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3120 A meeting of the Federal Reserve Board was held in Washington on Wednesday, October 10, 1934, at 3:10 p. m. PRESENT: Mr. Mr. Mr. Mr. Mr. Thomas, Vice Governor Hamlin James Szymczak O'Connor Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Paulger, Chief of the Division of Examinations Mr. Wyatt, General Counsel Mr. Boatwright, Assistant Counsel The Board considered and acted upon the following matters: Letter to "The National Metals Ban: of Hancock", Hancock, Michigan, ItcitrIg as follows: a/v.:The Federal Reserve Board has given consideration to your y 'cation for permission to exercise fiduciary powers, and grants °law,auth• °r1t7 to act, when not in contravention of State or local and bond trustee, executor, administrator, registrar of stocks or 18, guardian of estates, assignee, receiver, committee of estates tt.1:atics, or in any other fiduciary capacity in which State banks, wtth 239-flies or other corporations which come into competition ,c°at Of !Iilonal banks are permitted to act under the laws of the State Drovgan, the exercise of all such rights to be subject to the Pedel--°ns of the Federal Reserve Act and the regulations of the r:1 Reserve Board. liezleo Inasmuch as the application of The National Metals Bank of t1 ' 011n1 Hanc°ck, Michigan, was made prior to the date the Comp°f the Currency authorized it to commence 11. bwiness, the Board equire that your board of directors adopt a resolution ratifyle re',"ur aPPlication for permission to exercise trust powers, and it forway."11;sted that a certified copy of the resolution so adopted be the pXd as soon as possible through the Federal Reserve Agent at Iledel,;-1;lal Reserve Bank of Minneapolis, who will forward it to the %redVeserve Board. When a copy of such resolution has been ree ercis : Y the Board, a formal certificate covering your authority to -- trust powers will be sent to you." inz.; Approved. Lette, uo Mr. O'Connor, Comptroller of the Currency, reading as 312-1 o "In accordance with your recommendation, the Federal 'eserve Board approves a reduction in the common capital stock of "The New Market National Bank", New Market, New 1,1,1111113shire, from $50,000 to 4125,000, pursuant to a plan which ' r°vides that the bank's capital shall be increased by the i tII-Le of p25,OOO of °referred stock to the Reconstruction t4-nalce Corporation, that the released capital shall be used eliminate a corresponding amount of estimated losses, and at all remaining losses and depreciation in lower grade fcurlties shall also be eliminated, all as set forth in your " w loranduin of September 27, 1934." 4 Approved. ? eraorandum dated October 6, 1934, from Mr. Goldenweiser, Director °D the Division of Research and Statistics, submitting an article on memb"a 'nk reserve requirements written by- him at the request of Yls. Harry at°11 'cr the Whaley -Eaton Service, to be published in the magazine Sphere,,, and stating that Mr. Eaton talked to Vice Governor Thomas, who that he personally saw no objection to the publication of the tc)id l'ticle; that sugpestions made by Mr. James had been incorporated in the N'ttels; that it was understood that the article was satisfactory to him, that, t herefore, it is recommended that the Board approve the loubliti°11 of the article. Approved. Letter to 7/1r. Williams, Federal Reserve Agent at the Federal Reserve °f Cleveland, reading, as follows: Receipt is acknowledged of your letter of October 6, 1934, it : ahd b egard to a meeting of the boards of directors of your bank ' t,.1,'''anches with the Federal Reserve Board in Washington, and azi n,1,,Ins connection you call attention to the practice of holding Ci"ual meeting of the directors of your head office and branches j'eveland in June, of the directors of your head office and 3122 10/1o/34 -3- 7Pittsburgh branch in Pittsburgh in September, otZoefr.your head office and Cincinnati branch and of the direcin Cincinnati in "It is not believed that it will be possible to arrange for a,. meeting with your directors in October, so that the nearest ?ate suggested in your letter would be in June of next year. In the event that your directors feel that it would be desirable to with the Board before that time, it is suggested that you Xte ideration to some earlier date which would meet the convarl'ence of the boards of directors of your bank and branches and "vise the Board of their decision. m ."If it is felt that June will be a satisfactory time for the meeting, the Board rill appreciate advice as to the date of the Aeeting of your directors in Cleveland and the date they would '4esire to meet with the Board." Approved. Telegram dated October 9, 1934, approved by four members of the ?°41t1) to Wood, Chairman of the Federal Reserve Bank of St. Louis, as follows: Board'our telegram October 3 re meeting your directors with fit, in Washington. It now appears that date suggested can be oet'ed into general schedule, and, accordingly, Board has fixed 174 ,,c)ber 26, at 10 a.,11. 1 as date for meeting. You will be ad' il;ed later of matters which Board will wish to discuss at meettog 'Elnd it will be appreciated if you will request your directors con,e consideration to any matters which they would like to have latsldered and if you will advise Board with regard thereto not later than October 19." Approved. litttiat or Letter to Mr. Hoxton, Federal Reserve Agent at the Federal Reserve le ond, reading as follows: to t naeferring to your letter of October 3, it will be agreeable 31 ne Federal Reserve Board for you to defer until after December ,1694, submission of the statement and recommendations regardroclassification of member banks for electoral purposes ' e for in the Board's letter of September 19, X-8012." TA1 to etld Approved. erv% -Eiam dated October 9, 1934, approved by four members of the ) to "e Federal reserve agents at all Federal reserve banks, reading 1 6)4Up 10/10/34 as -4- follows: "Board has been asked whether a loan carried with a bank Prior to October 1, 1934 may be transferred after that date to 4 broker and designated as an 'old account' under section 7(a) °f Regulation T. Assuming that bank in question is not a mem'ler of a national securities exchange, Board has advised in e rp,f 4,x that suggested designation may not be made as section 8(e) ° Regulation T with respect to 'Transfer of Accounts' refers er4r1;7 to transfers from one 'creditor' to another 'creditor' and xl 'creditor' as defined in section 2(b) of Regulation T does °t include a bank which is not a member of a national securities exchange.” Approved. Telegram dated October 9, 1934, approved by four members of the to the Federal reserve agents at all Federal reserve banks, read- triE as follows: ma "in answer to inauiries as to the nature of an account which , /1,3te designated as an 'old account' pursuant to section 7(a) of - Inrd t s Regulation T, Board has advised that the account to be, re,":81gnated as an 'old account! shall include all financial op4;donships existing between a creditor and a customer at the -ng of business on October 1, 1934, except that those relaco,:fhiPs which be recorded separately in other special ac" ' L 13 in conformity with sections 3(b), 3(c), 3(d), 5(b), and nee bai d 4°t be included in such old account. The adjusted debit sec:'?e of such old account and the maximum loan value of the therein must be calculated in accordance with section (f) of the regulation as if it were a combined account, that „ except tun ' offie old account shall not affect or be affected by the staed fo any other special account or of any new account establishSuch customer." Approved. Tele ram dated October 9, 1934, approved by four members of the 'to th Federal reserve agents at all Federal reserve banks, read,as tollows: , response to ouestion whether section 8(a) of Securities broke,'-'e Act of 1934 and section 10(a) of Regulation T require Day 04) dealers and members of national securities exchanges to before October 15, any money borrowed prior to October 1, 3124 10/10/34 -5- :1934, from persons other than member banks, nonmember banks which "ave filed agreements pursuant to section 11 of regulation, and ;ther brokers, dealers and members of national securities exchanges, uard expressed the view that the restrictions of section 10(a) of oe regulation and section 8(a) of the Act apply only to borrowing IsZ registered non-exempted securities on or after October 1, 19541 then this section of the Act became effective, and do not require r e off of money borrowed before that. date or prohibit the trral or extension of a loan obtained before that date; provided 0-1,a 'such renewal or extension involves no increase in the amount 4, loan. In view of fact that violation of section 8(a) of :1‘1.?.Act is a criminal offense, however, Board's opinion upon this ;riJect would not preclude prosecution if Department of Justice interpret the law differently; and, in case of any doubt, mber, broker, or dealer should obtain advice of his own counsel." j Approved. 1108.1, Telegram dated October 9, 1934, approved by four members of the 'to the Federal reserve agents at all Federal reserve banks, reading 4 f°11ows: or : 4 Several inauiries have been received as to which provisions as 'Lie SecuritioS' Exchange Act of 1934, the Federal Reserve Act, ba fliended, and the Banking Act of 1933 are applicable to member sel,;2.and relate to the use of credit to finance transactions in 2-t1es within the meaning of section 8(a) of the Securities ecg-11ge Act of 1934 and of the Board's Forms T-1 and T-2 preof lu?d pursuant thereto. Since ouestion requires interpretation ti:1111inal statute rather than interpretation of Board's reglafrc- expression of opinion by Board would not afford protection sidm criminal prosecution if the Department of Justice, uponconthaZTicn of the matter should take position inconsistent with vioiR;aken by Board and should feel compelled to prosecute for of the section. Accordingly, Board does not feel that cillssi'1.114 be appropriate for it to express an opinion upon the exec tc)n other than to advise nonmember banks contemplating the Ilte;11; 4"°11 of Form T-1 or T-2 to familiarize themselves with statthai '11 question and to consider possibility that it may be held lowl. abovementioned language of section 8(a) refers to the folPr°visions, among others: Section 11(m) of Federal Reserve Aet D alclh- amended by section 7 of Banking Act of 1933, seventh para11 4 cr section 19 of Federal Reserve Act as amended by section l'Eigh4!: 11-11king Act of 1933, fourth paragraph after paragraph ttorl :;'I4 of section 4 of Federal Reserve Act as amended by sect of Bnnkinu Act of 1933, and those provisions of Securities T. i'ge Act of 1934 which are contained in appendix to Regulation 11 reply to another inquiry, Board advises that foregoing 3125 1°/10/34 -6u'uld he brought to attention of nonmember banks contemplating execution of agreements but that circularization of such information to all nonmember banks is believed to be unnecessary." Approved. Telegram dated October 9, 1934, approved by four members of the 4ar, to the Federal reserve agents at all Federal reserve banks, readg as follows: "In interpreting section 7(a) of Regulation T on October 2, the Federal Reserve Board said: 'If, between the opening ' 04 ,, business on October 1, 1954 and the time of the designation such account as an old account, there has been any withdrawal of de T°neY or securities from the aceount, such account cannot be 02:4!flated as an old account unless it is an unrestricted account 1:40ctober 15 or on the date of such designation, whichever is the coZ, or unless the cash and/VT- securities withdrawn from the accom, et.re, replaced before the account is desic:nated as an old ac(1ST this ruling has given rise to two additional inouiries. sec °es it prevent the withdrawal of any securities or only of terurities which as of October 15 will have the status of regisrenr and/or exempted securities? and (2) What is meant by the "ement of cash or securities withdrawn from the account? In ur • 'wer to the first question, the Board has ruled that the restrictier 'aPplies to the withdrawal of unregistered, non-exempted securiwell as to the withdrawal of registered and/or exempted sej, S.• In answer to the second ouestion, the Board has ruled that ere cash has been withdrawn, it must be replaced by an ' ent amount of cash and, where securities have been withdrawn, thev.a that ilT8t be replaced by money and/or securities to such an extent not ne money Plus the market value of the securities deposited is 17er, ess than the aggregate market value of the securities which hdrawn and the money plus the maximum loan value of the ireinrities deposited is not less than the aggregate maximum loan the e °f the securities which were withdrawn from the account. For urPose of determining the amount of cash and/or securities needinarePlace securities withdrawn, the current market value and loan value of the securities withdrawn and of the securities must be ascertained in accordance with section 5 of RegulaPlace :a8 of the opening of business on October 15 or the date of re' - erit, whichever is later." 1.934 p • -2 n •j Approved. $0 e'rd Letter dated October 9, 1934, approved by four members of the ' r. Case, Federal Reserve Agent at the Federal Reserve Bank of 3126 10/10/34 -7liel7York, reading as follows: "The Board has given consideration to the application of • George F. Schmidt, Clifton, Few Jersey, for permission under the , Provisions of the Clayton Act to serve at the same time as ilikirector and officer of The First National Bank of Clifton and he Clifton Trust Company, both of Clifton, New Jersey, and as dTirector of The Garfield Trust Company, Garfield, New Jersey. Yon the basis of the information before it, the Board feels that the issuance of the permit applied for would be incompatible with the public interest. ' issuedMoreover, it appears that on October 17, 1930, the Board to 7r. Schmidt a Clayton Act permit covering his service as officer of The First National Bank of Clifton and officer 4.,ld 1 director of The Clifton Trust Company. For the same reason (1:111at the Board believes the issuance of the permit under the Present applicatio n would be incompatible with the public interest, it also feels that the permit which previously has been -Lssued should be revoked. ,, "Accordingly, you are requested to advise Mr. Schmidt of Board's position in the matter unless there are pertinent cts which were not submitted with the application which you 0 ; e1 should be given consideration. If you deem it desirable rleCeSSary, you are authorized to inform Mr. Schmidt that the Board, s action with reference to his present application as well bast° the permit which previously has been issued to him was he ?' upon the unsatisfactory condition of the banks with which dirnas been associated in an official capacity and also as a to ect°P) the apparently excessive sacrifice made by depositors of Tapitalize The Clifton Trust Company and his poor record patiy.tendance at directors' meetings of The Garfield Trust Cornthat "hen you communicate with the applicant please advise him ?cc) in accordance with Section V (g) of the Federal Reserve tij dis Regulation L, consideration will be given to any addl. : aecnal facts or arguments not appearing in his application and BoacanYing forms, which he feels should be brought to the (.\' 2 attention, and that also, in accordance with Section to 1' 13 of the same regulation, he may be afforded an opportunity thi e in connection with the revocation of his permit. In c°nnection, please advise the Board promptly as to whether Mr,8, hearrhmidt desires to submit any additional data or to have a orrl 'ne) and if not, as to what steps he proposes to take in ' er to Comply with the provisions of the Clayton Act." Approved. Letters dated October 9, 1934, approved by four members of the vtira ) to a . Plalcants for permits under the Clayton Act, advising of ; 10/10/34 -8- "(31 -1 of their applications as follows: James M. Dunn, for permission to serve at the same time as Ejt. director of The First National Bank of Clifton, Clifton, New 4erseY, and, as a director of The Clifton Trust Company, Clifton, -ew Jersey, T1„ — 4 Kenneth H. 'Robinson, for permission to serve at the same time 01.8 a director of The First National Bank of Clifton, Clifton, New 4 : 1 seY, and as a director and officer of The Clifton Trust Company, 1 ton, New Jersey. Mr, ,e0rge p J. Smith, for permission to serve at the same time as Ldirector of The First National Bank of Clifton, Clifton, New e7, and as a director and officer of The Clifton Trust Com1-113r, Clifton, New Jersey. Approved, together with a letter, also dated October 0, 1934, and approved by four members of the Board, to Mr. Case, Federal Reserve Agent at the Federal Reserve Bank of New York, inelosing copies of the Clayton Act Permits referred to above; suggesting that the agent endeavor, in Cooperation with the appropriate supervisory authorities, to bring about a strengthening of the capital structure of The First National Bank of Clifton and a correction of the matters criticized by the examiner, and recuesting that, when the agent submits his recommendations, as a result of his annual review of the permits, he report fully as to the progress made in bringing about an improvement in the condition of The First National Bank of Clifton. tO p011 Letter dated October 2, 1934, approved by four members of the Board, PeYton, Federal Reserve Agent at the Federal Reserve Bank of Minneareading as follows: lette"rReference is made to the application, submitted with your August 22, 1934, of Mr. J. W. Barton, for permission 11"cler Natio the Clayton Act to serve as a director of The Central ReaerIlilal Bank of Minneapolis and as an employee of the Federal Benk of Minneapolis. that 4 4.11 its letter of April 29, 1933, X-74P5, the Board stated ballk 't believes that officers and employees of Federal reserve tinIE:8,c)ccuPYing responsible positions should give their entire fted ;4:(1 attention to the affairs of the bank and not be identi--`th any outside business interests, and the Board has taken 3128 "A0/34 -9- :the position in all cases that employees of Federal reserve 'Janke occupying responsible positions should not be officially .°11nected with outside business concerns, and that any such afiliations should be discontinued as soon as possible. Accord...41Y) in its letter to you of October 51 19331 in connection 7ith the service of Mr. G. Brudvik, field representative, as an !"ctive vice President and director of the Renville County Bank ; I Mohalli North Dakota, the Board expressed the opinion that Mr. trudvik's official'connection with the institution should be th erminated promptly and that he should dispose of the stock of 2bank held by him as soon as it was possible for him to do so ;pout resulting in undue hardship. In your letter of December e 193, you advised that Mr. Brudvik's resignation had been acePted bY the Renville Bank. view of these circumstances, the Board is unwilling to 1t Mr. r. Barton's application, and if he is to be retained in "' ot- Present position of manager of the industrial loan department 141,3r°ur bank, his connection with The Central National Bank of hi 4leapolis should be terminated as soon as it is possible for -01 to do so. l I.9A "In this connection, you refer in your letter of August 22, :, to Is, 0a.), tank Barton's indebtedness of $351600 to the First Naitan of Minneapolis. It appears from the statement of v. !Itedness submitted by Mr. Barton under date of July 171 19341 this indebtedness is secured by stocks and bonds and a life o ance Policy; the indebtedness being the balance due on an 1304-1-nal indebtedness of $761000 apparently incurred for the purto th°f 'raking investments. It is noted from your report attached has be Clayton Act application that $20,000 of the indebtedness with !?/l set up by the ex8miner of the national bank as a loss, has the comment that 'the loan is undermargined and the debtor means to pay it'. or The report of examination of the Metropolitan National Bank presifeapolis as of April 51 1930, shoed Mr. Barton as vice the '`ent of that institution and in the confidential section of report the examiner stated in part as follows: 'The condition of the assets and affairs of thip, -- bank, generally speaking, can now be classed 48 entirely satisfactory. This has been brought ; tb°ut through its affiliation with the Northwest ancorporation of Minneapolis, Minn. 'The trouble examiners have had in the past t° curb Vice President Barton's activities are a !natter of record in your office. It is now : water aver the dam", so I do not feel it is nec2sarY to go over it again - suffice to say his "4-nge have been clipped. 'Mr. Barton is a good banker - the only 1 3129 10/10/34 —10- "'trouble is, he is too anxious for business and too ready to take chances to get it. His dealings With W. B. Foshay are a good example of what he will do. He has at various times accommodated Foshay in amounts of upwards of :300,000.00 when other bankers in Minneapolis would have nothing to do with him and yet when the crash came, he came out of it clean. 'Something over 500,000.00 in paper was rejected when control passed to the Bancorporation "The examination reports of the Northwestern -National Bank °I Minneapolis, made following the purchase by that institution °f the business of the Metropolitan National Bank, indicated the qbability of losses resulting from the transaction. It is the ,°ard's understanding that Mr. Barton became an officer of the 1.orthrest Bancorporation after the Northwestern National Bank +1, o(3.1 Over the business of the Metropolitan National Bank, and :at some time thereafter his connection with the Corporation "IIIS terminated. *hi :The Board appreciates the emergency circumstances under sti3eu 14% Barton was employed, but it is assumed that careful conwo eration was given to: (1) whether Yr. Barton's indebtedness (n1) 11d have any adverse effect upon his service to your bank, and i4.whether there was anything in his record with the Metropolitan al Bank or the Northwest Pancorporation which would raise ti;'o 2ubstantial question as to his desirability as an employee of or I nk; and that you were satisfied that he was a suitable person 'Lt e position, notwithstanding the unfavorable factors involved. to ,In your letter of August 22, you state that the decision as eth r Li% Barton's indebtedness under the conditions existing witi7 aPPear to prohibit his connection with your bank, must lie tho the Federal Reserve Board. The primary responsibility for the Be] of employees of a Federal reserve bank rests with ther : , 11rd of directors of the bank, and it is suggested that if any question as to the suitability of Mr. Barton for the with " 1 now occupied by him in your bank, the matter be submitted, full statement of details, to your directors for a decision. sider It is reeuested that you advise the Board of the further conyour ! ft ion given by youto this matter, and, if it is submitted to lreotors, the Board desires to be advised of their decision ' thereon s n V ii 7701pe Approved. 8talk ' letter to Mr. McClure, Federal Reserve Agent at the Federal Reserve Of /cans that beto_as City, inclosing the following Clayton Act permit; stating releasing the permit to the applicant, the agent is requested 3130 "/10/34 —11-- to determine to his satisfaction that the applicant's non—banking rela— ti°11shiPe are in conformity with the provisions of section 8A of the Clayton itet 'in which event the agent is authorized to release the permit to tIB aPPlicant; and reouesting that the agent advise the Board of his disposi— tioll of the matter in order that its records may be complete. The letter 11°reouested that, when the agent submits his recommendation as a result °fills annual review of the permit, he report fully as to the Progress made t h- aPPlicant in liouidating his obligations to the banks involved and itleffecting an improvement in his financial affairs. c d. • "- Floyd, for permission to serve at the same time as a _3:rector and officer of the Sedan State Bank, Sedan, Kansas, and a director of The Union Stocards National Bank, Wichita, v,ansa.s. Approved. Of Letter to an applicant for a permit under the Clayton Act, advising aPProy al of his application as follows: an. —*.J. Maopean, for permission to serve at the same time as Dairicer of the Republic National Bank and Trust Company of Bal-ika' . s) Dallas, Texas, and as a director of the First National in Honey Grove, Honey Grove, Texas. Approved, together with a letter to Mr. Walsh, Federal Reserve Agent at the Federal Reserve Bank of Dallas, reading as follows: hi.aepe"The Board has reconsidered the application of Mr. R. J. the ctIln, Dallas, Texas, for permission under the provisions of Relpub 1": ton Act to serve at the same time as an officer of the azd nj-Le Nntional Bank and Trust Company of Dallas, Dallas, Texas, Holle;sna director of the First National Bank in Honey Grove, subit01Te 2 Texas, and, in view of the additional information and the expressed intention of Mr. MacBean to attend the th'rectors' meetings of the First National Bank in Honey Grove future, has granted the permit. Neorcl-ue Board feels that a director should have a satisfactory Patin °fdischarging his duties and responsibilities by partici— g in the management and operations of a bank which he is 3131 10/1o/z4 —12- "serving through attendance at directors' meetings and it is sug— F?sted that you inform :.Tr. .?,lacBean that it is with the expecta— lon that he will satisfactorily attend directors' meetings of the "neY Grove bank that the permit has been granted. 4.. "The Board reouests that, rhen you submit your recomrenda— , -11°ns as a result of your annual review of this permit, you report 11117 as to Er. MacPean's attendance at directors' meetings." i Letter to 7r. Sargent, Assistant Federal Reserve Agent at the Pederal Reserve Bank of San Francisco, stating that the Board has given e°"ideration to the following application for a permit under the Clayton ht, and that, upon the basis of the information before it, feels that the 1881111nee of the permit applied for would be incompatible with the public —erest The letter also requested the agent to communicate to the aPIllicant the Board, position in the matter, and to advise the Board Prozptlz as to whether the applicant desires to submit any additional data, , not as to what steps he proposes to take in order to comply with the Provisions of the Clayton Act. ". Prank E. Langer, , for permissio1:1 tc t) , serve at the samP time ;,cs a director and officer of The First National Bank of Poulsbo, Cal:sb°) Washington, and as a director and officer of the Kitsap Bank, Port Orchard, Washington. Approved. Of Letters to applicants for permits under the Clayton Act, advising a.pprovai. of their applications as follows: 14r. L. T\T dir . '• Dibrell, for permission to serve at the same time andecz of The First National Bank of Danville, Danville, Virginia, as'r PoraZT a director and officer of the Danville Loan and Savings Cor— i(); Danville, Virginia. aS 8.41Lnin S. Igleheart, for permission to serve at the same itirTI York dire or of The Grace National Bank of New York, Nev York, New t'Vall%a ;T2 , 1 as a director of The Old Fational Bank in Evansville, Indiana. John Denman, Jr., for permission to serve at the same tire as a 3132 "A0/34 —13— rector of The Citizens National Banl: in Independence, Independence, 'Iansas, and as a director of the Sedan State Bank, Sedan, Kansas. 7Jr. A Finsterwald, for permission to serve at the same time as a ;J-rector and officer of The First National Bank of Wheeler, Wheeler, ti as, and as a director and officer of the First State Bank, .opeetiel Texas. '11'• G Stiles, for permission to serve at the same time as a ; 11-Lector and officer of The First National Bank of ' Theeler, -heeler, exas, and as a ( irector of the First State Bank, Y,obeetie, Texas. 'Avl,r. 0 . C. Bassett, for permission to serve at the same tire as a salector and officer of The Capital National Bank of Sacramento, Bacramento, California, and as a director and officer of the Citizens nk of Sacramento, SacramentolCalifornia. n. A. LT F. Zoller, for permission to serve at the same time as a ,lrec ra'rtiaor and officer of The Capital National Bank of Sacramento, Sae ento, California, and as a director and officer of the Citizens 8811k of Sacramento, Sacramento, California. G, H. Greenwood, for permission to serve at the same tie as a direct washi or and officer of The Pacific National Bank of Seattle, Seattle, Res ngton, and as a director of the Seattle branch of the Federal ' rvs Bank of San Francisco, Seattle, Washington. Mrs, T. B, froward, for permission to serve at the same ti'e as a . ro or and officer of the Pasadena Naticnal Bank, Pasadena, Cali— AnZ ia as a director and officer of the Hollywood State Bank, Los 5ti4 es/ California, and as a director and officer of the Broadway e Bank, Los Angeles, California. direct F. Noltin -, for permission to serve at the same tine as a fol,t °r and officer of the Pasadena National Bank, Pasadena, Call— and director and officer of the Bank of Beaumont, Beau— Approved. At this Point 1,:r. Goldenweiser, Director of the Division of Research at.R4 Ze St1-vies, joined the meeting, and stated that under date of September 194, r, Neae, 4a7ernor Hamilton of the Federal Reserve Bank of Kansas City, ad— 'It a letter to him requesting any data which the Committee on Legisla— °gram Y have assembled on the subject of central banking which he 3133 IMO/34 -14- raig14 118e in the preparation of an address to be delivered before the Nebraska bezker S c onvention in November; that, in response to Governor Hamilton's ret h ' e had called attention to certain information on the subject referred to 5d had stated that it was assumed that Governor Hamilton was not planning toA4 -„Lscuss the broad controversial question of the merits of a central bank 48 Ar. -l'ainst the Federal reserve banking system; and that under date of October '1934, Governor Hamilton had written a letter in reply which read in Dart ala roaows br "It strikes me that should I in my address before the NetbEilska Bankers Association, undertake to show 'The important are the growth in the volume of trade and employment and the F:ctrat i on of incombs and realpurchasing power, am not the supply of currency which, under the operation of the quiera-L Reserve System, is automatically adjusted to publicreQoirments 2 (this was one of the suggestions contained in Mr. he mierrejs!iser s letter to Governor Hamilton as a matter to which 811134 "1, call ilig!ects fullyattention in his address) I would be discussing as controversial as the question of central bank4s,„ ”Por that reason I will ask you to lay before the Federal 1-6,17e is" rol= :the third paragraph of your letter which, quoted 'I don't know, of course, what the subject of Ycur address is to be, but assume that you are not planning to discuss the broad controversial questions of the ITts of a central bank as against the Federal Reserve to detanking system.', a refl.:Tale whether you have offered this as your own idea or as 11Poli tZeui°n of the Board's opinion. Frankly, I intended to talk tort , e subJect of 'Central Banking'. I had planned to give his- data concerning the fate of government owned and operated b sal' banks, discuss briefly the set up of existing central 114t* 0 ; 11 the principal countries, together with the new Central ceritr a.fladal give an outline of the Federal Reserve System as .Lromer:4- oanking institution, calling attention to how it differs 4/ned ng central banks in other countries, and government oi'T controlled central banks, leaving it largely to the judgich bankers present to form their own conclusions as to eiZt of a central bank may best serve the financial needs of :?8.b;7 146/*Y. I had no intention of calling particular attention Pro Posed Plan of a new central bank or to criticie any ad-"°n policies, and I don't see that a presentation of this 4 n 3134 10/10/34 -15,A-4-na would be entering an objectional controversial field. I ;',1111.3r intended to call attention to the manner in which the Reserve eua!lks have adapted their operations to conditions and problems xlsting in their respective districts, but in this I would be prebenting facts and not theory. "MaY I say that I cannot see that there would be anything ob, 4ctionable in discussing central banking, but in view of the paraihaPh of your letter quoted above, I hesitate to publicly discuss 1,;e subject if it is objectionable to the Federal Reserve Board. .-ease advise me at your earliest convenience concerning the subJect matter of this letter, and oblige," All of the members of the Board present expressed the opinion that it Nlad not be desirable for Governor Hamilton to make an address on the subject °feeatral banking at this time, and Mr. O'Connor suggested that Governor 11;1.1ton in his talk, and other officers of Federal reserve banks in talks to bt.tiker s, Could render a real service to the Federal Reserve System by speaking °II the contribution which the System had made to banking, business and agriclgtiire in the United States and the assistance which it has rendered in meeting the Problems related thereto. . At the conclusion of the ensuing discussion, Mr. Goldenweiser was requested to advise Governor Hamilton that the Board is in agreement with the suggestion that it would be undesirable for him to speak on the controversial question of central banking at the present time, and to suggest that the most profitable subject of discussion at this time would be along the lines of the service which the Federal Reserve System has rendered and is rendering to the business of the country. At this Point 7 . Opldenweiser left the meeting. Refe, -ence Was then made to a letter dated August 15, 1934, from 'eder , 'L Reserve Agent at the Federal Reserve Bank of Dallas, with re-ttc the examination to by the Federal reserve bank of private banks pursuant th 131, 0Iii81cns of section 21(a) of the Banking Act of 1933, and raising a 3135 10/1o/z54 -16-- question baro, as to (1) what action, if any, should be taken by the Federal reserve the by protection of the depositors of any private bank which may be found etillination to be ilsolvent, and (2) what responsibility, if anv, does the Pederal reserve bank have in connection with the matter of reporting to the PPropr113t.t's State authorities any apparent violations of the criminal provisions Of State laws that might be disclosed by Federal reserve bank examinaof private banki. At the suggestion of Mr. James, the questions raised Wp1shis letter had been referred to counsel for consideration of the legq- questions involved, and there was read a memorandum submitted by hr. wra.ght It is Assistant Counsel, under date of September 13, 1934, stating that clear that, wider the provisions of section 21(a) (2) of the Banking A.t Of 1933, a Federal reserve bank has no authority to sunervise private balik n submitting to examination or to reouire the correction of unsatisfactory 'aells in such banks; that, since a Federal reserve bank has no such power, i'°11Ows that it is under no legal duty to attempt to supervise such banks t e°rrect unsatisfactory conditions; and that as a matter of law, thereaPPears thet a Federal reserve bank is under no duty to take any rOr the Protection of depositors of any private bank which is ins01l'It or to „port to State authorities apparent. violations of the criminal DI"olt isions of State lm lemorandum also stated that, however, there laws. 44°N.Ile' in the law whichT:: prevent a Federal reserve bank from exert111 i•ts best eforts to induce a private bank to correct existing unsatisl' q °I'Y conditf'ions,. whether or not the bank is insolvent, and it is believed eleliFederal reserve bank should adopt a constructive attitude in this and that, subject to the exercise of discretion, a Federal reserve 3136 1°/10/34 be. rill-gilt report apparent violations of criminal provisions of State 'Ergs to the appropriate State supervisory authorities. After discussion of the question whether Congress intended that the Federal reserve banks should have any duty or responsibility under the section of the law referred to, Mr. Hamlin moved that the policy suggested in the last two sentences of the last paragraph of 7:Ir. Boatwright's memorandum be adopted, and that the Division of Examinations be requested to prepare a draft of letter to the Federal reserve agents at all Federal reserve banks advising them accordingly. Carried. Mr: Thomas called attention to an application for full fiduciary Pellet's submitted by the "Fir t National Bank in Greensburg", Greensburg, 1111S111Ar arlia y and he outlined briefly the circumstances involved in the 1)Plicati 0n set forth in a memorandum submitted by the Division of Exam- wider date of September 29, 1954. He also referred to the critiof the man agement of the bank and to the recommendation of the Divil °11 of ' Examinations that the Federal reserve agent be advised that the official. personnel of the applicant bank, as at present constituted, is not 4;ti•fac4ory- or competent to properly conduct the bank's affairs, that the 1/4.1*d is unwilling to grant trust powers to the bank until a satisfactory %I'rection of the management problem is made, which should include read- illqnirit of the executive salaries now being paid and the employment of a e°141.t1-li; exe tO cutive officer who was not connected with the old bank, all "e stItisfactory to, and subject to approval by, the Comptroller of the 8-lad that, pending receipt of information that satisfactory action httn be/1 ten- furtderat her consi ion of the application will be deferred. illlotlas stated that the predecessor national bank had trust accounts 3137 10/10/34 -18- totp14approximately $8,0000000, and that the applicant bank desires Etlithorit,7 to exercise trust powers in order that it may acquire this trust bust nese and benefit from the earnings therefrom, and he raised the cuestion as to whether trust powers could be granted subject to the condition that the bank will make the necessary corrections in its management. In tIlie co nnection, it was pointed out that it had been the policy of the E°ard in the Past not to grant trust powers conditionally. A discussion ensued, at the conclusion of Which Mr. James moved that the application, together with the memorandum prepared by the Division of Examinations, be referred to the Comptroller of the Currency with the request that he investigate the possibility of effecting a satisfactory correction in the management of the bank before action is taken by the Board on the application for trust powers, and that he advise the Board with regard thereto. Carried. Mr. Szymczak referred to the activities now being carried on by the? ederal Housing Administration under the authority granted by the 44tio 441- FIMISing Act, and he suggested that, as the Federal reserve banks * 1 be 1 4-00ked to by banks in their respective districts for information With r egard to loans under the National Housing Act, it might be desirable tOr the -e.eral Reserve Board to invite Mr. James A. Moffett, Federal g Administrator, and Mr. Roger Steffan, Director of Modernization . ties 44 " ° meet with the Board and outline the administration's activid 1111-1rPoses, following which consideration could be given to the Birebil Itir of suggesting to each Federal reserve bank that it invite 4Prese 4°Itives of the Federal Housing Administration to discuss the matWith its staff. A general discussion ensued during which the suggestion 3138 ' 0/10/34 " It made -19that, inasmuch as the Board intends to hold meetings in Wash- with the directors of the Federal reserve banks and their branches, it might be desirable to have representatives of the Federal Housing 114ministration present at such meetings to outline the administration's a•Ctivities. At the conclusion of the discussion, upon motion by Mr. Szymczak, Vice Governor Thomas was requested to confer with Hr. Moffett, and, if he is agreeable to the suggestion, to fix a date when he and Mr. Steffan will meet with the Board and its staff for the purpose of discussing the program and activities of the Federal Housing Administration. Dllring the discussion of the above matter., reference was made to thapr °gram for the meetings of the Board with the directors of the 'N'IloUs Federal reserve banks and branches, and Mr. James called atten- tilto the expense involved in, and time required to attend, the contftlaated meetings, and he stated that it WAS extremely important that "rail Prepared program be arranged which will justify the time and el4)ense involved. It was decided that consideration should be given to this matter by the members of the Board and that a meeting of the Board would be held on Friday, October 12, 1934, for the purpose of discussing it further. Mr. le Ilea Wyatt suggested that the Board authorize the publication in issues of the Federal Reserve Bulletin of the text of the rulings and made public by the Board interpreting Regulation T. Mr. Wyatt's suggestion was approved. 10 0 4 3139 -20-- Thereupon the meeting adjourned. As d: Secretary.
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