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795 A meeting of the Board of Governors of the Federal Reserve SYstem Was held in Washington on Friday, May 28, 1943, at 4:00 p.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Dreibelbis, General Attorney Messrs. Cagle and Pollard, Assistant Chiefs of the Division of Examinations Before this meeting there had been several informal discussions bYlalembers Of the Board of the information that had been received regardthe e --Paign of Transamerica Corporation to acquire 124,000 of the 25010u olat standing shares of the Citizens National Trust & Savings Bank Angeles, Los Angeles, California. At this meeting a draft of teleelNlI to the President of the Federal Reserve Bank of San Francisco which haq been Prepared in the light of these informal discussions was read, 6171cithe whole matter was considered from the standpoint of whether it killd be better to send the wire or to institute proceedings looking more dttly toward possible revocation of the holding permit held by Trans844eqe4 Corporation. It was the consensus of the members present that the telegram W0111,4 be the "0 best procedure as it would establish the facts and afford it de Corporation an opportunity to present such information as 811'ecil following which the Board could determine what further action 796 5/28/43 -2needed to be taken. There was also agreement that the sending of the telex„, ' 841 undoubtedly would be the beginning of a course of action by theB0_, 'I'd which might result in formal action to revoke the Corporation's vMane Permit. Several changes were suggested in the telegram, and at the conclusion of the discussion, upon motion by Mr. Szymczak, the wire was approved unanimously in the following form, with the understanding that a copy of the telegram would be sent to Mr. Crowley, Chairman of the Federal Deposit Insurance Corporation, and Mr. Delano, Comptroller of the Currency, for their information: "The Board has received reports from various sources that the tnageMent of Transamerica Corporation has authorized and is ne°ring a campaign to acquire 124,000 of a total of 250,000 Thi:es of Citizens National Trust (Sc Savings Bank of Los Angeles. 1; eaulPaign, as reported, bears a marked resemblance to previ . calliPaigns conducted by the Corporation and particularly he campai n which resulted finally in the Corporation acip ing Control g of First Trust & Savings Bank, Pasadena, Cal.u4ornia thrhe the Board7-“agement of the Corporation is already aware ofpursued 8 position with respect to the expansion policy bYth C as -e Porporation. If the Los Angeles case should turn out the eali asadena case did the Board sooner or later would be for:d upon to take some kind of action in that case. Thereto 1:) ,he Board in fairness to all concerned wishes once more 1)0841:Lug to the attention of the Corporation the Board's op"In-L6lon to such expansion policy. addition, information received by the Board of Governors ates that since July 1941, the expansion policy pursued by j _"e has extended into the industrial field. I171;'e that date it has acquired all of the stock of Premier ikannee Company representing a dollar investment of approx, „Y 4- $1000,000; the controlling interest in Axton Fisher Tobae ikate :r 9,0mpany representing a dollar investment of approxUqe-P7 92,300,000; substantially all of Adel Precision Prodt .rrporation representing a dollar investment of approxrepr:'4'Y $1,350,000; substantially all of Aerco Corporation sala aajflting a dollar investment of approximately $290,000; a(1017 - °f Enterprise Engine and Foundry Company representing investment of approximately 4379,000. During this 797 51*43 -3- same period direct and inter-corporate indebtedness of Transamerica, Corporation and its subsidiaries has continued unliqin substantial amounts. Permission of the Board for the changes in the character of Transamerica Corporation's assets brought about through the above mentioned acquisitions wr neither sought nor given. ,ne expansion policy pursued by the Corporation and the de1:1eloPments in connection therewith which have been commented in this wire have raised the question in the minds of the Board ,Ii0S.rd as to whether the Corporation has violated the agreement which it entered into with the Board on April 281 1937, and ParticUlarly paragraph 5 thereof reading as follows: 'That the management of the undersigned will be, and the undersigned will take such action within its power as may be necessary to cause the management of each of its subsidiaries to be, conducted under sound policies governing its financial and Other operations, including statements issued relating thereto; that the undersigned will maintain a sound financial condition; that its net capital aad surplus funds shall be adequate in relation to the character and condition of its assets and to its liabilities and other corporate responsibilities; and that, except with the permission of the Board of Governors of the Federal Reserve System, it shall not cause or permit any change to be made in the wthergeneral character of its business or investments; collr ef°re, the Board, before reaching a conclusion as to the !c't action to be pursued in these circumstances, would be glads wists 60 receive any expression of view which the Corporation may to offer on the question whether the Corporation has violated the its agreement. Of "Ple6erms tionef.e convey the contents of this wire to Transamerica Corporarepi "lth the statement that the Board will appreciate an early through the Federal Reserve Bank of San Francisco." 14 connection with the above matter, it was stated that a number teie ' aras and letters had been received from independent bankers proteetirlggl the acquisition by Transamerica Corporation of stock of the ational Trust & Savings Bank of Los Angeles. It was unanimously agreed that on Monday, May 31, telegraphic replies to these telegrams and letters would be sent over Mr. Morrill's signature, stating that the Board of Governors of the Federal Reserve System was 798 5/28/43 -4Opposed to the expansion policy pursued by Transamerica Corporation and had so advised the Corporation. At this point Messrs. Dreibelbis, Cagle, and Pollard withdrew the meetin_, g and ters the action stated with respect to each of the mate. "" lnafter referred to was then taken by the Board: The minutes of the meeting of the Board of Governors of the Fed- era) . eserve Syatem held on May 27, 1943, were approved unanimously. Telegrams to Mr. Paddock, President of the Federal Reserve Bank c)r Itx'. Boston, Mr. Treiber, Secretary of the Federal Reserve Bank of New York, Leach, President of the Federal Reserve Bank of Richmond, Mr. Frazer, Secreta.ry pro tern of the Federal Reserve Bank of Atlanta, Mr. Hodge, Aasisterit eounsel of the Federal Reserve Bank of Chicago, Mr. Stewart, 8"retarY of the Federal Reserve Bank of St. Louis, Mr. Powell First Vice Pl'esident of the Federal Reserve Bank of Minneapolis, Mr. Gilbert, Presldert of the .Vederal ReserVe Bank of Dallas, and Mr. Hale, Vice President °t the Federal Reserve Bank of San Francisco, stating that the Board apProves the establishment without change by the Federal Reserve Banks of St. Lotlis and San Francisco on May 25, by the Federal Reserve Bank of Atlanta on May 26, by the Federal Reserve Banks of New York, Richmond, Chic g°, Min neapolis, and Dallas on May 27, 1943, and by the Federal Reserve their /3411k of Boston today, of the rates of discount and purchase in eXisting schedules. Approved unanimously. the tem MeMorandwa of this date from Mr. Morrill, recommending that P°r4/7 a ppointments of Alvin Bissett as a cook and of James Hayden 799 5/28/43 -5a.8 4 Cafeteria helper in the Secretary's Office be extended for additional Peri°d8 of not to exceed 60 days each, effective as of the expiration of their Present appointments at the close of business on May 31, 1943. Approved unanimously. Letter to the board of directors of the "Farmers Bank of Parkes- bur— kezither Parkesburg, Pennsylvania, stating that, subject to conditions of 8"4 numbered i to 3 contained in the Board's Regulation HI the 130arci aPPr°Ires the bank's application for membership in the Federal Reserve 8 Y8teM and for the appropriate amount of stock in the Federal Reserve t of Philadelphia. The letter also contained the following special comment: are "It appears that the bank possesses certain powers which cluinot being exercised and which are not necessarily red in inx act the conduct of a banking business, such as the ?owas surety in certain circumstances. Attention is p0 : 4-bed to the fact that if the bank desires to exercise any be; el's not actually exercised at the time of admission tomemn 814) it will be necessary under Condition of membership beforeered 1 to obtain the permission of the Board of Governors exercising them. In this connection, the Board underet' at there has been no change in the scope of the corapiou e Powers exercised by the bank since the date of its 4-e ation for membership." eri:e Approved unanimously, for transmission through the Federal Reserve Bank of Philadelphia. to Mr. Walter B. French, Deputy Manager of the American 844kers Telegram A 88°oiati0n, New York, New York, reading as follows: lioard :7Presentatives of War Department, Navy Department and Posed ;:t Governors have been considering final proofs for submitted probY you: r loans book regarding war financing recently ' °r comment. It seems unlikely that suggestions can be 800 5128/43 -6- !3labadtted today but it is expected that they will be submitted in time to reach you first part of next week." Approved unanimously. Letter to the Presidents of all the Federal Reserve Banks, reactin g as follows: a+ °You will recall that several months ago Governor Ransom, _4 s Presidents, Conference, called your attention to a pending rssquest of the Department of Justice for access to registration tatements of small loan companies under Regulation W and assist4ance , in connection with a loan shark investigation under way by :i_te Department. The original request contemplated active assist71ce from the banks in making inspections and in collecting data u Tra the registration statements. The Board has now reached an ohcieratanaing with the Department which is evidenced by the exclange of letters between Assistant Attorney General Tom C. arkt and Mr. Dreibelbis, copies of which are attached. wil 4You will note that the Department agrees that all data at 1 be collected by its own staff through examinations of the da.nements by them and that it will treat confidentially any or so obtained. You will also note that it is the intention he Department to use the information only as a lead to obeli - evidence from other sources; that in the event of any will !!in the situation it will either subpoena the records or fact "Iprk out the problem with the Board on some other satistio or? basis; that the information will be used only in connecacjwith the loan shark investigation; and that the Board's 101;1 e stablishes no precedent. und Under these circumstances and in conformity with this ratancling, the Board requests that you give duly accredited re! ist;ssentatives of the Department of Justice access to the reg'tlon the classification eet Gut instatements of registrants within Mr. Dreibelbist letter to Mr. Clark." Approved unanimously. the Memorandum dated May 27, 1943, from Mr. Goldenweiser, Director dated 1443, 18,ipivisi'n of Research and Statistics, submitting a letter Mit 41' h 1943, from Mr. J. C. Capt, Director of the Bureau of the Census, e- Pl3roved the Board's request of May 7 to receive, under the terms the Second War Powers Act, certain department store records of the 801 5/ 443 —7-- 1939 Cen-sus of Retail Trade and which stated that the cost of preparing this . —0.usr1al for the Board would not exceed $500. The memorandum stated t at t LU.3 material would enable the Division of Research and Statistics to test the representativeness of its current department store data, which IN ere based on voluntary reparts by selected stores, and to correct these data when necessary, on the basis of the comprehensive biennial ernuter-,io • by the Census, and recommended that the Board approve the ex, Perlditur Approved unanimously, with the under— standing that the appropriate account in the 1943 budget for the Division of Research and Statistics would be increased accordingly. Thereupon the meeting adjourned. Secretary. I
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