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1521 A meeting of the Board of Governors of the Federal Reserve SYstem was held in Washington on Thursday, November 11, 1937, at 11:30 PRFSEUT: Mr. Eccles, Chairman Mr. Szymczak Mr. McKee Mr. Mr. Mr. Mr. Con Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman sideration was given to each of the matters hereinafter re- terred -0 and the action stated with respect thereto was taken by the B3arci: Telegram to Mr. Kimball, Secretary of the Federal Reserve Bank or ew °Ilt, stating that the Board approves the establishment without °114rige b7 the bank on November 10, 1937, of the rates of discount and rchaas in its existing schedule. Approved unanimously. Letter to Honorable J. F. T. O'Connor, Comptroller of the Curterley, as follows: prea, "This refers to Mr. Gough's letter of July 9, 1937, New7:ating on behalf of the First National Bank, Ithaca, 11.;,:t3rk, the question whether a.deposit of the 'Board of bcW Commissioners Relief Fund' may be classified by a membthk as a savings deposit. per It is understood that these funds consist of a 2 ent tax levied on foreign insurance companies on their : groa -2111111111ms received from insurance written in the City or if reli:,?ca, and that this money can only be used for the "of sick and injured firemen. tio "The Board of Governors has recently taken the postn that police or firemen's pension or relief associa- 1522 11/11/37 """ :”ohe (including a special fund held by a political sub,leion to provide pensions for police or firemen) may considered as organizations operated primarily for re16"1°11s, philanthropic, charitable, educational, fraternal ?r other similar purposes and that deposits of such organizations may be classified by member banks as savings desits if they comply with the other requirements of the e laition. It appears that the 'Board of Fire Commissioners pj Fund' falls within the scope of this ruling and, acI,!rdinglY, it is our view that the deposits in question may ' " c classified by member banks as savings deposits if they °mPlY with the other requirements of the definition. of "Mr. Gough also asks to be advised whether deposits s school districts may be classified by member banks as trillE;s deposits. The Board of Governors has recently taken :e.position that school districts may be considered as orZt atns operated primarily for religious, philanthropic, S , educational, fraternal or other similar purel. ses Accordingly, deposits of school districts may be plasslfied by member banks as savings deposits if they corny with the other requirements of the definition." r r Approved unanimously. Letter to Honorable X. F. T. O'Connor, Comptroller of the Curreading as follows: 4 I "Reference is made to Mr. Lyons' letter of December ) 1,936, regarding the question whether deposits under the ti be tle 'Custodian E. & R. Branch, 4th Corps Area' may theelRe drisified by member banks as savings deposits under nition in section 1(e) of Regulation C(.. wi th:Mr. Lyons stated that the funds in question may be pen,:fawn only on signatures of the officers of the Finance thent of the United States Army, which has advised er member bank that the funds are not public funds but n-aPpropriated moneys and public donations which are coli ealjuered to be in the same category as a Company or Or: ttimh Fund and that the funds are disbursed only for edll z ohal and recreational purposes. the i"The nature of these funds is not entirely clear from by .J,Ilfo rmation submitted. However, if the funds are held ser 'Custodian' for the benefit of the members of the rorlr:!e organization in question and are in fact used only ' w llicational and recreational purposes, no objection 1.523 11/11/37 -3"-. 41111 be offered to the classification of these deposits as. savings deposits, if they otherwise comply with the requirenents of the definition in section 1(e) of Regulation q.” Approved unanimously. Letter to Mr. hood, Vice President of the ederal Reserve Bank Of 6 L°uis, reading as follows: "There is inclosed a copy of a letter dated September 19371 received by the Board from The Callaway Bank, -1. 11°11, Missouri, requesting that the Board waive the rel eat for publication of reports in accordance with 111?,12a by Investors Realty Company, an affiliate of the ---ject member bank, together with a copy of the Board's ietter of acknowledgment dated September 20. The bank cliamitted and published the required report of the affiliate 1„8 af the last call date, June 30, 1937, but desires to be lieved from the necessity of publishing such reports in future. In support of its request it states that 'Pubof the affiliate statement requires a certain tiliqlInt of extra work, not of any significance, however, and same extra recurring expenses' and that 'the benefit and advantage to any one, of such publication is not worth theyd0es not justify this expense and extra work although are not excessive.' It appears that the Investors Realty Company was orgam ba-l ed in December, 1936, about three months before the 8 admission to membership, for the purpose of taking Over ch the bank's 'Other real estate.' The affiliate purti,.,eA the 'Other real estate' of the member bank for a ,''0$ giving in payment therefor 410,000 in cash and note for 20,000 secured by farm land and poojements. It further appears from the examination reat the bank as of February 8, 1937, that, on that 1.0.re, the shareholders of the affiliate owned 776 of the tilo" outstanding shares of the subject member bank. Alnot entirely clear, it is understood from the bank's s.hauer that control of the affiliate is still held by the ketj ellalders of the member bank who own or control a th;c4: 1 itY of the shares of such bank. If that is the case !Ilea -Ln vestos .r Realty Company is an affiliate within the iliprIling of subparagraph (2) of Section 2(b) of the Bank- Act of 1933, and the bank has raised no question as 13 p l j 1.524 11/11/37 -4"to the existence of such affiliation. Since the affiliate aPpears still to be indebted to the member bank in ',the amount of 820,000, reports thereof are not waived by 0:Le existing terms of waiver printed on Form 220b, inasmuch ) i8 the indebtedness exceeds 01,750, or 1 per cent of the Erik's capital and surplus. "In order to avoid any possible discrimination, the f°ard has, as you know, adopted certain rales applicable 60 all State bank members alike governing the waiver of rePorts of affiliates. These terms of waiver, which are 1.3trinted on Form 220b, were formulated in cooperation with wh,Comptroller's office and are the same as the terms of ' e l!'er prescribed by that office governing reports of aftliwTes of national banks. It is not the Board's practice i° .--va submission and publication of affiliate reports wn individual cases, although specific reports have been ral7ed in a few cases involving exceptional circumstances, example, where an affiliation was terminated soon after c call for reports was made. From time to time the Board w°nslders possible modifications of the existing terms of ! s tiver, but such modifications must, of course, be conRietent with the provision of Section 21 of the Federal Act, as amended, which empowers the Board to waive the e requireuent for submission of an affiliate report if, ! t the judgment of the Board, the report 'is not necessary sluxeldalsclose fully the relations between such affiliate and bank. pcInk and the effect thereof upon the affairs of such l ,'The Board sympathizes with the position of the subject bank and appreciates that the affiliate relationa shi _ was brought about in circumstances which doubtless Were that advantageous to the bank. The Board feels, however, ,' it would not be consistent with the pertinent proviw.1 . 41 csr law to issue regulations which would waive submission rel. Publication of reports of affiliates in cases involving t.,_ationships such as exist in this instance. Please advise member bank accordingly." Approved unanimously. Letter 4 as to Honorable Burton K. Wheeler, United States Senate, follows: Rard "This refers to your letter of October 26, 1937, reinE the application of the Viking Mining Company, Great 1525 11/11/37 -5- : Falls, Montana, for an industrial advance from the Federal ileserve Bank of Minneapolis. As you were advised in our letter of 30, 1937, we have communicated with the FedReserve Bank of Minneapolis and have obtained additional information with reference to this application. . The application was considered by the Industrial Adv ills°rY Committee and the Discount Committee of the Reserve ank and by the bank's counsel. One of the problems which erebee in their consideration of the matter was whether the requested advance could lawfully be made in accordance with section 13b of the Federal Reserve Act which, as you know, liprolrides that industrial advances may be made by a Federal brerve bank to 'an established industrial or commercial cA:!'lless * * * for the purpose of providing it with working o;'"ult. After carefully studying the matter it was conthat the proposed advance could not lawfully be _!de hY the bank since it was not a loan for the purpose Providing 'working capital'. "This conclusion was based upon the understanding that the 0 ; Proeds ce of the loan were to be used for the payment e existing indebtedness and for the purchase of permanent 4PiPment. In Mr. Dirks' letter of September 17, 1937, to ? Federal Reserve Bank of Minneapolis inclosing the applin for an advance, the following statement was made: ,w applied for a loan of ;i;35,000 with which to liquidate 426 i. ,845.36 of liabilities. The remainder of the loan, 4 granted, is to be used as further working capital.' "Although Mr. Dirks' letter stated that the remainder C)f the oth oan was to be used as further 'working capital', ti er information submitted in connection with the appliesi to be Used ndicated that the remainder of the loan was for fixed capital purposes. For instance, in his lette YOU dated August 13, 1937, Mr. Dirks stated the foler ng: 'Mr. Jenkins, therefore, referred us to the Fedree ' Reserve Bank, inasmuch as the accommodation that we leguire being for the payment of additional equipment, en— ilnr cigeuent of mill and betterment in the mine does not come theer the head of regular banking, and as stated before, thi returns from our small mill are not sufficient for ke 8 additional expenditure, which is justified and in ePing with our prospects and possibilities.' bet: "It appears from the report made by the Federal Reserve th04 to the Board of Governors that the application has had cl„r°ugh consideration by the Industrial Advisory Committee MU bY the Federal Reserve bank. The Federal Reserve Bank Z 1.526 11/11/37 -6- Of Minneapolis also advises that it has received a letter 1_,-ted October 26, 1937, from the applicant furnishing addiu.onal data regarding the application and that this letter has been submitted to the Industrial Advisory Committee d the applicant so advised. In the circumstances there 7,13Pears to be no basis for further action by the Board of "01Ternors in the matter." n Approved unanimously. Letter to Mr. Gidney, Vice President of the Federal Reserve Bank Or New yo rk, reading as follows: "The Board has considered your letter of October 20, 193 i,7 and inclosures regarding the desirability of amendt;:g Regulation R by adding an exception which would make provisions of section 32 of the Banking Act of 1933 eaePplicable to a 'limited' partner in a firm primarily ged in the business described in that section. "As You know, the question is the same as that which v" considered by the Board in revising Regulation R followw e the Banking Act of 1935. The Federal Reserve banks sPecifically asked to comment upon the desirability or Making such an exception, and the Board considered the m_vatt.er In the light of their comments and all other data ealable to it before the revised regulation was issued aL!fluerY 1936. It does not appear that any new facts or ,.0.5.Ltmants are advanced, and on further consideration the itard does not believe that it should alter the views which had when the revised Regulation R was issued." i Approved unanimously. Thereupon the meeting adjourned. 413b1, ed
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