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251 A meeting of the Federal Reserve Board was held in the office of the Reserve Board on Thursday, March 22, 1928 at 2:40 p.m. PRESENT: PliESEisT ALSO: Governor Young Yr. Platt Mr. Hamlin Mr. James Mr. Cunningham Mr. Eddy, Secretary Mr. McClelland, Asst. Secretary Mr. Wyatt, General Counsel Mr. Wingfield, Assistant Counsel The Governor stated that special order of business for this meeting would be e,. 0las ideration of a memorandum dated March 14th from the Board's Counsel, subtittlun. e revision of Regulation L, Series of 1926 on the subject of "Inter1c)ekilio. Bank Directorates under the Clayton Act"; the revision being necessary tri C4 °f the amendment to the Clayton Act recently enacted and signed by the Pr esident on March 9th. fo, After discussion, the Regulation was amended and adopted in the 41/3w1llg fonn: Regulation L, Second Series of 1928 (Superseding Regulation L of 1928) INTERLOCKING BANK DIIIECTOX,TES UNDER THE CLAYTON ACT Section I. Definitions Within the meaning of this regulationt . 1Nat nThe term "bank" shall include any bank, banking association or c4r1PanY organized or operating under the laws of the United States (*of: "11Y State thereof. .11e term "national bank" shall be construed to apply not only to !IltItrit,banking associations but also to banks, banking associations, "t4tels-u`' companies organized or operating under the laws of the United 'ilacluding all banks and trust companies doing business in the katri °t °f Columbia, regardlessiof the sources of their charters. the a Th -e term "resources" shall be construed to mean an amount equal to -4 Of the deposits, capital, surplus, and undivided profits. 252 3/22/28 -2- or tr, The term "State bank" shall include any bank, banking association, --at company incorporated under State law. The term "private banker" shall apply to any unincorporated individual kga erearig in one or more phases of the banking business as that term is genstw, Y understood and to any member of an unincorporated firm engaging in 4 business, the, The term "Edge corporation" shall mean any corporation organized under vrc)visions of Section 25 (a) of the Federal Aeserve Act, as amended. porat The term "city of over 200,000 inhabitants" includes any city, incorlast! sd tc)wn, or village of more than 200,000 inhabitants, as shown by the *her vreceding decennial census of the United States. Any bank located any4 ,ithin the corporate limits of such city is located in a city of over 200 locZtuu inhabitants within the meaning of the Clayton Act, even though it is ipaisci in a suburb or an outlying district at some distance from the prinpart of the city. Section II. Prohibitions of Clayton Act Under section 8 of the Clayton Antitrust Act(1) No person who is a director or other officer or employee of national bank having resources ag-xegating more than 45,000,000 can e.6aallY serve at the same time as director, officer, or employee of a_ "Y other national bank, rsgardless of its location. h (2) No person who is a director in a State bank or trust company balling resources aggregating more than 45,000,000 or who is a private anker having resources aggregating more than 45,000,000 can legally 2,117e at the same time as director of any national bank, regardless ul its location. , (3) No person can legally be a director, officer, or employee of national bank located in a city of more than 200,000 inhabitants who "the same time a private banker in the same city or a director, icer, or employee of any other bank (State or national) located in th : %same city, regardless of the size of such bank. Ale eligibility of a director, officer, or employee under the fore' Qvisions is determined by the average amount of deposits, capital, aUrioluvr 'and undivided profits as shown in the official statements of such the fia44.king association, or trust company filed as provided by law during acal Year next preceding the date set for the annual election of ditorand when a director, officer, or employee has been elected or se'011 hi accordance with the provisions of the Clayton Act it is lawful to continue as such for one year thereafter under said election ar " - °Ynlent e ee 11.1611 any person elected or chosen as a director, officer, or em' 0 act ?pf anY bank is eligible at the time of his election or selection '" such bank in such capacity his eligibility to act in such !Nett. "k trY le not affected by reason of any change in the affairs of such °t his-°111 whatsoever cause until the expiration of one year from the date election or employment. a Is t S 253 3/22/28 -3- Section III. Exceptions 111 The provisions of section 8 of the Clayton Act(1) Do not apply to mutual savings banks not having a capital stock re presented by shares. (2) Do not prohibit a person from being at the same time a director, officer, or employee of a national bank and not more than one other national bank, State bank, or trust company, where the entire capital -, stock Of one is owned by the stockholders of the other. , 0) Do not nrohibit a person from being at the same time a class A o irector of a d and also an officer or director, ba Federal reserve bank r both an officer and a director, in one member bank. r, (4) Do not prohibit a person who is serving as director, officer, /14 11 employee of a national bank, even though it has resources aggregat: g over 45,000,000, from serving at the same time as director, ofor employee of any number of State banks and trust companies, Provided such State institutions are not located in the same city of Over 2 00,000 inhabitants as the national bank and do not have resources ggregating in the case of any one bank more than A,000,000. (6) Do not prohibit a person from serving at the same time as director, provided officer, or employee of any number of national banks, 110 two of inhabitants 200,000 over of them are located in the same city and no one of them has resources aggregating over 45,000,000. 1(6) Do not prohibit a person who is not a director, officer, or emas officer, p ?" of any national bank from serving at the same time icli companies, trust or banks r:'ector, Or employee of any number of State Traless of their locations and resources. Do not prohibit a person who is an officer or employee but not d irector of a State bank from serving as director, officer, or emPloy vee of a national bank, even though either or both of such banks are have rl resources aggregating over in;5,000,000, provided both banks . inhabitants 200,000 (3. located in the same city of over a 0) Do not prohibit a person who is an officer or employee but not ofd irector of a national bank from serving at the same time as director, or both of fcer, or employee of a State bank, even though either , s both provided 45,000,000, over banks have resources aggregating . inhabitants 200,000 over of city anks are not located in the sane emor director officer, an or ni(9) Do not prohibit a private banker i:;°Yee of any bank or a Class A director of a Izederal reserve bank ,2111 being at the same time an officer, director or employee of not 're 44',' than two other banks within the prohibitions of the Clayton Act, 4 there is in force a permit therefor issued by the Federal deserve : Board e ooptions cumulative. - The above exceptions are cumulative. Section IV. Permission of the Federal Reserve Board 254 3/22/28 by In General. - Section 6 of the Clayton Antitrust Act, as amended the? the, Acts of May 15, 1916, Lay 26, 1920, and March 9, 1928, authorizes lederal Reserve Board to permit any private banker or any officer, diary °I' employee of any bank, banking association, or trust company, or Or e:"se A director of a Federal reserve bank to serve as director, officer, compvL aPloYee of not more than two other banks, banking associations, or trust Merit ,1! 1 " coming within the prohibitions of the Clayton Act, if in the judgt the Federal Reserve Board it is not incompatible with the public '1"est theol.b) When obtained. - Inasmuch as this exception to the prohibitions of suea Act applies only when "there is in force a permit therefor isby two 0 Y ton the Federal Reserve Board," it is a violation of the law to serve ore banks in the prohibited classes before such a permit has been ricer-6 ; ' A A permit should be obtained, therefore, before becoming an ofor emnloyee of more than one bank in the prohibited classes. ri be v air Procured before the person applying therefor has been elected as , eetor or %asses. ' appointed an officer or employee of any bank in the prohibited T (c) A A person wishing to obtain a permit Pplications for permission . of the"e Federal Aeserve Board to serve banks coming within the prohibitions Clayton Act should (1) Make formal application on F. R. 5. Form 94, or, if a private th.7'er, on F. R. 3. iorm 94d. 3ach oi these forms is made a part of iS regulation. (,) Obtain from each of the banks involved a statement on F. R. B. Porm 0 0?-7 4a, which is made a part of this regulation, showing the character 0i 'te business, together with a copy of its last published statement ▪ e011dition, and, if a private banker, make a statement on F. R. B. Q 0rm 9, showinc_7 the character of his or his firm's business. t3) Forward all these papers to the Federal reserve agent of his aletrict, who will attach his recommendation on F. R. B. Form 94b, in is made a part of this regulation, and forward them in due course (al°1e Federal deserve Board. bi4stlab.0, 1 Compatibility with the Public interest. - In determining whether the "clareC Of such a permit would be compatible with the public interest, the Ileeerve Board will consider: (1) Whether the banks involved are natural competitors; Whether their having the same directors, officers or employees -ula tend to lessen competition or to restrict credit; (3) Any other facts having a bearing upon the interest of the pubin such banks as affected by their having the same directors, of(sieve or employees. by the 13 Approval or disapproval. - As soon as an application is acted upon °arat the applicant will be advised of the action taken. 04 the b, If the board approves the application, a formal permit to serve (tc,rike involved will be issued to the applicant. • th the) Rea -ring. - If it appears to the Board that it would be incompatible v"lic interest to grant such permit the Board will so notify the frOta Z 255 3/22/28 •••• OMNI 41t1cant and will afford him every opportunity to present any additional ,,ts or arguments bearing on the subject before making any final decision the 44 case. (g) Effect of permits. - A permit once granted continues in force revoked, and need not be renewed. (h) Revocation. - All permits, however, are subject to revocation the Federal Reserve Board, after giving reasonable notice to the . them an opportunity to be rwrscmheu rci "4..60 whom they were issued and affording ,lnds that the public interest requires their revocation. Section V. Permits under Section 25 of the Federal Reserve Act dith the approval of the Federal Reserve Board, any director, officer, aPna 1°Yee of a °r tio4 member bank which has invested in the stock of any corporaengaged in international or foreign banking or financial rincipally j a Cil or vi°11s in a dependency or insular possession of the United banking State 89 under the provisions of section 25 of the Federal reserve act, may . serv as director, officer, or employee of any such foreign bank or financial vo ration. 4Pplications for approval. - The approval of the Federal Reserve Boar,l „(1)17 for such interlocking directorates may be obtained through an informal Board cai°n in the form of a letter addressed to the Federal Reserve l, eithe by behalf olle 0; vY the officer, director, or employee involved, or in his directsent be ly t,,4 the banks which he is serving. Such application should " the Federal Reserve Board. Section VI. Permits to Serve Edge Corporations With the approval of the Federal Reserve Board (1) Any officer, director, or employee of any member bank may serve at the same time as director, officer, or employee of any Edge corporation in whose capital stock the member bank shall have invested. (2) Any officer, director, or employee of any Edge corporation 1118Y serve at the same time as officer, director, or employee of any Other corporation in whose capital stock such Edge corporation shall have invested under the provisions of the Edge Act. APplications for approval. - Such approval may be obtained through 44 14f0— zieserv ',rail application in the form of a letter addressed to the Federal 44 h4 B°ard either by the director, officer, or employee involved, or in involved. Such applications 44041a tlf by one of the banks or corporations sent directly to the Federal Reserve Board. T A1 --Legralms dated March 21st from the Chairman of the Federal Reserve tkit of Philadelphia, March 21st from the Chairman of the Federal Reserve 44k of , 6t. Louis, March 22nd from the Assistant Federal Reserve Agent at 256 3/22/28 -6_ Zetaaa City, and March 21st from the Chairman of the Federal Reserve Bank Of Sen Francisco, advising that their boards of directors at meetings on the dates stated made no changes in the banks' existing schedules of rates of discOunt and purchase. Without objection, noted with approval. Report of Committee on Salaries and Expenditures on letter dated March 19th -01a1 the Assistant Federal Reserve Agent at Kansas City, advising of the act. 1°4 of the Executive Committee of that bank in voting to extend for PerinA as 0f four weeks, with full pay, leave of absence on account of ill- Prevthuely granted Mr. N. R. Oberwortmann, head of the bank's Examination Depart a 111-4-; the Board's Committee recommending approval of the salary payment 4ftivea, Approved. Letter dated March 14th from the Governor of the Federal Reserve Bank of 041 ca. transmitting memorandum prepared by the Deputy Governor of that bank with r Bepect to the recent establishment of a call money market in Chicago. The above letter, having been circulated among all members of the Board, was noted. Letter dated March 14th from the Deputy Governor of the Federal Reserve Bkik of New York, with respect to prospective transactiOns over the March 15th ta payment f.,eriod, particularly those affecting the open market investt4Bilt account. The above letter, having been circulated amon members of the board, was noted, tiara° 1:410.1she all rendum from Counsel dated March 22nd, recommending that there be cl in the forthcoming issue of the Federal Reserve Bulletin the text 257 3/22/2s -7- with a cn the amendment to the Clayton ;tot approved on March 9th, together 1) introductory statement relative thereto. Approved. forthUpon motion, it was also voted to include in the Second L, Aegulation c ,c)ming issue of the Bulletin the text of Series of 1928, adopted at this meeting. *on of Committee on Examinations on letter dated March 16th from the 41 aeserve Agent at Chicago, with reference to the pending merger of 4c1(11 ' the La G memrange State Bank and the La Grange Trust and Savings Bank, both be illat itutions, which will be effected on April 1st under a new charter • alicl Will involve System; the Committee a new application for membership in the ren .ornmeirig approval of a suggestion of the Federal reserve .,,.gent that the (If the supplemental information usually reouired of banks applying tor b,„ "'Illoership in the System be waived in this case. Aeserve Agent Upon motion, the suggestion of the Federal was approved. The secretary then submitted a request received through the Federal Res- ON 4 gent at Richmond, on behalf of Mr. J. P. Fishburn, prospective nominee el Strudwick, ection as Class B Director of that bank, to succeed Mr. Edmund aee ease, for a ruling as to :dlether service by r. Fishburn as a member of the 3tate comes within the prohibitions Conservation and Development Commission Qe the Board,s 131'41°188 t Federal Reserve banks and regulation forbidding directors of hold political office. consensus of opinion that After discussion, it was the the position held by Mr. Fishburn does not come within the referred to. Prohibitions of the Board's regulation lietnor submitting draft of letter andurn from Counsel dated. March 13th, 258 3/22/28 toRoaorable Eugene Meyer, Farm Loan Commissioner, requesting the the Views Of Federal Farm Loan Board as to the necessity and desirability of a further alliellcbtent to Section 8 of the Clayton Act which would exempt from the provisions "officers, directors and employees of Joint Stock Land Banks. there After discussion, the letter to the Farm Loan Commissioner was approved. The S ecretary then submitted a memorandum from Counsel dated February 17th with further reference to the Clayton Act application of Yr. Frank 0. Wetmore, volvtag the First National Bank of Chicago, the First Trust Joint Stock Land chicago, Bank the First Trust Joint Stock Land Bank of Dallas and the Chi4g° Title and back Trust Company of Chicago, which application was referred to the Law "the which consideration Committee at the meeting on January 16th for further question whether the Chicago Title and Trust Company is an institution 0°418e within the provisions of the Clayton Act. In his memorandum, q1.1 e xpressed the opinion that the institution is a "trust company" within t be neceseaninR of that term as used in the Clayton Act and that it will " seri °r ir. qetmore to sever his connection with one of the four institutions he i a 110'W serving, all of which come within the prohibitions of the Clayton Aet, Board After discussion, 'Mr. Hamlin moved that the of the view in application 'oretmore's defer action on Mr. recommending n consideratio under 'act that the Board has to Congress an amendment to the Clayton Act wilich would thereof. exempt joint stock land banks from the provisions Carried. Te en, Reserve Agent at San Francisco, 441 dated March 22nd from the Federal ' 1-1 Eifivista of R that arrangements have been made with the Superintendent of Banks 4404 Valley 4 whereby he will conduct a simultaneous entry examination of the 259 3/22/28 -9- Reserve °I Phoenix on March 31st, in connection with which the Federal 111111 4111c"San Francisco will make a credit investigation; the Federal Reserve 4gellt requestino. approval of the arrangement, which involves an extra cost to t4ePederal Reserve bank of approximately .300 in the form of a charge for c°Pies Of the report of examination, which will cover the additional expense to ""11 state department of making the examination. arrangeAfter discussion, it was voted to approve the ment outlined, by the Federal Reserve A.gent. The 14tal minutes of the meeting of the Federal Reserve Board held on March and 16th were read and approved. The were read and upon motion the actions recorded therein were ratified. The 218t minutes of the meeting of the Executive Committee held on .March 20th March minutes of the meeting of the Federal Reserve Board held on were read. and approved. '110:ITS OP STANDING 00:LMI2TEES: 1)4t March 21st, 22nd, 12latect, March 19th, 21st, Ijic%rch 20th, 21st, Reserve Banks Recommending changes in stock at Federal of this date. Book as set forth in the Auxiliary Minute Recommendations approved. fiduciary powers Recommending action on applications for of this date. Book Minute as set forth in the Auxiliary approved. Recommendations of Recommending action on applications or admission the in stated s conditi state banks, subject to the pplications, as set individual reports attached to the this date. f Boo Minute forth in the Auxiliary approve Recommendations e meeting adjourned at 3;40 li 13 oved.: Secreta
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