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1371 A meeting of the Federal Reserve Board was held in Washington ()114°1415 Y, May 14, 1934, at 10:30 a. m. PRESENT: Mr. Mr. Mr. Mr. Mr. Black, Governor Hamlin James Thomas Szymczak Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Morrill, Secretary Carpenter, Assistant Secretary Bethea, Assistant Secretary Martin, Assistant to the Governor Paulger, Chief of the Division of Examinations Smead, Chief of the Division of Bank Operations Goldenweiser, Director of the Division of Research and Statistics Wyatt, General Counsel Vest, Assistant Counsel Boatwright, Assistant Counsel The Board considered and acted upon the following matters: elegl-am dated May 14, 1934, from Mr. Walsh, Chairman of the Niertali bottr ()serve Barik of Dallas, advising that, at a meeting of the clot' directors today, no change was made in the bank's existing ech Of rates of discount and purchase. Without objection, noted with approval. tIle :171cTandalm dated May 11, 1934, from Mr. Goldenweiser, Director ti04 M31021 of Research and Statistics, transmitting the resigna , (1141" kek recortne tlizabeth M. Barcalow as a stenographer in the division erem ndille that in accordance with the usual practice Where ' k"Yees thirty -76 worked for three years or longer, Miss Barcalow be granted cia‘Ya e of absence with pay, and that her resignation be * 5/14/34 accepted as of the close of business on July 31, 1934. Approved. Memorandum dated May 11, 1934, from Mr. Paulger, Chief of the _ "n of Examinations, recommending a change in the title of Mr. W. D. 111 s4 from assistant Federal reserve examiner to Federal reserve examiner, 811d that his salary be increased from the rate of $3,800 to the rate of 14$200 Per annum, both effective May 16, 1934. Approved. Telegram to Mr. Stevens, Federal Reserve Agent at the Federal Re- serve 13 ank of Chicago, reading as follows: y Fi°ling s telegram May eleventh. Board approves designa; °11 of John Shinn as assistant examiner in Federal Reserve entis depart-nent your bank without change in compensation. f(gs! advise effective date and salary rate and furnish in0(....nit requested in Board's letter September 20, 1 ). g Approved. Letter dated May 12, 1934, approved by six members of the Board, to 111's ksti, Pederal Reserve Agent at the Federal Reserve Bank of Phila(10_131,11._ '1., reading as follows: th, ;eference is made to the report of examination of the Lock , Lock Haven, Pennsylvania, as of December che e1 e supplementary information submitted in connection um, CcimPanY' araot ' 4e report of examination indicates that estimated losses !? $70,690, including $23,345 on account of securities, ti Q14,06renaining depreciation in securities amounted to raonth 1° ' The report of arnings and dividends for the six ; I)erios a tilp„eriod ending December 30, 1933, shows that during the '-ear),S) L? , bank charged off $11,501 on account of losses in ;""'529 on account of losses and depreciation in se-and 1tie-' and $1,564 on account of losses in other assets, 1373 5114/34' -3"that the amount of unallocated charge-off on account of securities was reduced by $54,785, which amount was credited to unaivided profits. "As indicated in the Board's 1et:6rr of April 6, 1934, ;C-7848, the Board has consistently maintained the position that losses as classified by 1:Le eyaminer should be charged off or °therwise eliminated from the assets of the bank, and it is requested that you endeavor to obtain such action by the Lock Raven Trust Company. In the interests of cooperation, it may be advisable to take this matter up first with the aporopriate State authorities. The Board's views with respect to the minimum amount of depreciation in securities to be eliminated followthe examination of State member banks are also expressed in its letter X-7848. "It has been noted that on the date of examination the bank had reserves of $68,000 for losses and depreciation. The Board. ttt estimated losses and depreciation listed for eliminare iZila not been nronerly eliminated by the setting up of i”erves which are included with the bank's capital accounts in 5.1;8 Published statements. Such reserves should be used either or Taking charge-offs of the estimated losses and depreciation treated as valuation reserves and deducted from the assets stt"st which they are allocated, showing only the net amount of 10, -- assets in the published statement. If any reserves for se,7„es are shown -,mong the capital accounts they should repre.00;40-I-locations of surplus and/or undivided profits to cover tru_ or potential losses; or, in other words, represent for contingencies'. 'reserves"The of The report reflects several violations of the conditions resetbershi, I- and provisions of the Federal Reserve Act with ti4ec to the maintenance of adeauate credit data in connecof th all unsecured loans; to the disposal of all shares siz ns °vin stock held in investments or as collateral within 1932i cTtlls after its ad-iission to membership on December 5, pecler,b0 the issuance of surety bonds without permission of the °f th:121eserve Board; to the failure of an executive officer rnk to file with the Chairman of the Board of Directors of to tile u ank a statement of his borrowings at another bank; and the clirrchase since June 16, 1933, of 200 shares of stock of 'Is Company. It is also observed that preferenrates Publishing 0, officers a interest on loans have been granted to certain and directors , ti01, of the subject bank in possible violaif you°f the will Pennsylvania 'Banking Code. It will be appreciated eff„ advise the Board, what steps have been taken to or th /ection of these matters and obtain compliance with c°naition „ 01 membership and the provisions of the Federal 'erve Act. 1374 -4"The examiner lists also several criticisms of the operations of the trust department, including the practice of carrying in the bank's own earnings interest received on trust 7ort'Fages. In reporting as to the corrections made, please include flfor-lation as to th‘, amount of such earnings carried in the ank l s undivided profits and the adjustments made in connection t herewith. "It will be ac.oreciated if you will advise the Board regardig these matters not later than June 1, 1934." Approved. Letter dated May 12, 1934, approved by six members of the Board, tom Williams, Federal Reserve Agent at the Federal Reserve Bank of Cleve). and) reading as follows: :Reference is made to Mr. Fletcher's letter of May 3, 1934, ii.;111 is in reply to the Board's letter of April 26, 1934, whereWas made as to whether The Marengo Banking Company, 'Ohio, which accomplished its membership in the System n L'), 1934, had complied with the provisions of condiralmbered 17, which provided that the bank should, within 1:j,ee months from the date of its admission to membership, se;:l.les all excessive loans to amounts within the limits pre1/: 3 d bY the laws of the State of Ohio. az og The report of examination of The Marengo Banking Company, for ; N°17ember 27, 1933, made in connection with its application exe .lembershi-n, showed that the bank on that date was carrying essive loas follows: O C. A. Bumker C. B. Smith 11 74 . $ 8,405 10,032 the "15 noted that application has been made by Mr.. to liouinal r Land Bank for a loan in an amount sufficient o °f th aly , 1 .1,is line at The Marengo Banking Corn any; that officels :2 s would loan the stated confident ?e gre a/11-. that they were have be li zdeu, in which event Mr. Smith's line at the bank would fee CiLLLdet ed, and eels because of such circumstances Mr. Fletcher that additional time s_lould be granted the bank ihich to n w u tjith the condition numbered 17. l 134nizir:11 ilieW of all tne information, the Board grants The 7arengo -1,,Co-aPanY an extension of time to July 15, 1934, within . aald it-4-e Provisions of condition numbered 17 may be complied with re quested that you advise the bank accordingly. "No reference is made in Mr. Fletcher's letter to the El.inker line hereinbefore referred to and it is assumed that 71,1c11 line has now been reduced to an amount within legal limits." Approved. Lettpr dated May 12, 1934, approved by six members of the t0 Mr. O'Connor, Comptroller of the Currency, reading as follows: "There is transmitted herewith for your consideration al3plication of the First Security Bank of Idaho, Boise, 4.c1811°, a member bank, for Permission to establish and operate a branch at Shelley, Idaho. At the present time the First Security Bank of Idaho is °Perating the fifteen branches which were approved by you on .lovember 15, 1933. 22An Ashton Blackfoot Emmett Gooding Ialao Falls Jerome Mo ntpelier Mountain Home /Tampa Po catello Preston Payett e 1111Pert Shoshone ShelleY (proposed) in Office (Boise) Population 1,003 3,199 2,763 1,592 973 9,429 1,976 2,436 1,243 8,206 16,471 3,351 2,613 2,250 1,211 Capital requirements 50,000 50,000 50,000 50,000 50,000 100,000 50,000 50,000 60,000 100,000 100,000 50,000 50,000 50,000 50,000 1,447 50,000 21,544 100,000 :31,050,000 iO ens7tIliolzlissioner of Finance of the State of Idaho has ap-2roved .crarici --4-'Lshment of the brnch and the Federal Reserve Agent t San 4c° recommends approval of the application. carlt ba jier, of the apparent satisfactory condition of the ap-oleclera thP recomlendation of the Federal Reserve Aget,,t e estab_isnTent " i-71e2 erve Board, recommends that you approve the -rati°11 of a branch at Shelley, Idaho, by the First Security .644/34 -6of Idaho, Boise, Idaho, on condition that: 1. Prior to the establishment of the branch, such bank, if it has not already done so, shall charge off or otherwise eliminate all losses shown in the report of credit investigation as of February 10, 1934, made by an examiner for the Federal Reserve Bank of San Francisco, and all depreciation in securities other than those in the four highest grades as classified by a recognized investment service organization reularly engaged in the business of rating and grading securities. The attached file inclades a copy of the report of credit investi 19,, g( lon of the First Security Bank of Idaho as of February 10, made by examiners for the Federal Reserve Bank of San Francisof valid a copy of the memorandum prepared by the Board's Division fil-x aminations. It will be appreciated if you will return this 0 ,e when it has served your nurnose and when you advise the Board Y°11r action on the application described above." Approved. Tele gral to Of iiew 11130, `f., r • dated May 1 2, 19, anoroved by five members of the Case, Federal Reserve Agent at the Federal Reserve Bank reading as follows: Dili; ,"nsidering questions raised by letter May 9 from e,ct ' s'ln and inclosures and pending such consideration cej tn for ten days from May 13, 1934, time within which rmast'41 Farmers Trust Company of West Palm Beach, Florida afTil?btain and file agreements of its holding company iates Form P-5." Annroved. l'etter to ?Tr. Austin, Federal Reserve Agent at the Federal Reserlr e Bar.112; °Philadelphia, reading as follows: "l 50Pt is acknowledged of your letter of April 18, 014e7 Ile all anended a:onlication of the National B of elle./';q3"4 Philadelphia, Pennsylvania, for Philadelphia, i. °f stock of the Federal of Philadelphia Reserve Bank ld.; offio The amended application received at the Boal1 s was not Of til the APril 20, the day after you and the Comptro er ' rr uelleY were advised of the Board's approval of the z.) 5/14/34 -7aPplication originally submitted. It is understood that the Comptroller of the Currency issued a charter to the bank on &ril 23 and that 150 Shares of stock of the Federal Reserve Of Philadelphia were issued to it on April 24. In the circumstances the second application will be considered as ar atification of that previously submitted." An2roved. Letter dated May 12, 1934, approved by six members of the Board, 01, "nflor, Comptroller of the Currency, reading as follows: to i "In accordance with your recommendation, the Federal Reserve Board approves a reduction in the common canitel stock IThs First National Bank of Crown Point', Crown Point, 1)4dianal from $50,000 to $25,000, pursuant to a plan which ,.es that the, bank's capital shall be increased by pi '')0 of preferred stock to be sold to tic Reconstruction ;711:;.nce C orporation, and that the released capital, together is7Laisvoluntarv contribution of approximately $13,000 which laild;woe raised locally, and a Portion of the bank's surnlus, e1.4vided profits and reserve accounts, shall be used to ate unsatisfactory assets, all as set forth in your 'florial.nOum of May 4, 1934. t;on In considering the plan under which the proposed reducatt„ill,caPital is to be effected, it has been noted that ca,pije'"us proposed adjustments have been completed the bank s ceilt , 1 and surplus will amount to but approximately 9 per exa,i0-, total deposits. It has also been noted that your p1„,-11!r Criticised the management and recommended that any for'22- re habilitat4on submitted for approval should provide 11017:s str engthening of such management. It is assumed, wheTieleIr' that You have these conditions in mind and that er it is feasible to do so you will obtain such further corrections as may be practicable." 4M Anproved. to 14„. IT* tt Leer dated May 12, 196z, by six members of the Board, 1 am)roved - Ruvial'. d Stewart, Cashier of The First National Bank, Hermon, 40r, -$ ronA4 -u-Lug as follows: "Zap lette inquirY contained in the second paragraplAof your 14, 1934, addressed to the Comptroller erey fthe nas been replY referred to the Federal reserve Board or 1r 4.1 4-4 veyo ) -8"You state that you have been issuing certificates of dePcsit which you understand do not comply with the Federal 3(?rve Board's Regulation Q; but that you intend calling in such certificates and issuing new certificates of dc,,)sit .c:lich do comply with the regulation. In tne circumstances, You request to be advised whether you may lawfully pay ,flterest on tae deuosits in Question for the period they Ilave been represented by the old style certificates, either uY making such payment at the time the exchange is effected °r bY dating the new certificates back to the date of issuance ?.!' the old ones and -paying interest for the entire period at tae maturity of the new certificates. As indicated in 7.egulation Q, a certificate of deposit , 11Don which interest may lawfully be paid must conform to the sfin depositn of a time certificate of deposit contained in the roenCulation; and, accordingly, interest may lawfully be paid o-dthedeposits in Question for the period during which the eL certificates have been outstanding only if such certifie? meet the reouirements of the regulation with respect tlme certificates of deposit. The Federal Reserve Board le to determine, however, without an examination of t:e ci ficertificates in question whether they comply with the Itlition of time certificates contained in the regulation flaby iherefore cannot advise you definitely whether interest been awfullY be paid on the deoosits for the period they have represented by the old certificates." Approved. to mr. 0 t, rtl, Letter dated May 11, 1934, approved by six members of the Board, , Ass Assistant Federal Reserve Agent at the Federal Reserve Bank ell0nel reading as follows: You ia,;" refers to your letter of April a), 1934, with which questi`-Losed an °Pinion of your Counsel with reference to a A St arising under section 23A of 'Lae Federal Reserve invest Act : rlember bank on rnent5 and loans to June 16, 1933, had carA t,'11 itS affiliates in excess of twenty per cent of its erc,ait fana surplus and, subsequent to that date, it extended which °ne of its affiliates by the discount of a note The qu"as eligible for : rediscount at the Federal reserve ban °f s j e ti°11 arises whether this action constituted a violation ils °11 23A of ' the Federal Reserve Act. first ecti/%n 23A consists of three paragraphs. Under the Parar"h. loans and extensions of credit by a meraber 'Dank 1379 5/14/34 -9"t° anY of its affiliates, purchases under repurchase agreefrom any such affiliates, investments in stock or ob ligations of any such affiliates and advances upon the security of stock or obligations of any such affiliates are Prohibited, if the aggregate amount thereof outstanding will exceed, in the case of any one affiliate, ten per cent of the a' stock and surplus of such member bank or, in the case °f all its affiliates, twenty per cent of the capital stock ellrplus of such bank. The second paragraph provides in Part as follows: "'Within the foregoing limitations, each loan or extension of credit of any kind or character to an affiliate shall be secured by collateral in the form of stocks, bonds, debentures, or other such obligations having a market value at the time of making the loan or extension of credit of at least 20 per centwn more than the amount of the loan or extension of credit, or of at least 10 per centum Tge dit than the amount of the loan or extension of if it is secured by obligations of any State, Or of anY political subdivision or agency thereof: IIII944.1t1t That the provisions of this paragranh shall not apply to loans or extensions of credit secured by obligations of the United States Government, the Federal intermediate credit banks, the Federal land banks, the Federal Home Loan Banks, or the Home Owners' Loan Corporation, or by such notes, dratts, bills of exchange, or bankers' acceptances ;s are eligible for rediscount or for purchase by 14 the reserve banks. ***I ceptel thir paragraph, certain classes of affiliates are exd, .Lrom the provisions of the section. ' t is clear that loans or extensions of credit to an affili forate or secured by paper which is eligible for rediscount the re Purchase by Federal reserve banks are not subject to ret:aracillirements of the second paragraph of section 23A with it is t° the form and amounts of collateral security, but 30 Th manifest that loans or extensions of credit secured /Y such , 4irst 11, t',4Der are not excepted from the limitations of the -aragraPh of this section unless the word 'paragraph' in the abov other 4t. e quoted provision may be interpreted in a sense esta))ir s,Lan that ill which it is ordinarily used. It is an abeellt eu rule of statutory construction that, in the the utIttral °f ambiguitY, words in a statute are to be read in ,A1 ordinary mesning commonly given to them. 'Ireover. it is to be observed that in the third paragraph 1_380 SA4/34 0 of section 23A, in excepting certain classes of affiliates from all of the provisions of the section, the word 'section' iS used. In the circumstances it is not believed that it can be assumed that the word 'paragraph' in the second paragraph cf the section was inadvertently used or that it was intended to have the same meaning as the word 'section' in the third paragraph. Accordingly, the Federal Reserve Board agrees with 'he opinion of your Counsel that a loan or extension of credit clzed by paper eligible for rediscount or purchase at a reserve bank is not excepted from the limitations of thderal e first paragraph of section 23A of the Federal Reserve Act the amount of such loans which may be made and that a member bank which already has outstanding loans and extensions of dit to its affiliates and investments in the stock or c igations of such affiliates in an amount up to twenty Per t of its capital stock and surplus (the limit prescribed by that a,,a paragraph) may not lawfully make an additional loan to 2,;.,affiliate even though it is secured by paper eligible for ulecount or purchase at a Federal reserve bank." r Z Approved. Letter. dated May 12, 1934, approved by six members of the Board, a %ton, Federal Reserve Agent at the Federal Reserve Bank of Richraord, " ding as follows: to ur. orm vederal Reserve Board has given consideration to the a9D.Licati Zazir4 °11 of Wm. J. Flather, Jr. under Section 32 of the a . '4AC Act of 1933 for a permit to serve at the same time and : a a d irector of the American Security and Trust Company Preeid__ (3f we:hirt:Zt ona , l .dector of Wm. J. Flather Jr., Inc., both C. lilice ilathslo iteaPpears from the information contained in Mr. aDplication that the business of Wm. J. Flather Jr., firs, ia limited to the making and selling of loans secured by ills2 deed of trust on real estate, to the conduct of a general "Iiilice business, and to the collection of rents. ex, a letter dated April 16, 1934 (X-7866) the Board orTthe aeed °Pinion that, although there may be mortgage notes 01 :!nd which should be classified as 'securities' for the ordir -a Of Section 32, mortgage notes arising out of the witilill tYPe of direct loan on real estate are not 'securities tor the"Zri tntendment of Section 32, and that neither such notes seclari't4 gages securing the same should be classified engaged as ee l in n determining whether ,an organization 1381 5/14/3,1 -11- "dealing in such obligation comes within the scope of Section 32. "It will be appreciated if you will advise the above named a%.OPlicant that the provisions of Section 32 are deemed to be in94)Dlicab1 e to his service to the institution named in his application.u Approved. Letter dated May 12, 1934, approved V. six members of the Board, tov z. Iroxton, Federal Reserve Agent at the Federal Reserve Bank of Richt4)4c1. 'reading as follows: a ."The Federal Peserve Board has given consideration to the Plications of John Saul, Andrew Saul, and G. Percy McGlue under 32 of the Banking Act of 1933 for permits to serve at the same 0;.4le time as directors of member banks and as directors and/or 4-licers of B. F. Saul Company, Washington, D. C. appears from the information contained in the applications th hat "ItF. Saul Company is engaed in the business of lending „7.7 on notes secured by first deeds of trust on real estate, ;141. that the COmpany sells to the public only the original notes giled u bY the record owners of the property. the In a letter dated April 16, 1934 (X-7866) the Board expressed whir,1°,131.nicn. that although there may be mortgage notes of a kind seci-'44 should be classified as 'securities' for the purposes of ' .°11 32, mortgage notes arising out of the ordinary type of tlerle tet -oan on real estate are not 'securities' within the intendof Section 32, and that neither such notes nor the mortgages se ilie ellring the same should be classified as 'securities' in determinCorn whether an organization engaged in dealing in such obligations esrwithin the scope of Section 32. eL.0131.1It will be appreciated if you. will advise the above named iiIi4ITInts that the provisions of Section 32 are deemed to be ' l icable to their service to the institutions named in their abbil e Approved. to Itr. Letter dated May 12, 1934, approved by six members of the Board, :1111rL Bosworth, Denver, Colorado, referring to his apnlication ati°11 32 of the Banking Act of 1933 for a permit to serve at the time„ "a director of the First National Bank of Denver and as an 1382 5/14/34 -12- "cer and director of Bosworth, Chanute, Loughridge & Co., both of Deliver, Colorado, and stating that it appears that the relationship cc4'el ' ed bY the application is within the class which section 32 was (1 " lig1ad to terminate, and that, accordingly, the Board is unable to fitld that it would not be incompatible with the public interest as 4claredbY the Congress to grant the application, although in the elellt the applicant desires to submit further facts or arguments in all/IP°rt of the application the Board is prepared to give them careful e°48ideratioa, Approved. to ur. Letter dated May 12, 1934, approved by six members of the Board, all. W. Corby, Washington, D. C., reading as follows: tir, The Federal Reserve Board has given careful considerat-;-T to arolication the Clayton Act for a permit under _ "ure Qc compat the same time a member of the firm of W. B. Hibbs wash ark7 and a director of The Riggs National Bank, both of iflgton, D. C. "kr 'The Federal Reserve Board believes that it was the 11.7!0±' Section 8A of the Clayton Act to prevent the um,Bee c)f bank credit for the carrying of and trading in te a , and that the method b y which the section was ined to ace omplish this purpose was by terminating relation.?v°11/ine tha service of an officer, director, employee, .1); 3 grler of an organization making loans secured by stock Ilati,ncollateral as a director, officer or employee of a 0,0er;r1 bank or other bank or trust company organized or ace() under the laws of the United States. Since financed margin cotstts, and the brokers loans by which they are for ca;n! One of the principal ways in which credit is use servic ; 44mg or trading in securities, it appears that the stockdirector, officer, employee or partner of a ic.1, !rect :icchallge firm carrying such margin accounts as a ''41e pri °-- °fficer or employee of a national bank is one of 44,04413:1 Itvy el r 3eSdi Sect of rer: ed a. tionships at which the provisions or 11 13E13 5/14/34 -13"It appears that the carrying of such margin accounts constitutes a substantial portion of the business of W. B. Hibbs & C°mPany, and that therefore the relationship covered by your aPPlication is within the class which that section was designed to terminate. Accordingly, the Board is unable to find that it Would be not incompatible with the public interest as declared DY the Congress to grant your application. "It may be noted that the Federal Reserve Board would not be authorized to grant your application in any event unless W. B. & Company may properly be considered as a firm of private ers within the meaning of the provisions of Section 8 of the 4,,ton Act. The Board has not attempted to pass definitely upon phase of the matter although on the basis of the information .7flieb. has been submitted there appears to be considerable doubt nat W. B. Hibbs & Company may properly be considered as a firm Of private bankers within the meaning of those provisions. ar In the event that you desire to submit further facts or tog13111elits in support of your application, the Board is prepared facre them careful consideration. However, any such additional wr44 !or arguments should be submitted as promptly as possible, in the Federal Reserve Agent at the Federal Reserve B '7f)1InTir°a Approved. to mr. Ohic — Letter dated May 12, 1934, approved by six members of the Board, Stevens, Federal Reserve Agent at the Federal Reserve Bank of stating that the Board has given consideration to the following al..311eation for a permit under the Clayton Act, and that, upon the basis Of the illformation before it, the Board feels that the issuance of the DerrItt appli ed for would be incompatible with the public interest. The letter also re quested the agent to communicate to the applicant the 11(larclis position in the w/lether t matter, and to advise the Board promptly as to 11 aPplicant desires to submit any additional data, and, if not, az to wh at steps he Of proposes to take in order to comply with the provisions elaYtori Act: 1384 5/14A4 -14- Ur. George G. Thorp, for permission to serve at the same time as a director of The First National Bank of Chicago, Chicago, Illinois, and as a director of The Gary State Bank, Gary, Indiana. Approved. Letters dated May 12, 1934, approved by six members of the 104rd f $ vo aPplicants for permits under the Clayton Act, advising of 41/13rOir ft't ' 114 of their applications as follows: Mr. will, fljfl H. Matthai, for permission to serve at the same tiererz a director of the Baltimore branch of the Federal Bank of Richmond, Baltimore, Maryland, and as a :a.irsetor of the Morris Plan Bank of Baltimore, Baltimore, marYland. 14.1r. Thomas E. Donnelley, for permission to serve at the same :ime as a director of The First National Bank of Lake Forest, ke Forest, Illinois, and as a director of the Personal Loan Savings Bank, Chicago, Illinois. r ?Aar. J°hn C. Fischer, for permission to serve at the same time Insaa di rector and officer of the First National Bank in Glen First in ' Glen North, Dakota, and as a director of The Ilational Bank of Hebron, Hebron, North Dakota. Mr5 t. w dir • Kane, for permission to serve at the same time as worthector and officer of The Worthington National Bank, ineton, Minnesota, and as a director of The First Itati()n al Bank of Brewster, Brewster, Minnesota. Mr. L. L. a Son, for director permission to serve at the same time as ville -uor and officer of The First National Bank of Barneshe 13arnesville, Minnesota nn and as a director and officer Kent State Bank, Kent, Minnesota. Mr. Albe 184,44ir:tet107:tr for Permission to serve at the same ti officer of The e Buffalo National Bank, Buffalo, 3 ,tal and as a director and officer of The Security State ''aPle Lake, Minnesota. 11* : l airect " 11111, for permission to serve at the same time as " ‘,tiesoiari°1` of The Central National Bank of Carthage, Carthage, 4isso.ari s and as a director of the Webb City Bank, Webb City, t 1385 5/14134 -1 5- Iiir• H. G. Pratt,- for permission to serve at the same time as a director and officer of The Hastings National. Bank, Hastings, Nebraska, ana as a director and officer of the State Bank of juniata, Juniata, Nebraska. Mr 'Creo• Sullivan, for permission to serve at the same time bas a director and officer of The First National Bank of Overoak, Overbrook, Kansas, and. as a director of The Richland State Bank, Richland, Kansas. Approved. Consideration was then given to a draft of a proposed letter to 14r*rood.Pederal Reserve Agent at the Federal Reserve Bank of St. Louis, rete,, ' 411g to the application of Mr. Sydney M. Shoenberg wider section 32 the Ballki lig Act of 1933 for a perrait to act at the same time as a aekler in securities in his individual capacity under the name of Sydney ers and Company, and as a director of the First National Bank, b°th in. St. Louis, and stating that, from the information conMissouri' notti in the aPplication, it appears that Mr. Shoenberg is not an cer, director, or manager of any corporation, partnership, or un14c°11)orated as sociationli engaged in the business of purchasing, sellnegotiating securities, and. that, on the basis of a previous I'll „It4€ Of the Ikard, section 32 is inapplicable to the relationship c1-2eribsd that tb. -II tile application. Mr. Thomas said that he had. requested. the reae , cillestion raised in the letter be considered by the Board for son that, If Mr. Shoenberg were an officer or manager of a partnerei1.011 :ged Primarily in purchasing, selling, or negotiating securities, owila 414 2 w°111d be held applicable to him, but that, inasmuch as he °Perates the the securities company in his individual capacity, taectiort is hej d. to be inapplicable. He stated that, in his opinion, 1386 644/31 -16- it i s inconceivable that Congress should have intended such a result. Irr- Wyatt stated that the Board's ruling is the result of the raatzer tation in which the statute is worded, and is the only logical interprethat can be given to the statute. Mr. James moved that Counsel be requested to Prepare, for the consideration of the Board, drafts of letters to the Chairmen of the Committees on Banking and Currency of the Senate and the House of Representatives recommending an amendment to section 32 of the Banking Act of 1933 so as to make the interlocking directorate provision applicable to an individual engaged primarily in the business of purchasing, selling, or negotiating securities in his individual capacity, and that, pending consideration by Congress of the proposed amendment, the Board defer action on all applications by individual dealers in securities for permits to serve as directors under section 32 of the Banking Act of 1933. Carried. Mere was presented a draft of a letter, previously circulated 41°111C. the a PPointive members of the Board, to Mr. Curtiss, Federal Re411re .11 erlt at the Federal Reserve Bank of Boston, reading as follows: o Refer ence is made to your letter of April 25, 1934, Tliver ;''G the request of the Fall River Trust Company, Fall ' 4assaChusett5, for cancelation of condition of memberImbered. 21 which reads as follows: thin six months frora date of admission to me such bank shall cause the removmbership, al from its banking grArters of the offices of the cooperative bank now located oTh therein. blIthp,A e b ank was trir, „ admitted to membership on December 29, 1933, ve wat;e4— to that time, requested that condition numbered 'The Bo d. believes that it is not a desirable situation Zvet. whee quarters of that of r11._the abank are shared by another institution. OiQy cormection between the institutions is andlord and tenant, the true relationship existing in 1387 5/1'1N -17Q0 far as the public at large is concerned, is often unnown and 15'nfusini.;, and in the event of difficulties of either insti tution, f,-e situation might result in serious embarrassment to both. 4.-Iter careful consi deration of the matter, the Board feels that it 1 wou4d not be justified in this case in making an exception its genral policy in connection with the conditions presc ribed 'er r admission to membership in the System, and, therefore, the jcluest of the Fall River Trust Company for cancelation of condion Tambered 21 is denied. In view of all the circumstances, however, the Board grant s an piv exte _ _11,10n of time to December 29, 1934, within which the Fall Trust Corrmany may comply with the requiremen ts of conditiona ered 21 and you are reque sted to advise the bank accoraingly. Th ere was also presented a draft of a letter, Previously circu lated "he aDpointive members of the Board, to Mr. Hoxton, Federal Reserve 41411t a t the Federal Reserve Bank of Richmond, reading as follows: ren,l,s4'.-elerenCe is made to Mr. Fry's letter of April 26, 1934 threauest of the Citizens Bank and Trust Com?any,bp e Carolina, for cancellation of condition of mem _rWhich reads as follo ws: 'Within six months from the date of its admission to membership such bank shall require that the offices of the building and loan association now located in the bankina quarters of such bar be remov tlr ed therefrom.' ior bank was admitted to membership on November17, 1933. '° that ti - me, however, the bank haii requested that condiform(rbered 22 be waived anE on December 11, 1933 Mr. Fry to ll,. the Peder al Reserve Board that the bank had been requelsted title-l aIpg this tive ter thematter to the attention of the Reserve Bank some of the new year, at which time the execu7 a recZaittee first of the Reserve Bank would submit the request with ,endation to the Federal Reserve Board. 2°ard believes that it is not a desirable situation Ile.11, 11,- quarters of a bank are shared by another institution or: 4x r1 the only connection between the institutions is that Diiblie-,Xd and tenan t, the true relationship, insofar as the in the re is concerned, is often unknown and confusing, ; 4tuat' ne event of diffi culti es of either institution, the ,,as might co result in serious embarrassment to both. The nsidered the argument of the Citizens Bank and that it would be unfair to require the removal wherl and loan association from the quarters of that and loan associations are permitted to remain 1lZt 1388 6/14/34 -18- R. ln the banking quarters of the two other banks in Concord. The Board has no control over the operations of the other banks 1/1 Concord, while it has a responsibility regarding admission of State banks to membership in the System. After careful con!ideration of the matter the Board feels that it would not be Justified in this case in making an exception to its general ?licY in connection with the conditions prescribed for adto membership in the System, and, therefore, the request of the bank for cancellation of condition numbered 22 18 denied. "In view of all of the j g allte an extension of time the Citizens Bank and Trust , t 4te of condition numbered 4e bank accordingly." circumstances, however, the Board to November 17, 1934 within which Company may comply with the revire22, and you are requested to advise Mr. Hamlin stated he had requested that these letters be discussed 1)the the Board for the reason that, althouen he in agreement fully with 13tion taken by the Board that ank it is not desirable for a member bank to ehare its b ng quarters with another institution, he felt that the Zettter should be carefully considered as the Board had previously approved the licatj *Lich has 4;41,041 of the New Britain Trust Company, New Britain, Connecticut, a "vings bank in its banking room, and he understood that a rooitsba als * ih Providence, Rhode Island, is operating in the same bankthe Rhode Island Hospital Trust Company. Attention was also e&Ilecl to the fact that a national bank and a nonmember State bank in : c..allalate 4e°''a) 1713rth C rooms. arolina, have building and loan associations in their "suing. discussion developed the opinion that the present ext_ °11 °f the Board is the proper one, and that, rather than make 9?tiorls thereto, the rule should be applied uniformly to all banks. Mr. At the conclusion of the discussion, James moved that Counsel be requested 5/14/34 -19to prepare, for consideration of tr.e Board, drafts of letters to the Banking and Currency Committees of the Senate and House of Representatives recommending the passage of legislation Which would prohibit the maintenance, in the banking quarters of member banks and of banks whose deposits are insured by the Federal Deposit Insurance Corporation, of the offices of other banks or other institutions such as building and loan associations, etc. Carried, and the letters to Messrs. Curtiss and Hoxton referred to above were approved. Illere was presented also a draft of a letter to Mr. Hoxton, Federal ieted, Znt at the Federal Reserve Bank of Richmond, which had been circu, lows: °I-IslY among the appointive members of the Board, reading as fol- to: t This refers to your telegram of February 23, 1934, and 'le letter o_ wealac_ f February 28, 1934, from your Conmsel, Mr. with regard_ to the question whether the State Planters sy t all°- Trust Company, a member bank of the Federal Reserve , fors ,erLi.sylabY lawfully acquire re bonds of an affiliate in exchange e estete when, as a result of the transaction, t1.11) e d of the b will exceed the limitations prescri e Ti 23A of the Federal Peserve Act. It a sortie Ppears that the State Planters Bank and Tlamt, rCio d77 . cliateY ae rs ago assumed the liabilities of another b and thlis a Its assets, including certain real estate. The estate t° th eb (1131`,._ red Las been rented but the yield is small in relation; 'ievere v alue. The State Planters Bank and Trust Company ' oratiir ears ago organized the Richmond Mortgage Loan !Ilat lander the laws of and Virginia it is understood ' izQtaeteii,oittrientterirseReaT thal of the corporation is owned by the -ank and Trust Company. The corporation formerly 4.'debZ8 11Pon real c/1 estate and sold its collateral trust bonds aliTulses, which were the direct obligations of the corpora2°ellred Jere secured by co,, mortgages or the deposit of notes which were in turnhe , deeds of trust. It is understood that ira6i0n is n transcig otransactingno new business and is endeavor3143ate its affairs and its outstanding 10t an indebtedness, ;.°1• 111.1technic ally been placed in liquidation. A person ain b° d of the -corporation has offered to exchange ng 1)°cer st14 for tr s real estate in question and to pay to the ;-(11 1390 5/14/34 -20"State Planters Bank and Trust Company a certain additional amolint in cash. The transaction is considered desirable from the standpoint of the member bank; but, if carried out, will result in its holdings exceeding the limitations prescribed ih Section 23A of the Federal Reserve Act. "The question whether in the circumstances described an exchange of real estate should be considered an investment of funds by the member bank within the meaning of clause numbered of the first paragraph of Section 23A of the Federal Re!erve Act is a close and doubtful one and the Federal Reserve idoard will not at this time undertake to express an opinion 's to the interpretation which should be nlaced on the statute 2 1 1 this regard. However, inasmuch as it appears in this u caseth member bank proposes to dispose of unprofitable real st'te which was acouired some years ago and that the transsal!loh will be carried out in good faith for this purpose, in view of the other information which you have furnished connection, the Federal Reserve Board will offer no ;:Jection in the peculiar circumstances of this case to the eal?°sed exchange of real estate by the State Planters Bank la130 Trilet Company for bonds of its affiliate as above outlined conn condition that the bank advise you in writing before the tIles1F,ametion of the transaction that it will avail itself of 41rst o Pportunity which may occur for the disposition on rtsonable basis of the bonds of the affiliated corporation vkl.:111ireL It should be understood that the Board's position partA"i s matter is based entirely upon the circumstances of this 1,1cIreocLelelTe i, and, its action herein is not to be regarded as anY other case in which a similar question armser Section 23A of the Federal Reserve Act may be involved." L Upon motion by Mr. James, the letter was approved. trom mr.Attention was then directed to a memorandum dated May 4, 1934, Golde eeDiez of , hweiser, Director of the Division of Research and Statistics, wntel4 had been furnished to the members of the Board, transtaitti4e a Diitttio4 Merrl°ralldum of the same date from Mr. Woodlief Thomas of the tatea rat °f t. Researdh and Statistics, which suggested that, for the reasons he raemorandum, the Board consider a reduction in the maximum e °t int r„, Prescribed in Regulation Q, that may be paid by member 1391 5/14134 -21- banks on time and savings deposits. Mr. Goldenweiser stated that he had 8111rmitted the memorandum to the Board for consideration only, that he 44 not made up his mind as to whether a reduction should be made, and thEtt he felt no change in the interest rate should be made by the Board Iritil011t a complete investigation of the desirability of such action. Upon motion by Mr. James, it was voted to make no change in the maximum interest rate of 30 per annum on time and savings deposits, Prescribed in the Board's Regulation q. Reference was made to a letter addressed to Governor Black by C1"erzor Calid.ns of the Federal Reserve Bank of San Francisco under 44 "4144Y 2 '1934, which had been circulated previously among the 4.1.111'°illtive members of the Board, stating that officers of the Bishop 114ti°11a1 Bank and the Bank of Hawaii, both of Honolulu, were in San iav estigating the question of membership in the Federal Re81"e SYstem; that Governor Calkins had discussed the matter with t41411; and that he would appreciate wire advice from the Board as to (a) 4"41.118810n to membership of the banks referred to, and (b) the estab- 1411141ellt ill connection therewith of a currency depot in Honolulu in :etutchetlfrt:$2a,::01:63.000aratboe$5,000,000 would be deposited. It was sug- sent to Governor Calkins stating that the given careful consideration to the matter referred to in his bIlt b efore taking action thereon requests that tha board of tlitect tatitter(11'4 Of the Federal Reserve Bank of San Francisco consider the tout , "I" nth and submit a recommendation to the Board thereon, the recommendation of Governor Calkins and that of Mr. 1392 6/14/34 -22- lewton. Federal Reserve Agent; and that the Board also desires an estimate as to the cost of maintaining a currency depot in Honolulu and any other illf°rraation which Governor Calkins feels would be helpful in enabling the osEtrci to reach a decision in the matter. Upon motion by Mr. Hamlin, the Secretary was requested to address a telegram to Governor Calkins in accordance with the above suggestion. z. Governor Black presented a letter dated May 11, 1934, from Mr. ralle, Deputy Governor of the Federal Reserve Bank of New York, i'eferri AC to recent correspondence with the Board in regard to the ear4C Of gold for the Banco Central de Guatemala, and stating that the had. written the Federal Reserve Bank of New York expressing a deto the_ c)'Pen an account on the books of the New York bank, and that at of the board of directors on May 10, 1934, the officers were allthort zed subject to the approval of the Federal Reserve Board, to open alld mel PLaill at account on the books of the Federal Reserve Bank of New 1"k the Ilame of the B o Central de Guatemala and to carry out 13eratiom, ' 11 this market for that bank along substantially the same gezarai lnes and subject to substantially the same terms and conditions ut () othe r foreign central banks having accounts. with the New York tioll letter also contained information with regard to the organize, the (31e la"er8 of the Banco Central de Guatemala and stated that, if Of the account be approved, the New York bank will offer 1)articii3ett b enac104 ion in the account to the other Federal reserve banks as had 0 like i nstances in the past. After discussion, in which it was noted vt.lat the action taken by the directors limits the r elations to be established with the Banco 1393 5/14/34 -23Central de Guatemala to the opening of a one-way account, the Secretary was requested to advise Mr. Crane that the Board approves the action of the directors in authorizing the opening of the account, and to advise the other Federal reserve banks that the Board approves participation by them in the account, if and when opened, in the event they desire to do so. At this point Mr. O'Connor, Comptroller of the Currency, Mr. Awalt Deputy Comptroller of the Currency, and Mr. McGrath, Assistant colulsel in the Insolvent Banks Division of the Comptroller's office, Joined. the meeting. Governor Black presented a letter addressed to him under (late of 144Y 2, 1934, by Mr. Harold L. Ickes, Federal Emergency Administrator of Public Works, stating that his office had made arrangements "the °Ifice of the Comptroller of the Currency to furnish for the collfidential andprivate use of the Public Works Administration, as cEgis are made Photostat copies of reports of condition of national bellks in which funds are deposited by borrowers from the Public Works kllinistration; that it is his desire to make the same arrangement with the ?sclera Reserve system to furni sh the Public Works Administration, calls are made, with reports of condition of State member banks, •rx(1 that the arraneement with the Comptroller's office is that the Ad11114istration will reimburse the Comptroller for the actual cost of tlaki 143 the photostat copies. Ur. Morrill stated that he had talked with Mr. Await, Deputy 011er Of advise the . Currency, concerning this matter, and that Mr. Await that the Co-iptroller's office does not furnish the 13911 5/14/34 -24- Works Administration with the entire reports of condition of national banks, but that only the first nage of each report is being furniahed, and that the information contained on this page is required under the l to be published and, therefore, is not confidential. He also stated that it appeared that the Public Works Administration desired to theu same information in the case of State member banks but that anch b are not required to publish their condition reports made on call °I ' the Board; that such reports are regarded by the Federal reserve 44443 aild the Board as confidential and that, therefore, the suggestion ilad been made that t he Board obtain the permission of State member banks betor 6 ellch i nformation be given to the Public Works Administration. Governor Black s ested that Mr. Ickes be advised that, while it 15 th e actice of the Federal Reserve Board to issue calls for rePort of "Ildition of State member banks simultaneously with the calls 1)1, the Co mptroller of the Currency for reports of condition of Ilat* 1°43. bara, there is no requirement of law that these reports be published. 41141 tIleY are regarded by .aerve a the Federal reserve banks and the Federal 44"fort to a4 CO nfidential; that the Board will be glad to cooperate in lnake the desired information as to State member banks available; at if th e Public Works 11Zit of Administration will forward to the Board a the st Itkitz ate member b .s in which funds of borrowers from the Public 6k1 -.10n tulka reDori. _ are deposited, the Board will address letters to l'eque ti 8 Ile authority to furnish the information from the call mitted by them. 5/14/34 -25The Governor was requested to address a letter to Mr. Ickes in accordance with the above suggestion. Governor Black referred to the Board's telegram of April 28, 1934, t° 11r. Xewton, Federal Reserve Agent at the Federal Reserve Bank of San Prarip4 CO, copies of Which were sent to all Federal reserve banks, in the ruling was made that State member banks are prohibited by the 1)r°visi°48 of section 5136 of the Revised Statutes, which is made app1i4 ' 114 to State member banks by section 9 of the Federal Reserve Act, as °Lded, from purchasing stocks upon order and for account of their custotriers . /le stated that he had given the ruling a great deal of considera, h ad dioussed it with Messrs. Wyatt and Vest of Counsel's office, Mr. '0 COnnor,' Comptroller of the Currency, and Mr. Await, Deputy Comptroller of the thitt Incorrect and that the Board should reconsider the matter and rule member baall„ ,s are not prohibited by the provisions of law above re_ to the Currency, and had reached the conclusion that the nil- vm purchasing corporate stocks solely upon the order and for tte eclullt of customers. Governor Black also said that Mr. Robert V. Vlce P resident of the American Bankers Association had called orthim ' 414 advised that he had received telephone calls from various -arts extre::the c0114trY indicating that the member banks feel it would be Ntilit : detrimental to the b effect. 144, ch ork, 4airman 2 Mr %.s if the Board's present ruling is Re also read a letter received from Mr. James H. of the Board of the National City Bank of New York, to the possible Foverse effects of the present ruling. O'Connor stated that the same question as regards national 1396 6/14/34 -26- beJ3ks had been given very careful consideration in his office following the Passage of the Banking Act of 1933, and the conclusion reached that 131 lases of stodk by national banks for the " account of customers is Prohibited by section 5136, of the Revised Statutes and that, on the ba.eis of that position, his office had submitted to Congress a draft of 41enament which would amend section 5136 by striking out the words "in,Irestraent securities" in the first line of the second sentence of the 13""tb. paragraph of the section and inserting in lieu thereof the WcTds " stocks, bonds, or securities", which would clearly authorize raem41" to biky and bel")ilcs sell corporate stocks for the account of their ellatomers. Mr. O'Connor also said that the annual report of the office °I' the illg the Corr rptroller of the Currency covering activities for the year end- October 31, 1933, contains the statement that it would appear from alacuage of the seventh paragraph of section 5136 that a national iktlalt is prohibited from performing the service of purchasing or selling e°111)crate stocks for the account of one of its customers, and that his "flee had made the same reply to a number of inquiries received from ktttiorlta bartzs. A general discussion ensued during which it was pointed out that seoorid sentence of the seventh paragraph of section 5136 provides t44t t}as business of dealing in investment securities by a national bank 13144 be limited to purchasing and selling such securities without re- %1Lrse s°1elY 'upon the order and for the account of customers and in no 4.1e tor ite own. account, and. that the definition of investment securitieg tts cont tried in the paragraph refers to marketable obligations 1397 5/14/34 -27- encing indebtedness and not to corporate stocks. Mr. Await stated tliM prior to the amendment to section 5136 by section 16 of the Banking Act ' 31 '1933, the Comptroller's office had taken the position that national did have the right to buy corporate stocks for customers, but that 4 Was felt that inasmuch as the section as amended stated expressly the t44113 of securities which could be purchased by national banks for their el4it°rnere, which did not include corporate stocks, it was felt that such Dllrellasee for account of customers were prohibited, but that such prohibitIcqadid not take effect until June 16, 1934. The discussion brought out the feeling of the members of the Board ia view of the hardship which would apparently result to member banks Irilthe ruling, it would be Preferable for the Board and the Comptroller tlie Currency to reverse their rulings pending a clarification of the sttlite *bY Congress. Mr. O'Connor stated that it was his opinion that, ()lithe b asis vi the present law, the ruling of his office was the correct 4° arid that, as he had taken the position that an amendment to the law waz xxecessa,ry and had recommended to Congress the passage of such an arrielldraellt, he aid 1314 that as the s not see how his office could. take a contrary position, p:e s:::: :: eant ::ment is in the hands of the committees i (11'Coteress it is 11.1*. Wyatt may be passed at the Present session. stated that, in itsubmitting to the Board with his _ rIlling recently made by the Board on this subject, he had beetx irtillieliced largely by the facts the that, (1) it was in accordance with position taken by the D°rt alid Comptroller of the Currency in his annunl re- ill several letters written to individual banks; (2) the purpose 4D13r " 41 the 1398 5/14/34 -29- (It the provision of Section 9 of the Federal Reserve Act on this subject iS to place national banks and State banks on a basis of eqvinlity with ' l esPect to dealings in securities; and (3) this purpose would be effectnated bY having ' the Board and the Comptroller take the same position on this subject. Mr. Wyatt stated that, upon further consideration, however, he had readhed the conclusion that the rulings previously made on this 'llbject were incorrect; because, (1) the sentence in Section 5136 commencille; with the words, "The business of dealing in investment securities", attects only "investment securities" as defined elsewhere in the section s° as riot to include stocks and, therefore, this sentence has no effect whatever on the right of national banks to purchase stocks for the account (It their customers; (2) the sentence, "Except as hereinafter provided or otherwise Permitted by law, nothing herein contained shall authorize the DIkrchase by the association of any shares of stock of any corporation", 131)lies only to Purchases of stock by the bank for its own account and cl(5es not forbid the purchase of stocks for the account of customers, the havinc construed the word "purchase" as used in Section 32 of the tan.4 Act of 1963 as not anlAying to brokers who purchase tor ti stock only le account of their customers; and (3) therefore, the amendments to 4ctiOh 5136 c ontained in tae Banking Act of 193 do not affect the right °t national baxiks to purchase stocks on order and for the account of thEl'r ellstomers. „_ mr. Wyatt further stated that, since they are not Ilecifieetily authorized to purchase stocks for their customers, the questl04 wheter natinal banks nave uch authority irrespective of the amendconi (Ikke ttio4; 1)14 hein was the t of 1933 might be considered a doubtful n:ci G Ban Ac of the opinion that the Board could properly rule 1399 5/14/3,1 that, -29- if the charter powers granted by the various States to State member banks are broad enough to permit such banks to purchase corporate stocks for their customers, there is nothing in Section 9 of the Federal Reserve ct wilen read in connection with Section 5136 of the Revised Statutes, whie, would prevent them from doing so. At the conclusion of the discussion, Mr. Hamlin moved that the Board reconsider its action in approving the ruling contained in its telegram of April 28, 1934, to Mr. Newton. Carried, Mr. O'Connor voting "no". Mr. Szymczak moved that Counsel be requested to prepare a telegram to be dispatched immediately to the Federal reserve agents at all Federal reserve banks advising that the Board had taken the position that State member banks are not prohibited from purchasing corporate stocks solely upon the order and for the account of customers but not for their own account. Carried, Mr. O'Connor voting 193 Itr. O'Connor stated that one of the provisions of the Banking Act eliminated the double liability on stock of national banks issued cLttetJute 16, 1933; that, in his opinion, tne provision was a wise and ectilitable one in view of all the existing circumstances, but that the IlatiozleLl banking system had been weakened thereby inasmuch as none of the °f 11at10riaa banks issued since June 16, 1933, provides that additional Droteetion to depositors. He stated that he felt the benefits of the amend- e°111.ti be retained and the national banks protected by an amendment to 17 which would permit 1)1111, 4 the Comptroller of the Currency to require each azteed in the future to add to its surnlus from earnings until the D1 equals the zt tee., bank's capital. This would have the advantage, he OfCrub building up the capital account in times of prosperity the 1400 5/14/34 -30- c.,4ould be much more desirable than the practice in the past of relying ollthe double liability of stockholders which was attempted to be realized 1:1°11 largely in time of financial difficulty. Mr. O'Connor added that he telt it is desirable that the amendment be passed at the present time in °Iler that it could be applied to the large number of banks which it is contem,' ''"ed will be organized in the future. Mr. Await advised the Board that 4°111 thedollble has been introduced in Congress by Senator McAdoo to remove liability on the stock of all national banks and that in report- the bill the office of the Comptroller of the Currency had stated that-it w Old interpose no objection to the bill if national banks were re(Lired also to transfer to surplus before payment of dividends 10',; of eernillCe until the surplus account is eousl to lW; of the banks' "tcd- After a discussion of the proportion of the earnings of a bank thIcilnliCht be required by the proposed amendment to be credited to surP14 eac'a Year, M. O'Connor stated that he would appreciate it if the °f the Board would consider the amendment and give him tne benetit sut3 of tileir rPgestions with regard thereto. eeti - Ilessrs- Await and McGrath then left the meeting. G°vernor ---aok stated that the special order of business for this the co nsideration of the Annul Report of the Federal Reserve t" the Year 1933, but he suggested that, inasmuch as Mr. Miller is ed to '4 home by illness, action on the report be deferred for a ttrte - the 13"rd later in the week at which Mr. Miller is in attendance. Certain phases of the draft of the Annual Report were discussed briefly, but action on !ae reuort was deferred in accordance with uovernor Black's suggestion. 1401 rl 5/14/34 -31— There were then presented the following applications for original stock of Pederal reserve banks: A li cations for ORIGINAL Stock: Shares t National Bank in Carteret, Ca rteret, New Jersey 72 72 36 36 St ict hrst N No. 6. ational Bank in Tuscumbia, Tilseurabia, Alabama District No. 7. Iturora National Bank, Atrora, Illinois 116 Total 116 224 Approved. Thereupon the meeting adjourned. Secretary. 41)1)r d;
@FedFRASER