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252 A meeting of the Board of Governors of the Federal Reserve System was held in Washington on Monday, March 3, 1941, at 10:40 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman (most of meeting) Ransom, Vice Chairman Szymczak McKee Davis Draper Mr. Morrill, Secretary Mr. Carpenter, Assistant Secretary Mr. Thurston, Special Assistant to the Chairman ALSO PRESENT: Mr. C. V. Gregory, Deputy Chairman of the Federal Reserve Bank of Chicago Reference was made to the article which appeared in the Chicago Tribune yesterday with respect to the situation which has developed in connection with the selection of a President and First Irl-ce President at the Federal Reserve Bank of Chicago and there was 4 diocussion of the desirability of issuing a statement in some for.m Which would answer some of the possible implications of the news item. In this connection the suggestion was made that the s statement might be in the form of a reply to telegrams which had been received from Harry C. Hausman, Secretary of the Illinois tank ers Association, which Mr. Hausman would be authorized to re— ease to the press. Mr. Szymczak stated that during a conversation which he had thi„ - morning with Mr. Lewis, Chairman of the board of directors of the Federal Reserve Bank of Chicago, who is in Florida, Mr. Lewis 253 3/3/41 -2- said that he would be glad to come to Washington, or, if the Board desired, to have a committee of the Chicago board co-le down. Mr. 8z31111czak said he suggested to kr. Lewis that, inasmuch as Mr. GIN:gory had been acting in Mr. Lewis' absence, he should communicate with Mr. Gregory. Mr. Gregory reviewed his conversation with Mr. Cummings 14 Chicago yesterday during which the latter took the position that thel„, ' was no need for an in,...:Iediate meeting of the board of director, - of the Chicago Bank for the purpose of taking further action With -esPect to the appointment of a President and First Vice PresidEtt and in that connection called attention to the motion offered bzr Van Dusen and adopted at the last meeting of the directors _o that " meeting be held for that purpose until all of the members "he board could be present. Mr. Gregory stated that when that 410tion _ Was made at the meeting of the directors he took the posit4441 that, if adopted, it would have no binding effect for the reaNlthat the bylaws provided for a method for calling a special Illeeting and that if there appeared to be a need for a meeting, notWithstanding a motion to the contrary, he would have no hesitancy 14 calling one, but that he stated to Mr. Cummings yesterday that, w of Mr. Van Dusen's motion, ample notice of a meeting would be to all members of the board of directors so as to enable thela to attend. Mr. Gregory added that Mr. Cummings stated that he w °11-14 be willing to come to Washington at any time this week 254 3/3/41 —3-- after Tuesday and that he (Mr. Gregory) would undertake to arrange a meeting of a committee of the board of directors with the Board (If Governors on Wednesday, March 5, and would delay calling a meetiXlg of the board of directors of the Bank until after the committee haci nlet with the Board. Mr. Gregory made the further statement that Mr. Schaller, as President of the Chicago Bank, wrote a memol'arl°111m under date of February 28, 1941, designating Mr. Young to act as chief executive officer of the Bank until the next meeting Of board of directors which was in accordance with the provisiclls of the bylaws of the Bank. During the discussion which followed it was understood that GTegory should request Messrs. Lewis, Cummings, Williams, and 4tbellg, and any of the other directors who he felt should be preset' to attend a meeting with the members of the Board of Governors illWashington on Wednesday, March 5, 1941. There was a further discussion of the question whether the should issue a statement to the press and it was understood that 14r. Thurston would prepare a draft of statement for consideral'i°4 bY the Board. The conference then recessed and reconvened at 2:15 p.m. ivith the same attendance as at the morning session. Messrs. Szymczak and Gregory left the room to talk over the telephone with Mr. Lewis and upon their return stated that Mr. tewi s said he would be in Washington for the meeting with the mem- bers Of the Board on Wednesday, March 5. Mr. Gregory also said 255 34141 -4- that*. Lewis stated that he had talked with Mr. Cummings and that he (Mr. Lewis) had agreed to call a meeting of the board of directors of the Bank after the meeting with the Board of GayerOn March 5. There was presented a draft of statement prepared by Mr. kurston, which was in the form of a reply to the telegrams reved train Mr. Hausman, Secretary of the Illinois Bankers Associatien, and after some discussion of the draft it was agreed that "re. Gregory, Morrill, and Thurston should retire and revise the st atement. They withdrew from the meeting at 3:00 p.m. Mr. McKee stated that under date of January 24, 1941, First 'v President Clerk of the Federal Reserve Bank of San Francisco NA to the Board a letter with which he transmitted (1) the reof an investigation made by a Federal Reserve Examiner for the Purpose of determining whether on August 30, 1940, the Bank of Araeri ea National Trust and Savings Association was an affiliate of TNa samerica Corporation and (2) an opinion from Mr. Agnew, Counel tor the Federal Reserve Bank of San Francisco, to the effect that the national bank was an affiliate of the corporation. The lett -r also stated that it would be appreciated if the Board would corlxi rm or correct Mr. Agnew's opinion. Mr. McKee referred to a memorandum prepared by Mr. Baumann, 4"tatant Counsel, under date of February 21, 1941, which set forth the cir cumstances involved in the request from the San Francisco 256 3/3/41 -5- Ballk and stated that, if all of the shares owned or controlled by the T ransamerica Corporation on January 14, 1941, had been voted at the election of directors on that date, they would have constituted a majority of the shares voted, that this was probably t11118 at the time of the 1940 election although it was not deanestablished by the information submitted and that on August 30 '1940, Transamerica Corporation owned or controlled sufficient Shares so that, if an election had been held on that date it could have voted a majority, assuming that no more of the common stock riot 8° owned or controlled was voted than had been voted at the Pl'eceding election. The memorandum also stated that Mr. Agnew 1148 of the opinion that the corporation was a holding company affiliate of the bank within the meaning of the portion of the deanitton of a holding company affiliate which includes any corporation Ilhich owns or controls, directly or indirectly, more than 50% of the number of shares voted for the election of directors of any one at the preceding election, that Mr. Agnew's opinion was in acculce with the Board's original position with respect to the inte, 'Pretation of this portion of the definition as set forth in its tea. -gram dated January 29, 1934, to the Federal Reserve Bank of p rancisco, but that subsequently certain cases arose in which the aPplication of the original ruling would have caused seemingly Pal'e4°)cical results which led the Board, in a series of individual ease 83 to abandon the position originally taken, and that on 257 3/3/41 -6- -14 r 5, 1937, the Board advised the San Francisco Bank that the Board had no information indicating that Transamerica Corporation Wa8 then a holding company affiliate of the Bank of America and, unless there was some evidence of such a relationship, there was no r'eas014 Why the Bank of America might not participate in an election q 4 elass A director of the Federal Reserve Bank independently of 8. -anks controlled by Transamerica Corporation. The memorandum made the further statement that an opinion ()lithe General Counsel for the Treasury in 1939 that Transamerica C°I'Poration was a holding company affiliate of the Bank of America de 4° suggestion that the law should be interpreted in the manner Ngested by Mr. Agnew's opinion and that, although the Securities 411d4Change Commission had indicated that it considered the Bank Or Aerica a subsidiary of the corporation, the decision of the Comkiss& n °- was based on definitions materially different from the def-°n of a holding company affiliate. The memorandum also pointed 0111L 41_ .1lat to confirm Mr. Agnew's opinion and thus revert to the to-r d, 8 original interpretation of the law would involve the reve, —;ial of a position well established by numerous rulings and generalh ''Y known to interested parties and that, while it would be imPl5asibl-e to say how many cases would be affected by such action, few, if an ' Y tYPioal bank holding companies other than Transamerica CorDoreti °II would be affected and therefore in most cases the Board e°11.1A determine that the companies involved were not holding company 258 3/3/41 —7— affiliates except for the purposes of section 23A of the Federal Reserve Act• Mr. McKee stated that Counsel's Office was in agreement that MI,. Agnew's opinion was correct. He also said that under date Of March 1, 1941, Mr. Clerk addressed a second letter to the Board 11"hich it was stated that it would be very much appreciated if the Oa drd would advise him by wire on March 3 when the Federal Re" .e Bank might expect an opinion as to whether Transamerica Cor- 13°1 ' ation was a holding company affiliate of Bank of America. In the circumstances, Mr. McKee said, the Board should reach a decisio n on the matter. In the discussion which followed, lidr. Dreibelbis stated that there was also a question whether Transamerica Corporation 448' a holding company affiliate under another portion of the def- . o of a holding company affiliate which provides that a company isSO an affiliate if it controls in any manner the election of a 414j°/7itY of the directors of any one bank. He added, however, that thet'e was not sufficient information available to make it practie"le to consider this question at the present time. At the conclusion of the discussion of the matter, Mr. McKee moved that the Secretary be requested to advise Mr. Clerk by wire that, upon the basis of the facts submitted, the Board concurs in Mr. Agnew's opinion that Transamerica Corporation is a holding company affiliate of Bank of America National Trust and Savings Association, and that in the light of such opinion it was unnecessary to consider the applicability 259 3/3/41 -.8— of the portion of the definition of a holding company affiliate which relates to the control of the bank in any umnner. Mr. McKee's motion was put by the Chair and carried unanimously. At 4:35 p.m. Messrs. Gregory, Morrill, and Thurston, re— turned to the roam and copies of the statement prepared by them, Filch was also in the form of a reply to Mr. Hausman's telegrams, were distributed and discussed but it was agreed that no decision h°uld be reached on the statement pending further developments. At the conclusion of the discussion Messrs. Thurston and Greg°1*7 left the room and the action stated with respect to each °f the matters hereinafter referred to was then taken by the Board: The minutes of the meeting of the Board of Governors of the -D_ L'ecteral Reserve System held on March 1, 1941, were approved Letter to Mr. Gilbert, President of the Federal Reserve tank of Dallas, reading as follows: "In accordance with the request contained in your letter of February 24, the Board approves the designation of E. A. Thaxton as special assistant examiner, with the understanding of course that he will not be transferred Permanently to examination work without the Board's ap— Provea.H Approved unanimously. Letter to the board of directors of "The Bippus State Bank", Pp Indiana, stating that, subject to conditions of membership riurabe red 1 to 6, inclusive, contained in the Board's Regulation H, 260 3/3/43. -9- the Board approves the bank's application for membership in the FedZ41 Reserve System and for the appropriate amount of stock in the Federal Reserve Bank of Chicago. Approved unanimously, together with a letter to Mr. Young, Vice President of the Federal Reserve Bank of Chicago, reading as follows: "The Board of Governors of the Federal Reserve System approves the application of 'The Bippus State Bank', BlPpus, Indiana, for membership in the Federal Reserve System, subject to the conditions prescribed in the enClosed letter which you are requested to forward to the "°ard 1 of Directors of the institution. Two copies of such letter are also enclosed, one of which is for your files and the other of which you are requested to forward to the Director, Department of Financial Institutions for the State of Indiana for his information. "Since it is understood that in the State of Indiana trust funds deposited in the banking department of a bank . 1.*e preferred claims in the event of liquidation of the Dank, you are authorized, in accordance with the general authorization previously granted by the Board, to waive compliance with condition of membership numbered 6 until further notice." Letter to the board of directors of the "Fowler State Bank", Fowl ex', Indiana, stating that, subject to conditions of membership 411121bered 1 to 3, inclusive, contained in the Board's Regulation H 41cithe following special condition, the Board approves the bank's at1on for membership in the Federal Reserve System and for the app I'DPriate amount of stock in the Federal Reserve Bank of Chicago: "4. Prior to admission to membership, such bank, if it has not already done so, shall charge off or otherwise eliminate estimated losses of $700, as shown in the report of examination of such bank as of 261 3/3/41 -10"February 1, 1941, made by an examiner for the Federal Reserve Bank of Chicago." Approved unanimously for transmission through the Federal Reserve Bank of Chicago. Letter to Mr. Hitt, First Vice President of the Federal Reserve Bank of St. Louis, reading as follows: "In view of the circumstances outlined in your letter of March 1, the Board extends to April 1, 1941, the time within which the 'Citizens State Bank of Fair PlaV, Fair Play, Missouri, may accomplish membership." Approved unanimously. Thereupon the meeting adjourned. epice,4,-,A- hi) • Secretary. APProved/ Chairman.
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