Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, June 25, 1930, Volume 17, Part 2

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599
A meeting of the 2edera1 ,Leserve Board was hell in the office of the
Federal wserve Board on dednesdv, June 25, 1930 at 11:30 a.m.
23E12:

Vice Governor 2latt
1:ir. Hamlin
:Tr. James
lir. Cunningham
Pole
LT. McClelland, . -st. Jecretary

The Vice Governor stated that special order of business for this
meeting would be consideration of the matter on which action was deferred
at the meeting of the Lxecutive Committee on June 20th, namely, request
of the directors of the 2ederal ieserve Bank of lcew York that the Board
reiuce to 1 3/4,

the rate established by it as the minimum buying rate

for the purchase of bankers acceptances by that bank.
detailed discussion ensued daring which
Hamlin moved that the Board approve a minimum
buying rate of 1 3/4., for the 'iJew York Bank.
At the conclusion of the discussion, Li'. Hamlin's
motion was put by the Chair and carried, the members
voting as follows:
Vice Governor ?latt, "aye"
:7:r. Hamlin, "aye"
2ole, "aye"
:17. James, "no"
Cannin, an, "no"
'2elegram dated June 24th from the Chairman of the federal Aeserve Bank
of jan

advisinf; that the ,xecutive Committee of that bank today

established a minimum buying rate of 1 3/4

for purchases of ban:ers

acceptances.




Upon motion by _r. Hamlin, it was voteA to
approve a minimum baying rate of 1 3/4,0 for the
Jan Francisco bank, the members voting as follows:
Vice Governor 2latt, "aye"
::..r. Hamlin, "aye"
L:r. role,'aye'
Mr. James, "no"
r. Ounnin7;ha]i, "no"

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The above telegram also reported the establishment at the Ban Francisco
bank of the following schedule of effective rates for purchases of bankers acceptances:
1 to 90 days
91 to 120 days
121 to 180 days
Repurchase

2*/
2 1/8
2 3/8;b
2 li8;;

Without objection, noted with approval.
Memorandum from Counsel dated June 20th, with regard to application of
the Chase National Bank of the 'City of New York for permission to operate a
branch at Bush House, Aldwych, W. C. 2, London, England; the memorandum pointing out that prior to its consolidation with the Chase National Bank the Equitable 2rust Company of New York operated two branches in London but through inadvertence only one branch was covered by the application made by the Chase
National Bank to the Board for authority to operate in London.

He also

stated that there is no legal reason why the application should not be granted.
The Assistant Becretary reported that the Federal Reserve Agent at New York
has recommended approval of the application.
After discussion, upon motion, the following was ordered spread
upon the minutes, -essrs. James and Cunningham voting "no":
"WHEREAS, The Chase National Bank of the City of New York, has
made application, pursuant to the provisions of Bection 25 of the
Federal Aeserve Act for permission to establish an additionaLbranch
in the City of Landon, England, at Bush House, Aldwych, W. C. 2, and
it appearing that this application is properly made under the law
and should be granted;
"NOW, THEREFORE, o 13 OED that the said application be,
and it hereby is, approved and that The Chase National Bank of the
City of New York be and it hereby is authorized to establish an
additional branch in the L'ity of London, England at Bush House,
Aldwych, d. C. 2."

Memorandum from Counsel cl;,ted June 15th, with regard to the application




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of the Second National Bank, Beloit, disconsin, for permission to exercise
genral fiduciary powers; Counsel advising that there is no legal reason
why the Board should not grant the application, but outlining a question
of policy which is involved due to the fact that the capital of the Second
National Bank of Beloit, disconsin is 450,000 while a new National bank
organized in that city would be required to have a capital of at least
100,000 and the Board has been cooperating with the State banking authorities whose policy has been not to grant trust powers to a State institution
with a capital less than that required for the organization of a new National
bank in the same place.

In his memorandum, Counsel pointed out, however,

that in 1929 the banking authorities of jisconsin permitted the organization
of a trust company in Beloit with a capital of only 450,000 and the present
Commissioner of Banking states that under these circumstances he sees no
reason why the Board should not now grant a right to exercise fiduciary powers
to the Second National Bank of Beloit with its present amount of capital.
During the discussion which ensued, 1.,r. Platt brought out the fact that the
trust company was organized by the Beloit State Bank which has A considerably
greater capital, for the purpose of handling its trust business.
After some discussion, upon motion, it was voted to
approve the application of the Second National Bank of
Beloit for permission to exercise gemral fiduciary powers,
Lr. Platt voting "no".
Letter dated June 16th from dopes, Gray, Boyden and ?erkins, attorneys
for the Second National Bank of Boston, replying to letter addressed to them
in accordance with action taken at the me3ting an .;une 9th and inquiring as
to the minimum capitalization of




a

corporation organized under the laws of

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Massachusetts for the purpose of engaging in international and foreign banking in which the Board would authorize an investment by the :ational bank.
12he Assistant Secretary reported that an investigation of the Board's records
discloses that the smallest capitalization of any corporation operating under
an agreemmt with the Board in order to make its stoc

eligible as an invest-

ment for irational banks is .fli500,000.
. After some discussion, it was voted to reply
to the above letter that before any definite answer
can be made to the inquiry, the matter will have to
be considered at a meeting of the full Board but that
the minimum capitalization of any foreign banking
corporation with which the Board heretofore has entered
into an agreement is 4500,000.
At the suggestion of Lir. Hamlin, the Chairman of the
Committee on District l, who expects to be in Boston
next weak, he was authorized to take the matter up
informally while there.
.emorandum dated Juno 16th from Counsel, prepared in accordance with
action taken b;„ the Board on ::ay 29th, and submitting a revision of Condition
of Membership llo. 3, contained in Section IV of the Board's Aegulation H,
reading as follows:
"Such bank or trust company, except after applying for
and receiving the permission of the Federal Reserve Board,
shall not acquire more than 50,; of the capital stock of any
other bank or trust company; and, except with the Board's
permission, its total investments in the stock of other banks
and trust companies shall not exceed 20,; of its own capital
stock and surplus."
In his memorandum, Counsel raised the question as to whether the limitation
upon the purchase of stock of another bank without the permission of the
Board should be placed at 5070 or at some lesser figure, in view of the fact
that although technically 50.,; is required to exercise control, as a practical




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matter a corporation may in many instances be actually controlled by the
ownership of less than 50„, of its capital stock.

He also stated that

he understood one of the purposes of the present revision of the condition
is to relieve member banks of the burden and irritation of having to apnly
to the Board for permission to purchase small

amounts of bank stock and it

would seem that a limitation on such purchases at l5;;; or 201; of the stock
of the bank in which an interest is being acquired would be sufficient to
accomplish this purpose.
After some discussion, it was the consensus of opinion
that this matter should be considered at a meeting of the
full Board but it was voted, pending such a meeting, to submit the questions involved in the proposed revision of the
membership condition to the Federal Reserve banks for comment.
The ,L.ssistant Secretary then referred to the matter which the Executive
Committee at its meeting on June 18th voted to recommend to the Board,
namely, report of Committee on Examinations suggesting an amendment to the
Board's letter of January 26, 1929 (X-6223) on the subject of "Examination
of L:ember Banks" so as to incorporate the ruling tentatively adopted by the
Board on April 23rd as to entries of member banks which will not be considered
examinations.

He referred to the fact that Congress has adopted and there is

now before the President for approval the bill making it optional with the
Board as to whether charges for examinations shall be assessed against the
member banks examined, in view of Which fact it may be desirable to further
revise the Board's letter (X-6223) above mentioned.
Upon motion, it was voted to defer further consideration
of the matter pandIng approval by the President of the bill
referred to.




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Telegram dated JUMB 25th from Deputy Governor Kenzel of the Federal
Reserve Bank of New York, advising that after some days' hesitation, following the development of a demand from banking houses for bills, the last
of the dealers today reduced their rates to 2;; bid, 1 7/870 asked on maturities up to 90 days, 2 l/8,4 bid, 270 asked on four months' bills and 2 l/410
bid, 2 1/8

asked on five and six months' maturities, with endorsed bills

1/84 less.
Noted.
Memorandum dated June 24th from the Assistant Director of the Division
of Research and Statistics, recommending the temporary appointment for three
months, of La's. Florence C. O'Hare to a stenographic position in the Division
at a monthly salary of 4130, effective June 26th.
Approved.
Memorandum dated June 18th from the Chief of the Division of Bank
Operations, transmitting statements of expenditures by the Federal Reserve
banks for educational and welfare work, etc. during the month of Lay and.
for the five months ending May 31st.
Ordered circulated.
Letter dated June 23rd from the Assistant Federal Reserve Agent
at New York, advising of a pending merger of the Pacific Trust Company of
New York City, a member bank, Into the Manufacturers Trust Company, also a
member.
Noted.
Letter dated June 19th from the Federal Reserve Agent at Kansas
City, recommending the appointment of Mr. H. H. Rhodes, as Acting Assistant




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Federal deserve .Agent; the letter nointin,7 out that authority to exercise the
Feleral keserve Agents' control in connection with unissued Federal deserve
notes, etc. has been lodged heretofore in only the Federal deserve 2,gent and
his Assistant and some occasion mip:ht arise when both would be temnorarily
absent from the bank.
Upon motion, the desif7nation of L.r. ahodes
as Acting Assistant Federal deserve Agent was
approved.
:emorandum from Counsel dated June 20th, submitting draft of letter to
the ..,.ssistant Federal Aeserve Agent at 1:ew York, with reference to the service
of Lr. Charles E. ::_itchell as officer and director of the 1:ational City Bank
and as director of the Corporation 2rast Company, both of iiew York City; the
reply advising that after consideration of information furnished, the Board
is of the opinion that the Corporation ?rust Company, canes within the
exception to the Clayton Act applicaule to banking institutions which do no
can:nercial uankin&. business, as also does the Bank of Haiti, inc.
Upon motion, the ietter submitted by
Counsel was approved.
Lemorandum from Counsel uated June 20th, submitting draft of letter to
the Assistant Cashier of the lational Bank of Commerce of jeattle,
with regard to permits issue). by the Board to certain directors and officers
of that bank to serve as officers

or directors of certain other banks.

Approved.
1.:emorandum from Counsel dated June 16th, submittin

draft of letter to

all Federal wserve Agents on the subject of the effect of consolidations on
Clayton Act permits; the letter referrin




to a ruling on the subject made by

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the 3oard in Oanuary 1925 at which time the question whether a Clayton Act
permit would oe issued depended primarily on whether the oanks involved
were in substantial co7.oetition but th t in view of the amendment of the
Clayton Act since, the iederal _teserve 2,p.ents when roeortinc to the 3oard
whether or not a permit should be revoked on account of a consolidation
should consider, in addition to the question whether com7,etition between
the banks involved has been effected by the consolidation, whether the
public inter,st requires the revocation of a permit.
Upon motion, the letter submitted with
3ounsel's memorandum was approved.
:.emorandum from Counsel dated ,-une 17th, submitting for the Board's
information copy of the minutes of the Conference of Counsel of all
iederal _Leserve banks held in •.asifincton on June 9th and 10th.
Ordered circulrlted.
2he ,tssistant Jecretary then presented the regular report of the Chief
of the Jivis ion of Bank Operations, relative to deficiencies in reserves
of member banks during the first -uartar of 1960, submittinc: a list of bans
su ject to maximum penalty on account of deficient reserves.

:et called

attention to a notation by Lr. James that the Board should take some action
on the statement contained in the report that of the sixty-seven banks
listed as subject to the maximum penalty, nineteen were reported to the
Board in December 1929 as beinr: in an unsafe or extended conCtition and two
were called to the 3oard's special attention by the ,7elera1 -eserve Agents
because of a continued deficiency for six months.




L detailed discussion followed, at the conclusion
of which it was vote,L to request the Comptrol]er of the

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607

Currency to report to the Board relative to the
condition of the National banks included in the
list referred to and the efforts being made by
their management and his office to improve that
condition and also to make a similar request of
the appropriate Federal deserve Agents regarding
the State member banks listed.
, for
Application of the First National Bank of Greenwood, Indiana
a divided
permission to exercise general fiduciary posers, together with
l,
report thereon by the Law Committee; Lr. Hamlin recommending approva
and

r. Platt, disapproval, because of the fact that the capital of the

bank is but y25,000.
Upon motion, the application was approved,
. Platt voting lqio".
The minutes of the meeting of the Federal Reserve Board held on June
16th were then read and approved.
The minutes of the meetings of the Executive Uommittee of the Tederal
nt to the
deserve Board held Juma 18th and 20th were read and, after amendme
latter, the actions recorded therein were ratified.
The minutes of the meeting of the Federal deserve Board held an June
Pittsburgh
23rd were read and approved as far as they relate to the proposed
e
building; that portion relating to the meeting with the Executive Committe
nt
of the Open larket Policy Conference being referred back to the Assista
Secretary for amendment and resubmission to the Board.
The minutes of the meeting of the Executive Uommittee of the Federal
reReserve Board held an June 23rd were read and, upon motion, the actions
corded therein were ratified.
REPOTS OF STAUDE‘TG CO=ITTEES:
Dated, June 24th,
25th,




ecommending changes instock at Federal eserve banks
as set forth in the Auxiliary Linute Book of this date.
Recommendations approved.

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REPORTS OF STANDING COMIITTEES: (0ont e d)
Dated, thine 23rd, .ecommending approval of the application of Mr. Edward B.
Leisenring for permission to serve at the same time as
director of the Philadelphia National Bank of Philadelphia,
Pa., and as director of the Girard 2rust Company of Philadelphia, Pa.
Approved.
Dated, June 23rd, liecammending approval of the application of -r. C. J.
Berry for permission to serve at the same time as director
of the ,Jiglo & London Paris National Bank of San Fran- irst National Bank
cisco, .;alif. and as director of the i
in Bakersfield, Calif.
Approved.
of the application of Lr. Geo. L.
approval
Aecommending
Dated, :June 23rd,
atthius for permission to serve at the same time as director of the South Shore 3ank of Staten island, New
York City, N. Y., and as director and officer of the
Staten Island National Bank & Trust Company of New York
City, N. Y.
Approved.
Dated, June 23rd, Aecommending approval of the application of r. F. w.
Reimers for permission to serve at the same time as director of the Citizens National Bank of Hammond, La.,
and as director of the Interstate 2rust & Banking Company
of New urleans, La.
Approved.




The meeting adjourned at 1:15 p.m.

aaff,9

Assistant Secretary.

aw
Vice Govern or