Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, June 14, 1935, Volume 22, Part 3

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

1_370
A meeting of the Federal Reserve Board was held in Washington on
414J, June 14,
1935, at 11:00 a. m.
PRESENT:

Mr.
Mr.
Mr.
Mr.
Mr.

Eccles, Governor
Hamlin
Miller
Szymczak
O'Connor

Mr.
Mr.
Mr.
Mr.
Mr.

Morrill, Secretary
Betheal Assistant Secretary
Clayton, Assistant to the Governor
Wyatt, General Counsel
Thurston, Special Assistant to the Governor

Govern
or Eccles reported that he had attended a conference yesterday

it4rternoon in the
office of the Secretary of the Treasury at which Secretary
.43rgetithau,
I. Crowley, Chairman of the Federal Deposit Insurance Corporatioh
)** 01 Connor, Comptroller of the Currency, and himself, had conferred
with
a
°P of
bankers, including Mr. Tom K. Smith, Vice President of the
her

icahatinkers Association, regarding the provisions of the Banking Bill
(4'1965
of, Ti ' The bankers urged that the Administration agree to the separation

tle II from the bill or to a compromise which would result in reposing
t'ket authority in a
committee consisting of the six appointive memNez.

the Board and five Governors of the Federal reserve banks, with the
t'Illding that such committee would have an executive committee conOf

three members of the Board and two Governors. Governor Eccles
ttlted
NI:It Secretary
Morgenthau discussed these matters with the President
tto.
ot T.

t)1,
GN,401.

the meeting that the President would not agree to the separa-

ltle II from Titles I and III of the bill or to the suggested cornrespect to the membership of the open market committee.
said, however, that Secretary Morgenthau indicated that




1371
6/14/35
the Pr=sident would consider a modification of the proposal which he
ilor

Eccles) had previously offered in his testimony before the

an Currency Committees of both Houses of Congress which con—
telPlated
that open market authority would be centered in a committee
e°11eietini
cotpos

of the eight members of the Board with an advisory committee

ed °f five Governors, to the extent of permitting the five governors
to vot
e instead of
requiring that they serve in a purely advisory capacity.
4ddit'

ahouid

Governor Eccles said, the conference considered what action

be taken to comply
with the provisions of existing law with re—
Peet to banks
Which are not members of the temporary insurance fund
the Federal
Deposit Insurance Corporation. He pointed out that under

'
'' ieting

law the permanent insurance plan will become operative on

'111.13r 11 196-5, and that in order to obtain the benefits of the permanent
44'etce
every bank which is a member of the temporary fund must become
A st
ockholder of the Federal Deposit Insurance Corporation on or
b
e that date.
It was suggested at the conference, he said, that a
t'lltertent
be
prepared and released to the press over the signatures of

tIlehai'lneri of the Federal Deposit Insurance Corporation, the Comptroller
the
CUrrency and the Governor of the Federal Reserve Board, jointly,
41 0rder
that bankers and the public generally might be informed fully
to the
existing
situation. He stated that Secretary Morgenthau and
,
"Ir04iley
felt strongly that a statement of this character should be
tt ti
G d"(1 that, at the time, he had interposed no objection.

Eociest




Mr. Thurston,

request, then read the following draft of a proposed

1_372
6Cm5
-3-111'4s release.
B

"In the absence of final action by Congress on the pending
ing Bill of 1935, the permanent insurance plan provided for
Section 12B of the Federal Reserve Act, as amended, will become
c)Peltive under the terms of the present law on July 1, 1935. In
er to obtain the benefits of the permanent insurance, every bank
lch is a member of the temporary Federal Deposit Insurance Fund
lust become
a class A stockholder of the corporation on or before
,
1115r 1, 1955. For this purpose the corporation is sending out the
:etcessary application forms to all such banks. As the amount of
c °cIt which each bank is required to subscribe and pay for must be
Res t°1Pli ed in accordance with regulations prescribed by the Federal
Board, that Board has promulgated the necessary regulation
in;"teopies of the regulation are being sent to all banks which are
orIll'ere of the temporary fund. The law requires that upon receipt
C
aPplicrtion of each Insured bank the corporation shall reor'eL the Federal Reserve Board, in the case of a State member bank,
to the Comptroller of the Currency, in the case of a National bank,
to certify as to the adequacy of the assets of the applying bank
cre!!
lable it to meet all of its liabilities to depositors and other
or Ititors as
shown bj its books. State banks which are not members
irla u4e Federal Reserve System must also apply for Class A stock, but
:
Ell Rich as the necessary certification was furnished by the State
110—pr1nisory authorities at the time of their admission to the fund,
Ilxilther certification is required.
in t 'Blank forms which may be used in applying for
Class A stock
bet)
? Corporation are being sent out to the banks and plans are
completed for putting the permanent plan into effect on July 1.
pet, In order that the transition from the temporary fund to the
dellaliallent insurance may be effected smoothly and without unnecessary
tio Y or confusion, it is urged that every bank fill out its applicacot!' and file it with the office of the Federal Deposit Insurance
Pciation promptly upon receipt.
oll
e permanent insurance plan was scheduled to go into effect
ily ti'Y
a
1, 1954, but the effective date was postponed for one year
N be Congress. A revised plan for permanent insurance is now pendClarx
,
efore a subcommittee of the Senate Committee on Banking and
Ittty;
fley, having been passed by the House of Representatives on
In view of the impossibility of definite assurance that this
leg
bet44-etion, included in the Banking Act of 1935, will be enacted
e July 1, the Federal Deposit Insurance Corporation is accordY
PrePared to receive applications for continuance of insurance
erm-_
-Ge.11

Z
I

e(W

,zzetrid. 0

Miller said that it was not clear to him why it was considered

r desirable to give out a statement to the press regarding the




1373

1

aEltter and that, in any event, he would suggest the deletion of the
14tnp,
— agraph of the foregoing draft. Mr. O'Connor stated that he
1111d i
'
118t come from a meeting of the board of
directors of the Federal
Depo

84 Insurance
Corporation and that he also had suggested the omissiori
of the last
paragraph although he had yielded to the majority
°Pinto
11 in the
matter.
Governor
Eccles stated that while he had seen no particular
(lbjecti°n to making the announcement when the matter had been previously
1 ered,
e
the more he thought about it, the more he was inclined to
the vi
by

ew that, if any announcement at all were made, it should be made

erc le.7 as Chairman of the Federal Deposit Insurance Corporation
41d thai.
-- the
Comotroller of the Currency and the Federal Reserve Board
itsee not be parties to the statement.

He said that upon reflection

ztelt:
7
1 to him
that the matter of having the banks apply for Class A
the insurance corporation, and otherwise comply with the proPoqt ItOf existing law in this respect, concerned only the Federal DetlI„e °Ilrance Corporation since the Comptroller of the Currency and
N.14 41'41 Reserve Board had a purely administrative function to per111
ktee4
-fYing whether or not the assets of applying member banks
11(1

(11.18.te tu enable them to meet all of their liabilities to depositors
(IN1,
yi ttrifa creditors. Mr. O'Connor said that he subscribed fully to this
added that he believed no statement whatever should be given to
Prese
' He felt that such an announcement would cause repercussions
4Q
4 the
134flking interests of the country and shake the confidence of the




6/14/35
-5Pilblte/ resulting in the withdrawal of deposits which the banks could
riot
prevent because they would not be in a position to assure depositors
t116t they
would be admitted to the permanent insurance fund. Pr. Mier
atated
that, in his opinion, such publicity could have no good results
4r1"1
the contrary, might serve to scare both the bankers and the public.

The course
of the discussion embraced the following points:
Ildt r the
Provisions of Section 12B of the Federal Reserve Act, as
atle
d
every
bank which is or which becomes a member of the Federal
re4rve sYstera on or
before July 1, 1965, is required to take all steps
IleeessarY to enable
it to become a class A stockholder of the corporation
(It or before
that date; every member bank is required to apply to the
.r111 pePosit Insurance Corporation for class A stock in the Federal
Insurance
Corporation; and "upon receipt of such application
tlie°r13°ration

shall request the Federal Reserve Board, in the case of

4k4te tne mber bank, or
the Comptroller of the Currency, in the case of
111t10441.

Neh

bank,

to

certify upon the basis of a thorough examination of

w
to erztb, hether or not the assets of the applying bank are adequate
-le it to
meet all of its liabilities to depositors and other
eelito
as shown by the books of the bank; and the Federal Reserve
likr.
a kk)

the Comptroller of the Currency shall make such certification
Ils Pra
cticable".

'
ss l e't
tic)Illitt

-

he

No action by the Federal Reserve Board with

certification of such banks is required until the corpora-

received applications for class A stock and has requested such




1375
6/14/35
-6cottr
ication, the first step in the procedure being the filing of
the 4„

vP-Lications of the banks with the corporation; and the preparation

"Per forms of application and the furnishing of such forms to in4141 .k..
'
Ake is the function of the Federal Deposit Insurance Corporation.
tle et.
4'
e"templates that the Federal Reserve Board will prescribe regu141°48 with
regard to the computation of total deposit liabilities of
Member
banks as a basis for the determination of the amount of class A
st°elt to be
issued by the corporation to each eligible bank, and a

3

drafter such
regulations has been prepared. Upon favorable action
today by
the Board the regulations will be issued immediately. All
13tePtqletione
4411
1 350have been made to enable the Board to certify prior to
9
upon the request of the corporation, whether or not the
4Bliets of
taw_e each State member bank applying for class A stock are adequate
°I it to
meet all of its liabilities to depositors and other

"mit0,8"

shown by the books of the bank. If the applications are

441
'
144 by the
corporation, and the necessary request pursuant thereto
440
kir e bY the corporation upon the Federal Reserve Board, prior to
4 0'
1 1935, there appears to be no reason why the existing law cannot
L 41314/1

It

' The

with by that date with respect to all eligible State member
Board was informed by the Comptroller that he is prepared

11"esse-17 to furnish the necessary certifications to the corporation
*it
24
e0),
Ilcurs after the receipt by the Comptroller's office of the
‘P°r4t a,
-4 s request therefor.
M441

he

law as originally enacted set July 1, 1934, as the date




1376
eli4/35
-7UPola „
vr prior to
which all insured banks must become class A stockholders
olto,
-4e Federal
Deposit Insurance Corporation in order to continue the
illaurkles of their
deposits after that date. This provision of the law
1418 °Jae/Wed so
as to extend the time to July 1, 1935. The question of
deposit
i
nsurance has been for some time a major subject of discussion
411°4
bankers, and particniArly since the introduction of the banking
llj Of
19352 and it is believed that bankers generally are aware of
eitalaticn.
lic

Aside from the apparent lack of any necessity for a pub-

announcement of what is already generally known among bankers, un4468417 d
isturbance of mind and questions might be created by the issuance
cltleh a public
announcement at this time and undesirable inferences
be
- drawn therefrom. Such an announcement, particularly if given
the

kith

44)141idab1e appearance of a joint action of the three
agencies of the
qover
kith

11111elit which have greatest
power over banking throughout the country,
ereette great
concern and result in questions as to whether deposits

27

tielltex banks would continue to be insured after July 1; and no
,
wter
wolottibee°113-21 truthfully give assurance that the deposits in
his bank
,fittietti.1 Insured after July 1 until he received formal advice from the
to

ettls

teP°sit Insurance Corporation that the subscription of his bank
stock had been accepted and paid for.

t44

Bankers in this situa-

would f. a
t
0

la

themselves in a difficult predicament and might be sub-

Pail-10 stricken withdrawals of funds. Ur. OtConnor stated that
t1lt
ot tillestion
'
1- any public announcement had given him much disturbance
titid
a8
t0 the
possible effect upon the public. During the course of




1377
6/14/3
5
cliscussiona Governor Eccles and Mr. O'Connor successively were
ogled to
the telephone at the request of Secretary Yorgenthau, who
sought
their advice
as to the advisability of issuing the announcement.
4verrior
Eccles reported that he had advised the Secretary that he felt
thEtt it
'me not
necessary, that it would be unwise to make any announcetellt
whatever, that it was the opinion of the members of the Board that
it sholild
riot be a party to such an announcement, and
that consequently
se
Govertior of the
Board he could not join in such an announcement. Mr.
O'Colatior r
eported to the Board that in his conversation with the Secretaty
he.d stated
that, as the Secretary had asked for his advice upon
th,
tatter, he had made
a vigorous objection to the issuance of any
444111leement at
all, stating that he felt that it would be not only unllecessarl but
unwise and undesirable from every point of view.
After a full discussion of the matter, the
Board was unanimously of the opinion that it would
be injudicious to issue such a statement
and that
in any event it should not join in any announcement
on the subject which Mr. Crowley might decide to
make
Governor Eccles requested that a full statement of the Board's position be incorporated in
the minutes, which has been dune in the text of
these minutes preceding the above statement of
the Board's action.
%Nrernor Eccles stated that under existing law (Section 12B(e)
44 the Neral
Reserve Act) the Board is required to issue regulations
Nritt
the co
mputation by member banks of total deposit liabilities
°Iltilllehate to be
based subscriptions for class A stock of the insurkce e°11)°ration
for which member banks are required to apply on or




1378
8/14/35
-9befor..
111Y 1, 1935.

He said that the Board's staff had prepared a

Prell°secl regulation to be contained in a telegram to all Federal reserve
It€ellts with
instructions to have such regulation printed or mimeographed
ittd co
Pies thereof distributed immediately to all member
banks in their
e8Peet*lve
districts. At Governor Eccles' request, Mr. Morrill read the
tallow 4
'
131g Proposed telegram:
Re "Pursuant to provisions of section
12B(e) of the Federal
la!?rve Act authorizing
Federal Reserve Board to prescribe regu11l:40ne covering computation by member banks of total deposit
stoVaities on which are to be based
subscriptions for class A
balik
:of Federal Deposit Insurance Corporation for which member
I9„ are required by existing law to apply on or before
July 1,
"0,
tions:the Federal Reserve Board prescribes the following regula"'The term "total deposit liabilities" for purpose
ef de
termination by member banks of the amounts of subf!eriPtions for class A stock of Federal Deposit Insurance
poration under provisions of section 12B(e) of the
4'edera1 Reserve Act means the member bank's gross deposits
8 °f June 19, 1935, less items in process of
collection:
:Irovided, however, That any bank organized subsequent to
tUne 19, 1935 shall compute the amount of its subscription
e1aas A stock of the Federal Deposit Insurance Corpora1). on the basis of such total deposit
liabilities as of
''e aose of business on the date upon which it
becomes a
ember bank.
The term "gross deposits" (items 15 to 19
Si
in Comptroller of the Currency's form of report
:r c
ondition for national banks used as of March 4, 1955
8nd items numbered 14 to 18
inclusive in Federal Reserve
form of report of condition for State member
ire Used as of same date) means the sum of United
f,,,e`tee Government and Postal Savings deposits, public
Ilida of States, counties, school districts, or other
cebdivisions or municipalities, deposits of other banks,
t:tified and cashier's checks outstanding, and cash let0+
:
8 of credit and traveler's checks outstanding and all
trr demand and time deposits, including items credited
lr cl 0dit0rsI accounts subject to final payment but not
to
ding deposits payable only at an office located in a
ttie'e-lEn country. The term "items in process of collection"
4118 the sum of cash items with Federal Reserve
Banks in

t

!

W




1379
6114/35
-10ft!

process of collection and exchanges for clearing house
and other checks on local banks (items 4 and 7 of schedule I
it the form of report of condition used by member banks as
(;11* March 4, 1955) plus such part of amounts "due from banks"
kitems 5 and 6 of the same schedule) as represents uncollected
cash items.
'
a„ "Please have regulation set out above printed or mimeographed
"4 copies thereof distributed
immediately to all member banks in
Your
district."
Mr. Morrill drew particular attention to the fact that it was
11415c)aeci to fix June 19,
1935, as the date as of which computations
84144 be made and
e°4aitlerati0n

suggested that the Board might wish to give careful

whether some earlier date would not be more appropriate

view of the Practical difficulties which might be entailed by sped tN a Axture date.
Mr. O'Connor suggested that March 4, 1955, be
4batitaited
lieu of June ]9, 1935, since the former is the date of the
4at 043.1 report
and figures at the close of business that date are

N114116 from such reports

now on file in his office with respect to

114ti°1143" batiks and in the office of the Board's Division of Bank Operat443141th respect to State member banks.
qoyernor Eccles raised a
question as to what would be the situai°41fitil respect to nonmember banks inasmuch as they were not requested
'bthe
pecierai Deposit Insurance
Corporation to submit a call report as
kl
'ela 4:
1935. It was suggested that December 51, 1934, might be
but
objection was made on the ground that, in some cases, there

'4110x.
to

h

14we been
some "window dressing", for that particular date. Gov-

tecies indicated

that he agreed that it would not be satisfactory

.14/
teeenaber

31,




1954, but he believed that it was distinctly desirable

1380
6/14/35
-11-to tia
e 'EL back date rather than a future date.
t

Yr. Clayton called atten-

h

Lo the fact
that the proposed telegram instructed the Federal re-

it)"

4rws
'agents to send the regulation only to member banks and he suggested
that It
might be preferable to say "banks concerned", rather than "member
barikw%

Mr• WYatt explained that it was understood that the Federal Deposit
411Ce

torts

Corporation would send appropriate instructions and application

t° all nonmember banks which were covered in the temporary insurance
f11116tlarcrugh their branch
offices which he understood were located in each
444.1
reserve bank city.
Governor Eccles thought that Mr. Clayton's point was well taken
811Q.:gested that it would be desirable for the Federal reserve banks to
%tribute
regulations to all tanks which would apply for coverage in the
e'rrr441ett insIlrance fund. He said that the Federal Deposit Insurance
C°rP°ration had
only skeleton branch offices which, he assumed, would not
11111 Po
sition to perform the task as easily as the reserve banks. Mr.
o tC°17111or
concurred in
Mr. Miller thought that the Board should
this view.
'with the
Federal Deposit Insurance Corporation on this point and Mr.
°te()17Ellor left
the room to discuss the matter over the telephone with other
(/41eials
of the corporation. He reported back that the Federal Deposit
11114'Elliee
Corporation's facilities were available and the corporation
t4t,
it Was in a
z ieh
position to handle efficiently the transmission of
thkt Nglaetionc and forms to all nonmember banks.

Mr. O'Connor said

Ilktie he
Personally did not agree in this, he thought that, in the




1381
6/14/35
-12circum
staaces, the proposed telegram was in satisfactory form as drafted
411th th
e exception of the substitution of "the close of business on March
41 1935%
for "June 19, 1935", where that date first appeared in the telet) and
"March 4, 1935", where that date again appeared.
Thereupon the Board unanimously approved
the telegram quoted above, as revised to incorporate the change suggested by Mr. O'Connor,
and authorized the Secretary to send it out
immediately.
adar

Mr. Morrill read the following letter dated June 13, 1935, which

"
sed to the Board by Mr. Crowley, Chairman of the Federal Deposit
'41ce

Corporation:

or

"Please permit me to direct your attention to subsection (e)
..ection 12B of the Federal Reserve Act, as amended, wherein pro84 °11 is made for banks which are members of the Federal Reserve
8.
:
18
,:em becoming class A stockholders of the Federal Deposit Insur10,
-,' Corporation. The subsection provides that every member bank
or before July 1, 1935, shall take all steps necessary to enbe e it to become a class
A stockholder of the Corporation on or
JulY 1, 1935' and further that 'Except as provided in subin (g) of this section, if any State member bank shall not
hav
:
J111; rcome a class A stockholder of the Corporation on or before
1935, the Federal Reserve Board shall terminate its memberthe Federal Reserve System'.
cor 'It is made
the duty of every member bank to apply to the
ration for class A stock and of the Federal Reserve Board, in
thc
ZSe of a state member bank, 'to certify upon the basis of a
Etppl;?gh examination of such bank whether or not the assets of the
itie.:111g bank are adequate to enable it to meet all of its liabil_'_0 depositors and other creditors as shown by the books of
the
'
c4ti lki and the Federal Reserve Board *** shall make such certifi-° as soon as practicable'.
(lepo .The amount of the subscription is governed by the 'total
pte,
slt liabilities as computed in accordance with regulations
;
erIbed by the Federal Reserve Board' and an immediate payment
cillired
ability
. equal to k of 14 of the amount of such total deposit

te

it 1:Although no a)plications for class A stock have been received,
t4Ite- titssumed by
this Corporation that the steps necessary to be
44,1 tr1. in order to qualify banks for membership in the Corporation
o Prevent forfeiture of membership in the Federal Reserve




1382
6/14/35
3_
"System will be taken.
"In view of the fact that the proposed Banking Act of 1935
v,
n?.ch has been pending in Congress since February 6, 1935, and
4. 101 relieves both the barks and the Federal Reserve Board of
e
duties and obligations mentioned above is not yet reported
m Passage in the Senate, may I inquire what provision is being
Qe to assure compliance with the existing law in the event the
Pending Bill should not be oassed before July 1, 1965?
i4 "I shall be glad to cooperate in any way possible to facil13 4te the consummation of membership in this Corporation of the
'
Inks Which are members of the Federal Reserve System."

r

Mr. Morrill stated that a similar letter had been addressed under

the n

date to the Comptroller of the Currency by Mr. Crowley and that
'01Cn,-.Luca. had transmitted a copy of that letter, together with his
e131Y thereto,
to the Board for its information.
(Secretary's note: Mr. O'Connor's letter of trans—
mittal was dated July 13, 1955, whereas it evidently
Was intended to be dated June 13, 1935)
1,11teh h

Mr. Morrill then read the replies to Tc'essrs. Crowley and O'Connor

tid been prepared by the staff for the Board's consideration.
The reply to Mr. Crowley read as follows:
111,
0:Receipt is acknowledged of yGur letter of June 13, 1935
pro Ing the attention of the Federal Reserve Board to the
Re ,
,,'1si°ns of subsection (e) of section 12B of the Federal
iZve Act, as amended, requiring all banks which are members
bee "e Federal Reserve System to take all steps necessary to
Cor°
,
rae class A stockholders of the Federal Leposit Insurance
sio'4)ration on or before July 1, 1935. You inquire what provi—
t4 Z iS being made to insure compliance with the existing law
aq he event that the proposed Banking Act of 1935 is not en—
ed o
before July 1, 1935.
rev,:inder the provisions referred to every member bank is
ed to apply to the Federal Deposit Insurance Corporation
81-4 ?-18s A stock in the Federal Deposit Insurance Corporation
Corlo
iS provided that 'Upon receipt of such application the
4.40r tion shall request the Federal Reserve Board, in the
a State member bank, to certify upon the basis of a

c;l




1383
-14horough examination of such bank whether or not the assets of
th
bank are adecivate to enable it to meet all of its
PP
,iabilities
to depositors and other creditors as shown by the
1°°°1
:
8 of the bank; and the Federal Reserve Board or the Comptroller
Ole Currency shall make such certification as soon as practicable.'
E
It will be observed that no action by the Federal Reserve
ard with respect to the certification of such banks is required
antil the Corporation has received applicaticns for class A stock
c:d has
requested such certification. The first step in the prodilre, therefore, is the filing of the applications with the
tpporation; and the preparation of proper forms of application and
furnishing of same to member banks is the function of the
Bo eral Deposit Insurance Corporation. However, the Federal Reserve
rd will be glad to cooperate with the Corporation and to assist
iji
lit any way possible in the performance of this task.
pre iThe act contemplates that the Federal Reserve Board will
de Bebe
ri a regulation with regard to the computation of the total
eZVt liabilities of member. banks. The Federal Reserve Board'F
'
of
had prepared a draft of such a regulation prior to the receipt
sia llr letter and the Board expects to issue a regulation on the
R4Jeet today or tomorrow. It will
be telegraphed to all Federal
allerve banks with a request that they send copies immediately to
b;:' member banks
in tht7ir respective districts. It is assumed that
inar Procedure your Corporation can place copies promptly
blIt`41e hands of all nonmember banks through your regional offices;
the
'
vif you are unable to do so, the Board will be glad to request
'!deral Reserve banks to do so.
"The Federal Reserve Board is prepared to certify prior to
1965, upon the request of the Corporation, whether or not
1935,
Eta _ a'
of each State member bank applying for class A stock are
7
e
late to
to enable
it to meet all of its liabilities to depositors
0th
creditors as shown by the books of the bank. If applica1g3s8 are received from them by the Corporation prior to July 1,
therefore, there would seem to be no reason why the existing
steteannot be complied
with by that date with respect to all eligible
e member
banks."

j

4

The reply to Mr. O'Connor read as follows:
have received your letter of July 13, 1935 inclosirg for
bay
'
sat,e ermation a copy of a letter which you had received on the
Poret.c;14Y from the Chairman of the Federal Deposit Insurance Cor1 114 with respect to compliance before July 1, 1935 with the
th:.‘°n8 of existing law pertaining to the permanent insurance
tiegettlr'
,4ePosits of all member banks of the Federal Reserve System,
11 with a copy of your reply. The Federal Reserve Board
'




1384
-15-received

an almost identical letter from the Chairman of the
-edcral Deposit Insurance Corporation and I am inclosing for
Your
information a copy of my reply.
"Prior to the receipt of your letter and that of the Chairtheof the Federal Deposit Insurance Corporation the staff of
Federal Reserve Board had comenced the preparation of the.
"iteeessarY regulation for the computation of total deposit liabil!
i 8 of member banks in accordance with the provisions of subBenc4-0n (e) of section 12B of the Federal Reserve Act; and the
t-oli a expects to issue a regulation on this subject today or
h1 11.°w. In order to expedite matters, however, it is contemted that,
instead of having the regulation printed in Washingthe text thereof will be telegraphed to all Federal Reserve
with a request that they send copies immediately to all
tniber banks in their respective districts. In the circumstances,
liaj
'
c uld not seem necessary for you to distribute copies to all
co 1°11E1 banks; but the Board will be very glad to furnish you a
°f the regulation as soon as it is issued and to furnish
Such a
dditional copies as you may need as soon as possible."

r

After discussion, upon motion by Mr. O'Connor,
the Board approved the suggested replies and authorized the Governor to send them out without circulation to members of the Board.
Q°1rernor Eccles stated that following his radio speech in the
tiQr
'a-dio Forum on May 25$ 1935, a memorandum had been circulated
tob,
m*rabers of
the Board indicating his desire to send copies of the
4eeehl
together with copies of the speech which he made on June 5, 1955,
b"0e
the Pe
nnsylvania Bankers Association at Scranton, Pennsylvania,

EQI'
le mber banks.

He said that the memorandum was circulated and

bY several members
of the Board but that Mr. Miller had sugthat the
matter be brought up at a Board meeting for discussion.
ti()Is Eccles stated that he had been given a difficult assignment on
11141°Y1 by the administration and that he was looked upon as the
1 01
:::: sponsor of the proposed banking legislation.
:
1 :7

He said

speeches dealt largely with Title IT of the Banking




6/14/35
—16411 °f 1965/ and he felt that bankers generally v.ere vitally interested
illthe questions involved.

He felt that this was the only way that he

e°414 officially
offset some of the false propaganda disseminated by the
e(4441ttee for the
Nation, the Liberty League and other organizations in
417Y°11k Particularly and that he should be authorized to have the speeches
k1411:

and distributed to all member banks at the expense of the Board.

4'111112in said that he saw no objection to the Governor or Board members
414141g out copies of their speeches on official matters at the expense
the Board.
*. Miller said that his objection to the suggested procedure
-48ed largely on the fact that it had been the Board's policy in the
11°t to Permit such practice unless the material dispatched as offi—
e41 1)4sliless consisted of public documents.

He believed, he said, that

the 4eilities of
the Federal Reserve System should not be used for such
Althout,
-rh he agreed that any Board member has the right to ex—
'

his i
ndividual opinions officially, he thought that the Board should

le
Pacistkpialcqisly free as a Board in such matters. He said that he thought

tho
greatest obstacles in the way of the enactment of the proposed
lei

was tho feeling in some quarters that there is a lack

-41c1°Psrldence on the part of the Board as a body and a suspicion that
Itl"°111-inated by the administration. The transmittal, he believed, of
:
:
1t 1141 eXPressing

the views of the administration as business of the

helic/ed to crystallize such unfavorable opinion.
Gesliernor Eccles pointed out that he spoke in the National Radio




1386
6/14,135
-17at the
request of The Washington Star in the same manner as other
;)48htligton officials such as the Secretary of Agriculture, Chairman Fahey
"he Federal Home
Loan Bank Board and others, and that he felt that the
aPeech
't°gether with those which he had made on two previous occasions
ber(lre bankers conventions might prooerly be
construed as official.
l'Ir* Hamlin said that he considered that the Governor had the
l'ighLto

alake such statements as a member of the Board, and he could see
why the Board should not pay the expense if a member of the

8°44'cl wanted to send out copies of a speech he had made in his capacity
Bo4rC1

member.

He referred to the Board having once sent out a

bY Senator
Glass which was printed as a public document.
111". Miller stated that it would be found that there had been
41Te 64ciresses, Particularly of Mr. liarburg, published in the Bulletin
t4,t

thet 4 situation arose which caused the Board to consider the
whole
whereupon it had decided that no addresses of members of the

::
1 sh°4-141 be 'published by the Board in
the Bulletin. He added that
l‘ter'e 1*4t11er unimportant, but they did cause some comment, not to
as it appeared that they had a little of an argumentative
'11.t; that the
Board felt as a matter of general policy that it must
'44
l'ili)111()L181.y

N

tici

free as a Board from any suspicion of bias or propa-

that he felt that it was a sound position.

O'C nnor said that he had very definite views on the subject;
w45 his personal opinion that when members of the Board,
(317/1 judgment, wished to send out through the system statements




1387
6/1C/35
-18they had
made on subjects of concern to the system they should have
that
Privilege
Mr. Miller asked whether he meant that such statements should be
eit'eularized by the Board and Mr. O'Connor answered that that was his
1114
' Mr. Miller
then raised the question whether the Board would be
vised in the interest of the good repute of the Federal reserve
telaand of
the Board particularly to distribute every statement that
80a.rd
member might desire to make under the imprimatur of the Board.
lie teat
that any Board member could make an individual distribution of
6'147
statement that he made in any way that he thought suitable but that
differert question
was presented when it was proposed that the Board
1144 the
distribution.
Mr. Szymczak stated that, while he had originally agreed with
Position
taken by Mr. Miller, since then he had made two speeches,
vtle, of w
hich was on
industrial loans at Decatur, Illinois, before the
eollveri

t41

4 of the Illinois Bankers' Association, and the other before
New,
\i,t11

4°rIc State Bankers' Association at Lake George (Bolton Landing)

4

r

Qn the bankiag bill of 1955, that he had received several

Nuests for copies of these speeches, and that they had been
.494a
- at th3 expense of the Board and sent out under frank. He
htlt he
could not afford to pay this expense personally and that
he
alloill., n
ot be expected to do so,
but also felt that, having made the
v.ec_5
'
h , 1,,, ,
kik be '' had the duty of making their contents available to all who

klraq,

interested.




He thought that there was no difference in principle

1388
8/14/35
-19between the
course he had followed and that proposed by Governor Eccles.
1111118 judgment, therefore, there was no objection to every Board member
the same privilege, and he believed that whatever privilege was
6‘ee°11(1eci the
Governor in this respect should also be accorded to other Board
ler8) with the understanding that where controversial matters were
they should
first be considered and acted upon by the Board.

co .14r. Miller said that he recognized a distinction between supplyPles of speeches upon request and a distribution thereof to all
ketaber
banks initiated in Washington. Mr. Hamlin thought that it would
d .
Irable if the testimony of each Board member before the Senate
e°1111ittee of the
Banking and Currency Committee were forwarded to all
tt%rfiber b

he Bo

allks in order to show the difference of thought and opinion among
members.
After further discussion, Mr. O'Connor moved
that the Governor be authorized to have the speeches
referred to above printed and mailed to all member
banks as official business of, and at the expense
of, the Federal Reserve Board.
The motion was carried, Mr. Miller voting "no".

The

Board then acted upon the following matters:

Letter dated
June 16, 1935, from Mr. Sproul, Secretary of the
lk

1 Re3erve Bank of New York, and telegram dated June 16 from Mr.

0;(41,

1 414th;
:
leder41 Reserve Agent at the Federal Reserve Bank of Richmond,

ing that, at meetings of the boards of directors on that date,
tIg.es
iltalld were made in the banks' existing schedules of rates of dis-

11,)

Pu
rchase.
Without objection, noted with approval.




1389
8/14/35
Memorandum dated June 8, 1955, from fir. Wyatt, General Counsel,
1115Zitt'
lng the resignation of Miss Marcella McKenna as a stenographer in
the
,
-4.a.a. division, to take
effect at the close of business on July 2,
bss

'and re
commendinz that the resignation be accepted. The recommenda—
t104 was
approved by three members of the Board on June 13,
1935.
Approved.
Memorandum dated June 13, 1935, from Mr. Morrill, recommending
R. C. Twomey,
Supply Clerk in the Washington Building, who has

heti

assigned to supervise the mail and mimeograph work and messengers
14 the
Shoreham Building for the past three months, be permanently assigned
that
"rk with no change in his present salary- at the rate of Z2,200
:
tile
1111mi The memorandum
also recommended that

Walter Peregory,

Iler in the
telegraph office, who has filled Mr. Twomey's position
ck

the Past three months, be appointed to the position of
Supply
4421 that
his salnry be increased from a,080 to al200 per annum,
- as of June,
1935.
Approved.

Memorandum
June 4, 19350 from Mr. Goldenweiser, Director
dated
bi
visio n of
Research and Statistics, recommending the temporary
4P14)tritMent for
a period of three months of Mr. Alexander Graham Sander—
4111)
4., as
a
clerical assistant in the division, with salary at the
or
417s
Per month, effective as of the date upon which he enters
11P'11.
the
th
performance of his duties. The recommendation was approved by
rarhbers of

the Board on June 13, 1965.




Approved.

1390
Memorandum dated June 4, 1935, from tr. Goldenweiser„ Director
°f the

Div10 of
Research and Statistics, recommending the transfer

Of

Chandler Morse, of the Foreign Inf)rmation Division of the Federal
lerve Rank of New York, whose services have been loaned to the Board
3144 '114.rela 1, 1935, to the Board's Division of Research and Statistics
'1811 illaior
research assistant, with no change in his present salary at
the r
ate °f 03,700 per annum, effective as of the date upon which he
Nal

4
.63
thq

from the Federal Reserve Bank of New York, with the understanding

lt will
not be necessary for Mr. Morse to take the usual physical
Nral .
talik:7"1°11 inasmuch as he is at present a member of the Federal Reserve
etirement System.

or

The recommendation was approved by three members

on June 15, 1935.
Approved.
Letter dated June 13, 1935, approved by three members of the
4'a Case, Federal Reserve Agent at the Federal Reserve Bank

or

reading as follows:
Gold "Reference is made to Mr. Roelse's letter of June 7 to Mr.
costeweiser requesting approval for the exchange of Mr. Frank
O
Who now holds a position in your department, for an
thia°Yee from another part of the bank. The Board approves
t4-,
t ,
tirrangement provided that the salary attached to the posiqUestiOn is not increased."
Approved.
tQ‘t

Letter dated June 15, 1935, approved by three members of the
(1) t0
the board of directors of the "Commercial Bank & Trust Company",
e) Te

nnessee, stating that, subject to the conditions prescribed




1291
6/14/35
illthe

letter, the Board approves the bank's application for membership

&litheFederal Reserve System and for the appropriate amount of stock in
the Federal
Reserve Bank of Atlanta.
Approved.
Letter dated June 1:'3, 19351 approved by three members of the
80e.rd, to
the board of directors of "The Farmers State Bank of Alto",
kl-to)
Michigan, 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 Chicago.
Approved.
Letter
tokrti

dated June 13, 1935, approved by three members of the

t(
)the
board of directors of the "Fountain State Bank", Fountain,
)
stating that, subject to the conditions prescribed in the let44"1

1,

the
-""
4.oard

eclertti
4r1
sAetco.

approves the bank's application for membership in the

Reserve System and for the appropriate amount of stock in the
rceserve Bank of Chicago.

Approved.
Lett
er dated June 13, 1935, approved by three members of the
tt)
) to v
1*. L. L. Lillibridge, President of the Burke State Bank,
:41titti '
'South
Dakota, reading as follows:
4.1t(1

e
t 1S regretted that pressure of other important matters has
Illeti;'ed an earlier reply to your letter of March 60„ 1935, request()tfie.e Board's views with regard to the establishment of branch
%It1;8 bY State member banks in South Dakota under a statute re'enacted in that State authorizing State banks to establish




1392
-25"such offices.
It is understood that under such statute State
banks are
authorized under certain circumstances to establish
`
;
- 11cl operate branch offices for the purpose of receiving deposits,
1,!suing drafts and cashiers' checks, making change and paying
checks.
It appears that such offices may be established and
operated only in communities in which there are no banks and
that it is the
,
purpose of the statute to provide banking facili'ies to such communities.
fici !:The Federal Reserve Agent, the Federal Reserve Board's of181 representative, at the Federal Reserve Bank of Minneapolis
.Lhas
recently called this matter to the attention of the Board for
4.18 consideration and for such action as it might be possible for
Board to take in order to eliminate any disadvantage to State
ember banks in competition with nonmember banks.
t
"The Board advised the Federal Reserve Agent-that State memke
ir banks in South Dakota might establish branch offices of the
44(1 contemplated by the recent statute of that State, but that
th w°111d be necessary for any such State member banks to comply with
ofe requirements
of the Federal law applicable to the establishment
0,J?ranches by member banks generally in order to establish the
;041ces recently authorized in South Dakota. In this connection,
esL,11' attention is called to the fact that State member banks may
p,'Elblish branches located outside of the cities in which the
ent banks
are situated on the same terms and conditions and
to Ject to the same limitations and restrictions as are applicable
baell he establishment of branches by national banks. The require'S
applicable to the establishment of branches by national banks
st:te°ntained in section 5155 of the Revised Statutes of the United
nw es, as amended, and, among other things, it is provided that
thavIt:`Ttl banks must have a specified amount of capital in order
ettl "ley ma;/- be authorized to establish branches outside of the
?8 in which the parent banks are situated. In this connection,
4 b vIon 5155 Provides that no national bank shall establish
such
40.i.rnc1 unless it has a paid in and unimpaired capital stock of
'6,1ess than ,!500,000, except that in States with a population of
tlou0,000 and which have no cities located therein with a popula41101'4 exceeding 100,000, the capital shall not be less than $250,000
,feePt that in States with a population of less than 500,000
a4d ,e
T;Ilich have no cities located therein with a population exceedthe capital shall not be less than .a000000. Section
batik lurther provides th,tt the aggregate capital for every national
cetpi.4.414 its branches shall not be less than the aggregate minimum
or '
n 414t1 required by law for the establishment of an equal number
ite-t".°nal banks situAted in the various places where such bank and
anches are situated.
tiC4 It is understood that the State of South Dakota has a populata '
J1 more than 500,000 but less than 1,000,000 and that there
es city located therein having a population exceeding 100,000

r

Z

l




1393
6/14/35
-24-i habitants. Accordingly, a State member bank in South Dakota
st have a capital of at least 4,250,000 in order to establish
°ranch offices outside of the city in which it is located.
"However, it is understood that your bank has a capital
etclok amounting to only .25,000 and, under the law, it would be
141ecessary for it to increase its capital by an additional $225,000
'4 Order
to be eligible to establish branch offices of the kina
!
1 uthorized
by the recent statute of the State of South Dakota.
It
I is understood that such statute of South Dakota does not prescribe
nr specific amount of capital which a State bank must have in order
'a4 establish such branches and to that extent nonmember banks have
ste°mPetitive advantage over State member banks. In the circumw %Ices, the Board has given careful consideration to whether it
14.114 not be possible to obtain an amendment to the Federal laws
would permit the establishment by State member banks in South
of branch offices of the kind contemplated by the recent
Zrtute of that State for the purpose of affording banking facilir es in communities which are without such facilities without
:gard to the capital requirements of section 5155 of the Revised
1.1tutes, but the Board does not feel that it is practicable at
'
ills time to obtain such amendments.
/i
"It may be stated that the Board has received an inquiry from
d°11cIrable t. J. Bulow in connection with the letter which you adessed to him under date of Mprch 30, 1935, requesting a statement
13,,the Board's views in the matter, and the Board is advising Senator
W of its views."

j

Approved, together with a letter to Honorable
1'. J. Bulow, United States Senate, reading as follows:
ha "It is regretted that pressure of other important matters
illiPrevented an earlier reply to your letter of April 5, 1955,
pr-'?sing a letter you have received from Mr. L. L. Lillibridge,
garldent of the Burke State Bank, Burke, South Dakota, with reto the establishment of branches by member banks of the
orcleral Reserve System under the provisions of a recent statute
br the State of South Dakota authorizing the establishment of
cillailch offices by State banks for limited purposes. You have rean expression of the attitude of the Board regarding amendto the Federal laws which would permit member banks to estabtabsuch branch offices on the same basis as such offices may be
Etd lished by nonmember State banks. mr. Lillibridge has also
;"sed a letter to the Board with regard to this matter and
the
is inclosed for your information a copy of the Board's reply
watch its views are set out in detail.
YOU will observe from the inclosed copy of the Board's letter




1394
6/14/35
-25"to Is
Lillibridge that, under the provisions of section 9 of
"le Federal Reserve Act and section 5155 of the Revised Statutes
°f the United States, State member banks and national banks may
ric)t establish in South Dakota branch offices of the kind recently
tuthorized
by the statute of that State unless the capital of such
lulanke amounts to at least :250,000, while the State law permits
anmember banks to establish such branch offices without requiring
specific amount of capital. In these circumstances, it is apt:-'rent that
the nonmember banks have a competitive advantage over
tttional banks and State member banks. It also should be noted
ort the
statute of South Dakota contemplates the establishment
14 the branch offices for the limited purposes of receiving deposits,
ands
drafts and cashiers' checks, making change and paying checks,
that such offices may be established and operated only in camAgullities which are without other banking facilities.
"However, in view of the controversial nature of branch bankquestins, the Board has not felt that it would be practicable
ivoioc)btain the necessary amendments at this session of Congress which
1,0-44 permit member banks in South Dakota to establish branch offices
the limited purposes contemplated by the recent statute of that
.0
'
0ate without regard to the capital requirements usually applicable
th the establishment of branch offices by member banks outside of
e city in which the oarent bank is located.
se "In this connection, your attention is called to the fact that
Hoetioll 505 of the Banking Act of 1935 (H. R. 7617) as it passed the
rtielL,
ee of Representatives, contains an amendment which would permit
lo_ver banks under certain circumstances to establish branch offices
outside of the city in which the parent bank is situated
wiZnci
est at regard to the capital requirements usually applicable to the
slletblishment of such branches by member banks. You will note that
to L: Etmendment strictly limits the right to establish such offices
ef 44s_easonalt offices located in 'resort' communities in the county
de head office of the parent bank where no bank is located and
up01111E,business, and requires the termination of such a branch office
atr. Ole opening of a bank in the community. This amendment so
setictlY limits the right to establish such offices that it would
the seem to be of any substantial value to member banks located in
plIr State of South Dakota in establishing branches for the limited
PcTee contemplated by the recent statute of that State.
hersivj
tIll.
enletter which Mr. Lillibridge addressed to you is returned
Letter dated June 13, 1935, approved by three members of the
° Mr. Austin, Federal Reserve Agent at the Federal Reserve Bank
delPhia, reading as follows:




1395
6/14/35
-26"Reference is made to your letter of ray 17, 1955, inclosing
a
cin application of the 'Fidelity-Philadelphia Trust Company', Philadelphia,
for permission, as required under Section
17 of the Federal Reserve Act, to increase its investment in bankpremises, through advances of1.1000,000 to its affiliate,
Building Corporation, which have been made subsequent to
4tall ne 161 1933, and for permission to make additional advances to
ld
e buiing
corporation in an amount not exceeding ;,400,000.
vi "The Board has reviewed the information submitted, and, in
of the circumstances and your recommendation, approves the
ve-flces of .ia,000,000 which the Fidelity-Philadelphia Trust Com;1
1,115r
1 has made to its affiliate, Fidelity Building Corporation, and
approves the application of the trust company for permission
l ake additional advances to the building corporation in an
'
0'?unt not exceeding ;400,0000 provided such advances will be made
ti. -LY to the extent that the building corporation requires such
stance on account of current operations and to make amorti2aadcla PaYments on the first mortgage, and provided, further, such
stvences are within the limitations prescribed by the laws of the
State
of Pennsylvania. Please advise the trust company accordingly."

j

Approved.
Letter dated June 15, 1935, approved by three members of the
tokrd, to mr.
Sargent, Assistant Federal Reserve Agent at the Federal
4e4rve
Eank of San Francisco, reading as follows:
"This refers to In-. Sonnets letter of March 25, 1935, and
i7 letter of April 250 1935, and the stated inclosures, relatorgato the elimination
by First National Bank of Salt Lake City
eNseciation in securities by means of valuation reserves,
it:
hannection with the issuance of a limited voting permit to its
it Ting company affiliate, First Security Corporation of Ogden,
uanuary 1935.
"F1'om the Report of Condition and the Report of Earnings and
Divi,
of i'ends
p
of First National Bank of Salt Lake City, as at the close
Csiness December 31, 1954, it appears that reserves were set
the bank as follows:
$47,379.75
Reserve for premium on Treasury bonds
Reserve fOr stock of banks and banking
25,000.00
corporations
Reserves for other bonds, stocks and
15,816.60
securities
$88,196.35
yo




1396
6/14/35
-27!which amounts were deducted from the corresponding asset items
ln the report of condition.
"Vvhatever balances were in these various reserve accounts as
!
t August 2, 1934, and January 28, 1935, the dates of the latest
'ePorts of examination, were apparently included by the national
e:411111riers in 'Reserves for Contingencies, etc.' The report of
ebxamination az at August 2, 1934, showed net appreciation in the
ank t e entire securities account of :49,997.36, as compared with
a
T/ t°tal net appreciation of ii216,976.52 as at January 281 1935.
td the examiner
applied the amounts of the above mentioned valua';,!ion
reserves, the total net appreciation would have been increased
aeecrdintly.
pi). "From the copies of correspondence between your office and
e;'zt Security Corporation of Ogden it appears that the holding
toH1PanY affiliate was fully advised that as a condition precedent
13_ the issuance of the limited voting permit by the Board, it would
4 necessary
that its subsidiary banks, if they had not already
/le 30, 'charge off or otherwise eliminate (a) All losses in loans and discounts
(b) All depreciation in stocks and defaulted
securities
(c) All depreciation in securities not in the
four highest grades as classified by a
recognized Investment service organization regularly engaged in the business
of rating or grading securities, and
(d) All other losses;
sal
rion.
;shown by the latest available reports of examination by the
El;:d °Priete supervisory authorities, except that the charge-offs
attt.eliminations required by (b) and (c) above, may be based upon
thitjactory current appraisals of marketable securities,' and
'
eitt:
. 'the charge-off or elimination of estimated
losses and depreef,°-on in assets required in (a), (b), (c), and (d) above, may be
vEtl!c.,b_ed properly through the establishment and maintenance of
sta.r t'ion reserves, provided that in all reports and published
frorrments of such subsidiary banks, such reserves be deducted
I' flthe respective assets against which allocated,' and that
0.ppr
'
eterm1n1ng depreciation, allowance should be made for net
iliation, if any, in upper grades.'
to i There appears to be nothing in the reports and correspondence
Iclicate that the bank had net depreciation in securities of
- December 01,
7
report
'`
on
1934, 'as shown by the latest available
4 * 1Of examination by the appropriate supervisory authorities
based upon satisfactory current appraisals of
tnarke+ \or) *
bwt ,:!1°1e securities.' On the other hand, it appears that the
'ad set up the above mentioned reserves on its own accord.




1397
6/14/3s
-28"Therefore, it does not appear that it was necessary for First
"4t1ona1 Bank of Salt Lake City to eliminate the 08,196.35, or
"Y amount, of depreciation in securities either by actual chargeoff or deduction of valuation
reserves from the securities to which
allocated in order to comply with the Board's requirement as a
e?ndition to the issuance of
a voting permit. It will be apprelated if you will advise
Mr. C. I. Canfield, Assistant secretary"easier of First Security Corporati
on, accordingly.
u
"For your confidential information, it is understood that the
ci8e of valuation reserves as a means of eliminating losses and
rePreciation, although not objected to in some cases, has not been
as satisfactory, as a general rule, by the office of the
Com ptroller of
the Currency, and that no objections are raised to
0? actual charge-offs of reasonable amounts estimated by
officers
a national bank as losses and depreciation, even though not so
classified
by the examiners, and that the Comptroller's office has
time to time forwarded to all national banks regulations or
wh.uructions covering, among other things, the exact manner in
lossee and depreciation should be eliminated and certain
JPes of reservee should be handled.
Board has stated in its letter of November 261 1934 (X-9052-b)
hat
e7
6 it
t considers that the elimination of estimated losses and depre4-4
,
_ tion
assets may be effected properly through the estebliehment
maintenance of valuation reserves, provided that in all reports
the publ
ished statements of condition such reserves be deducted from
yovassets against which allocated. In authorizing the issuance of
lesl-ng permits the Board has provided that the specified items of
elis?s and depreciation may be either charged off or otherwise

2

4

thElt "In this connection, the Board desires to emphasize the fact
de+ ) although it favors, as a general rule, the eliminati
on of
tolet'mined losses and depreciation by actual charge-off, it has
Ilatiattempted in any case to prescribe the exact manner in which
it;
:
clinal banks shall make any eliminations, but has merely provided
elim1-1 cases an optional manner of making any actually required
-4.nat_Lons, with the understanding and expectation that holding
corar
,
'
ise llY affiliates, in complying with conditions precedent to the
barrnce of voting permits, will cause their subsidiary national
res s to make the eliminati
ons which are actually required with
14
1ct to losses and depreciation either by actual charge-off or
with!use of veluation reserves, whichever manner is in accordance
effective regulations and instructicns issued by the Comper of
e,
the Currency."
Approved.
tetter dated June 11, 1935, approved by four members of the




1398
6/14/3s
-29841'd, to fix.
Walsh, Federal Reserve Agent at the Federal Reserve
13e‘laic °I'

reading as follows:

the "This refers to your letter of April 241 19351 relating to
, Proposed deposit of trust funds by the trust department of
;)outhern Arizona Bank and Trust Company, at Tucson, Arizona, in
BPecial account with the Feeeral Reserve Bank of Eallas.
e Board has previously considered a similar inquiry from
otemothellFederal Reserve bank. In that instance the bank indied that it seriously doubted its legal authority to accept
andPdeposits and expressed the opinion that, from a practical
c
oint, it was undesirable for it to do so. In these cir:
(114'
c stances, the Board expressed the opinion that since it was
mUbtful whether the receipt of uninvested trust funds from
oner banks by Federal Reserve banks falls within the purposes
co 'he Federal Reserve Act, and since such deposit could not be
co.0
141ted as a part of the depositing member bank's reserve balance,
view of the legal responsibilities which might be assumed
110,a Federal Reserve bank in accepting such deposits, it would
'
1111 be advisable for Federal Reserve banks to receive deposits of
4-nvested trust funds from member banks. Subsequently, the
G0ver
of another Federal Reserve bank discussed this question
0
13
111411y with the Board's counsel after having advised a member
'
Etuth that he doubted whether the Federal Reserve banks have the
y to receive deposits of such funds.
Ari uln a recent conference with a representative of Southern
th4°11a Bank and Trust Company, the Board's staff was advised
trla „.while the trust company would prefer to deposit uninvested
tru
"funds with the Federal Reserve bank the amount of such
eoillSt funds held by the trust company had been reduced to a
Poe
tratively small amount and that it could deposit such
funds
arice.her banks and be fully orotected by Federal deposit insur411101
, It was also indicated that it was improbable that the
of such funds would be materially increased in the future.
40 4In the circumstances, the Board feels that it should take
al hurther action without obtaining the views of the other Federttt +nerve banks and that it is undesirable for it to reconsider,
art;"ls time, the opinion which it has previously expressed. If
or j,
consideration of the practical and legal aspects
e matter, you still believe the Federal Reserve Bank of
to c 8 should accept the proposed account, the Board will be glad
obtenunicate with the other Federal Reserve banks and, after
t
their views, to give further concideration to the matYou will, perhaps, desire that it be discussed as a
111 matter at the next Governors' or Federal Reserve Agents
el'ence.11




Approved.

1399
g/
-il4/35
Letter dated June L, 1935, approved by three members of the
E°ard +
'
.
0 "The Citizens National Bank of Hampton", Hampton, Virginia,
readirlg as
follows*
a
"The Federal Reserve Board has given consideration to your
PPlication for permission to exercise fiduciary powers, and
ints you authority to act, when not in contravention of State
st 1°.cal law, as trustee, executor, administrator, registrar of
(3eks and bonds, guardian of estates, assignee, receiver, camT-114ee of estates of lunatics, or in any other fiduciary capacity
t)a which State banks, trust companies or other corporations which
into competition with national banks are permitted to act
;per the laws of the State of Virginia, the exercise of all such
„_g,hts to be subject to the provisions of the Federal Reserve Act
'
4011 the regulaticns of the Federal
Reserve Board.
ciar, This letter will be your authority to exercise the fidu„/ powers granted by the Board. A formal certificate covering
"eh a
uthorization will be forwarded to you in due course."

T

Approved.
Telegram dated June 12, 1935, approved by three members of the
4-'d to m,
Sargent, Assistant Federal Reserve Agent at the Federal
qeserve B
ellk of San Francisco, authorizing him to issue a limited vot-

Pertai,.

to the "Arizona Realty 84 Holding Company", Phoenix, Arizona,

41
slleh organization to vote the stock which It owns or controls
1114
The r
'
°nsolidated National Bank of Tucson", Tucson, Arizona, for the
11111,
, e
of
acting at any time prior to October 1, 1935, upon a proposal
Prop°
--841s to place The Consolidated National Bank of Tucson in vol141tarz),

t°

liquidation, and to take such further action as may be necessary
effee
t alleh liquidation, including the ratification of any action
te-ken in connection with the liquidation of such bank, pro-

l'14c1 t t
N1,,,

a4.1 action taken shall be in accordance with a plan satisto the Federal Reserve Agent at the Federal Reserve Bank of




;41

-31laallets and
the Federal Reserve Agent at the Federal Reserve Bank of
Sall Pr
ancisco and ap)roved by the Comptroller of the Currency.
Approved.
Letter dated June 13, 1935, approved by three members of the
-"I to

14r. C. 0. Cryder, Cashier of The First National Bank, Lebanon,

8, reading as
follows:
el _

"This refers to your letter dated June 1, 1935 regarding the
sification of certain accounts as savings deposits.
kr "The names of the depositors and a description of each
account
e as
follows:
1. Township Treasurer of Schools - funds derived from
taxation and used for running expenses of schools,
but not an investment fund.
2.
City of Lebanon - funds derived from collections on
account of Lebanon Water District and used to pay
3. bonds as they mature.
City of Lebanon - funds derived from collections on
account of Lebanon Sewer District and used to pay
4. botds as they mature.
City of Lebanon - funds derived from the water system
-id used to pay current bills and expenses incident
to
the operation of the water plant.
S.
Building & Loan Association - proposed deposit of
u.atTii
crulated funds for which there is no demand at
time.
41,e
You state that you believe that none of the above accounts
tion ?vings deposits' within the definition of that term in secBist v of the Board's Regulation Q because the deposits do not con°Tf 'funds accumulated for bona fide thrift purposes'.
Your ,It is understood that the Chief National Bank Examiner for
do n gistrict has expressed the opinion that the first four accounts
:
flal
constitute savings deposits because they do not consist of
Ettct(--a!
..cumulated for bona fide thrift purposes. It is also underthe .unat he has
not had occasion to express an opinion regarding
plfth account.
depc„.The Federal Reserve Board believes that the question whether
0 61;
4s consist of funds accumulated for bona fide thrift purposes
80"to constitute savings deposits within the meaning of the
Regulation Q is one upon which no general rule can be prebasis,'and that each case must necessarily be determined upon the
°f its particular facts. The Board also feels that questions




1401
'

6/14/35
-32to whether deposits may be regarded as consisting of funds
,
aecumulated for bona fide thrift purposes, should, in most cases,
oe determined by the member banks in the light of the provisions
of the
law and the Board's regulation. However, on the basis of
the facts
stated above, the Board finds no reason to differ from
the opinion
expressed in your letter that the five accounts described therein do not consist of funds accumulated for bona fide
thrift purposes and therefore may not properly be classified as
avings deposits.
"If you have any further question regarding this matter, or
anY similar matter, it will be appreciated if you will submit
o!ur
r
inquiry to the Federal Reserve Agent at the Federal Reserve
of St. Louis."

i

Approved.
Telegram
dated June 13, 1935, approved by three members of the
141b(1) to the
Federal reserve agents at all Federal reserve banks, readas follows:
iO4 "On June 11th both Houses of Congress passed the following
joint
resolution:
"'Resolved, etc., That subsection (g) of section
22 of the Federal Reserve Act is hereby amended by
strikir out "Provided, That loans heretofore made to
4/1Y such officer may be renewed or extended not more
'11fin two years from the date this paragraph takes effect, if in accord with sound banking practice" and
,
-411serting in lieu thereof: "Provided, That loans made
,
t
,c) any such officer prior to June 16, 19Z5, may be renewed or
extended for periods expiring not more than
'Ire years from such date where the board of directors
°f the member bank shall have satisfied themselves that
!!Ich extension or renewal is in the best interest of
6ne
bank and that the officer indebted has made reasonable effort to reduce his obligation, these findings to
be e
videnced by resolution of the board of directors
8Pread upon the minute book of the bank."
dtr "In view of the affirmative action required by boards of
e)cen°rs in connection with renewals or extensions of loans to
isVe officers under provisions of above joint resolution it
djested that you promptly advise State member banks in your
Ptibi t of provisions of such resolution and give such other
-e4-tY regarding matter as you deem necessary. Any advice to




1402
-55nm.
Illuer banks or any publicity regarding this resolution should
:ake it clear that it has not yet been approved by President
nd you will be advised when it is so approved."
Approved.
Memorandum dated June 11, 1935, from Mr. Smead, Chief, Division
otkak o
peraticns, stating that in accordance with a program adopted
b:r4tc)raraittee

on the further revision of the Functional Expense Reports,

Ithichtlet in
Cleveland on June 10, 1935, it is planned to have three
NINIe
ntatives of the Federal reserve banks come to Washington on June
4t°1=l'ePare a report to the Governors' Conference Committee on Reim1114'44e Fiscal Agency Expenses which will include detailed instructions

It

t°11ft indirect expenses chargeable to fiscal agency operations are
tl)be determined,
and that it will be necessary to assign some office
tiNtee to
such men. The memorandum recommended that, inasmuch as it now
4Plzie
el's that
the Division of Bank Operations will, in the near future,
Nled
13°1IIJe additional space for its own use, a contract be entered into
1441
toot '
34e Shoreham Building for the rental, beginning June 12, 1955, of
41 which has approximately 200 sq. ft. of floor space, at an
4414104.
cost of t500, for a period of two years, with the understanding
tIktth
h
—6 tental contract may be canceled at any time by the Board's givN thr
e months
notice.
Approved.
Lett-er to Mr. Walter H. Peck, Special Representative, The
"huterir
State Life Insurance Company, Dallas, Texas, reading as fol-

fiat




1403
6/14/35
-4"Reference is made to your letter of June 4 in which you
atate that Deputy Governor Coleman of the Federal Reserve Bank
of Dallas has referred you to the Board for complete information
f_Narding the Federal Reserve Bank Retirement System so far as
411,Y information is public.
"The Board has not published the details regarding the
Federal Reserve Retirement System, which was established as of
1, 1954, but for your personal informaticn there is inclosed
"IV of the Rules and Regulations of the Retirement System."
Approved.
Letter dated June 13, 1935, approved by three members of the
BOard

) to la-.
Fletcher, Acting Federal i;,eserve Agent at the Federal
eserv
Bank of Cleveland, reading as follows:

a

,,e
"Reference is made to your letter of June
with regard to
r item 'State of Pennsylvania, Liquor Assignment of Accounts 4, (71.10' appearing against item 4-a of Schedule G of the conp''Ion report of The Toledo Trust Company, Toledo, Ohio, as of
"4rch 4, 1935.
"In view of the fact that available information indicates
that the
assigned accounts of the Pennsylvania Liquor Board are
eral obligations of the Comronwealth of Pennsylvania, invest1, nta therein by State bank members should, as you suggest, be
,Zorted as obligations of 'States, counties, districts, political
inuKu-visions, and municipalities' against item 1(e) of Schedule G
condition reports Form 105."

V

Approved.

Letter to Mr. Yorton Kominers, Brooklyn, New York, reading as

re, "Receipt is acknowledged of your letter of June 9, 1935, in
perrd to the destruction of cancelled postage stamps by the
krrerea Reserve Bank of New York, in which you inquire whether an
etthElngement, under which you would give a bond to insure that
vfo elled stamps purchased by you from the Federal reserve bank
Fe'
ci'd be sold only to collectors, would be satisfactory to the
el'ta Reserve Board.
411
For a number of years prior to 1929 the Federal reserve banks
Ned and sold used postage stamps to stamp collectors and others




6/14/35
-65e" representations that they were to be used for philatelic
PIIIPoses. However, in July, 1929, the Postmaster General advised the Federal Reserve Board that large quantities of such
8tamPs had been washed or otherwise treated and resold to various
P!rsons and firms for postage purposes. He also pointed out that
!
bamPs used by Federal reserve banks, becuuse of their high de'Jminations, are of particular interest to persons who might use
"em for improper purposes.
r
"The Postmaster General suggested that the small amounts
treived from the sale of used stamps did not appear to justify
r:
for the labor involved in collecting them and
,:41
,
1ested that, in view of the extensive misuse of them in the
C", the matter be drawn to the attention of all Federal reserve
;''.1cs and branches thereof with the view to having the sale of
Fa-47aged used stamps discontinued and the stamps destroyed. The
treral Reserve Board and the Federal reserve banks, upon giving
e matter careful consideration, concurred in the views expressed
i
the Postmaster General, and consequently the practice of dist4 ng of cancelled stamps to collectors and others was discon-,nued.

Zs

"In the circumstances, the Federal Reserve Board would not
with favor upon any arrangement which would involve a deb7
'
3.-tilre from the policy now being followed by the Federal reserve
44 and their branches with respect to this matter."
Approved.
Letter to Mr. Hoxton, Federal Reserve Agent at the Federal

N'Ve
4arlk of Richmond, reading as follows:
Aet "There are inclosed the original and copies of a Clayton
ce, Permit issued to Mr. A. W. McLean, Lumberton, North Carolina,
of:
"
1 inZ his services as director and officer of The National Bank
14mberton,
Lumberton, and The Atlantic Joint Stock Land Bank,
both of North Carolina, for the period ending January 1,1,
9
voi'' f°r transmittal by you to the applicant and the banks ina180 a copy for your files.
41d "Mr. 3.1cLean's application included his services as director
Nor,
cfficer of The Robeson County Loan Company, East Lumberton,
tjo'h Carolina, but, in view of the informntion and the recommendaiv4 contained in Kr. Fry's letter of May 23, 1935, the Board has
banken consideration only to the applicant's services to the two
excis involved. Please inform Mr. McLean of the reason for the
is r1181
"of The Robeson County Loan Company and, when the permit
Eidlri°11varded to him and the copies to the banks involved, please
Vlle-8 them that the permit has been issued so as to expire at
e.kose of January 14, 1966, as there is now pending before the




1405
-56Congress proposed legislation for the purpose of clarifying
112id otherwise amending the provisions of the Clayton Act relat14g to interlocking bank directorates."
Approved.
Letter to Mr. Hoxton, Federal Reserve Agent at the Federal
Iteser—
" Bank of fdchmond, reading as follows:
"Reference is made to your letter of May 29, 1965, in reto the Board's letter of May 23, 1955, relative to the Clayton
aet Permit granted to Mr. Sifford Pearre to serve at the same time
officer of The Equitable Trust Company of Baltimore and as
-rector and officer of The Maryland-Virginia Joint Stock Land
44k, both of Baltimore, Maryland.
0 ."In the Board's letter of May 23, 1935, transmitting the
criginal and copies of Mr. Pearre's permit your attention was
3811ed to the possible applicability of the provisions of Section
o the Banking Act of 1933 to Mr. Pearre's relationships with
thee
banks involved and Insuranshares Certificates, Inc., of Baltim
-,or,,
s'Y 4aryland; and you were requested to withhold delivery of the
;mit
ej
and cooies until you had satisfied yourself that the pro0ns of Section
52 were not applicable to Mr. Pearre's services.
ls noted from your letter that the question of the applicability
•
pe Section 32 to Mr. Pear e's relationships does not appear to be
tinent since neither of the banks involved in the application
member of the Federal Reserve System; but that, if the Board
so
1311 'esires, you will make further inquiry as to the character of
ens
cilless transacted by Insuranshares Certificates, Inc., in an
p413.7vor to determine whether or not it is compatible with the
e interest for Mr. Pearre to serve the two nonmember banks
• e at the same time serving as a director and officer of an
ilvestment trust.
or "The possible applicability of the provisions of Section 32
le Banking Act of 1966 to Mr. Pearre's relationships was the
considerati)n involved in the Board's letter of May 23,
to you; and with respect to this matter the Board's staff
invled to take cognizance of the fact that neither of the banks
SysV-ved in his application was a member of the Federal Reserve
Of ;
ems Please release the permit to Mr. Pearre and copies therethe banks involved and advise them as to the reason for the
19i'noe of the permit so as to expire at the close of January 14,
of Vin accordance with the last paragraph of the Board's letter
..Y. 23, 1935."

1V

•2




Approved.

1406
6/14/35
-37Letter dated June 130 1935, approved by three members of the
Boseel

to Mr. Hoxton, Federal Aeserve Agent at the Federal Reserve

Batik ()
f Richmond, reading as follows:
"There are inclosed the original and copies of a Clayton
Aet permit granted to Mr. Wm. G. Wood, Sperryville, Virginia, to
a_erve
at the same time as director of The Culpeper National Bank,
itIlpeper, Virginia, and as director and officer of The Rappahannock
nional Bank of Washington, Washington, Virginia, for the period
;
11Lling January 14, 1956, for transmittal by you to the applicant
nd the banks involved and a copy for your files.
In the consideration of this application it was noted from
the
wnLreport of examination of The Rappahannock National Bank of
ington, as of Aoril 23, 1935, that Jr. Wood apparently had
ilelated Section 22(g) of the Federal Reserve Act by reason of
1-Ls failure to report his loans at other banks, which alleged viov,!i°n was reported to the United States District Atterney, Roanoke,
c14--Lginia. However, the Board is without sufficient information to
ile
o ermine whether the apparent violation was of a kind which would
have been reported to the United States District Attorney under
the
Felp Procedure described in the Board's confidential letter of
ruary 13, 1955, (X-9124), regarding apparent violations involvg State member banks, if Mr. Wood should take steps to correct
/74? aPParent violation within a reasonable time. Accordingly, it
appreciated if you will make such investigation as you may
th".1
ink necessary, and if you find the circumstances to be such that
st
the aloParent violation would not have been reported to the United
teittes District Attorney pursuant to the Board's confidential letth °f February 13, 1955, (X-9124)„ please release the permit to
adev.aPplicant and forward copies thereof to the banks involved,
Hot18146 the Board of the disposition which is made of the matter.
hoever, if you find that the circumstances were such that it would
to!been reported to the United States District Attorney pursuant
ativ;'be Board's confidential letter, please hold the permit and
13e the Board fully respecting the matter.
co , In the event the permit is released to the applicant and
4
1 1es thereof to the banks involved, please advise them that the
194it has been issued so as to expire at the close of January 14,
let,' as there is now pending before the Congress proposed legispro'?fl for the purpose of clarifying and otherwise amending the
v1s1ons of the Clayton Act relating to interlocking bank direct0
,
-ates e e

i

Approved.

rea

Letter to Mr. Clark, Assistant Federal Reserve Agent at the
Aeserve Bank of Atlanta, reading as follows:




1407
If

6/14/3s

—58—
"There are inclosed the original and copies of a Clayton
Act permit granted to Ix. H. L. Williamson, Nashville, Tennessee,
/Yeriqg his service as director and officer of Commerce Union
"Ilk and as officer of Broadway National Bank of Nashville, both
c),,f Nashville, Tennessee, for the period ending Janunry 14, 1936,
1.,?/' transmittal by you to the applicant and the banks involved;
eLLSO a
copy for your files.
, "In the consideration of this application it was noted that
7 Williamson had not been elected a director of Commerce Union
T7ak on April 24, 1955, the date of his application, although
was anticipated that he would be elected a director of this
.111stitution. In
order that the Board's files may be complete,
elease request
Ur. Maliamson to advise you when he has been
Banted and has duly qualified as a director of Commerce Union
SO that you may, in turn, advise the Board.
'when transmitting the permit to Mr. Viilliamson and copies
tohe banks involved, please advise them that the permit has been
ie3LIeld so as to expire at the close of January 14, 1936, as there
,Ln°17 pending before the Congress proposed legislation for the
'i"ue103e of clarifying and otherwise amending the provisions of
Clayton Act relating to interlocking bank directorates."

Z

f

Approved.
Letters dated June 13, 1935, approved by three members of the

130

to

or Ile

Case, Federal Reserve Agent at the Federal Reserve Bank

ro*

tr

inclosing the following amended Clayton Act permits for

naraissi

n to the applicants;
The ? ymond B. Peer, to serve at the same time as an officer of
cur Jorristown Trust Company, Morristown, New Jersey, and as a
,Ter.ector of the First National Bank in Rockaway, Rockaway, New
eeY, for the period ending January 14, 1936.
Mr. r
otf* H. Walters, to serve at the same time as a director and
of The Phillipsburg National Bank and Trust Company,
-PSburg, New Jersey, and as a director of The First National
Of Belvidere, Belvidere, New Jersey, for the period ending
--liarY 14, 1956.
Approved.
ket

Letters dated June 13, 19351 approved by three members of the
4)to
aPPlicants for Clayton Act permits advising respectively of




1408
I I'6/14/35

-39the
1

flCe of permits by the Board as follows:
Che_r1c,3 W. Rovegno, to serve at the same time as a director
°f the Seaboard Trust Company, Hoboken, New
Jersey, and as a
director of the Hudson County National Bank, Jersey City, New
i
erseY, for the period ending January 14, 1936.

cbs u. O. Kibler, to serve at the same time as a director and
.cr4ficer of The Citizens Bank and Savings Company of Leesburg,
;43:°sburgo Ohio, and as a director of The Brown County National
1,
-1.1k of Mt. Orab, Mt. Orab, Ohio, for the period ending January
1966.
Reber 'h. Curtis, to serve at the same time as a director of

et"e First, National Bank of Petoskey, Petoskey, Michigan, and as

director and officer of the Old Kent Bank, Grand Rapids, Michi584., for the period ending Jannnry 14, 1936.
Mr t,
Y. Lemon, to serve at the same time as an officer of the
lonal Bank of Detroit, Detroit, Michigan, and as a director
the Miseouri Valley Trust Company, St. Joseph, Missouri, for
the
period ending. Janunry 14, 1936.
Mr. Th.
E. Young, to serve at the same time as an officer of the
Of
'
10/1a1 Bank of Detroit, Detroit, Michigan, and as a director
pe,,t.he Industrial Morris Plan Bank, Detroit, Michigan, for the
-110el. ending January 14, 1936.
Approved.
chttrige
8

4

There were then presented the following applications for

in stuck of Federal reserve banks:
,ns for ADDITIONAL Stock:

Shares

4,17a County
Trust Company,
'
jtztb•

) New York

186

186

No. .3.1

tiqm
-4st Nat.Lone.1 Bank of Henderson,
pi,7e1'13011, Texas
'lst N
ational Bank of Weslaco,
/14'te(ti tt/e°,
Texas
8e.
& Trust Company,
e 4-1-e, Texas




30

3
Total

34
220

1409
6/14/35
is

-.40—
for SURRENDER of Stock:

1118260Ples National Bank of New Brunswick,
,N utlIN
Eunswick New Jersey
-"e First
Nationtll Bank of South River,
taBouth
River, New Jersey
62.11Lopac National Bank,
mculopac, New York
let o
en:401adega National Bank,
441aadega, Alabama
k tart _
Tha
No. 7
st
National Bank of Dolton,
4434°11, Illinois
tletrict o. 11
ell'errY National Bank
.mtpdlton, Texas
Lepxsit
National Bank
14ctlPhis, Texas
tv.et No
2
f\Ritet
National Bank
ogan, Washington
4'
10..Lret
National Bank
'lulls Idaho

ThelS




Shares

30
6
52

68

60

60

60

60

of Hamilton,
50
of Memphis,
15

45

of Okanogan,
24
of Paul,
16
Total
Approved.

Thereupon the meeting adjourned.

42
275