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1334 A meeting of the Executive Committee of the Federal Reserve Board was held in Washington on Thursday, May 10, 1934, at 4:00 p. m. PRESENT: Mr. Mr. Er. Mr. Black, Governor James Thomas Szymczak Mr. Morrill, Secretary Mr. Carpenter, Assistant Secretary Bethea, Assistant Secretary Mr. Martin, Assistant to the Governor The Committee considered and acted upon the following matters: Memorandum dated May 8, 1934, from Mr. Eoell, Assistant SecreterY, stating that Mr. Mooney, Chief Telegraph Operator, has requested Perin:1885-011 to employ a vacation relief operator in the Board's telegraph °filo° during the months of June, July, and August, 1934, with Ar Y at the rate of $165 a month, and recommending that the request be 4PProved. Approved. Telegram dated May 8, 1934, approved by six members of the 4°Lrd, to Ur. Stevens, Federal Reserve Agent at the Federal Reserve 11ENc of Chicago, referring to the application of the "Farmers State 440, Montague, Michigan, for permission to withdraw immediately tr°14111elnipershiP in the Federal Reserve System, and stating that the 130krd waives the usual requirement of six months' notice of intention t0 arIritliciraw and that, accordingly, upon surrender of the Federal reOf stock issued to the Farmers State Bank, the Federal Reserve c ,L,Le . 4g° le authorized to cancel such stock and make a refund Approved. .1,335 5/10/3 -2Letter dated May 9, 1934, approved by six members of the Board, to Mr. Stevens, Federal Reserve Agent at the Federal Reserve 4allc of Chicago, reading as follow,: "Reference is made to the report of examination of the Adrian State Savings Bank, Adrian, Michigan, as of March 12, 1934, and to Mr. Young's letters of April 10, 14 and 16, in connection therewith. "The bank was not licensed after the national banking holiday, and was reopened on December 9, 1933, under a plan of re°rEanization which provided for a waiver of 50 per cent of unsecured deposits. The report of examination discloses that the bank is still in an unsatisfactory condition, with a substantial amount of criticised assets and a management regarded as lax and inefficient. Prior to the reopening of the bank, the State Bankinf; Commissioner stipulated that the former president, B. E. Tobias, who had dominated the bank in the past, should have no Part in the active management of the reorganized bank and he was, therefore, not continued as an officer or director of the reoreslanized institution. In January, 1934, however, he was elected a director, and your examiner now reports that B. E. Tobias again appears to dominate the situation, even retaining his old office 111 the bank. Jr.: B. E. Tobias is also one of the trustees in Charge of the trusteed assets, and your examiner reports that 4 Tobias operates the trust as he sees fit, that his administrah"of the trust has been anything but satisfactory, and that rf;s salary of 200 a month as trustee seems to be out of line ,-Lth the results accomplished. re "ihe report of examination made by one of your examiners balTas also a complete lack of harmonious cooperation in the oth StlIff, with each employee seemingly suspicious of the It appears also that Mr. Faulhaber, the former cashier, those ooll.es r ignation was required on account of irregularities, cor24.nUed to have a desk in the bank and was permitted free acpe:Lto the banking quarters where only bank employees should be th:Vted, and that the State Lank examiner was forced to demand th Faulhaber be denied access to the working quarters of e bank. j "It is • rsee„, noted that the Deputy Commissioner of Banking has bkh1c4,":LY discussed the situation with several directors of the zi8twal:/lcluding B. B. Tobias; that it is proposed to make Astank 1 Cashier Moore, who recently became associated with the and is considered competent, cashier; that the present Prosi,;that rilt of the institution, Mr. Taitney, has given assurances 'le realizes his responsibility and that he will not subject sta!if to the will of Mr. B. E. Tobias; that the Deputy Commisrankin7; feels certain that the undesirable influence 1336 5/10/34 -.3- H of Lir. 13. E. Tobias has now been eliminated, even though he has not actually been removed from the board; and. that in view of all of the circumstances it is the feeling of your office that no action be taken at this time under the provisions of Section 30 of the Banking Act of 1933, but that the present management be given an opportunity to show its good faith. ".his situation demands the continued and vigilant attention of the supervising authorities, and it is understood that your office and the State Banking Department are keeping in close touch with the situation. The Board is surprised to learn that 1711'• B. E. Tobias, vthose elimination from the managem ent was demanded at the time of the reorganization of the bank, is again a dominEuat factor in the bank's affairs, but notes that your office feels that no action should be taken regarding the management at this tixne. However, the Board desires to be advised from time t° time regardinr, the progress the bank is makincr, in effecting corrections in its condition and as to whether or not the affairs of the bank are being properl administered. y The Board under.stands L that another thorough examination of the bank will be made °J. one of your examiners sometime before the close of the current Year. "According to the analysis submitted and the recommendation certification, the bank has capital stock of .:1130,000, and a capital structure of appro:d.mately cs140,000 after allowance for , or the operating., deficit and assets classified as loss or doubt' T111. It is noted, however, that the bank plans to eliminate the ! usteese Liquidating Account of :)23,227, which was not classified • doubtful or loss in the report of examina tion, through reduc,:ni of corarion capital stock. It is not understood why the Trusau," Liquidating Account, which on the basis of the information re',Illitted is a collectible asset, should be eliminated through a ti fl in capital stock unless the entire amount of the proouseefd reduction of ,,50,000 in capital stock must be used for the 11thof it the Liquidating Trust, in which event the net amount c'r e bank's actual capital does not exceed $100,000. In the visueurnstances, therefore, it will be appreciated if you will adhe Board as to the plans regarding the proposed reduction crecia .Pital stock and whether the funds thus released can be for l tiIed to the bank's undivided profits account or must be used le benefit of the Liquidating Trust. yo",The memoran dum dated November 13, 1933, submitted with Ir. letter of November 17, 1933, regarding the proposed reor1%— i.rI izaticri and reduction in capital stock stated that the bank ur iie74e:fnutgl,reould be reduced from •80,000 to '465, 00 and that in the the account would be further reduced to an amount not builer14clir4; 50,000. The report of examina tion, however, shows the _, to be carried at ,7:80,000, which the examiner reports is at stleCasc ,;40,000 in excess of its true value, although no part of " 8et was classified as doubtful or loss, and further advice for t F 4-11 emettme as to the plam for reducing this asset to a reasonable value will be appreciated. "On the second page of the examiner's comments in the report of examination it is stated that notes and mortgages accepted in Payment of the assessment are carried in the assets of the bank, while the agreement under which the bank was reopened provides that the proceeds of the assessment shall go to the trust. The "ftninc of the statement in this connection is not quite clear, as according to the reconcilement of the Stockholders Liquidating Account the trust had already been credited with ,101,137.02, the amount of the assessment collected. It will be appreciated if You will clarify this matter and forward a copy of the trust agreement between the bank and the trustees. "The Board notes the comments of your examiner to the effect that the town of Adrian does not need four banks, that it is pos?ible that a consolidation could be effected between this institution and the Comercial Savings Bank, and that one of the exec.1_tive officers of the latter had stated that they would take over deposit liability of the Adrian State SavinPs Bank provided :he equivalent assets were acceptable, and it is understood that ,onsideration is being given to the possibilities of ltg the banking situation in Adrian throwh merger." strengthenApproved. Tele gram 13oeasa, , to dated May 8, 1934, approved by six members of the McClure, Federal Reserve Agent at the Federal Reserve 13411k Of lc. ansas City, reading as follows: :Refer your mire May 5. Board grants extension of time to 15, 1934 within which 'The First State Bank', Ness City, -44sas may accomplish its membership." Approved. Letter dated May 8, 1934, approved by five merbers of the to EkIsd, t -r. McClure, Federal Reserve Agent at the Federal Reserve 4)ak or h-atsas City, reading as follows: 4 the ference is made to the report of credit investigation 26, 193ZmPire Trust Company, St. Joseph, Missouri, as of January and the information submitted in connection Hr therewith. eondilions of membership under which the bank was adtted be r.7„; L'o membership provided that its capital stock should not 'LlIced except with the permission of the Federal Reserve fiy 5/10/34 "Board. It is understood that in order to provide for the elimination of estimated losses and depreciation in securities, the bank contemplated a revision of its capital structure throuTh the sale of 0_00,000 preferred stock to the Reconstruction Finance Corporation and the reduction of a like amount in its common stock. If the proposed reduction in common stock has not already been effected, you are requested to call this condition to the attention of the bank and transmit to the Board the request of the bank for permission to reduce its capital stock, together 'with pertinent details of the plan and your recommendation in the matter. In the event that the proposed reduction in common capital stock has already been effected, please furnish an explanation of the bank's failure to request the Board's permission to make the reduction and your recommendation as to the action, if any, 17hich should be taken in the circumstances, and also advice as to whether your Counsel is satisfied as to the legal aspects of the transaction and whether the transaction has been approved by the appropriate State authorities. Please forward, also, copies of any amendments to the articles of incorporation of the bank in connection with the chanes in its capital structure. %either the report of credit investigation nor the analysis 0 ,f the report indicate that an examination was made of the trust ctcPartment. Vaionever possible examinations for the purpose of icllertification should include an examination of the trust departInt. If, for any reason, it is impracticable to examine such : ?partnent at the time of the examination of the other departments, _ns report of examination should be accompanied by a copy of the re of the latest available examination of the trust department sq,Plenented by such additional information as may be available, You are requosted to forward such information in this case. It will be appreciated, also, if you will advise the Board a, ' 10 the corrections made by the bank following the examination. r to the report of examination lists real estate loans amounting reeY_429,800 sold by the bank without recourse. The Board's whXds do not indicate that the bank was engaged in such business it Was was admitted to membership in 1925. As indicated by Stand condition of membership numbered 12 now being prescribed, f does not ard look with favor upon banks engaging in the busselling loans, either with or without recourse, and you are re e quested to acquaint the bank with the Board's views in the matt r and suggest as a matter of sound banking policy that the ba discontinue the practice. pixie is noted that an incorrect report of the affiliated Emto th Deposit Company, as of December 30, 1933, was submitted teard° Board, and it will be appreciated if you will advise the Llarch as to the nature of the bank's reply to your letter of '1931, in this connection and as to the circumstances in the ^ase 5 z Approved. 5/10/3,1 Ole Letter dated Lay 9, 1934, approved by six members of the Board, to Lir. Licaure, Federal Reserve Agent at the Federal Reserve Bank of Kansas City, reading as follows: . "Reference is made to your letter of April 30, 1934, transthe request of the State Bank of Uheatland, iiheatland, , 11Y°Ining, for permission to invest approximately rA.G,000 in a euilding to be used as banking quarters. "In view of your recollunendation and the fact that the invostment of such an amount does not appear to be unduly large or improper or otherwise violate the spirit or purpose of eonnumbered 8 prescribed in connection with the bank's apPlleation for membership, the Board interposes no objection to such investment in an amount not to exceed 1.6,000, and it is requested that you advise the bank accordingly. . It is suggested that you acquaint the bank with the Board's which are known to your office with respect to making adequate provision for depreciation in banking quarters owned." Approved. Letter dated May 8, 1934, approved by six members of the 1304ra 'to Lir. O'Connor, Comptroller of the Currency, readinr as follows: "In accordance with your recommendation, the Federal Reerrrve Loard approves a reduction in the common capital stock of Pascagoula N etional Bank of Moss Point', Moss Point, Lissis75,000 to , 45,000, pursuant to a plan which provides 1,;- ,v the bank's capital shall be increased by il;75,000 of pre:red stock to be sold to the Reconstruction Finance Corporation rec , , l that the released capital shall be used to eliminate a cortij°nding amount of substandard assets and securities deprecia"3 all as set forth in your letter of May 1, 1934. in ,'In considerins the plan undor which the proposed reduction of ejPital is to be effected it has been noted that, on the basis extoile last report of examination, this institution was in an bct,,!Idod and frozen condition, and that there will remain in the dep're(11:ter the proposed eliminations are consummated, securities sider%ation amounting to approximately :,)78,000 which, if conaPpro!!, e. loss, will impair the bank's capital to the extent of the ' e- 1119:LelY v62,000. It is assumed, horpver, that you have to do condit minds in min and that whenever it becomes feasible Pr*,,t1cable.11.s° You will require such further corrections as may be from Approved. 1340 5/16/34 -7Letter dated May 9, 1934, approved by six members of the B°Ltrd, to hr. O'Connor, Comptroller of the Currency, reading as fol10Vt8 "In accordance with your recommendation, the Federal Reserve Board approves a reduction in the common capital stock of 'The Lumbermen's National Bank of Menominee', Menominee, Michigan, from $100,000 to $75,000, pursuant to a plan which provides that the bank's capital shall be increased by $50,000 of preferred Stock to be sold to the Reconstruction Finance Corporation, and that the released capital, together with a portion of the hank's 8urPlus and/or undivided profits, shall be used to eliminate uneatisfactory assets aggregating approximately $60,000, all as set forth in your memorandum of May 1, 1934. "In considering the plan under which the proposed reduction in common capital is to be effected, it was noted that the securities depreciation remaining in the bank's assets, if considered as a loss, would impair its capital to the extent of apProximately $12,700. It is assumed, however, that you have this °?Idition in mind and that whenever it is feasible to do so you 11 require such further corrections as may be practicable." Approved. Letter dated Lay 8, 1934, approved by six members of the to the chairmen of all Federal reserve banks, reading as fol1014, 8 el "In its letter of April 30, 1934 (X-7878), the Board into"ed, for your confidential information only, a copy of a letvhich it had addressed to the Comptroller of the Currency to resPonse to a request from him for rules which might be given co eIcatliners as a guide to them in determining whether banks are :Ying with the requirement of Regulation Q that savings deconsist of funds accumulated for bona fide thrift purposes. tO 4. 8 ated in the letter of transmittal, the copy of the letter kla 40 Comptroller was submitted to the Federal reserve bank as exEtZid t° it in the performance of its duties in connection with iTItions of member banks. to th view of the fact that repeated requests have been made to Board for a statement as to the practical interpretation Plced upon the phrase 'funds accumulated for bona fide thrift +PufP°0esi s and, in order to be as helpful as may be pose ,"? -ohe member banks, it is believed that certain of the Prizim --v4-08 set forth in the Board's letter to the Comptroller 0 1341 5/10/34 -8- should be made available to such banks to assist them in classifying deposits which may constitute savings deposits. Accordingly, there is inclosed herewith a statement in regard to the classification of deposits as savings deposits within the meaning of Regulation (1, and the views expressed in the inclosed statement may be comidunicated to member banks and to others in such manner as may appear to be desirable. 4xcept to the extent indicated by the inclosed statement, it is not intended that the views expressed by the Board in its letter to the Comptroller (X-7878-a) should be communicated to member banks or to others." lipproved. Board. Letter dated Eay 3, 193^..., approved by six members of the _ to Honorable Duncan U. Fletcher, Chairman of the Committee on anki nE and Currency of the United States Senate, reading as follows: "This refers to the letter from the Acting Clerk of your Committee, dated Larch 21, 1934, inclosing a copy of S. 3100, entitled 'A Lill rio amend section 33 of an Act to provide for the afer and more effective use of the assets of banks, to regulate intor-bank control, to prevent the undue diversion of funds into sPeculative operations, and for other purposes', and requesting a report thereon. , "Section 33 of the Banking Act of 1933 amended the Clayton -t-trust Act by adding after section 8 thereof a new section, emsli;nated section 8A, which forbids any director, officer, or ,21°Yee of any bank, bankin;.7 association, or trust company, 4urganized or operating under the la= of the United States', ' ci° be at the same time a director, officer, or employee of a orporation (other than a mutual savings bank) or a member of a Partnership 'organized for any purpose whatsoever' -which shall re 1°ans secured by sLock or bond collateral to any individual, -°c14tien, partnership, or corporation other than its own sub°3-diaries. n.• I •t is . the purposes of this section are not entirely clear, ot believed that they are generally to prevent an undue use viZedit for speculative purposes and to supplement other prooota;lac °f the Banking Act of 1933 which were designed to dis10 4ge corporations engaged in commerce or industry from making ceiL brokers or dealers in stocks and bonds, i.e., the soobjec.cbl brokers loans for others'. It seeks to accomplish these bY Preventing individuals associated with organizations from ' lake loans on the security of stock or bond collateral PloyeZer nz at the SRMO time as director s, officers, or emof banks organize d or operating under the laws of the z 1342 5/10/34 -9- "Unites States. "It is not believed that this section was actually intended to prevent the same person from serving as director, officer or emPloyee of two or more banks; but the conclusion that it has that effect seems inescapable, because banks clearly are included in the broad term 'corporation * * * organized for any purpose whatsoever' and also because the specific exception of mutual savings banks indicates that all other banks which make loans on stock or bond collateral are included. It is believed, therefore, that the amendment contained in the bill, S. 3100, which would broaden the exception so as to apply to all banks instead of mutual savings banks alone, is in harmony with the real purP°ses of the section and should be adopted. It is believed, however, that certain other amendments to this section should also be adopted. "Because of the very comprehensive language employed, and eePecially the words 'corporation * * * organized for any purpose atsoeveri, section 8A has been found to apply to certain other qPes of situations which are not believed to be within the purP28e of the statute; and there is respectfully submitted herewith zor the consideration of your Committee a draft of a bill to nand said section 8A. which has received the careful consideration the Board and which it is believed will meet the principal obtetions to that section -without affecting the accomplishment of ' 8 Pfslimary purposes. t , Rumerous member banks have suffered the loss of some of :Y31-r most valuable directors and aro threatened with the loss (7: others solely because such directors aro officers or directors cf,?erporations which occasionally make loans on stock or bond :lateral to their awn officers and employees or because they at'1u_ officers or directors of corporations engaged primarily in sic:Ficultural, industrial, or commercial business which occato ; 11Y make such loans to their own customers as an incident be Zir principal business; and it is felt that the statute should r inapplicable to such situations. Ejection 8A as originally enacted in section 33 of the BankAct 1311 1933 specifically excepts from its operation corporaerai-_elad partnerships which make loans on stock or bond collatB 'fllY to their own subsidiaries; and it is the view of the 4 od r that t . ch rake his exception should be extended to include those I4a4y c such loans only to their own officers and employees. theo.rPorations make loans to their own officers and employees Et4a„Lp own stock for the purpose of enabling such officers other °Yes to become stockholders of the corporations and 04 ats sometimes make loans to their own officers or employees Etre ."k or bond collateral in order to assist them when they vithr financial difficulties. Obviously, such loans are not with,11 the intent of the statute, although they are clearly 4-11 the language thereof. n r 4 1.3,1!11, 5/10/311 -10- "Kumerous cases have came to the Board's attention in which corporations and partnerships engaged primarily in industrial, comnercial, or agricultural business sometimes make loans to their own customers on the security of stocks or bonds as an incident to their principal business; and it is believed that such loans are not within the intent of the statute if they are not made for the purpose of enablirr; such customers to purchase or trade in stocks or bonds. flThe amendments contained in the inclosed draft of a bill to amend section 8A have been drawn with a view of makinr, exceptions covering these classes of cases and at the some time to guard carefully against any evasion of the true purposes of the law. In this connection, attention is invited to the proviso which prevents the exceptions from applying in the case Of corporations or partnerships which make loans to brokers or dealers in stocks or bonds or which make loans to finance the Purchase or sale of, or trading in, stocks or bonds other than 0a115 t0 their own officers and employees for the purpose of enabling them to buy stock in such corporations. "Attention is also invited to the fact that, under date of Se P.omLer 10, 1917, the Actinc, Attorney General of the United ates rendered an opinion with respect to section 8 of the .'aYton Antitrust Act in which he held that the phrase 'orsan2ed or operating under the laws of the United States' does not sncludo State banks which arc members of the Federal Reserve trtem. The reasoning of the opinion is equally applicable to „e same phrase as used in section 8A of the Clayton Act; and, •.etrefore, the Board has ruled that section 8A does not forbid , 1 ,0 ;erlockinr: relationships between State member banks and cor' lof a ions or partnerships which may make loans on the security ef s'"Ic or bond collateral. It is beleved that the purposes yiz”ction 8A will be accomplished more effectively if its prothel2ns are made applicable to State barks which are members of cia.jederal Reserve System as well as to national banking assobanka l°11s; and the inclosed draft of a bill would place national cl State member banks on the same basis st in this respect tru, trikinz out the words 'any bank, banking association or 11,,,;tedes °Ill tP aa tnyorgani t zed or operating under the laws of the es and substitutinr, the words 'any member bank of the p ederal Reserve System'. Incidentally, this change would M4ke Lct d section inapplicable to Federal Reserve Banks, Federal 4111.4 F?deral Intermediate Credit Banks, Federal Home Loan a similar institutions, which are not believed to be vrith' 111 the intent of the section. the "For the reasons stated above and in view of the fact that 193ele ,xtinfl Provisions of lEvu became effective on January 1, the . 0 Federal Reserve Board recomnends the enactment of car— lnoleseAu bill at the earliest practica ble date. In this should be noted that the inclosed bill would 1 the - 1 4 11/1,T 5/1V34 -11- "fully accomplish the purpose of S. 3100 to make section SA inaPplicable to interlockin; relationships between banking institutions; and, therefore, it could appropriately be substituted for S. 3100." Approved. Letter dated May 8, 1934, approved by six members of the Beard, to Lr. J. V. Rixev Smith, Secret ary to Honorable Carter Class, United States Senator, washington, D. C., reading as follows: ".deference is made to the letter addressed to you by 1,:r. li. Laurie Smith on Larch 14, 1934, and previo us correspondence, vAlich you referred to the Federal Reserve Board, with regard to the writinc: of title insurance or other forms of guaranty contracts by member banks. it is understood that Mr. Laurie Smith has reference to State banks admitted to membership in the Federal Reserve System, since national banks are not authorized to engage in business of this kind. Laurie Smith's first inquiry is with regard to whether member banks which are authorized to write title insurance or Other forms of Fuaran ty contracts will be permitted to continue to do so. Under the provisions of the Federal Reserve Act, a tate bank admitted to membership in the Federal Reserve System .t_Y continue to exerci se the corporate powers granted by the 'ate laws under which it was organized unless at the time of admissio n to membership the bank, as a condition of membership, egrees not to exercise such Dowers . Accordingly, a State bank ,ereisinc the right to write title insurance or other forms of aranty contracts at the time of its admiss ion to membership _the Federal Reserve System and which not did at that time ;',cee to terminate the exercise of such powers may under the 'I'Ll:lontinue to exercise those powers. However, it has been the °ard's practice for some time to require that banks having coritriht to write title insurance or other forms of guaranty Sysj acts and applying for membership in the Federal Reserve 71114,'M shall agree that such powers will not be exercised 110Z-4e the bank remains a member of the System. The Board does of Itl-eel that the writin'; of title insurance and other forms bajirs. arantY contracts are appropriate functions for deposi tary borehii, 5 o 47ti ons and, accordingly, bank,- admitted to memexercise have agreed as a condition of membership not to „. these powers are not permitted to do so by the Board. Lir Ildlethe _ • Laurie Smith' s last inquir two ies are with regard to of r member banks which write title insurance or other forms z3tetrantY contracts are requir ed to disclose in their published ' exits the amount of their contingent liability under such 2 t 1345 5/10/34. -1 2- II. insurance or guaranty contracts in force. The Board feels that the reports and published statements of member banks should reflect the true condition of the institutions, and it is the Board's practice to require that reports of State member banks which are required under the law to be made to the Federal reserve banks shall disclose all contingent liabilities as well O5 all direct liabilities of the member banks. Under this requirement any contingent liability of a State member bank on account of title insurance or other forms of guaranty contracts should be shown in reports of condition made to the Federal reserve banks. Under the present law, however, such reports are not required to be published and the Board has no authority to require their publication. The form in which member banks publish reports of condition required by State law is controlled by State authorities. "It is not the general practice of banks to show contingent liabilities in their published reports of condition; but the board will give careful consideration to this question if the .law is amended so as to require State member banks to publish he reports of condition rendered pursuant to the pro-visions of the Federal Reserve Act. "In tl.is connection, your attention is called to the fact t ipat upon the recommendation of the Federal Reserve Board a (,111 (S. 2870) has been introduced in Congress mhich would amend ' 3ection 9 of the Federal Reserve Act so as to authorize the Fedal Reservo Board to prescribe regulations covering the publica1°11 of reports of condition of State member banks. This bill, s You know, was passed by the Senate on Larch 28, 1934, and on rPril 5. 1934, was referred to the Committee on Banking and Curof the House of Representatives. It is understood that 'at L Committee has not yet reported on the bill." I Approved. Letter dated L.ay 8, 1934, approved by six members of the 13° Fird. "0 Lr. Case, Federal Reserve Agent at the Federal Reserve 134aik of Lew York, reading as follows: ."The Federal Reserve Board has under considerat ion the 411, 311-cation under Section 32 of the Banking Act of 1933 made by d°''ert A. Drysdale for a permit to serve at the same time as a ii'reotor of the Corn Exchanr;e Bank Trust Company of New York, er.lork. as a director of the Lontclair Trust Company of 1:lontii lieu Jersey, and as a partner of Drysdale and Company of ew York, Lew York. "In a rider attached to form 99a, the applicant states: 'Ey firm is engaged primarily in the business of 4 1346 5/10/34 . -13- "ebuyinP; and selling securities for others as stock brokers on a comnission basis; but it also buys and sells securities for itself and for its members, which latter business estimate at not more than five per cent of the entire business of the firm.' "In view of the principles stated in the Board's letter of April 13, 1934 (X-7860) it would seem that the firm of Drysdale and Company should not be regarded as engaged primarily in the business of purchasing, selling, or negotiating securities within the meaning of Section 32, and that therefore a permit covcring the relationship described in this application is not necessary. Accordingly, unless there are other facts -which you believe should be called to the attention of the Board, it is suggested that you so advise the applicant." Approved. Letter dated Eay 8, 1934, prepared in accordance with the ' e et on taken at the meetings on April 23 and hay 3, 1934, and approved bY8iX members of the Board, to Lir. Case, Federal Reserve Agent at the Fe deral Reserve Bank of New York, reading as follows: "Reference is made to the applications of the following Ilarned persons, under Section 32 of the Banking Act of 1933, to serve at the same time as directors of the Discount Corporation 'ley/ York and as officers and/or directors of the banks men‘'loned opposite their names: 8. Colt Bankers Trust Company, New York City. The National Bank of Tuxedo, New York. Tuxedo, %lazes li. Perkins The National City Bank New York City. of New York, W inthrop VT. Aldrich The Chase National Bank of the City of New York, New York City. Dunham B. Sherer Corn Exchange Bank Trust Company, New York City. William C. Potter Guaranty Trust Company 1:ew York City of New York, E. Gray, Jr. Central Hanover Bank and Trust Company, New York City Gordon 8. The National City Rentschler Bank of New York, Lew York City. lati "The Board reached the conclusion that, although the rehips involved in these applications are included within 1347 5/10/34 -14- "the literal terms of Section 32, they are actually of a kind different from those at which its provisions were directed and has, therefore, granted all these applications since no other facts appeared which in its judgment would make it incompatible with the public interest to do so. "As you know, all permits issued pursuant to the provisions of Section 32 are subject to revocation by the Board whenever it finds, after reasonable notice and opportunity to be heard, that the public interest requires such revocation. "The Board feels that dealings in excess reserves or 'Federal funds' raise Questions of considerable importance and may, under some conditions, affect the credit operations of the Federal reserve banks and thus become an element in their problems of credit policy and control, more particularly when such deals involve transfers from one Federal reserve district to another. "It is the understanding of the Board that the Discount Corporation, as a matter of policy, confines its dealin7s in il ederal funds to the Federal reserve district in which it is .Located, neither buying from nor selling to banks or other orEanizations outside of that district. This has been a material 2act influencing the decision of the Board that it would not now withhold its approval of the above listed applications because ef the dealings of the Discount Corporation in excess reserves. Accordingly, the Discount Corporation is being requested to advise you in case there should be any change in its general policy h respect to such dealings, and it will be appreciated if you T1171.11 keep yourself informed regarding the matter in order that ''°1] may advise the Board. t. "You will, of course, also understand oa cthat the Board's acion in the present case cannot be regarded as a precedent even ionj respect to an organization engaged in a business similar that of the Discount Corporation, since in such a case it aPpear that the organization in question was conductini!: ir8 affairs in such a manner, or was engaged in practices which, ° :iudment of the Board, would make it incompatible with the e Public interest to grant applications involving it. c_ "From the infomation submitted, it appears that Discount 101?ration of Kau York is a dealer in securities within the c:I/Ig of Section 32 and the Board's Regulation R, and that e rewYork City banks named in the first paragraph Of theth?f ls th letter is regularly associated with the corporation in b111,211rehacinc and selling of securities, since each regularly stqw, from and sells to the corporation obligations of the bnited the u3s, and since each regularly makes loans to the corporation, pr of tie e.whichare used by it in part at least to purchase ,flo, each 51 wof these facts, the Board is of the opinion that 1 bank is a 'correspondent bank' of the corporation :1L348 5/10/34 -15- "Within the meaning of Section 32 and the Board's Regulation R and that permits covering such relationships are therefore necessary. The Board is prepared to consider the application Of each bank involved upon submission to it of F.R.B. Forms 99e aad 99d only, accompanied by a statement of the applicant specifying the functions as to which a permit is desired. You are requested so to advise each of the banks involved. "Moreover, on the basis of the information submitted, the Board is of the opinion that the corporation, by rediscounting b!.nkers' acceptances for the New York City banks named in the first paragraph of this letter and by buying from and selling tc them Federal funds, thereby in part effecting its primary PurPcse of equalizing reserves, is a 'correspondent dealer' of each of said banks within the meaning of Section 32 and of the locardls Regulation R and that permits covering such relationships are therefore necessary. The Board is prepared to consider apPllcations of the corporation to act as a correspondent dealer behalf of each of said banks upon submission to it of Federal serve Board Forms 99f and 99d accompanied by the corporation's atement specifying the functions as to which a permit is desired. ' - 0u are requested so to advise the corporation." Z Approved, together with letters dated May 8, 1934, also approved by six members of the board (the letter to Mr. Colt was approved by five members) to the applicants referred to in the letter to Mr. Case, advising of approval of their applications. Letter dated ray 8, 1934, approved by six members of the (1111‘d, t0 Hoxton, Federal Reserve Agent at the Federal Reserve 8,4k Of Richmond, readinr as follows: 4101. The Federal Reserve Board has f4iven consideration to _the ill; -1eation of Bradford Ii. . Walker under Section 32 of the _ankroW'et of 1933 for a permit to serve at the same time as diof First and Merchants National Bank of Richmond, Richmond, tio;17flia, and as director of John G. Walker Investment Corpora%Richmond, V-ir7inia. Johri pIn his anplicationIjr. walker describes the business of titlker Investment Corporation as follows: l iT0 business other than holdinr; stock in one company, dividends received therefrom being iinmediately disbursed 11.Ppear e 8tatement of condition of the investment corporation tion ".11,r; on Form 99c discloses that the assets of the corporaof steira't solely of y20,474.52 cash in banks, and ‘,;7,500,000 004 of The Life Insurance Company of Virginia. 1349 5/10/34 -16- "It appears from the above information that John G. Walker Investment Corporation is engaged solely in holding securities, and therefore is not primarily engaged in purchasing, selling or negotiating securities. Accordingly, Section 32 of the Banking Act of 1933 is deemed to be inapplicable to the applicant's service to these two corporations. It will be appreciated if you mill so advise the applicant. "It is noted that in reply to Question No. 5 on Form 99a, the applicant states that he is also serving as vice-president and director of Dominion Securities Corporation, which is stated to be an 'investment trust'. It is assumed you have in mind the Possibility that the provisions of Section 32 may be applicable is. connection with his service to this corporation also." Approved. Letter dated May 9, 1934, approved by six members of the 13" d, to Mr. Hoxton, Federal Reserve Agent at the Federal Reserve Balak Of Richmond, reading as follows: "lhe Federal Reserve Board has given consideration to the application of Waller C. Hardy under Section 32 of the Banking Act of 1933 for a permit to serve at the same time as a vicePresident and director of the Kanawha Valley Bank, Charleston, !l_est Virginia, as vice-president and director of the Greenbrier .‘ftalley Bank, Lewisburg, West Virginia, and as partner of Winhr°P2 Uitchell & Company, New York, New York. "In answer to Question 2 of Form 99-a the applicant states tha+ .the business of Winthrop, Mitchell & Company is as follows: ecmmission broker, handling stocks and commodities on a purely trission basis. Does not engage in underwriting flotations or the °Pcration of pools.' However, it is not entirely clear, from e above statement, whether Winthrop,throp, Mitchell & Company purchases and sells securities as a dealer or whether it confines uu8ine55 exclusively to purchasing and selling securities as a broker. thevt "In a letter dated April 13, 1934 (X-7860), the Board ruled viv, the provisions of Section 32 are not applicable to a broker ti:o"..morely executes orders for the purchase and sale of securivii71 °n behalf of others on the open market. Accordingly, it iiitehbe appreciated if you will ascertain whether or not Winthrop, rita ell & Company transacts only business of that type. If you pro...that such is the fact, please inform the applicant that the 00. : 17 : 13 13i°11s of Section 32 are inapplicable to the relationship ed by his application, and advise the Board." Approved. 1_350 5/10/34 -17- Letters dated May 8, 1934, approved by six members of the Board, tO the following applicants for permits under section 32 of the Banking 4°t of 1933; each letter stating that it appears that the relationship covered by the application is within the class which section 32 was designed to terminate, and that, accordingly, the Board is unable to find that it would not be incompatible with the public interest as declared by the c ongress to grant the application, although in the event the applicant d4airo8 to submit further facts or arguments in support of the application the B (34rd is prepared to give them careful consideration: 121'. John N. Schiff, for permission to serve at the same time director of the Chemical Bank & Trust Company and as a Partner of Kuhn, Loeb & Co., both of New York, New York. "a 1 4.1re Pelix M. Warburg, for permission to serve at the same 116 as a director of the Bnnk of the Manhattan Company and as a Partner of Kuhn, Loeb & Co., both of New York, New York. Approved. to Letter dated May 8, 1934, approved by six members of the Board, 6 Stevens= Federal Reserve Agent at the Federal Reserve Bank of hic4Ds stating that the Board has given consideration to the applicatic44 Xre Grant MoPherrin, Des Moines, Iowa, for permission under the 1)r"ieicns of the Clayton Act to serve at the same time as an officer ktlidarector of the First Federal State Bank, Des Moines, Iowa, and as 641" ricer and director of the Central National Bank and Trust Company "68 Vbines, Des Yoines, Iowa, and that, upon the basis of the informati°111)"°re the Board feels that the issuance of the permit gpplied 1NtUld be -ncompatible with the public interest. The letter also recilleated tu_ "u agent to communicate to the applicant the Board's position 1351 5/10/34 -18- ilithe matter, and to advise the Board promptly as to whether the applicant deciresto submit any additional data, and, if not, as to what steps he pro114es to take in order to comply with the provisions of the Clayton Act. Approved. Letters dated May 9, 1934, approved by six members of the hoard, t° the respective Federal reserve agents stating that the Board has given -'44(erati0n to the following applications for permits under the Clayton 4(38.11d that, upon the basis of the information before it, the Board Nlsthat the issuance of the permit applied for in each case would be O0ta 5.1tible with the public interest. Each letter also requested the 831Itt9 comilunicate to the applicant the Board's position in the natter, Itzki to "vise the Board promptly as to whether the applicant desires to 4113zlit any additional data, and, if not, as to what steps he proposes to order to comply with the provisions of the Clayton Act. J "ePh L. Forsythe, for permission to serve at the same a director of The Sherburne National Bank, Sherburne, “ )ric, and as a director of The rational Bank and Trust 'PanY of Norwich, Norwich, New York. 11r. oh aa a ! t * H. Loucks, for permission to serve at the same time izrttdirector and officer of the First National Bank of orti dale, Scottdale, Pennsylvania, and as a director and C011-1;" of The National Bank and Trust Company of Connellsville, elasville, Pennsylvania. , Eta a Bradt, for permission to serve at the same time 41i 'urector of the First National Bank in De Kalb, De Kalb, Iii.1103-5, and as a director of the Genoa State Bank, Genoa, a./103.a 14r. ka : az 4-* Ellwood, at the same time be x icTficer and for permission to serve director of the First National Bank in 13krika ir3 ,4 De Kalb, Illinois, as a director of the Genoa State liat!/10a, Illinois, and as a director of The Citizens Bank of Lubbock, Lubbock, Texas. 1352 5/10/34 Mrs George H. Hanson, for permission to serve at the s an time as a director and officer of The First National Bank 0f °deb°lt, Odebolt, Iowa, and as a director and officer of the Kiron State Bank, Kiron, Iowa. :,• 111 Charles N. Stevens, f or permission to serve at the same ' 34110 as an officer and director of the First National Bank and Trust Company of Evanston, Evanston, Illinois, and as a director of the Wilmette State Bank, Wilmette, Illinois. Approved. Letter dated May 9, 1934, approved by six members of the Board, t° the f ollowing applicant for a permit under the Claybon Act, advising (It 4131)re-ital. of his application as follows: Ur i. • Hs Chester Story, for permission to serve at the same Rasta director and officer of The Rockport National Bank, • Massachusetts, and as a director of the Day Trust IllPanY• Boston, Massachusetts. Approved. In connection with the above there was presented a letter, also dated ma cheliter Y 9. 1934, and approved by six members of the Board, to Mr. H. Story, Boston, Massachusetts,. referring to his application under eeetiot. title 44 32 or the Banking Act of 1933 for a permit to serve at the same itrid ete a director of The Rockport National Bank, Rockport, Massachusetts, ill a Partner of R. L. Day & Company, Boston, Massachusetts, and stat- thttt the aPPears that the relationship covered by the application is class which section 32 VaS designed to terminate, and that, Ivi tt"°rdittglY. the Board is unable to find that it would not be incompatible t-itc:ta.}116:0::hicin interest as declared by the Congress to grant the applicaoz. the event the applicant desires to submit further facts trie:114148 ea.re::: i cli onael:P dp eo rr at tilthe application the Board is prepared to give Approved. 11353 -20Letter dated May 8, 1934, approved by six members of the Boards t43the folloying applicant for a permit under the Clayton Act, advising 411Prova1 of his application as follows: v„. George F. Trotter, for permission to serve at the same ES a director and officer of The Western National Bank of10-ueblop Pueblo, Colorado, and as a director and officer ct The American National Bank of Alamona, Alamosa, Colorado. Approved. Letters dated May 9, 1934, approved by six members of the Board, tl) 'le fondling applicants for permits under the Clayton Act, advising "tIPPr °70-1 of their applications as follows: kr* Edvdn IV, Levering, Jr., for permission to serve at the ;31wi time as a director of The First National Bank of Baltimore, Maryland, and as a director of the "'eras-utile Trust Company of Baltimore, Baltimore, Maryland. L a TZ Llardman, for permission to serve at the same time as a d irector and officer of the Northeastern Banking Company, ° 13....11Driere e, Georgia, and as a director of The azic of First National Commerce, Commerce, Georgia. ** Will• tize -3-8-111 W. Buchanan, for permission to serve at the same Tru " 4 a director and officer of the First National Bank and or t7, e°!r1PanY of Evanston, Evanston, Illinois, and as a director *41 lailmette State Bank, Wilmette, Illinois. kr. pa ttme ,,u1 A. Nehring, for permission to serve at the same De 41T a director and officer of the First Nation0 Bank in the G ' u De Kalb, Illinois, and as a director and officer of etoa State Bank, Genoa, Illinois. Lir title 4 "461 B. Wells, for permission to serve at the same tailk 0 ;a director and officer of the Marine National Exchange 44d off4lilwaukee, Milwaukee, 'Wisconsin, and as a director 4-oer of the Home Savings Bank, Milviaukee, Wisconsin. kr. ta title val'd II* Williams, for permission to serve at the same t 48 $,1 director and officer of the Marine National Exchange 44a:, 411waukee, Milwaukee, Wisconsin, and as a director eorlsiii:10er of the Holton Street State Bank, Milwaukee, Wis- Approved. 1354 6/10/34 -21- There were then presented the following applications for original 4tec1 s or for the surrender of stock, of Federal reserve banks: ications for ORIGINAL Stock: Shares l'ecTles National Bank of Secaucus, Secaucus, New Jersey 72 72 bistriet No. 3. The ational Bank of Ocean City, °eclat). City, Naw Jersey 36 36 bTietriet No. 4. he Citizens National Bank in West Milton, West kilton, Ohio katriet lio. 7. Piret National Bank in Tigerton, Nertcn, Wisconsin bietriet No. P. 10. lretlational Bank Goodland, Coodland, Xansas 4 'teatime for SURRENDER of Stock: riot 2. %Ili eo -e nd National Bank of New York, , trth Side Rill, New York, N. Y. Bank of Elmira, ira National 41rai New York bietriet tio. 3. The Rblrat National 'ellandoeth, pa. Ba.nk of Shenandoah, . 4 %Blairsville National Bank, Ati.o4.1 )u _ Pa. -.Lux 4-ftorth, of Ellsworth, pa. ..11-11iet No. 7. Iret National Bank of 'igert04, Tigerton• Wisconsin triet No. 9 -ret ..• ci,:"atlonal Bank `qtriee, of St. Charles, 36 36 36 36 36 Total 36 216 339 66 405 240 240 120 75 195 32 32 30 30 1355 5/10/34 -224 lications for SURRENDER of Stock: (Continued) 12. '40 Oilfields National Bank of Brea, tt Brea, California 40 Pirst National Bank of Condon, Condon, Oregon Approved. Thereupon the meeting adjourned. 4proyeal Shares 52 60 Total 112 1,014
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