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1290 A meeting of the Federal Reserve Board was held in Washington 04 Tuesday, June 4, 1935, at 11:30 a. m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Governor Thomas, Vice Governor Hamlin Miller James Szymczak Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary The minutes of the meetings of the Federal Reserve Board held on may 18, 21 and 22,1935, were approved. The Board then acted upon the following matters: Letter dated May 29, 1935, from Mr. Sproul, Secretary of the Federal Reserve Bank of New York, advising that, at the meeting cat the board of directors on that date, no change was made in the bank, 6 existing schedule of rates of discount and purchase. Without objection, noted with approval. Memorandum dated May 29, 1935, from Mr. Morrill, recommend- the temporary appointment of Miss Lucy E. Fulwiler as a steno- her in the Secretary's office for a period of three months, " wtt4 salary at the rate of 125 per month, effective as of the date 415c11 which she enters upon the performance of her duties. Approved. Letter to Mr. O'Connor, Comptroller of the Currency, reading 48 follows: 129 6/4/35 —2— "Your letter of May 15, 1935, advising that you have apPointed Mrs. Theresa MennP1 as a money counter in the Federal Reserve Issue and Redelimbion Division with salary at the rate 01,5a) per annum to fill the vacancy caused by the death of Mrs. M. C. Mulvihill, was received by the Board on May 28, 1935. "The Federal Reserve Board approves the salary at the rate of 4,500 Per annum for Mrs. Mennel, effective June 1, 1935. The Board is advised that Mrs. lennel is a contributing member °f the Civil Service Retirement Fund and as such will not be eligible for membership in the Retirement System of the Federal Reserve Banks. Accordingly, the Board aill not require that she pass the physical examination usually re,uired of new em910Yees in connection with membership in the Retirement System of the Federal Reserve Banks." Approved. Letter dated May 31, 1935, approved by five members of the oard, t° Mr. Stevens, Federal Reserve Agent at the Federal Reserve Bazik of Chicago, reading as follows: "Reference is made to your letter of April 19, 1935, transmyttillg an unfavorable recommendation of the Reserve Bank Com1111-L ee in connection with the application of 'The Farmers State of Alto', Alto, Michigan, for membership in the Federal Reserve System. Your letter of April 23, 1935, addressed to Mr. ha amlln with regard to the question of general policy involved 10 8 also been brought to the attention of the Federal Reserve 'oard. "It appears to the Board that the Committee's adverse reco -n dation is based largely if not entirely upon the following statement contained in the statement of general principles aptl,lcable to the consideration of applications for membership in Federal Reserve System which was submitted to the Federal Reserve Agents' Conference held at Washington in August 1933: "'Careful consideration should be given in each case to the needs of the community for the banking facilities to be Provided by subject bank, and to the probability of the successful operation of the bank in view of all circumstances Involved in the particular case.' of "The minutes of that Conference show thHt such statement mi , Principles was acceptable to the Conference, with certain Or Changes which did not refer to the paragraph quoted above, the statement of principles is set out in the minutes of the 6/4/3s -3"Conference. Subsee:uently, the statement of Principles was revised and amnlified in the light of the discussions during the Federal Reserve Agents' Conference nnd transmitted to the Agents in the Board's letter of September 11, 1953 (L-7581). In this revision, there was added to the statement quoted above the following sentence: "'In this connection particular ceneideration should be given to the circumstances involved in any reorganization of the applicant bank which has occurred within a short time Prior to its application for admission to the system, and attention is called to the Board's letter of August 21, 1933 (X-7556), with regard to applications involving such circumstances.' "You will recall that at the time the various supervisory authorities were devoting much time and effort in connection 7ith the reorganization of banks which had not been licensed at the close of the banking holiday. There were, moreover, considerable doubts as to the extent to which banks reorganized with vlaiver of deposits would be able to retain or gain the confidence of. depositors. The Boerd, therefore, felt that particular consideration should be given to these cases, and the statement just above quoted was included in the statement of general principles as contained in the Board's letter of Seotember 111 1933. be . "While you have not recommended what modifications should in the general principles quoted above, you have indicated that YOU you fPel that the Federal Reserve Agents should not be reest to give consideration to the probability of the successi Operation of State banks applying for admission to membership n the Federal Reserve System in view of the fact that there may be c numerous applications from banks the situation of which is omparable to The Farmers State Bank of Alto. have "The Board feels that both it and the Federal Reserve Agents responsibility in acting on applications of State banks for membership in the Federal Reserve System to consider all of he s ubstantiel factors having a bearing on the financial condith°11 of the bank at the time of its admission to membership and e Ill&sintenance of a sound financial condition. The Board, therefore, does not feel that it may properly instruct its Agents that they need not give consideration to the probability of the sucHos8ful operation of a bank applying for admission to membership. : rn ever, it appears that there is some misapprehension as to the isctning of the Board's Present instructions on this point. It ertemPleted that this is a feature which the Federal Reserve l s may not properly overlook in giving consideration to applie ' 111,, 1°ns for membership, but it is not expected that the recommen dation of approval of a bank's application carries with it a p 1293 6/4/35 "warranty that the bank will be successful. On the other hand, Where the facts involved clearly indicate that the operations of the bank cannot be successful and will result in its insolvency and loss to its depositors, the Board would not be justified in giving its approval to the admission of the bank to membership in the Federal Reserve System. It is the Board's understanding of its instructions that the Federal Reserve Agents, in formulnting their recommendations on applications for membership, will have a reasonable latitude in reaching a s0111 d judgment on this as well as other questions involved in aPPlications for membership. "As pointed out in the statement of general principles cpcivering the admission of State banks to membership, no rigid 11111ln can be prescribed for the admission of State banks to 1°1 ' Federal Reserve System, but consideration should be given to all of the facts involved in each particular case. In this co nnection, it may be helpful to you to describe briefly the circumstances involved in the following case which has been acted upon by the Board and which appears to be comparable to the case of The Farmers State Bank of Alto. f "The bank referred to, which is situated in a strictly arming community, was admitted to membership in the System in ‘?vember 1933, and at the time of an examination in connection 71th its application for membership, had a capital and surplus . 8 gregating .29,000 as compared Kith total deposits of ';77,000. deposits at the end of each of the five years from 1930 to ,)L1 have fluctuated between a high point of :122,000 on Decem' 1'er 31, 1930, and a low Point of 155,000 on December 31, 1933. fn 1927, the bank was reorganized under a plan which orovided b°r,a 50 percent waiver of deposits. The Agent advised that the : 114 was well managed. For the years 1928, 1929, and 1930 the on Paid substantial dividends out of net earnings. The Fedt al Reserve Agent at first submitted this case to the Board on oue basis of its being a test case for his guidance in acting aPplicatiens of other small banks similarly situated. Hower, after he was advised that it would be preferable to subthe application on the merits of the particular case, he sjiewed the facts involved, including the probability of the 01?ces3ful operation of the bank, and recommended that its apJ-cation be approved. 'During the last two years several other applications for membership by banks with deposits of a00,000 or less have been e*PProved. The "Wh'le it appears from the last report of examination of tamers State Bank of Alto that at that time it had deposits 1294 -5-.. "of approximately only 95,000, it has been observed from the .nformation submitted in this case that its deposits on the fol-cwing dates indicated have been as follo•As: 46'290,000 December 31, 1929 261,000 June 30, 1930 242,000 December 31, 1950 223,000 30 1931 June 203,000 December 31, 1931 191,000 June 30, 1932 185,000 December 31, 1932 181,000 February 14, 1933 (date of closing) "It has also been observed that The Farmers State Bank of Alto was organized in 1904 and that the examiner who made the examination in connection with its application for membership concluded his remarks with the following statement: "'This appears to be a moderately rich agricultural community and the town appears to have a reasonably extensive territory which should sustain it as a small trading center which will continue to require banking service. The town and consequently the bank apparently will not Prosper 4ithout a reasonable restoration of farm prosperity. That the _bank once prospered_is a.ttested by the statement that it regular cash dividends of from 5% to 20% after_its_first S21..-ve.,zears of oRprations.amq ja_120_%_csh_diviclend1918, been oaid_in_1923.iTh_tdividend is said e examineris report also shows that there are no assets classified as doubtful or loss, that the bank has an unimpaired Pital equal to more than 25% of its deposit liabilities, and at it has a very high ratio of liquidity. "On the basis of the information which you have submitted, the Boor feels that you would be justified in making a favorle recommendation and is willing to approve the application ' 4110n receLot of such recommendation." 1 Approved. Letter to ;Ir. Case, Federal Reserve Agent at the Federal ReBank of New York, reading as follows: "Reference is vide to your letter of May 23, 1935, transmit the request of 'The Summit Trust Company', Summit, New T -ing uer it seY, for an extension of time to July 1, 1936, within which maY comply with the provisions of membership condition 6/4/35 -6- "numbered 18 which reads as follows: Not later than July 1, 1954, such bank shall dispose of any stock it holds in the Summit Title and Mortgage Guaranty Company and shall not thereafter hold any stock in such company, directly or indirectly, through any device whatever.' "The Summit Trust Company has also requested that it be Permitted to continue to act, until July 1, 1936, as trustee in connection with bonds or other obligations issued by the Summit Title and Mortgage Guaranty Company even though the exercise of such function is prohibited under the provisions of membership condition numbered 19 which was accepted by the bank at the time of its admission to the System. The Bo-:rd, on June 28, 1934, extended to July 1, 1935, the time within which The Summit Trust Company might comply with the provisions of membership Condition numbered 18 and also within which the bank might be Permitted to continue to act as trustee in connection .r,iith bonds or other obligations issued by the Summit Title and 14ortgage Guaranty Company. "In view of all the circumstances and your recommendation, the Board extends to July 1, 1936, the time within which The Summit Trust Company may comply with the provisions of memberCondition numbered 18 and extends also to July 1, 1936, the time within which The Summit Trust Company may continue to a,?t as trustee in connection with outstanding bonds or other °ulig'itions issued by the Summit Title and Mortgage Guaranty Pany with the understanding, of course, that the bank will c entinue to act as trustee for the Summit Title and Mortgage , 1 11arant,Y Company only in connection with obligations which had 'een issued by the title company prior to the time of the bank's admission to membership. "It is requested that you advise the bank of the Board's action in the matter." Approved. Letter dated May 31, 1935, approved by five members of the 8cjarid, to Mr. McAdams, Assistant Federal Reserve Agent at the Federal ilerve Bank of Kansas City, reading as follows: "Reference is made to your letter of May 20, 1935, regarde contract entered into May 9, 1935, under the terms of 71,? the ' 1 n-eh the 'First State Bank of King City, Missouri', agreed to ran the Citizens National Bank of King City :;40,000 to be used 'V the national bank in paying off its depositors in a program 1296 6/4/35 -7- "of voluntary linuidation. It has been noted that some weeks previously the First State Bank discussed with you a plan under consideration for assuming the deposits of the Citizens National Bank and that at the time you called the attention of the bank to the necessity, under the provisions of general condition of membership numbered 1, of obtaining the permission of the Board before the bank committed itself to such a orogram, and that in order to avoid any possible delay the contract dated -4alY 9 was devised by counsel for the First State Bank with a view to handling the transaction in such a way as to eliminate the necessity of securing the advance approval of the Federal Reserve Board. Counsel for the Reserve Bank, however, has stated that, in his opinion, the contract as drawn is of such character as to require consent by the Federal Reserve Board under the conditions of membership. "It is understood that the First State Bank did not assume any liabilities of the Citizens National Bank under the contract but agreed to loan the national bank W,000 in order to enable it to deposit with a bank at St. Joseph, Missouri, sufficient cash to pav all of the liabilities of the Citizens National Bank to depositors and other creditors. It is understood, however, that the First State Bank anticipates that it will be able to acquire a substantial amount of the deposits of thC national bank, and the contract provides for certain payments to the national bank in case the State bank is able to retain such deposits for a time. "You state that you have no question as to the soundness 0f the loan made by the First State Bank to the national bank •'n.d that you consider the elimination of one of the two banks in king City a constructive move inasmuch as the banking business of the community for the past several years has not been m°re than sufficient to enable one bank to operate Profitably, and you recommend that the Federal Reserve Board grant permis.T on to the First State Bank to enter inte the contract provided fle transaction is considered b the Board to have been entered into in violation of condition of membership numbered 1. "Without undertaking to pass unon the question of whether the transaction covered by the contract referred to is of such la..nature , as to require the approval of the Board under the proions of general condition of membership numbered 1, in viea l '!f the circumstances and your recommendation, the Board will terPose no objection to the transaction provided it has been awected in accordance with the applicable provisions of State R . In this connection it has been noted that counsel for the aeserve Bank has raised the question of the validity of the greement in view of the fact that, contrary to the provisions n r 6/4/35 v "of State law, the agreement provides for the compounding of interest more often than once a year. Counsel for the Reserve Bank has also called attention to the fact that the loan is in excess of the loan limits nrescribed by State law and has suggested that the bank obtain the approval of the State Finance Commissioner for the loan. It will be appreciated if you will advise the Bo-rd if such approval and the supplemental contract to correct the defect in the original agreement relative to compound interest have been obtained as suggested in your letter of May 20, 1935, to the bank." Approved. Letter tonThe Peoples National Bank of Patchogue", Patchogue, New York, reading as follows: "This refers to the resolution adooted on February 15, , I=935, by the board of directors of your bank signifying the 'ankts desire to surrender its right to act as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies other corporations which come into competition with national yanks are permitted to act under the laws of the State of New " . )rk, as authorized by the Federal Reserve Board. "The Federal Reserve Board understands that your bank has never exercised its right to act in the trust capacities enumerated above, and that it has not assumed any duties in such capacities. The Board, therefore, has issued a formal certifi?ate to your bank certifying that it is no longer authorized -t? exercise any of the fiduciary powers covered by the provions of section 11(k) of the Federal Reserve Act, as amended. 'rlis certificate is inclosed herewith. "In this connection, your attention is called to the fact th0+ under the provisions of section 11(k) of the Federal Reerve Act, as amended, when such a certificate has been issued ul the Federal Reserve Board to a national bank, such bank (1) 4"11 no longer be subject to the provisions of section 11(k) ! the Federal Reserve Act or the regulations of the Federal heserve Board made pursuant thereto, (2) shall be entitled to j 7e returned to it any securities which it may have deposited lth the State or similar authorities for the protection of Private or court trusts, and (3) shall not exercise any of the ' P°Ivers covered by' section 11(k) of the Federal Reserve Act 6/4/35 It except with the permission of the Federal Reserve Board." Approved. Letter to Mr. Case, Federal Reserve Agent at the Federal Re- sel"ve Bank of New York, reading as follows: . "Reference is made to Assistant Federal Reserve Agent D'llistin's letter of May 22, 1935, recommending approval of a proposed reduction in the common capital stock of 'The Bank of Farmingdale', Farmingdale, New York, from !-)75,000 to $45,000, pursuant to a plan which provides for the sale of ,15,000 of new common stock at a premium of capital0_ 0,000; the retirement of the bank's present Class 'B 1 debentures in the amount of !'25,000; the transfer to surplus of the $30,000 of released capital and the10,000 Premium to be received from the sale of new common capital stock, and the elimination of all estimated losses and et depreciation in securities amounting to approximately 61/426,700, as shown by the report of examination a cf J nu737L, 17, 1935. "The Board has considered the information submitted, as well as the condition of the bank as reflected in the last report of examination, and, in accordance with Mr. Dillistin's r?commendation, approves the reduction in common capital stock, with the understanding that none of the released capital or Premium from the sale of new common stock will be returned to re stockholders, but will be used to eliminate approximately 26,700 of unsatisfectory assets and to augment the bank's surraus, profits or reserves; that the transaction has the approval of the Banking Department of the State of New York, and thatZ your counsel has considered the case and is satisfied as ,° the legality of the proceedings in connection therewith. 't will be appreciated if you will forward copies of any amendinents to the bank's charter which may be adopted in connection With the reduction in capital." Approved. Letter to Mr. O'Connor, Comptroller of the Currency, reading e.2 follows: r, "Receipt is acknowledged of Mr. walt's supplemental memoof May 22, 1935, in regard to the proposed reduction in Pital of 'The First National Bank and Trust Company of Talden', 1299 6/4/35 -10- "Walden, New York, from 100,000 to 50,0001 which was approved 10,5r the Board on March 1, 1935, pursuant to a plan which provided for the use of the released capital in eliminating a corresponding amount of undesirable assets. "It is understood that a report of examination of the bank, made as of April 81 1935, shows the condition of the institution to be materially improved and therefore a modification of the requirement previously imposed in regard to charge-offs or eliminations to be made, is desired. "In accordance with Mr. Awalt's recommendation, the Federal Reserve Board amends its previous approval of the proposed plan °f capital reduction to provide for the use of the released capital in the following manner: $201000 to be credited to the bank's surplus account; t251000 to be used as a credit to eliminate a like amount of unsatisfactory assets, and $51000 to be Placed in a reserve for contingencies account, all as set forth in Mr. Awaltts supplemental memorandum of May 221 1935." Approved. Letter to Mr. O'Connor, Comptroller of the Currency, reading as follows: "In accordance with Acting Comptroller of the Currency Awalt's recommendation, the Federal Reserve Board approves a educt±0 Ln the common capital stock of 'The First National auk of Harrison', Harrison, New York, from 05,000 to715001 ursnant to a plan which provides that the bank's capital shall e. increased by the sale of *1701000 of Class 'A' preferred ,ock to the Reconstruction Finance Corporation and $301000 of ,lase '131 preferred stock to local interests, and that the re-Leased capital, together with the institution's surplus and lndivided profits accounts, shall be used to eliminate estimated 88es as shown in the report of examination as of March 18, , 12, 4-05, all as set forth in Mr. Awalt's memorandum of May 22, 193s. t t I "In considering the plan under which the reduction in common capital is to be effected, it has been noted that the estimated losses exceed the aggregate of released capital, surl?lus and undivided profits by approximately $7,5001 resulting a capital impairment of that amount, and that securities depreciation unprovided for in the amount of approximately b °,600, if considered as a loss, will further impair the ank l s capital. It is assumed, however, that this condition 1300 6/4/s5 "1S receiving the attention of your office." Approved. Letter to Mr. O'Connor, Comptroller of the Currency, reading as follows: "In accordance with the recommendation of Acting Comptroller Await, the Federal Reserve Board approves a reduction in the common capital stock of 'The Franklin National Bank of Jersey CitY'y Jersey City, New Jersey, from i',400,000 to $150,000, pursuant to a plan which provides that the released capital shall 1?e used in eliminating e250,000 of the least desirable assets in the bank. all as set forth in Mr. Awalt's memorandum of May 22, 1935.n " Approved. Letter to Mr. O'Connor, Comptroller of the Currency, reading "follows: "In accordance with the recommendation of Acting Comptroller of the Currency Await, the Federal Reserve Board approves a reduction in the common capital stock of 'The Rutherford National Bank; Rutherford, New Jersey, from i,500,000 to 200,000, Pursuant to a plan which provides for the issuance and sale of 45300,000 of preferred stock to the Reconstruction Finance CorPorstion or others, and for the use of the released capital in s i_liminating a like amount of the least desirable assets in the !?anky all as set forth in Mr. Awalt's memorandum of May 17, 1935.ft Approved. Letter dated May 31, 1935, approved by five members of the 13° I'd, to Mr. Stevens, Federal Reserve Agent at the Federal Reserve 1111k Of Chicago, reading as follows: "Reference is made to Mr. Young's letter of May 18, 1935, and to the previous correspondence between your office and the Bo ard in regard to the question of the capital sufficiency of 'lie Grosvenor Savings Bank', Jonesville, Michigan, the 1301 6/4/35 -12- reorganization of the bank in March, 1934, having resulted in a decrease in the amount of its capital stock from 50,000 to 42,700, the amount collected by a 100 per cent stock assessment levied against the old capital stock. It is understood that the bank has recently sold 2,300 of capital stock, making a total capital of $35,000, that your office has requested a conference with the management regarding a further increase to $50,000, but that it is doubtful whether the additional capital C9n be raised. "As stated in the Board's letter to you of August 27, 1934, a reduction in capital stock by a member bank below the amount required for the organization of a national bank in the same Place constitutes a violation of the requirements of the Federal Reserve Act for which the bank's membership in the System be forfeited, but the question whether such action should be taken is one of policy for the Board's consideration in view of all the circumstances involved in the particular case. "On April 16, 1935, you were advised that, in view of all the circumstances, no action on account of the reduction of 2aPita1 of The Grosvenor Savings Bank would be taken by the Board for 90 days from the date of that letter. The report of namination of the bank as of April 3, 1935, which has since been received, showed no assets classified as doubtful or esflated losses, and net sound capital equal to 13 per cent of the deposits, which amounted to 286,000. "In a letter dated May 14, 1935, regarding a somewhat cornParable situation in the case of the Bank of Lakeview, Lakeview, 1chigan, the Board stated that no action would be taken at that time affecting the membership of the Bank of Lakeview by Vason of the reduction of capital from 440,000 to 30,0001 and Young asks whether, in view of that letter, you are to as,T,ILIme that no action will be taken affecting the membership of ' 'Oe Grosvenor Savings Bank if it is unable to raise the add!41-0nal capital by July 15, 1935. Any future action affecting 1'111e membership of The Grosvenor Savings Bank will be dependent 2°11 circumstances existing at the time. However, if no cireumstances have arisen by July 15, 1935, to alter the situation and if such a course would be in accordance with your recommendation the Board would not be disposed to take any action a 13tt. that time affecting the membership of The Grosvenor Savings reilk bY reason of the reduction of the capital stock in the wi ganization. It will be expected, however, that the bank 1' maintain at all times a capital structure which is adequate in • relation to its liabilities." Approved. 1302 e/4/35 -13Telegram dated May 31, L:335, approved by five members of the Board, to Mr. Curtiss, Federal Reserve Agent at the Federal Reserve Bank of Boston, reading as follows: "Re telephone message from Mr. Gilson concerning 'Menotomy Trust Company', Arlington, Massachusetts, time specified in condition numbered 20 of the conditions of membership of such bank within which 'Old Colony Trust Associates', Boston, shall obtein a general voting permit is hereby extended to December 1, 1935. Please advise Old Colony Trust Associates and the bank accordingly." Approved. Telegram to Mr. Case, Federal Reserve Agent at the Federal ve Banka of New York, authorizing him to issue a limited voting Pe111111t to "Financiel Institutions, Inc.", Warsaw, New York, entitling alleh °rganization to vote the stock which it owns or controls in "The 7 c) • 111311g county National Bank of Warsaw", Warsaw, New York, at any tjfle ,-. I'lcr to August 1, 1035, to act upon a proposal or proposals to eleate and issue common and/or preferred stock and to reduce common Stock ) and to make such amendments to the articles of association, el. and/or by-laws of such bank as may be necessary for such pur')such proposal or proposals to be in accordance with a plan or VietS which shall be satisfactory to the Federal Reserve Agent at the ?ciel'a-1 Reserve Bank of New York, and which shall have been approved the a ppropriate supervisory authorities. The telegram also stated tilat the Board had accepted the agreement executed by the applicant 111141 'date of May 24, 1935, two executed copies of which had been 1303 6/4/35 -14- received, and, accordingly, no conditions were imposed in connection With the issuance of the limited permit. Approved. Letter to Mr. Peyton, Federal Reserve Agent at the Federal Reserve Bank of Minneapolis, reading as follows: "Receipt is acknowledged of your letter of May 15, 1935, with reference to the application of Marshall-McCartney Company, Oakes, North Dakota, for a voting permit authorizing it to vote the stock which it owns or controls of The First National Bank of Oakes, Oakes, North Dakota. "It is noted that the limited voting permit authorizing Marshall-McCartney Company to vote such stock for the election Of directors and on routine matters at the bank's annual meeting at any time prior to April 1, 1935, was not issued pursuant to the Board's telegram of December 13, 1934, because that cornpanY did not comply with the prescribed conditions until after aPril 1, 1935. It appears that the bank held its annual meeting c l January 8, 1935, and information obtained from the office of f e Comptroller of the Currency indicates that Marshall-McCartney °mPany voted its stock at that meeting although it had not secured a voting permit. The Board concurs in the opinion of your c°unsel that the issuance of the permit at this time would have no effect and would not validate any action taken at the annual meeting which may have been void because the voting permit was !lot issued. In the circumstances, the Board believes that it is hOt necessary for it to take any action in the matter at this tine "In order that it may be determined whether the holding °mPany affiliate status of Marshall-McCartney Company has been ! 37rminated, it will be appreciated if you will obtain the fol?wing information concerning the ownership of the outstanding 8'ock of The First National Bank of Oakes and the last election .?! directors of such bank, which it is understood was held at 41e annual meeting on January 8, 1935: ' 1. Number of shares of each class of stock voted at the meeting for the election of directors. "2. (a) Number of shares owned or controlled and number of shares voted by applicant at the election. (b) Number of shares now owned or controlled by the r applicant. 1304 6/4/35 -15(a) Number of shares owned by the Reconstruction Finance Corporation and voted at the election. (b) Holder of the proxy for the stock owned by, and voted for, the Reconstruction Finance Corporation and by whom it was exercised at the election. (c) Connection, if any, which such person or persons, who exercised such proxy, had with the bank and/or the applicant. (d) Instructions, if any, given by Reconstruction Finance Corporation or any of its agents regarding the manner in which the stock owned by it should be voted. A copy of the letter or letters of instructions should be obtained. (e) Provisions, if any, contained in the proxy concerning the manner in which the stock owned by Reconstruction Finance Corporation should be voted for the election of directors. A coqy of the proxy containing any such provisions should be obtained. "4. Number of shares of each class of stock now outstanding.“ Approved. Letter dated May 31, 1935, approved by five members of the Beard, to Mr. Sargent, Assistant Federal Reserve Agent at the FedReserve Bank of San Francisco, reading as follows: "Receipt is acknowledged of your letter of May 14, 1935, in closing the application of Lincoln Securities Co., Toledo, 1?7Ti?con, for a voting permit authorizing it to vote the stock lch it owns or controls of The First National Bank of Toledo, ' ciledo, Oregon. "It appears that a conservator was appointed for the bank 011 March 27, 1933; that the conservator applied for cancelation _3-1 the stock of the Federal Reserve Bank of San Francisco owned 0 1°" 1.1. the bank; that such stock was canceled and the membership the bank in the Federal Reserve system was terminated on May 1934; that the bank was succeeded by The National Security ' r tnk of Toledo; and that the Comptroller of the Currency has inuested the Lincoln Securities Co. to secure a voting permit °rder to vote the stock of the closed bank to place such Ilk in formal liquidation. "In a letter of July 21, 1933, to the Comptroller of the 1 47rr.., , 6/4/35 -16- "Currency, a copy of which was furnished to you (X-7519), the Board ruled that a corporation owning or controlling stock of a national bank which was not a member of the Federal Reserve system was not a holding company affiliate of such bank and was not required to secure a voting permit in order to vote such stock. Accordingly, it is not necessary for Lincoln Securities Co. to s ,ecure a voting permit authorizing it to vote stock of The First Lational Bark or Toledo and it is assumed that no consideration need be given to its application. It is requested that you so advlse that company and the bank. This matter has been discussed with members of the staff of the Comptroller of the Currency and a coPy of this letter is being furnished to that office." Approved. Telegram to Messrs. Stevens and Peyton, Federal Reserve Agents at the Federal Reserve Banks of Chicago and Minneapolis, respectively, reading as follows: "Reference is made to Board's wire of May 31, 1035 re order of Banking Commission or State of Wisconsin prescribing maximum role of interest of 2 percent which may be paid by State banks, ' ,1 savings banks, or trust company banks subject to Wisconsin 1(JuL1 16anking Statutes after July 1, 1935. In view of provisions of !ection 24 of Federal Reserve Act and of the order of Banking ;ommission adopted May 27, 1935, it is the opinion of the Board that maximum rate of interest which has been prescribed by such after July 1, 1935, be the 'maximum rate authorized b' -7 law' to be paid upon time or savings deposits by State banks °r trust companies organized under the laws of Wisconsin within meaning of section 24 of the Federal Reserve Act. AccordflaY, the rate of interest accruing after that date and during 'ne period such order is legally in effect which a national bank Other member bank located in that State may lawfully oay on ' ,e or savings deposits may not exceed the rate of 2 percent oer .1-11 11111-111 prescribed in such order of the Banking Commission. It is belleved desirable that notice to this effect be given by you v thout delay to all member banks in your district located in Ir'.1e.State of Wisconsin, calling attention to the applicable proof section 24 of the Federal Reserve Act and to subsecRI°11 (cM of section III and nd subsection (c)(3) of section V of gulation Q, as well as to the provisions of the order of the aar , ,iking Commission. The order of the Commission does not prevent Qtate bank from 'laying interest at such rate as may be provided l e 1306 6/4/35 -17- "for in any contract 'now existing' and, accordingly, the Federal Reserve Board will not object to payment of interest by a national bank at a rate greater than 2 percent per annum in accordance with the terms of, and until the termination of, any contract existing on the date on which such bank receives notice from you of the limitation effective after July 1, 1935, provided such rate iS otherwise in conformity with the provisions of Regulation Q and the contract is terminated as soon as possible under the terms thereof. Under the provisions of section 210 of H.R. 7617, Passed by the House of Representatives, the pertinent provision of section 24 of the Federal Reserve Act would be repealed; but it is believed that it would be confusing to the member banks and therefore inadvisable to advise them of this possibility in ?onnection with your notice of the reduction in rate by the Banking Commission of Wisconsin." Approved, together with a letter to Mr. S. N. Schafer, Commissioner, State Banking Department of Wisconsin, reading as follows: "Receipt is acknowledged of your letter of May 28, 1935, inclosing a copy of an order recently issued by the Banking Cornof the State of Wisconsin, reducing the maximum rate of Interest which may be Paid by banks in Wisconsin on time and „'Irings deposits to 2 percent per annum after July 1, 1935. e Federal Reserve Agents at the Federal Reserve Banks of ,hicago and Minneapolis have been requested to notify the memoer banks in their respective districts in the State of Wisconsin Of the order of the Banking Commission and of the fact that national banks may not after July 1, 1935 pay interest on time and deposits at a rate in excess of 2 percent per annum, wIth an exception as to contracts 'now existing' as provided in 'with the order." e Letter dated May 31, 1935, approved by five members of the 8"I'd 't0 the chairmen of all Federal reserve banks, reading as follOws: "The Board will appreciate it if you will send to it cur-Y clippings from or copies of matter in the nature of ;2111ment, articles or speeches published in newspapers, business financial publications in your district which come to your ention from time to time having a bearing upon industrial n activities under Section 13(b) of the Federal Reserve Act. T 1307 6/4/35 -18- "The Board does not ask that you set up any new activity in Your bank for this special purpose but having no doubt that such material usually comes to your attention assumes that it Will not be an added burden for you to comply with this request. The Board feels that an opportunity to see such material will be helpful to it." Approved. Letter dated May 29, 1935, approved by five members of the Board) to the chairmen of all Federal reserve banks, reading as follows: "The Board has been advised by Mr. H. F. Strater, Secretary ?f the Retirement System, that the Board of Trustees of the Re.1 - .rement System of the Federal Reserve banks at its meeting held un April 16, 1935, passed the following resolution: RESOLVED that, subject to the approval of the Federal Reserve Board, the employing banks of the Retirement System be requested to bear the traveling and subsistence expenses of the members of the Board of Trustees and members of committees necessarily involved in operating the Retirement System.' f. "The Federal Reserve Board has authorized the payment by its jscal agent of traveling and subsistence expenses, incurred in ending meetings of the Board of Trustees of the Retirement 1 1 tem and committee meetings connected with the operation of the irement System, of its appointee on the Board of Trustees and the member of the Board of Trustees elected by its employees, 7.4 until further notice approves the payment by your bank of 16:)lmilar expenses of members of the Board of Trustees appointed Your bank or elected by employees of your bank." Approved. Memorandum dated May 16, 1935, from Mr. James, recommending 11114'°/74.1 of the following letter to Mr. H. F. Strater, Secretary of the Retirement System: "This is to advise you that the Federal Reserve Board, on :17,29 1 , 1935, approved the changes in the Rules and Regulations 'he Retirement System of the Federal Reserve Banks adopted by 1308 6/4/35 -19"the Board of Trustees of the Retirement System at its annual meeting on April 16, 1935, as outlined in the excerpt from the minutes of that meeting inclosed with your letter of May 3, 1935 "Copies of this letter are being sent to Mr. M. J. Fleming, Chairman of the Board of Trustees, and to Mr. L. R. Rounds, Chairman of the Retirement Committee of the Retirement System." The memorandum also stated that some consideration has been given to the des irability of authorizing the Federal reserve banks to make silecial contributions for the purpose of providing supplementary retire%ent allowances for employees involuntarily separated from the servic e before the attainment of age 65, either because their services are n„ ' longer required or because they have ceased to render satis4ctor/r -.I service through no fault of their own, and inquired whether the B °4rd desired to have a definite recommendation submitted to it on thi8 subject. The letter was approved by five members of the Board on May 29, 1935, and it was decided that the Committee on Salaries and Expenditures should be requested to submit to the Board a recommendation on the matter last referred to above. t41,ee Letter to Honorable Usher L. Burdick, House of Representa1 reading as follows: 19 "This refers to a letter written to you under date of May re '1935 by Mr. Peter Mite of Jamestown, North Dakota, with ce lp?ct to charges exacted by certain banks in cashing and refor deoosit checks of the United States Government. Mr. ie t states that banks in Jamestown are paying at par checks of tri.??rtain private corporation but are discriminating against the st"sd States Government checks. He also stated that the United rates Postmasters are not permitted to keep on hand sufficient ""ds to cash all Government checks. Mr. White's letter was e 1309 6/4/35 -20"forwarded to the Board with the request that the statements "Ilerein contained be investigated and information furnished you in order that you might reply to the letter. . "The imposition of collection charges by a bank which is /either a member of the Federal Reserve System nor a depositor in a Federal Reserve bank is of course not within the control of the Federal Reserve Board and even banks which are members of the System are Permitted by the provisions of the first paragra-Ph of section 13 of the Federal Reserve Act to impose reasonable charges not exceeding 107(t. per 0.00 or fraction thereof for the collection or paymPut of checks and drafts provided that no TIch charge is made against a Federal Reserve bank. Accordingly ,1?'ere is nothing in the law to prevent a member bank, if it deto do so, from making a collection charge in an amount c't exceeding that stated, with respect to United States Governnt checks, as well as with respect to other checks, if such ''larges are not made against a Federal Reserve bank. Under the a i-aw the Federal Reserve Board is empowered to regulate the h t of such charges within the limit specified but the Board uas issued no such regulations. ttim lane possibility of payment of United States Government by United States Postmasters is a matter entirely outside w,.Te jurisdiction of the Federal Reserve Board, with respect to "len no opinion is here expressed. and "A copy of this letter is inclosed for your convenience in accordance with the request on the printed forwarding 113 received by the Board, the original of Mr. Mite's letter s returned to you herewith." 2 Approved. Letter to Rear Admiral C. J. Peoples, Director of Procurement, sment Division of the Treasury Department, reading as follows: dr "Reference is made to your letter of April 23, 1935, adtoes ,fsed to the Chairman of the Federal Reserve Board in regard. fo,,; ! i e Order approved by the President on April 12, 1935, setting su- .1.1 the responsibility of the Procurement Division, Branch of ti21Y, with reference to the policies and methods of coordinaesi:;,and consolidation of the functions of the various Government dis ishments relating to the Procurement, warehousing, and (,r1bution of commodities. sist "As it is the desire of the Board to cooperate when it conan with other agencies of the Government, Mr. J. C. Assistant Secretary of the Federal Reserve Board, who 1310 6/4/35 -21"Customarily handles these matters, has been designated as its authorized representative to act in a liaison capacity, with Whom you may communicate concerning the transaction of business between your division and the Board." Approved. Letter to Mr. Fletcher, Acting Federal Reserve Agent at the Ne„ , ' ell Reserve Bank of Cleveland, reading as follows: "Receipt is acknoxledged of your letter of May 8, 1935, relating to the question whether under certain facts an affiliate r elationship exists within the meaning of section 2(b)(2) cf the Banking Act of 1933. 'You state that certain shareholders of a member bank own °r control more tirvin 50 per centum of the number of shares voted at the last election of the bank's directors and also own or cOntrol more than 50 Der centum of the number of shares voted at the but 1espreceding election of directors of a business corporation than a majority of the outstanding shares of stock of Such business corporation. Sour letter does not state whether the shareholders in queetio voted their stock at the next preceding elections of ;t!eetors of the member bank and the business corporation. In tl?1-8 c that aonnection, you are advised that the Board recently ruled holding company affiliate relationship did not exist i7er the provision of section 2(c)(1) of the Banking Act of th°3 ''which owns or controls directly or indirectly * * * more ti*41 50 per centum of the number of shares voted for the elecvo,°11 cf directors of any one bank at the preceding election', s el'e the possible holding company affiliate did not vote the ,°ek which it owned or controlled at the preceding election of fl''Ll'eotors of the bank. sis_ Your specific inquiry is whether it is necessary for the 0';'4 eholders of the member bank to own or control a majority -°le outstanding shares of stock of the business corporation in 114°rder for that corporation to be one 'of which control is othu) directly or indirectly, through stock ownership or in any e,,er manner' by such shareholders of the member bank. Consido ng the quoted provision in the light of the other provisions bel ections 2(b) and 2(c) of the Banking Act of 1933, the Board sho-T703 that it is clearly the intent of the law that control 1 be deemed to exist where the shareholders owning or contro11.1 btlaik-L1ng the required number of shares of stock of the member °'"1 or control and voted more than 50 percent of the shares 1311 6/4/35 -22b v ted for the election of directors of the business corporaat the preceding election. If, in the light of this letYOU, desire a further ruling by the Board on the particular case which you have in mind, please furnish full information c°11cerning all the facts having a bearing on the question." Approved. Letter to Mr. Sargent, Assistant Federal Reserve Agent at the Federal Reserve Bank of San Francisco, reading as follows: "This refers to your letter of May 13, 1935, relating to ur application of First Security Corporation of Ogden, Ogden, .:"811, for a voting permit authprizing it to vote the stock which owns or controls of certain banks and submitting information with reference to the possible termination of the holding comPanY affiliate relationships. "The Board understands that First Security Bank of Utah, N.A ph "has outstanding 6000 shares of preferred stock and 4000 ; -ares of common stock; that at the time of the bank's 1935 , nnual meeting First Security Corporation of Ogden owned or conrolled 3898.8 shares of the common stock and that it now owns or controls 3901.2 shares of such stock; that all of the pre''rred stock was and is owned by the Reconstruction Finance ZPoration; that at the bank's 1935 annual meeting 3920.8 star?! of common stock and all of the shares of the preferred se°c''', or a total of 990.8 shares, were voted; and that First e ,Leurity Corporation of Ogden voted all of the shares which it 4 :YWned or controlled. Is_ s 'The Board understands that First Security Bank of Idaho ou tstanding 7350 shares of preferred stock and 5000 shares ?ommon stock; that at the time of the bank's 1935 annual 49,ing First Security Corporation of Ogden owned or controlled 11,!, shares of the common stock and that it now owns a like 71Zper of shares of such stock; that all of the preferred stock thm.and is owned by the Reconstruction Finance Corporation; ato ' at the bank's 1935 annual meeting 4950 shares of common 12 k and all of the shares of preferred stock, or a total of orTO Shares, were voted; and that First Security Corporation gden voted all of the shares which it owned or controlled. ato,"The Board also understands that the proxies voting the 411J4 owned by the Reconstruction Finance Corporation at the anR 4' meetings ,ecuri, of First Security Bank of Utah, N. A. and First „ zY Bank of Idaho were not connected in any way with such or First Security Corporation of Ogden and were given 4 1312 6/4/35 -23"instructions which read in part as follows: "As a proxy of the Reconstruction Finance Corporation, you are instructed to be cooperative with the holders of the majority of voting stock, held by others than this Corporation, to the end that the policies and plans of that majoritr in the selection of directors and the conduct of the bank's affairs may be effectuated. Such limitation on your Power may be disregarded in instances where action is proposed clearly inimical to the interests of this Corporation.' "911 the basis of these facts, the Board is of the opinion that First Security Corporation of Ogden is not a holding cam18117 affiliate of First Security Bank of Utah, N.A. or First '?curity Bank of Idaho and it is assumed that no further conBlderation need be given to the granting of voting permits authorizing, the voting of the stock of these banks which is Tined or controlled by that corporation. If there are any li_urther facts which you believe should be brought to the atof the Board, the Board will be glad to give further to the matter. In the absence of such facts, yo may bo aliLmaY advise First Security Corporation of Ogden and the two t,"48 in accordance with this letter. It may be noted that if ir Reconstruction Finance Corporation should in the future 811e proxies to First SecurLty Corporation of Ogden, or a perUnder its control, a further question might arise concerning ise existence of holding comany affiliate relationships and it Tuggested that you call this to the attention of the insti,4kaons involved. Laic "The Board understands that First National Bank of Salt 750,e, CitY has outstanding 2500 shares of preferred stock and : al. shares of common stock; that at the time of the bank's 1935 meeting First Security Corporation of Ogden owned or controlil, 'eut 3979.6752 shares of the common stock and that it now prs;or controls 4133.94-04 shares of such stock; that all of the oor erred stock was and is owned by the Reconstruction Finance shal!!ration; that at the bank's 1935 annual meeting all of the stoci-cs of preferred stock and 4954.2144 shares of the common Fi' rst or a total of 7454.2144 shares, were voted; and that Sec1 Corporation of Ogden voted all of the stock which it 0 t or controlled. of 0 'On the basis of these facts, First Security Corporation tiollnlen clearly is a holding company affiliate of First Nasids : ' 4 Bank of Salt Lake City and, accordingly, further confIllth ' aticn must be given to the granting of a voting permit corij rizing that corporation to vote the stock which it owns or rols of such bank." 4 Approved. 1313 6/4/35 -24Letter dated May 31, 1935, approved by five members of the 4ard, to Mr. Wood, Federal Reserve Agent at the Federal Reserve Bank _, q St. L ouiu reading as follows: "Receipt is acknowledged of your letter of April 26, 1935, • incl-4osa. ng a letter from Mr. W. W. Smith, President of the First National Bank in St. Louis, and an opinion of General Counsel ct!r your bank, with further reference to the application of Mr. !leY M. Shoenberg under the provisions of section 32 of the 4ing Act of 1933 for a permit to be at the same time a direc, 4 " 7 1 of the national bank and a dealer in securities under the 11,me of Sydney M. Shoenberg Company, both of St. Louis, --Lssouri. "It appears from the information contained in your letter that the company is awned solely by Mr. Shoenberg and that the e companY name is used in order that it may obtain a dealer's dis114t in the purchase of securities; that all of the securities 2. 7,1ch it purchases are for the account of Mr. Shoenberg person' 4.4) his immediate family, and their personal investment comPaniSS; and that 'no securities are sold to outside parties'. "Your General Counsel has expressed the view that the re3, a ,ti°11shios involved are within the literal terms of section ac, but you recommend that Mr. Shoenberg be permitted to serve i8 a director of the national bank. However, as you 'mow, it i8 the Board's policy not to issue permits authorizing a dealer elle, securities to serve a member bank, except in extraordinary ses, and therefore it appears to be desirable to consider jurther the question whether section 32 is actually applicable il this case. In this connection, it is understood that Sydney M. Shoenberg & Company is not incorporated but is merely the name under which Mr. Shoenberg does business in purchasing and t ,ling securities for himself, his family and their personal circumstances, it is possible ti'lliestment companies. Under the cle!t the applicability of section 32 to Mr. Shoenberg should be itcermined on the basis of principles similar to those discussed t the Board's letter of March 12, 1954 (X-7820), relating to funds h4 distinction between organizations engaged in investing the within rae °rganizations engaged in dealing in securities t ing of section 32; and in this connection, it is suggested hat You obtain information as to the approximate volume of purcores and sales, respectively, made by Sydney M. Shoenberg & PanY during the past three years, stated in percentages of " 0 total securities owned by Mr. Shoenberg, and in percentages e 1314 6/4/35 -25'of total securities owned by this immediate family and their personal investment comoanies 1; and as to whether Sydney M. Shoenberg & Company participates in transactions involving the tulderNriting, flotation and distribution of securities for the Pprpose of obtaining a distributor's or underwriter's profit al:Id not merely for the purpose of acquiring securities at a dlsonunt for investment for Mr. Shoenberg, his family and their Personal investment companies. In this connection it is noted that Mr. Smith states that neither Mr. Shoenberg nor the ComPsAY advertises or solicits the sale of securities and that the only activity of the company is the purchase and sale of securities for the members of Mr. Shoenberg's immediate family and their personal investment companies. Perhaps these statements dispose of the last question, although it is not entirely It will also be appreciated if you and your General '?unsel will reconsider the matter in the light of such addil°nal information and advise the Board. "As noted in the Board's letter of March 11, 1935, Mr. Shoenberg states in his application that he is serving as President and director of Globe Investment Co. and Shoenberg rust Estate, both of St. Louis, Missouri, and it was assumed ! 1 the Board's letter that you had in mind the possibility that theto Provisions of section 32 might be applicable to his service these companies. The companies may merely be the personal investment companies of Mr. Shoenberg's family referred to ovel but it will be appreciated if you will advise as to Your conclusions with regard to these companies." I Approved. Letters to applicants for Clayton Act permits advising reaPecti„ 1Y or the issuance of permits by the Board as follows: M1' ; George G. Cochran, to serve at the same time as a director : 1) ,1u officer of The First National Bank of Perryopolis, Perrypi2li , Pennsylvania, and as a director and officer of The 8National Bank of Dawson, Dawson, Pennsylvania, for the vQrlod ending January 14, 1936. Mr. y_ ore."tonb France, to serve at the same time as a director and Ma,?er of The Equitable Trust Company of Baltimore, Baltimore, taW,-Land, as a director of the Maryland-Virginia Joint Stock meru.Bank, Baltimore, Maryland, and as a director of The Cornal National Bank and Trust Company of New York, New York, New Iork, for the period ending January 14, 1936. Approved. 1315 6/4/35 -26There were then presented the following applications for ci nges in stock of Federal reserve banks: A001 : . iTiseatl-ana_LT_L1212ITI)NAL Stock: thQ No 5 -,1rst National Bank of Westminster, ter, Maryland The vIllrst National Bank of Yorktom, ' -(3rktoYia, Virginia 9. National-Bank of Lakota, TheLakota, North Dakota Peonies Natioml Bank of Long Prairie, L°11g Prairie, Minnesota Shares 2 9 11 'Ile DisAnolteations for SURRENDER of Stock: The f;--t--r10-.---57West -ild National Bank, West WWiFT.E. infield, mew York 41tI119,t_No. Tli. F 9. irst -.i'a—:Lionqi — Bank of ',Ionclovi, loridovi, Wisconsin ,/,'-ii--___Ie•Llit)tatil. o. 10. ePlrst National Bank Ba of Johnstown, Jo hnstorn, Colorado 404. • The -fiationl Bank of TTa.tador, Mat.-xior, Texas 1 12. 'e Pirst NaTticcr-ial Bank of Lemoore, te111°°re, California Approved. 5 9 Total 14 25 10 10 9 9 12 12 22 22 108 Total 108 161
@FedFRASER