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577 A meeting of the Board of Governors of the Federal Reserve SYs.t,em was held in Washington on Monday, May 12, 1941, at 11:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Szymczak McKee Draper Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman The action stated with respect to each of the matters hereinafter referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Federal Reserve System held on May 5, 1941, were approved unanimously. The minutes of the meetings of the Board of Governors of the Federal Reserve System held on May 6, 7, 8, 9, and 10, 1941, were ap13r()Ireci and the actions recorded therein were ratified unanimously. Letter to Mr. Fletcher, Vice President of the Federal Reserve 41* of C leveland, reading as follows: Th "Reference is made to the report of examination of ofs Colonial Trust Company, Pittsburgh, Pennsylvania, as sul.januarY 25, 1941, and to the supplementary information umited in connection therewith. 14, 1,0 , is encouraging to note from your letter of April the that you believe that the new management under flewpresident Mr. C. H. McClintock, Jr., and Mr. Atwood, to executive vice president, will be more receptive ta.Z°ur suggestions regarding the correction of unsatist , --ory features of the institution's condition than was t ; e tl management under former President Chaplin. While the ad.st company continues to show a substantial amount of ofJusted capital, 17.9 per cent of deposits as of the date examination, it has been somewhat discouraging to note -e comments of the examiner that the institution had made 578 5/12/41 II no -2- particular progress with the various problems commented Upon in this and previous reports other than by absorbing charge-offs through the good earning power of the bank. "It is particularly gratifying to learn that both Mr. McClintock and Mr. Atwood are in accord with you as to the necessity of taking effective action to reduce real estate and holding of corporate stock and that Mr. Atwood stated ilt : .11- new management would immediately launch a program _1 01 : to a substantial liquidation of such assets. Please keep the Board advised as to developments in this respect as we shall follow with interest the progress made. "It is apparent that the trust department is in need of closer supervision and that effective steps should be taken to correct its unsatisfactory features. The examiner reports that a survey of the department by a trust officers' committee would prove beneficial and desirable; that it should include the operating as well as the administrative r a:cutlne and that the results of this review, together with 8 Program of correction, if such a program is deemed neces!'rY, should be submitted to the trust committee for consolderation. We shall be glad to learn of the action taken n the examiner's recommendation. "While the asset condition of the Colonial Trust ComatIrs wholly owned subsidiary, Freehold Bank, a nonmember fllnsured institution which was examined concurrently with ue trust company, appears to be satisfactory, it is observed, that the examiner reiterates the statement made in evicus examination reports that there is no apparent ason for the continued existence of this bank other than to enable the parent institution to deposit trust funds 2' ( ;,1-lout the pledge of assets. In this connection it is '81.cted that of the bank's total deposits of ,I ,987,900, trust wls?ount deposits made by the trust company were 917,900, 11e the bank had a balance of 643,900 with the trust come v ull3Y: .The report shows, in addition, that the loans of the extsldlarY bank include a substantial aggregate of credit te enelons to directors, officers, employees, and their inesl j sts, of the owning trust company. A loss of 36,600 is me lmated in the indebtedness of Mr. James C. Chaplin, forpresident of both institutions and presently a director pa each as well as chairman of the board of directors of the rel trust company. The reciprocal features of the operation of the Freehold, 1.10 -uank by the Colonial Trust Company would indicate that Useful purpose is being served by the continued operation g J g 4 —3— "of the Freehold Bank, that its operation continues to Permit an evasion of Pennsylvania law relating to the Pledge of security for deposits of trust funds, and it would seem logical that it should be absorbed by its par— ent institution. The operation of the Freehold Bank was commented upon in the Board's letters to you dated March le ak:rnid August 10, 1935. Tith the exception of the action Subsequently to segregate the records, assets, and operations of the bank from its parent, whose banking quarters it shares, the comments appear to remain generally Pertinent to the present method of operating the bank. The will appreciate your views as to the possibility of The Ine Colonial Trust Company absorbing the Freehold Bank. "The difficulties which you have faced in your efforts to have the affairs of The Colonial Trust Company placed in asa tisfactory condition and commensurate with the standing Of the institution in the community have been reported in e numerous data and correspondence submitted by you dur— g the past eight years. The Board trusts that every ef— fort will be made by the present management to take ad— vantage of increased business activity to improve the jtuation and that the management will be able to demon— strate its ability to place the trust company in a condi— '.1-on satisfactory in every respect." r Approved unanimously. Letter to Mr. Young, President of the Federal Reserve Bank of Chi e4go, reading as follows: h, "The Board of Governors of the Federal Reserve System s c ter onsidered the recommendation contained in your let— of April 26 and, pursuant to the provisions of Section of the Federal Reserve Act, grants permission to the Avenue State Bank', Milwaukee, Wisconsin, to main— tjutcllia b _in the same reserves against deposits as are required to amaintained by banks located outside of Central Reserve res Reserve cities, effective with the first semi—monthly Computation period beginning after the date of etter. . "Please advise the member bank of the Board's action in this matter calling its attention to the fact that stIch e ' the mission is subject to revocation at any time by Board of Governors of the Federal Reserve System." fr i r 4 580 5/12/41 -4The letter, having been initialed by Mr. Ransom with the statement that were he present at the meeting he would vote to approve, was approved unanimously. Letter to Mr. Denmark, Assistant Vice President of the Federal lieserve Bank of Atlanta, reading as follows: "This refers to your letter of April 7 in which you inquire whether arrangements might be made for your Bank to give advance information to State banking authorities your district regarding calls for condition reports to be made upon State member banks. "Since December 28, 1922, when the National Bank Act was amended so as to require a minimum of three calls per Year, instead of five as required before that time, the Comptroller of the Currency has made no more than four calls per year upon national banks for condition reports; ,nd beginning with December 1922 the number and dates of the Board's calls upon State bank members have been identi?al with the Comptroller's calls upon national banks. In the circumstances, you may advise each State banking department in your district that, in the absence of advice to the contrary, it may feel reasonably certain that a call for condition reports will be made upon State bank members whenever the Comptroller of the Currency calls ,1 Ton national banks for such reports. It is understood at the Comptroller's office advises every State banking telizertment of each national bank call date by confidential -Legram about two days before the call is publicly an11°unoed.” r Approved unanimously, with the understanding that a copy of the letter to Mr. Denmark would be sent to the President of each of the other Federal Reserve Banks. Letter to Mr. Francis J. Trecker, Acting Chief of the Defense ecntr4, 4 °ervice of the Office of Production Management, reading as follows: May"Your letter of May 8, 1941 and your memorandum of 7, to Governor Draper, with respect to the establishand maintenance of local field offices of the Division 581 5/12/41 H -5- r 01 Priorities of the Office of Production Management at certain of the Federal Reserve Banks and Branches, have been presented to the Board of Governors. The Board has authorized me to advise you that the Federal Reserve Banks are prepared to furnish space if available, _./-1d render the services requested to the Division of 1:ties under the same terms and conditions they now service to Defense Contract Service of the Of— '1.ce of Production Management, subject to the understand— ?-,11g stated in the last paragraph of your memorandum of laaY 9, 1941. It is understood that persons on the Pri— orities staff assigned to duty at a Federal Reserve Bank Branch will be satisfactory to the District or the rea Coordinator and to the President of the Federal Re— serve Bank." 131;r Approved unanimously. Thereupon the meeting adjourned. Secretary. Chairman.
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