Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, May 29, 1934, Volume 21, Part 3

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1_569
A meeting of the Federal Reserve Board was held in Washing-

toil on

Tuesday, May 29, 1934, at 3:00 p. m.
PRESENT:

Er.
Er.
Er.
Er.
Er.
Er.

Black, Governor
Hamlin
Miller
James
Thomas
Szymczak

Er.
Er.
Mr.
Mr.
Er.
Mr.
ALSO PRESENT:

Bethea, Assistant Secretary
Carpenter, Assistant Secretary
Martin, Assistant to the Governor
Tiatt, General Counsel
Wingfield, Assistant Counsel
Leonard, Federal Reserve Examiner

Er. J. H. Case, Federal Reserve Agent
at the Federal Reserve Bank of
New York

Governor Black stated that in accordance -with the Board's reCase had con o to Washington today and had brought with him

"

the report
by

state

°f ex

'nation of the City Bank Farmers Trust Company made

examiners as of March 31, 1934, and participated in by an

epciainer from
the Federal Reserve Bank of New York, and that the rePort had
been reviewed by Er. Leonard with Mr. Case this morning. The
Governor then
asked Er. Leonard to outline for the Board the informati°11 c°11tained in the report -with regard
to the condition of the trust
e°111PanY
and the character of
its business.
11r. Leonard stated that on the date of the examinati
on the
tr14t corpany
itself was in a strong asset position, with its capital
alld 511'1)1
"of

th4t 41-fter the

410,000,000 each intact, and that tho report indicates

company had provided for all losses and doubtful assets
it would
have undivided profits
and reserves of approximately 3.,800,000.




1570
5/29/34
The report discloses, Lr. Leonard stated, that of the
41,000,000 of deposits held by the trust company,

35,000,000 are

held in a fiduciary capacity and only approximately $1,700,000 are conmercial

deposits, and that loans, exclusive of ,;5,619,000 real estate

104ns, amount
to

3.2,975,000.

Of these, approximately $6,000,000 are

reported to be secured by readily marketable collateral and $5,600,000
to be
unsecured. lixcept for loans amounting to approximately
42002000 which are not listed in the report of examination and are
qparently secured by readily marketable collateral, and a 02,000,000
1°Pal secured by a pledge of a 2,500,000 deposit, the loans consist
largely„
01
capital loans pendinf: permanent financing, and loans to
bondholders' protective committees, to realty companies whose securitie"
- are held by
the bank or by trusts, and to a subsidiary and to
"
'estate.

The loans include tyro which were transferred to the trust

c°1111)11117 by the Ilational City Bank after the loans had been criticized
14 a report
of examination of the national bank. Accordim; to the
report of
examination, it is the practice for all commercial loans of

the truct

company to be made for it by the ilational City Bank, with

QUthorit,
J in the
vice president of the trust company to accept or reject the loans
wdAhin 24 hours, his decisions being ratified by the
4zeoUtive

Committee.
Leonard also reported that the examiner for the Federal

reserve bank
states that the affairs of the trust company appear to
be ecePtionally well regulated, that the capital is adequate, that

the clir'etcrc are reasonably attentive to the affairs of the trust




5/29/34

-3-

e°111Pa4Y, and that the management is capable and conscientious. Er.
Le"erd quoted the examiner for the Federal reserve bank as stating
that
mhile he did not have an opportunity to make a detailed investigation of individual trusts, he was favorably impressed with the inlieetment Policies of the trust company and the procedure followed in
the s
upervision of the trusts.
M. Leonard referred briefly to the plans of uniform trusts
1/8
"bY the trust company, and stated that approximately 0.8,000,000
111
"invested in
the four uniform trusts. Reference was also made to
the dis
tribution of the personal trust accounts, which showed that
the largest
group, both in number and in amount, consisted of living
truete, the total
of such funds amounting to S728,000,000 distributed
14 3,181
accounts.
Other matters referred to in, the report of examination, and
with

regard to the character of the business of the Farmers Loan and
Trust C
ompany at the time it becare affiliated with the National City

4‘1* in

1929, were commented upon by Mr. Leonard.
14r. Case stated that the City Bank Farmers Trust Company (for-

luerlY the

Farmers Loan and Trust Company) is the oldest trust company

the

United States, that he cane into close contact with the managefient in
3.902, and that, in 1912 he was made Vice President of the
"
1/Tany, -which
office he retained until 1917 when he left to
t'L'ke 4
position With the Federal Reserve Bank of NOW York. He said
thEtt the
old Farmers
Loan and Trust Company had always been a concern
the
highest type and had always had an excellent reputation; that,




1'73
5/29/34

-4-

while he felt
that the affiliation with the National City Bank had
not been
to the advantage of the trust company, it was his opinion
that the
present management of the company is able, conscientious and
honest; and that he mould recommend that, if an application is filed
Ivith the
Board, the trust company be admitted to membership. He also
said that
he felt sure that, bocause of the existing situation, the
trilet conpany mould be willing to accept the standard conditions of
Insztaship and discontinue any practices which are not in accordance
therewith.
There followed a detailed discussion of the character of busof the trust
company, during which the question was raised as
to vthether 2 n
I view of the affiliation betwBen the trust company and
the 41tic)nal City Bnnk of New York when considered in the light of the
Plafelrii°ns of section 5139 of the Revised Statutes, the company should
he Edzitted
to membership.

Upon inquiry, Mr. Wyatt stated that he

kliGNIT Of no provision of law- which mould be violated if the trust comP4I1Y7Tere adMitted to membership in the Federal Reserve System, but
that the
Purpose of section 5139 was to divorce member banks from affi1i4ted in
stitutions which do not carry on the kind of business conducted b
zember banks (other than corporations holding the bank's
Promises), and that,
as the City Bank Farmers Trust Company transacts
Practically no
business except a trust business and some business int0 the
trust business, it might be said that it would not be
consistent with the purposes of section 5139 to admit the
eell1P4nY to
membership.




or)

5/29/34

-5Toward the end of the discussion Mr. Case withdraw from the

meetings but before leaving stated that he hoped to submit to the
hoard, in the near future, recommendations for enlarging the official
staff of the Federal Reserve Ap:ent's Department at the Federal Reserve
Btaik of New
York.
At the close of the discussion, Mr. Hamlin moved
that the City Bank Farmers Trust Company be advised,
through the Federal Reserve Agent at New York, that
the Board is of the opinion that the corporate powers
exercised by the trust company are not consistent
With the purposes of the Federal Reserve Act, and for
that reason under the existing circumstances the Board
is not willing to admit the trust company to membership in the Federal Reserve System.
Carried, Governor Black and hr. Thomas
votinc;
There were then presented drafts of letters to Senator Fletcher
8.4a Congressman
Steap-all, Chairmen of the Banking and Currency Committees of
the Senate and House of Representatives, respectively, which
had been

previously circulated among the members of the Board and

'which read
as follows:
"The inflexibility of the provisions of the last two pararaPhe of section 19 of the Federal Reserve Act, -which relate to
the
Payment of interest on deposits, in a number of instances
,
1as caused hardships to member banks and to their depositors and
;Zs given rise to numerous difficulties in administration. In
ew of the undesirable situations created thereby, it is believed, that
these paragraphs should be amended in such respects
IllaY be necessary to eliminate the objectionable features, and
there.
is submitted herewith for the consideration of your Com6tee
a draft of a bill which it is believed will accomplish
end desired and at the same time will serve to further the
aurP"es of the present law. There is also inclosed a draft of
revision of the last two paragraphs of section 19, which shows
the
textual changes which would be made by the bill if enacted.
"In order that the provisions of the last two paragraphs of

1

T
p




5/29/34
ft

-6-

section 19 may be sufficiently adaptable to meet the requirements of actual conditions, it is believed that it is desirable
to vest in
the Board specific authority to define, for the purposes of such paragraphs, the terms 'time deposits', 'savinss
deposits?, and 'deposits payable on demand'. In addition, it
is believed
that the Board should be expressly authorized to
Prescribe such rules and regulations as may be necessary to effectuate the purposes of the paragraphs and to prevent evasions
thereof. The bill submitted herewith contains amendments for
such Purposes.
"The rates of interest customarily paid on deposits by foreign banking institutions are often in excess of the rates which
maY lawfully be paid by mamber banks of the Federal Reserve
System on the same kinds of deposits, and, as a result thereof,
branches of member banks operated in places outside of the United
States may lose substantial amounts of deposits unless they are
.13terynitted to
meet competition by paying interest at a rate equal
,o that
currently paid by competing foreign banking institutions.
view of such circumstances, it is the opinion of the Board
rlat the last two paragraphs of section 19 should be amended so
t° except deposits payable only at an office of a member bank
outside of the States of the United States and of the
locatedDistrict of Columbia from the prohibition upon the payment of
terest on deposits payable on demand and from the provisions
at g- to the
Payment of interest on time and savings deposits.
T e iclosed
bill would accomplish this purpose.
You will observe that the bill would also except from the
p‘rohibition upon the payment of interest on deposits payable on
Illand any deposit of trust funds with respect to which the pay07,11t of interest is required by State law. The laws of a number
States require the payment of interest on uninvested funds
held in trust
by banks, and, since trust funds awaiting invest„Tit as a practical matter must usually be available on demand
:,"_41 may nal; ordinarily be carried as time deposits, it is believed
that the
prohibition upon the payment of interest on deposits
on demand should be made inapplicable to deposits of
trust
funds with respect to which the payment of interest is requlr” by State law.
me
The
present law provides that the prohibition upon the payment
of interest on deposits payable on demand shall not be
;-Tstrued
to prohibit the payment of interest by a member bank
accordance with tho terms of any certificate of deposit or
Other
contract entered into in good faith and in force on the
i37.1'e.of enactment
of the Bankin7 Act of 1933. The inclosed bill
to°n-des in substance that such prohibition shall not be construed
bo nlY to any payment made in accordance with the terms of a
fide contract in force on the date on which the bank becomes
qoject to such
provisions. The amendment would except from the

Tju

r




5/29/34

-7-

U

Ii

prohibition upon the payment of interest on deposits payable on
demand any payment made by a bank entering the System subsequent
to the
enactment of the Banking Act of 1933, provided such payment is made in accordance with the terms of a contract entered
Into in good faith and in force on the date the bank becomes a
member of the System. Such an amendment is believed to be desirable.
. It is the view of the Board that the absolute prohibition
agalnst the payment of any time deposit before maturity should
be relaxed so as to permit the payment of such deposits before
in;
aturity in exceptional circumstances and in order to avoid hardsnips.
Accordingly, the inclosed bill provides that no time deP"it may be paid before its maturity 'except upon such conditions
and.ln accordance with such rules and regulations as may be prescribed by the Federal Reserve Board'.
"It should also be noted that the bill submitted herewith
ain8
c°11t
language which would make the provisions of the last two
Paragraphs of section 19 applicable to every bank -whose deposits
fl
,
-re insured under the provisions of section 12B of the Federal
Reserve Act. It is the view of the Board that banks which are
not members
of the Federal Reserve System, but the deposits of
21ch are
insured under the provisions of said section 12B,
7"°uld be on the same basis as to the payment of deposits and of
interest thereon as member bnnks of the Federal Reserve System.
:nder the
existing law banks which are members of the Federal Re1,?rlie System are subject to certain limitations and restrictions
vj4 11,_respect to the payment of deposits and of interest thereon
lell.are not applicable to other banking institutions, notwithst8 !
Indlng that their deposits are insured under the provisions of
ald section 12B, and such institutions are thereby afforded a
,
competitive advantage over member banks. The proposed amendment
1c2
) ld place all banks whose deposits are insured under section
13 (T a
basis of equality in this respect.
It is believed that the amendments suggested in the inclosed
'
are desirable and that the enactment of the bill mould be
az
;t1:10 interest of the member banks of the Federal Reserve System
Beu 121 furtherance of the essential purposes of the present law.
ta4ause of the existing situation, the Board hopes that your Com
am tee
7611 give early and favorable consideration to the proposed
,...„?ndments with a view to the enactment of the bill inclosed here"lth during the present session of Congress."
Ur. Hamlin stated that he had requested that the proposed letters be di
scussed at a meeting of the Board, and that he desired to
call the
Board's attention to the fact that the proposed amendment referred to
therein provides that, if an officer or director of a




1576
5/29/34
41E1.000

nonmember bank, whose deposits are insured by the Federal Deposit Insurexee C
orporation, shall continue to violate the provisions of the
last t• 7710

paragraphs of section 19 or the rules and regulations issued

Pursuant thereto after
having been warned to desist therefrom, may be
removed from
office, in accordance with the provisions of section 30
of the B
aakinz Act of 1933, upon warning to such officer or director
and certification
to the Federal Reserve Board by the Federal Deposit
Tzwurance

Corporation*
After brief discussion, the letters were
approved, together with a letter to Senator
Glass, inclosin a copy of the letter to
Senator Fletcher.

Governor
Black stated that at the request of Senator Glass
there had been
prepared a memorandum as to what the situation will be
cn July
1, 1934, in the
event the bill extending the temporary insurellee Pr
ovisions of section 12B of the Federal Reserve- Act is not enknd that copies
of the memorandum had been sent to the offices
Of

the

members of the Board for their information.
The Board
then considered and acted upon the following natters:
M
emorandum dated May 22, 1934, from Lir* amead, Chief of the

1)171
'
11-°n of Bank
Operations, recommending the appointment effective
jUlle 1• 1 1931* of lir* Howard T. James as a clerk on the night force of

the geld

settlement fund section of the division, with salary at the

•
°f
'
C1 50, ,)2.25 or 0.00 a night depending upon his hours of ser.ulee
'to take
the place of Mr* Oscar Stutler, an employee of the Incilvellt Banks
Division of the Office of the Comptroller of the Currency*




5/29/34
*Lose

-9-

resip;nation will be submitted when it has been determined that

14re ja.mes' services will be satisfactory.

The memorandum stated that

Stutler's services as a clerk on the night force of the gold set'blaze/it fund
section have proved entirely satisfactory, but that, inasmuch as he
is a Government employee and receives a basic salary of
2 °°0 Per annum,
'
it is thouht that it would be better to replace him
with
an employee not in the Government service,
particularly in view
or the
provision of law regarding a person holding two Government positions,
"e aggregate salaries of which exceed ,$
4 2,000 a year.
Approved.
Telegraphic reply on May 28, 1934, approved by six members of
the Board, to a
telegram of that date from Mr. Curtiss, Chairmen of
the Federal
Reserve Bank of Boston, advising of the death on May 27,
1934
'ef Er.
Edward S. Kennard, a Class A director of the bank. The
rePlY 8tated that
the members of the Federal Reserve Board regret since?elY te learn of
the death of Er. Kennard and requested Er. Curtiss
to e
xpress their
sympathy to the members of Er. Kennard's family and
his col,
'
4eagues on the
board of directors of the Boston bank.
Approved.
Letter to La.. Jilliams, Federal Reserve Agent at the Federal
ire 8411k of Cleveland, prepared in accordance with the action taken

at the

xeeting

May 28' 1934, reading as follows:

Cop "Thin refers to the application of the
Farmers Deposit Trust
R:84Y, Pittsburgh,
Pennsylvania, for membership in the Federal
pi era
"System, which was forwarded to the Board with Mr.
etcher's letter of May 21,
1934.




1.578
5/29/34

-10-

"Section 9 of the Federal Reserve Act, as you know, provides
.11-at, in passing upon applications for admission to membership
ln the Federal Reserve System, the Federal Reserve Board shall
consider not only the financial condition of the applying bank
and the general character of its management but also 'whether
or not the
corporate powers exercised are consistent with the
Purposes of this Act'. The Board has given careful consideration
to all of the facts involved in the application of Farmzrs DePosit Trust Company, and, in view of the character of the business
?f that institution, does not feel that it can properly approve
,
l_ts application for admission to membership. You are requested
-co advise the bank accordingly."
Approved.
Letter to the board of directors of "The Citizens Bank of
Ge°r&'ialla", Georgi

, Alabama, stating that, subject to the conditions

Prescribed in the letter, the Board approves the bank's application
for Inembership
in the Federal Reserve System and for the appropriate
amount of
stock in the Federal Reserve Bank of Atlanta.
Approved, together with a letter to
Newton, Federal Reserve Agent at the
Federal Reserve Bank of Atlanta, reading
as follows:
,.
"The Board has considered the application of 'The First National Bank of Greenville', Greenville, Alabama, for a permit
11!Ider Section
5144 of the Revised Statutes, as amended, permit,
-colng the voting of stock which it awns or controls of The Citizens
4k of Georgiana, Georgiana, Alabama, and has authorized the is"
v nce of such a permit to the applicant upon the condition that
8;1? Citizens Bank of Georgiana shall first be admitted to memberIIP 111 the Federal Reserve System. There is accordingly sent
herewith a permit which is in form to authorize the voting
of stock
of The Citizens Bank of Georgiana by the trustees mho
hold title to such stock or their successors in office and
of, jc11 You are authorized to deliver to the applicant at the tine
the admission
'
to membership of The Citizens Bank of Georgiana."

7

Telegram to Mr. Case, Federal Reserve Agent at the Federal Re%Ire

Bank of New
York, reading as follows:
"Refer Dillistin's telegram May 28, 1934.




Board grants

1579
5/29/34
"extension of time to June 12, 1934 -within which 'The Mount
ernon Trust Company', Mount Vernon, New York, may accomplish
its admission to membership."

y

Approved.
Letter to la-. O'Connor, Comptroller of the Currency, reading
as follows3
"In accordance mith Acting Comptroller Awalt's recommendation, the Federal Reserve Board approves a reduction in the com,
111,T1 capital stock of the 'Duluth National Bank', Duluth,
'1411nesota, from 0200,000 to 0100,000, pursuant to a plan which
provides that the bank's capital shall be increased by 0150,000
of preferred stock
to be sold to the Reconstruction Finance CorPcration and/Or others, and that the released capital shall be
used to
eliminate a corresponding amount of unsatisfactory assets,
all 49 set forth in Mr. Awalt's memorandum of May 18, 1934.
0
:ticonsidering the plan under which the proposed reduction
in c
capital is to be effected, it has been noted that securities depreciation unprovided for of approximately $69,000, if
.ejlnsidered as a loss, would impair the bank's common capital to
_10 extent
of approximately i?10,000. In addition there will rerin in the bank a large aggregate of slow and doubtful assets
'
11 which some loss seems probable. It is assumed, however, that
ou,have these conditions in mind and that whenever it is feasible
praZ8
012:yill require such further corrections as may be

r

Approved.
Board.,
low81

Letter dated May 28, 1934, approved by six members of the
tc Mr.
O'Connor, Comptroller of the Currency, reading as fol-

ti
"In accordance with Acting Comptroller Awalt's recommendaef.,'
l the Federal Reserve Board approves a reduction in the common
1/7"
41
?oraa stock of 'The First National Bank of Pender t, Ponder,
ktt, from 50,000 to '25,000, pursuant to a plan which protha.
the bank's capital shall be increased by 025,000 of
t eferred stock to be sold to the Reconstruction Finance Corporaion,
and that the released capital shall be used to eliminate
4 ,12!lei:1 and other
substandard assets, all as set forth in Mr.
'1%8 memorandum of May 18, 1934.
In considering the plan urder which the proposed reduction
in
Capital is to be effected it has been noted that, after




1580
5/29/34
-12application of the released capital to the elimination of estated losses, there will remain in the bank approximately
i.i3,200 of loans classified as losses, and ,,
- G,900 of loans classified as doubtful, as well as a large au,regate of slow assets.
the Board
feels that where, as in this instance, funds in the
form of surplus
and undivided profits are available, it would
be
preferable if provision were made for the elimination at
least of all estimate losses rather than
d
to carry such unsatisfactory assets in the bank, even though offset by surplus and
profits. It is assumed, however, that if the subject bank is
unable to collect or obtain adequate security for its doubtful
elimination111:e
.ms within a reasonable time you will require their
"It has been noted also that your examiner severely criticizes the bank's manageme
nt, which he regards as unsafe and
i.i.most entirely lacking in ability.
It is understood, however,
at this
matter is receiving the attention of your office."

V

Approved.
Letter to Mr. McClure, Federal Reserve A47ent at the Federal
Reserve Bank of
Kansas City, reading as follows:
"Reference is made to your letter
of May 19, 1934, advising
proposed reduction in the common capital stock of vihe
!
.
8b clan State Bank', Sedan, Kansas, from ;30,000 to 45,000, and
the
issuance and sale of 25,000 of preferred stock to the Reconstruction Finance Corporation, after which the bsnk will have
capital
of *10,000 and a surplus of 0.0,000.
It
appears from the information submitted that the entire
a flOut
of the released capital, together with the undivided
)
12i.:1""_ 8 and $10,000 of the present surplus of the bank, is to be
;
1. -"
eliminate losses as classified in the report of credit
„ve3tigation as of Earch 13, 1934, and that the recapitalization
u4 the bank
will result in a material improvement of its condition.
ft,
ilowever, it has been Observed that, although the amount
of
the
capital stock of The Sedan State Bank, after the proposed
re?aPi
talization, would be in excess of the minimum capital refor admission of a bank to membership in the Federal
ea:7:e System in a place the size of Sedan, the amount of the
'
or '
- al of such bank would be nevertheless insufficient for the
tee-1
,
1 ization of a national bank in Sedan. In this connection,
,
D
wh?,oard
has heretofore ruled that a member 6tate bank may not,
remaining
a member of the Federal Reserve System, reduce
aaPital below the amount required for the organization of a
bank in the place in mhich the State bank is located.
of a




1581
5/29/34

-13-

"In the
present case, however, it appears that after the proposed
reduction
and increase have been effected, the capital of the
bank will be greater in the amount of 11.0,000 than its capital
Prior to the time of such increase and reduction. In
these circumstances, the Board feels that the purpose of the law will have
been substantially
complied with. The Board will, therefore, approve the reduction in the bsnir's capital
as part of the plan of
reo
rganization described in your letter, with the understanding,
of course,
that such reduction has the approval of the State
uanklng authorities.
"It is observed from the report of credit investigation that
two notes aggregating , 6,000 have been placed with other banks
,1)(?/1 the endorsement of officers or
directors of the subject bank.
,113-s practice appears to be in direct violation of one of the conditions under which the bank was admitted to membership and you
are requested to
advise it to refrain from transactions of this
nature.11
Approved.
Telegram to Mr. Case, Federal Reserve Agent at the Federal
Reeerve Bank of LEM York, reading as follows:
"RETEL May 24. In accordance with your recommendation
board amends
its ANCIGAR telegram dated February 3, 1934, with
frespect to
issuance
of limited voting permit to Associates of
Orrj
County, Inc., by substituting 'July 1, 1934' for 'Lay 1,
34
'in each of the two sections following the letter 'D' in
Order
vu'l-G applicant may have time within which to exercise vot171C powers in
event that permit is issued."
Approved.
T
elegram to Mr. Yerton$ Federal Reserve Agent at the Federal
Servo

4Jank of
Atlanta, stating that the Board has considered the

aPPlication of the
"Hamilton National Associates, Incorporated",
ellattanooga,

Tennessee, for a voting permit under the authority of
aection 5
144 of the
Revised Statutes of the United States, as amended,
entitling such
organization to vote the stock which it awns or contr
"The
Hamilton National Bank of Johnson City", Johnson city,
l'e/Inessee, and
has authorized the issuance of a limited permit to the




1582
5/29/34

-14-

aPPlicant for the following
purposes:
"At any time prior to July 1, 1934, to act
upon a proposal
or proposals to create and
issue preferred stock of such bank,
o
c ! one or more
classes and having an aggregate par value of
X500,000, and to reduce the bwril,'s common stock from ;
, )250,000 to
and to make such amondments to the articles of association of such
bank as may be necessary for such purposes, such
Pr?Posal or proposals to be in
accordance with a plan or plans
uhich shall have
been approved by the appropriate supervisory
8:11thorities and shall be satisfactory to the Federal Reserve
Agent at the
Federal Reserve Bank of Atlanta."
The

telegram authorized the agent to have
prepared by counsel for the
Pederal
reserve bank, and to issue to the Hamilton National
Associates,
corporated
, a limited votinp permit in accordance with
the telegram.
The t
6-Legrez stated
also that the agent is authorized to amend the
1181141 form of limited voting permit by
adding after the name of the
CrIllitee the
words "or its nominees".
Approved, together with a letter to
Li-. O'Connor, Comptroller of the Currency,
reading as follows:
"The Federal
Reserve Board approves a reduction in the com3°LoaPital stock of 'The Hamilton National
BAnk of Johnson City',
a°Z.IT°n CitY, Tennessee, from $250,000 to $100,000, pursuant
to
1317.7n which
provides that the bank's capital shall be increased
's000 of preferred stock to be sold to the
Reconstruction
ch'"nce C
orporation and/or others, and that the released capital
e used to
eliminate a corresponding amount of unsatisfactor
assets,
all
as set forth in Acting Comptroller Amalt's
letter
orY
of Lay 17, 1934.
•
'In considering the plan
an under which the proposed reduction
111
'tal is
proea131
- to be
effected it has been noted that, after the
nations are consummated, there will remain in the
010Pni
of estimated losses, 75,000 of securities deprecieit 11'
, 4254,000 of
doubtful assets, and 0,208,000 of slow assets,
houltudition to
which the bank has a heavy investment in banking
thaZ° and furniture and
fixtures. It is apparent, therefore,
cuar a serious
capital impairment will still exist unless the
Aas,
a141tee of the holding, company affiliate, The Hamilton
Lational
-e'ates, Inc., for ;65,000,
and the statutory assessment




1583
5A9/34

-15-

against the stockholders of the former Tennessee National Bank,
to the extent that it may be collectible, are realized upon.
It 18 assumed, however, that you have these natters in mind and
that whenever it is feasible to do so you will require such further correction as nay be practicable."
Telegram to Er. Peyton, Federal Reserve Agent at the Federal
Reserve Bank of Minneapolis, stating that the board has considered
the aPPlication of the "First Bank Stock Corporation", Minneapolis,
14/111es°ta, for a votinp, permit under the authority of section 5144
Of the IQ
-evised Statutes of the United States, as amended, entitling
eueh °rganization to vote the stock which it owns or controls in the
"First

Rationa1 Bank of Mankato", Mankato, Linnesota, and has author-

ized t
"' issuance of a United permit to the applicant for the followPurposes:
At any time prior to August 1, 1934, to act upon a proposal
°r Proposals to create and issue to the Reconstruction Finance
'orporation preferred stock of such bank having a par value of
one
hundred thousand dollars (100,000) and to reduce the bank's
!
°111mon stock from two hundred fifty thousand dollars (S250,000)
.1101 one
hundred fifty thousand dollars (150,000), and to amend
e bank's articles of association accordingly, such proposal or
proposals
to be in accordance with a plan or plans which shall
it tiv° been approved by the appropriate supervisory authorities
mhich shall be satisfactory to the Federal Reserve Agent at
"e Federal Reserve Bank of Minneapolis."
The
tele
Crkm also authorized the agent to have prepared by counsel
for the
l'oderaa reserve bnnk, and to issue to the First Bank Stock
C°rPorati0_
41,
a limited voting permit in accordance with the telegram.
Approved, together with a letter to Mr.
O'Connor, Comptroller of the Currency, reading
as follows:
411
Awalt's recommendation, the Federal
(
1!o
fc.Frve accordance with Mr.
Board approves a reduction in the common capital stock
'First National Bnnk of Mankato', Mankato, Minnesota,




5/29/34

-16-

"from250,000 to ,160,000, pursuant to a plan mhieh provides
that the bank's capital shall be increased by
100,000 of preferred stock to be sold to the Reconstruction Finance Corpora81d that the released capital shall be used to eliminate
unsatisfactory assets or to establish reserves therefor, all as
set forth in
Mr. Awalt's memorandum of Lay 17, 1934."
Telegram to Mr. Peyton, Federal Reserve Agent at the Federal
Reserve Bank of
Minneapolis, stating that the Board has considered
the a
Pplication of the "Northwest Bancorporation", Minneapolis, ',Panne6°ta, for a
voting permit under the authority of section 5144 of the
Revi__
bed
Statutes of the United States, as amended, entitling such orto

vote the stock rhich it OTMS or controls in "The First
Ratio 1
1144 Bank of Dillon", Dillon,
Montana, and has authorized the issuance
ar a limited permit to the
applicant for the following purposes:
"At any time prior to August 1, 1934, at any meeting of
Shareholders, to
act upon a proposal to fix the number of directors
of such bank and to amend the
bank's articles of association accordingly and
also to elect directors and to conduct such business
`1J. a routine
nature as is ordinarily conducted at the annual meetof the
bank."
The tel
eErara also authorized the agent to have prepared by counsel for

the ped

era).

reserve bank, and to issue to the Northwest Bancorporation,

O. lizai

ted

'"4ng permit in accordance with the telegram.
Approved.

servo E

Letter to Lir. Case, Federal Reserve Agent at the Federal Re-

4:ak le New York, reading as follow:
fo "Receipt is acknowledged of the affiliates' reports of the
11°wing
of Viarch member banks submitted in response to the Board's call
5, 1934:
Peoples Trust & Guaranty Company
Hackensack, N. J.
ljank of
Bogota
Bogota, N. J.
Fort Lee
Trust Company
Fort Lee, N. J.
State Rank &
Hackensack, N. J.
Trust Company of




1565
5/29/34
"Bank of Hasbrouck heights
Hasbrouck Heights, N. J.
Ridgefield Park Trust Company
Ridg
efield Park, N. J.
laestwood
Trust Company
Westwood, N. J.
According to the affiliates' reports the Peoples Trust &
Guaranty Company of Hackensack (whi
ch has subsequently changed
it8 Mize to
the
Peop
les
Trus
Comp
t
any
of Bergen County) central)d
through trustees the Hackensack Securities Company, whic
h
in turn held
control of the other State banks mentioned. (Two
of these, the
State Bank and Trust Company of Hackensack, and
the Bank of
Hasb
rouck Heights, have since been absorbed by the
Peoples
Trust Company of Bergen County). It would therefor
e appear
that all
these member banks were affiliates of one another, and
that certain non-banki
ng subsidiaries owned by certain of the
tember banks
were affiliates of the other member banks.
"Thus for example, it would appe
ar that the Peoples Trust
alld Guaranty Comp
any should have reported not merely the Hackenlack Securities
!
Company, and the 210 Main Street Corporation, but
11 addition all
the subsidiaries controlled, directly or indirectY$ by the Hackensa
ck Securities Company; and it would appear as
!I further
exam
ple
that
the Ridgefield Park Trust Company should
have
reported not merely the Hackensack Secu
rities Company, but
1__.11.addition the
Peoples Trust and Guaranty Company, and all the
sidiaries,
direct or indirect, of the Hackensack Securities
Company.
In reports as submitted however each
of the subsidiary
11;:mber banks
included only its holding company affiliate, the
..,"ensack Securiti
es Company, and such direct subsidiaries as
"en Subsidiary
member bank itself controlled.
"It
it iti is requested that you review the above relationships, and
s found, as
appears to be the case, that the reports are
made out in accordan
ce with the Board's requirements, the member
by tbanks should be advised to that effect so that reports submitted
or hem in response to future
calls may cover all of the banks and
tioPorations, business trusts, associat
ions, or similar organizaB2! affiliated
with
them
unde
the
r
term
s of Section 2 of the
flIcalag Act of
1933."

1

r

Approved.
Telegra
ra to Mr.
Hale, Cashier of the Federal Reserve Bank of
Sala pr.s_
.4q1elsoos reading
as follows:
,L.
Referrinp your May 25 wire
r4o.a. "
Re
, it is understood that Philadelwher.1, serve bank
entered into an arrangement with the local mint
4re .7"Y silver
dollars paid by mint in exchange for silver bullion
thel.
'
eft at 'flin
m t for acc
account
ot of Reserve bank which gives credit
del,
toefer to a
designated member bank and thereupon sells the silver
dollars
to the mint as
a transfer of funds. Suggest you endeavor




1586
5A9/34

-18-

"to work out a
similar plan at San Francisco."
Approved.
Letter to Mr. Carlton McCarthy, New York, New York, reading
O.

f01
10178:

"The Federal Reserve Board has received a copy of your
letter to Er. W. H. Dillistin,
Assistant Federal Reserve Agent
at the
Federal Reserve Bank of New York, dated May 10, 1934,
connection 'with your applications under Section 32 of the
'anking Act of 1933 for permission to
serve at the same time as
1 director
of the Peoples National Bank of Patchogue, Patchogue,
New York,
as an officer and director of Great Northern Investing
C0
Inc., New York, N. Y., and as an officer and director of
Great"Northern
Bond and Share Co. Inc., NOW York, N. Y.
The Board wishes it understood that its action in refusing
to
grant you a permit to continue the foregoing relationships is
riot to be
regarded as reflecting in any degree upon your desiralitY as an officer and director of the Peoples National Bank
Patchogue, except in the respect that your relationships with
rat bank
and with the Great Northern Investing Co. Inc., and
Great
Northern Bond and Share Co. Inc., come within the prohibilons of
Section 32.
"The Board, homover, believes that
one of the purposes
underlyinr:,
the enactment of that section was the divorcement of
,0,111mercial banking from investment bankim:. The Great Northern
fcliesting Co. Inc., mad Great Northern Bond and Share Co. Inc.
°1*4 Your application appear to be dealers in investment securities
of the kind
referred to in that section, and the Board beti'leves that the
relationships covered by your application are of
,
16
which that Section was intended to terminate. According,f! ala the absence
of anything to show that the corporations
are not the kind at which the provisions
of the section
I"c d
irected, the Board believes that it may not properly make
exception as to your application."

1

Z

Approved.
Letter
32

Of tho

tio1ship

_
to the followino, applicant for a permit under section

'-'king Act
of 1933, stating that it appears that the rela-

covered by the application is within the class which section
de •
61gned to
terminate, and that, accordingly, the Board is unt p.
-111d that it
would not be incompatible with the public interest

32 vit.




158'7
5/29/34

-19-

as declared
by the Congress to grant the application, although in the
event the
applicant desires to submit further facts or arguments in
support of the
application the Board is prepared to give them careful
eration;
consid1.
Grayson M.-P. Murphy, for permission to serve at the same
:La.me as a
director of the Guaranty Trust Company of New York, New
York, New York, as a trustee of rihe New York Trust Company, New
York, New York, and as a partner of G. M.-P. Murphy end Company,
New York, New York.
Approved.
Telegram to lir. Young, Assistant Federal Reserve Agent at the
Federal

Reserve Bank of Chicago, reading as follows:

"Your wire today. Since you advise that Northern Trust CornPony
c
of Chicago is not regularly associated with N. 14. Harris
_°nTanY and other members of Syndicate handling 42,000,000 Hartford C
onnecticut Metropolitan District bonds, it appears that it
not correspondent bank for such other menbers and that permit
riot
necessary for it to join in syndicate."
Approved.
T elegram to Lr.
Stevens, Federal Reserve Agent at the Federal
Reserve

Bank of
Chicago, reading as follovis:

"Board today decided to issue permit to Harris Trust and
ThArIll
irgs Bank under Section 32 to act as correspondent bank for
in17. Harris Company for period until June 16, 1934 in dealobpn and/Or undermriting following types of securities only:
or S
I Itialls of United States, general obligations of any State
aut.— any Political subdivision thereof, obligations issued under
110 hori+
,--Y of Federal Farm Loan Act, obligations issued by Federal
'oan Banks, and/Or obligations issued by Honk) Owners Loan
811-013ation. Formal permit being prepared and 1,1111 be nailed
'''Ys Please advise Harris Trust and Savings Bank."
Approved, Mr. James voting "no".
Let
Letter to Mr. Curtiss, Federal Reserve Agent at the Federal
Recerve
of Boston, statin- that the Board has given consideration




150E3
5/29/34
-20to the

following application for a permit under the Clayton Act, and

th4t1 upon the basis of the information before it, feels that the
i"utInce of the permit applied for mould be incompatible with the
Public interest.
The letter also requested the agent to communicate
to the
aPplicant the Board's position in the natter, and to advise
the
Board promptly as
to mhether the applicant desires to submit any
additional data, and, if not, as to what steps he proposes to take in
order t° eariPlY with the provisions of the Clayton Act.
M.NCampbell Bosson, for permission to serve at the same time as
a director
of The Broadway National Bank of Chelsea and as a di!lector and officer
of the Chelsea Trust Company, both of Chelsea,
laas
sachusetts.
Approved.
Letter to Mr. Charles 6. Sargent, Now York, New York, reading
48 f011ows

.

"The Board has received your letter of Lay 18, 1934, regardits letter of April 30, 1934, denying your application under
6 Clayton Act
for a permit to serve at the same time as a partner of
the firm of G. M.-P. Murphy & Co., New York, New York,
d as a director of the Peninsula National Bank of Cedarhurst,
.r, 17 York. You
indicate that you are not certain mhether your
"21 should
be regarded as a firm of 'private bankers' within
'ne 21aning of
the Clayton Act.
Az was pointed out in its letter of April 30, 1934, the
l !rd would have no authority to issue a permit to you under the
g
i;0%Yton Ac4.
id if your firm is not a firm of 'private bankers' withen the meaning of
that Act. However, the Board feels that, irreklIcIti7e ef whether your firm is a banking institution of that
dec;" it Would be incompatible with the public interest, as
Ac,'Ilred by the Congress, to issue a permit under the Clayton
a .eovering
service at the same time to a national bank and to
m which
carries substantial margin accounts.
clan. Xce your service to G. M.-P. Lurphy & Co. and the Peninthe c
lonal Bank of Cedarhurst is forbidden by Section 8A of
layton Act, it will be appreciated if you will notify the
.whet
i-tt
erea
Reserve Agent at the Federal Reserve Bank of New York
st°Ps you intend to take to bring your relationship with

r




1":

5AW34

-21-

those institutions into conformity with the requirements of that
section."
Approved, toc;ether with a letter to
Mr. Case, Federal Reserve Agent at the
Federal Reserve Bank of New York, reading
as follows:
, "A copy of the Board's letter of April 30, 1934 addressed
1 1'. Charles S. Sargent denyinE his application under the Clay"
- 311 Act for a pernit to be at the same time a member of the firm
of G. M.-P.
Murphy & Company, New York, New York, and a director
of the
Peninsula National Bank of Cedarhurst, Cedarhurst, New
ork, has been sent to you.
Er. Sargent has also filed an application under Section 32
of: the Banking Act of 1933 for a permit covering the some relat
,;(311shiP. In view of the action taken by the Board denying the
--Layton Act permit, it would serve no useful
purpose for it to
act upon
the application under Section 32, as a permit issued
111:1der that
section would not render lawful a relationship prohibited lIthe Clayton Act. The Board, therefore, will take no
further
on upon that application."
to

Letter dated May 28, 1934, approved by six members of the
13clard, to La...
hoxton, Federal Reserve Agent at the Federal Reserve
Bank
Of Richmond, stating that the Board has given consideration to
the t°11a711/1g application for a permit under the Clayton Act, and that,
4°4 the basis
of the information before it, feels that the issuance
Of theri taPplied for would be incompatible with the public interests

The letter
also requested the agent to communicate to the applieant the Boardts
position in the matter, and to advise the Board
PrellaPtlY as
to 'whether the applicant desires to submit any
additional
if not, as to what steps he proposes to take in order to
eQ1Ply with
the provisions of the Clayton Act.
. 0
111 Ms 1). LittleDaT,e, for permission to serve at the same
a director of the Liberty hational Bank of Washington,.
D. C., and as a director of the Bank of Bowie, Bowie,
rYland.




Approved.

1590
5/29/3
-22Letters dated ',ay 28, 1934, approved by six members of the
Board, to
applicants for permits under the Clayton Act, advising of
aPPr°7a1 of their applications as follows:
Mr. I1liamR.
Collins, for permission to serve at the same time
‘s.a
t
director of The First National Bank of Norwood, I:or-wood,
ul?,10, and as a director of The First National Bank of
Cincinnati,
Cincinnati,
Ohio.
J. B. Doan, for permission to serve at the same time as a
director of The First National Bank of Cincinnati, Cincinnati,
, as
and
director of The First National Bank of Norwood,
Ohio.
Mr• r, 1.
Williams, for permission to serve at the same time as
director of The First National Bank of West Newton, l'est Newton,
bennsylvania, and as a director and officer of The First National
1)ank of'
Smithton, Smithton, Pennsylvania.
Mr. n W.
Lundsten, for permission to serve at the same time as
a.
director and officer of The Buffalo National Bank, Buffalo:
j-nnesota, and as a director and officer of The Minnetonka State
'bank, Excelsior,
Minnesota.
A
Mr. 'if
" 4. McMillen, for permission to serve at the same time as
Eit,. director
and officer of The First National Bank of Pukwana,
tre
s
t
LeSalint,Dakota, and as a director and officer of the OkaOkaton, South Dakota.
Approved.
Letters to applicants for permits under the Clayton Act, adof
aPproval of their applications as follows:
j
as
aliles T. O'Connell, for permission to serve at the same time
co a director of
The Aquidneck National Exchange Bank and Savings
Thnl,nY of Newport,
Newort, Rhode Island, and as a director of
Plan Company of Rhode Island, Providence, Rhode
'
181and.
lir. j
.
1 Thompson, for permission to serve at the same tire
as
and- oarector and officer of The Aquidneck National Exchange
Bank
dire vings Company of Newport, Newport, Rhode Island, and as a
Rhoci;I:
:
1011dT
.he Morris Plan Company of Rhode Island, Providence,




- 591
1
5/29/34-

-23-

Mr. .a. H. Barton, for permission to serve at the some time as
director and officer of rihe First I;ational Bank of Madison,
Idadison,
New Jersey, and as a director and officer of the Madison
Trust Company, Madison, New Jersey.
Mi. Maurice
Callahan, for permission to serve at the same time
,
..sf.3 a director and officer of The First National Bank of Old
Old Forge, New York, and as a director of The Hamilton
e; National Bank of Wells, Wells, New York.

Mt

Mr.

Dennis Dillon, for permission to serve at the same time as
director of The First National Bank of Old Forge, Old Forge,
New York,
and as a director of The Hamilton County National Bank
of Wells,
ie1l
New York.

1.1r.
Charles Williams, for permission to serve at the same time
as a
director of The First National Bank of Old Forge, Old Forge,
Flew York,
and as a director of The Vaitestovin National Bank of
ithitesboro, ';ihitesboro, lew York.
•
llard Matthews, for permission to serve at the same time
as a director and
officer of the Viest Side Bank, Scranton, Penn!
Ylvania, and as a director of The First National Bank of
Scranton, Scranton, Pennsylvania.
Mr. A
lexander T. Galloway, for permission to serve at the same
pl!!la as a director of the Central Farmers Trust Company, West
i!t-Lm Beach,
Florida, as a director of the First National Bank in
!
14- ]
jal Bee'clis Palm Beach, Florida, and as an officer of the Central
-G4lover Bank
and Trust Company, New York, New York.
J.
4. Williamson, for permission to serve at the same time
a director
of the Central Farmers Trust Company, :iest Palm
1,,oh, Florida,
and as a director of the First National Bank in
ta.m
Beach, Palm Beach, Florida.
c.
„14 _

I

WV.

Green, for permission to servo at the same time as a
;:4-ector of The
First lational Bank of Lake Park, Lake Park, Iowa,
asa director
of the Security State Bank, Sutherland, Iowa, and
a director
of the Security State Bank, Hartley, Iowa.
a
Thompson, for permission to serve at the same time as
direct
L...ror
and officer of The First National Bank of Lake Park,
IZ,Park, Iowa,
as a director and officer of the Security State
Bank, tn71'1and, Iowa, and as a director of the Security State
ey, Iowa.
Lir.
,
a ,:zeo. A.
Guild, for permission to serve at the same time as
ulrector and
officer of The Central National Bank of Topeka,




1592
5/29/34

-24-

Topeka, Kansas, ana as a director of The State Bank of Bern, Bern,
Kansas.
11r.A. E. Keeney, for permission to serve at the sane time as an
officer of the Mercantile Bone Bank & Trust Company, Kansas City,
141.88ouri, and as a director of The National Bank in North Kansas
Clty, North Kansas City, Missouri.
lir. Nathan Rieger, for permission to serve at the same time as
a director
and officer of the Mercantile Home Bank & Trust CornKansas City, Missouri, as a director of The Stock Yards
i'tional Bank of Kansas City, Kansas City, Missouri, and as a
Ii(Igicitor and officer of The National Bank in North Kansas
City,
Kansas City, Missouri.
Approved.

Thereupon the meeting adjourned.

Assistant Secretary.

41:113rOvecit