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1622 A. meeting of the Executive Committee of the Federal Reserve Eoard vas held in Washington on Monday, June 4, 1934, at 3:00 p. m. PRESENT; Mr. Mr. Mr. Mr. Black, Governor Hamlin James Szymczak Er. Morrill, Secretary Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Martin, Assistant to the Governor The Committee considered and acted upon the following matters: Memorandum dated May 31, 1934, from Mr. Goldenweiser, Directer of the Division of Research and Statistics, recommending the ap- P°illtrient of Mr. John 0. hergelin as research assistant in the diviai°42 Ilith salary at the rate of v2,800 per annum, effective June 4, 1934 'subject to his passing a satisf actory physical examination. The reee mmendation was approved by six members of the Board on June 2, 1934 . Approved. Telegram dated June 2, 1934, approved by six members of the 130ard 4_ BRalk Of Lr. 71-ood, Federal Reserve Agent at the Federa l Reserve St. Louis, reading as follow s: re "In view of information contained in your letter May 24 Br5ardl.ag service of Mr. Stuart Wilson as member of Red River noldge Distri ct Commission, Board is of opinion that service is c?ntrary to spirit of Board's ruling of December 23, 1915, vall interpose no objection to Er. ;iilson accept ing the apPolttment. " Approved. artd 1.10morand dated May 29, um Sa 1934, from Committee the la ri on es E)Tenditures, submitting a letter dated May 25 from Yr. Walsh, 1623 6/4/34 -2- Chairman of the Federal Reserve Bank of Dallas, which requested apPr°Iral of a change in the personnel classification plan of the bank tO PrQvids for a change from "comptometer operator" to "reserve deficiencY Clerk" in the title of a position in the accounting departThe memorandum stated that the commit tee had reviewed the ProPosed change and recommends that it be approved. Approved. Letter dated Juno '2, 1934, approved by six members of the Board, to Stevens, Federal Reserve Agent at the Federal Reserve Ban ofk. Chicago, reading as follows: "The Board has reviewed the information submit ted with the 1,10101ication of the 'Fountain State Bank', Fountain, Michigan, lor membership in the Federal Reserve System. "It has been observed that the bank suspended business F pebrnary 11, 1933, operat resume and ions on Novembor 27, 1933, d 1-00110-wins a reorganization involving a 100 per cent assessment t!1 the stockholders and a 50 per cent waiver of deposits, and : Mt while the information submitted would indica te that the ;sset condition of the bank followlng the reorganization is vnsonably satisfactory with a high degree of liquidity, the 0';'Ilme of business is small, the bank has no surplus account and n'Y a snall amount of undivided profits, and is under the same gement and direction as formerly. The application has been transm itted with a recommendation Of the st elral committee appointed by the Board of Directors of the peas Reserve Bank of Chicago to pass upon applications of dera banks for membership that 'action on the application be yetterred until the bank has been in operation for at least one and has again been examined by a Federal reserve bank exardner.1 x,75 "As stated in the Board's letter of September 11, 1933, diniela, it has been the consistent policy of the Board not to 4.11 t a bank to membership unless the Federal reserve bank and `.1-18 ederal acco Reserve Agent have recomended such admission. In not ruance With its expressed policy theref , ore, the Board does mie. licati Founta the of State on in Bank for member slp 1.1313r::ethi: andIoYOU la are requested, therefore, to communicate with the bank the withdrawal of its application, in Waich event, a•-•"4 6/4/34 -3- tt although the application itself and the accompanying papers will remain part of the Board's files, no adverse action there°n Will be taken by the Board. If, at a later time, you feel that the Board mould be justified in again considering the matuer, the Board will be glad to do so upon your recommendation, ,ocompanied by a new application and a current report of examl nation." Approved. idernorandum dated May 23, 1934, from Mr. Wingfield, Assistant Uoun stating that the Division of Examinations had called his attemtion, as a possible violation of the provision of section 22(g) ofthe Federal Reserve Act, to the fact that it appears from the alataysis of the report of examination as of October 7, 1933, of the Interboro Bank and Trust Company of Prospect Park, Pennsylvania, that the icsarl of a vice-president of that bank has been renewed with the ilielusion of interest on such loan. The memorandum suggested that, l'Or the reasons set forth therein, the Board would be justified in lact reporti g 11 cases of this kind to the Department of Justice; and that no action be taken in the instant case by the Board. Suggestion approved. Letter to Mr. Newton, Federal Reserve Agent at the Federal R"erve Bank of Atlanta, requesting advice with regard to certain mattel'8 e°11114ented on in the report of examination of the Greene County Greenevine, Tennessee, as of December 27, 1933. Approved. 4ser Te le6ram to Li.. Newton, Federal Reserve Agent at the Federal '91) Lank of San Francisco, reading as followm: 4- 1625 -4.. "Re Sargent's letters Lay 24, and 29, 1934 regarding concltion prescribed in connection with the establishmen by the t v1st Security Bank of Idaho, Boise, Idaho, of a branch at Shelley, Idaho. Comments in Board's letter of January 8, 1934, stating that in connection with the establishment of the oth?,r branches of the First Security Bank of Idaho a valuation reserve as defined in the letter would be considered compliance with the condition regarding elimin ation of losses and depreciation are -1-Icevise applicable in this case. In this connection refere nce ls made to the Board' s letter Larch 13, 1934 regarding the general question of valuation reserves." Approved. Letter dated June 2, 1934, approved by six members of the board, to Mr. O'Connor, Comptroller of the Currency, reading as follows; "In accordance with the recommendation of Acting Comptr oller of the Currency Await, the Federal Reserve Board approv es ;13. reduction in the common capital stock of 'The Tipp National tr : Of lippecanoe City', Tippecanoe City, Ohio, from 640,000 ti; v50,000, pursuant to a plan which provides for the use of eu:!.released capital in eliminating substandard assets and sedepreciation and the consolidation of the subject bank Citizens National Bank of Tippecanoe City, all as set orth in Acting Comptroller Awalt's memorandum of May 25, 1934." Approved. Letter dated Juno 2, 1934, approved by six members of the Leard, to 11r. O'Connor, Comptroller of the Currency, reading as follows tio "In accordance with Acting Comptroller Amalt's recommendaco the Federal Reserve Board approves a reduction in the IdsT,M°n caPital stock of the 'First Nation al Bank in Meridian', P1 idian 'Mississippi, from “00,000 to % 200,000, pursuant to a byalich provid es that the bank's capital shall be increased pilins ,000 of prefer red stock to be sold to the Reconstruction k;5(7ies Corpora tion, and that the released capital together with i4,1°00 from the surplus shall be used to eliminate a correspondof unsatisfactory assets, all as set forth in Li.. s letter of May 25, 1934 ." Approved. - 6/4/34 Letter dated June 2, 1934, approved by six members of the Board, to Er. O'Connor, Comptroller of the Currency, reading as follown: . "In accordance with Acting Comptroller Amult's recommendatlon$ the Federal Reserve Board appro ves a reduction in the common capital stock of llhe American National Bank of Gadsden', Gasden, Alabama, from .,;200,000 to v125,000, pursu ant to a plan ! Alloh provides that the bank's capital shall be increased by '' 5 000 of preferred stock to be sold to the Reconstruction inane° Corporation, and that the released capital shall be used to eliminate approximately c30,000 of unsatisfactory assets and to set up a reserve of v45,000 against doubtful items, all as set forth in Lai-. Awalt's letter of Lay 23, 1934." Approved. Letter dated June 2, 1934, appro ved by six members of the board, to Lir. O'Connor, Comptroller of the Currency, reading as followz n, ler A -Ln accordance with the recomrendation of Acting ComptrolAwait, the Federal Reser the ve Board approves a reduction in ett e ,ommon capital stock First National Bank of Lariof 'The a $ Larietta, Georgia, from ,100,000 to50,000, pursuant to b l'an which provides that the bank's capital shall be increased pi "MOO of preferred stock to be sold to the Reconstruction ton:11!.ce Corporatio n, and that released capital shall be used the all aiminate a corresponding amount of unsatisfactory assets, s set forth in Acting Comptroller Awalt's letter of 'Lay 25, 1934. It In c onsiderinr, the plan under which the reduction in com.0 cat " al stock P1 is to be effected, it was noted that no provl.4i 3 Inade for a chan-e in the management although the examiner reD aes the present management and states in the examinatio 141-cr e -cj t'that n there is some question in his mind mhether President off ! eY Should be rotai ned in the bank as its chief and executive : ap1 " 6 It has been noted from the report of examination that tied"imatelY '11,900 of the loan of President Lasse y is classi,'s doubtful by the examiner and that no interest is Paid (1 being cendl ill the loan. It is assumed, however, that you have this se YOU 111°11 in mind and that whenever it becomes pract feasiicabl ble to e."do ti11 effect such corrections as may be C:17' Approved. 1_627 6A/34 Letter dated June 2, 1934, approved by six members of the Board, to Mr. O'Connor, Comptroller of the Currency, reading as 2ol1nm4 PLeceipt is acknowledged of Lr. Awalt's memorandum of May 21,.1934, with reference to the proposed reduction in common tl.pa.tal stock of 'The First National Bank of Ripon' , Ripon, 4isconsin, from :;300,000 to ,/150,000, and the sale of ,;150,000 preferred stock to the Reconstruction Finance Corporation, which wasapproved by the Board on January 31, 1934. ILI'. Await advises that the bank desires to change its :tzinal plan to provide for the sale to the Reconstructi on Irance Corporation of ,120,000 of preferred stock instead of as originally contemplated, and recommends that the 4)0ard approve the proposed reduction of ,;30,000 in the amount Of PTerred stock to be sold. . Since the report of examination of Larch 13, 1934, shows 14 Improvement in the condition of the bank to the extent that surplus will be unimpaired, whereas on the basis of the 'c'carlanation report of April 7, 1933, which was the report under s cnslderation in connection with the original plan, there would el have been an impairment of approximately ii46,000 in the bank's cellir1 .1°11 capital, and inasmuch as the bank will have adequate ,,Ttal in relation to its deposits, the Board, in accordance Awalt's recommendation, approves the amended plan profor the sale of only :,;120,000 preferred stock, as set forth inMr. Await's memorandum of 21, 1934, with the undert411dinc that the other provisions of the plan remain unchanged." r 4 Approved. Letter dated June 2, 1934, approved by six menbers of the 1308.r lows I to" I O'Connor, Comptroller of the Currency, reading as fol- ti "In accordance with Acting Comptr oller Awalt's recoranenda0023 the Federal Reserve Board approv es a reduction in the ci : m11 capital stock of 'The Fideli ty National Bank of Oklahoma t'Y , Oklahoma City, Oklahoma, from c;300,000 to '150,000, purialklat to a plan which provides that the bank's capital shall be cocrea8ed by 300,000 of preferred stock to be sold to the lererruction Finance Corporation and/Or others, and that the tn,!) ,!;s°(1 capital shall be used to eliminate losses and sub— assets in the amount of approximately c100,000 and to r 6/4/34 -7- "set up a reserve for depreciation of $50,000, all as set forth in Lir. Alt's memorandum of Lay 18, 1934." Approved. Letter dated June 2, 1934, approved by six members of the I412*(1' " 0 141.0 O'Connor, Comptroller of the Currency, reading as fol- "In accordance with Acting Comptroller Awalt's recommenda/1, the Federal Reserve Board approves a reduction in the .rm ' i°23- capital stock of 'The Hoisingten National Bank', Hoising;ion,.Kaneas, from ;';50,000 to 125,000, pursuant to a plan which Provldes that the bank's capital shall be increased by the sale °f v25,000 of preferred stock to the Reconstruction Finance Cor1)oration and that the released capital shall be used in eliminatlng a corresponding amount of losses and substandard assets, all "set forth in Lr. Avalt's memorandum of May 18, 1934." Approved. Telegram to Mr. Newton, Federal Reserve Anent at the Federal 480 TO Bank of Atlanta, stating that the Board has given considerat the application of "Hamilton National Associates, Inc.", hattanoott, Tennessee, for a voting permit under the authority of seetioa 5144 of the Revised Statutes of the United States, as amended, eh titling such organization to vote the stock vthich it awns or controls the following banks: 'he rirst "7r First National Bank of Cartersville", Cartersville, Gear gia National Bnnk of Loudon", Loudon, Tennessee 11,i_ke en National Bank of Morristown", Morristown, Tennessee "° 6ational Bank of Pikeville", Pikrille, The First : Yirst Lational Bank of South Pittsburg', South13"Pittsburg, T ennessee ti;t National Bank in Harriman", Harriman, Tennessee 11,6 First National Bank of Lenoir City", Lenoir City, Tennessee i" ° Hamilton National BAnk of Chattanooga", Chattanooga, Tennessee 41°4 has eubjeet aUthorized the issuance of a limited permit to the applicant, tO the following condition: 1629 6/4/34 -8- "Prior to the issuance of the limited voting permit hereby authorized applicant shall re-execute and deliver to you in the !lanner customarily employed with respect to agreements executed 3:11 fulfillment of a condition of the issuance of a limited votIng permit, the identical agreement called for by the Board's A?GIGAR telegram to you dated January 9, except that in the first sentence of clause (a) the date 'September 1, 1934; shall be substituted for 'April 1, 1934,'." and for the following purpose; "10 act, at any time prior to September 1, 1934, upon a IlroPosal or proposals to authorize an increase in the capital lunds of each such bank and to do all things necessary for such PurPose, provided that such proposal or proposals shall be in accordance with a plan or plans which shall be satisfactory to the C omptroller of the Currency and the Federal Reserve Agent at 'he Federal Reserve Banlr of Atlanta." The telegram stated also that, Prior to the issuance of a permit enthe n aPplicant to vote on a proposal to reduce the capital stock of any of its subsidiary member banks, the details of the plan °I* Plane for such reduction should be submitted to the Comptroller of the currency and the proposed reduction should be approved by the Of the Currency and by the Federal Reserve Board. The telo ''ram authorized the agent to have prepared by counsel for the Federal r eserve oink, and to issue to Hamilton National Associates, Inc., d 6- voting permit in accordance with the telegram When the condiPr s e er.Lbed therein has been complied with. Approved. Telegram dated June 2, 1934, approved by six members of the 13°Itrd, to Lir , 44:k of -• ,eyton, Federal Reserve Agent at the Federal Reserve lainneaPolis 2 stating that the Board has given consideration te the a ,, 1-cation of the "First Bank Stock Corporation", Linneapolis, 4' 1.630 6/4/34 -9Ili411"cta, for a voting permit under the authority of section 5144 cr the Revised Statutes of the United States, as amended, entitling such or ganization to vote the stock which it owns or controls in the , NaLional Bonk of Valley City", Valley City, North Dakota, and 43 author ized the issuance of a limited permit to the applicant for the following purposes: "At any time prior to August 1, 1934, to act upon a proposal ar propos als to create, issue and sell to the Reconstruction Finance Corporation preferred stock of such bank having a Par valof fifty thousa nd dollars (50,000) and to reduce the rion stock of such bank from one hundred thousand dollars 'il°°,000) to fifty thousand dollars (050,000) and to make such !Illiendments to the articles of association of the bank and to take such other action as may be necessary to carry out such Pul a l )eeee; such proposal or proposals to be in accordance with . Nan or plans which shall have been approved by the appropriate ?,upervisory authorities and shall be satisfactory to the Federal 4eserve Agent at the Federal Reserve Bank of Minneapolis." r The tel°gram also authorized the agent to have prepared by counsel ter the Federal reserve bank, and to issue to the First Bank Stock 4rPorati0_, IL a limited voting permit in accord ance with the telegram. Approved, together with also dated June 2, 1934, and six members of the Board, to Comptroller of the Currency, follows: a letter, approved by Mr. O'Connor, reading as ti "In accordance with Acting Comptroller Awalt's recommondac °11, the Federa l Reserv e Board approves a reduction in the vcrinallIon caPital stock of the 'First National Bank of Valley City', to a. North Dakota, from 1.00,000 to A0,000, pursuant Plan which er - Plan provides that the bank's capital shall be inzteased byq50,000 of preferred stock to be sold to the ReconXtlon Finance ahr Corporation, and that the released capital fctes. be used to eliminate a corresponding amount of unsatisf orthrY inassets mi.. , or to set up reserves therefor, all as set Await's memorandum of May 17, 1934." Letter, o :linthrop W. Jadrich, Chairman of the Board of 6/4/34 -10- Directors of The Chase Bank, New York, New York reading as follows: "There is inclosed a copy of the report of examination of the Head Office of The Chase Bank, New York, as of the close of business December 4, 1933. The figures pertaining to the f?reign branches shown in the consolidated statement of condition have been obtained from reports submitted by the branches." 4proved. Letter dated June 2, 1934, approved by six members of the 13(41 to 14r. Charles C. Clough, Comptroller of the Lanufacturers , -°mPany, New York, hew York, reading as follows: "On account of the pressure of other matters arising in conn"tion -with the Banking Act of 1933 the Federal Reserve Board ras unable to give prompt consideration to the question presented !,your letter of October 18, 1933, in which you requested a nt; of the Board as to whether the L:anufacturers Trust Corn11 Y pay interest on a deposit of public funds of the GovernOf Puerto Rico or of a city in Puerto Rico which is payable derand; and We regret to find that no reply has as yet been ilkide to the letter. um ihe answer to the question which you raised depends upon hether Puerto Rico is to be considered a State within the manAxle; of that word as used in Section 19 of the Federal Reserve 'ce't relating to the payment of interest on deposits payable on -'.d an whether the law of Puerto Rico is to be regarded as 4.nulring the payment of interest on public Ponds deposited in Lanufacturers Trust Company. If the matter is one upon p2ell You still desire to have an expression of opinion by the rai Reserve Board, the Board will be glad to have you subcoy 'if you care to do so, the views of the attorneys for your •PanY on theseueqtions as an aid in the Board's consideration ef the matter." q I T Approved. Letter to Lr. R. I. Fulton, Cashier of The County National 4t Cl earfield, Pennsylvania, reading as follows: re "Receipt is acknowledged of your letter of Yay 17, 1934 ! pc r4 1nG the right of your bank under the Federal Reserve fr,74 Regulation Q to allow the transfer of a savings account ?,ne depositor to another. You state that in accordance with Section VI of Regulation 1_632 -11your bank requires thirty days' notice of intended withdrawal from savincjs accounts, except that any depositor may withdraw A00 during any calendar month without such notice. You request to be advised whether, in view of this requirement, you may lawfully permit a savings depositor -whose account is in excess of the 0100 limit to divest herself of title to such account by a transfer thereof to a savings account, in the name of another depositor, provided that the new account shall immediately be subject to the above mentioned rule of the bank with respect to withdrawals from savings accounts. "Section 19 of the Federal Reserve Act provides that no member bank shall waive any requirement of notice before payment of any savings deposit except as to all savings deposits having the same requirement. iursuant to this provision of the statute, the Federal Reserve Board has prescribed in Section VI (a) of its Regulation Q that if a member bank requires notice before the PaYnlent of any portion or percentage of the savings deposits of any depositor, it shall require such notice before the payment of the care portion or percentage of the savings deposits of any Other depositor which are subject to the same requirement. Since Your bank requires thirty days' notice before the withdrawal of eunts in excess of ,,,100 during any calendar month, it may not ,T:ifully allow The withdrawal of the funds here in question tlhout requiring such notice, unless it should change its pracvre in this regard in accordance with the provisions of Section it Of Regulation Q. It appears that ihe transaction described Y°ur letter would in effect make available to the savings de'',?sitor the entire amount of the funds contained in his account '(1)11-3pout requiring notice of withdrawal, thus discharging the ation of the bank to the depositor, and that a new account the BRMO amount would then be opened by another depositor. opinion of the Board that such a transaction would con"tqs the c031:21te a Payment of the savings deposits in question and: act ,'nglY, that the transaction is not permissible in view of present practice of your bank to require notice of thirty u. , .)efore payment of other savings deposits of similar amounts. pe You state in your letter that the two brInks in Clearfield, wiltif,,,lvania, 'have agreed to require 30 days' notice of intended u4,:Lurawal from savings accounts except that any depositor may 18'1.41:11drom 0.00 during any calendar month without such notice.' tio of the requirements of a savings deposit set forth in Regulais that the depositor be 11,/ must be required, or may at any time wii4,quIred, e by the bank to give notice in writing of an intended -4.1urawo not less than thirty days before a withdrawal is made. j l not clear from the information sulmitted whether each bank writlearfield has reserved the legal right to require notice in aziou g of not less than thirty days before withdrawals of and 0.00 or less; and if the contract between the depositor the ank does not reserve to the bank the legal right to r Z 1Z 11_6(gz 6/4/34 -12require the requisite notice of withdrawal of amounts of -,2.00 or less, or if such bank may not change its practice in this resPeot without the consent of the other bank concerned so as to require the requisite notice of withdrawal, the amount which is not Subject to such notice may not be treated as a savings deposit within the meaning of Regulation Q upon which interest may lawfully be paid. On the other hand, if the bank at its option IsaY legally require notice in writing of not less than thirty daYs before the withdrawal of any part of a savings deposit, re gardless of the amount to be withdrawn, without cantravening any Provision af its contract with its depositor or its agreement with other banks, the entire amount of such deposit may properly be classified as a savings deposit if it otherwise complies with the definition in Regulation Q. If there is any question as to the ri-ht of your bank in this respect, it is suggested that consideration be given to the advisability of reT I Ising the contracts with depositors and agreements with other : Inks so as to make clear the bank's legal right at its option .utiol require notice in writing of not less than thirty days before withdrawal of any amount whatever of a savings deposit, iner that the entire amount of such deposit may properly be Clas0-Liled as a savings deposit upon which interest may lawfully be Paid. In this connection it appears that your bank requires thirty d notice of intended withdrawals from savings accounts (withtha" -Lbw —e exception above discussed) but you do not indicate -Lc; .'Ln°tioe in writing is required. Your attention is invited Re requirement with respect to savings deposits contained in thgu:Lation Q that the depositor may at any time be required by bank to give notice in writin . G. of not less than thirty days beei.oro a withdrawal is made : 7---- ord Approved. Letter dated June 2,Chaiapproved 1934, by six members of the ik)ard, to onator Pletcher, rman of the Committee on Banking and CUrr encY of the United States Senate, reading as follows: t refers to the letter of Lay 18. 1934, from the Clerk nP Acting 3632, -A Your stat e ntitled Committee, in which a report is requested on S. 'A Bill To amend section 5153 of the Revised to as amended'. The bill would authorize a national bank fuzu7s;17, satisfactory security for bankruptcy and receivership niteduePosited with it pursuant to an order of any court of the States. Itrld e Proposed 't°1114 have no mnendment would affect national banks only direct effect on State banks which are members 1634 ,11 6/4/34 of the Federal Reserve System. Accordingly, the question of the desirability of the enactment of the bill S. 3632 would apPear to be one primarily within the jurisdiction of the Comptroller of the Currency and a matter upon mhich it is unneces!arY for the Federal Reserve Board to express an opinion. nowever, the Board has no objection to the enactment of the bill." Approved. Letter to Senator Fletcher, Chairman of the Committee on Bankand Currency of the United States Senate, reading as follows: %his refers to the letter from the Acting Clerk of your _??Tamittee, dated May 14, 1934, inclosing a copy of S. 3596, en-LI-tied 'A Bill To amend section 21 of the Federal Reserve Act, krici for other purposes', and requesting a report thereon. The would amend said section 21 so as to authorize the Federal leserve Board or the Comptroller of the Currency, as the case TnaY be, to waive the requirements of the present law with re!Peet to reports and examinations of affiliates of member bprks anY case in which it may appear to the Board or Comptroller, tesPectively, that the report or examination is not necessary b:,11sclose fully the relations between the affiliate and the Itricl the effect thereof upon the affairs of the bank. . Section 9 of the Federal Reserve Act, as amended by the f:, L, , 141k1ng Act of 1933, requires each State member bank to obtain each of its affiliates other than member banks and furnish t--111 O the Federal reserve bank of its district and to the Federal R0 eserve Board not less than three reports during each year, and Publish such reports under the same conditions as govern its 041aljendition reports. Said section 9 also requires such examl as 1°n4 of the affairs of the affiliates of State member banks sullarll be necessary to disclose fully the relations between uanks and their affiliates and the effect of such relations pr the affairs of such banks'. Similar requirements are aparil eal-ae to national banks under the provisions , of section 5211 coL' 012 section 5240 of the Revised Statutes. The latter section 'usttutes section 21 of the Federal Reserve Act. fur The scope of the provisi ons requiring examinations and the marliltshing and publication of reports of affiliates depends pHtamedupon the definition of the term 'affiliate' -which is conderr in section 2 of the Banking Act of 1933. Under the bu_tilltion in that section, the term includes 'any corporation, is"'llees trust, associa tion, or other similar organization' which or r14ed or control led *through stock ownership by a member bank memjthe majority shareholders of a member bank, or of which a a. rin: r bank or its majority shareholders control the election of -J°r1t1 of the organization's directors, trustees, or other 1635 6/4/34 -14"persons exercising similar functions, or of which a majority of the organiza tions' directors, trustees, or other persons exercising similar functions are directors of a member bank. In an opinion rendered under date of September 7, 1933, the Attorney General of the United States considered the question Whether there may be excluded from the operation of the statute an organization related to the bark in some manner set forth in said section 2 on account of the nature of the business of the °rganization or the manner in which ownership or control VMS obtained a and stated that 'the only safe course is to assume t that the statute means just what it says', and that 'the executive department must accept the law as Congress has written it, ?:.?!-Iring it to Congress to correct by amendment any inequities win-lch may appear'. "In view of the fact that the statutor y test as to whether an organizat ion is an affiliate of a member bank does not depend Upon the kind of business in which it is engaged or upon the manner -n which ownership or control was established, it has been e cessary to rule in certain instance s that a newspaper, a sani°rium, hotels, cemetery associations, eleemosynary institut ions, and organizat ions engaged in various industrial enterprises were .,ffiliates of member banks, even though it appeared that the re:aTtienship of the affiliate to the member bank had no substantial r fect on the solvency, management, operations, policies, or cePutation of the member bank, and although in certain of these ot;es it appeared further that control of the organization was by the member bank through its acquisition of stock in all ! t101 effort to protect itself against loss on a debt previously e ntracted in good faith, or that the organization was an affiliateof the member bank solely by reason of the fact that a major(); of the organization's director s, trustees, or other persons thereising similar functions happened to be also directors of _(3 member bank. Moreover, since the requirements of lam with :Irpect to the furnishing and publication of reports of affiliBoes are in terms mandatory and neither the Comptroller nor the folefd is authorized to waive such requirements, it was necessar y fi;the l member banks to obtain and publish reports of such af' ctna ates and to furnish such reports to the Federal reserve banks rel :t t? the Federal Reserve board. In those cases in which the ferZ liZnshiP of the affiliate to the member bank was purely u--ous, the furnishing and publication of reports resulted 14 .1tTwarrant able expense to the member bank, in the accumulation 46 Federal reserve banks and in the offices of the Board of : zo niation which was of no value, and oftentimes in the public's reiX1Y associating the member bank with an organization whose effe, , /4)nshiP to the bank was wholly casual and of no substantial "on the bank. It is clear that in such cases the member balik burdened with unjustifiable trouble and expense to no useful Purpose, and that 14 Purpose, it was not in the public interest to Z 1636 6/4/34 -15- require the furnishing and publication of reports. For similar reasons, it is apparent that examinations of affiliates of that kind involve expenses whichare disproportionate to any possible benefits to be derived therefrom. "Although it is desirable that the definition of an 'affiliate should be broad, it is believed for the reasons set forth above that the provis requiring affiliates to make reports ions !t,nd to submit to examination should be discretionary with the board or the Comptroller, as the case may be, in order to avoid ?fmsequences which are undesirable and not in accord with what -11(3 Board believes the intent of Congre ss to have been in enacting the present law. Accordingly, the Board is in favor of the enactment of the amendment proposed in the bill S. 3596 for this Purposes" Approved. Letter to lir. Worthington, Deputy Governor of the Federa l ReServe 0f Kansas City, reading as follow s: It is acknowledged of your letter of April 25, 1934, in which you submit certain questions arising out of the acquisition by the Federal Reserv e Bank of Kansas City of bonds °Iof the Federal Farm Mortgage Corporation and bonds of the home b;4ejsi Loan Corporation. You state that such bonds are acquired --e bank on accoun t of 'debts previously contracted', and you ' 0111P1Y that the bonds have maturities at the date of acquisition b more than 6 months and are ineligible for purchase by the liter . under the provis ions of section 14 of the Federal Reserve YOU desire to ea know whether there is any objection to your 1TYing the bonds so acquir ed in your investment account. bvLilk :E the bonds are taken for the purpose of protecting the cainst loss on debts previously contracted o in good faith bp, In compromise of doubtf ul claims, it is the opinion of the rd that in such circumstances the bank may lawfully acquire partseeurities and that they may thereafter be carrie d as a that °f its assets. Furthermore, it is the view of the Board %not necessary for the bank to dispose of such securi tjlees a specified period of time, but the Board feels that : ;t 1 : h 18) .:uld dispose of any such bonds which are ineligible under the provisions of section 14 as soon as tleab1e and within a reaso mble time after the acquisition sarae by the bank. auch You also request to be advised as to the manner in which queajeourities should be shown on Form 34. Since the bonds in Seet41°11 are not eligible for purchase under the provis ions of tierl : °11 14 of the Federal Reserve Act and were acquired in setdebts previously contracted, it is suggested that for 4 1_637 6/4/34 -16- the present they be reported on the Daily Balance Sheet, Form 34, among 'Miscellaneous assets' against the caption 'Bonds accepted in settlement of indebtedness'." Approved. Letter to Mrs George S. ilovey, President of The Inter-state °nal Bank, Kansas City, Eissouri, reading as follows: "Receipt is acknowledsed of your letter of May 8, 1934, the Board's letter of May 1, 1934, which stated that tt Ivati unable to grant your application under Section 32 of the "anking Act of 1933 for a permit to serve at the same tine as il esident and director of The Inter-State National Bank, Kansas altY, Lissouri, and as a director of Brown-Grummer Investment "pa, Y, Wichita, Kanoas. The Federal Reserve Board has considered the statement in Your letter that The Inter-State lational Bank is located in the Stockyards and that its business consists largely of receiving eel!"its from other banks and making loans to live stock interos s• Your statement that you have not recently expressed an 13131nlon to a prospective purchaser concerning the bonds of the rrcnin-erumaner Company has also been noted. The Board has also rrelved a letter from nr. McClure giving further information ''' gar V-lag your services. However, the action upon your application was taken purc't_4alit to a general policy which the Board adopted in order to ThrY.out the purposes which it believes the Congress had in .ln enacting Section 32, as stated in my letter of May 1, 1-!.; feels that permits should not be granted covering such 10 ninshiPs even though the particular applicant has not al11147' nis interest in a securities company to influence his judg' Ilnd actions as an officer or director of a member bank. make In the circumstances, the Board does not see how it can an exception in our case, and therefore has denied your EPPlicatione n CO V Approved. Letter to Lr, Newton' Federal Reserve Agent at the Federal Bank of San Francisco, reading as fellows: orr,_ iie Of 32 of If. l'ederal Reserve Board has considered the applications Jones, R. E. Jenney, and Frank G. Belcher under Section arld4, the Banking Act of 1933 for permits to serve as officers ' -r directors of The First National .rust and Savin:;s Bank of 1638 6/4/31 -17"4.n Diego, and as officers and/Or directors of T. A. Hutchinson (!' Company, both of San Diego, California. The Board has also c onsidered a similar application of F. J. Belcher, Jr., for a Permit to serve as president and director of the above mentioned bank, as director of the Los Angeles Branch of the Federal Reserve Bank of San Francisco, and as director of T. A. Hutchinson CamPany. "From the information contained in the answer to Question 2 of F. R. B. Form 99a, it appears that T. A. Hutchinsen. C?111Pany is engaged in a brokerfq;e business consisting of the purse and sale of securities on behalf of others in the open market. "In of April view of the principles discussed in the Board's letter 13, 1934 (X-7860), it appears that Section 32 is not aPPlicable to the relationships in question, and unless there are other facts which you believe should be called to the Board's attention, you may so advise the applicants. "Incidentally, it should be noted, in connection with the !Pplication of Mr. F. J. Belcher, Jr., that the provisions of :ection 34 apply only to menbor banks, and hence are not appliable to a branch or a Federal reserve bank. "It does not appear from the applications and accompanying Papers whether or not T. A. Fittchinson Company makes loans secured bY stock or bond collateral, either in connection with the of margin accounts or othomdse. It will be appreciated if Yc'u will ascertain whether the company makes such loans, and to Y(3 ' 1 find that it does, please call the applicants attention the fact that Section 8A of the Clayton Act forbids interlockrelationships between national banks and organizations which ) such loans. In this connection, reference is made to the Atu'lng Published at page 244 of the Federal Reserve Bulletin for Prilu1934, and to the Board's letter of April 50, 1934 (X-7884). P it is noted that in the answer to Question No. 5 on F. R. B. -orin On ide „ "42 it appears that F. J. Belcher, Jr., is serving as presn and director of Garrettson Investment Company, San Diego, :ornia, and as director of The Pacific Company, Los Angeles, Ireet,,,°Illia, both of which are engaged in. the business of 'in13?ntc 1, and as president and director of Demur & Company, that California, engaged in the business of 'securities'; Jones is serving as a partner of Jones & Fowler, San °tog°, California, and as a director of Dewar Company, San both of which are engaged in the business of DI itties T; and that F. G. Belcher is an officer and director : Of the b"" & Company, San Diego, California, which is engaged in the , u3'lless of 'securities'. It is assumed you have in mind Plic;Ti ility that the provisions of Section 32 may be apcom , e In connection with the applicants' service to these atioa 4111 Approved. -47 Ar‘tr73 -18Letter to Er. Peyton, Federal Reserve Agent at the Federal Recerve Bank of Minneapolis, reading as follows: "This refers to your letter of May 21, 1934, relative to t I r.h Clayton Act application of Earl Tt. Harrington of Plainview, ,a.nnesota, to serve at the same time as an officer and director of the First National Bank of Plainview, and the Dakota State Bank, Dakota, Minnesota. You state that the Dakota State Bank 1148 been absorbed by The Merchants Bank, Winona, Einnesota,'and at although the Dakota State Bank is not conducting a banking usirTse. it still continues as a corporate entity. If the Dakota State Bank makes no new loans secured by Ztock or bond collateral within the meaning of Section CA of ,he Clayton Act, it will not be necessary for 1.1r. L' obtain a Clayton Act permit covering such relationship. Haringtohj In e.connection it is Iraflerstood that the relationship of Mr. 'aarra..ngton. described above does not otherwise fall within the provzsionn of Section 8 of such Act." itp Approved. Reeerve Letter to Mr. kfcClure, Federal Reserve Agent at the Federal 16ank of Kansas City, reading as follows: th "This t e Claytonrefers to your letter of May 16, 1934, relative to Act permit of 1dr. H. a. Pratt, Hastings, Nebraska, erve at the same time as officer and director of the First ate. Ne Bank of Hastings, and the State Bank of Juniata, Junibraska. You advise that the State Bank of Juniata has merged with the Prosser State Bank, Prosser, Nebraska, 44L'Inoved to K enesaw, Nebraska, its name being changed to the op:111 ?°untY Bank, Kenesaw, Nebraska, and that such bank is ren-' 1nL', under the charter of the State Bank of Juniata. You celtrt to be advised whether the change in name and location for ,e Juniata Bank will necessitate a new Clayton Act permit ' Pratt. La. J tZ cha"Inamauch as the mere change an of title by a bank does not , the legal or the entity of the corporation, it is not necessary ch directors, officers or employees of banks which merely th: 43 their names to file new applications for permits under provisions of the Clayton Act. However, if the chaw;e in elloh loca‘ion of the Juniata bank to Kenesaw, Nebraska, will bring liactibank into competition with the First National Bank of lickit : gs, consideration should be siven to the question of rethe Permit already issued to Mr. Pratt." Approved. 164.0 6/4/34 -1SLetters dated June 2, 1934, approved by six nenbers of the Board, to applicants for permits under the Clayton Act, advising of 4Proval of their applications as follows: 'Cathryn Belts, for permission to serve at the same time as an 7m0 : 0yee of The First National Bank of Mishawaka, Mishawaka, , 1,1dlana, and as an employee of the First Trust & Savings Bank, vashavaka, Indiana. 14 " GeOrge Yrs Blair, for permission to serve at the same time ; 8 a director of The First National Bank of Mishawaka, Mishawaka 17 liana, as a director of the First Trust & Savings Bank, p.al,havaka, Indiana, and as a director of the North Side Trust oavings Bank, Mishawaka, Indiana. Esther E., Bumiller, for permission to serve at the same time an employee of The First National Bank of Lashauaka, hishaaka, Indiana, and as an employee of the First Trust & Savings 16ank, Mishawaka, Indiana. ! C. A. Bresch, for permission to serve at the same time as a dlreetor of The First National BR* of Mishawaka, Mishawaka, Indiana, as s director of the First Trust & Savings Bnnk, hisha!aka, Indiana, and as a director of the North Side Trust & Savlugs Bank, Mishawaka, Indiana. 14r. Elmer E. Faller, for permission to serve at the same time Lan 61110-oyes of The First National Bank of Mishawaka, hisha41 Indiana, and as an employee of the First Trust Savings Idshawaka, Indiana. : 1.71 :aleGeorge kio, as an kas anks r E. Greelt, nawa for permission to serve at the same employee of The First National Bank of Mishawaka, II .Idiana, and as an employee of the First Trust & SavMishawaka, Indiana. 4 J. Laing, for ' permission to serve at the same time as a illd.ctor of The First National Bank of Mishawaka, Mishawaka, 170,1 1e-11a' as a director of the First Trust & Savings Bank, lasha.41 Indiana, and as a director of the North Side Trust & ngri Bank, hishawaka, Indiana. *. A. j Major, for permission to serve at the same time dire, f as a tash1-1."°r and officer of The First hational Bank of Lishawaka, s 141 ' 4, Indiana, as a director and officer of the First Trust of Z11.114"s Lank: Mishawaka, Indiana, and as a director and officer 0 Lorth Side Trust & Savings Bank, Mishawaka, Indiana. 1841 6/4/34 -20- E. J. Robinson, for permission to serve at the same time aS an employee of The First National Bank of Mishawaka, hishallaka, Indiana, and as an employee of the First Trust & Savings Bank, lishawaka, Indiana. A. J. Schindler, for permission to serve at the same time as a director of The First National Bank of Lishawaka, Lishaka, Indiana, as a director of the First Trust & Savings Bank, 'Ishawaka, Indiana, and as a director of the North SiCe Trust & i,avinge Bank, Mishawaka, Indiana. D°nald B. Smith, for permission to serve at the same time Is an officer of The First National Bank of Nishaunka, Yishawaka, r1.1diana, and as an officer of the First Trust & Savinc,s Bank, .11shawa ka, Indiana. 11r. Fred N. Smith, for permission to serve at the same time as ector and officer of The First National Bank of Nishawaka, 4: 1144.17uka, Indiana, as a director and officer of the First Trust „-avings Bank, Uishawaka, Indiana, and as a director and ofJ-lcer of the North Side Trust & Savings Bank, Mishawaka, Indiana. Francis E. . - alters, for permission to serve at the same time officer of The First National Bank of Lishamaka, Mishawaka, ri.idiana, and as an employee of the First Trust & Savings Bank, uzshavaka, Indiana. 1 /3 an 17. E AA -nuams, for permission to serve at the same time as a Isireotor and officer of The First National Bank of Deadwood, Belldwood, South Dakota, and as a director of The First National ank of Lead, Load, South Dakota. Ur. Robert E. Driscoll, for permission to serve at the same time Leadeetor and officer of The First National Bank of Lead, tio , South Dakota, as a director and officer of The First Naof t I18 "1, 1 Bank of Deadwood, Deadwood, South Dakota, and as a director 6 Bank of Spearfish, Spearfish, South Dakota. 14r, Ra , A Carlton U. Gorder, for permission to serve at the same time Southofficer of The First National Bank of Deadwood, Deadwood, f t s i l l d a Zt aa . s a director of the Bank of Spearfish, Spearish, 0 1, 4c•a plc uarraugh, for permission to serve at the same time 'recter and officer of The First National 1114,.,_ -L11.1ul Bank of Philip, 3, South -Late JJankas r, Dakota, and a director and officer of the Farmers , Dupree, South Dakota. ki 6 J, C. T helson, for permission to serve at the sane time as a P 6/4/34 -21director and officer of the Bank of Spearfish, Spearfish, South Lakota, and as a director and officer of The First National Bank of Philip, Philip, South Dakota. Approved. Letters to applicants for permits under the Clayton Act, adn g Of approval of their applications an follows: Geo. C. Pullinveider, for permission to serve at the same ; , 13-rne as a director and officer of The National Bank of Huron, "uron, South Dakota, and as a director and officer of the Hitchcock State Bank, Hitchcock, South Dakota. Lr. EX Royhl, for permission to serve at the same time as a otirector and officer of the First National Bank in Arlington, Arlington, South Dakota, as a director and officer of The Sodi01.1rity National Bank of Huron, Huron, South Dakota, and as a rector Slid officer of the Hitchcock State Bank, Hitchcock, uouth Dakota, Approved. ahere were then presented the follomins applications for lictia•Ces ia stock of Federal reserve banks: lications for ORIGINAL Stock: 4strict No. 4. the Arcanum National Bank, Arcanum, Ohio kztrict No. 7. ilational Bank of Battle Creek: Battle Creek, Lichigan itict No. 10. lationa 'aak in Lamar, Lamar, Eissouri Shares 36 36 720 720 36 Total 36 792 Approved. Thereupon the meeting adjourned. 4PProved: Secretay. over or.
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