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2564 A meeting of the Board of Governors of the Federal Reserve System was held in Washington on Friday, November 29, 1955, at 10:00 a. m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Thomas, Vice Chairman Hamlin Miller James Szymczak O'Connor (first part of meeting) Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman In accordance with the action taken at the meeting yesterday, there was presented a draft of letter to Governor Harrison, Chairman of the Federal Open Market Committee, reading as follows: "Reference is made to the Board's letter of November 23, 1935, to you with regard to the resolution and motions adopted by the Federal Open Market Committee at its meeting in Washington on October 22-24, 1955. wahile the Board took the position that a substantial shift from short to long maturities in the System account would not be desirable at this time, the statement of this position waS intended to apply only to a shift to bonds and was not intended to apply to such shifts in the maturities of the bills Irld notes held in the portfolio as might be advisable in the Judgment of the Executive Committee. Therefore, the Board has requested me to advise you that it approves the authority given to the Executive Committee to the extent necessary to enable it, ! :lul'ing the period before the next meeting of the Federal Open Market Committee, to make shifts, in an aggregate amount not ,exceeding ;300,000,000, in maturities of Treasury bills and Iressury notes held in the System account. "A copy of this letter is being forwarded to the chairman Of the board of directors of each of the Federal reserve banks." Approved unanimously, for the reason stated in the letter, with the understanding that copies of the letter would be sent to all Federal reserve banks. Chairman Eccles stated that the special matter for consideration 2565 11/29/35 -2- at this meeting was the designation of chairmen and Federal reserve agents, and the appointment of deputy chairmen, Class C directors, and directors of branches of Federal reserve banks for terms beginning January 1, 1966. He said that possible approaches to the question of the designation of chairmen and Federal reserve agents were (1) to fill the existing vacancies and redesignate the present chairmen and Federal reserve agents at the other Federal reserve banks, appointing as Class C directors those whose terms as such expire on December 51, 1965; (2) to red eeignate the present chairmen and Federal reserve agents and reapPoint as Class C directors those whose terms as such expire on December 31 '1935, with the understanding in all cases that the continuance of their appointments would be at the pleasure of the Board of Governors of the Federal Reserve System, ( ) to redesignate as chairmen and Federal reserve agents only those whose terms as Class C directors do not expire at the end of this year, and (4) to redesignate none of the present hairmen and Federal reserve agents and to fill none of the existing Vaeancies. During the ensuing discussion, the question was raised by Mr. j4mee as to whether the Board was not under a duty to appoint Class C directors to fill all vacancies, both those now existing and those which will arise by reason of expirations of terms on December 51, and to designate chairmen and Federal reserve agents, at all the Federal reserve banks. Some of the members of the Board expressed the opinion that it would be consistent with the purpose of Congress in requiring the reorganization 2566 11/29/55 -3- of the Board to take such action now and that to do so would unnecessarily restrict the freedom of the new Board to make such appointments as it might desire. Mr. O'Connor expressed the view that the appointment of Class C directors with the understanding that they would serve at the pleasure of the Board would violate one of the fundamental principles of sound government that when a person is appointed under a statute for a definite term his appointment should not be made under conditions which would deprive him of his independence during the term. He also stated that he felt the present Board, with its intimate knowledge and experience in matters co ncerning the Federal Reserve System, was in a much better position to maks appointments at this time than a new Board would be. Mr. Szymczak pointed out that, if the present chairmen and Fedreserve agents could be redesignated to serve at the pleasure of the Board) the new Board would be at liberty to continue them in office or take such other action as it saw fit. He also suggested that a memorandum Ilight be left for the information of the new Board setting forth the Vie Y13 of the present Board with regard to the present chairmen and Fedreserve agents. Mr. Miller reviewed what appeared to him to be the important IA4tter8 to be taken into consideration by the Board in reaching a decision in this matter and stated that he felt it was of extreme importance that „ "la present Board take no action that would embarrass the new Board 2567 11/29/35 -4- or that would not be clearly in the best interest of the Federal Reserve • System. He referred to the possibility of an amendment to the law which would permit the separation of the office of chairman and Federal reserve agent and expressed the hope that such an amendment would be adopted at the next session of the Congress. He added that in view of these considerations he was inclined to the view that the best solution of the problem would be for the present Board not to redesignate the chairmen and Federal reserve agents whose terms as Class C director expire at the end of the Present year. There followed a detailed discussion of the possible actions that the Board might take in the premises and the problems presented in ecmnection therewith. In addition to the pending reorganization of the Board and the possible amendment to the law which would permit the sepa- ati°n of the office of chairman and Federal reserve agent, reference 714a also made to the fact that after March 1, 19362 the president of each Federal reserve bank will be the chief executive officer of the bank and that the new Board might have entirely different ideas from those of the Ill'esent Board concerning the duties of the chairman and Federal reserve 4gent and the type of men that should be chosen for that position. It Iv" 4180 pointed out that the Federal Open Market Committee will be reetIttstructed as of March 1, 1936, thereby making at that time a further )i challge in the organization of the Federal Reserve System, which the new Bottrri maY wish to take into consideration in the selection of Federal eerve agents at the Federal reserve banks. 25E8 11/29/35 -5Mr. Hamlin moved that, in view of the various considerations referred to above, the chairmen and Federal reserve agents whose appointments as Class C directors expire on December 31, 1935, be reappointed as Class C directors each for a term of three years beginning January 1, 1936, and redesignated as chairmen and Federal reserve agents for the period from January 1 to February 29, 1936, inclusive, and that the chairmen and Federal reserve agents whose terms as Class C directors do not expire at the close of the current year be redesignated as chairmen and Federal reserve agents for the period from January 1 to February 29, 1936, inclusive. Carried unanimously, and, accordingly, the following appointments and designations were made: "I F. H. Curtiss was reappointed a Class C director of the Federal Re-erve Bank of Boston for a term of three years beginning January 1, 1936, , 1145id Was redesignated as Chairman of the board and Federal Reserve Agent 'or the period from January 1 to February 29, 1936, inclusive. Mr. +1, "H. Case was redesignated as Chairman of the board of directors of "L'e Federal Reserve Bank of New York and Federal Reserve Agent for the Period from January 1 to February 29, 1936, inclusive. Mr. p . s -• L. Austin was reappointed a Class C director of the Federal ReBank of Philadelphia for a term of three years beginning January 1, ' A v 6, and was redesignated as Chairman of the board and Federal Reserve 4ge/It for the period from January 1 to February 29, 1936, inclusive. Mr, In ,,,, • W. Hoton was reappointed a Class C director of the Federal ReBank of Richmond for a term of three years beginning January 1, AiJo, and was redesignated as Chairman of the board and Federal Reserve ent for the period from January 1 to February 29, 1936, inclusive. 141'. ,B• M. Stevens was redesignated as Chairman of the board of directors Qpr e_he Federal Reserve Bank of Chicago and Federal Reserve Agent for the ' 10d from January 1 to February 29, 1936, inclusive. Mr. J., of , 0. Wood was redesignated as Chairman of the board of directors th_Lhe Federal Reserve Bank of St. Louis and Federal Reserve Agent for Period from January 1 to February 29, 1936, inclusive . 2569 t, 11/29/65 -6- Mr. J. N. Peyton was reappointed a Class C director serve Bank of Minneapolis for a term of three years 1936, and was redesignated as Chairman of the board Agent for the period from January 1 to February 29, of the Federal Rebeginning January 1, and Federal Reserve 1956, inclusive. Mr. c. C. Walsh was redesignated as Chairman of the board of directors of the Federal Reserve Bank of Dallas and Federal Reserve Agent for the Period from January 1 to February 29, inclusive. Following further discussion, Mr. Miller moved that, for the same reasons, the Board take no action at this time with regard to filling the vacancies existing in the office of Class C director and chairman and Federal reserve agent at the Federal Reserve Banks of Cleveland, Atlanta, Kansas City and San Francisco. Carried, Mr. O'Connor voting "no" for the reasons previously stated by him. In connection with the question of the action to be taken by the Board with regard to the appointment of Class C directors, other than chairmen and Federal reserve agents, for terms beginning January 1, 1956, Chairman Eccles referred to the letter of January 9, 1935, in which was Bet forth the policy adopted by the Board with respect to the appointmen t f directors of Federal reserve banks and branches, and suggested that the policy as set forth in the letter be followed in connection with the consideration of the appointment of Class C directors and directors at bl'anches of Federal reserve banks. During the ensuing discussion, Mr. 1145r tt, General Counsel, was called into the meeting and Chairman Eccles inquired whether, if the present Class C directors were not reappointed, the, could continue to serve until their successors were qualified. Mr. WYatt stated that three year terms for directors of Federal reserve banks 4 2570 11/29/55 were expressly prescribed by the law and that it contained no provision for a director holding over until his successor had qualified. Mr. James moved that, in accordance with the policy set forth in the letter above referred to, Mr. E. S. Burke, Jr., be reappointed as a Class C director of the Federal Reserve Bank of Cleveland for the term of three years beginning January 1, 1936; that Mr. John R. Stanley be reappointed as a Class C director of the Federal Reserve Bank of St. Louis for the three year term beginning January 1, 1936; and that Messrs. Owen D. Young, James Simpson, and E. R. Brown, all of whom on December 31, 1935, will have served six or more consecutive years, be not reappointed as Class C directors of the Federal Reserve Banks of New York, Chicago, and Dallas, respectively. Carried, Mr. Thomas voting "no", for the reason that he felt that Class C directors should be appointed at all Federal reserve banks for the terms beginning January 1, 1956. Thereupon, the following reappointments were approved unanimously for the same reasons as in the case of the designation of chairmen and Federal reserve agents: Mr. Allen Hollis was reappointed as Deputy Chairman of the Federal Reserv in ,e Bank of Boston for the period from January 1 to February 29, 1936, cualsive. Mr E. S. Burke, Jr., was reappointed as Deputy Chairman of the Federal a;rrve Bank of Cleveland for the period from January 1 to February 29, 6, inclusive. serv A. Delano was reappointed as Deputy Chairman of the Federal Re14,, e Bank of Richmond for the period from January 1 to February 29, 1936, 1 Mr. rj. serv" H. Kettig was reappointed as Deputy Chairman of the Federal ReitCJAIsive. ,e Bani- of Atlanta for the period from January 1 to February 29, 1956, 2571 11/29/35 -8- Mr. Paul Dillard was reappointed as Deputy Chairman of the Federal Reserve Bank of St. Louis for the period from January 1 to February 29, 1936, inclusive. Mr. Homer P. Clark was reappointed as Deputy Chairman of the Federal Reserve Bank of Minneapolis for the period from January 1 to February 29, 196, inclusive. Mr. E. P. Brown was reappointed as Deputy Chairman of the Federal Reserve Bank of Kansas City for the period from January 1 to February 29, 1936, Inclusive. 14'. S. B. Perkins was reappointed as Deputy Chairman of the Federal Reserve Bank of Dallas for the period from January 1 to February 29, 19360 inclusive. , 11r. W. N. Moore was reappointed as Deputy Chairman of the Federal Reserve iloank of San Francisco for the period from January 1 to February 29, 1936, i nclusive. There followed a discussion with regard to appointments of directors atu the branches of Federal reserve banks for terms beginning January ly 1936. During this discussion, Mr. O'Connor left the meeting. At the conclusion of the discussion, it was agreed unanimously that the policy set forth in the Board's letter of January 9, 1935, should be followed in connection with the appointment of directors at branches of Federal reserve banks and that, because of the pending reorganization of the Board, the present Board should not undertake to fill vacancies which will occur on December 61, 1965, by reason of the application of the policy. Accordingly, the following actions were taken: Mr. J. pe, B. Hill was reappointed a director of the Louisville branch of the ' ja eral Reserve Bank of S. Louis for a term of three years beginning naarY 1, 1966. Mr. J. , E. O'Connell was reappointed a director of the Helena branch of te l'ederal Reserve Bank of Minneapolis for the unexpired portion of the ' 1111 ending December 31, 1936. 2572 11/29/35 -9- Mr. R. E. Campbell was reappointed a director of the Omaha branch of the Federal Reserve Bank of Kansas City for a term of three years beginning January 1,- 1956. Mr. H. M. Haller was reappointed a director of the Portland branch of the Federal Reserve Bank of San Francisco for a term of two years beginning January 1, 1936. Mr. S. A. Easton was reappointed a director of the Spokane branch of the Federal Reserve Bank of San Francisco for a term of two years beginning January 1, 1956. Mr. Miller suggested that, in order that the Board's action with regard to the appointment of directors at Federal reserve banks and branches might be understood properly, a press statement should be issued satting forth the reasons for the action. It was agreed that such a statement should be prepared, and that the action of the Board should be held in confidence and the persons affected should not be advised of such action until the statement had been approved. It was also agreed that a meeting of the Board should be held tomorrow morning at 10:00 a. in. for the purpose of considering the statement. At this point Mr. Wyatt left the meeting and the Board acted upon the following matters: Letter to Mr. Fletcher, Acting Federal Reserve Agent at the Fed- 14 ' 111 Reserve Bank of Cleveland, reading as follows: "Receipt is acknowledged of your letter dated November 8) 1935, transmitting the request of The First-Central Trust Company, Akron, Ohio, for permission under the provisions of condition of membership numbered 12 to engage in the business cT selling mortgages insured under the provisions of the National Housing Act. It is understood that the bank has advised that, if the requested permission be granted, such sales will 2573 11/29/35 -10- "be made without recourse, guaranty, indorsements, or other obligation on the part of the bank, but that the bank will continue to service the mortgages for the purchasers. "In accordance with the request of The First-Central Trust Company, the Board excepts from the prohibitions of condition of membership numbered 12 accepted by such bank mortgages covered by insurance under the provisions of the National Housing Act. Please advise the bank accordingly." Approved unanimously, with the understanding that a similar exception would be granted to all banks now subject to standard condition of membership numbered 12. Letter dated November 27, 1955, aporoved by five members of the Bcard, to Mr. Hoxton, Federal Reserve Agent at the Federal Reserve Bank cr Richmond, reading as follows: "This refers to Mr. Fry's letter of November 12 with respect to the publication of the November 1 condition rePort by the Petersburg Savings and American Trust Company, Petersburg, Virginia. "It appears that the excess of the bank's assets over its liabilities to depositors and other creditors is less than the retirable value of its preferred stock plus the par value Of its common stock and that, accordingly, under the instructions contained in the Board's letter B-966 of March 17, 1954, the bank is not permitted to show any surplus and undivided Profits in condition reports on Form 105. It is understood, however, that in reports rendered and published pursuant to calls of the State banking department a bank is permitted to 8?Ow both surplus and undivided profits if its assets exceed liabilities plus the par value of preferred and common stock. !re Fry states in his letter that 'we are of the opinion that he public would be very much misled and disturbed if the bank should be required to publish its report of condition showing nO surplus and no undivided profits because of the requirement that the retirable value of the Class "A" stock be extended in the capital account'. "The Board appreciates that it would be confusing to the Public for a bank to publish two condition reports as of the same date, or approximately the same date, one of which showed surplus and undivided profits and the other did not. In the circumstances you may advise the Petersburg Savings and American 2574 11/29/35 -11- "Trust Company, Petersburg, Virginia, and any other bank with preferred stock outstanding with retirable value different from par value, that the excess over the par value of preferred and common stock, rather than the excess over the retirable value of preferred stock and the par value of common stock, may be used in determining the amount of surplus and undivided profits to be shown in condition reports submitted to your bank, provided that any surplus that may be shown in the condition reports shall be shown against the amended caption 'Surplus over par value of capital stock'." Approved unanimously, together with a letter to all other Federal reserve agents inclosing a copy of the above letter for their guidance in connection with similar situations arising in their districts. Letter to Mr. Prugh, Assistant Federal Reserve Agent at the Federal Reserve Bank of Chicago, reading as follows: "Receipt is acknowledged of your November 12 letter calling attention to discrepancies between the official report of condition (Form 105) and the publisher's copy (Form 105-e) submitted by the Citizens State Bank, Milford, Illinois. "The regulations printed on the reverse side of Form 105-e, Which govern the publication of condition reports submitted to the Federal Reserve banks, provide that 'The published information must agree in every respect with that shown on the face side of the condition report rendered to the Federal Reserve bank, except that any item for which no amount is reported may be omitted in the published statement.' Please call the member bank's attention to this portion of the regulation, and advise it that in future reports the instructions should be strictly followed." Approved unanimously. Letter to Mr. Case, Federal Reserve Agent at the Federal Reserve Bank of New York, reading as follows: "In connection with its consideration of the application of the 'President and Directors of the Manhattan Company', New York, New York, for a voting permit entitling it to vote the Istock which it owns or controls of 'The County Trust Company', Khite Plains, New York, the Board has determined that the ap?licant is not engaged, directly or indirectly, as a business in holding the stock of, or managing or controlling, banks, b8alking associations, savings banks, or trust companies within 2575 4/29/65 -12- "the meaning of section 2(c) of the Banking Act of 1966, as amended by section 601 of the Banking Act of 1965, and, accordiLely, the applicant is not a holding company affiliate for any purposes other than those of section 23A of the Federal Reserve Act. "Inclosed herewith is a letter to the applicant advising it concerning the Board's action in this matter. If, for any reason, you believe that this matter should be reconsidered by the Board, please communicate with the Board at once. Otherwise you are requested to transmit the inclosed letter to the applicant. A copy of the letter is also inclosed for your files. "As you will note, the Board expressly reserves the right to make a further determination of this matter at any time on the basis of the then existing facts. In this connection it is requested that you advise the Board if, at any time, you believe this matter should again be considered by it." Approved unanimously, together with a letter to the "President and Directors of the Manhattan CompaW, New York, New York, reading as follows: "This refers to the application of your company for a voting permit entitling it to vote the stock which it owns or controls of 'The County Trust Company', White Plains, New York. "The Board understands that your company is engaged in the general banking and trust business and is operated for that purpose; that your company owns 4588 of the 5000 outstanding shares of stock of The County Trust Company, White Plains, New York; that your company owns some stock of several other banks but does not manage or control such banks; that only a relatively insignificant portion of your company's assets is invested in bank stock; and that your company was not organized and is not Operated for the purpose of managing or controlling banks. "In view of the above facts, the Board has determined that Your company is not engaged, directly or indirectly, as a business in holding the stock of, or managing or controlling, banks, banking associations, savings banks, or trust companies within the meaning of section 2(c) of the Banking Act of 1936, as amended by section 601 of the Banking Act of 1965, and, therefore, it is not a holding company affiliate for any purposes other than those of section 23A of the Federal Reserve Act. Accordingly it is not necessary for it to obtain a voting permit in order to vote the stock which it owns or controls of The County Trust Company and, on this basis, the Board will give no further consideration to its application for such a permit. "If, however, your company acLiuires control over any other bank, or if the facts should at any time otherwise differ from those set out above to an extent which would indicate that your ?omPany might be engaged, directly or indirectly, as a business 111 holding the stock of, or managing or controlling, banks, this 2576 11/29/35 -1.3- "matter should again be submitted to the Board. The Board reserves the right to make a further determination of this matter at any time on the basis of the then existing facts. "The Board's action in this matter shall not be considered as affecting in any manner the time within which your company is required to dispose of its stock of The County Trust Company as provided by the conditions under which your company was admitted to membership in the Federal Reserve System." There was then presented a memorandum, dated November 27, 1935, Prepared by counsel in accordance with the action taken at the meeting of the Board on November 27, 1935, and submitting a revision of the proposed condition of membership number 5 to be included in the 111°ard'3 Regulation "H". The memorandum had been circulated among the aPPointive members of the Board, all of whom had indicated their apPr°val of the revised condition. Thereupon Regulation "H" was approved and adopted unanimously in the following form, to become effective as of January 1, 1936: "REGULATION H Revised effective January 1, 1936 (Superseding Regulation H of 1930) "MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL RESERVE SYSTEM "AUTHORITY FOR REGULATION . "This regulation is based upon and issued pursuant to provis3,-"s of section 9 of the Federal Reserve Act and related provilons of law. (Section 9 of the Federal Reserve Act is printed in the Appendix.) "SECTION 1. DEFINITIONS "For the purposes of this regulation -"(a) The term 'State bank' means any bank or trust comP4/1Y incorporated under a special or general law of a State or under a general law for the District of Columbia, any ilutual savings bank (unless otherwise indicated), and any 4°rri3 Plan bank or other incorporated banking institution 2577 11/29/55 -14- "engaged in similar business.1 "(b) The term 'mutual savings bank' means a bank without capital stock transacting a savings bank business, the net earnings of which inure wholly to the benefit of its depositors after payment of obligations for any advances by its organizers, and in addition thereto includes any other banking institution the capital of which consists of weekly or other time deposits Which are segregated from all other deposits and are regarded as capital stock for the purposes of taxation and the declaration of dividends. "(c) The term 'Board' means the Board of Governors of the Federal Reserve System. "(d) The term 'board of directors' means the governing board of any institution performing the usual functions of a board of directors. "(e) The term 'Federal Reserve bank stock' includes the deposit which may be made with a Federal Reserve bank in lieu of a subscription for stock by a mutual savings bank which is not permitted to purchase stock in a Federal Reserve bank, unless otherwise indicated. "(f) The terms 'capital' and 'capital stock' mean common stock, preferred stock, and legally issued capital notes and debentures purchased by the Reconstruction Finance Corporation Which may be considered capital and capital stock for purposes of membership in the Federal Reserve System under the provisions of section 9 of the Federal Reserve Act. "SECTION 2. ELIGIBILITY REQUIREUENTS "(a) Capital requirements.--Under the terms of section 9 of the Federal Reserve Act, as amended, to be eligible for adgassion to membership in the Federal Reserve System 1Under the provisions of section 19 of the Federal Reserve Act, national banks, or banks organized under local laws, located in Alaska or in a dependency or insular possession Or any part of the United States outside the continental United States are not required to become members of the Federal Reserve SYstem but may, with the consent of the Board, become members of the System. However, this Regulation H is applicable only to the admission of banks eligible for admission to membership under section 9 of the Federal Reserve Act and does not cover the admission of banks eligible under section 19 of the Act. Al:AY bank desiring to be admitted to the System under the provleions of section 19 should communicate with the Federal Reserve bank with which it desires to do business. 2578 11/29/55 -15- "(1) A state bank, other than a mutual savings bank, must possess a paid-up, unimpaired2 capital sufficient to entitle it to become a national banking association in the place where it is situated under the provisions of the National Bank Act, except in the following circumstances, in which case such a bank may be admitted to membership with a lesser capital as indicated: (A) Any such institution organized prior to June 16, 1933, (the date of the approval of the Banking Act of 1933) situated in a place the population of which does not exceed 3,000 inhabitants and at the time of admission having a capital of not less than $25,000; (B) Any such institution (whether or not organized prior to June 16, 1935) situated in a place the population of which does not exceed 3,000 inhabitants and which at the time of admission is entitled to the benefits of insurance under section 12B of the Federal Reserve Act and has a capital of not less than $25,000; (C) Any such institution which is required under the provisions of subsection (y) of section 12B of the Federal Reserve Act to become a member of the Federal Reserve System in order to be an insured bank or continue to have any part of its deposits insured under the provisions of section 12B of the Federal Re"2Section 345 of the Banking Act of 1935 provides in part that: 'If any part of the capital of a national bank, State member bank, or bank applying for membership in the Federal Reserve System consists of preferred stock, the determination of whether or not the capital of such bank is impaired and the amount of such impairment shall be based upon the par value of its stock even though the amount which the holders of such preferred stock shall be entitled to receive in the event of retirement or liquidation shall be in excess of the par value of such preferred stock. If any such bank or trust company shall have outstanding any capital notes or debentures of the type which the Reconstruction Finance Corporation is authorize d to purchase pursuant to the provisions of section 304 of the Emergency Banking and Bank Conservation Act, approved March ?, 19,33, as amended, the capital of such bank may be deemed .,c) be unimpaired if the sound value of its assets is not less its total liabilities, including capital stock, but excluding such capital notes or debentures and any obligations of the bank expressly subordinated thereto.' 2579 11/29/35 -16- "serve Act6 and for which the Board, pursuant to subsection (b) of this section of this regulation, waives in whole or in part compliance with the capital requirements of section 9 of the Federal Reserve Act relating to the admission of banks to membership in the Federal Reserve System. "(2) A mutual savings bank must possess surplus and undivided profits not less than the amount of capital required for the organization of a national bank in the place where it is situated. "(0 The minimum capital required for the organization of a national bank, referred to hereinbefore in connection with the capital required for admission to membership in the Federal Reserve System, is as follows: If located in a city or town with a population - : Minimum : Capital : Not exceeding 6,000 inhabitants 0 50,000 Exceeding 6,000 but not exceeding 50,000 inhabitants : 100,000 Exceeding 50,000 inhabitants (except as stated below) : 200,000 In an outlying district of a city with a population i exceeding 50,000 inhabitants; provided State law Permits organization of State banks in such location with a capital of 0.00,000 or less 100,000 "(b) Waiver of elig:ibility requirements. -- The Board is authorized to waive requirements relating to the admission of State banks to membership in the Federal Reserve System for any "5The first paragraph of subsection (y) of section 12B of the Federal Reserve Act provides that: 'No State bank which during the calendar year 1941 or any succeeding calendar year shall have average deposits of i1,000,000 or more shall be an insured 1. ank or continue to have any part of its deposits insured after ' 111Y 1 of the year following any such calendar year during which it shall have had such amount of average deposits, unless such ',1110ik shall be a member of the Federal Reserve System: Provided, That for the purposes of this paragraph the term "State bank" shall not include a savings bank, a mutual savings bank, a Morris Plan bank or other incorporated banking institution engaged only in a business similar to that transacted by Morris -en . banks, a State trust company doing no commercial banking business, or a bank located in Hawaii, Alaska, Puerto Rico, or the Virgin Islands.' V 2580 11/29/35 -17- "State bank which is required to become a member of the System in order to be an insured bank or continue to have any part of its deposits insured. However, under applicable provisions of law (see footnote 5 on page 4 of this regulation), it cannot be determined before the end of the year 1941 what banks will be required to become members of the System in order to be insured banks or continue to have any part of their deposits insured, and, therefore, the Board cannot exercise its authority to waive eligibility requirements before the end of the year 1941. "SECTION 3. INSURANCE OF DEPOSITS "Any State bank becoming a member of the Federal Reserve System after the date of the enactment of the Banking Act of 1935 (August 23, 1935) and which is not at the time an insured bank under the provisions of section 12B of the Federal Reserve Act, will become an insured bank under the provisions of that section on the date upon which it becomes a member of the Federal Reserve System.4 In the case of an insured bank which is admitted to membership in the Federal Reserve System, the bank will continue to be an insured bank. "SECTION 4. APPLICATION FOR MEMBERSHIP "(a) State bank, other than a mutual savings bank. -- A State bank, other than a mutual savings bank, applying for membership, shall make application on Form 85A to the Board for an amount of capital stock in the Federal Reserve bank of its district equal to six per cent of the paid-up capital stock and surplus of the applying institution. m(b) Mutual savings bank. -- A mutual savings bank applying tor membership shall make application on Form 85B to the Board for an amount of capital stock in the Federal Reserve bank of "4 In the case of a State bank which at the time of its admission to membership in the Federal Reserve System is not an insured bank, the Board is required under the provisions of subsections (e) and (g) of section 12B of the Federal Reserve Act t? issue a certificate to the Federal Deposit Insurance Corporation to the effect that the bank is a member of the Federal Reserve System and that consideration has been given to the financial fastory and condition of the bank, the adequacy of its capital structure, its future earnings prospects, the general character its management, the convenience and needs of the community to ue served by the bank, and whether or not its corporate powers are consistent with the purposes of section 12B of the Federal Reserve Act. 2581 rt 11/29/35 -18- "its district equal to six-tenths of one per cent of its total deposit liabilities as shown by the most recent report of examination of such institution preceding its admission to membership, or, if such institution be not permitted by the laws under which it was organized to purchase stock in a Federal Reserve bank, on Form 83C, for permission to deposit with the Federal Reserve bank an amount equal to the amount which it would have been required to pay in on account of a subscription to capital stock. "(c) Mutual savings bank not authorized to purchase stock of Federal Reserve bank at time of admission. -- If a mutual savings bank be admitted to membership on the basis of a deposit of the required amount with the Federal Reserve bank in lieu of payment upon capital stock because the laws under which such bank was organized do not at that time authorize it to purchase stock in the Federal Reserve bank, it shall subscribe on Form 83D for the appropriate amount of stock in the Federal Reserve bank whenever such laws are amended so as to authorize it to purchase stock in a Federal Reserve bank.5 "(d) Execution and filing of application. -- Each application made under the provisions of this section and the exhibits referred to in the application blank shall be executed and filed, in duplicate, with the Federal Reserve Agent at the Federal Reserve bank of the district in which the applying bank is located. "SECTION 5. APPROVAL OF APPLICATION "(a) M4tt,ers given special consideration by Board. -- In Passing upon an application, the following matters will be given special consideration: (1) The financial history and condition of the applying bank and the general character of its management; (2) The adequacy of its capital structure and its future earnings prospects; (3) The convenience and needs of the community to be served by the bank; and "5The Federal Reserve Act provides that, if the laws under which any such savings bank was organized be not amended at the first session of the legislature following the admission of the savil)gs bank to membership so as to authorize mutual savings !!lanks to purchase Federal Reserve bank stock, or if such laws ue so amended and the bank fail within six months thereafter to lurchase such stock, all of its rights and privileges as a member ank shall be forfeited and its membership in the Federal Reserve System shall be terminated in the manner prescribed in section 9 of the Federal Reserve Act. f 2582 11/29/35 -19- "(4) Whether its corporate powers are consistent with the purposes of the Federal Reserve Act. "(b) Procedure for admission to membership after approval of application. -- If an applying bank conforms to all the requirements of the Federal Reserve Act and this regulation and is otherwise qualified for membership, its application will be approved subject to such conditions as may be prescribed pursuant to the provisions of the Federal Reserve Act. When the conditions prescribed have been accepted by the applying bank, it should pay to the Federal Reserve bank of its district one-half of the amount of its subscription and, upon receipt of advice from the Federal Reserve bank as to the required amount, one-half of one per cent of its paid-up subscription for each month from the period of the last dividend.6 The remaining half of the bank's subscription shall be subject to call when deemed necessary by the Board. The bank's membership in the Federal Reserve System shall become effective on the date as of which a certificate of stock of the Federal Reserve bank, is issued to it pursuant to its application for membership or, in the case of a mutual savings bank which is not authorized to subscribe for stock, on the date as of which a certificate representing the acceptance of a deposit with the Federal Reserve bank in place of a payment on account of a subscription to stock is issued to it pursuant to its application for membership. "SECTION 6. CONDITIONS OF UEMBERSHIP "(a) Conditions applicable to 4331 institutions applying for 1 1 19.141.2ftnaill.R. -- Pursuant to the authority contained in the first Paragraph of section 9 of the Federal Reserve Act, which authorizes the Board to permit applying State banks to become members of the Federal Reserve System 'subject to the provisions of this Act and to such conditions as it may prescribe pursuant thereto', the Board, except as hereinafter stated, will prescribe the following conditions of membership for each State bank hereafter applying for admission to the Federal Reserve System, and, in addition, such other conditions as may be considered necessary or advisable in the particular case 1. Such bank at all times shall conduct its business and exercise its powers with due regard to the safety of its depositors, and, except with the permission of the Board of Governors of the Federal Reserve System, such bank shall not "6In the case of a mutual savings bank which is not permitted bY the laws under which it was organized to purchase stock in a Federal Reserve bank, it shall deposit with the Federal Reserve bank an amount equal to the amount which it would have been required to PaY in on account of a subscription to capital stock. 2583 11/29/35 -20- "cause or permit any change to be made in the general character of its business or in the scope of the corporate powers exercised by it at the time of admission to membership.7 2. The net capital and surplus funds of such bank shall be adequate in relation to the character and condition of its assets and to its deposit liabilities and other corporate responsibilities8, and its capital9 shall not be reduced except with the permission of the Board of Governors of the Federal Reserve System.10 "71f, after admission of any bank to membership, it should desire to make any change in the general character of its business or in the scope of its corporate powers exercised at the time of admission, it will be necessary for it to obtain the permission of the Board before making any such change. "The acquisition by a bank of the assets of another institution through merger, consolidation, or purchase may result in a change in the character of its assets or the scope of its functions within the meaning of condition numbered 1, and if at any time a member State bank subject to such condition anticipates making any such acquisition a detailed report setting forth all of the facts in connection with the transaction should be made Promptly to the Federal Reserve bank of the district in which such bank is located. ttpq -If at any time, in the light of all the circumstances, the aggregate amount of the bank's net capital and surplus funds aPpears to be inadequate, the bank, within such period as shall be deemed by the Board to be reasonable for this purpose, shall increase the amount thereof to an amount which in the judgment of the Board shall be adequate in relation to the bank's aggregate deposit liabilities and other corporate responsibilities. If9 This applies to capital stock of all classes and to capital notes and debentures legally issued and purchased by the Reconstruction Finance Corporation which, under the Federal Reserve Act, are considered as capital for purposes of membership. "A reduction in capital, however, shall not be deemed to be contrary to this provision if, at the same time, the capital is correspondingly increased or a specific reserve in an amount not less than the amount of the capital reduction is set aside to provide for an increase in capital and can be used for no Other purpose; provided, of course, the transaction does not vlolate any provision of applicable laws. "1() This condition will not be prescribed in connection with the admission of mutual savings banks to membership in the Federal Reserve System. 2584 f‘ 11/29/35 -21- Such bank shall not engage as a business in issuing or selling either directly or indirectly (through affiliated corporations or otherwise) notes, bonds, mortgages, certificates, or other evidences of indebtedness representing real estate loans or participations therein, either with or without a guarantee, indorsement, or other obligation of such bank or an affiliated corporation.11 "(b) Conditions applicable to institutions exercising trust -- The Board will also prescribe for each trust company or State bank exercising trust powers at the time of its admission to membership the following conditions of membership which are appropriate for institutions exercising trust powers: 4. Such bank shall not invest funds held by it as fiduciary in obligations of or property acquired from the bank or its directors, officers, employees, members of their families, or their interests, or in obligations of or property acquired from affiliates of the bank.12 5. Such bank shall not invest funds held by the bank as fiduciary in participations in pools of mortgage bonds or other securities, and the securities and investments of each trust shall be kept separate from those of all other trusts and separate also from the properties of the bank itself; provided, however, that the Board of Governors of the Federal Reserve System will not object to the collective investment of trust "11This condition does not apply to the sale of mortgages covered by insurance under the provisions of the National Housing Act. "12Under established principles regarding the handling of trust funds, a trustee or other fiduciary should not have any interest in the funds of a trust except as a fiduciary, and the condition contemplates that a trust institution will not invest trust funds in the obligations of any organization in which officers, directors, or employees of the trust institution or their families have such an interest as might affect the exercise of the best judgment of the management of the trust institution in investing trust funds. "This condition shall not be deemed to prevent investments which are expressly required by the trust instrument creating the trust or by court order. "1'This does not prevent a bank from investing the funds of several trusts in a single real estate loan of the kind which could be made by a national bank under the provisions of section 24 of the Federal heserve Act, as amended, if the bank owns no Participation in thc loan and has no interest therein except as trustee or other fiduciary. 2585 11/29/35 -22- "funds where the cash balances to the credit of certain trust estates are too small to be invested Separately to advantage, if the bank owns no participation in the securities in which such collective investments are made and has no interest in them except as trustee or other fiduciary, and if such collective investment is not prohibited by State law or the instrument creating the trust. 6. If funds held by such bank as fiduciary are deposited in its commercial or savings department or otherwise used in the conduct of its business, it shall deposit with its trust department security in the same manner and to the same extent as is required of national banks exercising fiduciary powers.14 "SECTION 7. POWERS AND RESTRICTIONS "Every State bank while a member of the Federal Reserve System "(a) Shall retain its full charter and statutory rights subject to the provisions of the Federal Reserve Act and other Acts of Congress applicable to member State banks, to the regulations of the Board made pursuant to law, and to the conditions prescribed by the Board and agreed to by such bank prior to its admission; "(b) Shall enjoy all the privileges and observe all the requirements of the Federal Reserve Act and other Acts of Congress applicable to member State banks and of the regulations of the Board made pursuant to law which are applicable to member State banks; and "(c) Shall comply at all times with any and all conditions Of membership prescribed by the Board in connection with the admission of such bank to membership in the Federal Reserve System. "SECTION 8. ESTABLISH2ENT OR MAINTENANCE OF BRANCHES "(a) In general. -- Every State bank which is or hereafter becomes a member of the Federal Reserve System is subject to the provisions of section 9 of the Federal Reserve Act relating to the establishment and maintenance of branches in the United States "14Such requirements applicable to national banks are contained in section 11(k) of the Federal Reserve Act and the Board's Regulation F issued pursuant to section 11(k). "In cases where trust funds are fully protected by a statutory Preference in all of the assets of the bank over its general credi"!sors, the Board may waive compliance with this condition. However, lf compliance be waived in any case, the Board expressly reserves the right to require compliance with the condition if, at any time, it feels that such trust funds are not adequately protected. 2586 11/29/35 -23- "or in a dependency or insular, possession thereof or in a foreign country. Under the provisions of section 9, member State banks establishing and operating branches in the United States beyond the corporate limits of the city, town, or village in which the parent bank is situated must conform to the same terms, conditions, limitations, and restrictions as are applicable to the establishment of branches by national banks under the provisions of section 5155 of the Revised Statutes of the United States relating to the establishment of branches in the United States, except that the approval of any such branches must be obtained from the Board rather than from the Comptroller of the Currency. Under the provisions of section 9, member State banks establishing and operating branches in a dependency or insular possession of the United States or in a foreign country must conform to the terms, conditions, limitations, and restrictions contained in section 25 of the Federal Reserve Act relating to the establishment by national banks of branches in such places. The principal applicable provisions of law have been interpreted as follows: "(b) Branches in the United States. -1. Branches established within the corporate limits of the city, town, or village in which the parent bank is situated do not require the approval of the Board. 2. Before a member State bank establishes a branch beyond the corporate limits of the city, town, or village in which it is situated, it must obtain the approval of the Board. 3. Before any nonmember State bank having a branch or branches established after February 25, 1927, beyond the corporate limits of the city, town, or village in which the bank is situated is admitted to membership in the Federal Reserve System, it must obtain the approval of the Board for the retention of such branches; and any provisions contained in this section of this regulation which by their terms relate to the establishment or retention of branches by member State banks are equally applicable to the retention by a nonmember State bank applying for membership and having any branches previously established. 4. A member State bank located in a State which by statute law permits the maintenance of branches within county or greater limits may, with the approval of the Board, establish and operate, without regard to the capital requirements of section 5155 of the Revised Statutes, a seasonal agency in any resort community within the limits of the county in which the main office of such bank is located for the purpose of receiving and paying out deposits, issuing and cashing checks ,nd drafts, and doing business incident thereto, if no bank 18 located and doing business in the place where the proposed agency is to be located; and any permit issued for the estab- 2587 11/29/35 -24- "lishment of such an agency shall be revoked upon the opening of a State or national bank in the community where the agency is located. 5. Except as stated in the immediately preceding paragraph, a member State bank which establishes a branch beyond the corporate limits of the city, town, or village in which it is situated must have a paid-in and unimpaired capital stock of not less than ;',500,0000 except that, in a State with a population of less than 1,000,000, and which has no city located therein with a population exceeding 100,000, the capital stock shall be not less than Z250,0001 and except that, in a State with a population of less than 500,000, and which has no city located therein with a population exceeding 50,000, • the capital stock shall be not less than 100,000. In any such case, the aggregate capital stock of the member State bank and its branches shall at no time be less than the aggregate minimum capital stock required by law for the establishment of an equal number of national banking associations situated in the various places where such member State bank and its branches are situated. 6. A member State bank may not establish a branch beyond the corporate limits of the city, town, or village in which it is situated unless such establishment and operation are at the time authorized to State banks by the statute law of the State in question by language specifically granting such authority affirmatively and not merely by implication or recognition, and subject to the restrictions as to location Imposed by the law of the State on State banks. 7. Any member State bank which, on February 25, 1927, had established and was actually operating a branch or branches in conformity with the State law is permitted to retain and Operate the same while remaining a member of the Federal Reserve System, regardless of the location of such branch or branches. 8. In order to remain a member of the Federal Reserve System, every member State bank must relinquish any branch or branches established after February 25, 1927, beyond the corporate limits of the city, town, or village in which the parent bank is situated, unless such branch or branches are In conformity with or are brought into conformity with the same terms, conditions, limitations, and restrictions as would be applicable in the case of the establishment of such branches. 9. The removal of a branch from one town to another town e?nstitutes the establishment of a branch in such other town within the meaning of the provisions of the Federal Reserve Act. 2588 11/29/65 -25- "(c) Application for approval of branches in United States. -Any member State bank desiring to establish a branch beyond the corporate limits of the city, town, or village in which it is located and any nonmember State bank applying for membership and desiring to retain any branch established after February 25, 1927, beyond the corporate limits of the city, town, or village in which the bank is situated should submit a reuest for the approval by the Board of any such branch to the Federal Reserve Agent at the Federal Reserve bank of the district in which the bank is located. Any such request Should be accompanied by advice as to the scope of the functions and the character of the business which are or will be performed by the branch and detailed information regarding the policy followed or proposed to be followed with reference to supervision of the branch by the head office; and the bank may be required in any case to furnish additional information which will be helpful to the Board in determining whether to approve such request. "(d) Foreign branches. -- Before a member State bank establishes a branch in a foreign country, or dependency or insular possession of the United States, it must have a capital and surplus of $1,000,000 or more and obtain the approval of the Board. "(e) Application for approval of foreign branches. -- Any member State bank desiring to establish such a branch and any nonmember State bank applying for membership and desiring to retain any such branch established after February 25, 1927, should submit a request for the approval by the Board of any such branch to the Federal Reserve Agent at the Federal Reserve bank of the district in which the bank is located. Any such request should be accompanied by advice as to the scope of the functions and the character of the business which are or will be performed by the branch and detailed information regarding the policy followed or proposed to be followed with reference to supervision of the branch by the head office; and the bank may be required in any case to furnish additional information which will be helpful to the Board in determining whether to approve such request. "SECTION 9. PUBLICATION OF REPORTS OF, MEZER BANKS AND THEIR AFFILIATES)-5 ni --Under the provisions of section 9 of the Federal Reserve Act, reports of condition of member State banks which, under that section, must be made to the respective Federal Reserve banks on call dates ixed by the Board of Governors of the Federal Reserve System 'shall be published by the reporting banks in such manner and in accordance with such regulations as the said Board may prescribe'. "Section 9 also provides that the reports of affiliates of a member State bank which are required by that section to be furnished to the respective Federal Reserve banks 'shall be published by the bank under the same conditions as govern its own condition reports'. The term 'affiliates', as used in this provision of section 9, under the exPress terms of that section, includes 'holding company affiliates as 4, 1rell as other affiliates', but a member State ba bank is not required to turnish to a Federal Reserve bank the report of an affilicted member sank. f 2589 11/29/55 -26- "(a) Reports of member banks. -- Each report of condition made by a member State bank, which is required to be made to the Federal Reserve bank of its district as of call dates fixed by the Board of Governors of the Federal Reserve System, shall be published by such member bank within twenty days from the date the call therefor is issued. "The report shall be printed in a newspaper published in the place where the bank is located or, if there be no newspaper published in the place where the bank is located, then in a newspaper published in the same or in an adjoining county and in general circulation in the place where the bank is located. The term 'newspaper', for the purpose of this regulation, means a publication with a general circulation published not less frequently than once a week, one of the primary functions of which is the dissemination of news of general interest. "The copy of the report for the use of the printer for publication should be prepared on Form 105e. The published information shall agree in every respect with that shown on the face of the condition report rendered to the Federal Reserve bank, except that any item for which no amount is reported may be omitted in the published statement. All signatures shall be the same in the Published statement as in the original report submitted to the Federal Reserve bank, but the signatures may be typewritten or Otherwise copied on the report for publication. "A copy of the printed report shall be submitted to the Federal Reserve bank attached to the publisher's certificate on form 105e. "(b) Reports of affiliates.16 -- Each report of an affiliate of a member State bank, including a holding company affiliate, shall be published at the same time and in the same newspaper as the affiliated bank's own condition report submitted to the Federal Reserve bank, unless an extension of time for submission of the report of the affiliate has been granted under authority of wig --Section 21 of the Federal Reserve Act, among other things, provides as follows: 'Whenever member banks are required to obtain reports from affiliates, or whenever affiliates of member banks are required to submit to examination, the Board of Governors Of the Federal Reserve System or the Comptroller of the Currency, as the case may be, may waive such requirements with respect to 4AY such report or examination of any affiliate if in the judgment of the said Board or Comptroller, respectively, such report or examination is not necessary to disclose fully the relations between such affiliate and such bank and the effect thereof upon the affairs of such bank'. Therefore, of course, in any case where he Board of Governors waives the filing of a report of an affillate of a member State bank, no publication of a report of such affiliate is required. 2590 11/29/35 -27- "the Board of Governors of the Federal Reserve System. When such extension of time has been granted, the report of the affiliate must be submitted and published before the expiration of such extended period in the same neuspaper as the condition report of the bank was published. "The copy of the report for the use of the printer for publication should be prepared on Form 220a. The published information shall agree in every respect with that shown on the face of the report of the affiliate furnished to the Federal Reserve bank by the affiliated member bank, except that any item appearing under the caption 'Financial relations with bank' against which the word 'none' appears on the report furnished to the Federal Reserve bank may be omitted in the published statement of the affiliate, provided that if the word 'none' is shown against all of the items appearing under such caption in the report furnished to the Federal Reserve bank the caption 'Financial relations with bank' shall appear in the published statement followed by the word 'none'. All signatures shall be the same in the published statement as in the original report submitted to the Federal Reserve bank, but the signatures may be typewritten or otherwise copied Oh the report for publication. "A copy of the printed report shall be subinitted to the Federal Reserve bank attached to the publisher's certificate on Form 220a. "SECTION 10. VOLUNTARY WITHDRAjAL FROM FEDERAL RESERVE SYSTEM "(a) General. -- Any State bank desiring to withdraw from membership in a Federal Reserve bank may do so after six months' written notice has been filed with the Board17; and the Board, in its discretion, may waive such six months' notice in any individual case and may permit such bank to withdraw from membership in a Federal Reserve bank, subject to such conditions as the Board may prescribe, prior to the expiration of six months from the date of the written notice of its intention to withdraw. "(b) Notice of intention of withdrawal. -- Any State bank desiring to withdraw from membership in a Federal Reserve bank should Signify its intention to do so in a letter addressed to the Board and mailed to the Federal Reserve Agent at the Federal Reserve bank of which such bank is a member. Such letter should state clearly "17Under specific provisions of section 9 of the Federal Reserve Act, however, no Federal Reserve bank shall, except upon express authority of the Board, cancel within the same calendar year more than twenty-five per cent of its capital stock for the purpose of effectVoluntary withdrawals during that year. All applications for voluntary withdrawals are required by the law to be dealt with in the order in which they are filed with the Board. 2591 11/29/35 -28- "the reason for the bank's desire to withdraw. Any such bank desiring to withdraw from membership prior to the expiration of six months from the date of written notice of its intention to withdraw should so state in the letter signifying its intention to withdraw and Should state the reason for its desire to withdraw prior to the expiration of six months. "Every notice of intention of a bank to withdraw from membership in the Federal Reserve System and every application for the waiver of such notice should be accompanied by a certified copy of a resolution duly adopted by the board of directors of such bank authorizing the withdrawal of such bank from membership in the Federal Reserve System and authorizing a certain officer or certain officers of such bank to file such notice or application, to surrender for cancelation the Federal Reserve bank stock held by such bank, to receive and receipt for any moneys or other property due to such bank from the Federal Reserve bank and to do such other things as may be necessary to effect the withdrawal of such bank from membership in the Federal Reserve System. "Notice of intention to withdraw or application for waiver of six months' notice of intention to withdraw by any bank which is in the hands of a conservator or other State official acting in a capacity similar to that of a conservator should be accompanied by advice from the conservator or other such State official that he joins in such notice or application. "(c) Time and Method of effecting actual withdrawal. -- Upon the expiration of six months after notice of intention to withdraw18 or upon the waiving of such six months' notice by the Board, such bank may surrender its stock and its certificate of membership to the Federal Reserve bank and request that same be canceled and that all amounts due to it from the Federal Reserve bank be refunded19. Unless "18The six months' period begins to run on the date when the notice of intention to withdraw is received by the Federal Reserve Agent, the Board's official representat ive at the Federal Reserve bank. "19A bank's withdrawal from membership in the Federal Reserve System is effective on the date on which the Federal Reserve bank stock by it is duly canceled. Until such stock has been canceled, such bad remains a member of the Federal Reserve System, is entitled to all the privileges of membership, and is required to comply with all provi"ns of law and all regulations of the Board pertaining to member banks and w.Lth all conditions of membership applicable to it. Upon the cancelation °f such stock, all rights and privileges of such bank as a member bank shall terminate. "Upon the cancelation of such stock, and after due provision has been made for any indebtedness due or to become due to the Federal Re! ervs bank, such bank shall be entitled to a refund of its cash paid subption with interest at the rate of one-half of one per cent per month ! row the date of last dividend, the amount refunded in no event to exthe book value of the stock at that time, and shall likewise be envi,_?.tled to the repayment of deposits and of any other balance due from tale Reserve bank. 2592 11/29/35 -29- "this is done within two months after the expiration of such six months' notice or after the waiver of such notice by the Board, or unless the bank requests and the Board grants an extension of time, such bunk will be presumed to have abandoned its intention of withdrawing from membership and will not be permitted to withdraw without again giving six months' written notice or obtaining the waiver of such notice. "(d) Withdrawal of notice. -- Any bank which has given notice of its intention to withdraw from membership in a Federal Reserve bank may withdraw such notice at any time before its stock has been canceled and upon doing so may remain a member of the Federal Reserve System. The notice rescinding the former notice should be accompanied by a certified copy of an appropriate resolution duly adopted by the board of directors of the bank. "SECTION 11. BOARD FORMS "All forms referred to in this regulation and all such forms as they may be amended from time to time shall be a part of this regulation." Letter dated November 27, 1935, approved by five members of the Board, to Mr. Worthington, Deputy Governor of the Federal Reserve Bank of Kansas City, reading as follows: "This refers to your letter of September 24, 1935, regarding purchases by the Federal Reserve Bank of Kansas City of Government bonds from the Federal Land Bank of Omaha under agreements obligating that bank to repurchase the bonds within a period not exceeding 15 days in each case. "In your letter you ask whether any action on your part is necessary at this time, in connection with such repurchase agreements, and what steps should be taken to bring the matter to the attention of the Open Market Committee to be appointed under the Banking Act of 1935. "Your attention is called to section VI of Regulation M, (which is still in effect) as follows: '14) Federal Reserve bank shall purchase or sell Government securities except in accordance with an open market Policy approved by the Federal Reserve Board and in effect at the time, except that: (1) In an emergency, any Federal Reserve bank may purchase Government securities when necessary to afford relief in a situation involving specific banking institutions in its district; and 2593 11/29/55 -30- "(2) After obtaining the consent of the Federal Reserve BoLrd any Federal Reserve bank may purchase or sell Government securities for other specific purposes, for its own account. • 'All purchases and sales of Government securities by any Federal Reserve bank for its own account shall be reported promptly to the Federal Reserve Board and to the chairman of the executive committee; and the executive committee may make such compensatory purchases or sales for the System account and such reallocations of the obligations in the System account as may be appropriate in the light of purchases and sales made for their own account by individual Federal Reserve banks.' "The provisions of the Banking Act of 1965 amending Section 12A of the Federal Reserve Act and creating the Federal Open Market Committee do not become effective until March 1, 1936. Purchases of Government bonds from the Federal Land Bank of Omaha Of the type referred to by you are therefore subject, except in the case of an emergency described in subdivision (1) of the above quotation, to obtaining the consent of the Board. "In view of the facts stated in your letter, the Board hereby grants its consent to the Federal Reserve Bank of Kansas City to acquire Government bonds from the Federal Land Bank of Omaha at the request of and for the convenience of that Bank in financing its needs, under agreements obligating the Federal Land Bank to repurchase the bonds within a period not exceeding 15 days in each case: Provided, That the aggregate principal amount of bonds embraced within the terms of such outstanding repurchase agreements shall not at any time exceed 0_2500,000; and that every such transaction will be reported promptly as required by Regulation "When the Federal Open Market Committee provided for under the Banking Act of 1935 is constituted after February 29, 1936, it .11 be appropriate for you to bring to its attention such informa' tl°n as you believe desirable in connection with the repurchase agreements. "It will be appreciated if you will send to the Board a copy of the forms of repurchase agreements entered into by you in the tr ansactions mentioned in your letter." V Approved unanimously. In connection with the above, there was submitted a memorandum dated November 20, 1965, from Mr. Benedict, Assistant Counsel, recommendtha+ . a study of the subject referred to in the above letter to Mr. 2594 11/29/55 -31- Worthington be made with the view of making appropriate recommendations to the Federal Open Market Committee as reorganized on March 1, 1956, as to its regulations or directions regarding such agreements. Approved unanimously. There was then presented the following application for a change in stock of a Federal Reserve bank: APPllcation for ORIGINAL Stock: 1112 Greene County National Bank in Carrollton, Carrollton, Illinois Shares 72 72 Approved unanimously. Thereupon the meeting adjourned. 7-*N t h, /t L42 Secretary. Approved:
@FedFRASER