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686 A meeting of the Board of Governors of the Federal Reserve SYnam wae held in Washington on Wednesday, May 15, 1940, at 10:30 PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Szymczak McKee Davis Draper Mr. Morrill, Secretary Mr. Bethee, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Thurston, Special Assistant to the Chairman Mr. Wyatt, General Counsel Mr. Goldenweiser, Director of the Division of Research and Statistics Mr. Smead, Chief of the Division of Bank Operations Mr. Vest, Assistant General Counsel Mr. Gardner, Senior Economist in the Division of Research and Statistics Mr. Solomon, Assistant Counsel Fed, TheT.. --- was Presented a draft of letter to the Chairman of the el.ai Res erve Bank of St. Louis, reading as follows: HR Board eferrinp: to your letter of April 25, 1940, the 1940 e'PPInves -payment of salaries for the period June 1, to ma y „ oi 1941 to the officers named below, at the itee indicated: Annual Name , Title Salary a rstarphen ts it% $6,200 General Counsel Bailey 6,600 General Auditor fford Wood 4,800 Cashier, Little Rock Branch -LEIY Childers Assistant Cashier, Little 3,600 Rock Branch "If 'I-red by the salari es of the other officers of the bank are your Board of Directors at their present rates, as 687 5/15/40 -2below the Board approves such salaries for the Period Xune 1, 1940 to the end of their present terms of ice in the case of the President and First Vice President, and for the period Tune 1, 1940 to May 31, 1941 in he case of the other officers. Annual Name Salary Title R W. Mc°. Martin .20,000 President Hitt 18,000 First Vice President O. NC• I, A 15,000 Vice President C. NI, ttebery 10,000 Cashier and Secretary A. R. Stewart 7,500 S. p. Raill Assistant Cashier P. N. Gilmore 7,000 Assistant Cashier G. 0. Hall 6,000 Cashier Assistant R ollocher 4,500 11. Assistant Cashier Weigel 3,000 Assistant Vice President Little Pock Branch A. p. Bailey g'9,000 Managing Director Louisville Branch 1 Schacht 8,000 Managing Director C.Y'e BUrton 4,200 Cashier S. xenks 4,000 Assistant Cashier W. R Memphis Branch 10,000 Managing Director X: Rle7.:i7w 5,300 C. P. Cashier er Martin 4,800" Assistant Cashier r Upon motion by Mr. Szymczak the letter was approved unanimously. the It accordance with the decision reached at the meeting of toam on May 10, 1940, consideration was given to a memorandum adNesed to the Board by Messrs. Wyatt and Gardner under date of May 9, 1910, l'eletinE to certain questions to be decided by the Board with re41kt to the Proposed Inter-American Bank. It was stated that, as Doinf. v ed out in the seek , oon:: cide to thde uld : memorandum, if the Administrat o to -kagislatin of grant a chart to the bank a session 688 5/15/40 _3Celle:1 ' 68s; the Board may be called upon in the near future for a prompt 941'ession of its views and that, therefore, it was important that it reeell a decision as to what its position would be on each of the four 144141ti°118 Set fOrth in the memorandum for the guidance of the members clt the 111 s staff who will work with representatives of the Treasury, the stet _ _ea) u artment, and any others who may have an interest in draft- 14€ the legislation. The first question considered was whether the director repreeeliting the United States on the board of directors of the Inter- kiellicart Bank should be appointed by the President, by the Secretary " State, the S ecretaryof the Treasury, the Secretary the E"rcl of Governors of the Federal :Reserve System, the er of F Ceder al ce, 4411 kIlliittistrator, or some other official or agency of the Govern1414 'Or by a committee consisting of representatives of several de11%r1erits a„ Liu a gencies. The question was discussed in the light of 1)°eition taken by the Board at the time the convention and the bMetWe °t the bank :ere being drafted on the question of the partici154t1()11 bY the pederReserve System in the direction of the bank's 7:1111.8 "cl in the light of the camments made in the memorandum sub`itttt ecl -Y. Messrs. Wyatt and Gardner. It was agreed unanimously that if the ewe of the Board were requested on this Point the members of the staff working on the matter should state (1) that the Board : 17 1 3uld suggest that the Committee procedure ' e adopted, (2) if this procedure be not 689 -4acceptable and a majority of the other departments and agencies favor the appointment of the director by the President of the United States, that the Board would not object to that Procedure, (3) if neither of these procedures be acceptable, that the Board would not oppose a Procedure agreed Upon by the State and Treasury Departments, and (4) if some other procedure were proPosed, that the matter would be considered by the Board. There was also unanimous agreement on the point that if the committee Procedure were adopted the committee should be provided for specifically in the legislation as a Committee on the Inter-American Bank with the function of selecting the American director and of receiving reports from end counseling end advising with the director, and that the law should provide that the Committee should consist of representatives selected by such agencies as it is desired to have represented on the committee. On the question Whether the existing ineli gibility of members of the Board of Governors of the Federal Reserve System and certain other Government officials to serve as a director, officer, or employee ) C f the Inter-American Bank should be removed, it was the unanimous opinion of the it of the Board that as it may be found desirable to have some official of the Government serve in one of these capacities, legislation might well be enacted which Would make it clear that any Government °fficial or employee could legally serve. On the question how the funds for the United States' subscription to stock of the bank should be provided, there was unanimous fl,graement that this question was one for the '°nRress to decide and, therefore, one upon Ittithe time.hrd should not express an opinion : C90 5/15/40 -5With respect to the question to what extent, if any, should the powers of the Federal Reserve Banks be broadened to permit them to deal with the Inter-American Bank, the opinion was expressed and unanimously concurred in by the members of the Board Present that the legislation should grant authority to the Federal Reserve Banks to do business with the Inter-American Bank subject to the consent of the Board of Governors of the Federal Reserve System. In taking the above actions it was understood the representatives of the Board would report currently to the Board any discussions they may have with represents.of other departments or agencies on these matters. At thi_ Point Messrs. Thurston, Wyatt, Goldenweicer, Smead, ;8% Gn -l ' aner and Solomon left the meeting and the action stated with resDect to each of the matters hereinafter referred to Was then taken /31" the Bot Peder _ s 6'1 The minutes of the meeting of the Board of Governors of the Reserve System held on May 14, 1940, were approved unanimously. lamorandum dated May 13, 1940, from Messrs. Goldenweiser, (3-$ and Hammond, the committee appointed by the Board on Feb1/41171' 21) 1940, to tEttki review and make suggestions with regard to the mett: Studies of 1940, recommending that Miss Marie Butler (Mrs. "Leven) be erre appointed as en editorial assistant for a period t° exceed sixmonths, with salary at the rete of 4-00 per month, etilre es of the date upon which she enters upon the performance of C-91 5/15/40 -6her duties, and that Miss Butler be assigned to the Correspondence "d PUbli cations Section of the Secretary's Office. Approved unanimously. Letter to the board of directors of "The Farmers' Loan and Tr4st company,, Columbia City, Indiana, stating that, subject to conons of m embership numbered 1 to 6 contained in the Board's Regulation R end the followinp, special conditions, the Board approves the 1113akte aPplication for membershiP in the Federal Reserve System and r0 the the aPPropriate amount of stock in the Federal Reserve Bank of Chicago: 117 . tt8. Stich bank shall make adequate provision for de-. Predation in its banking house and furniture and fi xtures. Prior to admission to membership, such bank, if it has not already done so, shall charge off or °thermise eliminate estimated losses of t3,09.63, as shown in the report of examination of such bank , e8 of March 18, 1940, made by an examiner for the zederal Reserve Bank of Chicago." The letter also contained the following special comments: : it has been noted that the bank has outstanding cornfi,c41;111Pitel stock of t50,000, which is in excess of the e ' t which the stock is shown on the books of the bank. ea s'°s connection, the Board feels that the bank should, Els tri, 4°11 as Practicable take such action within its power et CY be necessary to,cause the common stock to be shown ,, c(3 21"ts Le,Lireille• Such adjustments may be effected through ---"n of earnings of the bank, through reduction ea °Iltstanding. common capital stock, if and when such li nc , ti° 21 may be accomplished under the applicable probe 1,r.7 / -,.7 °I State law, or through such other means as may n the power of the bank. 692 -7"It has been noted that, althou gh the bank is authorized to exercise full fiduciary Dowers, the volume °f trust business is mall, the trust officer is ap! araatlY serving without formal designation and no trust co mmittee has been appointed. Acceptance of trust bust: 11aas entails serious responsibilities and should not be cePtad, no matter how mall the volume may be, unless itebank i is organized and equipped to handle it properly. said that some thought is being given to discon,_"141nR the handling of trust business; however, so long ' 36 1e the 1. bank has any fiduciary responsibilities, it will expected to handle the business in conformity with apOlovad trust practices." 4 Approved unanimously, together with a letter to Mr. Schaller, President of the Federal Reserve Bank of Chicaao, reeding as follows: 111Ltem a"The -yard of Governors of the Federal Reserve SysTru PProves the application of 'The Farmers' Loan and tatCz:z,Columbia City, Indiana, for membership Reserve System, subject to the conditions toeseribed in the enclosed letter which you are requested ° ,rward to the Board of Directors of the institution. Twor, , is fr, c)Pias of such letter are also enclosed, one of which to Your files and the other of which you are requested stifTv6rd to the Director, Department of Financial In-4ui°ns for the State of Indiana for his information. : trus Sinea it is understood that in the State of Indiana DLInds deposited in the banking department of a bank at you vraferred Claims in event of liquidation of the bank, eane"a authorized, of course, in accordance with the withral authori zation previously granted by the Board coladj ich You are familiar, to waive compliance with 4 of membership numbered 6 until further notice. Or th" '°1-111 attention is called to the fact that stock Plic,L'adaral Reserve Bank should be issued to the apPar basis of capital of 0_47,000, the aggregate the of outstanding common stock and face amount of held by the Reconstruction Finance Cor°11 ' In connection with the bank's capital debendebeti.'ald locelly, it will be recalled, of course, that "Ilres not held by the Reconstruction Finance Corpora"a not to be taken into consideration in figuring 693 5/15/40 -8"the number of shares of Federal' Reserve bank stock to be issued to a member bank. ternIt is assumed that your office will follow the metOf the bank's reducing to within statutory limits the excess balance with a nonmember bank and to bringing the : avings account listed on page 16 of the report into con'ormity with the Board's regulations. Letter to the board of directors of the "Elston Bank & Trust ef3n113811Y", Cra wfordsville, Indiana, stating that, subject to conditions Of -mtunersi,4 44.4 numbered 1 to 6 contained in the Board's Regulation H tadthe following special conditions, the Board approves the bank's IIPPlication for membership in the Federal Reserve System and for the al)Dl'oPriate amount of stock in the Federal Reserve Bank of Chicago: «17. Such bank shell make adequate provision for dePreciation in its banking house and furniture and fixtures. !!rior to admission to mambership, such bank, if it lia8 not already done so, Shall charge off or otherwise eliminate estimated losses of $9,814.40, as sh°wn in the report of examination of such bank as Of APril 1, 1940, made by an examiner for the Federal Reserve Bank of Chicago." The letter also contained the following special comments: toil : 0 It has been noted that the bank has outstanding camN4;'131-tal stock of $200,000, which is in excess of the ti; at which the stock is shown on the books of the bank. as sn's connection, the Board feels that the bank should, as 14;Zni.,ea Practicable, take such action within its power at it; be necessary to cause the common stock to be shown etInsei.Z.T value. Such adjustments may be effected through °t -"'" of earnings of the bank, through reduction 4 x.13'4.' oUtstanding common capital stock, if and when such ‘Isiot : ti°11 may be accomplished under the applicable pro, Of State law, or through such other means as may Olin the power of the bank." 694 5/15/ _gApproved unanimously, together with a letter to Mr. Schaller, President of the Federal Reserve Bank of Chicago, reading as follows: "The Board of Governors of the Federal Reserve SysaPProves the application of the 'Elston Bank 8c Trust -7,13snr, Crawfordsville, Indiana, for membership in the, eueral. Reserve System, subject to the conditions preteribed in the enclosed letter which you are requested T° forward to the Board of Directors of the institution. ill° copies of such letter are also enclosed, one of which Your files and the other of which you are requested !? forward to the Director, Department of Financial Institutions for the State of Indiana for his information. st "You are familiar, of course, with the fact that th"k of the Federal Reserve Bank should be issued to aPPlicant on the basis of capital of . 20,000, the .:gragate Par value of outstanding common stock and face the debentures held by the Reconstruction „Tie Corporation. ceit is understood that in the State of Indiana 14t funds deposited in the banking department of a bettk,era Preferred claims in event of liquidation of the auth,27°11 are authorized, in accordance with the general you -1:1zation previously ;fronted by the Board with which xenthare familiar, to waive compliance with condition of 111111) numbered 6 until further notice. has been noted that the bank has some problems dire,,,"4-41 require the best efforts of the management and arta-rrs and that the supervising examiner for the Fedttota eP°ait Insurance Corporation has serious reserveortic"to the capabilities of the principal executive of the bank, stating in his letter to Mir. /bung that eellt1"48 office has felt for several years that the exilic° ! v management should be changed. It has been noted, by 'hat the management situation has been complicated : tic recent death of the vice president and trust ofttfrh e Board understands that you have given full con:iderati -011diti,°n to the question of management and to the asset board : 11 of the bank and that you have confidence in the e the of°1 directors to effect the needed strengthening of rectili,,ficial staff. The situation is one which apparently -es Close supervision and it is requested that the j T 695 -10be kept advised as to developments, particularly With respect to the strengthening of the management. "It is assumed that your office will follow the matter of designation by the bank of a trust committee; and Zlso the matter of the periodic reductions in the carry, ag value of the stock of the bank's affiliate, the awfordsville Shale Brick, Inc., in accordance with j1Un derstanding with the State Department and the FedDeposit Insurance Corporation. el„ "On Page 17 of the report of examination for member4P the examiner states thet Director Buyck is president btinUnicipal bond house in Chicago and that upon the admission to membership such relationship will be ActrarY to the provisions of Section 32 of the Banking 10 °r 1933. It is assumed, of course, that you will fol.the matter to a conclusion. Please advise the Board 1 the steps which are taken in this connection. .rui "A letter to Ben Hur Life Association, CrewfordsPenve:2Iliana, relating to its status as a holding com-"lliate upon the admission of Elston Bark & Trust m,7anY to ted to membership, Is enclosed and is to be transthat organizetion. Two copies of the letter the ,sio enclosed, one of which is for your files and Panyo, er is for transmittal to Elston Bank & Trust Com- 4 In connection with the above mattell) the following letter to the Ben Mir Life Association, Crawfordsville, Indiana, was also approved unanimously: Of : t This refers to the Board's approval on this date ford`'e. aPPlication of 14 Elston Bank & Trust Compeny, Cra13em.e171.11e, Indiana, for stock in the Federal Reserve e°' Chicep.o, the ' subject to certain conditions, and to filieirls of Your organization as a holding caml?any afMem, -11Pon Elston Bank & Trust Company's becoming a --er bank. I lilliti, : "10 11e,13°ard understands that your organization is the 2' -- life insurance comnany; that it owns 1,225 of Trtist'°°0 ou tstanding share ' s of stock of Elston Bank & ()Zell n panY; that such stock was acquired in 1939 in org for class 'B' debentures of the bank which your 411-Zeti°31 Purchased in 194 with the view of assisting 96 5/15/40 -11"the bank and protecting your organization's interests R large depositor in the bank; and that your organization does not own or control 9ny stock of, or manage or .ctc)ntls°1, any bank, banking association, savings bank or 1118t camPElny, other than Elston Bank & Trust Company. 70n this basis, upon Elston Bank & Trust Company's bee, h -lung a member bank, your organization clearly will i:rale a holding company affiliate of it within the mean0f the following: provisions of section 2(c) of the tInking Act of 1933: 'The term "holding company affiliate" Shall include any corporation, business trust, ass ociation, or other similar organization-'(1) Which owns or controls, directly or in directly, either a majority of the shares of capital stock of a member bank * * *? Bost "However, in view of the facts above recited, the ea ' I d hes detennined that your organization is not engee, directly or indirectly, as a business in holding ass stock of, or managing or controlling, banks, banking thaTstions, savings banks, or trust companies within or .0 7:ealling of the following provisions of section 2(c) "e Banking Act of 1933: 'Notwithstanding the foregoing, the term " holding(company affiliate" shall not include except for the purposes of section 23A of the sderal Reserve Act, as amended) * * * any orwhich is determined by the Board of v ernors of the Federal Reserve System not to ne engaged, directly or indirectly, as a busi-sss in holding; the stock of, or managing or 3litr°11ing, banks, banking associations, sav"gs banks, or trust companies.' tical e result of such determination, your organizePeess"411 not be a holding company affiliate for any purr than those of section 231\ of the Federal Rea However, the Board reserves the right to make thall'?er de termination at any time on the basis of the 14 th: "18tinF facts and, if there should be such a change be A facts as to indicate that your organization might b to b igaged, directly or indirectly, as a 4814e8S in bilmv holding the stock of, or managing or controlv0zpa, 4 --s, banking associations, savings banks, or trust toarclas1;e8) this matter should again be submitted to the 7 T 697 5/15/40 -12Letter to the board of directors of "The Hoxie State Bank", 11°Xie r ,fansas, stating that, sabject to conditions of membership numbered 1 to rx - contained in the Board's Regulation H and the following 8Peoisi Ship condition, the Board approves the bank's application for member- 11 the stock in Federal Reserve System and for the appropriate amount of the Federal Reserve Bank of Kansas City: tt 4, Such bank shall make adequate provision for dePreciation in its banking house and farniture and f ixtures." Approved unanimously, together with e letter to Mr. Hamilton, President of the Federal Reserve Bank of Kansas City, reading as follows: tell "The Board of Governors of the Federal Reserve Sys}ioxiaPProves the application of 'The Hoxie State Bank', tem,e' Xansas, for membership in the Federal Reserve Syslett stIbiect to the conditions prescribed in the enclosed pireef which you are reouested to forward to the Board of are c;°r8 of the institution. Two copies of such letter the cuso enclosed, one of which is for your files and BeakTer of which you are requested to forward to the Illlationrmissioner for the State of Kansas for his inforMsyl ' a view of the disclosures in the report of the Ineur-' p- examination of the bank by the Federal Deposit Ilese;:ilee C orporation, it is assumed of course that the thst-:! Bank will follow the situation closely and see di c 'ue Practices criticized by the examiner have been s( eralTtinued in accordance with assurance given the Fed'ePosit Insurance Corporation and State Department. Posit : It has been noted that the bank is receiving defrom various individuals through persons operating IterZled chane counters at Park, Kansas, and Grinnell, ceses% The facts presented are comparable to those of tai;revi°usly considered in which the Board riled that th1nt t exchanc7es' did not constitute branches - Ole _ ng of the term 'branch' as it is used in 698 5/15/40 !Section 9 of the Federal Reserve Act; and, in view of the tact that one of them has been in operation, apparently without objection, since 1935, it is assumed that the c,State authorities do not consider the operations of the flange counters in this instance to be in contravention the State statutes making it unlawful for a bank to °IParate any branch bank, office, agency, or place of busitrs. However, if there should be any change in the relanoriships between the bank and the change counters, the i:estic)n as to whether branches are being operated would 4 °Ile for further consideration, and it is suggested that : he matter be followed closely." Letter to Mr. C. I. Canfield, Vice President, First Security C°1111:41nY) Ogden, Utah, prepared for the signature of Mr. Clayton, AssistEtri , -.4 To the wilairman, and reading as follows: "This is in further reference to your letter of 411 1940, with regard to the amount of obligations fle C F ommodity Credit Corporation, the Reconstruction ,21anceorition, the United States Housing Authority, ci:11 the Federal Credit Banks which may be Intermediate d by a member bank of the Federal Reserve System. ese "As you know, under the Provisions of the Federal Act, State member banks are subject to the same sell,,ati°11s and conditions with respect to the purchasing, end-'11g, u nderwriting and holding of investment securities seej t"k as are applicable in case of national banks under let 'on 5136 of the United States Revised Statutes. The ! "section provides that the limitations and restrictio enacts therein contained as to dealing in, underwriting for rl .rehasinL, investment securities by a national bank thitt-" . ,43 °Ima account shall not apply to oblirmtions of the epecZu States and certain Wier types of obligations the , ricellY mentioned. We are advised by the office of co.mm`4YmPtro1ler of the Currency that obligations of the CorgditY Credit Corporation, the Reconstruction Finance the i:ation, and the United States Housing Authority in with of investment securities which, in accordance -w, are unconditionally guaranteed as to principal and orrictiterest by the United States, are considered by the e°rdi eX the Comptroller as 'exempted securities'. Ace a national bank or a State member bank may APril of 4.7 699 5/15/40 -14-Purchase such obligations for its own account without reto the limitations and restrictions of section 5136, United States Revised Statutes. "Debentures of the Federal Intermediate Credit Banks ;re o bligations issued under the authority of the Federal : 1111 Loan Act, as amended, and therefore are also 'exempted 4lirities' by reason of the specific provisions of section United States Revised Statutes. I siretrust that this gives you the information which you de .ft J Approved unanimously, together with a letter to X. L. Driscoll, Executive Vice President of the First Security Bank of Idaho, Boise, Idaho, which took the sane position with respect to Commodity Credit Corporation oblip:ations as that set forth in the letter to Mr. Canfield. Thereupon the meeting adjourned. Chairman.
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