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702

A meeting of the Board of Governors of the Federal Reserve
8Ystan was held in Washington on Monday, May 29, 1939, at 10:30 a.m.
PRESENT:

Mr.
Mr.
Mr.
Mr.
Mr.

Eccles, Chairman
Ransom, Vice Chairman
McKee
Davis
Draper

Mr. Carpenter, Assistant Secretary
Mr. Clayton, Assistant to the Chairman
Mr. Goldenweiser, Director of the Division
of Research and Statistics
Mr. Snead, Chief of the Division of
Bank Operations
Mr. Dreibelbis, Assistant General Counsel
Mr. Vest, Assistant General Counsel
Mr. Boothe,Technical Assistant in the
Division of Bank Operations
Further consideration was given to the report to be made by
the B°ard in response to the request received from the Chairman of the
Ban'te4
-'
14g and Currency Committee of the Senate on the Mead bill (S. 2343)
44d to
the question whether the Board should recommend the adoption of

the Plan outlined in the memorandum prepared in the Board's offices
der date of
April 6, 1939, for the creation of a permanent agency
to Pr"ide funds for small business enterprises unable to obtain adeIlte financial assistance from other sources.




At the conclusion of the discussion,
the staff was requested to revise the draft
of report in accordance with suggestions
made during the discussion, it being understood that the revision would be considered
at the meeting of the Board on June 2.
It was also understood that Chairman
Eccles would call the Chairman of the Senate
Banking and Currency Committee on the telephone and advise him that the report was

703
5/29/39
being prepared and would be submitted to
the Committee not later than Monday of next
week.
At this point Messrs. Goldenweiser, amead, Dreibelbis, Vest
Boothe left the meeting and the action stated with respect to each
f the matters hereinafter referred to was then taken by the Board:
The minutes of the meeting of the Board of Governors of the
l'edellal Reserve System held on May 26, 1939, were approved unanimously.
Memorandum dated May 26, 1939, from Mr. Sgurney, Building

1114141ger, submitting the resignation of John M. Costello as clerk of
the

guard force and recommending, with the concurrence of Mr. Noell,

48aistant Secretary, that the resignation be accepted as of the close
or b
Usitess on May 15, 1939.
Approved unanimously.
Telegram to Mr. Hitt, First Vice President of the Federal
Res
"
lire Bank of St. Louis, reading as follows:
"Retel May 29. Board approves designation of A. Bas an assistant examiner in order that he may as8ist in the examinations referred to and scheduled for
this week."

PO wers

Approved unanimously.
Memorandum dated May 18, 1939, from Mr. Snead, Chief of the
1017-181
On of
Bank Operations, submitting a letter dated May 15 from Mr.

al Vice President of the Federal Reserve Bank of New York, which
ated approval by
the Board of changes in the personnel classification




704
5/29/39

-3-

Of the bank to
provide for the creation of the new positions of
"Senior Clerk" in
the Return Items and Government Check Division,
RetUrn Items Section of the Check Department, and "Senior Clerk" in
the Examng
Division of the Berk Exsmination Department, for the
discontinuance of the position of "Chief Investigator" in the Investi8"1°n Section of the Service Depal went and for the transfer of the
P°sition

"Investigator" in the Investigation Section of the Service

teP/Irtillent to the Personnel Section of the Personnel Department, for
increase in
the maximum annual salary for the position of "Dentist"
1/1 the Medical Division from $450 to 000, and for a minor change in
the cleecriPtion of work for the present position of Senior Clerk in

the Return Items
and Government Check Division, Return Items Section
"the Check
Department.

The memorandum stated that the proposed

ellehges had been reviewed and recanmended that they be approved.
Approved unanimously.
Letter to Mr. Evans, Vice President of the Federal Reserve
134k Of Dallas, reading as follows:
"This is in reply to your letter of May 17 regarding
the question of adequacy of the capital structure
the Southern Arizona Bank and Trust Company, Tucson,
arizona. You refer to the fact that in submitting the
morandum on Form 212 regarding the examination of the
as of March 24, 1939, you expressed the opinion,
cs"
ich was concurred in by President Gilbert, that the
structure is adequate at this time for
the
"le reasons set
forth by the examiner on pages E-1 and

?r

r




_ 705
5/29/39

-4-

of the report of exsmination. In your letter of
May 17, however, you state that the capital position is
well within the borders of what might be termed the twilight zone between adequacy and inadequacy, and that
before acquainting the trust company with your conclusion 'that, under all the circumstances, the situation
does not yet constitute a violation of the mmbership
condition regarding capital ratio', you would like to
have an expression of the Board's own views on the case.
"Ile capital account as shown by the books is admittedly low, and it is felt that, as stated by your ex41.11-ner on page 2(1) of his report of examination, contlnued consideration should be given to the adequacy of
the capital account in relation to the bank's liabilities
and with
respect to the condition of membership regarding
the
maintenance of an adequate capital ratio. The ex7,niner's comments with respect to the question on pages
44-1 and E,-2 of the confidential section of the report
have been read with interest, and it is believed that
the conclusion expressed on page E-2 represents a reasonable position. Accordingly, it is felt that no requirement
teed be made
at this time under the condition of memberShip for an increase in capital, but that you could
If
tl °PerlY request the management of the bank to give con'
fluing attention to the building up of the capital acc°11ht and to devote the major part of the bank's net profits
to that
purpose.
"It has been noted from the examiner's comments on
age E
,
2 that, because of the high rate of taxation on the
,,ank e s capital account, the management desires to keep the
:
ccount at a low figure. The question of taxation, however,
does not
enter into the determination of the adequacy of a
.ahk's capital account and a high rate of taxation does not
Justify a capital account which would be considered inade°Mate if the
tax rate were lower."

t

Approved unanimously.
Telegran to Mr. Shortt, Assistant Federal Reserve Agent at the
l'eder
al Reserve
Bank of San Francisco, stating that, subject to the conditi
-- set forth in the telegram, the Board of Governors of the Federal




706

5/29/39

-5-

Reserve System authorizes
the issuance of a general voting permit,
Ilader the provisions of Section 5144 of the Revised Statutes of the
United States,
to the "First Security Corporation of Ogden", Ogden,
Utah, entitling
such organization to vote the stock which it owns or
c°11t1*(31s of the "First Security Bank of Idaho", Boise, Idaho, and the
"11113t Security
Bank of Utah, National Association", Ogden, Utah, at
all

Meetings of shareholders of such banks, and that the period within

lilhieh a Permit may be issued pursuant to the authorization contained in
the telegram
is limited to thirty days from the date of the telegram unless an extension
of time is granted by the Board.

The conditions con-

tamlled in the telegram upon which the permit was authorized were as
follows:
t11.

Prior to issuance of general voting permit authorized herein, applicant shall execute and deliver to
You in duplicate an agreement in form accompanying
Board's letter X-9385, except that (a) paragraphs
numbered 1, 2, 4, and 5 Shall be omitted and remaining numbered paragraphs appropriately renumbered,
and (b) all lettered paragraphs and introductory
sentence immediately preceding them shall be omitted.
Prior to issuance of general voting permit authorized herein, each of applicant's subsidiary banking
institutions shall have charged off or otherwise
eliminated all assets in classification IV as shown
by latest available reports of examination by the
appropriate supervisory authorities.
rt3.
Prior to issuance of general voting permit authorized herein, Federal Reserve Bank of San Francisco
shall be satisfied that all provisions of voting




707
5/29/39

-6"permit application executed by applicant on November
18, 1936, and of agreement executed by applicant on
November 20, 1936, have been complied with.

"4. Prior to issuance of general voting permit authorized
herein, counsel for Federal Reserve Bank of San Francisco shall ascertain and be satisfied that no organization other than applicant is a holding company
affiliate of the banks named above by reason of fact
that majority of applicant's class B stock is held
by M. A. Browning, Val. A. Browning, George S. Eccles,
and S. S. Eccles, Trustees."
Approved unanimously.
Letter to Mr. Swanson, Vice President of the Federal Reserve
441c of Minneapolis, reading as follows:
"Reference is made to your letter of May 23, 1939,
transmitting
the request of the First State Bank of
!1!ahmore, Rushmore, Minnesota, for permission to purchase an additional 36/76 interest in the banking property which it now occupies for the consideration of
402,000.
"In accordance with your recommendation, the Board
interposes
no objection to such investment in the amount
indicated
and it is requested that you advise the bank
ac
cordingly."




Approved unanimously.

Thereupon the meeting adjourned.

Ass

tant Secretary.