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A meeting of the Board of Governors of the Federal Reserve Systcc"raa held in Washington on Tuesday, June 1, 1937, at 11:00 a. in. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Broderick Szymczak McKee Davis Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Thurston, Special Assistant to the Chairman Mr. Wyatt, General Counsel Mr. Goldenweiser, Director of the Division of Research and Statistics Mr. Koppang, Federal Reserve Examiner Mr. Davis referred to a memorandum submitted to the Board through the personnel Committee by Mr. Morrill under date of May 26, 1937, recleIncling the appointment of Mr. F. E. Spurney as Manager of the Board's 14% 1)1014in_ , g with salary at the rate of $4,500 per annum, effective as 8°°11 as he reports for duty after having passed satisfactorily the usual PhYeical examination. The qualifications of Mr. Spurney were discussed briefly and it was stated that after reviewing eighteen or twenty apPlications for the position it was felt that because of Mr. Spurney's teella1cal. education, together with his experience and training in the e°118trUction field, including the supervision of employees, he was the best Illalified applicant available for the position. Mr. Davis moved that Mr. Morrill's recammendation be approved. Carried unanimously. At this point Messrs. Thurston, Wyatt, Goldenweiser and Koppang 764 left the meeting and consideration was then given to each of the mattare hereinafter referred to and the action stated with respect thereto /4114s taken by the Board: The minutes of the meeting of the Board of Governors of the Federeq Reserve System held on May 26, 1937, were approved unanimously. The minutes of the meetings of the Board of Governors of the Fedel'41 Reserve System held on May 27 and 28, 1937, were approved and the act& °Ils recorded therein were ratified unanimously. Telegram to Mr. Sargent, Secretary of the Federal Reserve Bank Or i.)Eua Francisco, stating that the Board approves the establishment Without change by the bank today of the rates of discount and purchase In its existing schedule. Approved unanimously. Letter to Mr. Fletcher, Vice President of the Federal Reserve 'lank or — Cleveland, reading as follows: t. "Reference is made to the report of credit investigadl?fl or 'The Ohio Savings and Trust Company, of New Phila, E4Phia', New Philadelphia, Ohio, as of April 12, 1937, which "; 1 11s made as a follow-up of the regular examination of the „arti as of December 7, 1936, the report of which reflected uni"orably upon the management. "In the report of examination as of December 7, 1936, the ?a ' -;Aaminer expressed the opinion that, although the unsatisilact°rY condition of the bank was largely attributable to e nlanagement of the former president, there was urgent need ;o il" someone capable of aggressively taking charge of the vit"tion, that the accomplishments under the management of e,e President McKee, who came with the institution in 1933, u been disappointing and that ineffective management and ,"ernal dissension had retarded the rehabilitation of the rlic to a considerable degree. In the report of the credit "eatigation, however, the examiner states that while the r r 765 6/1/37 -3- "accomplishments of Mr. McKee, who was employed in the hope that he would be able to work out the unsatisfactory condition, heve not been particularly impressive, some progress is being made. The examiner also states that Mr. Frazier, who was emPloyed in the early Dart of 1936 for the specific purpose of working out the unsatisfactory real estate situation, and who wus made vice president and director in January of this year, has had considerable banking and real estate experience and that the two officers appear to be working in complete harmony are receiving the necessary cooperation of the entire board " 4 Of directors. it has been noted, also, that since the examirtation Mr. Judkins, former vice president, has been elected President, and that while he is not active in his capacity as President, it is reported that he has considerable financial th and that his advice and prestige are considered valuable. transmitting the report of credit investigation you advise that You concur in the examiner's suggestion that it might be well to leave the management as it is for the time being as ”. seems that Vice President McKee is doing all that is DOSelble to meet the requirements of the State Department and of the Federal Reserve Bank. "It is gratifying to note that there appears to be more harm within the bank and that the officers are receiving 'ue cooperation of the directors. It is hoped that the steps ! ll ' eadY taken may prove effective, but matters should not be l!ermitted to rest unless satisfactory improvement in the condition of the bank can be shown. "In both the report of the December examination and the l'eport of the credit investigation under discussion an estilated loss of 450,000 in banking premises was classified, and, "cording to the comments in the reports, the amount estimated t E118 , a loss is based upon a valuation placed on the property by ' d e nlanagement of the bank. It is said that the officers are sirous of writing the property down to its fair value, but beuat the earnings of the bank are such that it will be years fore the reduction can be accomplished. The Board's letter YOU of February 11, 1935, regarding the question of this 2 L1stitution making provisions for the elimination of undesir;ule assets, contained a reference to the possibility of efzecting a reduction in common capital if a proposed amendeut to the State laws under consideration at that time was rilacted to permit capital debentures sold to the Reconstruc()eon Finance Corporation to be considered as the equivalent eaPital stock for the purpose of meeting minimum capital wielquiraments. It will be appreciated if you will advise th : t4er a reduction in common stock is now permissible under State laws, and, if so, whether such reduction is feasible r j 766 6/1/37 -4- "in this case in order to permit a reduction of the carrying lialue of the bank premises to an admittedly reasonable figure. In case a reduction in capital is not feasible, please advise what other plans are under consideration to adjust the carrying value of the banking premises. "In connection with the credit investigation your regular trust examiner made a survey of the operations of the trust dePartnent of the bank. The volume of business is small and eXaminer states that from the standpoint of investments, reews, and general management, the officer in charge of the "ePartnent and the trust committee appear to be very conscienticlus, but that the records and accounting methods are such that a thorough and complete examination cannot be made and that despite repeated efforts on the part of examining authorities, no improvements have been made in the accounting Methods. The examiner states further that if no consideration iS to be given the recommendations and requests of the examiners in these matters, then the department should not be perMitted to operate. The Board feels strongly that the acceptance anY trust business creates a responsibility which can only u6 satisfied if the transactions are carried out efficiently and with the best interests of the beneficiary constantly in Mind, and that if a bank is not equipped to handle trust bud Properly, it should not accept it. As soon as practicable, Ola trust company should either take the necessary steps to Provide adequate care and attention for the trust business, discontinue the business entirely. It is requested that 011 keep the Board advised as to the developments in the si tuation." n 2r Approved unanimously.Letter to Honorable D. W. Bell, Acting Director of the Budget, Dtepco% ' 6d for the signature of Chairman Eccles, and reading as follows: "Reference is made to the letter of May 21st from your 5) u,ffice requesting the views of the Board of Governors of the i;edsral Reserve System with regard to the amendment proposed the Farm Credit Administration to the 3d paragraph of °.eotion 13a of the Federal Reserve Act as amended. This IcTosal as drawn appears to call for new banking legislaern and would seem, therefore, to be contrary to the underanding of the interdepartmental loan committee that no h new legislation would be sought at this session of °Ilgrese. "In the meantime, however, this subject has been dis`'`tssed between representatives of the Board and of the Farm 767 6/1/37 -5- "Credit Administration and further discussions are contemplated with a view to determining whether the general Pnrposes sought by the proposed amendment can be accomPlished without the necessity for new legislation by Congress." Approved unanimously. ' Thereupon the meeting adjourned.
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