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350 Minutes of actions taken by the Board of Governors of the ?ederea Reserve System on Thursday, March 11, 1948. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman pro tem. Szymczak Draper Evans Clayton Mt. Mr. Mt. Mt. Carpenter, Secretary Sherman, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board Minutes of actions taken by the Board of Governors of the der111.1 Reserve System on March 10, 1948, were approved unanimously. Memorandum dated March 10, 1948, from Mr. Leonard, Director orthe Division of Examinations, recommending that, effective as of tt% d ate upon which he enters upon the performance of his duties atter having passed the usual physical examination, Elmer W. Lyster be a., 401nted as an Assistant Federal Reserve Examiner, with basic "Y at the rate of $3,773.40 per annum, and with official headIllarter th„ s at Philadelphia, Pennsylvania. m, The memorandum also stated Lyster was a member of the Federal Reserve retirement sys- ter°, By unanimous vote, Mr. Eimer W. Lyster was appointed an examiner to examine Federal Reserve Banks member banks of the Federal Reserve System, and corporations operating under the provisions of sections 25 and 25(a) of the Federal Reserve Act, for all purposes of the Federal Reserve Act 351 -2and of all other acts of Congress pertaining to examinations made by, for, or under the direction of the Board of Governors of the Federal Reserve System, and was designated as an Assistant Federal Reserve Examiner, with official headquarters at Philadelphia, Pennsylvania; and with basic salary at the rate of $3,773.40 per annum, all effective as of the date upon which he enters Upon the performance of his duties after having passed the usual physical examination. Memorandum dated March 10, 1948, from Mr. Leonard, Director or the- Division of Examinations, recommending that the temporary ap- 1°°111trastit of james V. Fisler, an Assistant Federal Reserve Examiner tli t Division who is on loan from the Federal Reserve Bank of 41434R n„ - 'IV, be extended for a period not to exceed one year from 1, 1948, and that the basic salary of Mr. Fisler be increased tli°41 $3,397.20 to $3,522.60 per annum, effective March 211 1948. Approved unanimously. Memorandum dated March 10, 1948, from Mr. Leonard, Director °rtile Division of Examinations, recommending increases in the basic '11111141 salaries of the following employees in that Division, effective 114bell 21, 1948: 118.me 41 : 141' Designation H. Bugg L' Porter •. Assistant Fed. Res. Examiner Supervisor, Recording and Stenographic Section Approved unanimously. Salary Increase To From $3,271.80 3,146.40 $31397.20 3,271.80 352 3/11/48 -3Memorandum dated March 9, 1948, from Mr. Bethea, Director of the Division of Administrative Services, recommending increases in the 1348ic annual salaries of the following employees in that Division, ettecttve March 21, 1948: 40 Name Designation 13. Shipp Gardener Gardener Clerk Operator (Dup. Dev.) Charwoman Elevator Operator Mayhew Iq Jasper -0'14.een. Barnes RaY Cook 4elYn M. Lewis al'a Salary Increase To From $2,544.48 2,544.48 2,469.24 2,093.o4 1,888.00 1,756.00 $2,694.96 2,619.72 2,54.8P 2,168.28 1,954.00 1,822.00 Approved unanimously. Letter to Mr. DeMoss, Vice President of the Federal Reserve Of Dallas, reading as follows: "Reference is made to your letter of March 6, advising of certain delays which have been enc ?untered by the Empire State Bank of Dallas, Dallas, exas, in the rehabilitation of its banking quarters, arld submitting the request of that institution for an !teneion of the time within which its membership may Lie completed. "In view of your recommendation, the Board of Governors extends to July 1, 1948, the time within Ighich the -Empire State Bank of Dallas may accomplish Me mbership." Approved unanimously. Letter to Mr. Hitt, First Vice President of the Federal Reof St. Louis, reading as follows: "This refers to your letter of February 9, 1948, r tegarding the interpretation of the provisions of secion 6 of the Board's Regulation A relating to the 353 3/11/48 -4- "eligibility for discount of bankers' acceptances. "We understand from your letter that the question Presented is whether, when an unsecured banker's acceptance is offered for discount by a member bank other than the accepting bank, the Federal Reserve Bank must Obtain satisfactory evidence of compliance on the part Of the accepting bank with the requirement of the law that no member bank shall accept for one person drafts or bills exceeding 10 per cent of such bank's capital ,tock and surplus, unless the bank is secured either 7 attached documents or by some other actual security 03' m _°14ing out of the same transaction as the acceptance. g ;Ile question is prompted by the fact that subsection kb) of section 6 of Regulation A, relating to the eligibility of bankers' acceptances for discount, aft• er describing the kinds of acceptances which may be acthat discounted, contains a proviso to the effect ceptances for any one customer in excess of 10 per ceAt of the capital and surplus of the accepting bank lust remain actually secured throughout the life of 'he acceptance, and by the further fact that subsection k e) of the same section of the Regulation provides that 4 Federal Reserve Bank must be satisfied, either by eLeference to the acceptance itself or otherwise, that r acceptance is eligible for discount 'under the Lerms of the law and the provisions of this Regulation.' "As pointed out in your letter, the applicable r P . ovisions of section 13 of the Federal Reserve Act tglthorize a Federal Reserve Bank to discount acceptances of the kinds hereinafter described', provided such aceePtances meet the requirements as to maturity and are !udorsed by at least one member bank; and it seems clear -chat the 'kinds' of acceptances referred to are those er l ing out of the importation or exportation of goods, f l'omestic shipments of goods and storage of staples, and 0se designed to create dollar exchange, as subsequently rscribed in section 13. It is believed, therefore, that be limitation contained in the seventh paragraph of sec131°11 13 with respect to the aggregate amount which a memter bank may accept for one person, as well as the limi,.ation on total acceptances, is not to be regarded as a equisite of eligibility for discount but as a statutory ' estriction upon the extent to which a member bank may : ligage in the acceptance business. Z 354 3/11/48 -5- "The substance of the proviso now contained at the end of subsection (b) of section 6 of Regulation A was first included in the Regulation in 1920, under a subsection headed 'General Conditions'. In a subsequent revision of the Regulation in 1924, this provision was incorporated in the subsection relating to eligibility. The proviso, however, should not be construed as relating to technical eligibility for discount, but is intended to call attention to the limitations placed bY the law upon the right of member banks to make acceptances. A Federal Reserve Bank should not, of course, discount a banker's acceptance if the Reserve 1)ank has reason to know that the 10 per cent limitation has been exceeded by the accepting bank, as, for example, in a case in which the particular acceptance is unsecured and its amount is in excess of 10 per ?ent of the known capital and surplus of the accept1-hg bank. However, as pointed out in your letter, . lt would be impracticable in most instances for the offering bank to submit evidence as to whether the accepting bank has complied with this limitation. To lake such a requirement would unduly impair the mar! tability of bankers' acceptances and their availailitY for rediscount or purchase at the Federal Reserve Banks. "For the reasons above indicated, subsection (e) (3f section 6 of Regulation A is not to be construed as.requiring a Federal Reserve Bank to obtain affirmevidence of compliance with the 10 per cent limiation by the accepting bank where an acceptance is °ffered for discount by a member bank other than the e'ccepting bank." V Approved unanimously. Letter to Mr. Denmark, Vice President of the Federal Reserve 1 4* el' Atlanta, reading as follows: "This refers to your letter of February 17, 1948, lld previous correspondence, relating to the holding e' le,.°141Pany affiliate status of W. R. Reynolds & Company, 'alM Beach, Florida. "On April 4, 1940, the Board determined that W. R. eYnolds & Company, a corporation organized under the 355 -6"laws of the State of Maine, was not engaged, directly or indirectly, as a business in holding the stock of, or managing or controlling, banks, banking associations, savings banks or trust companies; and, accordingly, that corporation ceased to be a holding company affiliate for allY purposes other than those of section 23A of the Federal Reserve Act. We have learned recently, however, that that corporation no longer is in existence, having been merged, apparently in 1946, with a corporation of the same name organized under the laws of the State of !lorida. Accordingly, the determination made in 1940 ls not applicable to the present W. R. Reynolds & Com1)811Y (the Florida corporation) and has no bearing upon its holding company affiliate status. "The information submitted with your letter indicates that W. R. Reynolds & Company (the Florida corpo: 1 ation) has so reduced its holdings of bank stocks that is not now a holding company affiliate of any of the rlorida banks of which it formerly was a major shareh°1der. However, in order to avoid any future misunderstanding as to the effect of the 1940 determination, it 111 be appreciated if you will advise that corporation ! ln accordance with the foregoing, pointing out that if t is at any time a holding company affiliate, it will ' lave that status for all purposes unless it requests Itnd obtains from the Board a determination similar to he one made with respect to the Maine corporation." Approved unanimously. Letter to Mr. Young, President of the Federal Reserve Bank Or chi cago, reading as follows: "This willacknowledge receipt of your letter of ruary 14, 1948, and the accompanying memorandum from 7. Turner dated February 13, 1948, with further reyernce to direct sendings of member banks where the volume Checks payable in the territory of another Federal Reel.-7e Bank or Branch averages 300 or more items per day. "We have noted what you have to say with respect to Items payable in the southern parts of Illinois and -aillocated in the St. Louis District, and in the : 1.1c11t 1 ,1l parts of Michigan and Wisconsin located in the tn 356 3/11/48 -7- "Minneapolis District, which you refer to as the 'tip ends, of your district. The suggestions made by you will have the consideration of the Board along with 4117 similar questions that may be raised by other Federal Reserve Banks in connection with the request contained in the Board's letter of October 22, 1947, the effective date of which was postponed to July 1, 1948 bY the Board's letter of December 16, 1947." Approved unanimously. Letter to the Presidents of all Federal Reserve Banks readas follows: "The technical study, 'Debits and Clearings Statistics, Their Background and Interpretation,' by George GarvY of the Federal Reserve Bank of New York, is now available for distribution. One copy of the pamphlet is being sent to you herewith, and we shall be glad to send you without charge such additional copies as you IllaY request. One copy is also being sent to your Research Department but no copies are being sent direct co branches or directors of Federal Reserve Banks. "The pamphlet will be furnished free upon request Government departments, agencies, and establishments lforeign and domestic, including central banks); libra.1,'ies and teachers at educational institutions; public iLDibraries; and the press. For others the price will e 25 cents each up to ten copies and 15 cents each . lpor ten or more copies in single shipment. It would ' e appreciated if you would inform your staff of this Policy of distribution. "As in the case of other publications, there will be , a charge to member banks for copies ordered by them, °lit should you desire to distribute copies at your own e%Pense to some of your member banks the Board will be glad to supply the necessary copies at the rates stated 8:bc3ve as long as the stock lasts." Approved unanimously. Letter to the Honorable George C. Marshall, Secretary of Nte ) Washington, D. C., reading as follows: 357 -8"This is with reference to Mr. Paul F. McGuire's letter of February 25, 1948, in which it is requested that reference be made to FN 811.51645/1-2848. Mr. McGuire requests that information be supplied for forwarding to the American Embassy at New Delhi, India, giving 'an explanation of the circumstances in which, and the extent to which, New York State discriminates 4gain5t banks of foreign countries.' "In view of the request that the matter be kept with reasonable confidence, the State authorities of New York have not been consulted about the matter and this letter will be confined to a discussion of the aPParent meaning of certain New York legislation without regard to possible administrative interpretations Or applications of the statutes. Certain excerpts from the laws are attached. "Under sections 26 and 200-202 of the New York BankLaw, foreign banks (including both those incorporated in States of the United States other than New York and tho-- incorporated in foreign countries) may be licensed , ,O engage in the State of New York in the business of selling, paying or collecting bills of exchange, of issuing letters of credit or of receiving money for transmission or transmitting the same by draft, check, cable or otherwise, or of making sterling or other loans, any Part of such business.' Section 131 of the New '°rk Banking Law in effect prohibits any banking business in the State unless expressly authorized by the iloaws of the State. Since the authority for such foreign ahks apparently does not extend to the receipt of dePosits, it appears, therefore, that such banks may not cl° a general deposit business in the State. "It appears from section 131 that foreign corporamay not exercise fiduciary powers in New York except in limited classes of cases, and then only if they organized under the laws of other States of the united States as distinguished from the laws of foreign coUntries. "As compared with the $250,000 excess of assets over liabilities required of foreign banks, it may be of interest that the incorporation of a domestic bank or trust c°1zP5ny requires capital stock of at least $25,000, $50,000 Or $100,000, depending on the population of the place where lte Principal office is to be located, and that if the corpol ation is to exercise fiduciary powers the requirements are ' 358 3/11/48 -9 1100,000, $150,000, $200,000 or $500,000." Approved unanimously. Telegram to Mt. Knoke, Vice President of the Federal Reserve Batk °I New York, reading as follows: "Your wire March 11. Board approves the making of a loan or loans on gold by your Bank to Banco Central del Ecuador on the terms and conditions specified in Your wire, as follows: "(a) The amount to be advanced not to exceed $1,700,000 in the aggregate at any one time outstanding; such loan or loans to be made up to 98 per cent Of the value of refined gold bars held in your vaults as collateral; "(b) Each such loan or renewal thereof to run for 90 days, but no loan or renewal thereof to mature later than 180 days after the date of the first such loan; "(c) Each such loan and any renewal thereof to bear interest from the date such loan is made or renewed until paid, at the discount rate of your bank th effect on the date on which such loan or renewal is made. "It is understood that the usual participation 1.7111 be offered to the other Federal Reserve Banks." Approved unanimously. Secretary. ADProved: Chaifman pro tem.
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