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A meeting of the Federal Reserve Board was hold in the office of the Federal Reserve Board on Wednesday, liarch 9, 193, at 11:30 a. ra. PRESENT: The Chairman Governor Meyer 1:Ir. Hamlin Mr. Miller Mire Tames Mr. Yagee Mr. Pole 11r. Er. Mr. Mr. Morrill, Secretary McClelland, Assistant Secretary Harrison, Assistant to the Governor Wyatt, General Counsel. The minutes of the meeting of the Federal Reserve Board held on March 1, 1932, were apuroved. The followin': matters were then presented for the consideration and action of the Board: Application for 360 additional shares of stock in the Federal Reserve Bank of Atlanta, filed by the East Tennessee National Bank, Knoxville, Tennessee, and approved by the Executive Committee on March 7. Application approved. Telegrams dated March 4 from the Secretary of the Federal Reserve Bank of Cleveland and March 7 from the Chairman of the Federal Reserve Bank of Dallas, both advising that, at neetins of the Boards of Directors on the dates stated, no changes were nade in the banks' existing schedules of rates of discount and purchase. Without objection, noted with approval. Reports of the Committee on Salaries and Expenditures recommending aPproval of changes in personnel classification plans at Federal reserve banks, as follows: 3/9/32 -2Chicago: Creation of the new position "Currency Teller O." in the Paying Teller Department of the Detroit Branch. Kansas City: Reductions in the salary ranges for two positions in the Country Check Remittances Division of the Check Collection Department, and minor changes in the titles, descriptions of work, and qualifications required for those nositions. Recomnendations approved. Telegraphic reply to a telem dated Farch 7, 1932, from Deputy Governor Rounds of the Federal Reserve Bank of New York requesting authority to purchase from the Endicott National Bank, Endicott, New York, a tax revenue note of the Village of Endicott in the amount of ;10,000; the reply 11 stating that the Board authorizes the Purchase with the understanding that the note meets all requirements of Re-Illation IT except that it exceeds 25'' Of the total amount of warrants of the municipality outstanding. Reply approved. Reply, approved by five members of the Board on 1.arch 6, to a letter dated February 26, 1932, from the Federal Reserve Agent at Dallas reporting that the First National Bank, Raymondville, Texas, was deficient In its required reserves for the period August 1, 1931 to Tanuary 31, 1932; the reply stating that while, in accordance with the Agent's recommendation, the Board will take no action at this tire concerning the bank's deficient reserve position, other than to forward a copy of his letter to the Comptroller of the Currency for the information of his office, it is requested that the Agent advise the Board of the response of the directors Of the bank to the letters which he had addressed to them. Reply approved. ( g 3/9/32 -3Reply to a letter dated February 18, 1932, from the President of the Baltinore Clearing House, Baltimore, Tlaryland, inquiring whether a certificate of deposit which is Payable four months after date but which is also subject to the right of the bank to require thirty days notice in writing Of withdrawal, may properly be classified as a time deposit for the entire four months period, the reply stating that the date of the maturity of such a certificate would be a matter of some uncertainty, and, before undertaking to express an opinion on the question raised, the Board would wish to have before it a copy of such certificate in its entirety, together with infornation as to the period for which interest on a deposit of this kind would be paid by the bank. The reply also stated that, in view of the ambiguous Provisions of such a certificate, the rights of the depositor, as well as those of the bank, would appear to be uncertain and it would seem that the Interests of all parties 'would be better served by the adoption of a form Of certificate concerning the meaning of which there could be no doubt. Reply approved. Reply, approved by five members of the Board on Thrch 7, to a letter dated February 24, 1932, from the Federal Reserve Agent at Richmond referring to the Board's letter of January 1U, 1932, (X-7062) advising that In connection with the examination of state member banks the amount of depreciation on stocks and defaulted bonds only should be shown as losses, and incuiring whether the policy set forth in that letter is also applicable to banks applying for melbership in the Federal Reserve System. The reply stated that, in the opinion of the Federal Reserve Board, there is itIstification, under present conditions, for differentiating in the treat- 179 -4- 3/9/32 ment of bond depreciation which may exist in banks already members of the Federal Reserve System and that which may exist in the case of banks which are applying for admission to the System, but that in some recent cases the Board has not insisted unon strict observance of the policy outlined in its letter of June 19, 1931, (1-6914), and has approved applications for membership by bsrks with competent managements and the affairs of which were Otherwise in generally satisfactory shape, upon condition that they should, Prior to admission to the System, charge off all known losses and depreciation on bonds other than those classified in the four highest grades by an organized investment service organization. The reply also stated that, while no definite statement could be made in advance, it is Probable that the Board would be disposed to extend similar treatment to the bond depreciation of other banks applying for membership in the System if their managements and condition were generally satisfactory in all other respects, and suggested that the Agent consider these aspects of the matter carefully and advise the Board fully with regard to them in connection with any recounendation that he may submit in any case in which he feels that the Board would be justified in making a similar allowance for bond depreciation. The reply was approved and the Secretary was instructed to transmit a copy thereof to all other Federal reserve agents for their information and guidance. Reply, approved by five members of the Board on Larch 5, to a letter dated February 25, 1932, from the Federal Reserve Agent at Atlanta inquiring whether the Federal Reserve Board has prescribed any regulations in connection with Section 8 of the Reconstruction Finance Corporation Act, -5- 3/9/32 which authorizes among others the Federal Reserve Board, under such conditions as it may prescribe, to make available to the Reconstruction Finance Corporation in confidence such reports, records and other in'ol-ation as rlr have available rolotin to the condition of financial institutions and others, the reply sUtin -; that the Board has not prescribed any relations for the reason that it is felt that the conditions under which information might be disclosed to the cor)oration would develop only threuh Practical experience, and that safeguards should be worked out from time to time throu7h informal understandings with the local nana-Trs of the loan agencies of the corporation in such a manner as to be helpful to the cor-;oration and at the same 'AID 2rotect the confidential character of the 1/ 1nf01 mation. The reply was approved and the Secretary was instructed to transmit a copy thereof to all other Federal reserve agents for their information. Reply, approved by five members of the Board on arch 3, to letters dated February 1, 1932, from the Federa3 Reserve Agent at San Francisco referring to the actions on that date of the Albany State flank, Albany, Oregon, and the First Savings and Trust Bank of 'Thitman County, Colfax, 71ashington, member institutions, in taking over the assets and assuming the liabilities of the First Savings Bank of Albany and the Colfax rational Bank, respectively, and enclosing copies of letters to the member banks Which contained the statement that, under their conditions of membership, the banks should have made application to, and received the a,,Proval of, t. the Federal Reserve Board before entering into the consolidations. The reply stated that while the procedure suggested by the Federal Reserve 81 3/9/32 -6- Agent is, of course, the desirable one, it has been found in the great majority of cases that it is not feasible to obtain in advance of a consolidation sufficient detailed information regarding the current condition of the banks involved and the terms of the consolidation to enable the Board to reach a considered decision as to whether or not the transaction would result in a change in the character of the assets of the continuing member bank or in the scope of the functions exercised by it within the meaning of the general condition of membership to which practically all member banks are subject; that for this reason it has become the practice of other Federal Reserve Agents to get in touch informally with the officers and directors Of banks which are considering transactions of this character for the Purpose of going over the situation with them and of cooperating in the working out of the transaction as far as Possible in a manner which will be satisfactory, but without in any way attempting to forecast the ultinate action of the 3oard or to commit it in any way, since the circumstances are Usually such that it is not feasible to present the matter adequately to the Board at such a time; that, therefore, it is the general Practice of the Board when it receives preliminary advice of such a transaction to defer action until after the consolidation has been effected and the Board is in Possession of comolete information which can best be secured through an eXamination or credit investigation of the consolidated bank; that under this Procedure there is ample time to study both the practical and legal aspects of the questions involved and to point out such adjustments, if any, as should be Fade in the light of a careful consideration of the facts; and that this practice avoids the necessity of delaying consolidations which in 82 3/9/32 -7- many instances must be effected cuickly, and no difficulties in its Practical operation have been net 1.11) to the present time. Reply approved. Reply made by the Governor on 1-arch 5, to a letter addressed to hi:: under date of liarch 3, 1932, by Congressman Steagall rerluestinr: an expression Of views with regard to H. R. 8931; the reply being similar to the lettcr to Senator Steiwer, approved at the meeting on ilarch 3, with regard to S-2/109 which contains provisions corresponding to those in H. R. 8931. Reply approved. Reply to a letter dated Larch 1, 1932, from Assistant Secretary of the Treasury Lawman requesting an expression of the views of the Board on S. 3826, "a bill providing for the establishment and maintenance of the bank depositors' guaranty fund"; the reply stating that a number of states have initiated and endeavored to maintain systems for the purpose of insuring Or guaranteeing bank deposits but most of them have been terminated by legislative action and not one of them now remains in full force and effect and that the "Tederal Reserve Board and the Federal Advisory Council at various times in the Past have expressed disapproval of such plans and it is believed that experience has demonstrated their landamcntal unsoundness. The reply also stated that such systems tend to encourage incompetent and careless management and therefore penalize sound and efficiently operated institutions; that in the end they become hurtful rather than helpful to the best interests of the depositors and that, therefore, in the opinion °I' the Federal Reserve Board, the enactment of such legislation by Congress Would not be beneficial. Reply approved. 6" -8- 3/9/32 Letter to the Chairman of the Federal Reserve Bank of Philadelphia, approved by five members of the Board on l'arch 5, 1932, stating that according to the report of the examination of the bank as of the close of business October 10, 1931, the maximum penalty rate for deficiencies in reserves of member banks in that district has been reduced since the previous examination from 101; to 6; that Regulation D provides a maximm penalty of 10, and that, when a Federal reserve bank has been authorized by the Board to an')ly Progressive penalties, such Penalties should be assessed at the rate prescribed in the Regulation until the bank requests and receives the Board's Permission to modify or discontinue such nenalties. The letter also called attention to the fact that the progres ive penalty is now in effect in only four Federal reserve districtsand stated that if the Federal Reserve Bank ' Of Philadelphia should desire to have the Federal Reserve Board discontinue Progressive penalties in the Third Federal Reserve District, the Board would be glad to give consideration to such a request from the bank. The letter was approved, as was a letter along the same lines, also approved by five members of the Board on Larch 5, to the Chairman of the Federal Reserve Bank of Atlanta, at which there has been in effect for a nuMber of years, with the consent of the Federal Reserve Board, a maximum penalty rate of 8(1. Reply to a letter dated February 24, 1932, from the Federal Reserve Agent at Dallas with regard to the procedure to be followed in canceling Federal reserve bank stock issued to a member bank which is in liquidation or for which a receiver has been appointed, when the certificate representlug such stock cannot be located; the reply stating that in view of the Pilovision of Section 5 of the Federal Reserve Act that shares of Federal 184 3/9/32 -9- reserve bank stock owned by a nember bank shall not be transferred or hypothecated, a Federal resarve bank, after the Federal Reserve Board has approved an appropriate application for cancellation, may safely cancel Federal reserve bank stock where the certificate has been lost, if at the tine it makes refund on the stock it Obtains an agreement of release from the member bank, discharging the Federal reserve bank from any liability on such lost stock certificate. The letter also suggested the inclusion in the agreement of a Provision obligating the licuidating agent or receiver to surrender the certificate of stock in the event it should be located. Reply approved. Telegram dated TTarch 7, 1932, from the Governor of the Federal Reserve Bank of San Francisco stating that the San Francisco bank had requested the Federal Reserve Bank of rew York to take over .1.0,000,000 of the t°rmer's participation in the System's Special Investment ccount in order that the San Francisco bank might cover the Federal reserve notes in its cash; this action having been taken in anticipation of the Federal Reserve Board's approval of the bank's request for permission to pledge Government securities as collateral for Federal reserve notes. Noted. Reports of Standing Committee dated 'larch 4, 7 and 8, recomendin7 approval of the following changes in stock at Federal reserve banks: APP-LLaations for ORIGI1AL Stock: District No. 5. -71I-E1ITE-e-ITITaional Bank, Fredericksburg, Va. 3 eo. istrict1' iJirst National Dank of La Grande, Oregon. Shares 72 72 90 Total 90 162 C 3/9/62 -10- Applications for ADDITIONAL Stock: District No. l._ Lass. Foxboro National Dank, Foxbore, Vanchester National Bank, Winchest,er, Lass. District 10. 3. First National Bank Trust Co., Blackwood, 1. T. District TO, 4. Rittman Savings Bank, Rittman, Ohio. National Exchange Bank & Trust Company, Steubenville, Ohio. Second National Bank, Ashland, Ky. District No. 10. Farmers L Drovers National Bank, 1:larion, Kans. First National Bank, Tonganoxie, Kans. Gering National Bank, Gering, Nebraska. First National Bank, ITinatare, Nebraska. Security National Bank, Clinton, Oklahoma. 30 15 45 75 75 1 30 30 61 1 1 3 1 _ 2 Total 8 189 Abplications for SURITI-:NDI]iZ of Stock: District No. 2. First National Bank, Gasport, N. Y. (Insolvent) 30 30 District No. 4. --Citizens National Bank, Bolivar, Pa. (V.L.Abs. by Bolivar National Bank of Bolivar) First National Bank in Brockway, Pa. (Insolvent) 36 GO 96 District No. 5. First National Bank, Warsaw, N. C. (Insolvent) 30 30 District No. G. Southern Bank and Trust Co., Birmingham, Ala. (Insolvent) First National Bank, rUrfreesboro, Tenn. (Insolvent) 11 Shares District Ho 7 3.o11et Trust &Savings Bank, Joliet, Ill. (Insolvent) Rockford National Bank, Rockford, Ill. (Insolvent) First National Bank, Mendota, Illinois. (Insolvent) 333 180 513 120 900 120 1•140 )1 86 3/9/32 -11- Applications for SURRENDER of Stock: (Cont,d) District No. 8. First National Bank, Jeffersonville, Ind. (V.L.Abs. by Clark County State Bank of Teffersonville) Sedalia Trust Company, Sedalia, No. (Insolvent) District No. 9. First National Bank, Blair, Wis. (V.L.Abs. by Union Bank of Blair) ,District No. 12. Butler Banking Company, Hood River, Oregon. (Insolvent) Shares 108 75 183 18 18 105 Total 105 2,115 Approved. Reports of Standing Co.omittee dated Larch 5, 7 and 9, recommending approval of the following Clayton Act applications: C. E. Shill for permission to serve at the same time as director and officer of the Woodlawn-American National Bank of Birmingham, Alabama, and as officer of the First National Bank of Birmingham, Alabama. Mr. Frederick A. Dolfield for permission to serve at the same time as director of the Norris Plan Bank of Baltimore, Maryland, as director of the Maryland Trust Company of Baltimore, Maryland, and as officer of The Canton National Bank of Baltimore, Maryland. Ur. George E. Wilson, Tr., for permission to serve at the same time as director of the Merchants and Farmers National Bank of Charlotte, North Carolina, and as director of the American Trust Company of Charlotte, North Carolina. Ur. L. L. Uarcell for permission to serve at the same time as director of the Commerce Trust Company of Kansas City, Missouri, and as director of the First National Bank in Wichita, Kansas: Yr. T. M. Cumby for permission to serve at the same time as officer of the Republic National Bank and Trust Company of Dallas, Texas, as director and officer of the Liberty State, Bank of Dallas, Texas, and as director and officer of the Oak Cliff Bank and Trust Company of Dallas, Texas. Mr. W. O. Connor for Permission to serve at the same time as director of the Republic National Bank and Trust 'Company of Dallas, Texas, as director of the Liberty State Bnnk of Dallas, Texas, and as director of the Oak Cliff Bank and Trust Company of Dallas, Texas. 187 3/9/32 -12- Jjr. Frank E. Austin for permission to serve at the sare time as director and officer of the Republic National Bank and Trust Company of Dallas, Texas, as director of the Liberty State Bank of Dallas, Texas, and as director of the Oak Cliff Bank and Trust Comaany of Dallas, Texas. hr. Leslie Waggoner for permission to serve at the same tine as director and officer of the Republic National Bank and Trust Company of Dallas, Texas, as director of the First National Bank of Waco, Texas, and as director of the Liberty State Bank of Dallas, Texas. Approved. Thereupon the meeting, adjourned. Secretary. Approved: Chairman.
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