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1990 A. meeting of the Federal Reserve Board was held in Washington on Saturday, June 30, 1934, at 11:30 a. m. i'RESELT: Ur. Er. Mr. Er. Er. black, Governor Hamlin James Thomas Szymczak Mr. Er. Er. Er. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Martin, Assistant to the Governor Governor Black presented, for the Board's consideration, the following letter which he proposed to send to the governors and chairten of all Federal reserve banks, in regard to loans which the Federal reserve banks are authorized to make under the provisions of the industrial credit act: "You will recall that at the recent Conference I suggested that a letter be written you regarding loans to industry. "I rant first to thank you for your earnest consideration of the problems of the Conference and your evident spirit of cooperation. "lie mainly considered the opportunity furnished and the responsibility entailed by this new law. You will observe "(1) That in exceptional circumstances when it appears to the satisfaction of your bank that an established industrial or commercial business located in your district is unable to obtain requisite financial assistance on a reasonable basis from the usual sources, your bank may make loans to, or purchase obliga1; of, such industrial or commercial business, or may make 17 r)1 : connitments with respect thereto, on a reasonable and sound basis, for the purpose of providing it with working capital. "(2) That your bank shall have power to discount for, or Purchase from, any financing institution operating in your district obligations entered into for the purpose of obtaining workinp; capital for any established industrial or commercial business; to make loans or advances to any such financing institution on the security of such obligations, or to make conmitments with regard to such loans or advances on their security, including commitments :made in advance of the actual undertaking of such obligations. This provision requires participation by the 6/30/34 -2_ "financing institution. "Under these two provisions leans may be made direct to established industrial or commercial businesses or indirectly through financing institutions, such loans in either case to be for working capital. you blow the Board has promulgated Regulation S covering such loans, which regulation was submitted to and approved by the Conference. "This regulation has been made as simple as possible so that it might materially aid and in no way hinder the making of these loans, and most of the questions discussed at the Conference are flow covered by the law and the regulation. "The question of the personnel of the industrial advisory committee in your district is important. The resulation fixes the number at five. In my opinion the members of this committee should be men fully advised as to the industrial and commercial situation in your district, fully alive as to the needs of the smaller industrialist, and entirely sympathetic with the purpose of these loans. I also feel that three of the members should reside at your home office city so that a quorum may be immediately present for the consideration of applications. "The rate is also an important factor. I think this rate Should be considered from the standpoint of the purpose embraced in this law and that purpose is to aid the smaller industrialist in the solution of his problems. I do not think that a rate can be uniform because of diverse conditions in different districts. rather think that each district considerinn4 its own conditions Should determine the rate for its district. "It would be wise in fixing a rate to keep in view usual banking rates in your district but this approach must be limited if those banking rates are high when considered in the light of the purposes of this liC'td. "In determining whether there should be a different rate for individuals or financing institutions the increased risk in The caso of individuals may well be considered. "I do not believe that there should now be any preferential rate for member banks since the law made no distinction between financing institutions and because a substantial part of the funds loaned aro paid to us by the Treasury. Later experience may show that the element of risk may influence a preferential rate but I feel that we should await that experience before fixing one. It is my personal feeling that a commitment fee would be justified and that it should be a low fee. This feeling is Prompted by the knowledge that commitments will tie up available funds for loans and by the knowledge that through commitments an element of value is given the financing institution. "I am very hopeful that through the process of making,commitments We will engage the active cooperation of the banks, but This hope must be restrained within the limitaticn of having left 1_992 00/34 "available funds for immediate loans. "These expressions as to rates are only expressions. The Board mill fully consider the mature action of your directors on this question. "I am certain that you have carried home to your directors our earnest feeling, first, that these new loans will materially aid the Recovery Program, second, that it gives your bank an opportunity to render a real service in your district, and third, that this opportunity entails a responsibility that for the good of the Federal Reserve System must be fully met. "I am pleased to advise that the expressions of this letter are concurred in by the members of the Board, but that they must be considered only as our expressions, since the Board feels that each Reserve Bank can and mill meet its responsibilities under this law and mill be more fully advised as to the especial conditions in its district." Approved. The hoard then considered and acted upon the following matters: Letter to "The Y.erchants National Bank of Terre Haute", Terre Haute, Indiana, reading as follows: "The Federal Reserve Board has given consideration to your application for permission to exercise fiduciary powers, and grants you permission to act, when not in contravention of State or local law, as trustee, executor, administrator, guardian of estates and committee of estates of lunatics, the exercise of all such rights to be subject to the provisions of the Federal Reserve Act and the regulations of the Federal Reserve Board. "This letter will be your authority to exercise the fiduciary powers granted by the Board. A formal certificate covering such authorization will be forwarded to you in due course." Approved. Letter to Er. O'Connor, Comptroller of the Currency, reading as follows: . "In accordance with Acting Comptroller Amaltt s recommndatlons the Federal Reserve Board approves a reduction in the com, /:lon capital stock of 'The First National Bank of Hamden', Hamden, 'haw York, from V75,000 to '50,250, pursuant to a plan which provides that the bank's capital shall be increased by 25,000 of Preferred stock to be sold to the Reconstruction Finance Corporaand that the released capital, together with a portion of 1_993 00/34 -4- "the bank's surplus, undivided profits and reserve accounts, shall be used to eliminate estimated losses and securities depreciation in the lover grades, and provides also, that the proceeds from the sale of preferred stock shall be used to reduce the bank's liability on bills payable, all as set forth in Er. Amalt's memorandum of June 16, 1934." Approved. Telegram to Li-. Peyton, Federal Reserve Agent at the Federal Reserve Bank of Linneapolis, reading as follows: "Refer your letter June 19. You are authorized to issue to Northwest Bancorporntion, Linneapolis, Linnesota, limited voting permit similar to that authorized in Board's ANCIGAR telegram of May 21, 1934, and issued to such corporation under date of June 16, 1934, except that you may provide in permit authorized hereunder that Northwest Bancorporation may vote stock of member banks named in such permit for purposes stated therein 'At any time prior to September 1, 1934.' instead of 'At any time prior to July 1, 1934," Approved. Letter to Er. Case, Federal Reserve Agent at the Federal Reserve Bank of New York, reading as follows: "This refers to kr. Dillistin's tmu letters of June 20 regarding the Citizens hational Bank of Hammond, Hammond, New York, and the Romulus National Bank, Romulus, New York, -which were placed in receivership on October 12, 1933, and December 7, 1933/ respectively, but whose receivers have not yet filed applicaticns for cancelation of stock of the Federal Reserve Bank of New York outstanding in the names of the banks. In view of the plans Pending for the reorganization and reopening of the banks, the Board approves Mr. Dillistin's recommendations that action in the matter of canceling the Federal Reserve bank stock outstanding in the names of the Citizens National Bank of Hammond and the Romulus National Bulk be deferred for the present. If, however, the banlis have not reopened or the receivers of the banks have not made application for cancelation of their Federal Reserve bank stock within three months from the date of this letter, you are requested to submit a further report and recommendation." Approved. Letter dated June 29, 1934, approved by five members of the l9Dtt 6/30/34 -5- Board, to Honorable A. W. Hall, Director of the Bureau of Engraving and Printing, reading as follows: "Referring to your letter of June 6, 1934, it is estimated that Federal Reserve note printing requirements for the fiscal year ending June 30, 1936, will amount to .6,409,200 sheets as follows: Fives 2,486,000 sheets Tens 2,915,000 Twenties 973,000 Fifties 19,000 Hundreds 16,000 One thousands 200 Total 6,409,200 "You are further advised that the Board is today placing with the Comptroller of the Currency a formal order for the printing, during the fiscal year ending June 30, 1935, of 8,027,150 sheets of Federal Reserve notes of the various Federal Reserve Banks and is requesting the Comptroller to cancel all orders now on file with the Bureau for printing Federal Reserve notes." Approved, together with a letter, also dated June 29, 1934, and approved by five members of the Board, to Nr. O'Connor, Comptroller of the Currency, in accordance with the letter to Mr. Hall. In connection with the above, there was presented a second letter dated June 29, 1934, approved by five members of the Board, to Honorable A. W. Hall, Director of the Bureau of Engraving and Printing, reading as follows: "Referring to your recent telephone converscltion with la.. Smead in regard to the stock of incomplete face printed Federal Reserve notes held at the Bureau in denominations of 4500 and over, it is understood that the Bureau will arrange to hold all such notes as a reserve stock until such time as the new face plates are completed when all such notes remaining on hand (7,757 sheets) will be destroyed." Approved. Letter to Lir. Baxter B. Bond, Secretary, Berdrers Bond and Securities compan y, Hannibal, Missouri, reading as follows: 1995 6/30/34 -6- "eference is made to your letter dated June 14, 1934, addressed to the Federal Reserve Agent at the Federal Reser ve Bank of St. Louis, in regard to the application of Mr. Scott Leyer under Section 32 of the Banking Act of 1933 for a permi t to serve at the sane time as a director of the Hannibal Natio nal Bank and as a director of the Bankers Bond and Securities Company, both of Hannibal, Lissouri. "Careful attention has been given to your statement that you feel that Lr. ..eyer's service as a director of the Banke rs Bond and Securities Company and as a director of the ilannibal I;ational Bank has not tended to influence the bank's credit and investment policies in a manner incompatible with the public interest. The Board has also considered the situation which arose in 1932 in connection with a loan by the bank to your company which ivas cited as an illustration of the fact that 1.x. Meyer's service to the securities company and to the bank had not influ enced the credit policies of the bank. "The Board wishes to make it clear that the position taken in its letter of May 14, 1934, in regar d to Mr. Meyer's application was not based upon the belief that the particular relat ionshit) covered by his application had resulted in an improper influence upon the member bank in question. The Board belie ves that it was the intent or Congress in enacting the provisions of Section 32 in regard to interlocking directorates to eliminate any possibility of an impro per influence upon the management of member banks. This action on the part of the Congr ess was apparently based upon a belief that such interlocking directorat e relationships had a tendency to cause an undesirable influence upon the credit and investment policies of member banks and their advice to their correspondents. "In view of the fact that the Congress has enacted into law a general policy that such inter locking directorate relationships should be terminated because they were belie ved to be incommtible with the public interest, the Board feels that it should not grant permits covering relationships which are actually within the class at which Secti on 32 VMS directed, even though in a Particular case the applicant has not allowed his interest in a securities company to influence his judgment as a director of a member bank. "Althoucji the Federal i/eserve Board is not unsympathetic with your desire to have :Er. Moyer continue to serve as a director of Your company and as a director of the bank, the Board feels that rur letter states no facts which would justify an exception in Leyer's case and, accordingly, has decided that unless there arO other facts to be submitted, 2Zr. Meyer's application should be denied." .pp roved. 1996 6/30/34 -7Letters to Messrs. Case and Stevens, Federal Reserve Agents at the Federal Reserve Banks of New York and Chicago, respectively, referring to the following applications for permits under the Clayton Act, and stating, in each case, that, upon the basis of the information before it, the Board feels that the issuance of the permit applied for vould be incompatible with the public interest. Each letter also requested the agent to communicate to the applicant the Board's position in the matter, and to advise the Board promptly as to whether the applicant desires to submit any additional data, and, if not, as to -what steps he propose s to take in order to comply with the provisions of the Clayton Act. Mr. George G. Kleindinst, for permission to serve at the same time as a director and officer of the Liberty Bank of Buffalo, Buffalo, New York, and as a director of the Buffalo Branch, Federal Reserve BAT*. of New York, Buffalo, New York. lir. James E. Tucker, for permission to serve at the sane time as a director of The Mid-Gity National Bank of Chicago, Chicago, Illinois, as a director of The Liberty Bank of Chicago, Chicago, Illinois, and as a director of the Sears-Community State Bank, Chicago, Illinois. Approved. Letter to Mr. Stevens, Federal Reserve Agent at the Federal Reserve Bank of Chicago, reading as follows: "The Board has given consideration to the application of Mr. Joseph E. Lindquist, 208 South LaSalle St., Chicago, Illinois, for permission under the provisions of the Clayton Act to serve at the same time as director and officer of the National Builders Bank of Chicago, Chicago , Illinois, and as an employee of the C3-Y National Bank and Trust Company of Chicago, Chicago, and, upon the basis of the information before it, feels that the issuance of the permit applied for would be incompatible nith tho public interes t and concurs in your recommendation that the permit be refused. You are requested to advise the applicant of the Board's position in the matter, unless there are pertinent 6/3 (04 -S- "facts which were not submitted with the application and which you feel should be given consideration. "In communicating with the applicant, please advi se him that, in accordance with Section V (g) of Regulation L, consideration will be given to any additional facts or argument s not appearing in his application and accompanying forms which he feels should be brought to the Board's attention. In this connecti on, please advise the Board promptly as to whether itir. Lindquis t desires to submit any additional data, and, if not, as to what steps he proposes to take in order to comply with the provisio ns of the Clayton Act. "If you deem it advisable or necessary, you are authoriz ed to inform Mr. Lindquist that the Board's action upon his application was based largely upon his apparent responsi bility for the unsatisfactory loaning policies of the National Builders Bank of Chicago and upon the fact that obligations of himself, his family and/or his interests in the National Builders Bank of Chicago classified as slow, doubtful and/or loss indicate , an abuse of the credit facilities of that bank. In view of these circumstances, the Board has not given consider ation to the question Of whether the service of Ur. Lindquist as Lanager of the Busi ness Development Division of the City rational Bank Trus and Comp t any Of Chicago and as Chairman of the Board of the National Builders Bank of Chicago invo lves a conflict of interests inimical to the welfare of either or both institut ions. If reconsideration of this application is desired, you are requested to develop full Information in this connection." Approved. Letter to ljr. Stevens, Fede ral Reserve Agent at the Federal 1.0serire Bank of Chicago, reading as follows: "You will find incl osed Clayton Act permit and copies thereof issued by the Board to Ur. M. Kenn edy to servo as director of New First Lational Bank in New Hampton, New Hamp ton, Iowa, and as director of F'rmers and Traders Savings Bank, Bancroft, Iowa. "Information obtained from the files of the Comptroller of the Currency indicates that apparent violations of Section 5209, United States Revised Statutes on the part of officers of the Lew First National Bank in New HEmpton base d upon transactions ivolving 'bond trad es' have been repo rted to the United States t)?istr ict Attorney. Inasmuch as Ia.. Kennedy is not an officer of it Las m u ed that the apparent violations reported do n(rt i invo hn: lve It Boar in this • matter,d feels, however, that, if the applicant is involvcd definite information regarding its disposit ion :2:r. 1998 00/34 -9- "should be obtained bofore the permit issued under the provisions of the Clayton Act is released. If it is ascertained that he is not so involved or that the matter has been duly considered and closed without prosecution, you are authorized to release the inclosed permit to lir. Kennedy and transmit copies thereof to the banks involved, at the same time furnishing the Board complete information with respect to the disposition of this case in order that its records may be complete. "It is assumed that in accordance with your report the nonattendance of the applicant at directors' meetings of the Farmers and Traders Savings Bank will be brought to his attention. "The Board also desires that when you submit your recommendation as a result of your annual review of this permit you report fully as to the applicant's attendance at directors' meetings and 'whether any violations of the law by the applicant or officers and directors of the New Hampton bank have been reported." Approved. Letters to applicants for permits under the Clayton Act, advising of approval of their applications as follows: 14. . . Frank W. Allen, for permission to serve at the same time as a director of The Mid-City National Bank of Chicago, Chicago, Illinois, and as a director of the Suburban Trust and Savings Bank, Oak Park, Illinois. 11r. T. W. Robinson, for permission to serve at the same time as a director of the City National Bank and Trust Company of Chicago, Chicago, Illinois, as a director of the South Chicago Savings Bank, Chicago, Illinois, and as a direc tor of the Personal Loan and Savings Bank, Chica go, Illinois. Dr. S. C. Dean, for permission to serve at the same time as a director and officer of The Le Flore County Natio nal Bnnk of Poteau, Poteau, Oklahoma, and as a direc tor and officer of the State hank & Trust Company, Hove, Oklah oma. Lr. H. h. Ostenberg, for permi ssion to serve at the same time as a director and officer of The Scottsbluff Lational Bank, Scottsbluff, Nebraska, and as a direc tor and officer of The First National Bank of Bayard, Bayard, Nebra ska. Mr. W. H. Ostenberg, Jr., for permission to serve at the same time as a director of The Scott sbluff National Bank, Scottsbluff, liebraska, and as a director of The First National Bank of Bayard, Bayard, Nebraska. Approved. 1 1999 6/30/34 -10- Thereupon the meeting adjourned. CAA-AC Secretary. Approved*
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