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1127 meeting of the Federal Reserve Board was held in Washington °11 Tu -daY, May 14, 1935, at 11:30 a.m. PRESENT: Mr. Eccles, Governor Mr. Thomas, Vice G,vcrnor Mr. Hamlin Mr. Miller Mr. Sz:,-mczak Mr. Morrill, Secretary Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. The Board acted u)on the following matters: 'Telegram dated May 1:i3, 135, from Mr. Powell, Secretary of the Fed,eral Re-Serve Bank Of Minneapolis, stating that the board of directors Of 4-1 wle bank, at its meeting on that date, voted to establish a runt rate of 2% on mdiscounts of eligible paper for member b nks and dv encec to member banks under the provisions of sections 13 and cif 0. the Federal Reserve Act, effective the first business day fol- sgthat on which approved by the Federal Reserve Board. or % The rate c"ablished by the board of directors of the Federal Reserve 13A 1 of ullnce?ciiis was approved by three members of the Board on :13 .0 tke effect May 14, 1935. APproved. the Telegram dated May 10, 1935, from Mr. Clark, Secretary of nederaReserve Bank of Atlanta, stating that the board of 4re tOrs Of the ban',: at its meeting on that date, made no change t bankrz exIsting schedule of rates of di count and 2urchase. Without objection, noted with approval. -2Memorandum dated May 9, 1935, from Mr. Morrill stating that Governor Eccles had recommended that as soon as the annual leave accrued by Mr. Daiger, Special Assistant to the Board, was suflent to cover the period of his absence because of illness from Decembel, 1934 to January 8, 1935, inclusive, he be paid 5°O, the amount of salary which would have accrued during the Period had he not been absent, in lieu of his taking the cccrued lea The memorandum stated that Mr. Daiger was absent 13 days arid 6 hour had EilICe (working days) during December and January, and as he been absent 1 day and 4 hour;2 which w,s charged to annual leave) ufficient annual leve to cover his absence during his illneQ would be accrued on June CI 13,35. The recommendation was sp- rayed by five members of the Board on May 13, 1935. Approved. Letter dated May toarri 19:5, approved by four members of the 'La Mr. Peyton, Chairman of the Federal Reserve Bank of lanean 14 readinz as follows: "The Board has reviewed the report of examination the Federal Reserve Bank of Minneapolis made es at .1"e' close of business March 160 1935, copies of which were left with you and Governor Geery. ,"On page 24 of the report the examiner comments ' b the policy of the Reserve Bank in giving to member railks located in the portions of the States of Michigan lacconsin situated in the Ninth District immediate `2,'Irailability on drafts payable to the Reserve Bnnk `Irawn on Chicago and Milwaukee correspondent.. 110 ( .309 /14/35 —3— “It is noted that the examiner's recommendation that the practice be discontinued would be referred to the Executive Committee for consideration, and it will be appreciated if You will advise of the result of such consideration. "The examiner calls attention (page 22) to the fact thet the by—laws of the Helena Branch provide for a meeting ot the directors on the second Monday of each month but that since the date of last examination meetings have been held each month on call of the Managing Director and only one of the meetings was held on the day provided in the by— •laws. It is ob:-erved that the by—laws will be changed to permit meetins.s on call of the Managing Director, and it is assumed that, in accordance with the usual procedure, the proposed change will be submitted to the Board for ap2roval. "After the report and this letter have received the consideration of the board of directors of the Federal Reserve Bank, the Board would appreciate advice from you aS to what action has been taken or will be taken on the matters discussed.” Approved. Telegram to Mr. Austin, Federal Reserve Agent at the Ped al Re erve Bank of Philadelphia, reining as follows: . "Question raised in connection tith isuance of ,7°t2-11g permit to The First National Bank of Philadelphia aes not yet been acted u)on, and Board therefore extends June 15, .15, the time within which 'First Trust CO OmParlY of Philadelphia', Philadelphia, PennsylvLnla, IfY.accomplish its membership end Idthin which 'The First tIonal Bank of Philadelphia', Thiladelphial Pennsylvania, holding company affiliate, may obtain a voting permit. rlease advise banks accordingly." Approved. Letter to lb. O'Connor Comptroller of the Currency, etcliltig 'az folloI s: Ft "in 'accordance with your recommendation, the Federal • eterve Board approves a reduction in the common cLpital 1130 t/14/35 -4- "stock of 'The National Bank of Opelika', Opelika, Alabama, from 0125,000 to 0100,000, pursuant to a plan which provides that the released capital, toether with 05,000 from surplus and approximetely c 31,283 from undivided profits, shall be used to eliminate approximately 061,283 in unsatisfactory assets, all as set forth in your letter of May 60 1935. "It is noted that the bank on April 11, 19340 increased its capital by the sale of 450,000 of preferred 6-took to the Reconstruction Finance Corporation and that the plan of capital reduction does not contemplate anY further increase in capital at this time." Approved. Lotter to Yr. Stevens, Federal Reserve Agent at the Federal Itesp -rve Bank of Chicago, reading as follows: "Reference is made to the correc2ondence between your offic and the Board in regard to the question of capital 2ufficiency of the Bank of Lakeview, Lakeview, Michigan, the reorganization of the bank in January, 19E4, having esulted in a decrease in the amount of its cz,pital stock rro M 43 to 030,000, the amount collected of a 100 per 'cnt tock assessment levied against the old capital stock. 073 "As stated in the Board's letter to Mr. Young under 'Lc of March 9, 1934, a reduction in capital stock by a illrbor bank below the amount required for the organization a. national bank in the same place constitutes a viola"211. of the requirements of the Federal Reserve Acl, for fnloh v the bank's membership in the System might be fort,e, ted, but the question of whether such action should be 1721'ell is one of policy for the Board's consideration in ' 41 of all the circumstances involved in the particular ease. arl , "The Board, in its letter to :,-ou of November 23, 1934, 'Ir4-sed that it would take no action at that time with re!=2ect to the termination of thP bcnk's membership in view Qr the r edommendation of your office that action in the matter be deferred until L)ril 1, 1935. "It ic now understood, from Mr. Young's lelLer of May 1 1965, and the letter from Mr. Fred Mann, Deputy of- 48sioner of Banking of the State of Michigan, copy ' 7thich was transmitted therewith, that the bank is un- 5/14/35 —5— "-;,illing to increase its present capital, feeling that the present amount of $30,000 is adequate in comparison with its deposits of approximately $157,0001 and that it contemplates withdrawal from membership in the Federal Reserve System rather than restore its capital to $40,000. "Further consideration has been given to the various Phases of this matter, including the plan under which the benkts reorganization was effected, the satisfactory asset condition reflected by the report of examination of April 9) 1935, and the existing ratio of net sound capital to deposits, as tell as the fact that the bank would be e11L-113le for membership in the System with its present capitd and that legislation now under consideration by Congress will, if enacted into law, broaden the Board's discretionary powers in the matter of capital require— ments. In view of all the facts and circumstances in— volved, the Board will take no action at this time af— fecting the membership of the Bank of Lakeview in the Pederol Reserve System by reason of the reduction of capi— tn1 from $40,000 to $30,000." Approved. Letter to Mr. Guy L. Tildermuth, Reading, Pennsylvania, ac follows: , "This refers to your letter of April 23, 1935, to erncIr Eccles, regarding the failure of the Bank of u ura, Auburn, Pennsylvania. "The Board has been informed that, at your request, a hec-ring was held at Auburn on April 10, 1935, by the St,lte Banking Department to afford you an opportunity to -Present , any pertinent information or raise any questions You might desire regarding the suspension of the "114 of Auburn and subsequent developments. It is under— stood that the Depositors' Committee was represented by You as its chairmpn and by another member of the Committee tc)L'''ether with counsel for the Committee; that in addition r° representatives of the State Bankinz Department, there FneZIIEetir Present representatives of the Attorney General ate of Pennsylvania; several of the directors of s laellk and their counsel; Mr. Citgreaves, former Deputy AecretarY of Banking; Mr. Hill, Assistant Federal Reserve gent at the Federal Reserve Bank of Philadelphia; and Mr. rb 1132 5/14A;5 -6- "Rrittain, counsel for the Federal Reserve Bank of Philadelphia. In the circumstances, it would seem that your Committee hac been given e full opportunity of being heard in the matter before the various parties Co corned and, since the Bank of Auburn was organized the laws of the State of Pennsylvania and is in uhe hands of the appropriate authorities of that State, tht, it would not be aopropriate for the Board to take any action in the matter. "According to the Board's information, the difficulties of the bank arose from its operations during the first year of its organization and as soon as the unsatisfactory situation was disclosed by an examination Step ore taken by the supervisory authorities to correct the situation. From the record before the Board, it is apparent that the action taken by the office of ie Federal Reserve Agent at the Federal Recerve Bank of Ph iladelphia with respect to the Bank of Auburn was with the best interests of the depositors of that bank in mind." Approved. Letter dated May 13, 1935, approved by four members of the c'ard to Governor Calkins Chairman of the Governors' Conference, readi ng as follows: "Replies to the Board's letter of February 26, 1935, reeuesting advice as to the practice of the Federal ' ,:e8erve banks in placing coupons, bonds, scrip, stock ;1-?rtiri,crtes, etc., in the ordinary mails instead of i11 , ' 2.)atChing such mtter by registered mail, indicate -C-lat Ile Reserve banks do not have a uniform policy in this fI'2 . Pect- Some of the banks, according to the replies, that the practice of using the ordinary mails for t -ro of:/)e of matter should be discouraged, while others Lhe opinion that considerable savings may be ofat little or no risk, by using the ordinary mails left than the registered mails. co, t ,There is inclosed, for your information, a memorandum 11.1.J-Lllin.2; excerpts from the replies to the Board's letter stat l reflect the attitude of the various banks, and also a QIII°r1t choi_ig, by banks, the estimated savings which b`,: v e u/ted from the practice of dispatching coupons, ctc., by ordinary mail instead of by regiz,tered mail. j fee , 1133 5/14/35 -7- "In view of the difference of (minion of the Federal Reserve banks on this subject, the Board feels that it might be hel)ful if the question vere discussed at a conference of the governors of the Federal Reserve banks and, ..accordingly, it is requested that the matter be made a , k oplc for inclusion in the program of the next Governors' C onference." Approved, together with a letter to Mr. C. B. Ellenberger, Third Assistant Postmaster General, reading as follows: "Reference is made to the Board's letter of February 26, 1935, which stated, in reply to your letter of February 14) 1935 (89608-R), that the governor of each Federal Reserve bank had been requested to advise the Board as to the present practice of the Reserve bank with regard to the use of the ordinary mails in shipping coupons, bonds, scrip, stock certificates, etc. "The information requested has now been received from all Federal Reserve banks and the replies indicate that of the banks use the ordinary mails rather than the cthe registered mails for dispatching certain coupons, bonds, etc. These banks are of the opinion that with little or no risk c onsiderable savings may be effected by forwarding such rter by the ordinary mails and, therefore, prefer to con-flue their present practice in this respect. In view of the fact that there is some difference of opinion on this subJect, the Board feels that the question should be dis?ussed at a serve banks conference of the governors of the Federal Reand, accordingly, has requested that the sub.pet be included in the program of the next Governors' Con4.?1 : ence. After the Governors' Conference has considered Luis topic, the Board will communicate with you further." J Letter to Mr. Arthur J. Linn, Secretary of The National A58oeiati01j of Bank Auditors and Comptrollers, Washington, D. C., l'e4ding as follows: reor have your letter of May 1, suggesting that a e.entative of the Federal Reserve Board be designated ur) A,"°ric With a special committee representing the National ' 8°ciation of Bank Auditors and Comptrollers and with IPT 1134 5/l4/35 -8- It representatives of State banking authorities to investigate the possibilities and work toward the development of an accepted set of standard forms for reports of condition, earniags and dividends, etc. "We shnll be glad to cooperate in this matter and have esignated Mr. Smead, Chief of the Board's Division of Bank Operations to meet with your committee. It is suggested that you communicate with Mr. Smead with regard to the date of your meeting. "The interest of your organization in this subject is aPPreciated, and any suggestions and recommendations that Your committee may wish to make after its study is camPleted will be carefully considered by the Board." Approved. Letter to Mr. Philip R. Clark, Chairman, Committee on tJnj iedtlon of the Reserve City Dan':ers Association, Chico, Illinois, reading as follows: "This refers to your letter of May 4 advising the Bc)ard that the Reserve City Bankers Association at its 1,797)4 convention appointed a special committee to study possible unification of report forms and asking the 0.?Lrd to appoint a representative to work with your committee and with representatives of other Federal and State al.lthorities. We shall be glad to cooperate with your comTI-ttee in this matter and have designated Mr. Smead, Chief °f the Board's Division of Bank Operations, to work with Y°1-1r committee. "The interest your association is taking in these rters is greatly appreciated and I wish to assure you hr °Ilr desire to cooperate in every way in any plan which b s `12 its object the unification of report forms used by ' A -nk's in furnishing information to supervisory authorities. 0 , 114j-form reporting system would not only reduce the work the banks but would produce more valuable information °r the use of supervisory authorities." Approved. 5/14/35 Letter to Mr. 'eyton, Federal Reserve Agent at the Federal Reserve Bank of Minnea oils, reading as follows: "Receipt is acknowledged of your letter of May 6, 1935, with reference to the application of C. E. Conrad Estate, Inc., Kalispell, Montana, for a voting permit authorizing it to vote the stock which it owns or controls of The Conrad National Bank of Kalispell, Montana, and submitting information relating to the possible termination of the holding c°m)any affiliate relationship. "The Board understands that The Conrad National Bank of alispell has outstanding 1000 shares of common stock =qa 2000 shares of preferred stock; that C. E. Conrad Eztate, Inc. owns or controls 505 3/5 shares of the common 2 toc1c; that the Reconstruction Finance Corporation owns all of the preferred stock; that at the 197)5 annual meeting 867.6 shares of the common stock and all of the shares of 2roferred stock were voted; that C. E. Conrad Estate, Inc. ?v.ned or controlled 505 3/5 shares voted at that meeting; ; 11at the proxy of the Reconstruction Finance Corporation fl_ad no connection with either The Conrad National Bank of =sor C. E. Conrad Estate, Inc.; and that the in1-aL3It given by the Reconstruction Finance Corporation to it, proxy read in part as follows: ,. "You are instructed to vote in the election of -Lbw Chairman and the Secretary of the meeting, and 3.'a proxy of the Reconstruction Finance Corporation, YOU are instructed to be cooperative with the holders of the majority of voting stock, held by others than this , Corporation, to the end that the policies and Pans of that majority in the selection of Directors and the conduct of the bank's affairs may be efectuated. Such limitation on your power may be dis.1.1erded in instances where action is proposed clearly Inmical to the interests of this Corporation.' 004 on the basis of these facts, the Board agrees with your co elusion that C. E. Conrad Estate, Inc. is not now a holding acilel9anY affiliate of The Conrad National Bank of Kalispell and, be ' 1:dialgly, it is assumed that no further consideration need th4lven to the application for a voting permit. If, however, tthel are any further facts which you feel should be called to c0s attention, the Board will be glad to give further you-l'eration to the matter. In the absence of such facts, 111c,Y advise C. E. Conrad Estate, Inc. and The Conrad National 1136 5 14/35 -10- "Bank of Krlispell in accordance with this letter. It may be noted that if the Reconstruction Finance CorporaShould at any future time execute a proxy to C. E. Conrad Estate, Inc., or a person under its control, a further question might arise rith reference to the existence Of a holding company affiliate relationship, and it is slagested that you call this fact to the attention of C. E. Conrad Estate, Inc." Approved. Letter to Mr. Sargent, Assistant Federal Reserve Agent at the Tied eral Reserve Bank of San Francisco, reading ic follows: "This refers to Mr. Sonnets letter of April 12) 1935, -celative to the possible existence of a holding company .a,.fte relationship between Valima Securities Corpora61°11, Yakima Uashin-rton and Y. kima V1 ley Bank and Trust Como ,any, Yakima, Washington. "It appears that Yakima Valley Bank and Trust Company was reorganized under the terms of a !Plan for Reopening! r IT eared by the Supervisor of Banking of the State of ':e'sflingtan under date of November 161 1933. The Plan read 111 part as follows: "At least 51% of the capital stock of the bank Shall be )1aced in the hand of the Valima Securities Corporation as additional security for the loan hereinafter described to be obtained from the Reconstruction Firlence Corporation and for the final payment of the deferred or waived Portion of the deposits of the bank. 111-8 pledge of stock will be accompanied by authorizad:on in the Valima Securities Corporation whenever desired by it prior to the retirement of said loan and deferred deposits of the right to vote the same. The elaPeradded liability will still remain on the actual owners of the stock.' veal "It further appears that pursuant to this plan Yakima tio eY BPIlk and Trust Company and Valima Securities Corporareje-xecuted an agreement dated February 10, 1934, which in Part as follows: is agreed that at least 51," of the capital r* of the bank shall be placed in the hands of the 2rporati0n as additional security for said loan from ;111.e Rec onstruction Finance Corporation and for the Payment of the deferred or waived portion of the 1 35 "deposits of the bank. The Corporation is hereby authorized to vote said stock thenever it shall elect so.to do and agrees to vote the same in such manner and for or against such persons, resolutions, motions and propositions as may be directed from time to time by said Reconstruction Finance Corporation until the repayment of said loan and thereafter as may be directed by said Supervisor of Banking until the payment in full of said deferred deposits, but the superadded liability incident to the ownership of such stock shall remain on the actual ov.ners thereof.' "It is understood that in connection with the reorganization of the bank certain of the stockholders surrendered their stock to the bank which in turn issued to Valima Securities Cor)oration an 'interim' certificate for 765 shares (51% of the outstand 4 ng shares). Subsequently, it was deemed advisable izLue the certificates of stock to the individual stockolders and to deliver such certificates, properly indorsed, o lialima Securities Corporation in lieu of the 'interim' certificate. In this connection, a trust agreement was prefl October, 1934, for execution by the individual stockers and Valima Securities Corporation, as trustee. ApDcrently thc execution of this agreement has not yet been com)leted but will be within a short time. This trust agreereads in part as follows: "Said Trustee and said Reconstruction Finmce Corporation, in the event of a transfer of said certificates to it) are hereby given full power and authority to carry out all the terms cnd conditions of said plan (of reopening) a3 specified thereby including the right to vote said stock -‘fid sell and disoose of the same as therein )rovided; * * (Words in parenthesis added). 0 "It is understood that the stock pledged with Valima Lecuritics Corporation has in turn been pledged with the Re.ct,o, struc tion Finance Corporation as security for a loan ob' c0"ed from that Coroor-tion but the Board is not advised fe2cer'ling the provisions of the pledge agrecnent with reto the voting of this stock by the Reconstruction "a-nc Corporation. It is noted that representatives of %e th,, _construction Finance Corporation have orally indicated unrulatCorporation does not care to vote the bank stock sirels,; come occasion ,should arise making such action de°n its part. It is noted that practically all of 10E,11;'t stock .v.as voted by the individual stockholders at the last annual meeting and that none of it was voted by Securities Corporation. In his letter of April 8, Z 1138 5/1V35 -12- In o", -,00.1 Mr. L. B. Vincent, Vice President, Yakima Valley Bank and Trust Company, states: "The Valima Securities Corporation does not interpret the agreement referred to in paragraph two above as giving it the power to vote such stock except under the specific direction of either the Reconstruction Finance Corporation or the Supervisor of Banking of the State of Washington. * * * The primary function that the corporation Las intended to perform in connection with the bank reorganization was that of a collecting agent and to a limited extent a trustee with no power of control at all of the actions of the bank and we deem it of vital importance to the welfare of the bank that the corporation have nothing to do with the bank's management except insofar as it might act as a mere agent under instructions from the other authorities involved. So far asEny control is concerned as between the two corporations the plan was intended to work just the other way, inasmuch as the bank iS quite vitally interested in the liquidation of the assets transferred by it to the corporation for collection and as a matter of fact the Board of Directors end officers Of the bank keep in quite close touch with the progresc of 'UT liquidation being carried on by the corporation.' It apoears from the facts as above stated that Valima Securities Corporation is not the beneficial owner of the stock ...1-Ja question; that the individual stockholders retain the right .n)vote the stock until such time as Valima Securities Corpora,'1-on shall see fit to exercise its right to vote it; that Valima urities Corporation agreed in Its contract with the bank that Icould vote such stock as directed by the Reconstruction 4:t-nee Corporation or the State Supervisor of Banking; that stockcorporation has not in fact exercised control over the -al view of all the circumstance of the case the Board tl'e°cE with the conclusion of your counsel that Valima Seeuriuorporation is not now a holding company affiliate of Valley Bank and Trust Company and, in the absence of any c:tt'her facts thlch you believe should be called to the Board's yoa will )lease so Lc-vise the bank." Approved. Letter dated May 13, 1935, approved by four members of the 1139 6/14/35 -13- Board, to Mr. Case, FederEl Reserve Agent c't the Federal Reserve sank of New York, reading as folloLs: "Consideration has been given to the information forwarded with your letter of May 2, 1935 in connection with the epplications of Mr. Arthur S. Kleeman under the provisions of section 32 of the Banking Act of 1933 for permisE:ion to serve at the same time as director of Colonial Ist Company, New York, New York, and as director and ofOf Arthur S. Kleeman & Company, Inc., Home and 10 c)relem Securities Corporation, and Oils & Industries, Inc. 15 noted that you and counsel for your bank are of the 31s..on that section 32 is not applicable to these relation- 27 "It appears that Arthur S. Kleeman & Company, Inc. ne underwriting or distributing of securities; that formed merely for the purpose of hElnOlinL. the personal interests of Mr. Kleeman; and that none of its seZ"-ties are in the hands of the public. It also appears . ! nat, at the end of the year 1933, and at the end of the Year 1934, all of the securities in the corporation's 9°11tfolie had been held for more than twenty-four months. t. "It appears that Home and Foreign Securities Corpora)1?fl is an investment company and that it does not particiUi the undemriting or distribution of securities. It icrs that purchases and sales of securities in cer)oration's portfolio showed only moderate activity the years 1930 to 1936, inclusive, and that although erc 1:-c a relatively large turnover durinL; the year 1934 three-fourthE of this turnover resulted from purchase of a block of the securities of Oils & InInc., which Mr. Kleeman states was 'made purely -Lnvestment', and the sale of securities to provide funds that purchase. It further appears that 47.33 per cent 1,,t4he securities in the corporation's portfolio in the year tr;;I llad been held for over twenty-four months. The re52.67 per cent had been held for less than six months c°nsisted almost entirely of the securities of Oils & Inc., referred to above. The corporation has or distributed none of its own securities during the Past st three years. men, It appears that nth & Industries, Inc. is an investthat it has not participated in any syndiandclTZM3r, 1932, when Mr. Kleemnn became connected 11_40 5/14/35 —14— "with it; thEt purchases of securities for its portfolio during the years 1932 to 1934 inclusive averaged 12.7 per cent of the total assets and sales averaged 4.1.4 per cent; that, at the end of 1934, 56.17 per cent of the securities in its portfolio l]L(] been held for twenty—four months or more, and 18.46 per cent had been held for six months or less; and that no securities of the corooration have been sold or distributed duriaL; the :ast three years. "On the basis of the information submitted, the Board believes that section 32 of the Banking Act of 1933 is not aPplicable to the relationships mentioned in the first paira— g,1 ,1`)11 of this letter, and it will be appreciated if you will ' a 7120 Mr. Kleeman accordingly." Approved. Letter dried May 132 1935, approved by four members of the 13°ard, to Mr. Core, Federal Reserve Agent at the Federal Reserve Bank of Ne;. York, reading as follows: for "Consideration has been given to the additional in— m,Llon forwarded with your letter of Aoril 31 1955 in cannection with the aloolicatiDn of Mr. TOLin P. Maynard the Provisions of section 32 of the Banking Act of for for a permit to serve at the same time as officer taind of Brooklyn Trust Company, Brooklyn, New York, as director of Capital Administration Company, Ltd., iNew York, New York. It is noted that, on the basis of the fo Ac,tion which has now been submitted, you and counsel Your bank are of the oninion that section 32 should notbe regarded as aoolicable to the relationships in question. "It mittappears from the information which has been sub— that Capital Administration Company, Ltd. is a so— investment trust' engaged in investing and rein— : s ink; its finds in securities, and that it does not engage in ti' ransacLions involving the issue, underwriting or distribu— h:"°11 of securities. A statement of its investment policies ,hc,bcen submitted, accom:)anied by an analysis designed to fo3' Vlat only ruch changes are made in its investment )ort— m ' ac- ere required by a sound and conservative invest171;;r Policy and that the comoany has not cored to attempt, Of con2idered itself equioped to attempt, to take advantage a.00rliallket fluctuations to obtain speculative profits. It dul,l`rc that purchases and sales of securities by the company ' 1g the past five years: omitting purchases and sales of 1141 5/14/z.)5 _15_ "United States Government securities criC of the company's 01:n securities, were equivalent to the following percentages of its total assets: Year Purchases Sales, 1930 62.39 64.77 1951 43.56 55.19 1952 39.87 29.92 1933 50.03 51.38 1934 4.6.28 48.05 Averaze for five Years 49.6 48.7 "In this connection it appears that in June 1932 arranements were completed whereby the corporation obtained Investment advice from Tr -Continental Corporation. The .T)flPany therefore feels that the figures for the three years irom 1932 are the beat measure of the activities of the c°mPanY as it exists today. For this period, the purchases averaged 45.39 per cent and sales, 56.45 per cent. The divergence between purchases and sales is explained by the fact plat the indenture under which the company's 5 per cent debentures, Series A, were issued provides that the company will all times maintain current assets in an amount not less per cent of the aggregate principal amount of the ZrsIti and funded obligations issued by it. Because of shri , nkage in the value of its portfolio, the company was 0 ;L,/:ced during 1931 to sell other securities and purchase ated States Government securities, and, when this process ,,!8 later reversed, purchases of securities other than United Qk,ates Government securities exceeded sales. It further appears that the securities in the company's 1 10 . as Portf°of December- 31, 1955 had been held for the fa' 'IL periods in the following percentages; Held less than 6 months 23.00 Held 6 to 12 months 24,06 Held 12 to 24 months 22.71 Held over 24 months 30.25 100.00 "It also appears that since 1929 the company has not is.1-led or sold any of its own shares or other securities, alt1,0ubert h it has repurchased in the open market some of its deand preferred stock. 20 1,"As you know, the Board stated in its letter of October be''' s 64 that, on the basis of the information which had then Li)e ubmitted, the provisions of section 32 were apparently 1, ' 1 1leb1e to the relationships covered by this application. ne matters particularly referred to in the Board's letter r 1142 -16%ere the relatively high rate of turnover in the company's )ortfolio and the absence of definite information reg-rding the periods during which securities had been held in the c°mPanY's portfolio. As stated above, definite information has now been received regarding the latter. nth respect to the rate of turnover, the revised figures which have been submitted are considerLbly lower than those which were the .!'sis of the Bard's earlier consideration. It appears that difference results (a) from the inclusion of the year 1934 in the five-year period covered and the corresponding °mission of the year 1929 during which a large portion of the _Purchases represented initial investment of the company's (b) from the omission of purchases and sales of United "ates Government securities, which manifestly were not purchLccd for speculative purposes but in order to conserve idle fullde investment in other securities or to guard inst the provision in the debenture indenture referred to aoove, and (c) from the fact that the previous figures were cLaculated on the basis of the average value of the company's ascete at the beginning and at the endof the respective year, 'he the revised figures were calculated on the basis of leic)et. In vie of the great decline in the general market "of securities, this last change has produced a condifference in the perccAtages shown; but it appears ora.4t.1 even if this change in basis had not been side, a rate ,urnover of only slightly more than 50 per cent per year iyuld have been shown for the years 1932 to 1934, inclusive. Un, b the basis of the additional information which has cubmitted, the Board is of the opinion that section 32 the TO. -anking Act of 1933 is not applicable to the relytionZ-ps described in the first paragraph of this letter. Of 14.113e, this conclusion is equally applicable to Mr. Alfred vie llinEer, who has filed an application covering his serc,nde asa. director of Capital Administraticn Company, Ltd. New ' iL 8 en officer of Central Hanover Bank and Trust Company, " - )rk, New York. It will be c)preciateC if you will ad' e th° e)pliccnts accorCingly." 1,)proved. toa,rd, Letter dated May 13, 1935, approved by four members of the t° Mr. Clark, Assistant Federal Reserve Agent at the Federal Re, .el‘ve 1. cn,- of Atlanta, reading as folloLs: 1.143 5/14/35 -17- "Receiut is acknowledged of your letter of May 4, 1035, inclobing the application of Mr. Ernest 0. Spencer under the provisions of section 52 of the Banking Act of 19"-5 for a permit to serve at the same time as director of the Capital National Bank in Jackson and as president the Mortgage Bond & Trust Company, both of Jackson, iEsissippi. You point out that the Mortgage Bond & Trust ,orapany appears to be enj s,ed primarily in the business of dealing in municipal bonds, and that although you have ad-Ed the applicant that the Board's J:eneral policy has been to grant applications covering relationships of the kind Lae involved in the absence of exceptional circumstances, only information you have received regarding the question thether till: case is exceptional is that obtained orally by Your Chief Examiner, who ras informed by two of the senior officerS of the national bank that, while they would be ?lcEsed to -have Mr. Spencer continue as a director of their institution, they did not believe the circumstances are unsual or exceptional. Under the circumstances you recommend uhat this aoplication be refused. It appears from a statement made by the applicant in a letter dated March 29, 1955, which you quote in your reort in connection with this application, that the Mortgage & Trust Company, since 1952, has confined its activities Pr nciPally to the sale of municipal bonds, and, as you Paolnted out in your letter of April 2, 1935 to the applicant, ti c°)Y of Lhich you inclosed, the Board has taken the position f,v1,,tt the reasons stated in its letter of March 7, 1934 (X-7811) r Its zeneral policy in connection with cases of this kind, equ , in cases ' wnere Line dealerdeals only in municipal L'onds Bo, "Accordingly, for the reasons stated in that lettEr, tIie ctra is unable to find that it would be notincompatible with tiie Public interest as declared by the Congress to grant this even though nothing has been called to its attenv'hich would reflect in any degree upon the applicant's 14?rability as a director of the bank, except that the reCovered by his application appear to be of a kind -ea it wcs the intention of Congress to terminate." E Approved. the Let, , Ler to an applicant for a Claton Act )ermit advising of ssuEnce ' 11 a permit by the Board as follows: 1144 -6V14/35 —18— Mr. Leon Sloss, Jr., to serve at the same time as a director and officer of The Anglo California National Bank of San Francisco, San Francisco, California, and as a director of the N10 Alto National Bank, Palo Alto, California, for the period 'ending January 14 1936. Approved. There were then presented the following applications for haives in stock of Federal reserve banks: l ications for 3 ADDITIONAL Stock: aturotants Banking Trust Company, anoy City, Pennsylvania. DiStrict No. 11. he First National Bank of Harlingen, Harlingen, Texas. 4r:it National Bank in pampa, Ptmpa, Texas. !!istrict No. 12. "eurity Bank of Myrtle Point, Myrtle Peint, Oregon. Dail:son Valley Bank, Gunnison, Utah. A :1g.41.1111 . tg:1:7 1 SURRENDER of Stock: he Morristown Trust Company, Morristown, Trade JerseY, Bank of New York, New York, N. Y. trict No. 7. First N ational Bank of Ogden, Ctlen, Iowa. Shares 15 15 21 6 27 3 6 Total 9 51 240 122 362 33 35 kStriet No. 9. ThemPirst N ational Bank of Montgomery, IINirrItag°111erY, Minnesota. Na Bank in Moorhead, Moorhead, ...4411 aesota. 23 15 38 1145 5/105 lications a ..41.1gt No. The Neiti.;;Tci. lance, -19for SURRENDER of Stock: (Cont'a) 10. National Bank of Alliance, Nebraska. District No 11 The San Ant;nio.National Bank, San Antonio, Texas. The First National Bank of ThtoCkMorton, Thr ockmorton, Texas. Shares 69 69 60 '73 575 13 _ Total Approved. Thereupon the meeting adjourned. 4)}, 01/ Secretary. Governor.
@FedFRASER