The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
164.3
A meeting of the Executive Commit
tee of the Federal Reserve
Board was
held in
ashington on - ednesday, June 6, 1934, at 2:30
p.m.
PRESENT:
L;r.
Mr.
Mr.
Mr.
Black, Governor
Hamlin
James
Szymczak
Er.
Mr.
Mr.
Mr.
The
Morrill, Secretary
Bethea, Assistant Secretary
Carpenter, Assistant Secretary
Martin, Assistant to the Governor
Committee considered and acted upon the following matters:
Tel
egrams dated June 5, 1934, from Mr. McAdams, Secretary of
the Federal
Reserve Bank of Kansas City, and June 6, 1934, from Mr.
Cha.irmari of the Federal Reserve Bank of Boston, Mr. Austin,
of the Federal Reserve Bank
of Philadelphia, and Mr. Wood,
Chttirman
of the
Federal Reserve Bank of St. Louis, all advising that,
Ett meetings
of the boards of directors on the dates stated
, no changes
"de in the banks' existing schedules
of rates of discount and
Plarehtt‘le.
Without objection, noted with approval.
temorandum dated June 1, 1934, from Mr. -;iyutt, Genera
l Counsel,
l'oeoliteridiaag the
appointment of Liss Mary M. McDonnell as a steno"1111211,
the legal
division, with salary at the rate of :4.'560 per
effectil:e as of
the date upon which she enters upon the per()IIELIllee of
her duties
after having passed a satisfactory physical
eX4tination.
The recommendati
on was approved by six merbers of the
13°41
'd ell
June 5,
1934.
Approved.
1644
-2Memorandum dated May 29, 1934, from the Committee on Salaries
and ExPenditures, submitting a
letter dated May 21 from Mr. Sailer,
tsPuty Governor
of the Federal Reserve Bank of New York, which requested
aPProval of changes in the personnel classification plan of
the bank to
provide for the now positions of "junior clerk" in the
securities division of
the securities department, and "coin paying
teller" in.
the coin and bullion division of the cash department;
a
recilleti°11 in the salary range of the position of
"translator" in the
r°1'eign in
formation division of the foreign department; and the trans-
A
of the position of "parcel checker"
from the administration-service
di
-vision,
utility section, to the administration-protection division.
he
Inemorkndum
stated that the committee had reviewed the proposed
el114-"e Etad
recommends that they be approved.
The recommendation was
413r°7ed by
five members of the Board on June 5, 1934.
Approved.
Letter dated June 5, 1934,
approved by five members of the
to Tiri.
Austin, Federal Reserve Agent at the Federal Reserve
Bahl,
of Philadelphia,
reading as follows:
eceipt is acknowledged of your letter of May
25, 1934,
a report of indebtedness and outside business
affilicTe submitted by Mr. Ernest
C.
Hill,
Assistant
Federal
Reserve
Q'
A,e14.
1 as of May 1,
1934.
:The Federal Reserve Board
is pleased to note that Mr.
H&11
two ,4.8 continuing the
reduction of his indebtedness to the
'.'clulember banks listed in the report and
that he will
guldate the
loans entirely as soon as conditions permit.
previ
:
Itg is also noted from your letter that
the indebtedness
1411 ,:uelY reported by Mr. C. F. Eaton, Examiner, to the Mitten
14, lottagenent Bank and Trust Company was paid in full
on May
I11 this
connection, the Board's letter of April 29, 1933,
R
4ti
sng
16e1,5
6/6/34
II
X-7425, stated that there should be a prompt report to the
Board of any indebtedness of the kind referred to in the letter
incurred by the agent or any member of his staff after July 1,
1933, and such report should contain information similar to that
called for in the Board's letter with respect to indebtedness
outstanding
on that date. Accordingly, it is suggested that
You arrange to report to the Board promptly any indebtedness,
excluding current bills for ordinary personal or household exPcilses, incurred by members of your staff, and that you submit
°n July 1 and January 1 of each year a report with regard to the
procress being made in the liquidation of the indebtedness previously reported."
Approved.
Letter to Lri. *Peyton, Federal Reserve Agent at the Federal
12°aervs Bank
01 lanneapolis, reading as follows:
"Receipt is acknowledged of your letter of May 24, 1934,
in r I
to the Board's letter of May 22 regarding the condition
fi '441 Daly Bank and Trust Company of Anaconda, Montana, as reinectd the report of examination as of April 7, 1934.
tit, "It is noted that the bank plans to have its recapitaliza16'1*;1.1 plans completed and 3500,000 paid into the bank
by July 10,
a . The total of estimated losses, depreciation in
securities,
tn
ild assets
classified
as
doubtful
considerably
in
excess
is
of
au
!total of
the
capital
and
in
bank's
accounts
as
of
April
7,
thuilitt
ing the analysis of the report of examination you state
haat,it is obvious that the bank cannot be certified until it
1711,7 :4ssued the preferred stock. -,Chile legislation is pending
,,n•'would postpone for one year the inauguration of the per71'11,1„n;lft insurance fund, it is not believed that the bank would be
.tu,ied in counting upon such extension until the bill is acba
'
ap enaeted and it is suggested that you endeavor to have
the
ord a re0apita1ization program expedited as much as possible in
re
_ or
. 44,
there may be no question about the certification if
qulred before July
1, 1934."
Approved.
Etri
Letter to Mr,
O'Connor, Comptroller of the Currency, reading
lovre t
file,
'
441re is transmitted herewith, for your information and
St.
tical
a ecIPY of a letter from Federal Reserve Agent ;iood, at
32 to the Board, In- regard to the proposed consolida04 The
Citizens National Bank of Evansville and the Citizens
IG16
6/6/64
-4-
"Trust & Savings bank, both of Evansville,
Indiana, and the
Board's grant of trust powers to the national bank
effective it
and when the merger is effected.
"In view of the information contained in Li-.
liood's letter,
it is respectfully
requested, in the event your office should
decide to approve the pending merger without
requiring the issunee and sale of the preferred stock originally contemplated,
wlat the
Board be afforded an opportunity to reconsider its
grant of
trust Powers in the light of the report of examination
°f the national bank which it is understood
has recently been
coillpleted, before such merger receives your formal approval."
Approved.
Letter to Lr. McClure, Federal Reserve Agent
at the Federal
Rcser
zank of Kansas
City, reading as follows:
"'the Federal Reserve Board has
again considered the appli_icn of 'The Commercial National
Bank of Kansas City', Kansas
'
'
Y KanBas, for permission to °xi-raise full fiduciary powers
Unaer the
provisions of Section 11(k) of the Federal Reserve Act.
"In view of the
information contained in the report of exaThination as of February 12, 1934, which
includes a report of
inexamination of the Kansas Trust
Company,
and the adverse recomcrdation of
yourself
and
your
executive
committee, in which the
a Mpt
rollnr of the Currency concurs, the
Board is unwilling to
rP
ePr°ve the bank's
application for fiduciary powers. You are
4alueeted, therefore, to advise The Commercial
National Bank of
Ileas City that the
Board has denied its application.
"The board
will be glad to consider another application
ul:Lt.he subject
bank whenever its condition and management are
subm4?lat you and your executive
committee mould be willing to
it with a
favorable recommendation."
T
Z
Approved.
ward, t
Letter dated
June 5, 1934, approved by five members of the
Lir. O'Connor,
Comptroller of the Currency, reading as fol-
ler ofJ-11 a
ccordance with the recommendation of Acting Comptrol4 red lit_he
Currency Await, the Federal Reserve Board approves
Of peuecion in common
capital stock of 'The First National Bank
an
to
1Y, perry,
New York, from .100,000 to 350,000, pursuant
mended plan which provides that the
bank's capital shall
6/6/34
"be increased
by $120,000 of preferred stock to be sold to the
Reconstruction Finance Corporation and others, and that the released capital, together with the surplus and undivided profits,
shall be used to eliminate a
corresponding amount of the least
desirable assets in the bank, all as set forth in Acting Comptroller Amalt's supplemental memorandum of May 21, 1934.
In considering the plan under which the proposed reduction
ii
capital is to be effected, it has been noted that after the
roPcsed eliminations are consummated, there will remain in the
•!Ilk approximately 09,000 of depreciation in securities, which,
11
considered a loss, mould impair the bsnk's capital to that
?xtent. It is assumed, however, that you have this condition
111 maul and whenever it is feasible to do so you will require
such further
corrections as may be practicable."
t
Approved.
Letter dated June 6, 1934, approved by five members of the
t° Mr* O'Connor, Comptroller of the Currency, reading as fol-
t. "In
accordance with Acting Comptroller Auult's recommendaclons the
Federal Reserve Board approves a reduction in the
211Imon capital stock of
'The First National Bank of GarrettsZlllet, G
arrettsville, Ohio, from $80,000 to ai50,000, pursuant
c:
)
. a Plan which provides that the bank's capital shall be inst
re"sed
!.uctiobY “5,000 of preferred stock to be sold to the ReconnFinance Corporation and/or others, and that the
„leased capital
shall be used to eliminate a corresponding
runt or the least
desirable assets, all as set forth in Er.
Ivaltts meraorazdum of May 25, 1934.”
Approved.
LoarA
Letter dated
June 5, 1934, approved by five members of the
t 0,
1(yrit
O'Connor, Comptroller of the Currency, reading as fol-
tiot ",1,/1 accordance
with Acting Comptroller Awalt's recammendac„,..'
approves a reduction in the
—.non°Ie
ea Federal Reserve .Board
•
, •
141401,
PiA,a1 stock of The First
Lationa Bank of Kenoval,
111411:LL4est Virginia, from :40,000 to 00,000, pursuant
to a
by 2.(
.7.1.ch Provides that the banIc's capital shall be increased
Pill ',7'°00 of preferred stock to be sold to the
Reconstruction
--ce Corporation, and that the released capital shall be
1618
6/6/34
-6-
used to elinanate a corresponding amount
of the least desirable
assets, all as set forth in Yr. Awalt's letter of
May 25, 1934.
"In this connection, it is understood
that
the
balance of
the
losses estimated by your examiner will be eliminated by the
use of a portion of the bank's surplus and undivided profits accounts."
Approved.
Letter dated June 5, 1934, approved by
five members of the
Board
'to idr. O'Connor,
Comptroller of the Currency, reading as follOws:
4.. "In accordance with
Acting Comptroller Await's recommenda'
10n, the
Federal Reserve Board approves a reduction in the
capital stock of 'The First I:ational Bank of Shenandoah',
'',tenandeah, Virginia, from :„;50,000 to ;,25,000, pursuant to a
34a-ri which
vY 25,000 provides that the bank's capital shall be increased
of preferred stock to be sold to the Reconstruction
_,1_nnce Corporation and/Or others, and
that the released capital
used in eliminating unsatisfactory assets in the amount
1948
:
720,30, all as set forth in Mr. Awalt's letter of May 19,
1
7
It has been
noted that Er. Awalt's letter does net state
Vhat
It . i
spositlon will be made of the remaining released capital.
to .3-6_asSumed, however,
that none of such funds will be returned
eliZe shareholders,
but that the entire amount will be used to
for Ila,411 unsatisfactory assets or
to establish reserves thered that all
eliminated assets will remain the property of
ank.
"The Re,
propo_
--ard feels, as has been stated in the case of other
"d capital adjustments, that where, as in this
instance,
at
leafunds will be available, the eliminations should
alriPle
include
the 1 st the estimated losses and depreciation in securities in
o
...wer
grades."
the r
Approved.
Letter to
Eta foliovit
Mr. O'Connor, Comptroller of the Currency, reading
H I_
th
accordance with the recommendation of Acting
Comptroller
duoti° Currency
Await, the Federal Reserve Board approves a re11the common capital stock of 'The
Citizens National
AthGns', Athens, Tennessee, from 05,000 to ',50,000, pur'`'() a Plan -which provides that the
bank's capital shall be
Of
1649
fi
W6/34
-7-
II •
increased by ';',50,000 of preferred stock to
be sold to the Reco
natruction Finance Corporation, and that the released capital
10.1.1 be used to eliminate unsatisfactory
assets in the amount
?f aloproxtmately 0.6,732 and to augment the surplus account in
12110 amount of approximately . 8,268, all as set forth in Acting
Uomptrollar
Aruit's letter of Lay 26, 1934."
Approved.
Letter dated June 5, 1934, approved by five members of the
13card., to
s. O'Connor, Comptroller of the Currency, reading as followsl
,
"In accordance with Acting Comptroller of the Currency
"vklt/s
recommendation, the Federal Reserve Board approves a rectuctlon in the common capital
stock of 'The First ilational Berk
°f Cl
earwater', Clearwater, Florida, from '. ?21100,000 to 0.00,000,
,11 accordance with a
plan which provides that the bank's capital
ILlall be
increased
by )100,000 of preferred stock to be sold to
er.Reconstruction Finance
Corporation, and that the released
sT.tal shall be used to eliminate a corresponding mount of unlsfactory assets, all as set forth in Lir. Awalt's letter of
Lay 23,
1934."
t
Z
Approved.
80
Let
.
tc4 dated June 5, 1D34, approved by five members of the
l‘ta, to Id
r. O'Connor, Comptroller of the Currency, reading as fol-
accordance with the recommendatioL of Acting Comptroller A..
the -4111t$ the Federal Reserve Board
approves a reduction in
of unl°n capital stock of the 'Palmer-American Uational Bank
pur --v4.110$
Danville, Illinois, from '300,000 to f.',100,000,
be ?uallt to a plan uhich provides that the bank's capital shall
n llicreasnri,
vy v200,000 of preferred stock to be sold to the.
tea,
struction Finance Corporation, and that the released cap.-arid toether with
a portion of the surplus and undivided profits
on u:PProximately rE30,000 to be made available by
collections
use-cilaticfactory assets or by local contributions, shall be
mate' 0,eliminate unsatisfactory assets in the amount of approximemo Y 411 $611
$ all as set forth in Acting Comptroller Awalt's
randum of May
24, 1954."
Approved.
1670
6/6/34
-8Lotter to hr. O'Connor, Comptroller of the Currency, reading
f0110v,r8
"In accordance with ,,cting Comptroller of the Currency
Aualt's recom3rendation, the Federal Reserve Board approves a
reduction in the
common capital stock of 'The First-herchants
atonal Bank of La Fayette', La Fayette, Indiana, from $325,000
to 25,000, pursuant to a plan which provides that the bank's
capital shall be increased by i500,000 of
Class 'A' preferred
stook to be sold to the
Leconstruction Finance Corporation and
c225,000 Class 'B' stock to be sold to local interests, and
that the
released capital, together with a portion of the surplus alad undivided
profits and approximately $50,000 to be made
ilable by a voluntary cash contribution, shall be used to
7I1minate unsatisfactory assets in the amount of approximately
Al3/000,
all as set forth in Mr. Amult's memorandum
an
of May 28,
1934,
In
in c • considerimr the plan under which the proposed reduction
aPltal is to be effected, it has been noted that securities
depreciation unprovided for, if considered as a loss, would rem,.' in a material impairment of capital. There will also rei;1!1 in the
bank a heavy aggregate of slaw and doubtful assets.
Is
Erid
assumed, however, that you have these conditions in mind
r_that whenever
it is feasible to do so you will require such
u-rcher
corrections as may be practicable."
Approved.
Letter
Qc
to Mr. O'Connor, Comptroller of the Currency, reading
folloyz., 2
tio "In accordance with Acting
Comptroller Amalt's recominendacor n/ the
Federal Reserve Board approves a reduction in the
ilarn111°11 capital stock of 'The First
iCational Bank of Harvey',
pri/ Iowa, from
25,000 to , 10,000, pursllart to a plan which
er- v-ides that the
bank's capital shall be increased by U0,000
'rod stock to be sold to the Reconstruction Finance
Co4refeorat
,•
eli_,
lon, and that the released capital shall be used to
;A-0=4) unsatisfactory assets in
the amount of approinately
Itatel7 and to
establish a reserve for contingencies of approxi'
51000$ all as set forth in la*. Await's memorandum of
10'4
-r _
/11011
441 Considering
the plan under which the reduction in comluala aPital stock
is to be effected, it was noted that the
ex4m5em ent of the bank was subject to severe
criticism by your
eliti ner at the time of the last examination, and
that, apparr1 flo change in such management is
contemplated. It is
C;51
6/6/34
-9-
assumed, however, that you have this condition in mind and that
whenever it becomes feasible to do so, you will effect such corrections as may be practicable."
Approved.
Letter dated June 5, 1934, approved by five members of the
oard, to
Lr, 0'Connor, Comptroller of the Currency, reading as fol-
"In accordance with Acting
Comptroller of the Currency
Awalt's
recommendation, the Federal Reserve board approves a rein the common capital stock of the 'First National Dank
(t)f
Barron', Barron, Wisconsin, from C25,000 to 15,000, pursuant
c) a Plan which provides that the bank's capital shall be inthebY :).25,000 of class 'A' preferred stock to be sold to
P.
11 Finance Corporation and el0,000 class 'B'
eferred stock to be sold to local
interests, and that the rer,e,ased capital
shall be used to eliminate a corresponding amount
!..1,nsatisfactory assets which are to remain the property of the
all as set forth in Lr. Awalt's
memorandum of 1,:ay 25,
r
Approved.
Letter to
Walsh, Federal Reserve Agent at the Federal Re"rile Bank
of Dallas, reading as
follows:
-tri accordance with
your recommendation, the Board will interpos
fr c,,ofno objection to the proposed reduction in common capital
the 'Guaranty Bond State Bank', Lt. Pleasant,
Texas,
th:In G60,000 to '40,000,
pursuant to a plan which provides that
s capital shall be increased by T;25,000 of capital debent
to be sold to the
Reconstruction Finance Corporation,
hat
00 the released
capital shall be used to create a surplus
0 and to charge off
losses shown in the report of examinaof 1, aecf February
17,
1934,
all as set forth in your letter
'4Y 23, 1934."
Approved.
Tel
egram dated
Juno 5, 1934, approved by five members of the
° Lir.
Peyton, Federal Reserve Agent at the Federal Reserve
Minneapolis, stating that the Board has given consideration
1652
6/6/34
-10-
to the aPPlication of the "First Bank Stock Corporation", Minneapolis,
1411,
'sots.' for a voting permit under the authority of section 5144
CtthA
-evised Statutes of the United States, as amended, entitling
such or
ganization to vote the stock which it owns or controls in "The
Pirct National
Bank of Bismarck", Bismarck, North Dakota, and has
culthorized the issuance of
a limited permit to the applicant for the
f°110ming purposest
At any time prior to August 1, 1934, to act upon a proposal
2
:
1 proposals to create, issue and sell to the Reconstruction
rinanoe Corporation preferred stock of such bank having a par
14e of one
hundred thousand dollars (0.00,000) and to reduce
(,e
common
stock from two hundred thousand dollars
.\t v200,000)
to one hundred fifty thousand dollars (.150,000) and
0 make such
amendments to the bank's articles of association
)
1
,,
1d to take
such other action as is necessary to effect such
.' 113"es; such proposal or proposals to be in accordance with a
:
t. -Lat or plans
-which shall have been approved by the appropriate
;
:Pervisory authorities and which shall be satisfactory to the
deral Reserve Agent at the Federal Reserve Bank of Minneapolis."
Z
he
telegram also
authorized the ar:ent to have prepared by counsel
for th
e
Federal reserve bank, and to issue to the First Bank Stock
C°rPoratiori,
a limited voting permit in accordance with the telegram.
Approved, together with a letter, also
dated June 5, 1934, and approved by five
members of the Board, to Li-. O'Connor, Comptroller of the Currency, reading as follows:
"It accordance with the recommendation of Acting
Of
Comptroller
u re
d°.
t Curren
cy Await, th e Federal Reserve Board approves a re-°nifl2 the common capital
stock of 'The First National BPI*.
Bismarck, North Dakota, from 200,000 to150,000,
be i"it to a plan
which provides that the bank's capital shall
Reco:ereased by :1;)100,000 of preferred stock to be sold to the
c80
,istruction Finance Corporation, that a contribution of
thX)°° 71111 be made to the bank's undivided profits account, and
fctet the
capital shall be used to eliminate unsatisforj
rY assets or to establish reserves therefor, all as
set
" it Acting
Comptroller Awalt's memorandum of May 18, 1934.
6/6/34
-11"In this connection, the Board feels that where, as in this
instance, ample funds are available, it would be preferable if
Provision were made for the elimination of at least all estimated
losses and
depreciation in securities in the lower grades, rather
than to
carry such unsatisfactory assets in the bank, even though
.ffset by reserves, unless such reserves are specifically al,?cated to and deducted from the respective accounts in all pubshed statenents of condition. It is assumed, however, that
your Office
will require such charge-offs as may be found desirable and
practicable when the adjustments are consummated."
7
Telegram
to Mr. Newton, Federal Reserve Agent at the Federal
leser7e Bank of San Francisco, stating that the Board has given coneideration to the
application of the "American National Corporation",
Nrtland, Oregon,
for a voting permit under the authority of section
5144 of
the Revised
Statutes of the United States, as amended, en6 SUCh organization to vote the stock which it owns or controls
ill "The
Nat
i°nal Bank of Commerce of Astoria", Astoria, Oregon, and
"The
American Lational BATIV of Portland", Portland, Oregon, and has
alltliorized the
issuance of a limited permit to the applicant for the
f°11"i11g purpose:
"At any meetinc,
of the shareholders )fraT11.1 of such banks,
or at
arly adjournment thereof, at any time
to August 1,
1934, to
act upon a proposal or proposals to effect the liquidatioll. of
that bank."
T he t 1
e-egram
requested that the agent advise 14-. W. C. Bristol, Portland,,
vree;cn, attorney for
The Anglo California Lational Bank of San
Pr
ktlelsoo, that
the Board is not required to, and does naL, determine
the la
erlt
s
of
differences existing between his client and the appli-
bUt
that before
authorizing the issuance of this limited voting
Perinit, the
Board gave careful consideration to his letter dated
Oetobe.,,,
3, 1933,
addressed to the Board, and his letter dated May 16,
1654
6/6/34
-12X34, ad
dressed to the Federal Reserve Bank of San Francisco, and vas
110t Convinced by such letters that the public interest reouired
the
dellial of the
applicant's request for a limited permit. The telegram
180 authorized
the agent to have prepared by counsel for the Federal
reserve bank,
and to issue to the American National Corporation, a
ed voting permit
in accordance with the telegram.
Approved.
Telegram dated June 5, 1934, approved by five members of the
13"rd, to
kr. Edwin S. Mack of
Miller, Lack & Fairchild, Milwaukee,
readin,, as follows:
Qn
at if basis information furnished by you Board is of opinion
and *len trust agreement, copy of which as forwarded
thth Your
letter of June 1, becomes effective, First lisconsin
Plonal Bank of Milwaukee will not be affiliated
with First
01,8;cnsin Company within meaning of Section 20 of Banking Act
a'
933 provided that majority of direct
ors of Company are not
eirectors of Bank, and that trustees are in fact independent
of
control both by
Bank and by iisconsin Bankshares Corporation.
ofard is not passing upon validi
ty of trust or effect on trust
batZseztioorfl
(
If
,.
:
!te or Federal law other than Section 20,
Approved.
Memorandwn dated June 1, 1934, from Mr. Smead, Chief of
the
bivision
Of Bank
Operations, referring to the Board's approval an
4Y 18 of the chances
recommended in the form to be used at the time
Of
th° ":ct call for reports of condition of State
member banks, and
reeoraii)ending that
the form be furti)er amended so that balances due
rz‘°14146111ber beziks
will be reported separately from balances due from
11°11111°11)er banks.
The memorandum stated that the proposed change has
Laeli
tent
atively agreed
upon with the office of the Comptroller of
1_655
6/6/'34
the
-13-
Currenc vs subject to the Board's approval, and
that the change is
suggested partly in
order to provide data for use in comparing reVired
reserves of member banks unfler the present law with proposed
l'ecluired reserves
under the so-called "velocity plan" 'which has been
l'"oremended to Congress by the Board.
Approved.
Telegram
dated June 5, 1934, approved by five members of the
Board, to
the goverrcrs Qr all Federal
reserve banks except Einnespoils,
reading as follows:
"Governor Geery has
suggested that Board call a conference
of, officers of
all Federal reserve banks who have immediate
i
e''arGe and supervision of all failed bank
operations and accountf°r Purpose of arriving at uniformity in the
policy of reeir
"banks in absorption of expenses of collection of paper of
"ed banks, in charging interest on such paper, and in account.0 and reporting in
connection therewith. /Jr. Peyton has also
uCested that certain
h01.
complications in connection with the
Other
Real
Estate could best be ironed out in such a
e ntr%
e
:1:
Please advise by mire whether you favor calling such
'-ITIference, and furnish list of topics
you would suggest be
cale on program
provided conference is held. If conference is
pr
d'ted Board feels
that it should consider other accounting
ajiulemss particularly
those relating to fiscal agency custodiandepositary expenses and reimbursements therefor on aclett of
S
fe er E-941 Treasury and other Governmental agencies (Board's
of December 29, 1933 and replies thereto)
If con:;r1ce is held it would seem that
it
should
be
attended
by a
abo-°r officer who
is
familiar
with
bank's
policy
with
regard
to
ace'r subjects
and able to discuss in detail these and other
btlrik/Inting problems and policies
relating thereto, which reserve
8 or
Board night desire to place on program."
z!I
Lpproved, toether with a similar telegram to Governor Geery of the Federal
Reserve
hank of Linneapolis.
Lett
er dated June
5, 1934, approved by five members of the
ea
:311 -rrnan (1- Sterling, attorneys and counselors at law,
Now
-4, 4417
York,
reading as follows:
6/6/34
-14"On account of the pressure of other matters
arising in
connection with the Banking Act of 1933, the Federal Reserve
,
1)°ard was unable to give prompt consideration to your
letter of
oatuary 15, 1934, relating to the
payment
of
interest
on
deposits
Ip
sY the branch of
The National City Bank of New York located at
an hoz, Puerto Rico; and we regret to find that no
reply has
as yet been
made to the letter.
"You inclose a copy of an opinion of
the Attorney Ueneral
of Puerto Rico
addressed to the Secretary of the District Court
San Juan, Puerto Rico, advising that the prohibition of Sec'13-on 11 of the
Banking Act of 1933 on the payment of interest
on depocite
payable on demand does not apply to the Puerto Rico
?ranch of The
National City Bank. As indicated in the Federal
4eserve
Board's Regulation Q, deposits of moneys paid into
courts by
private parties pending the outcome of litir;ation are
Icict dePosits of public funds made by or
on behalf of any State,
v?unt
Ys school district or other subdivision or
municipality
:thln
,
ac
jd It is meaning of Section 19 of the Federal Reserve Act;
the view of the Federal Reserve Board that the
restrictt°118 contained in
Section 19 of the Federal Reserve Act upon
ctIr Payment of
'
deposits and interest thereon by member banks
ciZ aPPlicable to
deposits payable at an office of The National
of
New
York
located in ilierto Rico. The Federal ReserY411k
accordingly,
is unable to agree with the view exPre'
tio
!
sed by the Attorney
General of Puerto Rico in this connecjilt
" and is of the
opinion that the bank may not lawfully pay
-oat at its Puerto Rico branch on
demand deposits of moneys
Paid
to
gation. courts by private parties pending the outcome of litiIt
'ratio It is observed from your
letter that you assume that The
publi nal CitY Bank may lawfully pay interest on deposits of
-c funds made on behalf of Puerto Rico or
thereon
ag
of municipalities
alad that for this
purpose
Puerto
Rico
has
the status of
AcZYt
.ate within the
meaning of Section 19 of the Federal Reserve
thiz The Federal Reserve Board
has not expressed an opinion on
ter j°int but as an
aid in the Board's consideration of the mattorne"° Baard will be glad to have you
submit your views as at(1,, Ys for The National City Bank of New
York if you care to
Approved.
.r felo
gram dated
June 5, 1934, approved by four members of the
to4rdi to
II
l'edtlk
'
B. Wells, Bank
Supervisor, Indianapolis, Indiana,
follom:
"Y°1-kr tight
letter June first.
Board's regulation fixing
1657
6/6/34
-15-
1-imit of three percent per annum compounded semiannually upon
intorcst that may be paid by member banks of Federal reserve
system on time and savings deposits was made after
careful
survey of rates of interest paid by banks throwhout the country
nd Lod does not contemplate reducing such
maximum limit in
0 near future. 'there is nothing in section 19 of the Federal
Aeserve Act as nended by the Banking Act of 1933 or in the
??nsiderations rhich led to
the adoption of the Board's regula-clons thereunder fixing the three percent limit that
would provent
bank or group of banks from fixing lower maximum rates,
nd many banks have taken such action as a matter of sound bankb
3 tf,P°110Y. 'Ihere is likemise nothing to prevent any State
sza=ority within the scope of its powers from taking
Z
Approved.
Letter
dated June 5, 1934, approved by five members of the
13°4rd, to Li-.
-jibed, Federal Reserve Af;ent at the Federal Reserve
14(4k ce St.
Louis, reading as follows:
with "This
refers to your letter of May 25, 1954, with inclosures,
regard to the practice of the Union Planters
National Bank
l'1,1runt Company of
Memphis, riennessee, in respect to balances
4.; thetrust
department carried in the cohnercial department of
batik.
tr
"It -s
understood from the information submitted that the
ineur
:
t department of the bank deposits in
the commercial departter11""
12-11 amounts which it is unable to invest; that as a matoi)of b
ookkeeping and in order to show the cost and profit in
the several departments of the bank there is credited
to
trust department 2 per cent of the average balances cart.°
'
ln the commercial
department by the trust department; that
dirtart Of the amount thus credited to the trust
department is,
beneetlY or indirectly,
paid or credited to any trust estate or
oveerficiary thereof; and that the
trust department in turn pays
the bank all
earnings of the department.
tO ti °II the basis of these facts, it appears that the crediting
Ivitt.le trust
department of 2 per cent of its average balances
tio the c
ommercial department is merely a bookkeeping transac6-114, since no part of the amount is paid or credited to any
other than the bank, it is the view of the
Board that no
ve
i nterest within the moaning of Section 19 of the FedAct is involved. however, in a case of this kind
Soct.lal care should be taken to comply with the
provisions of
'alg a) of the Board's Regulation F in
order that the
of the trust department, in an endeavor to
increase
Z
1658
6/6/34
-16"the apparent earni
ngs of the department, may not keep balances
of trust funds uninvested
and on deposit in the commercial dePartment for a longer time than is reasonably necessary.
"
Approved.
Letter to Yx. Williams, Federal Reserve Agent at the Feder
al
ReServe
Lof (ileveland, reading as follows:
"Receipt is acknowledged of your letter of May 16, 1934,
together with its inclosures, in regard to
the action proposed
tO be
taken by The Toledo Trust Company, Toledo, Ohio, in order
to
comply with the requirement of section 9 of the Federal Reserve Act
that after June 16, 1934, no certificate representing
the stock
of any State member bank shall represent the stock of
laxly other
corporation, subject to certain exceptions not here
Pertinent, nor shall the ownership, sale,
or transfer of any
?rtificate representin7 the stock of any such
bank be condi,
loned in any manner whatsoever upon the owner
ship, sale, or
'I'an.sfer of a certificat repre
e
senting the stock of any other
:
corpo
ratio
n , except a member bank.
'4J-on
From
Stood that the information submitted to the Board, it is underall of the stock of the Toledo Corporation (hereinafter called the Corporatio
n) is trusteed for the benefit of the
xr
oholders of The Toledo Trust Company (hereinaft
er called the
lank) and that the benef
icial interests of the Bank sharehoIlers
stock of the Corporation are evidenced by appropriat
iLthe
e
pi crsoment on
their Bank stock certificates. In order to 00T111;0Y.With the
requirement of law aforesaid, the Bank proposes
i„lsue and exchange for its certificates of stock now outstande:b new certi
ti'-icePt that ficates in the same form as the old certificates
the indorsement; evidencing the rights of the holders
ii
:
reof in the stock
of the Corporation will be eliminated. , In
of 4 of such indorsemen
t, the trustees will issue certificates
ceXtrtici.oaLion in the assets of the trust and thereafter such
or:
lficates
and the shares of Lank stock may be owned, sold,
Irnsferred entirely independently of each other.
Gtock It is further
understood that the trustees holding, the
deo]. of the
Corporation have passed an appropriate resolution
to j
ring that it is
desirable and the Corporation does elect
the rd up and disso
lve, as provided in section 8623-79(c) of
the
Corporation Act of Ohio, but that the Min--; with
Secretary
of State of certain formal papers required by
the
+
to t„ll'ute has been deferred because the Bank does
not desire
such action and publi
cize the proposed dissolution
1,or thafter it is
assured of the Board's a)proval of the plan
that ,e liquidation of the Corporation. It is state
d, however,
the r
oquisite documents will be filed as soon as the Board's
Z
r
1651)
6/6/34
-17approval of the plan is ;;iven, and it has been noted that, in
the opinion of counsel for your bank, upon the filing of such
d ocuments the Corporation will be legally dissolve and thered
after will exist only for the purpose of liquidation and may
transact no business except such as may be incidental to the
liquidation of its business and affairs. The liquidat
ion of
the 0
orporation will be under the supervision of its board of
directors,
subject to control by the court, and such board will
consist of three stockholders of the Bank who own, respecti
vely,
100, 40, and 240
such
stock
the
shares
Bank.
of
of
No
one
of
directors
is an officer or director of the Bank.
"If the above described plan is consummated substantially
in accordance with its
terms, it is the view of the Board that
thereafter the stock of the Bank will not represent the stock
f the
Corporation, nor will its ownership, sale, or transfer
r conditioned in any
manner upon the ownership, sale, or trans,
"of the stock of the Corporation. Yoreover
, if the Corpora1011
Placed
laced in formal liquidation in accordance with the
set forth in the General Corporation Act of the State
,lEpdo, section 8623-79, et seq.,
it will not thereafter be an
filiate
t
of
the
within
Bank
Purview
the
of those provisions
Of
ni
!?ction 9 of the Federal Reserve Act which require the furfi.”111E and publication of reports, and the examination, of affiliates of
State member banks. Parenthetically, it may be
lie ed that the Board has been advised that the Corporation is
pul'aencaTed principally
in the issue, flotation, underwriting,
sale or distribution of securities and is not within the
Scop1c
e
2e0,ij of section 20 of the
Banking Act of 1933.
pose "The
Board has considered the documents which the Bank prothe
t° use in connection with the separation of the stock of
tionlnk and the
stock of the Corporation, and finds no objecfro,
the sane,
except as hereinafter indicated. In a letter
t counsel for your bank under date of Lay 26, 1934, it was
sta'
io,_e(1 that it
was believed an amendment should be made to the
l'iollaltercommunication of the trustees and the Bank to the stocks of the
Bank by revising the first full paragraph on
Page 4 0.0
said joint communication, and that the certificate of
Parti .
used ?1Pation
should provide that 'the term "shareholders' as
partir, said trust agreement means holders of certificates of
under 1Pation and all rights of and charges against shareholders
!
3 -id trust agreement shall inure to and be imposed upon
the h,;
thr, 8%)loters of
ubstanee certificates of participation'. The Board favors
nierlts
of the changes proposed to be made in such instruer thelr, counsel
for your bank, but believes that the revision
full
lancnin
paragraphararra
,•
" ph on page 4 should contain additional
clearly
that the shares of stock of the Bank
the int
Ettion
erests of the shareholders in the stock of the (Jorpor- snail
1n the
tructno longer be 'irrevocably inseparable', as provided
agreement, and suggests that such paragraph be
11dTu
:1660
6/6/34
-18-
revised to read as follows:
'Under the plan herein outlined, the trust agreement
of September 9, 1929, and all its terms, provisions, options
and conditions will continue in full force except that new
and separate certificates of participation will evidence the
rights in stock of Toledo Corporation, in lieu of the indorsements on the certificates for bank stock now outstandlug; such certificates of participation and shares of stock
of the Bank may be owned, sold, or transferred independently
of each other; the interest in stock of Toledo Corporation
Will be in accordance with the terms of the certificates of
Participation, specimen form of which is inclosed herewith;
and the option of the Bank to buy from the arustees the
stock of Toledo Corporation will be terminated by appropri!
tr agreement between the Bank and the Trustees.'
at
whic. 2he Board also feels that it is desirable that the sentence
h counsel suggests should be inserted in the certificate of
Part'
ipation should read as follows:
'The term "shareholders" as used in said trust agreement
shall mean holders
of certificates of participation and all
Xt; and charges against shareholders under said trust
groem, as modified by a certain joint communication by
the Trustees and Ihe aoledo
Trust Company to the shareholders
of said Bank dated
, 1934, shall inure to and be imP°Vdupon the holders of certificates of participation.'
in
It has been observed that since the enactment of the Bankg Actof
1933 the Bank in certain instances has extended credit
to th
e ‘iorporation and to
the subsidiaries of the Corporation
amounts in
excess of the limits prescribed by section 23A of
Federal Reserve Act, and that certain of these loans were
arecured, in
violation of the provisions of that section. Ineh 8.5
as such loans
were unlawful when made, it is the view of
the B0
car
that the Bank should take such action as may be necestheY to reduce all
such loans or obtain adequate security for
sITG, as soon as practicable.
aria "41e i3oard has also noted that the Bank failed to furnish
su II_Ilblieh reports of the subsidiaries of the Corporation purtxfpi
k%to the
Board's early calls for reports of member banks and
:
31 . -.3
,-tec, but understands that the Bank acted in good faith
Of tl,-1nce upon an opinion by its counsel tha+, the subsidiaries
basi"e Corporati
on were not affiliates of the Bank. On the
is nstof that
understanding and of your recommendation that this
the ;
ease in which the penalties provided in section 9 of
take eueral
Reserve Act should be collected, the Board will not
ties
action with a view to subjecting the Bank to any penal"
question
.its failure to comply with the provisions of law in
11'!)
"The u
the re
-oard has not had an opportunity to review in detail
will P°rt of examinat
ion of the Bank as of March 23, 1934, but
write you in regard to that report at a subseque
nt date
1661
6/6/34
-19it appears to be necessary or desirable to coLment thereon."
Approved.
Letter to Senator Fletcher, Chairman of the Committee on Banking and
1)
Currency of the United States Senate, reading as follows:
"This refers to the letter from the Acting Clerk of your
Committee, dated May 22, 1934, inclosing a copy of S. 3651, enad 'A bill To amend the Federal Reserve Act and sections
'
497 and 5136 of the Revised Statutes, as amended by the Banking Act of 1933, and for other purposes', and requesting a
report thereon.
The first section of the bill would amend the last two
Paracraphs of section 19 of the Federal Reserve Act, which reto the payment of interest on deposits, and the Board be.leves that the enactment of such amendment would be in the
flterect of the member banks of the Federal Reserve System. '.he
1*,,Text0ility of the provisions of section 19 regarding the payinterest on deposits has caused hardships in certain
l
alistan"s to member banks and to their depositors and has created
ofnumber ef difficulties in connection with the administration
llo/1 provisions. For the reasons set forth hereinafter, it
tIsl be"eved the amendment proposed in S. 3651 will eliminate
t,e objectionable
features of such provisions and at the same
4The vill serve
to further the purposes of the present law.
of
"In order that the provisions of the last two paragraphs
me,retion 19 may be sufficiently adaptable to meet the requireto-'s of actual conditions, it is believed that it is desirable
purvest in the Board specific authority to define, for the
,l
den ses of such paragraphs, the terms 'time deposits', savings
Eldtt8e, 'deposits payable on demand', and 'trust funds'. In
lon, it is believed that the Board should be expressly
neZ:!
.,
z
,ed to prescribe such rules and regulations as may be
prec -- Y to effectuate the purposes of the paragraphs and to
Purposeoatn evasions thereof. S. 3651 contains amendments for such
fore:The rates of interest customarily paid on deposits by
NhieiLICII banking
instituLions are often in excess of the rates
serve ,,Y
11
lawfully be paid by member banks of the Federal Rethere :Ystem on the same kinds of deposits, and, as a result
of member bnnks operated in places outside of
ItiebdrZitleat
lose substantial amounts of deposits unat a,1,Y are Permitted to meet competition by paying interest
batici- ae equal to that
currently paid by competing foreign
epizong in
stitutirms. In view of such circumstances, it is the
ehe P,oard that the last two paragraphs of section
19 siti°11
°2bt
Quid
auended so as to except deposits payable only at an
11(3C2
6A/34
-20-
"office of a member bank located outside of the States of the
bnited States and of the Lastrict of Columbia from the prohibition upon the payment of interest on deposits payable on demand
and from the provisions relating to the payment of interest on
time and savings deposits. S. 3651 mould accomplish this purPose.
"The bill mould also except from the prohibition upon the
Payment of interest on deposits payable on demand any deposit
of trust funds with respect to which the payment
of interest is
:equired by State law. The laws of a number of States require
,`116 Payment of interest on uninvested funds held in trust by
'anks, and, since trust funds awaiting investment as a practical
ratter must usually be available on demard and may not ordinarily be
carried as time deposits, it is believed that the prohibithe payment of interest on deposits payable on demand
d be made inapplicable to deposits of trust funds with re11.11111pon
sPect to which
the payment of interest is required by State law.
ihe present law provides that the prohibition upon the
PaYment of interest on deposits payable on demand shall not be
to prohibit the payment of interest by a member bank
in
JOT, accordance
with the terms of any certificate of deposit or
Other
r1
contract entered into in ;ood faith and in force on the
:'Ette of enactment of the Banking Act of 1933. S. 3651 provides
in s
ubstance that such prohibition shall not be construed to
brlY t° any payment made in accordance with the terms of a
cona fide contract
in force on the dato on which the bank beme8 subject to such provisions. Such an amendment would except
from
the prohibition upon the payment of interest on deposits
paioyable;_
on demand any payment made by a bpylk entering the System
rquent to the enactment of the Banking Act of 1933, provided
elreb PaYment is made in accordance with the terms of a contract
becered into in good faith and in force on the date the bank
"Ils a member of the System.
the view of the Board that the absolute prohibition
b l t the payment of any time deposit before maturity should
elaxod so as to permit the payment of such deposits before
shi ritY in exceptional circumstances and in order to avoid hard1' A
ccordingly, it approves of the anendment in S. 3651
turiZ Provides that no time deposit may be paid before its marulesYZ
ITt upon such conditions and in accordance with such
regulations as may be prescribed by the Federal Reservp,
- ,-oardt.
sionsi8. 3651 also
contains language which would make the proviever, °f the last two paragraphs of section 19 applicable to
eeetfo'ank whose deposits are insured under the provisions of
8
130ara Zila
l.t
2Lafnie
the eral Reserve Act. It is the view of the
which are not members of the Federal Reserve
YrItem
b
'but
the deposits of which are insured under the preyOf said
section 12B, should be on the same basis as to the
t
fry,
6/6/34
-21-
Payment of deposits and of interest thereon as mm
eber banks of
the Federal
Reserve System. Under the existing law banks which
are members of
the Federal Reserve System are subject to certain
limitations
and restrictions with respect to the payment of dePosits and of interest thereon which
are not applicable to other
banking institutions, notwithstanding that
their deposits are insured under
the provisions of said section 1213, and such institu'
41,ions are thereby afforded a competitiv
e advantage over member
:
a1115s. The proposed amendment would place all banks
rhos() dev°slts are insured under section 12B on a basis
equal
of
ity in
this respect.
"It should be noted that the propo
sed revision of the last
two paragraphs of secti
on 19 does not provide any penalty for
a violation of
the provisions of those two paragraphs. Under
section 30 of the Banki
ng Act of 1933, however, the Federal Reserve
Board is authorized, upon certification by the Compt
roller
,c)
_f the
Currency or the Federal Reserve Agent, as the case may
tc remove any director
or officer of a national bank or
'ate member bank
who shall have continued to violate any law
relati
/Its to such bank or shall have conti
nued unsafe or unsound
1C0 in conducting
the business of such bank, after having
been
warned to discontinue such violations
of law or such unit-e or
unsound practices, and it is the view of the Board that
St tsii"id have like power to remove directors or officers of
e nonmerter banks whose
deposits are insured under the pro-°118 of section 12B of the Federal Reserve Act,
upon certifiit ?-on by the
Federal Deposit Insurance Corporation. Accordingly,
of ,
18 suCgested that there be added
to the paragraph on page 3
, 3651 at line 25 the following, sentence:
j_ AllY director or offic
er of any bank who shall have continued
0 violate
the
provi
sions of this or the preceding paragraph
or tk.,
e rules or regulations issue pursu
d
ant thereto after
ing been warned to desis there
t
fror my be removed from
t,fice in accordance with the
provisions of section 30 of
Banking Act of 1933: Provided, That, in the case of
a
f?ctor or offic
er of a nonmember bank, the warning and cerer ;cation provided for therein shall be given by the FedInsurance Corporation.'
of se °E)otion 2 of
the bill would amend the first two sentences
brateV°n 5197 of the Revised Statutes so as to authorize a
ehar -c, of a member bar& located outside of the United States to
Of :
tig
a rate of
interest equal to the 'rate allowed by the laws
suiez country,
territory, dependency, province, dominion, inis
P?s86ssion, or other political subdivision where the branc
h
P
10eaCed t. 1For reaso
oUrth
ns similar to those set forth in the
v'raCraPh of this letter the Board believes that such
altend
rLent is
4
desirable.
'Sectlon
'
3 of the bill would amend the seventh paragraph
4
X
Zif
6/6/31
-22tt
of
subsection (1) of section 12B of the Federal Reserve Act so
as to exclude, in
any determination of the insured deposit liabilities of any closed bark or of the total deposit
liabilities
°f any bank which is a holder of Class A stock
of the Federal
Deposit Insurance Corporation, the amounts
of all deposits of
such bank which are payable only at an
office thereof located
outside of the States of the United
States and the District of
1.,
;°1111nbia. It is believed that such an amendment would be in
riony with the present purpose of the section to
exclude de''c°011s.1Zpeayable only at an office thereof located in a foreign
In addition, it is not believed to be desirable that
bariJcs located in the
Unijed. States should be required to contribt.obht
etlz:i
cisf
z
=
of losses incurred by banks located outr%
"Section 4 of the bill would amend sectirn 23A of the Fedoral Reserve Act, -which
prescribes certain limitations and restrirJtions
as to extensions of credit by member banks to their
affiliates, and as to investments by member banks in, and loans
ob
ligations of thaLr affiliates. The last paragraph of secern 2ati. exempts from the -provisions
of that section certain
,
8 of affiliates, including any affiliate 'engaged solely
i:'"
1olding the bank premises of the neYiber bank with which it
Word' affiliated'. The
proposed amendment would strike out the
'solely'
in
the
phrase quoted, so that the exemption would
riot
nort fr ited
flu
to an affiliate engaged 'solely' in hnlding the
6Thies of an
affiliated member bank.
'It is the
view of the Board that such an amendment should
to,' be adopted,
because it would relax the provisions of Secpran 23A
which are designed to restrict certain unsound banking
sirctices fornerly existincs; to an extent
which is clearly undew4,1,
123- For example, prior to the
enactment of Section 23A it
1,°01110131dZlilice of member banks to create affiliated corporain or hold real estate other than the bank's own
tic
:
lscs- This is
believed to be an unsound and dangerous pracer and the
pp uation proposed amendment would probably result in the
of that practice.
41011,_Of even more
serious consequence is the fact that the
affi7nt would make it possible
for a bank desiring to have an
to e,nte uilich is not subject to the limitations of
Section 23A
iortiaip "le the law by
causing
the
to
transfer
the
affiliate
of the
111_, Premises.
"'hereafter,
under
the
proposed
amendment,
the
ar
a pirer
. -ank
could continue to operate and deal with such affiliPoosin°ut regard to the provisions of Section 23A. It is imaffili-Le to
prophecy haw far the banks would go in utilizing an
and +
,
ate engaged in holding the bank premises for other
purposes,
dest;"e enactment
of this amendment, therefore, might virtually
l!o rci°1" the e
ffectiveness of section 23A. Accordingly, the
dcec not favor
its enactment.
l
1665
6/6/34
",(Jection 4 of the bill would also amend the last paragraph
Of section
23A so as to make the provisions of that section inaPplicable to any subsidiary of an affiliate in whose capital
toek a national banking association may invest pursuant to sec!
'ion 25 of the Federal Reserve Act, and to any subsidiary of an
affiliate organized under section 25(a) of that Act, in any case
Which more than
of the stock of the subsidiary is owned
by the affiliate. .9(V)
In effect, the proposed amendment would
exempt altogether from the provisions of section 23A a subsidiary of un affiliate of the kind referred to, if the affiliate
chould awn more than
90,,, of the stock of such subsidiary, roof the character of the business engaged in by the subsidiary.
"It is the Board's view that there is no proper basis for
excepting organizations merely by reason of the fact that they
arO s
ubsidiaries of a corporation in the capital stock of which
Innal banks are authorized to invest pursuant to section 25
(-"e Federal Reserve Act or of a corporation organized under
section 25(a)
thereof. It is to be observed that the proposed
eeePtion in favor of such organizations would not be based upon
the c
haracter of business in which they are engaged but merely
Jon the fact that they are subsidiaries of corporations of the
Iond mentioned.
It is believed to be neither logical nor proper
wh except a subsidiary of an affiliate of the kind referred to
n the
Other affprovisions of section 23A would remain applicable to
„iliate
s of the member bank which may be engaged in the
sioen kind of business as the subsidiary excepted. 'line provithe.s *would remain applicable to such affiliates even though
r1
entirecapital stock is directly awned by the member bank.
_ Por the
reasons indicated, the Federal Reserve Board does
enactment of the amendments contained in section
'44uOfitor36t5117.
section 5 of the
bill mould amend paragraph 'Seventh' of
bankion 5136
of the Revised Statutes so as to authorize national
g associations
to underwrite investment securities, subject
to
the pur tlle limitations now applicable under that section to .
belie chase of investment securities by national banks. It is
ullderrdtnat an amendment which would permit national banks to
credit
i - investment securities would provide a new source of
lett
_ lrf
-or
financing capital issues and would aid in the stimu21.1 of
business, and, accordingly, the Board is in favor of
the7
rident which would permit national banks to contract for
c,Alards c-ase of investment securities, subject to proper safe/1-1„
: ofac to the exercise
of such power. however, it is the
,,the Board that such authority should not be given to nation 0,,uanks unless
they are forbidden to engage in the distribuinvestment
securities and are prohibited from selling
securitie
:
. ° acquired except on the open market through brokers
or dealer
Z
16C6
6/6/34
Approved, together with a draft of a similar
letter to Senator Fletcher, prepared for the signature of the Secretary of the Treasury in accordance
With a request received under date of May 28, 1934,
from idr. William H. McReynolds, Administrative Assistant to the Secretary.
Letter to Senator Fletcher, Chairman of the Committee on
131,
---Lng and Curren
cy of the United States Senate, readinE as follows:
"This refers to the letter of May 18, 1934, from the Acting
Cle
r- Of your Committee, in which a report is requested on S.
396 entitled
'A bill relating to dividends and surplus of nalonal banking associ
ations'. The bill would require a national
,3,11l( before
being
author
ized to commence business to have a paidin
surplus equal to 20 per cent of its capital stock with certain
.r.teePtions and would also requir such
e
a bank before the declara1411 of a dividend to carry one-tenth part of its not profits of
the
preceding half year to its surplus fund until the same shall
''''qual.its capital stock.
11The proposed anendm
ent would affect national banks only
u-1 would have
no direct effect on State banks which are members
of
de . /10 Federal Reserve System
. Accordingly, the question of the
toTability of the enactment of the bill S. 3636 would appear
primarily within the jurisdiction of the Comptroller
2 Currency and a matter
upon which it is unnecessary for
he
Fedora Reserve Board to express an opinio
n. However, the
'
I'
Qt has no objection to the enactment
of the bill."
Approved.
Letter to hr.
Ralph C. Gifford, President of the Kentucky
Title Trust
°mPany, Louisville, Kentucky, reading as follows:
ft
requesIhs refers
to your letter of May 16, 1934, in which you
1;0 be advised whether the issuance by your bank of certaia
vi,1 real estate debenture securities' is affected by the proof the
Banking Act of 1933.
zake8 It is understood that the Kentucky Title Trust
Company
fl Securedsecur
arid
ed by first mortgages on improved real estate
to one
e obligations secure
d by such mortgages are assigned
two corporate trustees, in accordance with the terms
bElnk just agreement,
to secure the payment of bonds of your
"'Rich are
sold to the public. From an examination of the
.tig
!
10 the
trust agreement and of the sample copy of the inert"ds izsued by your bank pursuant to such agreement,
it
16G7
6/6/34
also appears
that these bonds tire issued serially in denominations of aC0.00,'
s 500.00 or c.1000.00 each, that the bonds bear
interest payable semiannually, that the bonds are negotiable, that
such bonds are direct obligations of your bank and that in addition to Obligations secured by mortgages certain securities of
specified classes may be deposited with the trustee to secure
the
Payment of such bonds. You have also advised that such outstanding bonds at one time amounted to approximately )13,000,000
arid at this
time amount to approximately ;i8,000,000.
the Board understands that the Kentucky Title Trust Company
iS affiliated
with the First httional Bank, Louisville, Kentucky,
11.
16-thin the meaning of Section 2(h) of the Banking Act of 1935.
'
11 view of this fact, your attention is called to Section 20 of
the
Banking Act of 1935, which prohibits a member bank from being
affiliated with corporations 'engaged principally in the issue,
ota
fltion,
underwritin
,
, public sale, or distribution at wholesale or retail or
through syndicate participation of stocks,
Ilds, debentures, notes, or other securities', after Juno
16,
4. 34. On the basis of the facts presented
therefore, it appears
.rat it will be
necessary for the Kentucky Title Trust Company
take appropriate steps to comply with the provisions of Sec4"°11 20 of the lAtnking Act of 1933. For your information
there
closed herewith a copy of the Federal Reserve Act on pages
nd 116 of which you will find the
provisions of Section 20
Of
defthe Lanking Act of 1933 and on page 114 you will find
the
cf an affiliate referred to in Section 20.
Of course, the question whether a
particular organization
engaged
'Principally'
in
the
business
of issuing or dealing
n
restisecurities within the meaning of this section is essentially
_an of fact which must be decided on the basis of all the
a
e!: eurastances
Tigeare from involved in each particular case, but, since it
the last report of examination of the Kentucky Title
A3,,81Le mPany that its outstanding bonds amounted to approximately
,1 7,000 as compared with deposits amounting to approximately
'J-3512, it would seem that your company
should properly be
ev;;ldered aprincipally engaged in issuing securities. Howif You so desire, you may submit to the Federal Reserve
i%eirt
facts at the
Federal Reserve Bank of St. Louis any additional
the , on this point that you deem appropriate and he will advise
11)ard thereof.
i.:Your
Of
attention is also called to the fact that Section 21(a)
for7 Banking Act
of 1935 makes it unlawful after June 16, 1934,
Und* * corporation * * * engaged in the business of issuretaii:erwriting$ selling, or distributin, at wholesale or
debelit or through
* stocks, bonds,
syndicate participation, *
ame j
res'notes, or other securities * * * to engage at the
deto,i.tIlle to any
extent whatever in the business of receiving
* t • This section provides a penalty of fine or ir..11111ent for
violation of its provisions and the interpretation
r
Jai
1668
6/6/34
-26-
'of the
provisions of such section is a matter entirely within
the jurisdiction of the Departme
nt of Justice. Accordingly, the
Board does not atte
mpt to rule upon questions arising under this
statute or other statutes
the violation of which is subject to
criminal prosecution; but the provisio
ns of Section 21(a) are
called to your atte
ntion for consideration as to Ithether, after
Uxo 16, 1934
, the business transacted by your company would be
ln violation
of
that section. The provisions of Section 21(a)
Of the
Banking Act of 1933 may be found on pages 169 and 170 of
the inclosed
copy of the Federal Reserve Act.
It is understood that the dire
ctors of the Kentucky Title
Trust Company
are also serving as directors of the First National
3ank of
Louisville, Kentucky. In this connection, your attention
called to the provisions of Sect
ion 32 of the Banking Act of
1933 with
regard to interlocking directorates or other relations
beta member bank and an organiza
tion engaged primarily in
,ic (3 business of
purchasing, selling, or negotiating securities,
or Your consideration in work
ing out the problems involved in
ease by reason of the provisions of Sections 20 and 21(a
4i:terred
)
to above. The provisio
Sect
ns
of
ion
of
32
the
Banki
ng
of tic)! 1933 are
set out on pages 127 and 128 of the inclosed copy
e Federal Reser w Act.
There is also inclosed for your infor
142na-tion in this connecti
on
a copy of the Board's Regulation R
-cri regard
to relationships covered by Section 32."
Approved.
Letter to Mr.
Case, Federal Reserve Agent at the Federal Reof Hew
York, reading as follows:
Fode "This
refers to a letter to hr. .II. Dillistin, Assistan
t
i:
16-72
1 0serve Agen
t at the Federal Reserve Bank of New
Ctary-s'
2,
A. Rush, Vice President and
o ry of the 1934, from Mr.
YorSe
Secr
creeBank of the Manhattan Company, Lew York
City
,
a
copy
de.twich was incl
osed in a letter to the Board from Er. Dillistin,
:111,eilL
.a,
Y
1934
. Mr. Rush's letter deals with the question
her the
e Dew York Title & Lortgage Corporation is
an affiliate
aff.,! bank of the Yanhatten Company within the defi
nition of an
14-late in
section 2 of the Banking Act of 1933.
2 th "BY reason
of the provisions of subsection b(2) of sect
ion
the
1;aw York Title
Mortgage Corporation is an affiliate of
soils 6111k if it is
controlled by shareholders among whom are pershare°
'
1111inc] or cont
rolling either a majority of the outstanding
84_ 8 of the
Bank or more than 50 per centum of the numb
er of
pre'e:sa.voted for
the election of directors of the Bank at the
1932
dizt,rji.he election. It is understood that as of December 16,
stock of the New
York Title 6: lilortgage Corporation vas
uted to the
stockholders of the Bank of the Manhattan
1669
6/6/34
-27"CmPany so that for a time at any rate the Corporation was an
affiliate of the Bank within the above mentioned provisions of
subsection b(2).
"Lr. Rush indicates that because of the large number of
stockhol
ders of the Bank there is groat practical difficulty in
whether, among the stockholders of the Corporation,
there
persons who own or control either a majority of the
Shares
s of the Bank or more than 50 per cent
of the number of
shares of the Bank voted for the election of its directors
at
the last
election, which, it is understood, was held in December,
1933. The difficulty arises
from the computation necessitated
by the
statute, and it must be obvious that the consequences,
vIlich by the
statute are predicated upon the affiliation, may
not be
ignored because or the difficulty in ascertaining that
the
affiliation exists.
tha. 'Yr. Rush also states in the last sentence of his letter
t in view
of the fact that the Dew York Title
i:lortgage ComtanY, a wholly owned subsidiary of the
litle
:dew
York
&; Mortgage
Corporation
is now in rehabilitation and that the shares of its
.6
8 dock constitute substantially all of the assets of the Corporathe question whethe the Corpor
r
ation is an affiliate of the
,
;'.1A4 'would appear
to
be
academ
ic'.
The
Board is unable to agree
qth this
conclusion of Er. Rush. The nature of the rehabilita°11 °f the New York Title & kortgage Company is an important
of
factor
in determining
whether or not that Company is an affiliate
cn2le Bank, but the rehabilitation of the Company is not signifitil'_in determining
whether the Corporation is an affiliate of
°
sank
The facts disclosed by Yr. Rush indicate that in his
it is not important that reports of condition of the
Cerili°11
e
.,.Por
ation be submitted and publis
hed since such reports mould
l'Itclose little
except the ownership of the stock of the Company,
of no exception of this nature
is justified under the provisions
5(eleetion 9 of the Federal Reserve Act, as amended by section
Of the
Banking Act of 1933, which require the furnishing
belikPublioation of reports of all affiliates other than member
The responsibili
ty for detenniniw; the existence of its
sxfi1
the B7la es rests square
ly upon the member bank and in order that
tleAtean4 may not be misled by the absence of a reply to the
statethe B made in Mr. Rush's letter the board requests you to advise
if tl.,!flk of the substance of this letter and to point out that
way i7 C
orporation is in fact an affiliate of the Bank the only
presc
hich the Bank
may avoid becoming, subject to the penalty
v4ith u c'd by the seventeenth paragr
.dl
aph of section 9 is to comply
°visions of that section by Obtaining and furnishing
tatrop:rstr called
for. You are also requested to keep the Board
1"d of thA
the Bank takes to insure a full oxraPlianoe with;h:tla?
law."
Approved.
ot*"*_ .°14.,(r)
6/6/34
-28Letter to Li.. ;:;cClure, Federal Reserve Agent at the Federal
Reserve Bank of
Kansas City, reading as fellows;
"Receipt is acknowledged of your letter of May 23, in which
You say -that in a
recent credit investigaLion of tile Fidelity
oavings State Bnnk, Topeka, Kansas, it was developed that this
Tember bank was affiliated with the Farmers State Bank, Bucklins
,ansas, and the Plains state Bank, Plains, Kansas, but that no
-ePorts had been submitted by the member bank for those affiliates. In cases of this kind where a member bank fails to submit
and Publish an affiliate's report because the existence of an
!iffiliation has not been recognized or determined, and where
'
l here is no evidence of an attempt to evade the law, no practical
pspo
ur
ciliat8esappears to be served by pullication of reports as of
anteriorto the current call date, except as a disciplinary
me
40 "Since you have notified the member bank that it will be
atts_3arY for it to submit and publish reports of its affiliates
R 'due time of the ne;:t call for condition reports by the Federal
v:serve
Board, and since it is your opinion that the member bank
Iprs not aware
of the exis-,,ence of the affiliation, the Board apb_ c)ves your recommendation that the reports of these affiliates
u
required for past call dates.
•
it appears from information which you supplied to the Board
n,
i t1le Past, that, besides the banks mentioned, there are also
calovri
-crel ed by ng which comprised all together a chain of banks conJ. H. Collingwood and family:
St4te
,
Bank of Pretty Prairie
Pretty Prairie
rarmers State Bank
Sabetha
Copeland State Bank
Copeland
ttanta State Bank
Satanta
w Valley
State Bank
Topeka
the
will be appreciated if you will inform the Board as to
th„,„P!:?sent status of this chain, and whether any banks other
-).e Farmers utate Bank,
Bucklin, and the Plains State Bank,
Fiden which may belong to the chain, are affiliates of the
of 1,1?
.”Savings State Bank undr the terms of the Banking Act
t
Approved.
Letter to
4ezerv
e Bank of san
Ilewton, Federal Reserve Agent at the Federal
Francisco, reading as follows:
flier% "lth reference to affiliates' reports submitted by State
,
er
Llaroh
in your district in response to the Board's call of
1034, we desire to call your attention to the following:
ir`}-41 -ift
_11_0
6/6/34
-29"American Trust Company, San Francisco. On the copies of
Form 220 iTiiirnga by this member brink
for its affiliates, the
reverse of the form is filled out only by the
affiliates controlled by the member bank and its direct holding
company affiliate, the American Company. It will be appreciated if in
the future the detailed information required
on the reverse of
the form as
well as the general description of the affiliation
given on the face of the form
is furnished for all affiliates.
In this
respect it is noted that the reports of the Atlas CorPoration, the Pacific Eastern Corporation, and the American
C°111PanY do not show the number of shares of the American Company
Slid the
Pacific Eastern Corporation involved in the Atlas CorPoration's indirect control of the American Trust Company.
tn,1, "First Security Bank of Idaho, Boise, Idaho.
This member
submits reports on-Forms 220 and 220-a of its two member
'Clak affiliates, the
First Security Bank of Utah, N. A., Ogden,
I
lud
the
First
National
Bank, Salt Lake City, Utah. There
is
of course no
objection to submission and publication by a
Tember bank of
reports of its affiliated member banks, but it
:
I 8 suggested
that you make sure, if you have not already done
that the mom-Ler bank is not
under the impression that it is
tPuired LO submit and publish such reports. The member bank
$
,
°
,ir
t
t
is and publishes reports or certain affiliates in
which as stated in the instructions accompanying
or
is unnecessary.
tlf.L.
•win Falls Bank
Trust Covany, Twin Falls, Idaho. On
the
np
fa'
' T;T-7JT-7riT'gT-a7-TLT'TrTed for the Home Loan Company, an
7j
cifiliate of this
member bank, it is indicated that the bank and
th
:liome Loan Company are
affiliated by virtue of the fact that
ens stock ownership of
the two is identical. This being the
be 7 the answ:r under item
5 on the reverse of the form should
ri Yes' in the case of
at least one of the sub-items (a), (1))
Ilsli'?c)- In the
published report certain items are omitted. As
1.4ill
'
ed in the instructions on
the reverse of Form 220-a all the
„rms should be
included in the printed report and the word
to eor
t:
1130t
0rtdb
.e used in the cases vfilere there are no amounts
Farmers and Lerchants Bank, Provo, Utah. In
the published
ti7177717CM- Assets Company, an affiliate of this member
stahe item 'Stock of other banks owned' is omitted. Az
i Le "" in the
instructions on the reverse of Form 220-a all
IlloTis t should be
included in the published report and the word
ported.should
be used in cases where no amounts are to be reren
Savinp-s & Trust Compau, Salt Lake City, Utah. This
ttuer
holding company affiliate, the Corporaof the
President of the Church of Jesus Christ of LatterTria,jints, and four
affiliates, namely, Zion's 3nvings Bank
C°MPany, Utah Savings J, Trust Safety Deposit
Company, Utah
6/6/34
-30no
oavings
Trust Abstract Company, and Utah Savings & Trust Building Company. It appears however from the information supplied
in connection with the application of this member bank's holding
emPany affiliate for a votinF, permit that the holding company
affiliate also omns the following subsidiaries:
Utah State National Bank
Temple Square Hotel
Beneficial Life Insurance Company
kiion's Securities CorporaLayton Sugar Company
tion
Utah Hotel Company
Deseret News Publishing Co.
"Since those subsidiaries are omned by the Corporation which
is the control
lin{; shareholder of the member bank, it would appear that they were
affiliates of the member bank under the terms
Of
icic:n 2 (b) (2) of the Banking Act of 1933, and should be so
=
"Coffman-Dobson Bank & Trust Company, Chehalis, ilashinton.
In the
heading of the report submitted on isorms 220 and 220-a by
c
this
member bank for its affiliate, the Coffman-Dobson Investment
s?InPanY, the latter is described as a holding company affiliate.
o lice it appears from the information furnished elsewhere on Form
._ 4() that the
affiliate owns no stock of the bank, and exercises
,eontrol over it, it should be described as an affiliate and
°I: as a holdin company affiliate.
It is not considered necessa
ry at this time that reports
,
L),!. rePublished in correct
ed form, but it is desired that the
nnts which have been mention
ed be brought to the attention of
he
member banks concerned for their guidance in the preparation
u Publication
of reports submitted in response to future calls.
"(3 appear not to have received proof of publication on
lani:Itle21.210):
the affiliates' reports for the following State
r
t
Commercial
Bank of
State
Bank of Tiilbur
Spokane c,; Eastern Trust
Company
Spanish Fork, Utah
Washington
Spokane, :;ashington"
Approved.
Letter dated
June 5, 1934, approved by five members of the
to 7,1r.
ReserveAgent at the Federal Reserve
411k of
LostonC,11:::::: as
follows:
of _ "The
Federal Reserve Board has received Hr. McRae's letter
DentiaY 18, 1
934, concerninr the application of Hr. F.Wincnester
to :
8
3- und,uSection 32 of the Banking Act of 1933 for a permit
tl
a:BIZezt the
same time as a vice president and director of
t Bank and Trust Company, Everett, Massachusetts, and
Irice president
of The First of Boston Corporation of
-31lassachusetts,
Boston, Massachusetts.
"It appears from Mr. Denio's letter of May
18, 1934, and
from the extract from the minutes of a
special stockholders'
meeting that The First of Boston Corporation of
Massachusetts
has been
transact placed in formal liquidation, and that it will not
any new business.
"In view of the above facts, the
Board agrees with Mr.
MeR
Ile 8 suggestion that no permit under Section 32
is required
covering
Mr. Denio's sertHce to the above named institutions,
and it will be appreciated if you will
advise him accordingly."
Approved.
Letter dated June 5, 1934, approved by
five members of the
I Lrd,
to Li.
Curtiss, Federal Reserve Agent at the Federal Reserve
Of Boston,
reading as follows:
of
"ahe Federal Reserve Board has
received Mr. EcRae's letter
4Y 28, 1934,
concerning the application of Mr. dwin R.
chall under Section
32 of the Banking Act of 1933 for a per-t to serve
at the same time as an officer and director of the
Zevard Trust
Company of Brookline, Brookline, Massachusetts,
of ," an officer and
director of the First of Boston Corporation
i4as
sadausetts, Boston, Massachusetts.
Ihe;
It aPpears from "I‘x. Marshall's letter of May
25, 1934, that
irst of Boston
Corporation of Massachusetts has been placed
11e88"rmal liquidation, and that it will not
transact
an
any new bus1
.
T
48, "In view of the above facts,
the Board a,
-rees with Mr. Mccoy. s suggestion
that no permit under Section 32 is required
alacie ng Mr.
Marshvll's service to the above named Institutions,
'will be appreciaLed if you
mill advise him accordingly.
Approved.
Letter dated
June 5, 1934, approved by five members of the
ard, t
°
Ruel P. Pope, Vice President of
the Beverly National
• 13ever,
J-Y, Massachusetts,
reading as follows:
Qp
,
25, 19:le Federal Reserve Board has received
your letter of May
wado °LI, c
oncerning the application of 1.r1r. Charles E. Ober
8erv
:Section 32 of
the Banking Act of 1933 for a permit to
ncttic,„!:!; the same
time as president and director of the Beverly
dtre-'
11 Bank, Beverly,
Massachusetts, and as vice president and
etor of
Stone & Webster and Blodget, Incorporated, New
6/6/34
-32"Ifew York, in charge of its Boston branch.
'The Board has considered the statements in your letter
concerning the course of dealings between the bank and the securities company, and the value of Mr. Ober as an officer and
director of the bank. Careful attention has also been given
t0 youdiscussion of the general condition of the bank, the
1?nc association of the applicant with the bank, and the necessltY of the bank obtaining advice in respect to its securities
ace°unt, of a kind which the applicant is qualified to rendcr.
"However, the action upon Yr. Ober's application WaS taken
pursuant to a general policy which the Board adopted in order
z? carry out the
purposes which it believes the Congress had in
mind in
enacting Section 32, and it is believed that permits
shc)uld not be granted covering relationships of the type inived in his application, even though the particular applicant
elals not allowed
his interest in a securities company to influce his judgment and actions as an officer or director of a
member bank.
r
'he Board believes that your letter states no facts which
w°uld justify it in making an exception in Mr. Oberis case, and
therefore has decided that his aeplication should be denied."
r
Approved.
Letter dated June 5, 1934, approved by five members of the
tioEtra,
to Rr. 'i.inslow Sears, Boston, Massachusetts,
reading as fol1017,33
Iry
__
c
lour letter of May 17, 1934, addressed to Er. Frederic IA.
13-"lss concerning your application under
Section 32 of the
d!
Inklng Act of 1933 for a
permit
to
serve
at the same time as a
rector of
United States Trust Company and as a general partner
Company, both of Boston, Massachusetts, has been refer6°,(r8
'
1 0:- to the
Federal Reserve Board.
areful attention has been given to the statements in
n yoyour
o-er and
urth
in the letter of Mr. A. C. Ratshesky, chairman of
as lillited States Trust Company, regarding your desirability
rua direct
or, and your continued interest in the welfare of the
ts
purolk' e°111PanY. It has also been noted that the trust company
part—ases no securities
through Sears (!.1 Company or through any
ost.nerhip or
corporation in which you have a financial inter,1 co 'fle Loard has also considered your statement that
Soars
soeul,
‘
l anY is not now engaged in the flotation of new issues of
thai-j-ties, that IA does not accept deposits from its customers,
yoll neither it
nor you borrow from the trust company, and that
ticalare
willing
to
agree to resign before any of the above mened tra
nsactions occur.
4
6/6/34
-.33"However, the action upon your application was taken pursuant to a general policy which the Board adopted in order to carry
out the purposes which it believes the Congress had in mind in
enaotin;
t Section 32, and it is believed that permits should not
be E;ranted covering relationships of the type involved in your
!1?plication, even though the particular applicant has not allowed
"ls interest in a securities company to influence his judgment
91
/
4nd actions as an officer or director of a member bank.
"The Board believes that your letter states no facts which
vfuld justify it in making an exception in your case, and there-Lore has decided that your application should be denied."
.=Approved.
Letter dated June
-a
, to
°a1.
1934, approved by five members of the
14., case, Federal Reserve Agent at the Federal Reserve Bank
otliew lork, reading as follows:
,
"ReeeiPt is acknowledged of your letter of lay 11, 1934 in
. 11ca you inclosed a proposed form of letter to be used by you
obtaining the information which the Board's letter of April
it',1934 ((-7866) stated would be necessary in order to enable
1 _ uo determine whether organizations engaged in the mortgage
ve,14/1 L usiness, which are involved in pending applications under
0,otion 32 of the
Banking Act of 1933, are actually organizations
13,
(3 the kind
referred to in that section, so that the Doard may
t,in a position to determine whether the statute is applicable
th?, relationships described in the respective applications.
The form of letter which you inclose includes a quotation
fro
044,,,,m the body of the
Bourd's letter of April 16, 1934 (X-7866)
asks that the information therein described be furnished
You In
duplicate.
pro "51ae board feels that the procedure -which you propose is
whiP,7 and has no objection to your writing letters in the form
°""You inclose.
the B in addition to the information specifically described in
be loardis letter
of April 16, 1934 (/,.-7866), the Board would
foo 'ad to have any further information or comments which you
oelal should be
furnished, and, in each case, the opinion of
for
Your
bank upon the question presented."
sel
Approved.
13otx,
c1
Letter dated
June 5, 1934, approved by five members of the
t0
• Stel-mrt S. Hathaway, President of the Institutional
Socills4a.
J.tlea Co
rporation, New York, New York, reading as follows:
1676
6/6/34
-34"Under date of December 20, 1933, you addressed a leti,er to
Governor
Black of the Federal Reserve Board asking whether the
Board would regard your corporation as a dealer in securities
within the meaning of Section 32 of the Banking Act of 1933.
After a conference with members of the Board's staff, you have
7itten an additional letter dated May
7, 1934 iving further
-Lnformation regarding the nature of the business conducted by
Your corporation.
"From your letiers it aDpears that your corporation was
created for the purpose of purchasing mortgages from mutual savings banks in the
State of New York in cases whore it right be
desirable, from the standpoint of the bank, to liquidate a perof its mortgage assets. All of the stock of your corPoration is owned by such savings banks. Your corporation purchases mortgages from the savings banl, payment therefor being
de partly in cash and partly by the issuance of Participating
e
Debentures
an individual debenture certificate being issued in
-°1111ection with each mortgage purchased. The amount paid for
each mortgage
is fixed by your corporation after an inspection
ad appraisal of the property covered. Mortgage papers consisting
vr, of original mortgage, bond, title memoranda, assignment to
'la:II!' corporation, and all other documents pertinent to the trans'
on are examined before the purchase is made.
Your corporation is borrowing extensively from the ReconCorporation, on the security of the mortgeges
thus
c'riChr=
pu
c
,
s= to supply itself with additional funds
nce
i
n
ri lao
:
1;17r ell
°
-teke such
prl ,/tecordincly, it appears that your corporation is engaged
ne-LPaly in dealing in individual mortgages and obligations
securedto,
thereby. The Board believes that such obligations are
ceourities' within the meaning of Section
32. Therefore,
i;to'u: the basis
of the facts submitted, it is the opinion of the
d that
Section 32 of the Banking Act of 1933 is not applicable
to of.„
J-cers or directo
rs of member banks who are serving as office e,
re or directors
of your corporation."
Approved.
Letter
dated June 5, 1934, approved by five members of the
i()41.cis to
Or
1'44
14r. Case, Federal Reserve Agent at the Federal Reserve Bank
“prk, re adin
•
"the V
as follows:
101'
J-•
-ederal Reserve Board has under consideration
the ap-leati
Act *
of Frederick J. Liman under Section 32 of the Banking
of
19,33 for a permit to serve at the same time
as a director
tile
Colonial Trust Company, New York, New York, and as ofarid
director of the Lisman Corporation, New York, New York.
677
6/6/34
"In its answer to Question 2 on F.E.B. Form 99a, the applicant states the general nature of the
business of the Lisman
Corporation to
be the 'purchase and sale of securities for account of Lismar Corporation and for customers'. That
company,
in a rider attached to F. R. E. Form 99c,
makes the following
statement:
'The Lisman Corporation was formed in March 1931. It has
not participated in any syndicate with the exception of
forming one mall private group in which only a very few
People participated. The Corporation might, in the future,
engage in the underwriting, flotation, and distribution of
security issues when an opportunity arises which might appeal to the Board of Directors.'
The Statement of that company on the same form shows that
nearly one-half of its assets are composed
of 'other bonds and
t ec
urities'. This fact would, seem to indicate that the phrase
tpurchase
and sale of securities for account of Lisman Corporamay refer to transactions by that company as a retail
de
l3aler
in securities; and in that event the relationship covered
th
I application would be within the scope of Section $2.
"Purthermore, Calvin Bullock's 'Security Dealers of North
11eri (
-4ea
%1934 edition) describes that corporation as:
'Dealers in
Lailroad, Public "Utility, Foreign and
ij
Industrial Issues'.
is
1S
from the remarks in the preface of that book
that understood
foregoing statement is based on information submitted
1, 'Au dealer in reply
to a questionnaire issued by the pub4.a.shers of the
book.
.
"However, the Board does net
believe that it has sufficient
3-riform
oor
„ at on to enable it to make a
decision in the matter. Acto
it will be appreciated if you will obtain and forward
Li2he board further
information regarding the activities of the
'm n Corporation
ever
the period of the last three years with
Partic
uler reference to the act4
vities of that firm in connection
with the
tlitur
purchase or sale of securities for its own account, the
'LI/n(3 %and Purpose of such transactions, the proportion of that
t7
0',.._°I its business to the total
business of the firm both as
3colVume of purchases and sales, and profits, the
nature of the
pert,Ities dealt in end such other information as you
may deem
-Lnent in the
premises, together with your remarks."
Approved.
Letter dated
June 5, 1934, approved by fivo members of the
Lcarci, to 1,
4" J. S.
Rippe]., Newnrk,1.,ew Jersey, reading as follows:
•
it co"ReceiPt ls
acknowledged of your letter dated May 10, 1934,
Illlection with your applicttion under Section 32 of the
1698
6/6/34
-36-
banking Act of 1933 to serve at the same time as Cheirnrui of the
Board and director of the Merchants & Newark Trust Company, and
as Chairnin of the Board of Directors and director of J. S. Rippel
& Company both of Newark, hew Jersey, from which letter it is
toted that you will submit to the Federal Reserve Bank of LeW
York additional information in support of your application.
It
Board wishes it understood that its action was based
solely upon the fact that your relationships with The Merchants
arid Newark Trust Company and the firm of J. S. Rippe). & Company
come within the prohibitions of Section 32. The Board believes
that one of the principal purposes underlying the enactment of
the Banking Act of 1933 was the divorcement of commercial banking
from
investment banking and that Section 32 was enacted to further the purposes of that act by terminating certain relation!blips between member banks and dealers in securities. Accordthe board feels that it should not grant permits under
jat section
authorizing relationships which are actually of
-ule kind
referred to therein.
i
"The firm of J. S. Rippel & Company appears to be a dealer
An investment securities of the kind referred to in that section.
e"rd-inr,0-Y, the Board felt that it could not properly make an
2ceePtion in your case and grant a permit authorizing the con`luuance of the relationship referred to in your application.
pi. "It is the Board's practice t6 afford to persons making apt,
1":tions under the provisions af Section 32 every opportunity
aspresent
any facts or arguments bearing on the subject and as
to been pointed out to you previously, the Board is prepared
tion117e careful consideration to such additional facts or arguan,tas you may desire to present. Consequently, before making
f,f,lnal decision on your application, the Board will await the
1:
(
;gner ,
information which you have advised that you will submit
Federal
Reserve Agent at the Federal Reserve Bank of New
York It
c
Approved.
Letter to Jr. Vtilliam
A. Pohl, Cincinnati, Ohio, reading as
Apr.1"The Federal Reserve Board has considered your letter of
934, regarding your application under Section 32 of
1934,
the
'1
25
plaking Act of 1933 for a permit to serve at the same time
dIr- 'lrector of the Second National Lank and as an officer and
elor of Grau
& Company, both of Cincinnati, Ohio.
imnr
appears from your letter that you may be under the
Company
Wore ea that a permit would be granted if Grau
"Caged primarily in the purchase and sale of securities
1679
6/6/34
-37-
It
as a principal, and that a permit would be denied if the company
were engaged primarily in a brokerage business. The Board has
ruled, however, that the provisions of Section 32 are inapplicable to a
broker, who merely executes orders for the purchase and
sale of securities on behalf
of others in the open market, but
that the provisions
of the section are applicable to a dealer in
securities
who purchases and sells securities as a principal, and
that
rmits should not be granted authorizing officers and directors of member banks to serve such dealers in securities.
"In your letter, you state that approximately ninety-five
per
of the business of Grau & Company is comprised of the
?urchace and sale of municipal bonds. The Board understands that
-,11 such purchases and
sales, Grau 0: Company acts as a principal.
under such
circumstances,
it appears that the relationship coyered by
k'Y your application is within the class which Section 32
waS
designed to terminate.
It should be understood that the denial of your applicaZ'cal is no reflection upon your desirability as a director of the
onThe Board believes that the Congress, by the enactment of
32, has determined that interlocking relationships be??11 mlember banks and dealers in securities are incompatible
the public interest. Since the relationship covered by
,
aPplication is one of the kind prohibited by that sectioKI,
the Board
has concluded that your application must be denied."
Approved.
Letter dated June 5, 1934, approved by five members of the
i'll'
isd
'to IT
John A. Chapman, Chicago, Illinois, reading as follows:
22. 1"90ceipt is
acknowledged of your letters of May 17 and May
a
.
addressed to the Federal Reserve Board regarding your
lcation under Section
32 of the Banking Act of 1933 for a
tjait to serve
at
the
.asame
time as a director of the First lapr n!
)-1 Bank of
Lake Forest, Lake Forest, Illinois, and as Vice
preside
Of Bartlett, Knight
& Company, Chicago, Illinois.
taFtederal
Reserve
Board has noted your statement to the
eofffet
YOU
were
instrumental in obtaining the appointment
i,the
plduciary Council, I.,
all
New York, to pass upon
Inc
: Y
Iework,
f̀tetor the
investments made by the bank, and has considered the
&t You are apparently a valuable director of the bank.
cuatt "evlever, the
action upon your application was taken puratreneral policy which
the Board adopted in order to
ZY.
purposes which it believes the Congress had in
acting Section
enacting
32, and it is believed that permits
Should
vcive
'
d not be
granted covering relationships of the type inhas 11,,in,Y°ur application, even though the particular applicant
-t 4-tlowed his interest in a securities company to
gPi
6/6/;54
Influence his judgment and actions as an officer or
director of
a member
bank.
The Board believes Ihat your letter
states no facts which
would justify it
in making an exception in your case, and therefore has
decided that your application should be denied."
Approved.
Letter dated June 5, 1934, approved by five members of the
Oa
to hr.
Stevens, Federal Reserve Agent at the Federal Reserve
8411k of
Chicago, reading as follows:
"The Federal Reserve Board has
given consideration to the
1PPlication of Er. F. K. Lytle under Section 32 of the Banking
!
t
1:)33 for a permit to serve at the same time as a
director
0J. the
Security National Bank and as vice-president and director
°I' the Lytle
Investment Company, both of Sioux City, Iowa.
e_
"In ansver to Question No. 1 of F.R.B. Form 99e, the r.en(1 111 nature
'
of the business of the Lytle Investment Company is
escrited as follows:
'handling
of real estate rentals of the holdings of the Lytle
Investment Co. rihey are not in the business of selling se"
bili
es. They have no salesmen for their company nor do
d° any advertising. They do sell a few securities to
erPloyees and friends.'
re, "It aPpears that tho Lytle Investment
Company should not be
eei ded as engaged primrily in the business
of purchasing,
*:Z2ti
lnegotiating securities Ilithin the meaning of Section
a pernit covering the relationships described in
.cation
is not necessary.
show
AccordinglY. unless there are other facts which you believe
that34 be called to
the attention of the Board, it is suggested
you so
advise the applicant."
Approved.
Letter
dated June 5, 1934, approved by five members of the
tp 14r, R. H.
Tinsman, Kansas City, Missouri, reading as folfly
°Ilr letter of
May 11, 1934, addressed to the Federal Re4eti0-c,ent at
Kansas City, concerning your application under.
the s 11 32 of the
Banking Act of 1933 for a permit to serve at
tire as a director of the
Inter-sAate National Bank,
30rVe
1681
6/6/34
ill
,,ansas City, Missouri, and as an
officer of Prescott, Wright,
.111.der Company, Kansas
City, Missouri, has been referred to the
Federal Reserve Board.
"Careful attention has been given to the statement in your
letter concerning the
difficulties of the Inter-State National
B
in obtaining
suitable directors, and to the statement of
Y°ur personal reasons for
desiring to continue as a director of
tLie bank.
"However, the action upon your
application was taken purs
n uant to a general policy which the Board adopted in order to
the purposes which it believes the Congress had in
F2n enacting Section 32, and it is believed that permits
not be granted covering relationships of the type involved
,
11
, rY" aPplication, even though the particular applicant has
'
1?c allowed
his interest in a securities company to influence
ankj.udgment and actions as an officer or director of a merber
"The Board believes that your letter states no facts which
ltd_justify it in making an exception in your case, and
s"ei-ore has decided that your application should be denied."
Approved.
Letters dated June 5,
1934, approved by five members of the
13Q4rd
'to the
followinf; applicants for permits under section 32 of
the BEllicing Act of 1033;
each letter stating that it appears that
the
relationship covered by
application is within the class which
section 32
was
designed to terminate, and that, accordingly, the
(14jNI is unable
to find that it would not be incompatible with the
Nate
interest as
declared by the Congress to grant the application,
elthe'u* in, the
event the applicant desires to submit further facts
°t. arguzetts
ln
support of the application the Board is prepared to
Ve
them
careful consideration:
,
wlarles A.
a director Stone, for permission to serve at the same time
tts s
of the Manufacturers National Bank of 'iroy and
4.ork. or ri artner of
C. A. Stone and Company, both of Troy, ilaw
Colvin
F
entress, for permission to serve at the same time
1.682
6/6/34
-40a director of the Barnett
National Bank of Jacksonville,
J,,acksonville, Florida, as a director of the Personal Loan &
°avings Bank, Chicago,
Illinois, and as an officer and director
°f Baker,
Fentress & Company, Chicago, Illinois.
48
A. Frost, for permission to serve
at the same time as a
ulrector of the Commercial
National
Bank
in
Shreveport, Shreveport,
Louisiana, as a director of the State National Bank,
1e
,2xarkana,
Arkansas, and as a partner of Frost, *;dlited (4 Co.,
'311re\rePOrt, Louisiana.
Approved.
Letter to Lr. T. Is,
Reyno10.s, Secretary-Treasurer of The
Yfilasett
System Loan
Company of Cincinnati, Ohio, reading as follows:
"This refers to
your letter of /larch 16, 1934, in which
request to be advised whether a
director of your company
-:j
a
PPly
for
a
permit
to
serve
at
the
same time as a director
01 a
national bank.
"You state that The Viimseti
System Loan Company of Cincinnatl.
10a
,-Q an industrial financing
corporation which makes small
bond
1:tletico-maker security and frequently upon stock or
As you know, Section 8A of the Clayton AntiWrust
4
:01. makes
it unlawful after January
.i
1, 1934, for a director,
ti4cer,
or employee of a
national bank to serve at the same
(0Z. as a
director, officer, or employee of any corporation
elzroe
dr
,
than a mutual
savins bank) mhich shall make loans se,ri -- uY stock or
bond
collateral other than to its own subsididi;es. It is
clear, therefore, that this section prohibits a
direet°r of a national
bank from serving at the same tire as a
cur!!tc)r of your
company, if such company shall make loans se"013Y stock or
8
bond collateral.
c4the cl„the Federal Reserve Board is authorized by Section
„yton Antitrust Act to issue permits, under certain
of J3$ covering
relationships otherwise prohibited by any
provisions of that Act, this authority is limited to the
thkrit
e,! °f
it is-,4-ee permits covering relationships between not more
'tanks, banking associations, or trust companies.
porat.rderstood
that The .iimsett System Loan Company is a corlA ws 1 n organized
totesof the State and existing under the general corporation
of Ohio for the purpose of 'loaning money on
collat with or
without security; on real estate mortgages:
raortD..eral security
or otherwise; or to buy and sell bonds and
dep4;`Cest; that it
does
not and is not authorized to accept
tendelts; that it
is not under the supervision of the Superinthe cl)m
tltZstIts
.; and that it is the holder of a license from
of Securities to engage in the so-called small
!n
1683
6/6/34
"loan business as
provided in Ohio General Code, Section 6346-1
LO gr4A
inclusive. In these circumstances, it is the opinion of the Federal
Reserve Board that The amsett System. Loan
C°111PanY is not a 'bank, bankixv; association or trust company'
11,/ithin the meaninv of Section 8 of the Clayton Act; and that,
therefore, the Board would have no authority under the law to
'
l arit a permit covering the service of a director of such con&
PanY as a director of a national bank.
that ",In this connection your attention is invited to the fact
Section 8A of the Clayton Antitrust Act is applicable only
soi cor
porations which 'shall make' loans secured by stock or
Z,°Ild collateral; and, accordir61y, the law does not prohibit
service of a director of a national bank as a director of a
orporation which shall make no new
of the kind referred
sue° in Section 8A of the Clayton Act although it
may have made
h loans
in the past and may have such loans outstanding."
Approved.
Letters dated June 5, 1934, approved by five members of the
13
3 to a
pplicants for permits under the Clayton Act, advising of
4PProval of
their applications as follows:
j
ustin D. Eowersock, for permission to serve at the same
i
'me
as an
officer of The Lawrence National bank, Lawrence,
c5.1418Es, and as a
director of the Union National Bank in Kansas
L'Y, Kansas
City, hissouri.
‘
1 "
Tiz
for permission to serve at the same time as a
ector and
officer of The Lawrence National Bank, Lawrence,
cit;,
11841a
tas
uzy,
clifei:=rTf„. the Union National Bank in h.ansas
d.Ue "
for permisAon to serve at the sane time a
4ris or and
officer of The Lawrence National Baru, Lawrence,
TOtIrlcrn,
'
4 as a
director of The First National Bank of Tonganoxie,
C oxle, KEuis
as.
1;.:1.ak,
er S. 1
:etcalf, for permission to serve at the same time
T01301,arector and officer of tho Federal Home Loan Bank
of
tl
'
on;i
ct'BT
Ks
at:s
. a director of The Lawrence La-
t
XT,=::,
ch
:
ada
i'
s
reet
"•
orlhompson, for permission to serve at the same time
of Tho Lerchants National Bank of Topeka, Topeka,
lopek:' „Tld as a director of the Federal Home Loan Bank of
---,“Teka, Kansas.
Approved.
1634
6/6/34
-42There were then presented the
following applications for
4ges in
stock of Federal reserve banks:
lications for ORIGINAL
Distrio
Stooks
eYstone
ational Bank in Pittsburgh,
Piitsburgh,
Pennsylvania
k
atriet
irst a
tonal Bonk in Fort Myers,
Port
Myers, Florida
bistriet No.
7.
irst NEt
tonal Bank at
Darlington,
Darlington, Wisconsin
biatriet No.
12.
rst
N
lBank in Corcoran,
Corcoran, Califor
nia
"tlacouver
National Bank, Vancouver,
Washingt
on
Shares
300
300
75
75
36
36
36
72
lications
latrietZT. for
3. SURRENDER of Stocks
Th
e
eoPles
ationc.1 Bank of Lakevrood,
'Lakewood, New
Jersey
(1, ettsburg National Bank,
Farmettsburg,
etnaylvanta
441.8 !'irst
bational Bank of
klldred,
Mildred,
Pennsylvania
i tit No.
4.
onda-Citizeno N
ational Bank of
S
pringfield, Ohio
katriet
Icacit 41o. a•
z
rst
toii,
ax
ti
erTtu
iac
lky
Bank of Clinton,
li
ectional
sOle
of Steele,
stae
souri
Pirst LaBalik
National Bank
of jindsor,
kklaor,
Missouri
kat i
4.4
10.
rst
ationai Bank
J\Fj
of
The
las
Calvin,
laltersOklahoma
National Bank,
Walters, Oklahoma
108
519
180
27
39
246
384
384
42
18
39
99
21
39
60
6/6/34
A l
ications for
District 0, 11. SURRENDER of Sto
The irst
National Bank of Hamlin,
Ramlin, Texas
(Continued)
38
District No.
12.
ir!t at ona
ank in Grass Valley, Grass
7, valleY,
California
,7c:111;:liZtia.le National Bnrk, Placerville,
41e Vallejo
Commercial National Bank,
Vallejo,
California
Approved.
Thereupon the
APpr
Shares
eting adjourned.
38
33
36
72
lOtal
141
968
@FedFRASER