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411 A meeting of the Board of Governors of the Federal Reserve S\Istera lras held in Washington on Tuesday, March 14, 1944, at 11:00 PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Evans Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Clayton, Assistant to the Chairman The action stated with respect to each of the matters herein- atter referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Nier al Reserve System held on March 13, 1944, were approved unani1401411y. Memorandum dated March 10, 1944, from Mr. Goldenweiser, Director. of the Division of Research and Statistics, recommending that kies 444rY L. Carver be appointed as a clerk-typist in that Division ()11 t the erlIP°rary basis for an indefinite period, with basic salary at r4te of ft,620 per annum, effective as of the date upon which she erlters Upon the performance of her duties after having passed satist4cto 1 47 the usual physical examination and subject to a satisfactory ' cheek Of her references. Approved unanimously. ke Telegram to Mr. Will Howard Smith, Prattville, Alabama, reading follows: 412 3/14/44 -2- "The Board of Governors of the Federal Reserve System has appointed you director of the Birmingham Branch of the Federal Reserve Bank of Atlanta for the unexpired portion of term ending December 31, 1945, and will be Pleased to have your acceptance by collect telegram." Approved unanimously. Letter to Mr. Hill, Vice President of the Federal Reserve Bank °I' Philadelphia, reading as follows: "This refers to your letter of February 28, 1944, dressed to Mr. Paulger, requesting advice relative to the eligibility for purchase by member banks of 'when issecurities, .4. "It is assumed that the agreement to purchase securi:les on a 'when issued' basis is not of the 'standby' type 0 4?r the purpose of acquiring securities which may not be 4Lherwise sold, and it is our understanding from your letter that no question is raised with respect to a case where v, Payment on account of the purchase is made by the member v4ak to a broker before the securities are actually acquired. "Upon this basis, the Board is of the opinion that ?here no legal objection to a member bank's committing it-e--1118 to purchase securities at a later date when they are actually issued, provided such securities otherwise a°T131Y in all respects with the requirements of the law al the regulation of the Comptroller of the Currency on 4'118 subject. "We have discussed this matter informally with represntatives of the Comptroller's office, and it is underthat the conclusion stated is substantially in accord "-Lth the position of that office." Approved unanimously. Letter to the "Citizens Bank and Trust Company", Concord, North Carolin a, reading as follows: te "The Board of Governors of the Federal Reserve SysConsidered the application for permission to exSe fiduciary powers made by you on behalf of Citizens 4ik1 3/14/44 -3- "National Bank of Concord, Concord, North Carolina, the national bank into which the Citizens Bank and Trust ComPanY, Concord, North Carolina, is to be converted, and grants such national bank authority, effective if and 1.vhen it is authorized by the Comptroller of the Currency t° commence business, to act, when not in contravention of State or local law, as trustee, executor, administrator, r?gistrar of stocks and bonds, guardian of estates, as??nee, receiver, committee of estates of lunatics, or n any other fiduciary capacity in which State banks, 6rust companies or other corporations -which come into coMpetition with national banks are permitted to act under the laws of the State of North Carolina, the exercise of all such rights to be subject to the provisions 13f the Federal Reserve Act and the regulations of the ° °ard of Governors of the Federal Reserve System. "After the conversion of the Citizens Bank and Trust cOy/i PanY into Citizens National Bank of Concord becomes nifective and the Comptroller of the Currency authorizes 1_41e national bank to commence business, you are requested , have the board of directors of the national bank adopt resolution ratifying your application for permission s':(3 exercise trust powers, and a certified copy of the 'leeolution so adopted should be forwarded to the Federal reserve Bank of Richmond for transmittal to the Board 1,°r its records. When a copy of such resolution has been eceived by the Board, a formal certificate covering the Itional bank's authority to exercise trust powers will Lie forwarded." l T Approved unanimously. 0011113,_ Letter to Mr. Robert J. Kiesling, President of the Camden Trust Camden, New Jersey, reading as follows: t. "Your letter of February 21, 1944 refers to a prac-?e which has been adopted by some lenders in making loans , ,111 trh they claim are exempt under section 8(a) of Regulari IL(on the ground that they are 'secured by a bona you first lien on improved real estate duly recorded'). r inquiry 1_znde is whether the Regulation is violated if the r the . relies solely upon a statement by the borrower that oni lien is a first lien or upon such a statement supported Y by an ordinary credit agency report. 414 3/14/44 -4- "The penalties of the Regulation apply when a Registrant willfully or negligently makes an extension of credit which violates the Regulation, that is to say, an extension 0f credit which he knows or has reason to know does not c°mPlY. If an extension of credit based upon the above !Xemption in section 8(a) is not, in fact, secured by a lirst lien, the exemption is not applicable and the loan °es not comply with the requirements of the Regulation. !-11 such a case, the remaining question is whether the 'egistrant knew or had reason to know that the loan did not comply and whether the violation was willful or negligent. "Obviously, if the Registrant knew that the loan was r!r ot a first lien, his failure to comply would be willful. le.question whether negligence should be imputed to a "eglstrant would depend upon the usual test of what a Person of ordinary intelligence would do under the same °r similar circumstances. mWith specific reference to your inquiry, if a 1 ender, relying upon a statement by the borrower or uptr! i. an ordinary credit agency report, was satisfied that re lien was a first lien, he would not be guilty of a Z43-1ful or negligent violation of the Regulation provided : 4 acted in good faith; but a lender would be guilty of t willful or negligent violation if he knew or had reason i° know that he was not in fact acquiring a first lien or the circumstances were such that an ordinary prudent would not rely upon the statement of the borrower or 'le credit agency report." e Approved unanimously. Thereupon the meeting adjourned. Chairman.
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