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700 A meeting of the Board of Governors of the Federal Reserve SYStenl was held in Washington on Thursday, May 16, 1940, at 11:30 Et. ra. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Szymczak McKee Davis Draper Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairnan The action stated with respect to each of the matters herein4tter referred to was taken by the Board: The ederta). minutes of the meeting of the Board of Governors of the Reserve Q LTstem held on May 15, 1940, were approved unanimously. Letter to Mr. Martin, President of the Federal Reserve Bank "St. Louis, reading as follows: "In accordance with the request contained in your lett Geo , 7 r Of May 9, the Board approves the appointment of geniTe 1. Baggott as an examiner for the Federal Reserve sist2! 8t. Louis, and that of Earl H. Chapin as an aspoinZt examiner. Please advise us of the dates the apents became effective, and, as requested in letter appoi4e 8!:e fkl..rnish us with recent photographs of the V Approved unanimously. Letter to the board of directors of the "Newtown Title and Net c m Q-PEtnr, Newtown, Pennsylvania, stating that, subject to con4104 °r membe rshipnumbered 1 to 6 contained in the Board's 901 2- - Regtilation H and the following special condition, the Board approves the bank's aPPlication for membership in the Federal Reserve System d the appropriate amount of stock in the Federal Reserve Bank ot Philadelphia: "7. S'ach bank shall make adequate provision for dePreciation in its banking house and furniture and fixtures." The letter also contained the following special comments: It appears that the bank possesses certain powers Which eal1 are not being exercised and which are not necesbILY required in the conduct of a banking and trust ci:'1188s, such as the power to act as surety in certain it:ceuzastances. Attention is invited to the fact that ex, , th, bank desires to exercise any powers not actually be —clisad at the time of admission to membership, it will 88rY under condition of membership numbered 1 to obtilee" ex 8i11 the pernission of the Board of Governors before etni ! ising them. In this connection, the Board underco-"us that there has been no change in the scope of the orlTrate Powers exercised by the bank since the date ' 48 application for membership." Approved unanimously, together with a letter to Mr. Sinclair, President of the Federal Reserve Bank of Philadelphia, reading as follows: :Me Board of Governors of the Federal Reserve Sys-P the application of the 'Newtown Title and tilqest Proves company?, Newtown, Pennsylvania, for membership in Pre P ee.clieral Reserve System, subject to the conditions in the enclosed letter which you are requested Two -rward to the Board of Directors of the institution. is fr, e°Pies of such letter are also enclosed, one of which to r-r Your files and the other of which you are requested or p°rWard to the Secretary of Banking for the Commonwealth elliasylvania for his information. 702 5/16/40 -3-"In submitting the application Mr. Hill recommended hat 'no Special conditions of membership be prescribed in view of the fact that the managing officer of the bank had assured the Reserv e Bank that upon admission to membership Pj°vision would be made for the estimated losses shown in p4e report of examination as of March 30, 1940, and that a lirr n as to provision for depreciation in banking house ar rniture and fixtures had been agreed upon. Accordthe usual condition regarding elimination of losses yos not been prescribed. It is assumed, however, that ,2" 011 .1ill satisfy yourself that provision has been made for vrinating losses in accordance with the assurances given. , 1-1 .1-1-e the usual condition regarding provision for depreciai rliblzking house and furniture and fixtures has been you will note that the condition is general ts terms and is not inconsistent with the program greed Upon. th It is assumed that you will follow the matter of ore 1,11ank's revising its certificate of deposit form and ti 111-Lso bringing into conformity with the Board's regula,,,°ns the savings accounts listed on page 16 of the report ex amination. tir..: On Page 17 of the report the examiner states that is c)r Sidney F. Tyler is a partner in a concern which rio,ctonsidered to be primarily engaged in the issuance, icoa underwriting and sale of stocks and bonds, Which co rel ationship, in the examiner's opinion, will be ActrarY to the provisions of Section 32 of the Banking thatc), 1933 upon the bank's admission to membership, and ; ords rs Tyler is to resign as a director of the bank in thai. to correct the situation. It is assumed, of course, -v You will 11 follow the matter to a conclusion. Please 48e the ad ' co Board of the steps which are taken in this 4rlection.” Ii Letter to the board of directors of the "Sulphur Springs State 8111Phur Springs, 7 Texas, stating that, subject to conditions of 13 elbsrehiP numbered 1 to 3 contained in the Board's Regulation H and th_ tollomitig special condition, the Board approves the bank's appli- etIti°4 rOh" members hip in the Federal Reserve System and for the approqttte sr acillit of stock in the Federal Reserve Bank of Dallas: b/16/40 -4ft4 . Such bank shall make adequate provision for dePreciation in its banking house and furniture and fixtures." Approved unanimously, together with a letter to Mr. Gilbert, President of the Federal Reserve Bank of Dallas, reading aS follows: tea "The Board of Governors of the Federal Reserve Sys13641013Pr°vas the application of the 'Sulphur Springs State Sulphur Springs, Texas, for membership in the Feder„0 ttaserve System, subject to the conditions prescribed in to ne enclosed letter which you are requested to forward of " 4 Board of Directors of the institution. Two copies filsuch letter are also enclosed, one of which is for your to n and the other of which you are requested to forward "vs C ommissioner of Banking for the State of Texas for -48 information bank,"It is assmmed that you will follow the matter of the tio,8 bringing into conformity with the Board's regula0 ,'Ls the time deposits listed on page 16(1) of the report are mination." MaMorandwm dated May 10, 1940, from Mr. Smead, Chief of the '111810/1 of Bank operations, recommending that Form F.R. 105, call reor e°11diti0n of State member banks, be amended in the manner in°11 the Copy of the form attached to the memorandum. The memo- lb"d11111"ed that all of the proposed changes were of a minor nature : 4d1'4*e stIggssted merely in the interest of clarity and that it was -1/ci rstood th,.L *1-- c made by the Comptroller or the c‘trren_y orresponding changes would be tozte c and the Federal Deposit Insurance Corporation in the ,Atite Of e"1 reports required of national banks and insured nonmember l'esPectively. The proposed changes were approved Unanimously. 704 5/16/40 _5Letter to Mr. Upham, Deputy Comptroller of the Currency, read- 1118 118 fOliows: "This refers to your letter of May 3, 1940, inquiring whether a loan made by the Liberty National Bank, Weatherfo rd, Oklahoma, to the wife of Mr. C. H. McBurneY, President of such bank, is in violation of section 22(g) of the Federal Reserve Act. 42 "It appears that Mrs. McBurney has a net worth of 12000 and that she does some business in her own name, or conve nience the husband and wife keep most of their p funds in a joint account. It also appears that l'eeident McBurney, durin the examinatio g n of the bank, Paid one loan of $1000 made to his wife and that he has lid the interest on the :2500 obligation of Mrs. McBurney. The Eaeminer concludes that the loan in question was made meLthe accammodat ion of her husband, while President dia"uu „' 4 rneY states that the loan was not made for his inbenefit. Although it is not so stated, it is lit;s11111ed that President McBurney is not legally liable in nlanner in connection with the loan. Boa :In view of the conflicting statement of facts, the Thar' 4 is reluctant to take a defin ite position in this case. 10 mere fact thet the husband paid the interest on the waas ail.f,in question is not conclusive evidence that the loan rect r his accomodation and, on the other hand, the oint that the wife has rather substantial assets in her havenelue does not neces sarily mean that the loan may not that been for the accommodation of her husband. We hope reachY°1-1 will appreciate our difficulty in attempting to we d a definite concl usion in cases of this kind where it tcli not have ready acces s to all of the details involved fiea , e transaction and the statement of the executive ofaPPears inconsistent with the conclusion of the exthet%' : 1 For Your guidance, however, in view of the fact in havIle Wife of the executive officer has separate assets the ar °wn name sufficient to justify the loan and upon with .rumPtion that he is not legally liable in connection that l', 1!.e loan, it is not clear in the opinion of the Board goa "ge t /TN,ransaction was in violation of the law or the t egIllation O." t Approved unanimously. 705 5/16/40 -6Letter to Mr. Paddock, First Vice President of the Federal Rese e -.. of Boston, reading as follows: clo:This refers to your letter of May 2, 1940, with en14_ -"res, regarding the applicability of the Clayton Act to Frederick H. Tarr, who is president and director of The R"kPort National Bank, Rockport, Massachusetts, and a di!!ctor of the Gloucester National Bank of Gloucester, uloucester, Massachusetts. It is understood that the 'City of Gloucester' con11t 4ilt ee; an incorporated political subdivision of a county; its Population is approximately 24,000; that its total ti-; 1 e i8 aPproximately thirty-six square miles; that within area are several distinct settlements or communities thout corporate boundary lines; that among them is a cornknown also as Gloucester, the area of which is about i:vn-eighths of a square mile and the population of which 1.8 7'000; and that the Gloucester National Bank of Gloucester "")cated in this community. It is understood that the el:11.112r Rockport' constitutes an incorporated political tat;T".sion of a county; that its population is approxie 3,600; that its total area is approximately four taerit ; e miles; that within this area are two distinct settle- or co—__ mmunities without corporate boundary lines; that 111,:a°f them is a community known also as Rockport, the the °f which is less than one-fourth of a square mile and The 113,.°Pul8-tion of which is approximately 2,600; and that it i'"kPort National Bank is located in this community. or tisi s180 understood that, although the corporate limits 'Cit.? incorporated political subdivisions known as the zul4 t of G loucester' and 'Town of Rockport' touch, the cornare las known also as Gloucester and Rockport, respectively, the L E few miles distant from each other, thus presenting or tration whether exception numbered (5) of section 8 With ZI,ClaYton Act is applicable to Mr. Tarr's services banks named above. Pears FromI' the information which you have submitted it apco„ that the distance between the business centers of the 84Zaities known as Gloucester and Rockport, where the rekiles;v4a.,benks are located, is slightly in excess of four ratizati ' 41.St the distance between the edges of the two cankiles es °n their nearest sides is slightly more than three is that the territory within this three mile section Pract eAl 1 Y unsettled since, owing to the topography 706 5/16/40 _7 Cape Ann, practically all of the settled areas in the .region are along the coast; that the principal industry c)f Gloucester is the canning and preserving of fish, where: 8 Ro ckport is principally a residential town; that The ,'"kPort National Bank has fifteen depositors who are residents Of the 'City of Gloucester', but that these accounts ; 4 re Of long standing and constitute accounts of people, r"rlY residents of Rockport, who subsequently moved to h'c/uc'st er; that the Gloucester National Bank of Gloucester 4%s ' xtY savings depositors who are residents of the 'Town :ockport', the majority of wham either reside in the Pigeonl Cove canmunity or are employed in the community of 'oucester; and that, although the whole of Cape Ann is a resort by reason of which both Rockport and Gloucester 07,11,!fit from the simmer tourist trade, it is the opinion IletAu". Loeffler, vice president of the Gloucester National : e of Gloucester, that the people (including to a large „.,0Brat the summer tourists) residing in the 'City of Gloucester' its various communities transact their banking business Gloucester and the people residing in the communities of Pi ee°n Cove and Rockport transact their banking business in llockport. j kxati "Chi the basis of the foregoing, it appears that the sitrespectPresented in this case is similar, in its essential s, to that discussed in the Board's letter of February of ( .24° (S-205) to President Young regarding the 'Towns' sai;'"-lford and Dover-Foxcroft, Maine, wherein the Board sectithat it 'is of the opinion that the word "town" in such °n 8 of the Clayton Act does not refer to a "Town" Nniteil l Guilford, and that the question whether two comadiee' such as those ... discussed are "contiguous or Int" is similar to the question which would be presslat : stat; -bin the case of two unincorporated villages in another case- "aving a different system of subdivisions. In such a eilvs; unless the two coullaunities were, geographically, a cipre community ... it would be necessary to apply the prinINhett8 stated in footnote 8 of Regulation L for determining 4:r or not two places are "adjacent".' the c Acc ordingly, the Board sees no reason to differ from 1n reached by your counsel that the communities Gloucester and Rockport are not 'contiguous or adjaB Of thin the meaning of exception numbered (5) of section "a ClaYton Act, and that such exception is applicable 707 5/16/40 -8”to the services of Mr. Tarr as president and director of Rockp rt National Bank and as director of the Gloucester onal Bank of Gloucester." Approved unanimously. Thereupon the meeting adjourned. eta. Chaitman.
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