Board, you shall
not acquire an interest in any other bank or trust
company, through the purchase of stock in such
other bank or trust company.
"It has been noted that the dissolution of the Oswegatchie
Securities Corporation has been undertaken for the purpose of
complying with the requirements of Section 20 of the Banking Act
of 1933, and that in connection with the dissolution the bank
acquired all of the assets of the affiliate and canceled the
affiliate's indebtedness to the bank. The bank shares in
question were among the assets of the affiliate or acquired in
lieu of an assessment against the affiliate.
"While it appears that the manner in which the shares in
question were acquired may have constituted a violation of
Section 9 of the Federal Reserve Act and of condition of memberShip numbered 6, in view of all the circumstances and your
recommendation the Board will take no action with respect to
the matter at this time with the distinct understanding that
the bank will use its best efforts to dispose of the stocks at
the earliest practicable opportunity. Please advise the bank
of the Board's position in the matter and advise the Board when
flnal disposition of the shares in question has been made."
Approved.
Letter to Mr. O'Connor, Comptroller of the Currency, reading as
follows:

"There is transmitted herewith for your consideration an
application of the 'Fidelity Union Trust Company', Newark, New
Jersey, a member bank, for permission to establish two branches
at East Orange, New Jersey, after purchasing the assets and
assuming the liabilities of the Essex County Trust Company,




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"East Orange, New Jersey, a nonmember bank, which proposes to
enter into voluntcry liquidation. The latter institution
Operates one branch which is located within the city limits
of East Orange, and it is the desire of the member bank to
maintain both offices as branches.
"The Fidelity Union Trust Company owns 3,725 of the 5,000
shares of the capital stock of the Essex County Trust Company.
Under the proposed plan, the Fidelity Union Trust Company will
acquire all the assets and assume all the liabilities, except
liabilities to stockholders, of the Essex County Trust
Company, paying a cash consideration of $400,000 the proceeds
of which will be distributed to the shareholders of the Essex
County Trust Company.
"The Federal Reserve Agent at the Federal Reserve Bank
of New York has recommended approval of the application and
the Commissioner of Banking and Insurance of the State of New
Jersey has issued his formal approval for the establishment
of the branches.
"The Board is of the opinion that the establishment and
Operation of the two branches at East Oraive is in accordance
With the provisions of the Federal Reserve Act governing the
establishment of branches by a State member bank, and it is
recommended, therefore, that you approve the establishment
and operation of two branches in Fast Orange, New Jersey, by
the Fidelity Union Trust Company of Newark, New Jersey, on
condition that the Fidelity Union Trust Company 1. Shall not acquire from the Essex County Trust
Company any corporate stocks, or loans secured
in whole or in part by stock of the Fidelity
Union Trust Company;
2. Shall not set up on its books at more than market
value any of the securities acquired from the
Essex County Trust Company;
3. Shall not include in the carrying value of the
assets acquired from the Essex County Trust
Company any estimated losses, including any of
the estimated losses aggregating $352,100 in
loans and miscellaneous assets as shown in the
report of examination of the Essex County Trust
Company as of February 9, 1935, made by an
examiner for the Federal Reserve Bank of New York,
which have not been previously eliminated.
"The attached file contains copies of the latest reports
of examination of the Fidelity Union Trust Company and of the
Essex County Trust Company and a copy of a memorandum prepared
by the Board's Division of Examinations. It will be appreciated if you will r ,turn this file vhen it has served your




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purpose and when you have advised the Board of your action on
the application described above."
Approved.
Letter to Mr. Stevens, Federal Reserve Agent at the Federal Reserve Bank of Chicego, reading as follows:
"Reference is made to Mr. Young's letter of July 10 regarding the cancelation of Federal Reserve bank stock outstanding in the name of The First National Bank of Odebolt,
Iowa.
"It is noted that one of the members of the liquidating
cosumittee of the subject bank will not be available to sign
the application for cancelation of Federal Reserve bank stock
until about September 1. The notice from the Comptroller of
the Currency of the voluntary liquidation of the bank names
a liquidating comlaittee of 7 members, comprising the board
of directors of the bank. As the board of directors of a
liquidating national bank is competent to name a liquidating
agent or committee for the bank, you are authorized to waive
tne requirement of the signature of the member of the
liquidating committee who is absent."
Approved.
Letter to Mr. O'Connor, Comptroller of the Currency, reading as
follows:
"In accordance with the recommendation of Acting
CoPiptroller of the Currency Await, the Federal Reserve Board
approves a reduction in the common capital stock of 'The First
National Bank of Perth Amboy', Perth Amboy, New Jersey, from
$300,000 to $15,000, pursuant to a plan which provides for
the sale of $350,000 Class 'A' preferred stock to the
Reconstruction Finance Corporation, the sale of $100,000
Class 'B 1 preferred stock to local interests, the subordination
of the $.300,000 of outstanding preferred stock (which will be
designated as Class IC' preferred stock) to the new Class 'A'
and 1131 preferred stock, and the conversion of $75,000 of
subordine,ted deposits into Class 'C' preferred stock. The
Plan also provides that the $285,000 of released common capital,
together with surplus, undivided profits and applicable reserves aggregating approximately $136,0001 will be used in
eliminating a corresponding amount of undesirable assets which




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"will remain the property of the bank, all as set forth in
Mr. Awalt's memorandum of July 17, 1935.
"In considering the plan under which the reduction in
common capital is to be effected, it has been noted that the
losses estimated by your examiner in his report of examination as of June 20, 1935, exceed the aggregate of the released
capital and the surplus, undivided profits and reserve
accounts by approximately $206,400, resulting in a capital
impairment of that amount; that securities depreciation unprovided for in the amount of approximately $7,1001 if considered as a loss, will further impair the bank's capital,
and that there will also remain unprovided for a large
amount of doubtful assets in which further losses appear
Probable. It was noted also that your examiner severely
criticizes the active management. It is assumed, however,
that these matters are receiving the attention of your office."
Approved.
Letter to Mr. Case, Federal Reserve Agent at the Federal Reserve
Bank

of New York, reading as follows:
"Reference is made to Mr. Dillistin's letter of July 3,
1935, recommending approval of a proposed reduction in the
common capital stock of the 'Mount Pleasant Bank and Trust
Company', Pleasantville, New York, from $200,000 to $25,000,
Pursuant to a plan which provides for the conversion of its
outstanding 'B' debentures, amounting to $75,000, into a like
amount of new common stock, and the use of the released
capital funds in eliminating or otherwise providing for an
equal amount of undesirable assets.
"The Board has considered the information submitted as
well as the condition of the trust company as reflected in
the last report of examination, and, in accordance with your
recommendation, approves the reduction in common capital
stock with the understanding that none of the released capital
will be returned to stockholders but will be used to eliminate
estimated losses in loans and/or depreciation in securities
as shown in the report of examination made by an examiner
for the Federal Reserve Bank of New York as of April 3, 1935;
that the assets so eliminated will remain the property of the
trust company; that the transaction has the approval of the
aPPropriate State authorities and that your counsel is satisfied as to the legality of the proceedings in connection
therewith. It will be appreciated if you will forward copies
Of any amendments to the trust company's charter which may be




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"adopted in connection with the capital adjustment and advise
the Board as to the eliminations effected as well as any
corrections which may have been made of the criticized matters
set forth in the last report of examination.
"It is noted that the trust company has made application
for the sale of $100,000 additional debentures to the Recontruction Finance Corporation. The Board feels that the
introduction of such additional capital funds is highly
desirable and it is suggested that you continue your efforts
to bring about the consummation of this program."
Approved.
Letter to Mr. Austin, Federal Reserve Agent at the Federal Reserve Bank of Philadelphia, reading as follows:
"Reference is made to your letter of July 17, 1935,
recommending that the 'West Branch Bank and Trust Company',
Williamsport, Pennsylvania, be granted permission to reduce
its capital stock from $453,000 to $225,000 by the retirement and cancellation of $228,000 of preferred stock owned
by the Reconstruction Finance Corporation.
"The Board has reviewed the information submitted, together with the report of examination of the bank as of May
11) 1935, from which it appears that the member bank is in a
generally satisfactory condition and under good management,
and that after completion of the proposed retirement of preferred stock its capital structure will be adequate in
comparison with its deposit liabilities. In accordance with
Your recommendation, therefore, the Board approves a reduction
of $228,000 in the capital of the Test Branch Bank and Trust
Company by the retirement of that amount of preferred stock,
With the understanding, of course, that the transaction has
been approved by the Secretary of Banking of the Commonwealth
Of Pennsylvania and that your counsel is satisfied as to the
legality of the proceedings in connection therewith."
Approved.
Telegram to the Federal reserve agents at all Federal reserve
banks

reading as follows:

"Board today adopted in form set forth below amendment No. 5
of Regulation T. This amendment is effective August 8, 1935.
Upon receipt of this telegram you are requested to print this




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"amendment and, after checking against confirmation of this
telegram, to distribute copies to interested persons. The
amendment is as follows:
Amendment No. 5 of Regulation T - Effective August 8, 1935.
"Subsection (e) of section 8 of Regulation T is hereby
amended by adding at the end thereof a new paragraph reading as
follows:
'In the event of the transfer of an account from
one customer to another, such account may be treated
by the creditor for the purposes of this regulation
as if it had been maintained for the transferee from
the date of its origin: Provided, That, if the account
be a restricted account, the creditor shall have filed
a report with any regularly constituted committee of
a national securities exchange having jurisdiction over
the business conduct of its members, of which exchange
the creditor is a member or through which his transactions are effected, reciting the circumstnces of the
transfer and stating, as of the time of the transfer,
the adjusted debit balance of the account and the
maximum loan value of the securities in the account.'"
Approved.
Letter to Mr. Austin, Federal Reserve Agent at the Federal Reserve
Bank

of Philadelphia, reading as follows:
"Reference is made to your letter of July 11, 1935, concerning the application of Mr. Wilfred W. Fry, Philadelphia,
Pennsylvenia, for permission under the provisions of the
Clayton Act to serve at the same time as a director of The
First National Bank of Philadelphia and Fidelity-Philadelphia
Trust Company, both of Philadelphia, Pennsylvania, which was
refused by the Board on May 21, 1935.
"It is noted that Mr. Fry was out of the city at the time
advice was received of the action of the Board on his application, that he is undecided as to whether he will submit
additional facts or arguments with respect to the application,
and that before reaching a decision he wishes to discuss the
situation with Mr. Gest, Chairman of the Fidelity-Philadelphia
Trust Company, who is on vacation and will not return until
sometime in August.
"The Board is in agreement with your suggestion that no
further action need be taken in connection with the application
until Mr. Fry has had an opportunity to discuss the matter with
Mr. Gest, and with your further suggestion that Mr. Fry should




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"refrain from attending the meetings of directors of one of the
banks involved pending final determimtion of the matter.
"It will be appreciated if you will advise Mr. Fry
a
ccordingly."
Approved.
There were then presented the following applications for changes
in stock of
Federal reserve banks:
lications
for ADDITIONAL Stock:

Shares

Ihe City
National Bank of Binghamton,
,, Binghamton, New
York.
4fle El
izabethport Banking Company,
Elizabeth, New
Jersey.
Savings Bank, Alpena, Michigan.
VellaSavings

Bank of Manchester,
Ma
nchester, Michigan.
4anitowoc Savings Bank, Manitowoc, Wisconsin.
National Bank
of Canton, Canton, Illinois.
'-trst
National Bank in Georgetown,
Georgetown,
Illinois.
4e First
National Bank of Lockport,
ckport, Illinois.
Th
1,0:4.Nationa1 Bank of Monmouth, Monmouth, Illinois.
Th'' Wayne National Bank, Fort Mayne, Indiana.
Th°National Bank of Logansport, Logansport,
TheIndiana.
First National Bank of Monroe,
la
Monroe, Michigan.
Tha.
The County State Bank, Ida Grove, Iowa.
Farmers State Bank of Alto, Alto, Michigan.
l'Isi8trlet No. 12.
4e C
itizens National Trust and Savings Bank of
Th.R.Igverside, Riverside, California.
'irst National Bank of Idaho, Boise, Idaho.

biz}ications for SURRENDER of Stock:
The rict No. g
jirst National Bank in Bedford,
uedford, Pennsylvania.




60
120

180

21
6
48
15
6
9
60
6
3
12
2
1

30
28
Total

30

179

58
417

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A lications for
SURRENDER of Stock: (Cont'd)
District No. 5. Contid)
The
Haddonfield National Bank, Haddonfield,
New Jersey.
14184W152.,...114..
The City
National Bank of Olney, Olney, Texas.
D
istrict No. 12.
The United
States National Bank of Eugene,
lagene, Oregon.




Shares

90

45

120
Total

Approved.

Thereupon the meeting adjourned.

1q6ITAL,

120
285