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1452 A. meeting of the Executive Committee of the Federal Reserve Board was held in Washinton on Saturday, May 19, 1934, at 11:15 a. m. PRESENT: Mr. Mr. Mr. Mr. Hamlin, Presiding Miller Thomas Szymczak Mr. Mr. Mi. Mr. Morrill, Secretary Carpenter, Assistant Secretary Bethea, Assistant Secretary Martin, Assistant to the Governor The Committee considered and acted upon the following matters: Letter dated May 17, 1934, from Mr. Sproul, Secretary of the Federal Reserve Bank of New York, advisi ng that, at a meeting of the b°ard of directors on that date, no change was made in the bank's iflc' schedule of rates of discount and purchase. Viithout objection, noted with approval. Memorandum dated May 7, 1934, from Mr. Paulger, Chiof of the Divi81°11 of Examinations, recommending that Mr. Charles T. Malone be tralizferre _ d from the field force to the office force of the division, that na.B title be changed from Assistant Federal Reserve Examiner to Pederal Reserve. Examiner, and that his salary be increased from the Z'Ette °f '44,200 to the rate of ;4,30 per annum, all effective May 0 16, Approved. Letter 804rd, dated May 18, 1934, approved by five members of the to 1 -re CR80, Federal Reserve Agent at the Federal Reserve Bank eW York, readinF; as follows: Adi_ "40ference is made to the report of examination of The '°114ack Trust Company, Saratoga Springs, New York, as of 1.453 5/19/34 -2- ( i "December 28, 1933, and the information submitted in connection therewith. "The bank was admitted to membership in the System on April 17, 1933, and according to the information submitted, the bank is not complying with conditions of membership numbered 5 and 12 which were accepted by the bank at the time of its admission. Condition of membership numbered 5 requires that the bank shall maintain adequate credit data in connection with all unsecured loans. Your examiner, however, reports that the credit information on file is meager and old. Condition of membership numbered 12 provided in part that except with the permission of the Federal Reserve Board, the bank should not engage in the business of issuing or selling mortgages or mortgage participations. The report of examination indicates that on the date of examination he bank had mortgage participations outstanding amounting to P122,423.07. The Board's records in connection with the admission of The Adirondack Trust Company to membership in the System .ctle not contain any infornation to indicate that at that time he bank was engaged in the business of selling mortgage loans or participations therein. "It will be appreciated, therefore, if you will advise the card fully as to the circumstances in this case and as to what action has been taken to insure compliance with the conditions Of membership." Approved. Telegram dated May 18, 1934, approved by five members of the Etrd, to Lir. Case, Federal Reserve Agent at the Federal Reserve Bank Or IT -ew York, reading as follaws: v_ "Your letter/ ..ay 15, 1934 re The Lount Vernon Trust Company, :14:)unt Vernon, New York. In view of your recommendation and the 1:oommendation of the Superintendent of Banks of the State of Y°r1c., The Lount Vernon Trust Company may be admitted to memcor3hiP whenever you deem it advisable to issue the stock in a?: and conditions prescribed in the Board. 1933 to you and to the bank. It is as18!tt:eollfitv=r414: aluIllelr that you are satisfied that the attitude of the public is " as to Ahe , permit the successful operation of the institution re opened." Approved. 13(krci, Lett "dated /Jay 18, 1934, approved by five members of the to • -lewton, Federal Reserve Agent at the Federal Reserve 1454 5/19/34 -3- Bank of Atlanta, reading as follows: "Ihis refers to the unsatisfactory condition of the American Bank & Trust Co., New Orleans, as reflected in the report of examination as of December 9, 1933, and the supplementary information submitted therewith. "It has been noted that you have previously conferred with the management in an effort to convince them of the necessity of rehabilitating the bank's capital structure; that the management, however, has been unwilling to proceed with a program of rehabilitation; and that you feel that you cannot recommend that the Federal Reserve Board certify that the assets of the American Bank & Trust Co. are adequate to enable it to meet all of its liabilities to depositors and other creditors as shown by the books of the bank until steps have been taken to rehabilitate the capital structure of the bank. It has been noted further that your Executive Committ ee unanimously approved your position in this matter. The Board is in full accord with your opinion that the estimated losses shown in the last report of examination should be eliminated and that a substantial amount of new capital funds should be provided. It has been observed that the State Bank Uommissioner of the State of Louisiana concurs in your opinion and has stated that he would vigorously support your recommendations in the matter. "Particular attention has been given to the bank's investment in the equity in bsnking house and furniture and fixtures, :hich on the date of examination amounted to $2,418,750. This oPitY is represented by an investment of $1,683,700 in stock American Sal 'e Deposi Compan t y, affili an which ate holds title to t_ the building used as a benking house, and a loan of 735,050 es,t .he affiliate which is secured by a mortgage on the property 110Ject to a prior indebtedness of a,105,000. It has been noted eider8 this buildi ng was constructed in 1929 when costs were conably higher than at presen t, that no provisions have been yocde IT 1 by the bank for depreciation in the property, and that, in +I:Tinton, there is a probable loss of 500,000 to %;750,000 the-ue presen t carrying value of the bank's equity which, using the 11,:nmum figure, would practi cally eliminate the balance of timat', I8 capital not already impaired as a result of the esPort e ' 4 lossos and securities depreciation shown in the last reof examination. It is obviou s, therefore, that depositors' boar;tare invested in an equity in fixed assets, and, in the opinion, this type of investment does not represent a uctory offset to deposits. It is the b.„ assumed that in the conferences with the officers of polic:Lut you called special attention not only to the unsound Itricati2! continuing the payment of dividends in view of the ate _ 4actcrY condition of the bank caused by the large aggroor estimate d losses and heavy investment in fixed assets, 4 1455 5/19/34 -4- "but that you also called attention to the provisions of Section 9 of the Federal Reserve Act relating to the payment of unearned dividends and insisted that the bank comply with the provisions of law regarding the payment of dividends. The Board feels that the further payment of dividends by the bank is unwarranted until a very material improvement has been effected in the condition of the bank. "Unless there has been such an improvement in the bank's condition as to permit you to recommend that the bank be certified to the Federal Deposit Insurance Corporation, you are requested to present the condition of the bank as you see it to the Board of Directors of the institution with the request that dhey advise you of what action they expect to take to provide a net sound capital structure adequate to support the deposit liability, and inform them that the Board is of the firm opinion that necessary action should be taken. Your earnest and continued effort to obtain a satisfactory Oorrection in the condition of the bank will be appreciated. Please keep the hoard advised as to developments in connection t herewith." Approved. Letter dated May 16, 1934, approved by five members of the Board '60 Mr. Peyton, Chairmmn of the Federal Reserve Rank ofiiinneEtpo 4_ 14-u, reading as follows: "Reference is made to the report of examination of the Com- arcial Trust and Savings Bank, Yitchell, South Dakota, as of yaauary 6, 1934, and the supplemental information submitted in connection therewith. "The Board has been advised by the Reconstruction Finance Corporation that it has considered the application of the ComIll_erojaa i Tr o orporat rt and Savings Bnnk for the Reconstruction Finance to purchase 475,000 of capital debentures of the emd has agreed to purchase .100,000 of such debentures profs ( , )(1 that at the full amount be issued by the bank. The Board els that any bank in need of capital funds should take advantage of present opportuni ties to strengthen its capital structure oatilake every effort to provide an adequate amount of net sound c , al tO suppart the denosit liability. In the case of the your reial Trust and Savings Bank, the Board is in accord with pora2Pinion and the opinion of the Reconstruction Finance Corttild .1.0a that at least ,100,000 of additional capital is needed, thislt a , i8 h°Ped that your efforts to induce the bank to issue raav 1,—"°1111t Of debentures will be successful and that the matter ue brought to an early conclusion. 145,6 /1 5/19/34 -0- "From the information submitted, there is no indication as to that corrections are contemplated in connection with the program of recapitalization. The Board feels that a bank's published statements should reflect its true condition and that estinated losses as classified by the examiner and depreciation in at least securities other than those in the four hir;hos t grades should be charged off or otherwise eliminated. It will be appreciated, therefore, if you will endeav or to obtain such corrections in this case. "It has been noted from the report of examination that Cashier Loonier was indebted to the bank in the amount of 0,800, of INtich 41,300 was classified by the examiner as a loss. The Board feels that loans to officers, directors, and employees should be above criticism at all times and that any officer or director, more particularly an active officer, who has caused embarrassment to his bank has seriously impaired his usefulness to that instit ution. "It has been observed that the bank has been acting in a fiduciary capacity without authorization, but that it has recently been granted permission by the Superintendent of Banks cf the State of South Dakota to exercise trust powers and has 202/1plied with the State requirements in connection therewith. One of the conditions of membership accepted by this bank at the 1:21e of its admission to membership in the Federal Reserve System was as follows: 'That, except with the approval of the Federal Reserve Board, there shall be no chaTv,e in the general character of your assets or broadening in the functions now exercised by you such as will tend to affect materially the standa rd now maintained and reauired as a condition of membership.' The Board feels that the exerci se of trust powers by a member bank which was exorcising only general powers at the time of its admission to membership constitutes a very material broadening in the functions of the bank and for this reason the C onsent Of the Federal Reserve Board should be obtained in accors d ent land:ce with the above condit ion of membership before the bank necti akes any business of a fiduciary character. In this con11, la' your attention is called to the Board's letter of October it '''4, X-4171, and you are requested to advise the bank that Reserve 11 be necessary for it to make application to the Federal Board for permis sion to exercise trust powers. • the "It , has been observ ed, also, that the bank has been engaged t'ur3inoss of negotiating and selling real estate mortgage and Participations therei %4 o' ), n. Inasmuch as the Board's files -06 contai n any inform indica ation ting that the bank was enP liZed in Such business at the time it was admitted to membership, s.-4. , -1k, activities in this connection would appear to be a eha/1Pre66 E)c/lor in its function contrary to the spirit and purpose of the al Conditon -'3 which it was admitted to member i under ship, if 145'7 5/19/34 11•11t300 "not an actual violation thereof. As you know, the Board feels that it is contrary to sound bfinkin;, practice for a commercial bank to engage in the business of issuing or selling, either With or without recourse, notes, bonds, mortgages, certificates, or other evidences of indebtedness representing real estate loans or participations therein. If you have not already done so, the Board would be pleased to have you acquaint the bank with lts views in this respect, calling specific attention to condition numbered 12 of the revised regular conditions under which State banks are now admitted to membership in the System. The Board mould also be glad to receive an expression of your views as to any action which should appropriatel y be taken at this time either by the Board or by your office in connection with Particular activity of the institution. "Please keep the Board advised also as to any improvement effected in the condition of the bank." Approved. Letter dated Lay 13, 1934, approved by five members of the 113ard 'to hr. Newton, Federal Reserve Agent at the Federal Reserve of San Francisco, reading as follows: "This is to advise you that upon recommendation of the Federal Reserve Loard, the Comptroller of the currency has approved application of the First Security Bank of Idaho, Boise, for permission to establish and operate a branch at th Shelley , Idaho, provided that: Prior to the establishment of the branch, such bank, if it has not already done so, shall charge off or other1"ise 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 vrades as classified by a recognized investment service organization regularly engaged in the business of rating EradinG securities. "You are requested to advise the bank accordingly. at ti It is observed that the bank is exercising trust powers br(1, 3 main office in Boise and at the Pocatello and ilampa : the " 4 , and that the examiner critici zed the operations of elaal.dePartments, particularly in regard to the lack of careful t1reot supervision by investment committees and qualif tru, ied 8150;18.ricers. The acceptance of trust business creates a retuabies "1 ,,11tY Which demands the supervision of qualified and call 4' Officers and directors and it is suggested that you bank's attention to the criticisms of the trust 5/19/34 -.7.. "department and request that prompt consideration be given to effecting the corrections necessary in the circumstances. Furthermore, the Board feels that, until the administration of the banks' trust departments has been materially improved, trust Powers should not be exercised at the branches of the bank where such powers are not now exercised. It is suggested that you acquaint the bank with the Board's views in the natter and request that before the exercise of trust powers is extended to any branches the bank consider with you what improvements in the administration of its trust departments are necessary." Approved. Letter to the "First Npstional Bank in Palm Beach", Palm Beach, Florida, reading as follows: "The Federal Reserve Board approves your application for pernission to act, when not in contravention of State or local law, as trustee, executor, administrator, registr ar of stocks alad bonds, guardian of estates, assignee, receiver, committee Of estates of lunatics, or in any other fiduciary capacity in Ithich State banks, trust companies or other corporations which °°re into competition with national banks are permitted to act under the laws of the State of Florida , the exercise of all such rights to be subject to the provisions of the Federal Reserve Act and the regulr,t iens of the Federal Reserve Board. "This letter will be your authority to exercise the fidueiarY Powers as set forth above. A formal certificate covering such authorization will be forwarded to you in due course." Approved. Letter dated May 18, 1934, approved by five members of the Bc'erd, t° Ili* O'Connor, Comptroller of the Currency, readily:, as follows: In accordance with your recommendation, the Federal Reserve B tr oard approves a reduction in the connon capital stock of il he ford National Bank and Trust Company', Milford, Eassa4 .e setts, from U25,000 to y25,000 , pursuant to a plan which propr"that the bank's capitol shall be increased by a00,000 of tvte iferred stock to be sold to the Reconst ruction Finance CorporandAr others, and that the release capital d , together aj ortion of the bank's surplus and undivided profits , c Le used to elimina te estimat all losses ed depreci and ation eeurities in the lover grades, all as set forth in your 1459 "memorandum af May 8, 1934." Approved. Letter dated Lay 10, 1934, approved by five members of the ()ard, to Mr. O'Connor, Comptroller of the Currency, reading as follows: . "In accordance with Acting Comptroller Awalt's recommendation, the Federal Reserve Board approves a reduction in the com,on capital stock of the 'First I:ational Bank and arust ComPany of Yanhasset', Manhasset, 1:ew York, from w100,000 to )10,000, Pursuant to a plan which provides that the bank's capital shall be Increased by ::,;250,000 of preferred stock to be sold to the i,econstruction Finance Corporation and/Or others, and that the released capital, together with the bank's surplus and undivided profits accounts, shall be used to eliminate a corresponding amount of estimated losses, and that the balance of such losses shall be charged to profit and loss account and carried as a debit balance, all as set forth in Er. Awalt's memrandum of ' lay 7, 1934. "In considerin,i; the plan under which the proposed reduction in.capital is to be effected, it has been noted that the proposed adJUstments fall fer short of placing the bank in satisfactory c?ndition. Estimated losses and securities depreciation unproylded for result in a capital impairment in excess of .“100,000, ln addition to which the bank is burdened with an excessive agregate of slow and doubtful assets. It has been noted also that r_(31z examiner severely criticised the management. It is assumed, ::°17ever, that you have these conditions in mind and that whener lt is feasible to do so you will obtain such further correc10nc as may be practicable." j Approved. Letter dated May 18, 1934, approved by five members of the 13°e ' rd, to M. O'Connor, Comptroller of the Currency, reading as followa Boa "In accordance with your recommendation, the Federal Reserve 1,4' I d aPProves a reduction 41%er in the common capital stock of 'he e 4tiona1 Bank of Allentown', Allentown, New Jersey, from (),000, pursuant to a plan which provides that the to 1;2' capital shall be increased by 100,000 of preferred stock 'Sold to the heconstruction Finance Corporation and/Or 1460 (1 5/19/34 0 ,..1.111, tt others, and that the released capital shall be used to eliminate a corresponding mnount of substandard assets, all as set forth in your memorandum of May 12, 1934." Approved. Letter dated May 18, 1934, approved by five members of the I8'eard, to Nr. O'Connor, Comptroller of the Currency, reading as follows: "In accordance with your recommendation, the Federal .Heserve Board approves a reduction in the common capital stock of 'The Second Lational Bank of Ilashington', Washington, D. C., from v750,000 to , 450,000, pursuant to a plan which provides that the bank's capital shall be increased by 0.50,000 of preferred stock to be sold to the Reconstruction Finance Corporation and that the released capital together with part of the surplus, reserves and undivided profits shall be used to eliminate substandard asts &fld securities deprecivtion in the amount of approximately v428,897, all as set forth in your letter of May 11, 1)34." r Approved. Lokra, lows: Letter dated May 18, 1934, approved by six members of the tc L1r. O'Connor, Comptroller of the Currency, reading as fol- "It accordance with your reccanLendation the Federal Reserve BoarA a reduction in the common capital stock of 'The Loui approves , j sa County National Bank of Columbus Junction', Columbus , tuletion, Iowa, from ,:50,000 to cr,12,500, pursuant to a plan which 4;23,vides that the bank's capital shall be increased by ,25,000 Per referred stock to be sold to the Reconstruction Finance Corth-a4°32 aad v12,500 'B' preferred stock to be sold locally, and the released capital, together with contributions of ?10,000, shall be used to eliminate substandard assets anri securities delij ilation in the mount of approximately $37,500 and to estabdat a surplus of 0.0,000, all as set forth in your memorandum edi llaY 9, 1934. c tin considerinr, the plan under which the proposed reduction iterallital is to be effected, it has been noted that your examcomp !riticized the active management of this bank as being inin zle j:'ent. It is assumed, however, that you have this condition such rld arid that whenever it is feasible to do so you will obtain corrections as may be practicable." Approved. 5/19/34 10 Letter dated 14ty 18, 1934, approved by five members of the Bc'ard, to Er. O'Connor, Comptroller of the Currency, reading as follows: "Receipt is acknowledged of your letter of Nay 11, 1934, in regard to the proposed capital reduction of the First National BEzik of Okanogan, Okanogan, Tlashinton, which was approved by the Board on November 14, 1933, subject, among other conditions, to the following: 'That such preferred stock shall be sold only to persons or concerns who have knowledge as to the present condition of the bank and the use to which the funds released by the capital reduction are to be applied.' You state that the capital of this bank was increased on .1,)ecember 22, 1933 by the sale of S40,000 of preferred stock locally, and that the bank now desires to proceed with the proPosed reduction in its common capital stock, but that on account ?f the length of time elapsing between the increase and decrease , : 3 11. capital stock it will undoubtedly prove inconvenient and emioa rrassing to the bank to have to contact the preferred stockders and advise them 'the use to which the funds released by the capital reduction are to be applied.' "In accordance with your recomendation the Board waives the D PPlication of the portion of its condition numbered two forth above, wherein it stipulates that the preferred stockr1 'tiers shall have knowlede of the use to which the released 'Unds are to be applied." Approved. T°1egram dated Lay 18, 1934, approved by four members of the to Lir. Case, Federal Reserve Agent at the Federal Reserve Bank °I' 41r York, reading as follows: , Comp Upon Lasis of statements made in letters from The Tulsa YourallY' Inc. and City Bank Farmers Trust Company inclosed with letter to board of Lay 9, and provisions of law applicable : pecii€t°, Board Sees no reason to object to voting of stock at -6-e8i-:!-t,meeting of stockholders of Central Farmers Trust Company, Tul ,alm beach, Florida, in manner indicated in letter from The xl4d. : 11 Company, Inc. quoted in your telegram of May 16, it being exte -rsto ou A that voting will take place prior to expiration of 11 of time granted by Board within which Central Farmers COtipeol :"'•V"IlY must obtain and file agreements of its holding Act." affiliates pursuant to section 9 of the Federal Reserve Trust" Approved. 1462 5/19/34 -11Memorandum dated Lay 14, 1934, from Li-. Smead, Chief of the Division of Bank Operations, submitting a copy of the last edition of Form 105, quarterly condition report of State member banks, and rec- °Innlending that the chanr-,cs indicated thereon be incorporated in the f°rm to be used at the time of the next call for reports of condition. The memorandum stated that all of the proposed changes are being made by the Comptroller of the Currency in the report form to be used by 114tional banks in submit tinr; their next condition reports. The rec- Q11In1endation was approved by five members of the Beard on May 16, 1934. Approved. Letter dated May 18, 1934, approved by six members of the 13°4rd, to Mr. Case, Federal Reserve Agent at the Federal Reserve Bank of New York, readilyg as follows: "This refers to Mr. Dillistin's letter of April 20 with the osed application of the Bank York of Jamestown, Jamestown, hew , , for 201 additional shares of stock of the Federal Reserve '44lik Of New York. "The applic ation shows the capital of the bank as ; . 1,800,000 rd its surplus as Q200,000, but a letter dated April 13 from the „resident of the Lank to Mr. Dillistin, a copy of which WES ttlrniched the Board with Mr. Dillistin's letter of April 24, 3(;1,-dioa.tes that the capital figure, l.,800,000, includes 300,000 .LeaPital debentures sold to the bank's stockholders. As indilatIL,ed in the Board's telegram of /ovember 23, 1933, Trans 1913, quidetermiting hother a State bank has the minimum capital rebY law for admiss member ion to ship and amount the of FedRe _ bank stock to be subscribed for, the proceeds of debentures sold by it should be considered as capital Only pi2r if such debent ures were purchased by the Reconstruction Aot'nee Corpora tion under the provision of Section 304 of the stated ! reh 9, 1933, as amended. Althow;h not specifically that z,4zi. the Board's telegram, Trans 1913, it was also intended to th' 41e proceeds of capital notes or debentures sold other than Should 116.!°fletruction Finance Corporation by State bank members the ,_ be considered as part of their capita l, in determining 'Qquired holdin gs of Federal Reserve bank stock. 1463 5/19/34 "Accordingly, it is suggested that a revised application be submitted based on the aggregate of the bank's capital stock, capital debentures sold to the Reconstruction Finance Corporaend surplus as shown by the books." Approved. Letter to Mr. Walsh, Federal Reserve Agent at the Federal Reserve Bank of Dallas, reading as follows: "i;eceipt is acknowledged of Mr. Evans' letter of May 8 stating tLat the Union State Bank, East Bernard, Texas, failed to Publish the report of its affiliate, the Union Motor Company, as of Yerch 5, 1934, and askin, whether or not, in view of the : fact that the affiliation has since been dissolved, it will still be necessary for the bank to publish the report. %line the report of the affiliate as of March 5 should have been published, if the affiliate relationship between the bank and the Union Motor Company has been effectively discontinued, "aPpears to be the case, it is believed that no real purpose would be served by publishing the affiliate report at this time." 4proved. Letter to Yr. Charles L. Smith, First Vice President of The CitY tiOfl1 Bank 8: Trust Company, Gloversville, New York, reading et the ."Your letters of April 19, and April 28, 1934, adc.ressed to Comptroller of the Currency, regarding the right of your bank t r° Pay Christmas Club accounts before their maturity, have been eferf:ed to the Federal Reserve Board for reply. It appears th,„4. It from the rules and regulations which you inclose `' in the accounts here in question are made in the of weekly payments for a period of fifty weeks; and that the dur;111 3° deposited may not be withdrawn, transferred, or assigned lat : IIS such fifty weeks payment period. Since the rules and reguevirns do not require that the pass book or other form of receipt InadAellelal such deposits shall be presented when a withdrawal is the-, 61-1ch deposits cannot be regarded as savings deposits within erajTanillg of the definition contained in Section V of the Fed'eserve Board's Regulation Q, a copy of which is inclosed ewith. 11 ezpre ' 1 e the rules and regulation s which you inclose do not abl 89.Y state that deposits made in such accounts shall be pay' at the expiration of a certain specified period, nevertheless, A 5/19/34 . it is provided that such deposits may not be withdrawn before the expiration of the fifty weeks payment period and it would appear, therefore, that such deposits are in fact payable upon the expiration of such period. It is the view of the Board that all deposits made in such accounts up to 30 days prior to the expiration of the fifty weeks period are 'deposits * * * in respect to which a written contract has been entered into with the depositor at the time the deposit is made that neither the vthole nor any Part of such deposit may be withdrawn by check or otherwise prior to the date of maturity, which shall be not less than thirty days after the date of the deposit' and that, therefore, such deposits must be regarded as 'time deposits, open accounts' within the meaning of paragraph (2) of Section III(a) of Regulation Q. Accordingly, such deposits may not lawfully be paid before their maturity, that is, before the expiration of fifty weeks from the date of the first weekly deposit. II Viith respect to deposits made in such accounts within thirty days prior to the expiration of the fifty weeks payment period, a somewhat different situation is presented. Since such deposits are Payable within thirty days, they may not be regarded as time deposits within the meaning of Section 19 of the Federal Reserve .A_Lct or the Board's Regulation Q; and as to these deposits, therefore, the prohibition against payment before maturity is not apPlieable. loa,i, "It is noted that you also raise the question whether your --- may lawfully make loans to depositors in such Christmas Club accounts on the security of their pass books as collateral. As mfootnote 7 under Section IV of Regulation Q provides CEItttle. ' of a loan to the owner of a time deposit by a Thepamber bank for the purpose of evading prohibition upon the a time deposit by a member bank before its maturity Will, to tho extent of such loan, be deemed to be the payment of Zlilat deposit in violation of the prohibition. It is not believed any general rule can be prescribed as to whether a loan is I,'e in good faith or for the purpose of evading the prohibition i question; and each case should be determined upon the basis of pe,1 tYwn Particular facts. It would not be practicable for the c,' ( ...?ral Reserve Bourd to undertake to determine in individual lrs questions submitted to it by member banks as to whether orT made in particular circumstances are loans for the purpose 1)0f:cling the prohibition upon the payment of a time deposit 2 its maturity; and the Board feels that these are quesillellupon which each member bank should exercise its best jucIL-;It __ 111 the light of the provisions of the law and the regulation. n4 iaLLY be --Lrcur"+ Stated, nowaver, that it seems probable that, in the by -- anees described in your letter of April 19, a loan made Your bank to the owner of a Christmas Club account on the sot.lereof th, would be a loan made for the purpose of evading u Prohibiton in n question. Az indicated in the regulation, in u ent of it 5/19/34 -14- it any case in Which a loan is made to the owner of a time deposit by a member bank, the bank must be prepared to show clearly that it was made in good faith and not for the purpose of evading such prohibition." Approved. Letter to Mr. .,alsh, Federal Reserve Agent at the Federal Re8el've Dank of Dallas, reading as follows; "An analysis of the examination of the First State Bank and Trust Company, Bryan, Texas, as of Larch 10, 1934, contains a eminent indicating that that bank is paying interest on certain demand deposits of the City of tryan, Texas, and of the Agricultural and Mechanical College of Texas; and it is noted that counsel for your bank, in a memorandum dated March 31, 1934, suggest that the question whether interest may lawfully be paid on such deposits under the provisions of Section 19 of the Federal Reserve Act be submitted to the Federal Reserve Board for a formai "You will recall that in a letter to Governor McKinney, dated Larch 27, 1934, the Board ruled that the payment of interwith respect to deposits of funds of the City of Vernon, 'exas, is not required under the law of that State -within the lling of Section 19 of the Federal Reserve Act and that, thereTee ' .Lipore, a nomber bank may not lawfully pay interest upon such de1283-tr. which are payable on demand. Counsel for your bank state the memorandum above referred to that the question now pro"d with respect to the deposits of the City of Bryan is malar to that which was presented in connection with the doof the City of Vernon. If such is the case, the ruling Zc on'ined in the Board's letter of Larch 27, 1934, is applicable tiesi? present case, and no interest may lawfully be paid on 4)° lts of funds of the City of Bryan, Texas, which w are pable payable c/1 demand • furid "With respect to the payment of interest on deposits of the Agricultural and Mechanical College of Teas, if the Prn-lund'7' of such institution are of the kind governed by the T:v-Lsions of Section 2, Ch. 221, Acts of 45d Session of the lcas le islature, which is quoted in the opinion of your counis it would appear that the payment of interest on such funds auflnuired under State law. However, the Board does not have 11 1ent information to enable it to determine whether such dep : e-re deposits of 'public funds made by or on behalf of Yiotate, county, school district, or other subdivision or Re,,ZtYi within the meaning of Section 19 of the Federal Yo;1, Ye Act as amended. In view of the fact that counsel for bRnk aid not discuss this point in their memorandum of X 14G6 5/19/34 -15- '1ar} 31, it is requested that the matter again be submitted to such counsel for particuler csideration of the iestion Whether the deposits properly fall within that category, and that you follow comiso1' coflo1u5jDfls with reslect thereto unless YOU are of the opinion that the matter is one whien should be BUriitted to the oerd. If the question is referred to t1 Board, it is requested that there be furnished to the Board Copies of all pertinent provisions of the State law, a copy of counsel?8 opinion discussing all aspects of the question fully and in detail, end a copy of an opinion on the qstion rendered by the State Attorney General or other State official having Jn-1ar authority, together with any other information which may be relevant." Approved. Letter to Lr. Stevens, Federal Reserve Agent at the Federal 5er Bank of Chicago, reading as follows: I,. .'.he Board has under consideration the application of r. '' Halo under Section 32 of the Banking Act of 1033 for per1ofl to serve at the seno time as a direct or of Harris Trust iid 5avings Bank, Chicago, Illinois, and as director of the Terflhlnal Nation al Bank, Chicago, Illinois, and as director of The . Harris Company, Chicago, Illinois. "It appears that the provisions of the Clayto Act n are also applicabi to the service of Mr. Hale as a director of the two ban flamed above. As stated in the Board's letter of Docember '1q33 (X.773 1) a permit issued under the provisions of Seeion. 32 Would not render lawful a relationship prohibited by 'tO prov3i05 of the Clayton Act. Accordin1y, it would serve fl Useful Purpose to issue a permit to Mr. Hale under the proviof Seei 32 unless and until an application under the ' 0V1sion8 of the Clayton Act is received and acted upon favorab1 by the Board. th0 de8 is therefore suggested that you discuss with Mr. hale .ability of filing an application under the Clayton Act, l]. 'be him that action upon his application under Section 32 deferred until advice is received by the i3oard as to the COUSe he intends to pursue." Approved. Letters to the following applicants for pennits under section 0 Act of 1933; each ]2tter stating tt it appears rela4oflehiP covord by the application is within tho class 11469 5/19/34 -16- which section 32 was deslzaed to terminate, and that, accordingly, the Board is unable to find that it would not be incompatible with the Public interest as declared by the Congress to grant the applicati°11, although in the event the applicant desires to submit further facts or arguments in support of the application the Board is prepared tO them careful consideration: lir. Herman J. 1.:anzel, for permission to serve at the sane time as a director of the Liberty Bank of Buffalo, Buffalo, New York, and as a director of the City Union Corporation, Buffalo, New York. Walter E. Sachs, for permission to serve at the same time (4 3; Moit=or of the Lawyers County Trust Company and as partner Sachs Co., both of New York, New York. " /1 .Jchn J. O'Brien, for permission to serve at the same time as e_..director of the Harris Trust and Savings Bank and as an of1 177 ; .1;:d . director of H. Li. Byllesby and Company, both of Chicago: Approved. Letters to the following applicants for permits under section 2 of the Barazi ng Act of 1933, for permission to serve at the same ti248 48 directors and/or officers of The First National Bank of 1:-Aabile, 418'1311111a '44d as directors and/or officers of the First Securities Corn1l, Alabama; each letter stating that it is understood that 111 't later ,J.041 June 16, 1934, the First Securities Company will be liglAidEtted or a divorcement of its affiliation with The First National Lalak of Itobile vi ill be effected in order to comply with the requireOf section 20 of the Banking Act of 1933, and that, in those l'elztstanees, the permit referred to is granted for such limited peri(1(1 4° that tho empany may have the benefit of the applicant's services 116-8 5/19/34 -17- in effecting such liquidation or divorcement: 1.4-, kr. Mr. 1.11-. Mr. Mr. J. L. Bedsole J. P. Bestor, Jr. Milton L. Brown Aaron A. Lowenstein L. LeBaron Lyons Lark Lyons Mr. Mr. Mr. Llr. Mr. Mr. Thomas R. Murray G. C. Outlaw B. B. Peebles H. A. Pharr John E. Toomey J. W. Woolf Approved. Letters to the following applicants for permits under section 32 of the Banking Act of 1933, for permission to serve at the same tiMe asofficers and/Or directors of The United States National Bank of r,onver, St t" Colorado, and as officors and/Or directors of the United National Company, Denver, Colorado; each letter statinr, that ' 1 is understood that not later than June 16, 1934, tho United States N'Itic3nea Company will be liquidated or a divorcement of its affiliation, with The United States National Bank of Denver will be effected order to conply with the requirements of section 20 of the Banking Act of 1933, and that, in these circumstances, the permit referred to te' 1*44t6d for such limited period so that the company may have the beriefit of tho applicant's services in effecting such liquidation or clivoreeyaentt A. Hover !44'. E 1j. '. Kassler Albert A. Reed James Ringold Li. Henry Swan Approved. Reservo; Letter to Mr. Peyton, Federal Reserve Agent at the Federal tank of Lanneapolis, reading as follows: thecZlyltsonmrs to your letter of April 13, 1934, relative to application of Er. e.g. H. Klein. It appears that 1469 5/19/34 -18- "11,r. Klein is an officer and/or director of four national banks and three state bsrks and because of his large stockholdings in each of the banks, he desires to serve on as many banks as possible while at the same time complying with the provisions of the Clayton Act. In the application, Mr. Klein has requested permission to serve as officer and director of the First National Bank of Chaska, the Security National Bank of Montevideo and Klein National Bank of Madison, all in the State of Minnesota. He states that in order to continue his relationship with the Other national bank and three state banks, he proposes to have such banks cease making loans secured by stock or bond collateral for their awn account but effect an arran:;ement whereby the cashiers of such banks will make loans for and on account of ane of the national banks for which he has a permit to serve as officer and director. "The Board has given careful consideration to the questions involved in your letter, the application of Mr. Klein and to the opinions of your counsel. "In the light of the specific language of the statute, the Board , L may not grant a permit covering a relationship with more "Ian three banking institutions . On the basis of the application under consideration, it will be necessary for Mr. Klein to Sever his connec tion as office direct r or or of the First Nation al Bank, , Laconia, Minnesota, whether or not such bank ceases to make ' I") °ans secured by stock or bond collat eral, because he would then ! 0 serving at the same time as a director or officer of a bank _tganized and operating under the laws of the United States and :7a_a director and officer of other corporations making loans setir oed by stock or bond collateral (namely, the three other narein ! banks), without having obtained a permit covering such lonship. He may, y, homever, continue his connection with the " thr e state banks provided such banks cease to make loans secured bY ! suock or bond collateral. Itle_ "The Board feels, however, that the propos ed arrangement nt_!?0Y the cashiers of those banks uhich do not make loans on bn::s and bonds on their own behalf act for the three national a;;;;-, would be an evasion of the spirit and purpose of the statute basisec sequently, will not issue the permit applied for on the such an arrae nr ment. Moreover, it would seem that such est:Trgement mould be in violation of the branch banking providefite_f.Section 5155 of the Revised Statutes, as amended, which Is) the term 'branch' to include any 'branch bank, branch office tu_ , ranch airless * * agency, additional office, or any branch place of or rat,ne * at which deposits are received, or checks paid, lent'. "It i of thi 8 suggested that you advise Mr. Klein of the contents tkke 4 8 -etter and ascertain from him what steps he proposes to 'urther order to comply with the provisions of the Clayton Act. consideration of his application will be suspended 1470 5/19/34 -19- "pending receipt of such information." Approved. Letters dated May 18, 1934, approved by five members of the Board, to applicants for permits under the Clayton Act, advising of aPProval of their applications as follows: 141:. B. W. Mott, for permission to serve at the same time as a director and officer of The National Bank of Port Byron, Port Byron, Lew York, and as a director and officer of The Red Creek National Bank, Red Creek, New York. 14, John S. Gibbs, Jr., for permission to serve at the same time as a director of The First Lational Bank of Baltimore, Baltimore, Maryland, and as a director of The Fidelity Trust Company, Baltizo re Maryland, 1dr. c . n. Phenicie, for permission to serve at the same time as EG). director of the Kellogg-Citizens National Bank of Green Bay, 8reenBaY$ Wisconsin, and as a director of the Peoples Trust & alangs Bank, Green Bay, Wisconsin. Mr, G., H. Adams, for permission to serve at the same time as a director and officer of The State BnnIr of Somers, Somers, Montana, alld as a director and officer of The First National Bank of KalisPell, Kalispell, Montana. 111 R. Harris, for permission to serve at the same time as a 144*recter and officer of The Union National Bank of Marquette, N"luettes Michigan, and as a director and officer of The First ati°nal Bank af Alrer County, at Mimi sing, Munising, Michigan. 14.r. p di 'aos Heath, for permission to serve at the same time as a rector and officer of The First National Bank of Mandan, Mandan, North8., Dakota, and as a director and officer of The First National cuir of L apoleon$ Napoleon, North Dakota. tr.r. we , dire 410 Jarmuth, for permdssion to serve at the same time as a verm r and officer of the First National Bank in Vermillion, pir;on$ South Dakota, and as a director and officer of The National Bank of Heron Lake, Heron Lake, Minnesota. 111'' CY R114 -er$ for permission to serve at the same time as a rector " and officer of The First National Wac hi. Bank of Washington, sttc_e/Iton $ Oklahoma, and as a director mad officer of the First ank, Noble, Oklahoma. Approved. 6/19/34 -20-Letter dated May 18, 1934, approved by six members of the I/clard, to an applicant for a permit under the Clayton Act, advising Of aPProval of his application as follows: Mr. Alfred Christopherson, for permission to serve at the same tlme as a director and officer of The First National Bank of Albert Lea, Albert Lea, Minnesota, as a director and officer of the Farmers State Bank, Hartland, Minnesota, and as a director and officer of the State Bank of Oakland, Oakland, Minnesota. Approved. Letters to applicants for permits under the Clayton Act, ad'741.11C of approval of their applications as follow: 14r. Edward E. Coatswerth, for permission to serve at the same as a director and officer of the Lackawanna National Bank, 4-iackawanna, New York, and as a director of The Niagara National Bail* of Buffalo, Buffalo, New York. lire Charles Diebold, Jr., for permission to serve at the same Lrime as a director of the Lackawanna National Bank, Lackawanna, l'ev York, and as a director of The Liagara National Bank of Buffalo, Buffalo, New York. i Lir. Fred 1. Bieseeker, for permission to serve at the sane time Ec, t13 a director and officer of The First National Bank of Somerset, ,remerset, Pennsylvania, and as a director of the Somerset Trust ''eLlPany, Somerset, Pennsylvania. E a.r • 1/. Cook, for permission to serve at the same time as a 'rmeeoto and e First National Bank of Somerset, officer of 'the rnet , Pennsylvania, and as a director of the Somerset Trust °IrTanY, Somerset, Pennsylvania. B• Scull, for permission to serve at the same time as a etor of The First National Bank of Somerset, Somerset, Penne4.vttllia, and as a director of the Somerset Trust Company, Somer,. Pennsylvania. 14r. Gen D diret-. ". Scull, for permission to serve at the same time as a solner or and officer of The First National Bank of Somerset, Setersets Pennsylvania, and as a director and officer of the set Trust Company, Somerset, Pennsylvania. c)hil I* Scull, for permission to serve at the same time as a 1492 5/19/34 -21- director and officer of The First National Bank of Somerset, Somerset, Pennsylvania, and as a director and officer of the Somerset Trust Company, Somerset, Pennsylvania. Robt. S. Scull, for permission to serve at the same time as a director of The First National Bank of Somerset, Somerset, Pennsylvania, and as a director of the Somerset Trust Company, Somerset, Pennsylvania. 14r• J. O. Snyder, for permission to serve at the same time as a director and officer of The Second National Bank of Hagerstown, ! i_agerstown, Maryland, and as a director of The Clear Springs 14ationa1 Bank, Clear Springs, Laryland. ' Ill:* H. A. Bedell, for permission to serve at the same time as a , director of The Farmers National Bank of Opelika, Opelika, Alaand as a director of The First National Bank of Opelika, Opelika, Alabama, " 14 W. E. Davis, for permission to serve at the same time as a director of The Farmers National Bank of Opelika, Opelika, Alabama, and as a director of The First National Bank of Opelika, °Pelika, Alabama. 1 r. Frank J. B. DuChateau, for permission to serve at the same time as a director of the Kellogg-Citizens National Bank of Green Bay, Green Bay, Wisconsin, and as a director of the West side State Bank, Green Bay, aisconsin. John Rose, for permission to servo at the same time as a director and officer of the Kellogg-Citizens National Bank of green Bay, r: Bay, Wisconsin, and as a director of the West Green Bay, Wisconsin. 24r. F4yette E. :La director Brown, for permission to serve at the same time of The Miners State Bank, Iron River, Michigan, ironaLlti i rztg.cloh le First National Bank of Iron Mountain, a. tlz Approved. ital or There wore then presented the following applications for ori additional stock, or for the surrender of stock, of Federal l'"°rlie banks: lica.lt,Lo_n for ct 147 . 4. ORIGINAL Stock: ....1•Ctr4 .4- Shares rihe Ohi o 4ti°11a1 4oak of Oak Harbor, Oak harbor, 36 36 5/19/34 -22- A lications for ADDITIONAL Stock: Shares ' 4"ruWWrers National Bank & Trust Co. w _clf ,Smyrna, Smyrna, Delaware --u rennsauken Township National Bank of North Lerchantville, North Merchantville, Nev Jersey The First National Bank of Altoona, Altoona, r. Pennsylvania Ile Bryn Mawr National Bank, Bryn Mawr, Pennsylvania The C itizens National Bank of Muncy, Muncy, ennsylvania The St, Michael National Bank, St. Michael, Pe nnsylvania 21 11 33 60 12 12 149 75 75 59 Total 59 134 cations for SIIRREEDER of Stocks he ir t 1atjonal Bank of The Thousand Islands, Alexandria Bay, New York tlatrict No. katheirn Firet12. ational Bank, Anaheim, C alifornia Approved. Thereupon the meeting adjourned. Secretary. 41*°17ed: --"allii37---,- Executive Committee.
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