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A meeting of the Federal Reserve Board was held in Washington on
M°114Y, October 16, 1933, at 11 a. m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Black, Governor
Hamlin
Miller
James
Thomas
Szymczak
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
ALSO PRESENT:
Morrill, Secretary
Carpenter, Assistant Secretary
Bethea, Assistant Secretary
Martin, Assistant to the Governor
Paulger, Chief of the Division of Examinations
Leonard, Federal Reserve Examiner
Wingfield, Assistant Counsel
Boatwright, Assistant Counsel
Mr. Benjamin H. Brewster, Jr.,
)
President, Union Trust Corn)
paw of Maryland
)
Messrs. W. Graham Boyce and Charles )
W. Hoff, Vice Presidents, Union )
Trust Company
)
Messrs. Walter H. Buck and H. Webster)
Smith, Counsel for the Union
)
Trust Company
) Members of
Messrs. Millard F. Tydings and
) the delega,
Phillips Lee Goldsborough,
) tion favorUnited States Senators from
) ing consumMaryland
) mation of
Mr. John J. Ghingher, Bank Commis- ) the prosioner of the State of Maryland ) posed plan
Mr. John D. Hospelhorn, Deputy Bank ) of reorganiCommissioner of the State of
) zation of
Maryland
) the Union
Mr. William Preston Lane, Jr.,
) Trust ComAttorney General of the State of ) pany of
Maryland
) Maryland
Messrs. S. P. Nelson, William H.
)
Meese, R. S. B. Hartz, B. Howell )
Griswold, H. M. George, Moses S. )
Hecht, George P. Bagby, W. Bladen)
Lowndes, Lloyd B. Wilson, Michael)
A. Muller, Charles M. Cohn, E. M.)
)
Sturtevant and A. J. Hazlett.
10/16/33
-2-
Mr. Carl S. Bloede, Chairman, and
Messrs. C. W. Roberts, J. T.
Fritz, L. W. Barroll, J. Cookman
Boyd, Jr., and Robert E. Kanode.
30
Members of
the committee representing the
depositors
dissenting
from the proposed plan of
reorganization
of the Union
Trust Company
Governor Black welcomed the two delegations, and
suggested that
Bloede, as Chairman of the committee represen
ting the depositors dis2eating. from the proposed plan of reorganizati
on of the Union Trust CornpaAY of
Maryland, Baltimore, Maryland, present such informat
ion as the
c°mmittee might desire to have cons
idered with regard to the proposed re°I'eanization
and the application of the Union Trust Company for
membership
in the
Federal Reserve System.
Mr. Bloede introduced Mr. Kanode, of coun
sel for the committee,
8.8 sPokesman
for the committee, who made a statement setting
forth the
bjeotions
raised by the dissenting depositors to the proposed
reorganizati°n plan. During his stat
ement, Mr. Kanode said that his committee
clid- not obje
ct to the reorganization of the trust company,
and, on the
c°11trarY, felt that it shou
ld be reorganized and that it should be adMitted
to membership in
the Federal Reserve System, but that the committee
felt that the
plan of reorganization adopted should be one which
17°111(1 be equi
table from the standpoint of the depositors. He reviewed
the hiStory of certain litigation involving the constitu
tionality of the
1441'4a3ld statute under which the bank
is being reorganized and stated that
the rilatter is
now pending in the Court of Appeals of Maryland.
Upon inquiry of Governor Black as to the particulars in whic
h the
10/16/33
371
—3-
committee of dissenting depositors desired revision of the
plan, Mr.
4anode stated that (1) there should be an effort on the
part of the
Officers, directors and shareholders to furnish funds
for the purpose
Of
restoring the trust company's capital, and (2) that the stock
of the
trust company, instead of
being turned over to the City Certificates Cor—
poration, should be trusteed for the benefit of the deposi
tors and held
bY the trustees until
the depositors are paid in full.
He stated that if
these two changes were
made in the proposed plan, there would be no objec—
tion to the plan
so far as his committee is concerned, altholiel the com—
raittee feels that,
with proper cooperation between the trust company and
the Agencies of the Federal Government, a greate
r proportion of deposits
than the 20% now propos
ed could be made available, and that the reorgani—
zation
plan should be revised so as to eliminate all preferences of de—
Positors which might make doubtful the legality of the
plan.
Mr. Kanode also stated that in his opinion there is no liability
en the part of the trast company, under the plan of reorganizati
on, in con—
with the certificates of beneficial interest proposed to be issued
13Y. the City Certificates Corporation, but that the certificates would be
the o
bligations of the City Certificates Corporation.
Governor Black then called on Mr. Brewster as spokesman for the
delegation in favor of the plan of reorganization, and Mr. Brewster stated
tilat
Mr. Smith of counsel for the trust company would make a statement to
the Board.
Mr. Smith outlined certain points which were given consideration in
e°11rlect10n with the formul
ation of the plan now proposed, referring parti—
11411-Y to the reasons for the phases of the plan to which objection
'
was
372
10/16/33
-.
4
--
mate in the statement of Mr. Kanode.
He also referred to certain improve-
Illents which have taken place in the trust company's condition
since the
Proposed plan was first presented to the shareholders and
during the period
that the company
has been open on a restricted basis.
He then discussed
brieflY the question to what extent, if any, the Union Trust
Company would
be liable on the
certificates of beneficial interest proposed to be issued
bY the City Certificates Corpora
tion, and stated that, in his opinion, any
liability on the part of the trust company
which might result from the
"
1 11a 1oe of such certificates would not be sufficient to impair the capital
st"lc of the bank within the meaning of section 9 of the Federal Reserve
Act, and that in his opinion the certificates do not constitute a liabili
ty
04
the part of the
Union Trust Company.
There followed a brief discussion
with recard to the
latter point.
Mr. Brewster then reviewed his connection with the Union Trust ComPar and his efforts to work out a suitable plan of reorganization, and
stated that he had intervi
ewed the larger depositors and 153 of the de(Isitore who have $5,000 or less on deposit in the Union Trust Company and
that
they had all assured him of their support. He also stated
that he is
firr
,
convinced that without becoming a member of the Federal Reserve Systhere will
be no other course open to the trust company than to go into
,ceiv
erehip. Upon inquiry as to wh r this was the case, Mr. Brewster stated
that ,
ne believed the community would not continue to deposit with the bank
11111e
.
28 it
were a member of the Federal Reserve System and that the trust com-
colild not occupy its proper place in the community without being aditteci to membership.
He also stated that he had prepared a written state-
10/16/33
-5-
73
ment for presentation to the Board which he would request Mr.
Buck of
counsel for the trust company to read to the Board.
Mr. Buck, after
expressing his opinion that the proposed plan is a desirable one, read
the statement
prepared by Mr. Brewster, a copy of which has been placed
in the Board's
files.
Mr. John J. Gbin6her, Bank Commissioner of the State of Maryland,
stated that he had approved the proposed plan of reorganization
; that he
feels it is practicable; and that if the bank is permitted to open and
to
become a member of the Federal Reserve System, he feels it will succeed,
but that
there is serious doubt as to its success if it does not become
a
member.
Governor Black then requested each of the delegations to present
to the
Board, not later than Wednesday, October 18, 1933, a brief containin6 in addition to any further information the delegation may wish
to submit, an
opinion on the question whether the certificates of beneficial interest proposed to be issued by the City Certificates Corporaticn would constitute a liability on the part of the Union Trust Company.
Re stated that this
is an important question in considering whether the
tI
'llst company, if reopened in accordance with the proposed reorganization
Plan, would have an unimpaired capital, and that it is a question which
the Pederal Deposit Insurance Corporation would be required to consider
in connection with
the trust company's application for insurance of its
clePosits.
Statements were then made by Senators Tydings and Goldsborough,
i4 which they stressed the desirability of an early decision by the Board
the matter and the importance to the community of the reopening of the
10/16/33
bank and the aid which would be given to business in Baltimore and the
State of Maryland by the release of deposits proposed by the plan.
Mr. William Preston Lane, Jr., Attorney General for the State of
MarYland, stated that he had approved the plan and feels that the courts
will declare the emergency banking act of Maryland under which the plan
was formulated constitutional and the details of the plan legal.
He also
stated that in his opinion the only alternative to the reopening of the
bank under the plan submitted is receivership, which would result in
serious consequences for the city of Baltimore.
Mr. Smith then called upon Messrs. George P. Bagby, President of
the Western
Maryland Railway Company; Mr. H. M. George, Treasurer of the
Delds Coal and Coke Company; Mr. R. S. B. Hartz of the Baltimore and Ohio
Railroad Company; Mr. A. J. Hazlett, President of the Eastern Rolling
Mills; Mr. Moses S. Hecht, President, Hecht Bros.; Mr. E. M. Sturtevant,
Counsel for the Consolidated Gas, Electric Light & Power Company; Mr. S. P.
lielson, Treasurer of Johns Hopkins University; and Mr. Michael A. Muller,
President
of O'Neill & Company, all of whom represent large depositors in
the Union Trust Company, and each of them expressed approval of the plan
and- agreement that it is highly desirable that the bank be reorganized and
its deposits released as soon as possible as a stimulus to business in
13altimore and the State of Maryland.
Mr. W. H. Meese, President of the
13a1timore Association of Commerce, read a prepared statement regarding the
'1.(11)0sed reorganization, a copy of which has been placed in the Boardls
files.
Thereupon the members of the two delegations, and Messrs. Paulger,
5
10/16/33
Leonard, Wingfield and Boatwright of the Board's staff, left the room.
The minutes of the meetings of the Federal Reserve Board held
on September 19, 22, 26, and 28, 1933, were approved.
The Board then considered and acted upon the following matters:
Letter dated October 13, 1933, from Mr. Sproul, Secretary of the
Pederal Reserve Bank of New York, and telegrams dated October 12, 1933,
from Mr. McClure, Chairman of the Federal Reserve Bank of Kansas City,
and October 13, 1933, from Mr. Hoxton, Chairman of the Federal Reserve
Baaik of
Richmond, and Mr. Clark, Assistant Federal Reserve Agent at the
Pederal Reserve Bank of Atlanta, all advising that, at meetings of the
b°arde of directors on the dates stated, no changes were made in the banks'
ezisting schedules of rates of discount and purchase.
Without objection noted with approval.
Telegraphic reply on October 13, 1933, approved by five members
°f the Board, to
a telegram of the same date from Mr. Stevens, Chairman
Of the Federal Reserve Bank of Chicago, stating that the executive committee of the bank, at its meeting on that date, voted to adopt, subject
to the approval
of the Federal Reserve Board, rates of 45 per annum on
advances to member banks under section 10(b) of the Federal Reserve Act,
"amended
by the Act of March 9, 1933, 4% per annum on advances to non-
member banks and trust companies under section 404 of the Act of March 9,
1933, as
amended, and 4% per annum on advances to individuals, partnerships
or corporations secured by direct obligations of the United States
er
section 13 of the Federal Reserve Act, as amended, effective October
16, 1933.
The reply stated that the Board approves the rates referred to.
Approved.
t) 1
10/16/33
Memorandum dated October 11, 1933, from Mr. Wyatt, General Counsel,
recommending that Mr.
Alfred K. Cherry be appointed to the position of
Assistant Counsel in the office
of General Counsel, with salary at the
rate of $5,500 per annum,
effective as of the date upon which he enters
Upon the performance of his duties;
the recommendation having been ap—
Proved by five members of the Board on October 13,
1933.
Approved.
Reply on October 13, 1933, approved by seven members of the Board,
to a letter dated October 5 from Mr. Case, Federal Reserve Agent at New
York, stating that the board of directors of the Federal Reserve Bank of
liew York, at its meeting on that date, voted to recommend to the Board
tlie designation of Messrs. Charles A. Robinson and George W. Siver, em—
P1°Yees in the bank examinations department, as assistant examiners in
tile
Pederal reserve agent's department of the bank.
The reply stated
that the Boara
approves the designation of Messrs. Robinson and Siver
45
assistant examiners without chance in compensation. The reply stated
415o that it
is noted from the agent's letter that the name of Herbert
17. 131)11ock, whose designation as an assistant examiner in the agent's
clePal'tment was approved by the Board on September 21, should have been
211(31711 as Robert W. Bullock, and that the Board's records have been changed
4ecordincly.
Approved.
Telegraphic reply on October 13, 1933, approved by five members
of the Board, to a letter dated October 4 from Mr. Austin, Federal Reserve
4eellt at Philadelphia, requesting approval of the appointment of Messrs.
10/16/33
L. C. Powers and H. V. Eichmann, now employed in the bank liquidation
division and the credit department of the bank, respectively, as assistant examiners
in the Federal reserve agent's department, with salaries
at the
rates of $2,400 and $1,980 per annum, respectively.
The reply
stated that the Board approves the appointments as requested with salaries
at the
rates stated.
Approved.
Letter dated October 14, 1933, to Mr. Helm, Deputy Governor of the
Federal Reserve Bank of Kansas City, approved by five members of the Board,
stati--
tliat, in accordance with the recommendation contained in his letter
of October 4, the Board approves changes in the personnel classificat
ion
Plarl of the Oklahoma City branch to provide for decreases in the salary
'
l 411(;es of the positions of "clerk" and "clerk in charge" in the accounting
a/ld non
-cash collection departments of the bank, respectively.
Approved.
Letter dated October 14, 1933, to Mr. Stevens, Federal Reserve
Agent at
Chicago, approved by five members of the Board, referring to the
haral s telegram to the agent under date of September 18 approving the
temp°retry
appointment of six examiners in the Federal reserve agent's dePartment of the bank with a salary range of from $3,600 to $5,000 per
a4111.11m, with the understanding that complete information as to each examiner
17°111d be forwarded promptly.
The letter stated that it appears from As-
1.stant Federal Reserve Agent Young's letters of September
18, 19, 23,
a4r1
25, and October 2 and 3, and his telegrams dated October 4, 1933, that
the peeLeral reserve agent has employed temporarily as
examiners in the
378
10/16/33
-10-
Federal reserve agent's department and transferred to the Federal Deposit
Insurance Corporation, effective as of the dates indicated, the following
individuals,
with salaries at the rates stated:
Name
H. C.
Crays
W. J. Penningroth
Lyman C. Sorensen
Harold G. Hudson
Harold M. Cox
Herbert W. Sadler
Salary per
Annum
Date of
Employment
$4,500
4,500
4,000
4,000
3,600
3,200
September 19
"
25
23
II
25
II
22
October
2
Date Transferred
to F.D.I.C.
September 27
27
30
27
27
The letter
stated also that a review of the information submitted with
respect to these men indicates that all but Messrs. Sorensen arc;
Cox are
indebted to
banking institutions; that in the case of Mr. Cox no statement
i8 made as to his indebtedness and the agent's advice in this connection
will be appreciated; that in the case of Mr. Sorensen the statement is
raade that he is not in debt; and that, in the circumstances, the Board
approves the temporary appointment of Mr. Lyman C. Sorensen as an examiner
i4
the Federal reserve agent's department of the bank with salary at the
rate of $4,000 per annum, effective September 23, 1933, and defers further
action with respect to the five remaining individiAls pending receipt of
"
11
sPecific information concerning them in the light of the requirements
set
forth in the Board's circular letter X-7425, dated April 29, 1933,
information as to whether they have any outside business con-
Ilecti°ns.
The letter stated further that it appears from the information
slibmitted in Mr. Young's letters that Mr. Crays owes $5,000 for the purchase
Of bank stock, and that Mr. Sadler owes $1,750 of which $950 represents
inaeb teclness to the Aurora National Bank, Aurora, Illinois; that it appears
ci
10/16/33
-11-
also from the statements of indebtedness submitted with the agent's letter
of September 26 that Mr. Penningroth is heavily indebted, to the extent
of $29,350 of which $750 represents indebtedness to
the City National Bank
and Trust Company, Battle Creek, Michigan, $3,600
to the Union & Peoples
Company of Jackson, Michigan, and $25,000 to the Guardian
Holding Company
of Detroit, Michigan; and that Mr. Hudson owes $930 to
the First State
Bank, Decatur, Michigan, a nonmember.
The letter added that the Board
feels strongly that, in considering applicants for appointm
ent to positions
on the bank's examinin
g staff, men should not be selected who are involved
financially, are
heavily in debt, or are indebted to banking institutions,
Particularly to member banks; requested that
the agent furnish the Board
with further information with regard
to the transfer of Mr. Sadler and
certain assistant examiners to the Federal Deposit Insurance Corporation;
aria
stated that, according to the Board's records, E. H. Anderson is listed
48 an examiner rather than as an assistant examiner as stated by Mr. Young,
his appointment having been anoroved as of October 3, 1932; that in the
ease of Harry Dearborn, the Board appears to have no information concernhis appointment or employment; and that it will be appreciated if
tIle agent will furnish the necessary information covering the questions
l*aisod regarding these two men.
Approved.
Letter dated October 14, 1933, to the Federal reserve agents at
411 Pederal reserve banks, approved by five members of the
Board, stating
tIlat, supplementing the Board's circular letter X-7425,
dated April 29,
1933, regarding indebtedness of officers and employees, the Board
desires
10/16/33
380
-12-
to point out the desirability of applying the principles set forth in such
letter to the selection of individuals for appointment to positions on the
examining staffs of the Federal reserve banks; that, in view of the growing
necessity for examiners of the Federal reserve banks to conduct, or particiPate in, examinations of nonmember banks
in connection with applications
for membership
in the Federal Reserve System or in the Federal Deposit Insu1744oe Fund, or for other reasons, it is clearly undesirable for employees,
in the Federal reserve agent's departments
of the respective reserve banks,
engaged in audits and examinations to be indebted, directly or indirectly,
to any
bank or banking institution in their respective Federal reserve districts; and that attention is called to the fact that the Board's circular
letter X
-7595, dated September 20, 1933, regarding appointment of examiners
at Federal reserve banks, required that detailed reports
be made concerning
persons recommended for appointment including:
"Information as to applicant's indebtedness, if any, whether
indebted to member banks, their subsidiaries or affiliates, when
indebtedness was contracted, its original amount, progress made in
liquidation, and whether, if tendered appointment by the Federal
reserve bank as an examiner, the applicant will resign any official
connection he may have with other business concerns and discontinue
anY other existing relationship which may have an undesirable effect
Illoon his service as an employee of the Federal reserve bank."
7115
letter stated also that the Board feels strongly that, in considering
ePplicants for appointment to positions on the examining staffs of the Fed.reserve beAks, men should not be selected who are involved financially,
are
heavily in debt, or are indebted to banking institutions, particularly
to zember
banks.
Approved.
Letter dated October 13, 1933, to the board of directors of the
41.
10/16/3s
"Citizens Bank", Hartford, Kentucky, approved by six members of the
Board, stating that, subject to the conditions prescribed in the letter,
the Board approves
the barkis application for membership in the Federal
11.eserve System and for the number of shares of stock of the Federal Reserve Bank of St. Louis to which the bank will be entitled upon the basis
of its capital and surplus as of the date upon which its membership becomes effective.
Approved.
Telegram dated October 13, 1933, to Mr. Stevens, Federal Reserve
Agent at Chicago, approved by five members of the Board, referring to the
application of the "First State Bank", Milford, Michigan, for permission
to withdraw immediately from membership in the Federal Reserve System, and
stati__
46, that the Board waives the usual requirement of six months notice
of intention to
withdraw and that, accordingly, upon surrender of the Fed.reserve bank stock issued to the First State Bank, the Federal Reserve
Ilal* of Chicago is authorized to cancel such stock and make a refund there.
O1.
Approved.
Reply on October 12, 1933, approved by five members of the Board,
to a letter dated October 2 from Mr. Hoxton, Federal Reserve Agent at
Richmond, with reference to the capital structure of a bank in North
Carolina which is considering applying for membership in the System,
the batk in question having a capital of $30,000, (which, on the basis
°f the population of the town in which it is situated, is sufficient)
13111
'
13111s of $100,000, and undivided profits and reserves of $48,500, as
eciPared with deposits of $1,417,700.
Mr. Hoxton's letter stated that
3H2
10/16/33
the directors of the
bank would willingly agree to maintain a capital
and. surplus in accordance
with the rOgvlar condition of membership numbered fifteen, but that they object to increasing
the capital by transfer
from surplus because of the added
expense in the form of taxes, as, under
the laws of the
State of North Carolina, investments in bonds of the United
States Government and the State of North Carolina are
deductible for the
purposes of taxation from a bank's surplus, but not from its capital, and
that advice is requested as to whether, under these conditions, the Board
would require an increase in the capital stock of the bank as a condition
of membership.
The reply stated that it is desirable that the capital of
a bazic represent a reasonable proportion of the total capital accounts;
but that,
in the circumstances described by the agent, assuming that the
ba4kl e condition otherwise warrants approval of the application, the Board
wolad not require an increase in the capital stock of the bank as a conof membership, but would require the transfer of at least $15,000
fl'cot undivided profits to surplus account in order that the combined capital and surplus of the bank would amount to at least 105 of the deposit
liabilities, as required muier the Board's general condition of membership
tUmbered fifteen.
Approved.
Letter dated October 14, 1933, to Mr. Austin, Federal Reserve
4aent at Philadelphia,
approved by five members of the Board, replying
t° A"illE Assistant Federal Reserve Agent Fenner's letter of September 7
"
sine that the Integrity Trust Company of Philadelphia, a member State
;has acquired 625 shares of the stock of the Philadelphia National
/144
13a4c and 214 4/14 shares of the stock of the Fire Association of Phila,cielPhia, through the liquidation of a loan of one of its customers.
10/16/33
-15-
The reply stated that Mr. Fenner has called attention to the fact that
the Integrity Trust Company is subject to a condition of membership
which prohibits it from acquiring an interest in any other bank or trust
COZ13Dv%
4, through the purchase of stock in such other bank or trust cornT, and that, under the provisions of the Banking Act of 1933, a State
member bank may not purchase stock in another corporation, except in certain
limited classes of cases, the circumstances of which are not here
applicable; that, in view of the reason given for the acquisition of the
"odic, the Board will not take any action in the matter at this time, but
that the agent is requested to advise the Integrity Trust Company that it
Should dispose of the stock as soon as possible, and that it will be ap1:
'rsoiated if the agent will advise the Board when such stock has been disPosed of.
Approved.
Reply on October 13, 1933, approved by five members of the Board,
to a letter dated September 29 from Mr. Hoxton, Federal Reserve Agent at
Richmond, relative to a proposed agreement whereby the Kanawha Valley
Bank,
Of
Charleston,
West Virginia, a member bank, would assume the deposit ha-
and acquire certain assets of the Capital City- Bank, of Charleston,
West Virginia, a nonmember bank, and recommending that the Board give the
41184ha Valley Bank permission to purchase the assets and assume the dejr38it liabilities of the bank as provided in the proposed agreement.
The
'
l elAY stated that the Board cannot undertake to approve any such
agreement
IrithoUt full information as to the transaction, including an appraisal
of
the assets to be taken over, but that, in the circumstances, the Board will
illtarpose no objection at this time to
the proposed transaction.
The reply
4
10/16/33
-16-
stated also that whether the transaction actually results in a change
it the character of the assets or in the scope of the functions of the
member bank within the meaning of the conditions of membership is a matter of fact to be determined; that, if the agent's
examiners do not appraise the assets to be taken over prior to their acquisition by the
Xanaliha Valley Bank, it is desired that they participate in the next
examination of the bank; that the report
of such examination should inclIlde a classification of any assets remaining in the low*. which had been
acquired from the Capital City Barilr and should also include a report of
anY losses which have been charged off on account of the assets so acquired;
and that, following the next examinatio
n of the Kanawha Valley Barilr, the
agent is requested to make a further report to the Board containing full
information as to the condition of the bank and the nature of the
changes,
if a/1Y, by reason of the transaction in the general character of its assets
in the scope of the functions exercised by it, and to submit a recommendas to the action to be taken by the Board in the circumstances.
Approved.
Letter dated October 13, 1933, to "The First National Bank of
Meecmb City", McComb, Mississippi, approved by six members of the Board,
stating that, in addition to the authority heretofore granted to the bank
to act, when not in contravention of State or local law, as trustee, execut°1', atd administrator, the Board has approved the bank's application for
Parlaission to act as guardian of estates, the exercise of such right
being
altbiect to the provisions of the Federal Reserve Act and
the regulations
Of the
Federal Reserve Board.
Approved.
10/16/33
-17-
Letter dated October 13, 1933, to the "Union National Bank in
Kansas City", Kansas City, Missouri, stating that the Board approves
the bank's application for permission to act, when
not in contravention
of State or local law, as trustee, executor, administrator, registrar
of stocics and
bonds, guardian of estates, assignee, receiver, committee
Of estates
of lunatics, or in any other fiduciary capacity in which
State banks, trust companies or other corporations which come into cornPetition with national banks are permitted to act under the laws of the
State of Missouri, the exercise of all such rights being subject to the
Provisions of the Federal Reserve Act and the regulations of the Federal
Reserve Board.
The letter stated also that the Board notes from the
ezamination reports of the Fidelity National Bank and Trust Company,
Xansu City, Missouri, that many trusts and trust department accounts
have been adversely commented upon; that it feels that, if the Union
Vational Bank
in Kansas City is tendered any of the trusts or trust dePartment accounts now held by the Fidelity National Bank and Trust ComPallY, it 6hould carefully scrutinize their condition and should not accept any
such trusts or accounts, Which, through their assumption, may
be detrimental
to the interests of the Union National Bank; and that the
hard has requested the Comptroller of the Currency to have a national
1/4lik examiner visit the Union National Bank for the purpose of assisting
It in
determining the trusts or accounts now held by the Fidelity National
1/a104 and Trust Company which may be detrimental to the interests of the
National Bank if assumed by it.
Approved.
10/16/33
Reply on October 13, 1933, approved by five members of the
Board, to a letter dated September 23 from Governor Norris of the Fed,era Reserve Bank of Philadelphia inclosing a copy of a letter address
ed
to him by the president of the Western Saving Fund
Society of Philadelphia
With regard to the question whether the deposit
s of the Society may be
Classed, as savings deposits under the Board's regulations.
The reply
referred to the rules and regulations of the Society applicable to deposits, as set forth in a letter dated September 22, 1933, from the president of the Society, /Ina stated that, except
for failure to comply with
the requirement that the prescribed notice of intended withdra
wal be
given in writing, deposits made in accorda
nce with such rules and regula..
tions would appear to comply with the definition of "savings accounts" in
the Board's Regulation D and of "savings deposits" in the Board's Regulati
"q•
The reply stated also that it is noted that the president of the
Society states that withdrawals upon shorter notice than two weeks are
Permitted only in cases
of real emergency, and that, in this connection,
it 1114Y be pointed out that it would be necessary for the Society, if it
2hould become a member of the Federal Reserve System, to comply
with the
1)r"ision of section 19 of the Federal Reserve Act that no member bank
811411 waive any requirement of notice before payment of any savings deexcept as to all savings deposits having the same requirement, and
with the
provisions of section VI of the Board's Regulation Q, on this
811bieot.
Approved.
Reply on October 13, 1933, approved by five members of the
10/16/33
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667
Board, to a letter dated September 30 from Mr. R. S. Hecht, Chairman of
The Hibernia National Bank in New Orleans, Louisiana, referring to the
matter of the absorption of exchange or collection charges by member banks
In connection with items received by
them on deposit, and suggesting that
the Board issue a definite ruling as to the law with respect
to this matter.
The reply stated that the Board has given careful consideration to
the matter but does not feel that it is possible to issue a general ruling
by
reference to which it could be determined definitely under the circum-
8tances of 611 cases whether the absorption of exchange or collection
charges by member banks is lawful or unlawful; that questions as to whether
ellch an absorption of charges does or does not constitute a payment of
Interest within the meaning of section 19 of the Federal Reserve Act, for4g member banks to pay interest on deposits payable on demand either
directly or indirectly by any device whatsoever, must be determined as and
When they
arise in particular cases and in the light of the special facts
Of each such case; that,
as
pointed out to Mr. Hecht in the Board's letter
Of September 26, 1933, the absorption of exchange or collection charges
ill an amount equivalent to a certain percentage of the amount of the bal440e of the depositor, in the Board's opinion, is clearly in violation of
the law on the subject; and that no member bank wherever located may lawabsorb exchange or collection charges on such a basis.
The reply
"ate(' also that the Board feels that the banks and the clearing house
ELeeociations should
themselves consider whether, in the light of the
2Pirit and purpose of the prohibition of the statute upon the
payment
Of interest, the practice which they wish
to follow with respect to the
10/16/33
-20-
absorption of exchange or collection charges is lawful; that, if in any
case it appears questionable whether the practice proposed conforms to
the requirements of the law
on the subject, the question may be submitted,
if
desired, to the Federal reserve bank of the district for consid..
eration; and that, of course, the Federal reserve bank, in cases where
it appears necessary, may present the matter to the Board with a request
for a
ruling.
The reply stated further that the Board is not informed
as to the practice of the Atlanta banks with regard to the absorption of
"change or collection charges in connection with accounts of depositors
other than correspondent banks; but that, in view of Mr. Hecht's stateraent on the subject, the Board will take the matter up with the Federal
Reserve Agent at Atlanta with a view to effecting a correction of the
Practice of member banks in this respect if it appears to be unlawful.
Approved, together with a letter dated October
13, 1933, to Mr. Newton, Federal Reserve Agent at Atlanta,
also approved by five members of the Board, inclosing a
copy of Mr. Hecht's letter, and a copy of the Board's reply thereto; calling attention to Mr. Hecht's statement as
to the practice of Atlanta banks with respect to the absorption of exchange charges for railroads, express companies,
etc.; and requesting that the agent ascertain whether the
practice of member banks in Atlanta in this respect is in
conformity with the law on this subject, and, if unlawful,
that he communicate with such member banks with a view to
having such changes made as may be necessary to bring their
practices into harmony with the statute, and that he advise
the Board of the results of his communication with the Atlanta
member banks in this connection.
Telegraphic reply on October 14, 1933, approved by five members
Of the Board, to a telegram dated October 9 from Mr. McClure, Federal
Reserve Agent at Kansas City, with regard to the legality of a service
littlige plan in force among certain banks in the Tenth Federal Reserve
kstrict.
The reply stated that the Board understands that, under the
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;389
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plan, the potential earning power of a depositor's balance is calculated
according to a certain percentage of the amount of the balance and. that
the amount of service charges imposed on the depositor is subject to a
deduction of an amount equivalent to the said percentage of the depositor's
balance; and that, on the basis of the information submitted in the agent's
t
elegram, the Board is of the opinion that the deduction from the amount
Of service charges imposed on the depositor of an amount equivalent to a
certain percentage of his balance, which is payable on demand, is an in,direct payment of interest within the meaning of section 19 of the Federal
Reserve Act, and, accordingly, that no member bank may lawfully make a
d,eduction from
service charges on such a basis with reference to deposits
1387able on demand.
Approved.
Telegraphic reply on October 14, 1933, approved by five members
of the
Board, to a telegram dated October 7 from Deputy Governor Paddock
Of the
Federal Reserve Bank of Boston referring to a letter addressed to
the bank under date of October 6 by Acting Secretary of the Treasury
Acheson,
relative to the continuation of the acceptance by Federal reserve banks from nonmember banks of gold coin and gold certificates, and
irlquiring whether the Board's telegram of March 9, 1933, with regard to
tile absorption by Federal reserve banks of abrasion and shipping charges,
is still in
effect.
The reply stated that section 6 of the Executive
Order of April 5, 1933, provided that the Secretary of the Treasury would
ill all proper cases
pay the reasonable costs of transportation of gold
gold bullion, or gold certificates delivered to a member bank or
10/16/33
i
!
i
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Federal reserve bank in accordance with sections 2, 3 or 5 of the Execu
tilm Order,
including the cost of insurance, protection, and such other
incidentaa costs
as may be necessary, upon production of satisfactory
evidence of such
costs, that this authorization, however, is not con,teined in the Executive Order of August 28, section 11 of which revokes
the Executive Order of April 5; and that the Board has also been advised
Y the Treasury
that it will not reimburse the Federal reserve banks for
abrasion
on gold coin beyond the usilnl limit of tolerance.
The reply
stated also
that, in the circumstances, the Board. feels that the Federal
reserve banks 6hould no longer assume any abrasion loss on gold coin dewith them or tendered in exchange for other forms of currency or
an
shiloping charges on gold coin or gold bullion, and that the Board sees
4° °Ilieetion to the reserve banks assuming shipping charges on gold certificates received from member banirs.
Approved, and the Secretary was
requested to send a copy of the telegram
to all other Federal reserve banks for
their information.
Report of Standing Committee dated October 13, 1933, recommend.approval of the following change in stock at a Federal reserve bank:
t7,4taaliat6t
ralion for ORIGINAL Stock:
Shares
'ltizens National Bank of Morgan City,
Morgan City, Louisiana.
66
Approved.
Thereupon the meeting adjourned.
41*'oved.:
e.,
••••••••••••
••••••••••-•••••11.411.
Gove
66
@FedFRASER