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776 A meeting of the Board of Governors of the Federal Reserve Sist,era was held in Washington on Thursday, May 23, 1940, at 11:30 PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak Davis Draper Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman The action stated with respect to each of the matters herein— ter referred to was taken by the Board: Nierea The minutes of the meeting of the Board of Governors of the Reserve System held on May 22, 1940, were approved unanimously. Letter to the board of directors of the "Farmers and Merchants 8811k of T " tO Linesville, Pennsylvania, stating that, subject : pe nditi°ns of membership numbered 1 to 3 contained in the Board's th . -ati°n HY the Board approves the bank's application for membership - the Federal Reserve System and for the appropriate amount of stock the Federal Reserve Bank of Cleveland. Approved unanimously, together with a letter to Mr. Fleming, President of the Federal Reserve Bank of Cleveland, reading as follows: teta "The Board of Governors of the Federal Reserve Sys— PPP°ves the application of the 'Farmers and Merchants °f Linesville', Linesville, Pennsylvania, for membership 777 5/23/40 -2- in the Federal Reserve System, subject to the conditions t Prescribed in the enclosed letter which you are requested forward to the Board of Directors of the institution. ;710 copies of such letter are also enclosed, one of which .38 for your files and the other of which you are requested forward to the Secretary of Banking for the Commonwealth Of Pe nnsylvania for his information. the amount of estimated losses classified in the report of examination for membership is small, the , ue report sual condition regarding the elimination of estimated "ses has not been prescribed. re :Apparently the bank does not reserve the right to tl(tIlre notice of intended savings deposit withdrawals of b„Mor less and it is assumed that you will see that the practices in this respect are brought into conformity th.s. the provisions of Regulation Q. It is assumed also ai u You will follow the matter of the bank's making provicn for the amortization of premium on all bonds." l Letter to Mr. Leo T. Crowley, Chairman of the Federal Deposit 1.48111,an ce Co rporation, reading as follows: su 7his refers to your letter of April 15, 1940, reWritten consent of the Board of Governors for exL e .xaminers of your Corporation to make an independent ot•tion of the Syracuse Trust Company, a member bank, -Yracuse, New York. cor ,"In view of the many conversations held between your SteT°rtion, the Reconstruction Finance Corporation, the of -e 'anking Department of New York and representatives ha the Bo ard regardg in the bank, an answer to your letter been delayed until the Board had received formal adWe!of certain other arrangements that had been made. chi're now in receipt of a letter from Mr. V. J. McGrath, tio : ' f Examining Division, Reconstruction Finance Corporathat he has been advised by telephone that in view matt: °f the developments your Corporation will consider the : The of making an independent examination as closed. Youl,-;ore, the Board assumes that no further answer to -Letter is desired." Approved unanimously. 778 5123/4o 0 Letter to Mr. T. A. Dines, President, The United States National Denver, Colorado, reading as follows: 1940, relati "This refers to your letter of May 16, tive to the Clayton Act status of directors E. S. Kassler, r'', and C. A. Kendrick of your institution who are also Serving as directors of the First InOustrial Bank of Denver, Denver, Colorado. You request permission under the Clayton jet,' for them to continue serving the two institutions, and, 4. _ such permission is not possible, you request advice as whether they may be permitted to serve as directors of The United States National Bank and as members of an AdBarY Committee of stockholders of the First Industrial of Denver to be created in order that Messrs. Kassler Kendrick may have a continuing contact with the First ustrial Bank of Denver and make their influence, counsel -"" judgment available to it. in "Section 8 of the Clayton Act, as amended by the BankAct of 1935, prohibits a director, officer or employee ° t1-1 a member bank of the Federal Reserve System or branch or"eof from serving at the same time as a director, officer th sraPloyee of any other bank or branch thereof located in lae same city, town or village or in cities, towns or vilciges contiguous or adjacent thereto, except in certain thnes of cases enumerated in the statute and except that vi; Board of Governors may by regulation permit such seronee as a director, officer or employee of not more than is other such institution or branch thereof. The Board of : 1t1., 1°t now authorized, as it was prior to the enactment Banking Act of 1935, to grant permits in individual Case dotW; and its power of granting permission is limited to res,,e° by regulations of general applicability with the rel-4- that an exception, by regulation, applicable to the Plin.rships of Messrs. Kassler and Kendrick would be ap%J-e to all similar cases. cepti In January 1936, the Board of Governors made an ex-; - )2',133r regulation, applicable to Morris Plan banks and , appe:"4.1ar institutions. Subsequently, however, when it depocTed that many Morris Plan banks had begun to receive and were no longer limiting the scope of their aceilli les to the type of loans which were originally pesitZ.to Morris Plan banks, and after investigating the 80 ' 10n over the whole country, the exception which the 41'd had made with regard to Morris Plan banks was revoked. n '79 5/23/40 -4- "The statute, as you probably know, contained a proauthorizing the continuance until February 1, 1939, of such interlocking relationships as were lawfully existing on August 23, 1935; and on several occasions the Board, Pursuant to the authority conferred upon it by the Congress, "tended the time for the continuance of relationships in..°17ing a member bank and not more than one other institu:t°n, the final extension dated February 1, 1940, authoriz' 42g the continuanc e of such relationships until June 1 1940. The extensions which the Board made were also apPlicable to existing relationships involving Morris Plan banks. 8. "In recent months the Board has had occasion to con.1-der the nature of business conducted by some Morris Plan rilnitutions and in a few cases has reached the conclusion pi "a particular company operating strictly on the Morris ojian and possessing substantially all of the characteristics tb!,loan company rather than those of a bank was not a th-'n.' within the meaning of section 8 of the Clayton Act, ore effect of which was to exempt from the prohibitions the Clayton Act interlocking relationships involving th : 10 ‘ "' : IIrectors of such company who were also serving a mem, kank. If there is a substantial basis for a determinathat the First Industrial Bank of Denver is not a l'ithin the purview of the Clayton Act, it is suggested g 5r°u first take up the question with the Federal Reserve of Kansas City. or l‘ith respect to your further question whether members ga„! Prospective Advisory Committee of the First Industrial eaa of Denver would be considered 'directors, officers, or tion°Yees‘ within the meaning of the Clayton Act, a determinaand-jf this matter depends very largely upon the facts C"e Purpose of its creation. If the members of such Ce are elected by the directors and not the stockact:. 11'ns; if, as indicated in your letter, the Committee Probi-erel,Y as a conference group upon such questions and recto; : I Is as maY be referred to it by the officers and difly 0;,'"/ its counsel and opinions not being binding upon otherl; and if the Committee has no control, legal or bers se over the operations of the institution, the memof th,..anng no vote or power of decision upon the affairs that ij,uank, and receiving no compensation, it is possible °r emn=r5r would not be regarded as 'directors, officers within the meaning of the Clayton Act. Before t 780 5/23/4o -5- upon this question, however, the Board would need to o have definite information as to the purpose for which tIlsle Advisory Committee was created, whether the members of wr Committee are elected by the stockholders or directors, "ether there are any unusual provisions of the State law : 21 of the charter or by-laws of the institution which would have a bearing on the question; and information as to the rnPosition of the Committee, together with a copy of the t-law Provisions creating the Committee and relating to 8 Powers, functions and responsibilities. copy of your letter and a copy of this reply are be. being"A forwarded to the Federal Reserve Bank of Kansas City, traa City, Missouri, and it is suggested that you discuss he two matters referred to herein with that bank which, is unable to advise you fully in regard thereto, will frkit.either or both to the Board, together with full 1n11114tlon, for a determination thereon." Z j Approved unanimously, together with a letter to Mr. Worthington, First Vice President of the Federal Reserve Bank of Kansas City, reading as follows: 19 "There are enclosed a copy of a letter dated May 16, Nat?' from Mr. T. A. Dines, President of The United States of rnal Bank, Denver, Colorado, and a copy of our reply of els date thereto, relative to the Clayton Act status arj es ra. E. S. Kassler, Sr., and C. A. Kendrick, which 0 -1-fexplanatory. det 'The paragraph in our reply relating to the matter of Den : 1111ining whether the First Industrial Bank of Denver, 01 r, Colorado, is a 'bank' within the meaning of the tel;"'°n o s Act has reference, as you know, to the Board's letOctober 19, 1939, S-189-a. pro laith respect to the question whether members of the of Ered Advisory Committee of the First Industrial Bank the , ; - ver are 'directors, officers or employees' within to t1-1-aning of the Clayton Act your attention is directed Pede e ruling of the Board published at page 118 of the ral Reserve Bulletin for 1917." Mr. the c°at of -°rrill suggested that the Board authorize the payment of the luncheons served to Messrs. Louis J. Taber, Eugene A. 781 5/23/40 4kert, p. J. tittee -6Frestonel and Ray W. Gill, members of the executive com,- of the National Grange, in the Board's dining room today. Approved unanimously. Thereupon the meeting adjourned. tscce.22.. ke Chairman. Secretary.
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