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A meeting of the Federal Reserve Board was held on Friday, Tune 3,
1932, at 11:35 a. in.
PRESENT:
Governor Meyer
Mr. Hanlin
Mr. Miller
Mr. Tames
Mr. Magee
Mr. Morrill, Secretary
Yr. McClelland, Assistant Secretary
Harrison, Assistant to the Governor
Er. Smead, Chief, Division of Bank Operations.
The Governor reported briefly on his attendance at meetings held at
the Federal Reserve Bank of Cleveland on June 1 and at the Federal Reserve
Bank of Philadelphia on Tune 2, at Which committees of business men and
beakers were appointed for the purpose of developing ways and means of making
effective use through the banks in those districts of the funds which are
being made available by the open market program of the Federal Reserve
SYstem.
Reference was also made to the fact that the governors of the Fed-
eral Reserve Banks of 'Atlanta, St. Louis, Dallas and San Francisco have
already appointed similar committees in their respective districts and that
the organization of such a committee in the Richmond district is under way.
The minutes of the meetings of the Federal Reserve Board held on
114 16, 17 and 20, 1932, were approved.
The minutes of the meeting of the Federal Reserve Board held on
144 23, 1932, were amended and approved.
The Board then considered and acted upon the following matters:
Letters dated Hay 26 and Tune 2, 1932, from the Secretary of the
lilederal Reserve Bank of Nan York, and telegrams dated May 27, 1932, from the
Chairman of the Federal Reserve Bank of Chicago, June 1, 1932, from the
Chairmen of the Federal Reserve Banks of Boston, Philadelphia and St. Louis
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and June 2, 1932, from the Secretary of the Federal Reserve Bank of Kansas
City and the Chairnan of the Federal Reserve Bank of San Francisco, all advising that at meetings of the boards of directors on the dates stated no
Changes were made in the banks' existing schedules of rates of discount and
purchase.
Without objection, noted with approval.
Letter to the Federal Reserve Agent at Cleveland, approved by five
members of the Board on Tune 1, 1932, stating that the Board has approved
the bonds, each in the amount of '',50,000, executed by 1:1.essrs. W. H. Yolte and
R. G. Johnson, as acting assistant Federal reserve agents of the Federal Re"rye Bank of Cleveland at its Pittsburgh and Cincinnati branches respectively.
Bonds and letter approved.
Telegraphic reply, approved by five members of the Board on Lay 31,
to a telegram dated Eay 28, 1932, from the Federal Reserve Agent at San
Francisco requesting approval of the temporary designation of i.ir. E. B.
lIcBride as an examiner for the purpose of making emergency examinations in
the Salt Lake territory; the request having been occasioned by the fact that
the bank's regular examiners are occupied with work for the Reconstruction
Iiiinance Corporation.
The reply stated that the Board approves the temporary
clesiCnation of Er. McBride as an examiner for the purpose referred to.
Reply approved.
Letter to the Comptroller of the Currency, approved by five members
or
the Board on D3.y 31, stating that in accordance with the recomrendation
contained in his letter of Eay 20, 1962, the Board has approved a salary at
the rate of .3,0100 per annum for Lir. Adam Wetzel, national bank examiner.
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-3Salary and letter approved.
Reply, approved by five members of the Board on May 31, to a letter
dated May 14, 1932, from the Chairman of the Federal Reserve Bank of Atlanta
stating that, subject to the approval of the Federal Reserve Board, the
board of directors of the Atlanta bank had made an appropriation of 02,450
for educational and recreational purposes at the bank's head office and
branches during the year 1932; the reply stating that the Board has approved
the appropriation referred to.
Reply approved.
Reply, approved by five members of the Board on May 31, to a letter
dated May 17, 1932, from the Federal Reserve Agent at St. Louis transmitting
411 application filed by the Grand National Bank, St. Louis, Missouri, for a
reduction in its reserve requirements from 10% to 7% of demand deposits; the
IlePlY stating that the Board has considered the matter in the light of the
agent's unfavorable recommendation and the information contained in his
letter and has disapproved the application.
Reply approved.
Telegraphic reply, approved by five members of the Board on Tune 2,
1932, to a telegram of that date from the Governor of the Federal Reserve
Bank of Boston requesting an extension to Zune 16, 1932, of the authority
granted to the Boston bank on May 21, 1932, to advance, in accordance with
the provisions of section 10(b) of the Federal Reserve Act, as amended, to
the Worcester Bank and Trust Company, Worcester, Massachusetts, not exceed01,000,000, at a rate of 5 1/2% per annum, payable on demand; Governor
stating that the member bank is not using any portion of the credit
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at the present time and that, while withdrawals have subsided, it is
believed the Federnl reserve bank should be in a position to function quickly
should further withdrawals occur.
The reply stated that the Board extends
to June 16, 1932, the authority granted in its telegram of rhy 21, 1932.
Reply unanimously approved.
Telegraphic reply, approved by five members of the Board on Tune 2
1932, to a telegram of that date from the Governor of the Federal Reserve
Bank of Boston requesting a further extension to Tune 16, 1932, of the
authority granted by the Board to the Federal Reserve Bank of Boston on
APril 29, 1932, to advance, in accordance with the provisions of section
10(b) of the Federal Reserve Act, as amended, to the United States Trust
C°211Dany, Boston, 1,assachusetts, not exceeding y2,000,000, at a rate of 5 1/2'",
Per annum, and payable on demand; Governor Young stating that the bank is now
USing
380,000 of the credit and that, inasmuch as there is a continued loss
of deposits, it is felt the Federal reserve bank should be prepared to lend
additional assistance.
The reply stated that the Board extends to Tune 16,
1932, the authority granted in its telegram of April 29, 1932.
Reply unanimously approved.
Telegraphic reply, approved by five members of the Board on Tune 2,
1932, to a telegram of that date from the Governor of the Federal Reserve
Bank of Boston requesting a further extension to June 16, 1932, of the
authority granted by the Board to the Federal Reserve Bank of Boston on Lay
GI 1932, to advance, in accordance with the provisions of section 10(b) of
the Federal Reserve Act, as amended, to the Quincy Trust Company, ,'- uincy,
flassachusetts, not exceeding .250,000, at a rate of 5 1/2('', per annum, payable on demand; Governor Young stating that the member bank is not using
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anY portion of the credit at the present time and that, while withdrawals
of deposits have subsided, it is believed the Federal reserve bank should be
ia a Position to extend credit should further withdrawals develop.
The
reply stated that the Board extends to Tune 16, 1932, the authority granted
in its tele_ran of Day 6, 1932.
Reply unanimously approved.
Telegraphic reply to a wire dated Tune 3, 1932, from the Governor of
the Federal Reserve Bank of Boston requesting authority for an advance to the
IpeePles National Bank, Southbridge, Eassachusetts, in accordance with the
provisions of section 10(b) of the Federal Reserve Act, as amended, of not
to exceed .75,000, at a rate of 5 1/2;; per annum, payable on demand, on the
security of approximately .200,000 of miscellaneous marketable bonds, the
advance being desired to assist in meeting a run now in progress against
the bank.
Governor Young stated that only such advance will be made as is
felt will be adequately and safely secured.
The reply advised that the
Board authorizes the Federal Reserve Bank of Boston during a period of two
Weeks from this date to advance to the member bank not to exceed
75,000
Under the terms and conditions recommended.
Reply unanimously approved.
Telegraphic reply, approved by five members of the Board on Tune 2,
1932, to a telegram of that date from Deputy Governor Rounds of the Federal
Reserve Bank of New York reouesting authority for an advance, in accordance
With the provisions of section 10(b) of the Federal Reserve Act, as amended,
to the First National Bank, Bolivar, New York, in the amount of .60,000, for
) per annum, and on the security
Period of ninety days, at a rate of 5 1/2,7
er customers, notes secured by mortgages, oil leaseholds, miscellaneous
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bonds and shares of stock, and unsecured customers' ineligible notes
aggregating approximately 408,000 face amount, the advance bein: desired
because of the Probable inminent failure of the institution without Pronnt
relief and the fact that its closing might seriously affect other banks in
the surrounding territory.
The reply stated that the Board approves the ad-
vance, subject to the terru and conditions recoru:.ended.
Reply unanimously approved.
Telegraphic reply to a wire dated June 3, 1932, from. Deputy Governor
Rounds of the Federal Reserve Bank of New York requesting. authority to purchase from the Bank of Nutley, New Tersey, a tax anticipation note of the
Town of 1;ut1ey in the amount of 425,000; the reply stating that the Board
11
authorizes the purchase with the understanding that the note meets all
Isequirements of :Regulation E except that the net funded indebtedness of the
DiUnicipality exceeds 10,, of the valuation of its taxable property and that
the amount of the note offered exceeds 25:, of the total amount of outstanding warrants of the municipality.
Reply approved.
Telegraphic reply, approved by five nenbers of the Board on Tune 2,
1932, to a telegram of that date from the Governor of the Federal Reserve
Bank of Boston recomnending approval by the Board of an application received
ICzon the Berlin National Bank, Berlin, New Hampshire, for permission to recliscount a note of the Fidelity Savings Bank of Berlin, a nonmember bank,
secured by United States Treasury bonds, the reply stating that the Beard
authorizes the Federal reserve banl:, in its discretion, for a period of six
Imoriths from Tune 2, 1932, to rediscount for the national bank good and
eligible paper acquired from or bearing the signature or indorsement of the
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Fidelity Savings Bank.
The reply also stated that the Board believes that
no such paper should be rediscounted until the national bank has utilized
all other paper in its portfolio which is eligible and acceptable to the
Federal reserve bank for rediscount; that the Board wishes to point out that
member bank is permitted by law to borrow from the Federal reserve bank on
its own note secured by obligations of the United States for a maximum period
of fifteen days and, if the note made by the nonmember bank secured by
Obligations of the United States is rediscounted for the member bank, with
maturity at the tine of rediscount in excess of fifteen days, the nonmember
bamk would thus be enabled indirectly to obtain credit from the Federal
l'eserve bank on its own note for a longer period than is permissible in
ease of direct borrowing by the member bank; and that it is believed
aPPropriate in such case to give due regard to the question whether the
transaction between the member bank and nonmember bank has been entered into
in good faith or merely as an indirect means of obtaining Federal reserve
bank credit on a note of a nonmember bank for a period in excess of fifteen
daYs.
Reply approved.
Letter to the OaMberland National Bark, Bridgeton, New Xersey,
stating that the Federal Reserve Board has approved the application filed
bY the bank through the Federal Reserve Agent at Philadelphia for permission
to act when not in contravention of State or local law, as trustee,
eZeeuter, administrator, registrar of stocks and bonds, guardian of estates,
a8Bignee, receiver, committee of estates of lunatics, or in any other
fiduciary capacity in which State banks, trust companies, or other
corporations which come into caavetition with national banks are permitted
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to act under the laws of the State of New Jersey, the exercise of such
rights to be subject to the provisions of the Federal Reserve Act and the
regulations of the Federal Reserve Board.
Application and letter approved.
Letter to the Federal Reserve Agent at New York referring to
Assistant Federal Reserve Agent Downs' letter of May 14, 1932, submitting a
certified copy of a resolution of the board of directors of the First
National Bank of Kenmore, New York, signifying the bank's desire to surrender
its right to exercise trust powers; the Board's letter stating that, in
accordance with the procedure prescribed in Regulation F, the Comptroller
Of the Currency is being requested to have one of his examiners make a
special investigation of the trust department of the First National Bank of
Kenmore upon the occasion of the next regular examination of that bank and
to furnish a report upon the basis of which the Board may determine whether
it may properly issue a certificate to the bank terminating its right to
exercise trust powers.
Letter approved, together with a letter to
the Comptroller of the Currency in accordance therewith.
Letter to the Federal Reserve Agent at Minneapolis referring to
Assistant Federal Reserve Agent Bailey's letter of May 5, 1932, transmitting
the request of the Tames River National Bank and Trust Company of Tamestown,
North Dakota, that the Board return the trust permits previously filed with
the Board in connection with the national bank's desire to surrender its
trust powers; the Board's letter inclosing the permits referred to,
together with a copy of a letter received from the Treasurer of the State
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Of North Dakota under date of Nay 23, 1932, and of the Board's reply thereto.
The letter from the State Treasurer of /forth Dakota stated that the
8ecUrities pledged by the Tames River National Bank and Trust Company have
been returned to the bank on the ground that it is no longer doing a trust
business, and that before the bank may again exercise trust powers it must
first deposit 050,000 in securities which are acceptable to the State
examining board.
The Board's reply to the State Treasurer's letter stated
that, while a national bank's corporate power to act in fiduciary capacities
does not cease automatically when it obtains a release of the securities
Pledged with State authorities, it cannot lawfully resume the exercise of
Such powers under the terms of section 11(k) of the Federal Reserve Act
Without first depositing with the State authorities the securities required
by State law for the protection of private or court trusts, and that in the
circumstances the Board assumes that the State Treasurer has no objection
to the return to the Tames River National Bank and Trust Company of the
Permits to act in fiduciary capacities previously issued to it.
The letter
to the Federal Reserve Agent at Minneapolis also stated that in returning
the permits to the national bank its attention should be called to the fact
that it may not lawfully reswre the exercise of trust powers without first
depositing with State authorities the securities required by State law.
Letter to the Federal Reserve Agent and
reply to the letter received from the Treasurer
of the State of North Dakota approved.
Reply to a letter dated May 24, 1932, from the Federal Reserve Agent
"Philadelphia, referring further to the deficient reserves of the First
National Bank, Mount Holly Springs, Pennsylvania, for a period of more than
six consecutive months, the reply stating that, in view of the agent's
445
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report that the required reserve is now being maintained, the Board will
take no further action at this time.
Reply approved, together with a letter, to the
Comptroller of the Currency transmitting a copy of
the Federal reserve agent's letter and of the Board's
reply thereto.
Reply to a letter dated Day 20, 1932, from the Federal Reserve Agent
at Richmond reporting that the Central National Bank of Spartanburg, South
Carolina, was continuously deficient in its required reserves during the
Previous six months period; the reply stating that, in view of the information submitted and the agent's recommendation, the Federal Reserve Board is
taking no action in the matter at this time other than to forward a copy
of the agent's letter to the Comptroller of the Currency for the information
Of his office.
Reply approved together with an appropriate
letter to the Comptroller of the Currency.
Reply to a letter dated May 25, 1932, from the Federal Reserve Agent
at St. Louis with further reference to deficiencies in the reserves of the
Peoples National Bank and Trust Company, Sullivan, Indiana, Which have continued for more than a year; the reply noting that pinns for a reorganization of the bank are contemplated, and requesting that the agent advise
the Board in due course whether the reorganization is effected and if not,
that he submit his recommendation as to the action to be taken by the
BOard in the premises.
Reply approved, together with a letter to the
Comptroller of the Currency transmitting a copy of
the agent's letter and the Board's reply thereto.
Letter to the Federal Reserve Agent at New York, approved by five
446
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nembers of the Board on i'ay 31, 1932, statin_, that the Board has considered
the application filed by the Steuben Trust Company, Hornell, New York, for
membership in the Federal Reserve System, and the recommendation of the board
Of directors of the Federal Reserve Bank of New York that such application
be approved subject to the usual conditions of membership and the further
condition that the trust company strengthen its capital structure within
ninety days by the addition of not less than :a50,000 of new capital funds
to be paid in prior to the completion of membership, but that, in view of
the generally unsatisfactory condition of the applicant, the Board is of
the Opinion that it will require considerably more than the introduction
of .150,000 of new money to place the institution in a condition which
Would warrant the Board's taking favorable action on its application for
Membership in the Federal Reserve System, and that it is, therefore, requested that the agent discuss the natter with the applicant and suggest
that it request the Board not to take action on its application at this
time and that the bank submit a new application at a later date when its
Unsatisfactory condition has been corrected.
Letter approved.
Letter to the Federal Reserve Agent at New *Fork referring to
Assistant Federal Reserve Agent Dillistin's letter of December 29, 1931,
and other correspondence with regard to the merger as of November 2, 1931,
Of the Overpeck Trust Comany, Ridgefield Park, liew Jersey, with the Ridgefield Park Trust company, both member banks, under the charter of the
latter and under the title of the Ridgefield Park-Overpeck Trust Con:)any,
the Board's letter stating that the information submitted would indicate
that there has been no material change in the general character of the
IS
(
)
i
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assets of the Ridgefield Park Trust Company or broadening in the scope of
the functions exercised by it within the meaning of the general condition
under which it was admitted -to membership in the 7ederal Reserve System and
that, in accordance with the agent's recomrendation, the Board will interPose no objection to the transaction.
The letter also stated that, in view
Of the bank's undercapitalized condition by reason of estimated losses and
depreciation on stocks and defaulted bonds, the Board requests the 3.7,e/it
to Consider the advisability of approaching the bank at such time as conditions warrant on the question of increasing its capital to provide
adequate protection to depositors.
Letter approved.
Letter to the Federal Reserve Agent at Philadelphia, approved by
five melibers of the Board on Eay 31, referring,to his letter of March 15,
1932, and subsequent correspondence with regard to the absorption on
October 17, 1931, of the Seaside Trust Comnany by the Guarantee Trust
Company, both nonmember banks in Atlantic City, Now Jersey, and the subSequent consolidation on December 28, 1931, of the Guarantee Trust Company,
the I:arine Trust Company and the Neptune Trust Company, nonme- lbers, with
the Atlantic Safe Deposit and Trust Canpany, a menber, all of Atlantic City,
Under the charter of the latter institution and under the title of the
atiarantee Trust Company; the Board's letter statin7, that it appears from
the information submitted that the action of the member bank in consolidatinp.
the nonmember institutions has not resulted in any material change in the
general character of its assets or broadening in the scope of the functions
e:cercised by it within the meaning of the general condition under which it
448
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Was admitted to membership in the lederal Reserve System and that the Federal Reserve Board, in accordance with the agent's recorziendation, will
interpose no objection to the transaction.
Letter approved.
RePly, approved by five merrbers of the Board on Tune 1, to a letter
dated Larch 26, 1932, from the Federal Reserve Agent at Philadelphia stating
that at the tine of the last increase in its capital the Wilmington Trust
Company, W*ilmington, Delaware, made loans to certain of its directors and
employees for the Purpose of enabling them to Purchase the stock of that
institution and that the notes of such officers and employees were guaranteed
by the President and Vice-President of the trust company, respectively, who
hold the shares of stock so purchased as partial security for their
guaranties; the agent raising the questions (1) whether these transactions
involve a violation of the spirit of the provision of section 9 of the Federal Reserve Act which requires State mmber banks to confom to the provisions of law which prohibit national banks from lending on or purchasing
their own stock, and (2) whether the new issue of stock was fully paid-in
in view of the fact that a portion thereof was represented by the notes referred to.
The reply stated that the transaction described constitutes a
clear violation of the spirit and purpose, if not the letter, of section 9
of the 2ederal Reserve Act, and that it is also clear that when capital
stock of a bank is issued in return for the promissory notes of the purchasers it cannot properly be considered as "paid up" within the meaning
Of the provisions of the Federal Reserve Act.
The reply also requested
that the agent take the matter up with the trust company with a view of
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obtaining a correction of the situation, and suggested that if he is
Unable to obtain satisfactory action within a reasonable time he consider
the advisability of bringing the matter to the attention of the appropriate State authorities in connection with the question of a possible
violation of a provision of the State constitution which provides that
no corporation shall issue stock except for money paid, labor done or
Personal property or real estate or leases thereof, actually acquired by
such corporation.
Reply approved.
Reply, approved by five members of the Board on May 31, to a letter
dated May 7, 1932, from the Federal Reserve Agent at Richmond with further
regard to the Maryland Trust Company of Baltimore, Maryland, holding its
oNn stock through ownership of the Securities Corporation of New England;
the reply noting that a substantial amount of the stock so held has been
4isposed of since the date of the last examination of the trust company and
that it appears that the institution is doing all it can to dispose of the
balance of such stock, and stating that in these circumstances the Board
Will take no further action with reference to the matter at this time, but
that, unless the agent receives a further report from the trust company
Within a reasonable time, he should again call the natter to the attention
Of
the trust company and at the end of six months make a further report to
the Board as to the progress made in disposing of the stock.
The reply
alee noted that the agent has taken up with the trust company the holding
Of its own stock as collateral security for two of its loans and requested
that the agent advise the Board at the end of six months as to what
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disposition has been made of this natter by the trust company.
Reply approved.
Reply, apProved by five menbers of the Board on 1 -ay 31, to a letter
dated Fay 21, 1932, from the Federal Reserve Agent at Dallas transmittinc;
a voluntary notice of intention to withdraw from rombership in the 7edera1 Reserve System, filed under date of /Tay 18
1932, by the 7irst State
Bank of Bedias, Texas, which has reduced its capital from .25,000 to
017,500, an amount below that required or a member bank; the reply stating
that, in view of the circurotances, and in accordance with the agent's
recomadendation that the bank be permitted to withdraw immediately, the
Board has voted to waive in this case the usual requirement of six months
Us
notice and to permit immediate withdrawal from membership by the member
bank.
Reply approved.
Reply, approved by five members of the Board on Eay 31, to a
letter dated ray 17, 1932, from the Federal Reserve Agent at Philadelphia
stating that a number of member banks in the Third Federal Reserve
District, because of an unliquid condition and continued loss of deposits,
have been unable to maintain their reserves, and inquiring whether, in
view of the circumstances involved, the Federal Reserve Board will require
a strict compliance with section IV(b) of Regulation D with regard to
addressing letters to the directors of banks with deficient reserves;
the reply stating that the purpose sought to be accomplished by the subSection referred to is to bring to the attention of the individual
directors the fact that the member bank is not maintaining its reserves
I/1 order that the directors may take the proper steps to see that the
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bank meets the requirements of the law in the future; that it is realized,
however, that there may be instances in which it is apparent from the
Federal reserve agent's contact with the bank, or from other available
information, that the failure of the member bank to maintain its reserves
is due to its unsatisfactory condition rather than any disregard on the
Part of the management for the requirementsof the law, or that other
reasons exist which would make it undesirable to write the directors concerning the matter, and that in these cases such letters, rather than
accomplishing the desired purpose, might have an adverse effect; that it
was for this reason that, as stated in the Board's letter of January 18,
1928, (X-5039), the subsection was purposely phrased in such a way as to
permit some flexibility and to afford the agent an opportunity, after discllssion with the chief national bank examiner in the case of a national
bank or with the State bank supervisor in the case of a State member bank,
to exercise a reasonable discretion in its administration; and that, therefore, in each case where there are indications that the bank is not paying
due regard to the maintenance of its reserves, the agent should give careful
consideration to all the circumstances involved and consult with the chief
national bank examiner or the State bank supervisor in order to determine,
in the exercise of a reasonable discretion, whether it is advisable to
Write the directors.
The reply also stated that in cases where it becomes
necessary for the agent to report to the Board, in accordance with section
Ilr(b) of Regulation D, deficiencies in reserves for a period of six
consecutive months, it is requested that he include in his report full
information as to the consideration Which has been given to the matter of
Writing the directors of the member bank, and, where such letters have not
452
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been sent, the reasons therefor.
Reply approved, together with a letter to the Federal
Reserve Agent at Cleveland, approved by three members of
the Board on May 31, in response to his letter of May 20,
1932, and a circulfir letter to the Federal reserve agents
at other Federal reserve banks, approved by three members
of the Board on ;Tune 2, each inclosing a copy of the letter
to the Federal Reserve Agent at Philadelphia.
Telegraphic reply, approved by five members of the Board on June 1,
to a telegram dated May 31, 1932, from Deputy Governor Clerk of the Federal
Reserve Bank of San Francisco incuiring whether the Valley Bank and Trust
Company of Phoenix, Arizona, could lawfully consolidate the Arizona Bank
Of Phoenix, and retain, as branches of the consolidated institution, all
offices of the Arizona Bank of Phoenix existing in January, 1927, as well
as the Flagstaff, Arizona, branch which resulted from the removal in 1931
Of the head office of the Arizona Bank from Flagstaff to Phoenix, the Flagstaff office being continued as a branch; the reply stating that if the
Arizona Bank of Phoenix should consolidate with the Valley Bank and Trust
Company under tho provisions of a State law whereby the corporate existence
Of
the constituent institutions is merged into and contained in the con-
solidated ban'‹, or, in the absence of such a State law, if both institutions
should consolidate with a national bank under the Act of Uovember 7, 1916,
as amended, the consolidated bank may retain the out of town branches
established by the constituent institutions -Prior to February 25, 1927;
that the Board is not advised whether there is a consolidation statute in
Arizona containing such provisions, and that on the basis of the facts
stated it appears that the Flagstaff. office of the Arizona Bank was not a
branch established prior to February 25, 1927, and, therefore, cannot lawr4l1y be retained.
The reply further stated that if in the light of all
45:3
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the facts, counsel for the Jan Francisco bank is of the opinion that the
Flagstaff office can be retained, the Board will be glad to reconsider the
Matter in the light of his opinion, the reasons therefor, and a full stateMent of the facts.
Reply approved.
Letters to the First National Bank, Shawano, W.sconsin, the
Dawson-City National hank, Dawson, Georgia, and the Beckley Nationnl Exchange
Bank, Beckley, 1 iest Virginia, each of which is an institution resulting
from the consolidation under the Act of November 7, 1918, of two national
banks, one or both of which had previously been authorized by the Board
to exercise trust Powers; the letters inelosing in each case a certificate
in the form recently approved by the Board of the consolidated bank's
authority to exercise the trust powers previously granted to the constituent national banks.
Letters and certificates approved.
Reply to letters dated Tanuary 30 and February 8, 1932, from the
Federal Reserve Agent at St. Louis with regard to the continuance of group
life insurance upon the lives of certain enployees of the bank who have
been retired because of disability or old age; the executive cornittee of
the bank having determined, subject to approval of the Federal Reserve
Board, that in cases where an emloyee has becom so disabled after reach-
taT, the are of sixty as to render His services unsatisfactory and the
(nficers of the bank are satisfied that his case merits such consideration,
he should be carried on the payroll at a nominal salary, and the insurance
"vering his life under the group policy continued in the amount carried
at the time of disability.
The reply requested a copy of the group life
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insurance policies in force in the bank at the present time and at the
time of the retirement from service of the employees affected by the action
Of the executive comrlittee, and, also that the Board be advised for what
Period each of these employees had been in the service of the bank and what
his age was upon retirement from service.
The reply also raised the question
as to whether under the bank's policies the insurance of disabled employees
is not permissible without the necessity of carrying them on the Payroll
even at a nominal salary, and requested that the Board be advised whether
the matter has been discussed with the insurance company on this basis and
Whether, in the opinion of the bank's counsel, it was necessary under the
terms of the policy that these employees be carried on the payroll at a
nominal salary in order that the insurance covering than might be continued.
Reply approved.
Ilemorandum from Counsel dated Lay 25, 1932, referring to :Public Act
N. 138, 72nd Congress, which was approved on nay 19, 1932, and which
authorizes the use of debentures of Federal Intermediate Credit Banks as
security for member banks' fifteen day notes, and authorizes Federal reserve
banks to rediscount notes evidencing direct loans or advances of Federal
Intermediate Credit Banks, Counsel recom -Bndin - that the text of the Act
be Published in the next issue of the Federal Reserve Bulletin together with
a brief introductory statement in the form submitted with the memorandum.
Counsel's recommendation having been approved
by five members of the Board on l_lay 31, the publication of the text of the Act and the introductory
statement referred to was approved.
Circular letter to the Governors of all Federal reserve banks,
approved by four members of the Board on flay 28, 1932, outlinin: a new pro-
455
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6/3/32
cedure to be followed in connection with the publication of the Tuly issue
Of the par list.
Letter approved.
Replies, approved by five menbers of the Board on May 31, to
letters dated May 6, 1932, from the President of the First National Bank,
-Allegheny, New York, and May 15, 1932, from the President of the Citizens
National Bank, Wellsville, New York, with regard to the eligibility for
rediscount at a Federal reserve bank of paper the proceeds of which are
used for the drilling of oil wells; the replies stating that the Federal
Reserve Board considered this question in 1920 and expressed the opinion
generally at that time that an oil producer's note, the proceeds of which
have been, or are to be used for drilling oil wells, even on proven
territory, is a note "the proceeds of which have been or are to be used for
Permanent or fixed investments" within the meaning of the Board's regulations
and that, therefore, such a note is not eligible for rediscount by a Federal reserve bank; that since receiving the letters referred to above the
Board has carefully reconsidered this question
and
again has reached the
conclusion that such paper is issued or drawn for a capital purpose and
18, accordingly, ineligible for rediscount; and that when the proceeds of
a note are used for the drilling of oil wells on other than proven
territory the purpose is a speculative one within the meaning of the
Board's regulations and such a note would be ineligible for this reason
also.
Replies approved.
Reply to a letter dated
may 13, 1932,
from Deputy Governor Paddock
Of the Federal Reserve Bank of Boston stating that a national bank has
4n6
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6/3/32
tA
raised the question whether it may accept a draft drawn under the following
circumstances:
A cotton broker finances the shipment of cotton which he
has purchased by drawing on his bank at 90 days sight, the order bill of
lading covering the cotton being attached at the time of acceptance; the bill
of lading is released by the bank to the cotton broker on trust receipt,
and later the broker delivers to the bank a storage receipt for the cotton
issued by a mill and also a contract for the sale of the cotton to the mill
in 90 days; the receipt issued by the mill acknowledges that the cotton has
been received for the account of the broker and contains an agreement by
the mill to hold the cotton subject only to the broker's orders and to be
responsible to whom it may concern for any damage to or any loss of the
cotton; at maturity of the acceptance the broker at the request of the
Mill extends the sales contract for a further period of 90 days and requests his bank to finance the cotton by an acceptance for an additional
Period, offering the mill receipt as the basis for a warehouse acceptance
credit.
The question presented is whether the member bank may properly
accept the draft for the additional period.
The reply differentiated between the ruling of the Federal Reserve
Board published on page 52 of the Federal Reserve Bulletin for 1922 and the
rUling published on page 811 of the Bulletin for 1929, and stated that
Deputy Governor Paddock's letter does not contain a sufficiently detailed
statement of the facts of the transaction, particularly with respect to
11)
the question whether during the life of the acceptance the cotton is
actually held by the mill in storage or is used by the mill in manufacturto enable the Board to determine whether the purpose of the acceptance
457
6/3/32
—22—
is to furnish working capital for the mill or is otherwise inconsistent
With the requirements of the Board's previous rulings on such question; that,
in order to determine the question whether the mill receipt is issued by a
Party independent of the customer and whether it conveys or secures title
to the cotton, it would be necessary to have a copy of the sales contract,
a copy of the mill receipt, and a copy of any other document arising out of
the transaction which might tend to show the relationship between the
Parties; and that, with the requisite information concerning these matters
before it, the Federal reserve bank, with the assistance of its counsel,
Will probably be in a position to determine the questions presented in the
light of the Board's regulations and the previous rulings on acceptance
1
questions, and that if after reviewing the matter, the bank still feels
that the questions should be considered by the Board, there should be sub'flitted to the Board a statement covering in more detail the facts of the
transaction and copies of the documents mentioned, together with a copy
c)f an opinion of the bank's counsel with respect to the several questions
Presented.
Reply approved.
Reply to a letter dated April 23, 1932, from Deputy Governor
ZUrlinden of the Federal Reserve Bank of Cleveland with further reference
to the question whether notes of farmers given to finance the storage of
Cherries grown by them and cold packed at their expense are to be regarded
118
agricultural paper and eligible for rediscount with maturities up to
nine months; the reply stating that the Board has heretofore taken the
Position that the storage of crops pending their orderly marketing is one
458
8/3/32
-23-
of the steps in the marketing of such crops and that the paper of a grower,
the proceeds of which have been used to enable him to store his crop pending
orderly marketing is agricultural paper; that inasmuch as it appears that
Processing is essential to the proper storage of cherries for the period
necessary in their orderly marketing, the Board feels that the processing
or cold packing of cherries at the expense of the grower may properly be
regarded as incidental and necessary to their orderly marketing and that
the notes of the grower given for the purpose of financing the storage of
atich cherries as one of the steps in their orderly marketing are eligible
for rediscount as agricultural paper with maturities up to nine months.
The reply further stated that where the storage or processing is not
1
incidental and necessary in orderly marketing or where the cherries are
stored for speculative purposes rather than for the purpose of orderly
Marketing, paper the proceeds of which are used to finance such storage or
Processing would not be eligible as agricultural paper.
Reply approved.
Letter to the Secretary of Commerce, approved by five members of
the Board on May 31, 1932, referring to bill H. R. 11424 which would direct
the Secretary of Commerce to disc cntinue the monthly collection by the
Bureau of the Census of certain industrial statistics; the letter stating
that these statistics are of great importance to the Board and the Federal
reserve banks and their continued collection is a matter of genuine interest
tO the Board and the banks; that the statistical series referred to make
413 23;; of the Board's index of industrial production which is widely used
bY Government statisticians, business men and others, both in the United
States and abroad, and that in view of the extensive use of these monthly
1
459
6/3/32
data the Board hopes that the Committee of the Census, in its consideration
Of the bill, will take account of the interest of the system in the continued collection of the figures.
Letter approved.
Letter to the Chairman of the Committee on Banking and Currency of
the Senate, prepared for the signature of the Secretary of the Treasury
at the request of the former and approved by five members of the Board on
May 26, 1932, with regard to bill IL R. 11499, "an act for restoring and
maintaining the purchasing power of the dollar"; the letter inclosing a
copy of the Secretary's report of May 13, 1932, on bill S. 4429, which report was approved at the meeting of the Federal Reserve Board on May 16,
1932, and stating that, as the purpose of the bill in question is the same
as that of S. 4429, it is the view of the Treasury Department, for the
reasons stated in the earlier report, that the enactment of H. R. 11499
Would be undesirable.
Letter approved.
Letter to the Chairman of the Banking and Currency Committee of
the Senate stating that it is believed that his attention should be invited
to the fact that, if enacted in its present form, the so-called Glass Bill
Would repeal the amendment contained in S. 2409, approved on May 19, 1932,
Which makes debentures of Federal intermediate credit banks which are eligible
for purchase by Federal reserve banks, eligible also as security for advances made by them to their member banks, and that if, notwithstanding
the recommendations contained in the Board's letter of March 29, 1932,
section 8 of the Glass Bill is to be retained in its present form, then
in order to preserve the amendment made by section 6 of S. 2409, section 8
460
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6/3/32
of the Glass Bill should be amended in the manner outlined in the letter.
Letter approved, together with a letter to
Senator Carter Glass transmitting for his information a copy of the letter to the Chairman of the
Banking and Currency Coranittee of the Senate.
Letter, approved by five members of the Board on Tune 1, 1932, to
Messrs. Iclibever&Goss, Inc., as agents for the owners of the Shoreham
Building,referring to negotiations with them for a lease by the Federal
Reserve Board of the entire office space on the fourth floor and a designated portion of the office space on the third floor of the Shoreham
Building, and stating that it is understood that the agents have offered,
OX. behalf of the owners, to lease to the Board the space referred to at
a rental of C4.50 per square foot per annum based upon an aggregate area
for the purpose of determining rental, of not more than 13,808 square
feet, and in no event exceeding ,120,712 per annum, for a term of five
Years beginning July 1, 1932, subject to the right of the Federal Reserve
Board to terminate the lease at or after the end of the third year upon
notice in writing given by the lessee to the lessor not less than sixty
clays prior to the date of termination and subject also to the terns and
conditions set forth in the letter.
The letter also notified the agents
Of the Board's acceptance of the offer upon the terms and conditions mentioned and subject to the execution of a proper lease by the lessor comany
Which shall contain the usual conditions for the repair and maintenance
or the leased space by the lessor and be in form satisfactory to the
lb
Pederal Reserve Board.
Letter approved.
461
-26-
6/3/32
Reply, approved by five members of the Board on May 27 to a
Memo-
randum dated May 12, 1932, left with the Board by the Governor of the Federal
Reserve Bank of San Francisco, suggesting that the Board increase to
Acf,
5
p J,000,000, the margin fixed for the San Francisco bank in the Board's
letter of May 2, 1932, with regard to the pledging of United States Government securities as collateral for Federal reserve notes, and stating that
while it would be possible to meet the situation with the present margin
fixed for the bank by requesting the Federal reserve agent to appoint
assistant Federal reserve agents at some or all of the branches of the bank,
the agent is reluctant to make such appointments unless it is necessary as
it has been found extremely undesirable to have representatives of the
1/
agent's department attached to branch offices and at the same time without
occupation other than the custody of notes.
The reply reviewed the method
Used by the Board in arriving at the margins fixed for the various Federal
reserve banks and stated that if the plan for the appointment of acting
assistant Federal reserve agents recently adopted by
some
of the other Fed-
eral reserve banks were adopted at the Los Angeles branch, the Federal
reserve agent could assign to his representative at the branch such other
dUties as in his opinion were not inconsistent with the functions of an
"ting assistant Federal reserve agent, and that as the Los Angeles branch
)107 keeps on hand about ,,J0,000,000 of Federal reserve notes it may be
that the appointment of a present employee as acting assistant Federal reholding
serve agent at the branch to act as the agent's representative in
in custody, jointly with the branch, unissued Federal reserve notes, will
satisfactorily take care of the situation without increasing the operating
462
-27-
6/3/32
costs of the branch.
The reply also stated that if it is found that the
aPpointment of one of the present employees as an assistant to the agent
at one of the northwest branches also would be in the interest of
efficient and economical operation of the bank, the Board is prepared to
give prompt consideration to a request from the Federal reserve agent to
Make such an appointment.
Reply approved.
Reports of Standing Comittee dated May 27 and 28, 1932, and
rune 1 and 2, 1932, recomnlending approval of the following changes in stock
at Federal reserve banks:
.44211TILIns
for ORIGINAL Stock:
District No. 5.
Peoples National Bank, Parkersburg, W. Va.
Shares
District NO. 7Oconomowoc National Bank, Oconomowoc, Wisconsin.
District No. 10.
Nebraska National Bank of Alliance, rebraska.
306
306
60
60
66
Total
66
432
41221192,Ilaar
ADDITIONAL Stock:
District No. 1.
Gloucester National Bank, Gloucester, Mass.
24
24
ioationsforSlofStock:
District No. 3.
Orbisonia National Bank, Orbisonia, Pa. (V.L.Abe.
by First National Bank of Mount Union, Pa.)
23
23
District No. 7.
Streator National Rank, Streator, Ill.
(Decrease in surplus)
15
15
21
21
.!!12trict
No. 9.
First National Bank, Winnebago, Mimi. (Abs. by the
Blue Earth Valley National Bank, Winnebago,
/linnesota.)
46:3
6/3/32
-28-
cations for SURB7DER of Stock: (Cont'd)
District No. 10.
First Nationol Bank, Highland, Kans. (Insolvent)
First National Bank in Independence, Kans.
(Decrease in surplus)
Shares
30
60
90
18
18
72
Total
72
239
District No. 11.
First State Bank, Murchison, Texas. (V.L.Abs. by
First National Bank, Athens, Texas.)
District No. 12.
Citizens National Bank, Baker, Oregon. (V.L.Abs.
by First National Bank of Baker, Oregon.)
Approved.
Report of Standing Committee dated Stine 1, 1932, recommending
aPProval of the following Clayton Act application:
111% Millard E. Tydings, for permission to serve at the
same time as director of the Baltimore Trust Company of
Baltimore, Maryland, and as director of the First National
Bank of Aberdeen, Maryland.
Approved.
Thereupon the meeting adjourned.
Secretary.
Approved:
@FedFRASER