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4:96 A meeting of the Federal Reserve Board was held in the office of the ?sclera]. Reserve Board on Wednesday, June 8, 1927, at 11:00 a.m. PRESENT: PIES= ALSO: Governor Crissinger :Vat. Platt Mr. Hamlin i,'ir. Miller Mr. James 1:r. Cunningham Mr. Eddy, Secretary Mr. McClelland, Asst. Secretary Mr. Wyatt, General Counsel The minutes of the meeting of the Federal Reserve Board held on June IFtlawere read and approved. The Governor then stated that he had received from Mr. Harrison, SeelaetarY of the Governors' Conference, a report regarding the recomIneliclatiOne made by the last Conference which require action by the Federal 1418"ve Board. He called attention to the fact that several members are 144E4 leaving Washington and inquired whether the Board desired to take up the ,-weommendations of the Conference in the regular manner, by reference ' t' 270priate committees. After discussion, the Secretary was instructed to submit to each member of the Board a copy of all recommendations of the Conference, following which they are to be made special order of business for some future meeting of the Board. The Governor then referred to a recent letter received from the ?eaeral iloserve Agent at Dallas, requesting that the Board be represented itt the meeting of stockholders of that bank to be held in Dallas on June ltth, After discussion, the Secretary was directed to advise the Federal Reserve Agent that the members of the Board regret that it will be impossible for any of them to attend the meeting. -197 _ ieport of Jommittee on Examinations on letter dated June 6th from the , reaeral eserve AF-cent at Philadelphia, transmitting and recommending ap yy„ -,,oval of an applicJition of the Lock Haven ?rust Company, Lock Haven, 1)4 ' , for approval of its recent action in acquiring 343 shares of the st°' 11 Of the :ill Hall ; .tate Bank, Lill Hall, Pa.; the Committee recoinllg approval. Approved. aeport of Committee on Examinations on letter dated June 6th from the, rederal deserve Agent at iTew York, transmitting application of the Illterstate ?rust Company, ::ea York, IT. Y., for permission to take over as branches the banking business now conducted by Bloomingdale Brothers • thA. --lr department store at 59th Street and Lexington Avenue, ::athattan, th. eranklin ITational Bank located at Franklin and Hudson Streets, 1,43,411 at tan; the Committee recommending approval of the recommendation of the, “ )deral Reserve Agent that the establishment of the Bloomingdale brel ich be approved unconditionally and that the mergar of the Franklin T-4.L Bank into the Interstate ?rust Company be approved effective if alla When formal approval is issued by the ew York Banking Department. Upon motion, the recommendation of the Federal _teserve Agent was approved. 1:emorandam dated June 6th from the Chief of the Division of Bank Opel, atin aoproved by the Executive Committee, recommanding that the Boa,ra 4rrane elz t-e to telegraph to the Federal _teserve 3ank of Chicago each consolidated figures showing the condition of all member banks (1 -198 6/8/27 -3- 48 theY appear in the Board's weekly statetent to the press; the telef_Tam. to be aispatched at the same time the statement itself is released to the :91'6es by the Governor's office. In his memorandum, the Chief of the Division Of 8a4k Operations referred to the release of certain of the figures which 30a has permitted the Hew York bank to make regularly at the same tle state!.,ent is released here to the press. Upon motion, the recommendation of the Chief of the Division of Bank Operations was aporoved. Letter dated June 2nd from the Deputy Guyer-nor of the Federal .Zeserve Bank. of Chicago, requesting a rulii-L,-7 by the 3oard as to the classification 4s t bne deDosits by the Harris Trust and Savings Bank of Chicago of amounts if to banks and bankers subject to thirty days' notice." aeferred to the Law Committee. Letter dated June 6th from the Federal 2teserve Agent at Chicago, recl'E'ating the views of the Board as to hi 3 accepting an invitation extended t Prepare for quLlication in local nauspaf)ers an article commendatory ot „ , )tate Bank and Trust Company of Evanston, Illinois, which is about to 111°1re into a new bank building. heforred to the Governor with power. Letter dated June 6th from the Governor of the Federal lieserve Bank or . „4,11.11710fla, transmitting copy of letter received from their architects l'IttrIE to the vault to be installed in the naw building being erected the 3 altimore Branch. Noted. The, Governor stated that special order of bsiuess for this morning's 499 6/8/27 -4tileetirig was the proposed revision of the Board's Regulation K, prepared 137 the Board's General Counsel, in consultation with ',Ir. Albert Rathb one, SPeeial Counsel, and submitted in Mr. Rathbone's letter to the Board of alitts 69 1927. He calledattention to the motion made by Mr. Hamlin at the rneetillg Yesterday "That the Board adopt the revised Ztegulation K as submitand. that it be promulgated immediately, superseding Iiegulation K, Series 91' 1924. 11r. Hamlin withdrew the motion made by him yesterday and discussion 6481,ea as to the advisability of Subsection (a) of Section 11 of the proposed 111° Nulation as set forth in the draft submitted in Mr. 3athbone's letter. Mr. Hamlin moved that Subsection (a) of Section 11 be not amended. Mr. Miller moved as a substitute for Mr. Haffilin's motion that Subsection (a) of Section 11 be eliminated and that there be inserted in lieu thereof a statement as follows: "A corporation is not required by law or by this regulation to make application to or obtain the approval Of the Federal aeserve 3oard before making an issue of its debentures, bonds, notes or other obligations, but corporations issuing their debentures, bonds, notes or Other obligations must comply with the rules, regulations and conditions hereinafter set forth." 2.1.r. Miller's substitute motion being rut by the Chair was carried, Mr. Hamlin voting "no". 14r. Platt then referred to the last provision of Subsection (c) of the cillaft of Section 11 that "The documents filed with the Federal deserve toeta, 111 accordance with the requirements of this subsection shall be open to the . lisPection of the public." 0() La 6/8/27 —5— He moved that this sentence be changed to read "The documents filed with the Federal Reserve Board in accordance with the requirements of this subsection shall be open to inspection at the discretion of the Federal Reserve Board." Mr. Hamlin moved as a substitute for Mr. Platt's motion that the sentence be chanced to read The Federal i-teserve Board reserves the right to make public whenever it believes it to be necessary in the public interest any documents filed with it under this subsection." Mr. Hamlin's substitute motion being put by the Chair was carried. lir, James then referred to the provision of Paragraph (a) 2 of Sub"i°4 (c) of the draft of Section 11 that within ten days after an issue corporation the corporation shall file with the Board a statement, by affidavit, of "The aggregate amount of the debentures, bonds, Obligations issued under the Trust Indenture and the net price by the corporation therefor". He moved that the words "and the net price received by the corporation therefor" be stricken from the paragraph. James' motion being put by the Chair was lost, the members voting as follows: Mr. Platt, "aye" Mr. James, "aye" Governor Crissiner, "no" 1:r. Hamlin, "no" Mr. Miller, "no" Mr. Cunningham, "no" Llr° James then referred to the provisions of ?aragraph (f) of Subsection (o) or the draft of Section 11, relating to staten,ents to be filed with the ) 11041.4 14 cOnnection with substitutions or changes in the securities behind 501 : 6/8/27 -6- He moved that tLese provisions be stricken from the paragraph. After discussion, at one o'clock the Board recessed until 2:30 p.m. At 2:30 p.m., the Board reconvened, the sane members being present as attellded the morning session. James withdrew the m,)tion made by him at the morning session that til"e be stricken from Paragraph (f) of Subsection (c) of the draft of 8"on 11 the provisions relating to statements to be filed with the Board ill °Iltaction with substitutions or ch.inr;es in the securities behind. an issue. He moved in lieu thereof that the provisions in question be amended to read as follows: "In case there shall be aay substitution of or chanr7e in the securities at any time held under any such Trust Indenture securing aa issue of debentures, bonds, notes or other obligations the Corporation, each time it makes a report to the Federal _ieserve Board pursuant to the provisions of Section XVI, shall file with the Federal wserve Board a statement verified by the affidavit of the President or a Vice President and the Treasurer, Cashier or Jomptroller of the Corporation. A. Giving the details of such substitution or chan6v4 and B. Certifying that at the time of such substitution or change the additional collateral transferred to the Trustee under the Trust Indenture had a market value at least equal to the market value of the collateral security released from the lien of such Trust Indenture. Such statement shall be accompanied by an acknowledgement by the Trustee under the Trust Indenture that there has been delivered to it and that it holds as such Trustee the additional collateral specified in such statement." :Ir. James' motion, being put b, the Chair, was carried. II ()2 -7- r:r. James then referred to Paragraph 3 (b) of Subsection (b) of the draft and moved that it be amended to read as follows: "(b) Have an aggregate market value equal at all times to not less than one hundred and ten per cent of t'fln aggregate principal amount of the obligations issued or to be issued against such securities; and" 17,r. James' motion, being put bp the ihair, was carried. Discussion then ensued as to Subsection (d) of the draft of Section 11 , :Lir. James moved approval of the subsection as submitted. James' motion Leing put by the Chair was carried. :.!r. Platt then moved adoption by the 3oard of the draft of :Legulation 81113:m1tted in :tathbone's letter to the I;oard of June 6t1 as amended at meetinP, and that it be promulgated immediately, suporsedinP: w" 30ries of 1924. Platt's motion, being put by the Chair was carried. ?he Board's Counsel then submitted a letter dated June 6th from the \rice President of the First Federal Foreign Investment Trust of :Taw York eitY calling attention to the fact that in connection with the corpora- tio4, Proposed issue of notes, it is desired to issue to the purchasers 81-1c4 notes stock purchase warrants giving the holders thereof an option to 1)11111ase the stock of the First Federal Foreign.Investment Trust during the ' t ree Years' period following the issue, and that all necessary corporate ' boon taken to authorize such increase in the capital stock of qo c ) oration as may be necessary to enable the corporation to issue shares 503 6/8/27 _s_ Of stock to the holders of such warrants; the letter statin; that the e°rPoration desires to have some assurance from the Federal eserve Board that, if and. when the holders of such stock purchase warrants exercise their °I1tiO4S to purchase stock, the :Federal Jeserve Board will approve the neces'IV increases i_n the capital stock of the cor -, oration. After discussion, ::r. Platt moved that the Boani approve any and all increases in the capital stock of the First Federal FOzign Investme,nt 2rust which may be necessary to enable the corporation to issue the additional stock called, for by the warrants in question in an aggregate amount not to exceed i,500,000, such approval to take effect if, as and. when the holders of such stock purchase warrants exercise their ootions to purchase stock, provided that such options are exercised Within three years from the date of the issuance of the warrants, and provided further that the cornoration shall certify to the Board the date and amount of each such increase in its capital stock. Li'. Platt's motion, being put by the ‘..thair, was carried. 'The Board's Counsel then withdrew from the room with instructions to Preb„ 4-4,-e a letter to the :irst Federal Forei3a Investment Trust, transmitting 4 C011, Of the revised _iegulation K, just adopted, and advising of the Board's , with reference to increases of the corooration's capital stock. :-:r• Hamlin, on behalf of the sp:.,cial committee appointed at the meet111 )11 "Y 27, 1927, reported an interview between the Committee and Lr. 4.\\Teis Assistant Secretary of the Treasury, rege.rdins' the proposal of the / 1 4eltal lieserve Bank of Atlanta, approved by the Board, to carry a stock or 1111issued -7edere.1 .eserve notes at its Cuban Agency. he stated that Cl°11el'uor %row., of the 'federal heserve :3a.nk of hew York has prepared a as a substitute for the present agency arrangement, which, however, 504 -9- wetIld involve a change in the existing treaty of the United Jtates with the 24epub1ic of Cuba, which ::r. Dewey advised the Committee informally the , tate Department apparently does not favor. Dewey stated that Assistant Secretary of itate Castle and 1:r. e Of the :_;tate Deuartment had advised him that in no event would the State Department be willing to take the matter up with the Cuban Govern- /11°11t until after the assembling of the Pan American Financial Congress in December of this year. 1:r. Hamlin reported tnat Mr. Dewsi had stated that as to the carryOf unissued Federal aeserve notes at the Lgency he wished to take the l'attQr under further consideration and may wish to secure an opinion from the Itttorncro General. :r. Hamlin naported furt,ner that Mr. Dewey had at4ted that the Secretarj of the 'Ireasury would address a formal letter totI State Department asking its o2inion on Governor 3trong's plan and that _ -1'. .Dewey had stated while he thought the Board should withhold notitiQat 104 to the Federal eserve Bank of Atlanta of its approval of plans carrZ:14c unissued notes at the Agency until he could further examine 0 the matter, he saw no reason why the Board should not in regular course ta Up the matter of the proposed vault at the Agency. 1:r. Hamlin also referred to the proposal which has been discussed by the Board informally of issuing a pamhlet containing questions ana 4v/01. 'a on the Federal :.:eserve System along the lines of the pamphlet d. by the Federal _ieserve Bank of ,Achmond, which, however, deals 141, ---Y with the Fifth Federal ..esore district. r4 f 505 6/8/27 -1011+ A discussion of the matter ensued, during which some members of the Board expressed the opinion that it would be difficult to frame for publication replies to some controversial questions which mi4lt be raised. The discussion ended without formal action being taken. The Board's Counsel then entered the room and submitted draft of letter to the First Federal Foreign Investment Trust of New York City, prepared 14 accordance with the instructions given him and reporting the action taken bY the Board at its meoting today in promulgating a new 3egulation K, efteCtive immediately, and also its action with respect to increases in the eaPital stock of the corporation in connection with stock purchase warrants beiAR issued in conjunction with the issue of notes to be made by the corDoration, Upon motion by Mr. Platt, the proposed letter was approved. . ---. P9.-2LOF STA:TIDING- CO:IIITT233: 4tga. June 6th, i0commending approval of the application of Mr. H. 3tacy Smith for permission to serve at the sage time as 'rice President of the North 'lard National Bank, 'Jallark, N. J., and as President of the Equitable Trust Company, Newark, N. J. Itecommendation amroved. 1311tea, June 7th, iiecomnending approval of the application of Mr. John Stites for permission to serve at he same time as director-officer of the Louisvil s Trust Company, LouisNational Bank of ville, Ey., and as director of Kentucky, Louisville, Ky. Recommendation approved. The meetin,s. adjourned at N1 / 4. 41.1)pro ved Secretary.
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