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A meeting of the Federal Reserve Board was held in Washington on Wednesday, October 25, 1933, at 11:00 a. mi. PRESx;iiT: Mr. Black, Governor Mr. Hamlin Mr. :iller Mr. James Mr. Thomas Mr. Szymczak Mr. O'Connor Morrill, Secretary Carpenter, Assistant Secretary Bethea, Assistant Secretary Martin, Assistant to the Governor Wyatt, General Counsel Paulger, Chief of the Division of Examinations Mr. Vest, Assistant Counsel Mr. Chase, Assistant Counsel Mr. Leonard, Federal Reserve Examiner Mr. Mr. Iii'. Er. Mr. Ni'. Governor Black stated that Mr. J. 1.1. Daiger had interested him8e1f in the possibility of the purchase by the Board of the United States Chamber of Commerce building at the corner of H Street and ConAvenue and had discussed the matter on various occasions with G"ernor Black and 1.1r. James, but, upon looking into the situation, it /1'11'8 ascertained that the building was not for sale, and that Mr. Daiger 114d then discussed with Governor Black and :r. James the possibility of the Board leasing two floors in the building and additional space in 44 adjoining building. Governor Black said that, in his opinion, it Would not be desirable for the Board to make such an arrangement and that, if the Board at a future time Should determine to provide space tor it& offices outside of the Treasury building, such provision should be Of made through the erection or acquisition by the Board of a building its oval. The matter was discussed briefly, reference being made to 10/25/33 -2- the consideration given by the Board on previous occasions to the acquisition of space outside of the Treasury building, and to the need of the Board for additional space in the Treasury building at the present time, and Governor Black stated that the matter was being brought to the attention of the members for their information and with the suggestion that they give the problem some thought in connection with any action which may be necessary by the Board in the future. Governor Black read the following letter received under date Of October 21, 1933, from :r. F. G. Await, Acting Comptroller of the Clarrencyt "Receipt is acknowledged of your confidential letter of October 19 with reference to the application of the Continental Illinois Hational Bank and Trust Company, Chicago, Illinois, for reduction of its capital stock and specifically with reference to the question of management. "This office fully recognizes the losses sustained in this bank and which we believe have largely been due to the policies of the former Chairman of the Board. The Comptroller's office does how, ever, desire to make certain comments in regard to management, Which it feels, as does your Board, should be strengthened but believes that such strengthening should be done as a gradual process in order that the bank's relation to the public will not suffer. The Comptroller's office also believes that the first step in this direction should be the appointment of an outstanding Chairman of the Board of Directors for the bank and that after such appointment is made the other necessary changes in management should gradually develop. "This office has no objection to your Board sending a copy of Your letter to the Federal Reserve Bank at Chicago." Governor Black referred to the action taken at the meeting of the Loard on October 19, 1933, with regard to the application of the Coatinental Illinois Eptional Bank and Trust Company for permission to l'c'cluee its capital stock, and he stated that he did not feel that it 17°111d be desirable to present a copy of the Board's letter to the Comptl ' °11er of the Currency at the regular meeting of the board of directors 10/25/33 -.3.- Of the Federal Reserve Bank of Chicago and that, unless there was objection on the part of members of the Board, when he is in Chicago on Friday of this week he will arrange to have the letter considered by a committee of three directors of the Federal reserve bank and by that committee presented to the board of directors of the Continental Illinois liational Bank and Trust Company. No objection was expressed to the procedure proposed by Governor Black. 2.1r. :dller stated that he was of the opinion that the shareholders of the Continental Illinois National Bank and Trust Company would be unable at the present time to raise ;;25,000,000 for additional ecnimon capital stock, but that he felt that certain of the shareholders Inight be in a position to subscribe for some additional amounts of stock, Possibly up to 0.0:000,000, and that it would be desirable, in case such aubscriptions are made, for the subscribers to be given priority, as reCards the additional stock, over the other common Shareholders of the 14&111c. Governor Black stated that he would take this matter up when he ln Chicago. 1/.. Wyatt stated that careful consideration had been given to the suggestions received from the Federal reserve agents in response to the board's letter of September 13, 1933, with regard to revision of "L", "Interlocking Bank Directorates and Other Relationships Ulider the Clayton Act"; that a revised draft of the regulation and ace°14130-nying forms had been prepared in which were incorporated a number (It the agents suggestions; that copies of the revised draft of regula- n were furnished to all members of the Board yesterday, and that it 445 10/25/33 -4- is now ready for final consideration by the Board. After discussion, the Board approved the regulation in the following form, effective 1:ovember 1, 1933, authorized its publication in the next issue of the Federal Reserve Bulletin, and also authorized the printing of official copies in pamphlet form. The Secretary was requested to send mimeographed copies to all Federal reserve agents with the request that they have copies printed locally for immediate distribution, in order to avoid unnecessary delay. "REGULATION L, SERIES OF 1933. (Superseding Regulation L, Series of 1930) INTERLOCKING BANK DIRECTORATES AND OTHER RELATIONSHIPS UNDER THE CLAYTON ACT SECTION I. STATUTORY PROVISIONS. Sections 8 and 8A of the Clayton Antitrust Act approved October 15, 1914, as amended by the Acts of May 15, 1916, May 26, 1920, March 9, 1928, March 2, 1929, and June 16, 1933.1 "Soc. 8. That from and after two years from the date of the approval of this Act no person shall at the same time be a director or other officer or employee of more than one bnnk, banking association, or trust company organized or operating under the laws of the United States, either of which has deposits, capital, surplus, and undivided profits aggregating more than c5,000,000; and no private banker or person who is a director in any bank or trust company organized and operating under the laws of a State, having deposits, capital, surplus, and undivided profits aggregating more than 5,000,000, shall be eligible to be a director in any bank or banking association organized or operating under the laws of the United States. The eligibility of a director, officer, or employee under the foregoing provisions shall be determined by the average amount of deposits, capital, surplus, and undivided Profits as shown in the official statements of such bank, banking association, or trust company filed as provided by law during the fiscal year next preceding the date set for the annual election t Amended by sec. 25 of the Federal Reserve Act as emended Sept. 7, 1916, and by act approvod Dec. 24, 1919, amending the Federal Reserve Act, as to corporations engaged in foreign banking and financial operations. See secs. 25 and 25(a) of Federal Reserve Act. 10/25/33 "of directors, and when a director, officer, or employee has been elected or selected in accordance with the provisions of this Act it shall be lawful for him to continue as such for one year thereafter under said election or employment. "1:o bank, banking association, or trust company organized or Operating under the laws of the United States, in any city or incorporated tomn or village of more than two hundred thousand inhabitants, as shown by the last preceding decennial census of the United States, shall have as a director or other officer or employee any private banker or any director or other officer or employee of any other bank, banking association, or trust company located in the same place: Provided, That nothing in this section Shall apply to mutual savings banks not having a capital stock represented by shares, to joint-stock land banks organized under the provisions of the Federal Farm Loan Act, or to other banking institutions which do no conuaercial banking business: Provided further, That a director or other officer or employee of such bank, banking association, or trust company may be a director or other officer or employee of not more than one other bank or trust company organized under the laws of the United States or any State Where the entire capital stock of one is awned by stockholders in the other: And provided further, That nothing contained in this section shall foAid a director of class A of a Federal reserve bank, as defined in the Federal Reserve Act, from being an officer or director, or both an officer and director, in one member bank: And pzpvided furthor, That nothing in this Act shall prohibit any Private banker from being an officer, director, or employee of not more than two tanks, banking associations, or trust companies, or Prohibit any officer, director, or employee of any bank, barring association, or trust company, or any class A director of a Federal reserve bank, from being an officer, director, or employee Of not more than two other banks, banking associations, or trust companies, whether organized under the laws of the United States or any State, if in any such case there is in force a permit therefor issued by the Federal Reserve Board; and the Federal Reserve Board is authorized to issue such permit if in its judgment it is not incompatible with the public interest, and to revoke any such permit whenever it finds, after reasonable notice and opPortunity to be heard, that the public interest requires its revocation. "The consent of the Federal Reserve Board may be procured before the person applying therefor has been elected as a class A director °f a Federal reserve bank or as a director of any member bank. %hen any person elected or chosen as a director or officer or selected as an employee of any Lank or other corporation subject to the provisions of this Act is eligible at the time of his election or selection to act for such bank or other corporation in 4447 10/25/33 -6- such capacity his eligibility to act in such capacity shall not be affected and he shall not become or be deemed amenable to any of the provisions hereof by reason of any change in the affairs of such bank or other corporation from whatsoever cause, whether specifically excepted by any of the provisions hereof or not, until the expiration of one year from the date of his election or employment. "Sec. SA. That from and after the 1st day of January 1034, no director, officer, or employee of any bank, bfinking association, or trust company, organized or operating under the laws of the United States shall be at the same time a director, officer, or employee of a corporation (other than a mutual savings bank) or a member of a partnership organized for any purpose whatsoever which shall make loans secured by stock or bond collateral to any individual, association, partnership, or corporation other than its own subsidiaries. SECTION II. DEFINITIONS. "Within the moaning of this regulation -"The term 'bank' shall include any bank, banking association, or trust company organized or operating under the laws of the United States or of any State thereof. "The term 'national bank' shall be construed to apply not only to national bAnking associations but also to banks, banking associations, and trust companies organized or operating under the laws of the United States, including all banks and trust companies doing business in the District of Columbia, regardless of the sources of their charters. "The term 'resources' shall be construed to mean an amount equal to the sum of the deposits, capital, surplus, and undivided Profits, and, in the case of a bank, banking association or trust company, shall be determined by the average amount of deposits, capital, surplus, and undivided profits as shown in the official statements of such bank, banking association or trust company filed as provided by law during the fiscal year next preceding the date set for the annual election of directors. "The term 'State bank' shall include any bank, banking association, or trust company incorporated under State law, except banks doing business in the District of Columbia, referred to above. "The term 'private banker' shall apply to any unincorporated individual engaging in one or more phases of the banking business as that term is generally understood and to any member of an unincorporated firm engaging in such business. "The term 'Edge corporation' shall mean any corporation organized under the provisions of section 25(a) of the Federal Reserve Act, as amended. "The term 'city of over 200,000 inhabitants' includes any city, incorporated town, or village of more than 200,000 inhabitants, as Shown by the last preceding decennial census of the United States. 10/25/33 "Any bank located anywhere mithin the corporate limits of such city is located in a city of over 200,000 inhabitants within the meaning of the Clayton Act, even though it is located in a suburb or an outlying district at some distance from the principal part of the city. SECTION III. PROHIBITIONS OF CLAYTON ALT. "(a) Under section 8 of the Clayton Antitrust Act, except as noted below under section IV (a) "(1) 1:o person who is a director or other officer or employee of a national bank having resources aggregating more than 5,000,000 can legally serve at the same time as director, officer, or employee of any other national bank, regardless of Its location. "(2) No person who is a director in a State bank or trust company having resources aggregating more than v5,000,000 or who is a private banker having resources aggregating more than 5,000,000 can legally servo at the same time as director of any national bank, regardless of its location. "(3) No person can legally be a director, officer, or enployee of a national bank located in a city of more than 200,000 inhabitants who is at the same time a private banker in the same city or a director, officer, or employee of any other bank (State or national) located in the same city, regardless of the size of such bank. "(b) Under section 8A of the Clayton Antitrust Act, except as noted below under section IV (b) -"From and after January 1, 1934, no person can legally be a director, officer or employee of a national bank who is at the same time a director, officer or employee of a corporation (other than a mutual savings bank) or a member of a partnership organized for any purpose mhatsoever mhich shall make loans secured by stock or bond collateral to any individual, associa.tion, partnership or corporation other than its own subsidiaries. "(c) The prohibitions of section 8 and section SA are cumulative, i.e., the prohibitions contained in section 8A of the Clayton Antitrust Act are in addition to those contained in section 8 thereof. SECTION IV. EXCEPTIONS. "There are certain exceptions to section 8 and certain exceptions to section 8A, but they are not identical. Therefore, all the exceptions applicable to each section are stated separately "2 The Federal Reserve Board has ruled that a Conservator of a national bank is not a director, officer, or employee of such bank within the meaning of the Clayton Antitrust Act. zjIL19 10/25/33 -8- "below in order to avoid confusion. "(a) The provisions of section 8 of the Clayton Act -"(1) Do not apply to mutual savings banks not having a capital stock represented by shares. "(2) Do not apply to joint-stock land banks organized under the provisions of the Federal Farm Loan Att. "(3) Do not apply to barking institutions which do no commercial banking business. "(4) Do not prohibit a person from being at the same time a director, officer, or employee of a national bank and not more than one other national bank, State bank, or trust company, -where the entire capital stock of One is owned by stockholders in the other. "(5) Do not prohibit a person from being at the sane time a class A director of a Federal reserve bank and also an officer or director, or both an officer and a director, in one member bank. "(6) Do not prohibit a person who is serving as director, officer, or employee of a national bank, even though it has resources aggregating over $,000,000, from serving at the same time as director, officer, or employee of any number of State banks and trust companies, provided such State institutions are not located in the same city of over 200,000 inhabitants as the national bank and do not have resources aggregating in the case of any one bank more than 5,000,000. "(7) Do not prohibit a person from serving at the same time as director, officer, or employee of any number of national banks, provided no two of them are located in the sane city of over 200,000 inhabitants and no one of them has resources aggregating over 5,000,000. "(8) Do not prohibit a person who is not a director, officer, cr employee of any national bank from serving at the same time as officer, director, or employee of any number of State banks or trust companies, regardless of their locations and resources. "(9) Do not prohibit a person who is an officer or employee but not a director of a State bank from serving as director, officer, or emp3oyee of a national bank, even though either or both of such banks have resources aggregating over ,:,5,000,000, provided both banks are not located in the same city of over 200,000 inhabitants. "(10) Do not prohibit a person who is an officer or employee but not a director of a national bank from serving at the sane time as director, officer, or employee of a State bank, even though either or both of such banks have resources aggregating over ,;5,000,000, provided both banks are not located in the same city of over 200,000 inhabitants. "(11) Do not prohibit a director, officer, agent, or employee of a member bank which has invested in the stock of any corporation principally engaged in international or foroign banking or financial operations or banking in a dependency or insular Possession of the United States, under the provisions of section 25 of the Federal Reserve Act, from being at the same time a 10/25/33 "director, officer, agent, or employee of any such foreign bank or financial corporation, if the Federal Reserve Board has granted its approval.3 "(12) Do not prohibit any officer, director, lient, or employee of any member bank from being at the same time a director, officer, agent, or employee of any Edge corporation in whose capital stock the member bank shall have invested under the provisions of section 25 or section 25(a) of the Federal Reserve Act, if the Federal Reserve Board has granted its approvaJ.1 .3 "(13) Do not prohibit an officer, director, agent, or employee of an Edge corporation from being at the same time a director, officer, agent, or employee of any other corporation in 'whose capital stock such Edge corporation shall have invested under the provisions of section 25(a) of the Federal Reserve Act, if the Federal Reserve Board has granted its approval. "(14) Do not prohibit a private banker or an officer, director, or employee of any bank or a class A director of a Federal reserve bank from being at the same time an officer, director, or employee of not more than two other banks within the prohibitions of the Clayton Act, if there is in force a permit therefor issued by the Federal Reserve Board. "The above exceptions are cumulative; but apply only to the prohibitions of section 8. The exceptions to section 8A are stated below. "(b) The provisions of section SA of the Clayton Act -"(1) Do not prohibit a person who is a director, officer, or employee of a national bank from being at the same time a director, officer or employee of a mutual savings bank. "(2) Do not prohibit a person who is a director, officer, or employee of a national bank from being at the same time a director, officer or emplOyee of a corporation or a member of a partnership which shall make loans secured by stock or bond collateral only to its own subsidiaries. "(3) Do not prohibit a person who is a director, officer tt3 If a director, officer, agent, or employee is affected only by section 8 of the Clayton Act, informal application for the approval of the Federal Reserve Board under section 25 or 25(a) of the Federal Reserve Act may be made in the form of a letter addressed to the Board either by the director, officer, agent, or employee involved or in his behalf by one of the banks which he ls serving, such applicction to be delivered to the Federal reserve agent at the Federal reserve bank of the district in which the bank now served by the applicant is located. however, if a director, officer or employee is affected by section SA of the Clayton Act, it is necessary for him to apply for and obtain a formal permit in accordance with the provisions of section V of this regulation, since the above exceptions do not apply to section 8A of the Clayton Act. 10/25/33 "or employee of a national bank from being at the same time a director, officer or employee of a corporation or a member of a partnership which does not actually make loans secured by stock or bond collateral, even though such corporation or partnership is permitted by law to make such loans. "(4) Do not prohibit a person who is not a director, officer, or employee of any national bank from serving at the same time as an officer, director, or employee of any number of State banks or trust companies, whether members of the Federal Reserve System or not. "(5) Do not prohibit a private banker or an officer, director, or employee of any bank or a class A director of a Federal reserve bank from being at the same time an officer, director, or employee of not more than two other banks within the prohibitions of the Clayton Act, if there is in force a permit therefor issued by the Federal Reserve Board. "The above exceptions are cumulative, but apply only to the prohibitions of section 8A. The exceptions to section 0 are stated separately in section IV (a) of this regulation. SECTION V. PERIdISSION OF THE FEDERAL RESERVE BOARD. "(a) In general - Section 8 of the Clayton Antitrust Act, as amended by the acts of May 15, 1916, May 26, 1920, and ::.arch 9, 1928, authorizes the Federal Reserve Board to permit any private banker or any officer, director, or employee of any bank, banking association, or trust company, or any class A director of a Federal reserve bank to serve as director, officer, or employee of not more than two other banks, banking associations, or trust companies coming within the prohibitions of the Clayton Act, if in the judsment of the Federal Reserve Board it is not incompatible with the public interest, and permits may be issued covering relationships between banks which are prohibited by section 8A as well as those prohibited by section 8. "The Federal Reserve Board is authorized only to issue permits covering private bankers and directors, officers and employees of banks, banking associations and trust companies, and therefore cannot issue a permit to a director, officer or employee of a national bank or a class A director of a Federal reserve bank to be a director, officer or employee of a corporation other than a bank, banking association or trust company, or to b9 a member of a partnership ather than a firm of private bankers.' "(b) Men obtained. - Inasmuch as this exception to the prohibitions of the -Ur7fon Act applies only when 'there is in force a permit therefor issued by the Federal Reserve Board', it is a violation of the law to serve two or more banks in the prohibited classes before such a permit has been obtained. A permit should be obtained, therefore, before becoming an officer, director, or "4 See, however, exceptions ros. 11, 12, and 13 on pages 0 and 9. 452 10/25/33 -11- "employee of more than one bank in the prohibited classes. It may be procured before the person applyinr_; therefor has been elected a director or appointed an officer or employee of any bank in the prohibited classes. "(c) Applications for_permission. - A person wishing to obtain a permit from the ioedereA Reserve Board to servo banks coming within the prohibitions of the Clayton Act should -"(1) Lake formal application on F.R.B. Form 94, or, if a private banker, on F.R.B. Form 94d. "(2) Obtain from each of the banks involved a statement on F.R.B. Form 94A, showing the character of its business, together with a copy of its last published statement of condition, and, if a private banker, make a statement on F.R.B. Form 94e showing the character of his or his firm's business. "(3) Forward all these papers, in duplicate, to the Federal reserve agent of his district, who will attach his recommendation on F.R.B. Form 94b and forward them to the Federal Reserve Board. "Each of the forms referred to in this subsection is made a part of this regulation. "(d) Couatibility with the public interest. - In determining whether the issuance of such a permit would be compatible with the public interest, the Federal Reserve Board will consider -"(1) Whether the banks involved are natural competitors; "(2) ,:hether their having the same directors, officers, or employees would tend to lessen competition or to restrict credit; "(3) The condition and the character of the management of the banks with which the applicant is connected and the extent of his responsibility therefor; "(4) Whether the applicant discharges the duties and responsibilities of his office by attending directors' meetings or otherwise; 1 (5) Whether the applicant, his family or his interests have abused the credit facilities of the bank or banks he is already serving; "(6) Whether the applicant's influence upon the banks involved in his application is likely to be helpful or harmful to such banks; "(7) The nature and extent of the loans made by each of such banks secured by stock or bond collateral and the policy of each bank with respect to making such loans; and "(8) Any other factors having a bearing upon the effect which the issuance of the permit may have upon the public interest. "(e) Burden is upon aulicant and banks involved. - In view of the fact that sections 8 and BA of the Clayton Antitrust Act forbid interlocking relationships between banks of certain classes except in cases where the Federal Reserve Board finds the specific Interlocking relationships not incompatible with the public interest and ;1-ants permits therefor, the burden must rest upon each 43:i A ) 10/25/33 -12- "applicant for such a permit, and upon the banks involved, to show to the satisfaction of the Board that it would not be incompatible with the public interest to permit him to serve the banks involved. ) _la A royal or disapproval. - As soon as an application is "(f\ acted upon by the Board, the applicant will be advised of the action taken. "If the Board approves the application, a formal permit to servo the banks involved will be issued to the applicant. "(g) Hearin. - If it appears to the Board that it would be incompatible with the public interest to grant such a permit, the Board will so notify the applicant and will afford him every opportunity to present any additional facts or arguments bearing on the subject before making final decision in the case. "(h) Effect of permits. - A permit once granted continues in force until revoked, and need not be renewed. (i) Revocation. - All permits, however, are subject to reH vocation whenever the Federal Reserve Board, after giving reasonable notice to the persons to whom they were issued and affording them an opportunity to be heard, finds that the public interest requires their revocation." The Governor presented a letter addressed to him on October 24, 1933, by the Secretary of State reading as follows: "In making the arrangements for the representation of this Government at the Seventh International Conference of American States to be held at Montevideo, Uruguay, opening December 3rd next, I find that in order adequately to take care of the interests of this Government in the discussion of certain items on the program of the Conference, we will need the services of Mr. Walter R. Gardner in connection with the discussion of monetary and financial subjects. "I would be very grateful if you could release Mr. Gardner for this duty in which case I shall arrange that his transportation expenses from 'Washington to Montevideo and return will be met from the special appropriation made by Congress for the Conference and that he will be provided -with a room and meals while at Montevideo at the hotel selected for the residence of the Delegation." Governor Black stated that he had discussed the request for • Gardner's services with all of the members of the Board, except 1)1'• lall:)r and Mr. O'Connor, and that they had indicated their willingto grant the request. He also stated that he had discussed the Illatter with Mr. Goldenweiser, Director of the Division of Research and 454 10/203 -13- Statistics, and proposed to discuss it with him further and with the Secretary of State at a conference -which is being arranged. After a brief discussion, the matter was referred to the Governor with power to take such action as he might decide to be proper. The Governor also presented a letter addressed to him on September 22, 1933, by Lr. Herbert Feis, Economic Adviser of the State Department, inclosing a copy of a letter dated August 29, 1933, addressed to the State Department by the Secretary General of the Honeand Economic Conference, in which the United States Government is asked to consider its adherence to the Convention signed at the Hague °n January 20, 1930, granting various immunities to the Bank for Inerna'6iona1 Settlements. The letter also inclosed a copy of the Hague 4Creement referred to, and requested that consideration be given to the matter and the State Department advised of any judgment which the 130ard may have in regard to it. Governor Black said that upon receipt of the letter he had turned it over to Counsel for preparation of a reply and that, as he cle3ired to discuss the matter with the Secretary of State, he mould 4Preciate it if the members of the Board mould review the proposed rePly and give him their comments upon it prior to his conference with the Secretary of State. Hr. Morrill then referred to the application received by the 13°"d from the ilorthmest Bancorporation, Linneapolis, A.nnesota, for a 1il4ited voting permit for the sole purpose of permitting the applicant to Irate its stock in the rorthmestern ilational Bank of lanneapolis in elscier to consummate a merger of that institution and the Yinnesota 10/25/33 -14- Loan and Trust Company of Linneapolis in accordance with a plan previously submitted to the Comptroller of the Currency and approved by Reference was also made to memoranda prepared in the Division of Lxaminations under date of October 11, 1933, and in the Legal Division under date of October 20, 1933, recommending that the limited permit be granted on condition that the applicant shall agree to strengthen the capital structure of the consolidated institution by an amount not less than 2,500,000, such increase to be effected not later than Janu- arY 1, 1934. Liz'. stated that la.. Await, Deputy Comptroller of the Currency, had just advised him that representatives of the Northwest 13anoorporatign were in the Comptroller's office discussing a program °f reorganization which involved the conversion of a number of State bIllIks included in the 1:orthwest Dancorporation group into national bealks and of other State institutions into branches of national banks; thttt the plan contemplates a charge-off of losses, depreciation, bank buildings, etc., amounting to a total of $29,000,000, and the submisi°11 of a request to the Reconstruction Finance Corporation that it subscribe for15,000,000 of preferred stock, of which c4,000,000 would h° issued by the Lorthwestern rational Bank. lie also stated that, the Federal Reserve Agent at lanneapolis and the Board's staff 001 that it would be desirable for the merged institution to have 0,000 additional capital, the Board's Division of Examinations is °f the opinion, which opinion is concurred in by the Board's staff, th ' It, inasmuch as the merged institution will be free of estimated 4-56 10/25/33 -15- losses and doubtful assets, and since C;2,500,000 of additional capital will establish a ratio of approximately ten to one between the deposit liabilities and capital structure of the institution, it is not essential at this time to require that the capital stock be increased more than $2,500,000. Morrill also said that drafts of letters had been prepared to the Northwest Bancorporation and the Federal Reserve Agent at 14nneapolis, advising of the issuance of the limited permit subject to the condition recommended by the Division of Examinations and Counsel's °ffice, the letter to the Northwest Bancorporation advising that the Permit is being sent to the Federal Reserve Agent at 1.Iinnes.polis with authority for its issue upon receipt by him of an agreement, in form and substance satisfactory to him, that the Northwest Bancorporation, not later than January 1, 1934, will increase the capital stock of the merged institution by an amount not less than '2,500,000. After discussion it was decided to issue the limited voting permit as requested, and the Secretary was requested to send the proposed letters to the Northwest Bancorporation, and the Federal Reserve Agent at Linneapolis. Llorrill then stated that the Board also had received an 4PP1ication for full fiduciary powers filed on behalf of the Northtern:ational Bank and the proposed Northwestern National Bank and USt Company of Unneapolis, which institution will result from the merger of the Northwestern National Bank and the Lannesota Loan and ' TI Llst Company. He stated that the reason for the application is that the State institution has a large profitable trust department which 4;57 10/25/33 -16- the national bank desires to continue; that, while there are some criticisms of the manner in which the trust department was conducted, they are not sufficient in the opinion of the Division of Examinations to warrant adverse action; and that the Division of Examina tions and Counsel's Office had recoliimended approval of the application, although Counsel's Office had pointed out that the bark has three branches which the office of the Comptroller of the Currency has considered as being in operation without legal authorit. hr. 1ZOrri11 stated that he had discussed this latter point with Deputy Comptroller of the Currency Await, rho had advised that, because of the fact that the legal question involved is not free from doubt, and because of the complications involved, the Comptroller of the Currency had concluded that no action should be taken regarding the matter at this time. La-. Lerrill added that the Board's staff concurs in the r"oramandation that the bank's application for full trust powers be aPproved. The Secretary was requested to address a letter to the northwestern hational Bank stating that, effective if and when that institution and the Linnesota Loan and Trust Company of Minneapolis are merged under the title of the northwestern National Bank andirust Company of Einneapolis, the Federal Reserve Board approves the application made on behalf of the merged institution for permission to act, when not in contravention of State or local law, as trustee, executor, administrator, registrar of stocks 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 competition with national banks are permitted to act under the laws of the State of Minnesota, the 10/25/33 exercise of all such rights being subject to the provisions of the Federal Reserve Act and the regulations of the Federal Reserve Board. There was then presented a letter dated October 21, 1933, from Assistant Federal Reserve Agent Young of the Federal Reserve Bank of Chicago, inclosing a copy of a letter dated October 19, 1933, from 1:r. 11, B. Upham, Comptroller of the City of Chicago, in which he quoted an °Pinion of the city's Corporation Counsel holding that the payment of interest on demand deposits of funds of the City of Chicago is required under State law. Lr.. Young's letter also inclosed copies of opinions of counsel for the Federal Reserve Dank of Chicago stating that, mhile the question is not free from doubt, it is believed that the statute does not require the payment of interest on demand deposits of funds ef the City of Chicago and that, therefore, no interest may be paid by member banks on such deposits. Mr. Wyatt referred to a memorandum dat d October 24, 1933, prepared by lag. Vest, Assistant Counsel, oxthe opinion that it cannot properly be said :that interest is l'equired under the State law on deposits of public funds of the City °f Chicago, but that, in view of the action previously taken by the 13eard on the question whether interest may be paid on demand deposits Of funds of the State of Illinois and of Cook County, Illinois, under lar statutes, it is assumed that the Board will rule in the present ce-ce that interest is required under State law and that, accordingly, It draft of letter to the Assistant Federal Reserve Agent at Chicago has been prepared, advising that, in the circumstances, it is the Board's °Pinion, on the basis of the information submitted, that the payment 4;i9 10/25/33 -16- of interest on deposits of public funds of the City of Chicano is required under State law-within the meaning of section 19 of the Federal Reserve Act, and that, accordingly, assuming that the deposits in question consist of public funds of the City of Chicago, a member bank may lavfully pay interest on such deposits which are payable on demand. After discussion, the proposed letter was approved. Governor Black stated that, following receipt of the briefs which the Board, at the meeting on October 16, 1933, requested be submitted by representatives of the Union Trust Company of Baltimore, IZaryland, and by representatives of the Dissenting Depositors' Commit0e, he and Er. Thomas had given detailed consideration to the proposed Plan of reorganization; that after a discussion of the matter with individual members of the Board it was agreed informally that the application for merbership should not be approved on the basis of the proPosed plan of reorganization; that Lr. Thomas in consultation with members cf the Board's staff had drawn up a number of suggestions as to changes in the plan; and that it had been suggested that, if the suggested changes are approved by the Board, it might be stated to the ' l c'Presentatives, who are to meet with members of the Board this aftercon, that, if the suggested changes are made in the plan, it mould be ETProved by the Federal Reserve Board. A detailed discussion ensued which 1.:r. O'Connor left the meeting. la-. James stated that, in his opinion, the suggested procedure 11°111d place the Board in the position of having suggested the adoption Of a plan of reorganization End would make it responsible, so far as 460 10/25/33 the general public is concerned, for the success of the plan, and that the Board should not place itself in that position. In this connection, 1.r. Thomas stated that the representatives of the bank had requested that, if the proposed plan of reorganization be unacceptable to the Board, they be given the benefit of the suggestions of the Board's staff 118 to acceptable changes in the plan. It was concluded that Governor Black and Yx. Thomas should meet vdth the representativos of the trust company and the Dissenting Depositors' Committee and advise them that an informal discussion by the members of the Board of the present application for membership indicates that the plan of reorganization of the trust company is not acceptable for the reasons that, (1) the certificates of beneficial interest proPosed to be issued by the City Certificates Corporation involve a question of legal liability on the part of the trust company which might resiAt in an impairment of its capital, (2) the present stockholders Of the trust company are not called upon for any contribution of funds 1111dor the proposed plan, (3) the condition of the trust company as to "undness and liquidity is not as satisfactory as it should be, (4) the Pr°Posed certificates of deferred deposits would have no definite matu' l itY date, (5) the plan does not provide for the trusteeing of Charged°ff assets for the benefit of waiving depositors, (6) the plan does not 13r"ide for segregating written-down assets for the benefit of waiving depositors, and (7) the plan does not provide for a pro rata distributi°11 of recoveries among waiving depositors. It was also understood that, if an opportunity afforded, in discussing the proposed plan vith q hi 10/25/33 -20- the representatives and the reasons why it was not acceptable to the Board, Governor Black and Er. Thomas, without committing the Board to the approval of any plan, mould offer suggestions as to acceptable revisions in the proposed plan. Reference was then made to the following letter addressed to Governor Black on October 19, 1933, by Governor Harrison of the Federal Reserve Bank of Low York: "On May 8, 1933, I sent to Governor Meyer a copy of a letter which I addressed to the Secretary of the Treasury on that day asking, at the request of my board of directors, whether he or the Administration would object to having the Governor of this bank become a director of the Bank for International Settlements. In my letter to Governor Meyer I stated that I mould, of course, want to know whether the Federal Reserve Board had any objection. For your convenience in reference, I am enclosing a copy of my letter to the Secretary as well as a copy of my letter to Governor Meyer. "After receipt of ny letter, the Secretary discussed the question with the President and later advised me orally that, while the President had no objection to my serving as a director of the Bank for International Settlements, he thought that action with reference to it should be postponed until after the then pending Economic Conference. On Lay 12 the Federal Reserve Board advised me that after careful consideration the conclusion Was reached by the Board that no action should be taken with respect to the matter at that time. "Since then I have received a letter from Hr. Fraser, President of the Bank for International Settlements, a copy of which I am enclosing herewith, formally advising nB that Mr. NeGarrah is severing his connection with the Bank for International Settlements and inquiring whether I would now be milling to accept the post which the statutes of the Bank for International Settlements reserve for the Governor of the Federal Reserve Bank of New York. 'When I was in Washington yesterday, on the suggestion of Secretary V;oodin, I called on the President about other natters and mentioned incidentally this question of my membership on the Board of the Bank for International Settlements. He remembered the earlier discussion with Secretary Woodin, and said that he now had no objection to my serving and that he thought it was a good thing to do. In the circumstances, I 1.ould very much appreciate an expression of the present views of the Board in order that I might advise Mr. Fraser formally whether or not I am in a Position to accept the position as a director of the Bank for 10/25/33 -21- "International Settlements. The reasons which prompted my directors last May to ask for the approval of the Board at that time are referred to in my letter of May 8 to Secretary Woodin but if there are any further aspects of the situation which you would care to have re elaborate, I hope that you will be good enough to let me know." During the discussion of Governor Harrison's letter, the questiOri was raised as to whether Mr. Harrison could accept the position °f director of the Bank for International Settlements wild as to the authority of the Board with respect to it, in view of the provisions (14 ' the Federal Reserve Act, as amended by the Banking Act of 1933, P"tieular attention being directed by Mr. Miller to section 14(g). At the conclusion of the ensuing discussion, the question was referred to Counsel for an opinion. The minutes of the meeting of the Executive Committee of the Federal Reserve Board held on October 5, 1933, were approved and the ctetions recorded therein mere ratified unanimously. The Board then considered and acted upon the following matters: Letter dated October 21, 1933, to Li-. Case, Chairman of the Federal Reserve Bank of New York, approved by six members of the Board, replying to a telegram and letter dated October 19 from Hr. Sproul, Secretary of the Federal Reserve Bank of New York, confirming advice Of the action taken by the board of directors of the bank, at its meeten that date, in establishing, subject to review and determination c)r the Board, a rate of discount of 2% per annum for rediscounts of eliCible paper for member banks and advances to member banks under the terris of sections 13 and 13(a) of the Federal Reserve Act, effective *°111 the opening of business October 20, 1933. The reply stated that, 46:3 10/25/33 -22- 5.5 Governor Harrison was advised over the telephone, the rate of established by the directors of the hew York bank, was approved by the Federal Reserve Board; that the Board has noted with approval that the buying rates of the bank on trade bills and on Governnent securities under repurchase agreement were reduced to the discount rate; that Lr. Sproul's letter further states that the directors also established, effective from the opening of business on October 20, 1933, a minimum buying rate of 1/2% (a reduction from 1%) for the purchase of bankers acceptances at or above which currently effective minimum buying rates for the purchase of bankers acceptances may be fixed by the officers of the bank; and that it is noted from Deputy Governor Burgess' teleCram of October 20 that the officers of the bank established the follovzinC schedule of currently effective minimum buying rates on bankers' Ileceptances: 1 to 90 days 91 to 120 days 121 to 180 days 1/'2% 1 %. The reply also stated that, under the procedure being followed at the present time with regard to changes in buying rates on bankers' teceptances, the minimum authorized rates established by the directors Of the Federal reserve bank are not made effective until approved by the Board; that, however, the Board approves the minimum authorized buYir-L'; rate of 1/'2,; established by the directors; and that, in view of the aPparent understanding of Li.. Burgess, indicated in his telephone c)Ilversbtion with the Secretary's office on October 19, 1933, that the rate previously authorized for the bank was 1X, the Board 4o4 10/25/33 -23- notes without objection the establishment at the bank as of October 20, 1933, of the schedule of currently effective minimum buying rates referred to above. Approved. Telegraphic reply, sent on October 20, 1933, with the approval of six members of the Board, to a telegram of the same date from 1r. villliams, Chairman of the Federal Reserve Bank of Cleveland, stating that the executive committee of the bank, at its meeting on October 20, Ilhder authority of the board of directors, voted to establish a rediscount rate of 2 1/2% on rediscoums of eligible paper for member banks Ellid advances to member banks under the provisions of sections 13 and 13(a) of the Federal Reserve Act, as amended, effective the first busilless day following that on which approved by the Federal Reserve Board. The reply stated that the Board approved for the Federal Reserve Bank of Cleveland the rediscount rate of 2 1/2 ,>, effective October 21, 1933. Approved. Telegraphic reply, sent on October 20, 1933, with the approval six members of the Board, to a telegram of the same date from Stevens, Chairman of the Federal Reserve Lank of Chicago, stating that the executive comnAttee of the bank, at its meeting on October 20, IllIder authority of the board of directors, voted to establish a redisecUnt rate of 2 OA, on rediscounts of eligible paper for member banks EtIld advances to member banks under the provisions of sections 13 and 13( a) of the Federal Reserve Act, as amended, effective the first busi- lic s day following that on which approved by the Federal Reserve Board. 465 10/25/33 -24- Ihe reply stated that the Federal Reserve Board approved for the Federal Reserve Bank of Chicago the rediscount rate of 2 1/2,!;, effective October 21, 1933. Approved. Telegraphic reply, sent on October 20, 1933, with the approval Of five members of the Board, to a telegram of the same date from Yr. Williams, Chairman of the Federal Reserve Bank of Cleveland, stating that the executive conuittee of the bank, at its meeting on Octobcr 20, Under authority of the board of directors, voted to establish rates of 4% per annum on advances to member banks under section 10(b) of the Federal Reserve Act, as amended by the Act of March 9, 1933, 11; per anon advances to nonmember banks and trust companies under section 404 °f 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 under section 13 of the Federal Reserve Act, "amended, effective the first business day following that on uhich 84)Proved by the Federal Reserve Board. The reply stated that the Board 4Ppreves for the Federal Reserve Bank of Cleveland the rates referred to, effective October 21, 1933. Approved. Telegraphic reply, sent on October 20, 1933, with the approval Of five menbers of the Board, to a telegram dated October 19 from Er. '°°°(13 Chairman of the Federal Reserve Bank of St. Louis, stating that the bof directors of the bank, at its meeting on October 18, voted to establish a rate of 4 1/2 per annum on advances to member banks 406 10/25/33 -25- under the provisions of section 10(b) of the Federal Reserve Act, as amended by the Act of Larch 9, 1933, effective the first business day follauing that on which approved by the Federal Reserve Board, and that no other change VMS made in the bank's existing schedule of rates Of discount ard purchase. The reply stated that the Board approved for the Federal Reserve Bank of St. Louis the rate referred to, effective October 21, 1933. Approved, and, there being no objection, the action of the directors of the St. Louis bank in making no other change in the bank's existing schedule of rates of discount and purchase was noted with approval. Telegraphic reply, sent on October 20, 1933, with the approval Of Six members of the Board, to a telegram dated October 19 from awton, Chairman of the Federal Reserve Bank of San Francisco, stating that the board of directors of the bank, at its meeting on that date, Ircited to establish, subject to approval by the Federal Reserve Board, ra. tes of 4;; per annum on advances to member banks under section 10(b) ef the Federal Reserve Act, as amended by the Act of March 9, 1933, 4;4 . 13(31 ' annum on advances to nonmember banks and trust companies under secti (34 404 of the Act of 'Larch 9, 1933, as amended, and 4% per annum on Mvanoes to individuals, partnerships or corporations secured by direct °131iCat1ans of the United Staes under section 13 of the Federal Reserve Act, as amended, effective October 19, 1933, and that no change was II14de tia the bank's rediscount rato. The reply stated that the Board Etillproves for the Federal Reserve Bank of San Francisco the rates reed to, effective October 19, 1933. 4 37 10/25/33 -26Approved, and, there being no objection, the action of the directors of the San Francisco bank in making no change in the bank's rate on rediscounts of eligible paper for member banks and advances to member banks under the provisions of sections 13 and 13(a) of the Federal Reserve Act was noted with approval. Lemorandum dated October 17, 1933, from Li'. Paulger, Chief of the Division of Examinations, recommending the appointment of flr. John R. Radford, Jr., and his designation as an assistant Federal reerve examiner, with salary at the rate of $4,900 per annum; the recommendation having been approved by six members of the Board on October 23, 1933. Lir. Radford was appointed an examiner for all purposes of the Federal Reserve Act, as amended, and of all other acts of Congress pertaining to examinations made by, for, or under the direction of the Federal Reserve Board; and was designated an assistant Federal reserve examiner, with salary at the rate of 3,900 per annum, all effective as of the date upon which he enters upon the performance of his duties. Lemerandum dated October 19, 1933, from 1.1r. Paulger, Chief of the Division of Examinations, recommending approval of the appointment 14i8s Helen V. Dolan and flr. Arch B. Brown as stenographers in the Di.vision of Examinations, each with salary at the rate of :,1,560 per allrlunl, effective as of the respective dates upon which they enter upon the' performance of their duties; the recommendation having been approved brr3i3c members of the Board on October 24, 1933. Approved. Lemorandum dated October 21, 1933, from Lir. Goldenweiser, Director of the Division of qesearch and Statistics, recommending that 10/25/33 -27- L1i5s Elizabeth Barcalow, an employee in the division, be granted leave 'without pay beginning October 23, 1933, for such time as may be fecessarY in order that she may be with a member of her family who is seri°Ilaly ill in another city. Approved. Telegraphic reply on October 24, 1933, approved by five members Of the Board, to a letter dated October 19 from Jr. Curtiss, Federal Reserve Agent at Boston, requesting approval of the temporary appointment OfYiessrs. harold C. Mite, George W. Brown and Benjamin F. Groot as aasistant examiners in the Federal reserve agent's department of the Federal Reserve Bank of Boston, with salaries at rates of ,800, and 2,400, 2,100 per annum, respectively, effective as of the dates i ndicated in the agent' letter. The reply stated that the Board ap- Proves the temporary appointments referred to with salaries at the rates stated. Approved. Telegraphic reply on October 24, 1933, approved by five members Of the Board, to a letter dated October 19 from Jr. Austin, Federal Re'Ire Agent at Philadelphia, requesting approval of the appointment of • lartin J. Lavin as an examiner in the Federal reserve agent's deof the Federal Reserve Bank of Philadelphia, with salary at the ' l ate of c4,020. per annum. The reply stated that the Board approves the QPPotntment referred to with salary at the rate stated. Approved. Telegraphic reply on October 24, 1933, approved by six members W25/33 -28- of the Board, to a letter dated October 19 from Lr. Williams, Federal Reserve Agent at Cleveland, recommending the appointment of Ur. Miles . Townsend as an examiner in the Federal reserve agent's department of the Federal Reserve Bank of Cleveland, with salary at the rate of 6 v54400 per annum, it being contemplated that Er. Townsend will be err- Played in the examination department of the bank as a trust examiner in accordance with the suggestion at the recent conference of Federal reserve agents which was approved by the Federal Reserve Board. The reply stated that the Board approves the appointment referred to with salary at the rate stated. Approved. Letters dated October 20, 1933, to jr.L Helm, Deputy Governor cr the Federal Reserve Bank of Kansas City, approved by six members Of the Board, stating that, in accordance with the recommendations contained in his letters of October 4, 6 and 10, the Board approves ellanc;es in the personnel classification plan of the bank to provide tcr four new positions in the examination department; for changes in the titles of four positions in the fiscal agency department and ells-ages in the description of work and qualifications required for the Pcaitions; for the new position of "junior clerk", in the fiscal agency ' l 513artment; and for an increase in the salary range of the position of e-Lork-bookkeeper" in the fiscal agent-Reconstruction Finance Corporatio4 department. Approved. Letters dated October 20, 1933, approved by six members of the 10/203 -29- Board, to the boards of directors of the following named banks, .each letter stating that, subject to the conditions prescribed in the letter, the Board approves the bank's application for membership in the Federal Reserve System and for the number of shares of Federal reserve bank stock 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: Federal Reserve Bank Applicant Bank "The Peoples Bank of Montross Virginia, Incorporated", Montross, Virginia "Bank of Slidell", Slidell, Louisiana "Guthrie County State Bank", Guthrie Center, Iowa "Citizens Bank of Tolono", Tolono, Illinois "The Mohawk State Bank", Mohawk, Indiana "Merchants Bank of Winona", Winona, Minnesota "Merchants State Bank", Freeman, South Dakota "Bank of Alpena", Alpena, South Dakota Richmond Atlanta Chicago Chicago Chicago Minneapolis Minneapolis Minneapolis. Approved. Letters dated October 24, 1933, approved by six members of the Board, to the boards of directors of the following named banks, each letter stating that, subject to the conditions prescribed in the letter, the Board approves the bank's application for membership in the ?ederal Reserve System and for the number of shares of Federal reserve ballk stock to which the bank will be entitled upon the basis of its °4Pital and surplus as of the date upon which its membership becomes efrective: 4.7 10/25/33 -30Federal Reserve Bank Applicant Bank "Blue Hill Bank & Trust Company", Milton, Massachusetts "Citizens State Bank of St. Charles, Linnesota", St. Charles, Minnesota Boston Minneapolis. Approved. Telegraphic reply on October 23, 1933, approved by six members Of the Board, to a letter dated October 18 from ,,jr. Curtiss, Federal Reserve Agent at Boston, transmiUing the request of "The New Britain Trust Company", New Britain, Connecticut, for an extension to November 21, 1933, of the time in uhich it may comply with the conditions of membership contained in the Board's letter of September 22, 1933. The rePly stated that the Board grants the extension requested, and that, ill the future, in submitting to the Board a request for an extension Of time in cases of this kind, the agent is requested to advise as to the reasons for the request for such extension and to give the Board 4 firm recommendation as to the action which should be taken. Approved. Telegrams dated October 20, 1933, to Mr. Wood, Federal Reserve 4Zent at St. Louis, approved by five members of the Board, referring to the applications of the "Belleville Savings Bank", Belleville, IlliZoi s, and the "State Bank of Collinsville", Collinsville, Illinois, for Permission to withdraw immediately from membership in the Federal 143serve System, and stating that the Bo rd waives the usual requirement Qf 81 X months' notice of intention to withdraw and that, accordingly, IIPOn surrender of the Federal reserve bank stock issued to the Belleville 472, -31- 10/25/33 Savings Bank and the State Bank of Collinsville, the Federal Reserve 'Jank of Chicago is authorized to cancel such stock and make refunds thereon. Approved. Letter dated October 20, 1933, to Ur. Curtiss, Federal Reserve Agent at Boston, approved by six members of the Board, stating that on October 19 Jr.1 Shumway, President of the Merrill Trust Company of Bangor, Maine, a nonmeMber licensed bank, and Jr. Osgood, Manager of the Reconstruction Finance Corporation's Agency at Boston, called at the Board's offices to discuss the plan of reorganization of the trust e°111100.ny and the possibilities of its admission to membership in the Fedoral Reserve System. The letter stated also that, while the 1,erril1 Company was licensed to reopen on an unrestricted basis after the banking holiday last larch, Mr. Shumway asserts that its financial conis such that it must be closed unless it can be reorganized on 4 sound basis and contends that there are four necessary and fundamental 8tePs, as set forth in the letter, to be taken before the plan of reorMnization can be put into effect; and that, according to Mr. Shumway, allialaGements have been made for the completion of the first three steps, Pr°7ided assurances can be given that the new bank will be able to obtain rrien thership in the Federal Reserve System. The letter stated further that Mr. Shumray was advised that the Board could not undertake to con4,kit .L uself in advance of the receipt of a formal application for memberaccompanied by full information as usually required, including the Ilente s detailed analysis in the form now used in connection with W25/33 -32- aPplications for membership, and his recommendation; that, in order that the Board may be able to act promptly and intelligently in the matter, the agent is requested to forward with the application certain information as set forth in the letter; and that, upon receipt of the aPPlication, together with full information as requested, action will be taken promptly by the Board and the agent advised. Approved. Reply on October 24, 1933, approved by six members of the Board, to a letter dated September 28 from 1:12-. Williams, Federal Reserve Agent at Cleveland, advising that the First National Bank of I4eadville, Pennsylvania, was continuously deficient in its required reserves from Earch 1, 1933, to September 15, 1933; and to letters dated October 2 and 11, 1033, in regard to such reserve deficiencies. The reply stated that it is noted that the agent has advised the Chief Katicnal Bank Examiner for the Fourth Federal Reserve District of the baroct B continuous reserve deficiencies and has also called to the at- telltion of the president of the institution the responsibilities of its directors in connection with such delinquency; that it is noted, further, that for the period September 16 to 30, 1933, the bank maintained its quired reserves with the Federal reserve bank and, in addition, cara daily excess of about 5 of the required amount; and that, al- the agent submitted no recommendation in the matter, in view. of the c ircumstances recited, the Board will take no action at this time reardinG the bank's continuous reserve deficiencies, other than to 17ard copies of the agent's letters and inclosures to the Comptroller ' l'°1 W2V33 -33- of the Currency for the information of his office. Approved. Telegraphic reply on October 24, 1933, approved by six members of the Board, to a telegram dated October 13 from Er. Wood, Federal Reserve Agent at St. Louis, recommending that the Board interpose no objection to the proposed absorption by the First Trust and Savings Eank, Larrisburg, Illinois, a member institution, of the Raleigh State Bank, Raleigh, Illinois, a nonmember bank. The reply stated that the Board cannot undertake to approve the transaction without complete information including an appraisal of the assets taken over; that, in of the agent's recommendation and advice that the State Banking bePartment of Illinois has approved the plan and that reports of exam&nation of the two banks indicate that the absorption may be safely Iliad°, the Board will interpose no objection at this time to the proposed transaction; and that it is understood that the transaction will not result in the establishment of a branch of the member bnnk. The reply tated also that, if the agent has not already done so, he should obtain advice from counsel for the Federal reserve bank as to whether the Pr°Posed transaction will result in any change in the corporate existence Of the member bank -which will affect its membership in the Federal Re- "rite System independently of a possible violation of the general conof membership; that any change in the character of the assets or 14 the scope of the functions of the member bank as a result of the tre-nsaction is a matter of fact to be determined at the next examination Of the First Trust and Savings Dank, in which examination participation 475 10/25/33 by -34- the agent's examiners is desired; and that the report of such ex- amination should include a statement of the assets acquired and the liabilities assumed in the transaction, a classification of the assets sO acquired remaining in the bnnk, and information as to any losses charged off on account of the assets so acquired. The reply stated further that, subsequent to such examination, it is requested that the agent make a further and complete report to the Board relative to the condition of the bank and the nature of any changes as a result of the absorption in the general character of the assets or in the scope of the functions exercised, submitting a recommendation as to the action t° be taken by the Board and copies of any agreements or other docunents Pertaining to the transaction and a copy of any amendment to the charter °f the member bank, together with a reference to the provisions of State law covering the transaction. Approved. Reply on October 21, 1933, approved by six members of the Board, t° a letter dated October 5 from :r. Peyton, Federal Reserve Agent at 14„ —Lcapolis; the reply reading as follow,: . "Receipt is acknowledged of your letter of October 5, 1933, and inclosures thereto, from which it appears that the State Bfink-' of Aurora, Minnesota, has applied for membership in the Federal Reserve System; that a serious question has been raised as to whether the bank is legally a corporation or not; and that it has been suggested that, in order to eliminate all doubt on this question, it should obtain a new charter. In view of the fact that such new charter would be obtained after June 16, 1933, however, the question arises whether it would be necessary for the bank to have a capital of at least50,000 in order to be eligible for membership Whether it might be admitted to membership with a capital of v25,000, in view of the fact that Aurora, Minnesota, has a population of only 1700 inhabitants. 476 10/25/33 -35- "As you were advised in the Board's letter of July 22, 1933, (X-7521) a State bank organized on or after June 16, 1933, in a place with a population of not more than 3,000 inhabitants is required to have a capital of ,;;150,000, in order to be eligible for membership in the Federal Reserve System, unless it is at the time entitled to the benefits of insurance under Section 1213 of the Federal Reserve Act, in which event it is eligible for membership if it has a capital of not less than ,;,;25,000. "The Board understands that, in order to be entitled to the benefits of insurance under Section 1213 of the Federal Reserve Act between January 1, 1934, and July 1, 1934, a nonmember State bank must have been admitted by the Federal Deposit Insurance Corporation to the Temporary Federal Deposit Insurance Fund, pursuant to the provisions of subsection (y) of Section 1213 and that, in order to be entitled to the benefits of insurance between July 1, 1934, and July 1, 1936, a nonmeiler State bank must have become a member of the Federal Deposit Insurance Corporation either by subscribing for the same amount of Class A stock of the corporation as it vrould be required to subscribe and pay for upon becoming a member bank, or by depositing with the corporation an amount equal to the amount it would have been required to pay in on account of subscription to such stock, if it is not permitted to subscribe for such stock by the laws under which it was organized. "A State bank organized after June 16, 1933, and having a capital of only :„25,000 would not be legally eligible for membership in the Federal Reserve System, therefore, until it has become entitled to the benefits of insurance under the provisions of Section 12B of the Federal Reserve Act by one of the two methods described in the preceding paragraph. "If it is necessary for the State Bank of Aurora to obtain a new charter, therefore, and if the new bank has a capital of less than , :50,000, it cannot be admitted to the Federal Reserve System until it has been admitted to the Temporary Federal Deposit insurance Fund, which does not become effective until January 1, 1934. It could, however, submit its application for membership in the Federal Reserve System and that application could be apProved, effective if and when the bank is admitted to the benefits of the Temporary Federal Deposit Insurance Fund; provided the bank is otherwise eligible and acceptable for membership in the Federal Reserve System. , "The question whether the Aurora State Bank was 'organized wader the general laws of any State' within the meaning of Section 9 of the Federal Reserve Act is primarily a question of State law, upon Ithich it would be advisable for you to obtain a definite opinion from Counsel for the Federal Reserve Bank of Minneapolis. "In accordance with your request, the papers inclosed with your letter are returned herewith, in order that they may be forwarded to the Board in proper form if and when the application is finally submitted to the Board." Approved. 10/25/33 -36- Reply on October 24, 1935, approved by six members of the Board, to a letter dated August 31 from L:r. Newton, Federal Reserve Agent at Atlanta, forwarding the application of the "City National Bsrlf Of Baton Rouge", Baton Rouge, Louisiana, for permission to act in all fiduciary capacities authorized under section 11(k) of the Federal Reserve Act, with the recommendation of the executive committee of the Federal Reserve Dank of Atlanta that limited trust powers be granted arid that action on the question of granting full fiduciary powers be deferred pending the next examination of the bank. The reply stated that, from a review of the information available, it appears that the Inallacemont of both of the old banks to which the applicant succeeded was eubject to criticism; that the new institution is apparently controlled by former officers and directors of those banks; that it also appears that the trust departments of the old banks, especially the Dank of 134t°11 Rouge, were not properly managed; that the volume of trust busiIleE's involved is small and of questionable value; and that, in view of these facts, and inasmuch as the new bank has not as yet been examined ' a Ild Current intermitter' regarding its assets and operations is not the Board is unwilling at this time to approve the applicati ° * The reply stated also that the Board will be pleased to consider Et liev; application from the City National Bank of Baton Rouge after an --4u.nation has been made of the institution by representatives of the A e°1TIPtroller's office and a report thereof is available. Approved. Letter dated October 20, 1953, to "'Ale National Bank of Jackson", W25/33 -37- Jackson, Michigan, approved by six members of the Board, 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 stocks 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 competition with national banks are permitted to act 114der the laws of the State of Michigan, the exercise of all such rights being subject to the provisions of the Federal Reserve Act and the regulations of the Federal Reserve Board. Approved. Letter dated October 20, 1933, to Lr. Williams, Federal Reserve / 1 41511t at Cleveland, approved by six members of the Board, replying to As3istant Federal Reserve Agent Fletcher's letter of October 10 transirdt, • tlng the request of the "Beaver Trust Company", Beaver, Pennsylvania, fcr permission to reduce its capital stock from c;300,000 to .150,000. he reply stated that it does not appear that the Board's permission tor the contemplated reduction in capital stock is required since no Ilch requirement was prescribed at the time of admission of the Beaver 41113t Company to membership in the Federrsi Reserve System; and that, as 4 Practical matter, the Board will offer no objection to such a reductt°11 provided the entire amount of the reduction is transferred to the s surplus account to be used for the purpose of removing objectionassets from the bank, and the transaction has the approval of the 41zi.y11vania. Department of Banking. Approved. _ 10/25/33 -38- Letter dated October 21, 1933, to Jr. Williams, Federal Reserve Agent at Cleveland, approved by six members of the Board, replying to Assistant Federal Reserve Agent Fletcher's letter of October 11 relative to the proposed agreement whereby The First Wellington Bank, ington, Ohio, would assure the liabilities of the First I;ational Bank, Wellington, Ohio,(unlicensed) except liabilities of shareholders as such, and receive in payment therefor a note executed by the national bank in an amount equal to the liabilities assumed, such note to be eollateraled by all of the assets of the national bank, and recammnding that if, as and when, the contract and transfer have been approved by the Superintendent of Banks and the Comptroller of the Currency, it be approved by the Beard. The reply stated that it appears from the infer- Illation submitted that the proposed transaction would not result in any tutterial change in the character of the assets of the First Wellington 1344k or in the scope of functions exercised by it -within the meaning of the general condition under which the institution was admitted to the Federal Reserve System, and that, in accordance with the recommendation, or the agent's office, the Board will interpose no objection to the tl'allstIction, provided it is consummated in accordance with an agreement Purchase which meets with the approval of counsel for the Federal reserve bank. Approved. Reply on October 21, 1933, approved by six members of the Board, to a letter dated September 29 from Mr. Newton, Federal Reserve Agent Ett Atlanta, advising of a proposed reduction in common capital of the t;40 10/25/33 -39- Bank of Commerce of Clayton, Alabama, from 50,000 to 25,000, and the sale of ,';;25,000 of preferred stock to the Reconstruction Finance Corporation, and recommending that the reduction and increase in capital be approved. The reply stated that, since it appears from the informa- tion submitted that the entire amount of the reduction in common capital is to be used to eliminate objectionable assets from the bank and will effect a material improvement in its condition, and since the Board's consent to the reduction in capital is not required by law or the conditions of merlership applicable to the bank, the Board offers no objection to the reduction in capital in the amount indicated, or to the issuance of preferred stock, with the understanding that counsel for the Federal reserve bank has considered the case and is satisfied as to its legal aspects, and that such reduction and increase in capital will not result any change in the corporate existence of the bank which will affect its membership in the Federal Reserve System. The reply stated also that it is assumed that, in view of the provisions of section 9 of the Federal Reserve Act and of section 5138, Revised Statutes, the increase capital will take place before the reduction. Approved. Letter dated October 20, 1933, to la-. O'Connor, Comptroller of the Currency, approved by six members of the Board, replyinr; to his 1141orandura of September 26 recoralendins approval of a reduction in com1c311 capital stock of the First National Bank of Collinsville, Alabama, *c41 50,000 to ,;e 25,000, and the immediate increase of such capital to 050 ' 000 by the sale of 325,000 of preferred stock; the released capital 10/25/33 -40- in the amount of $25,000, together with surplus, profits and reserves °f $21,796.12, to be used to eliminate estimated losses, securities depreciation and doubtful assets of an equal amount. The reply stated that the Board approves the proposed reduction under the plan submitted, subject to the conditions set forth in the reply. Approved. Memorandum dated October 13, 1933, from Mr. Smead, Chief of the Division of Bank Operations, recommending the adoption of revised forms, attached to the memorandum, for use in obtaining reports of affiliates Of State member banks at the time of the next call for condition rePorts, and the approval of a draft of instructions, also attached to the l iftorandum, to be incorporated in the letter of the Federal reserve ballks transmitting the forms to member banks; the recommendation having been approved by five members of the Board on October 21, 1933. Approved. flemorandum dated October 23, 1933, from Mr. Smead, Chief of the Division of Bank Operations, stating that he had been informed that the Cola Ptroller of the Currency desired further information regarding the eizs of deposit balances in national banks, for use in connection with the operations of the Federal Deposit Insurance Corporation, and had 4cided to include a new schedule "Q" in the next call for condition IleP°rts, asking for such information; that it is assumed that the Board 1/111 want to obtain similar data from State bank members in order that the Pederal Deposit Insurance Corporation may have the information as 4°°4 as it can be obtained from the call reports as to the approximate 10/25/33 -41- amounts of deposits of member banks which will be insured under the temporary fund; and that, accordingly, it is reconnended that the proPosed schedule, modified to conform to the form of State member bank condition report, with accompanying instructions, be approved for use in obtaining the information from State bank members. The memorandum 4180 submitted for approval a draft of a proposed letter to be sent to all Federal reserve agents transmitting the condition report forms and atfiliate forms to be used in connection with the next call for condition reports. Approved. Lemorandum dated October 23, 1933, from Governor Black to 1V.r. referring to the consideration given by the Board at the meeton October 17, 1933, to the suggestion that there be included in the forthcoming call for reports of condition of member banks a conficlenti I schedule showing the market value of investments in addition to their book value, and stating that he has conferred with Er. Snead, Chief of the Division of Bank Operations, regarding the matter, and it had been agreed not to put the suggestion into effect as regards State Tr'elliber banks prior to the December, 1933 call. Noted. Reply on October 21, 1933, approved by six members of the Board, to a letter dated September 28 from Lr. Case, Federal Reserve Agent at 14"' York, in regard to the appointment of examiners in the Federal re" 1 agents' departments of the various Federal reserve banks and referr; 'flg particularly to the issuance of revised identification cards to 46:3 10/25/33 -42- examiners appointed at the Federal Reserve Bank of New York. The reply stated that the draft of the proposed text to appear on such identification cards inclosed with the agent's letter has been reviewed, and that it is suggested that it be revised in accordance with the draft inclosed with the reply. Approved. Telegraphic reply on October 24, 1233, approved by six members Of the Board, to a telegram dated October 12 from Deputy Governor Conniff °f the Federal Reserve Bank of Atlanta referring to the Board's letter (If October 16, 1933 (X-7640), with regard to the absorption of abrasion loss on gold coin and shipping charges on Gold coin, gold bullion or Cold certificates, and inquiring whether the bank is authorized to con- tinue to absorb shipping charges on coin received from member banks. The reply stated that, as the period during which gold coin was required to be turned in has expired and as the Executive Order of August 28, 1933, revoked the Treasury's authority to pay transportation charges on old coin deposited with Federal reserve banks, the Board feels that 1311ch charges should not be absorbed by Federal reserve banks. Approved. Reply on October 21, 1933, approved by six members of the Board, to a letter dated August 29 from Ir. Curtiss, Federal Reserve Agent at inclosing a letter dated August 25, 1933, from Mr. Alexander teside, Actuary of the Massachusetts Hospital Life Insurance Company of Boston, Massachusetts, raising the que tion whether section BA of the Clayton Antitrust Act as amended by section 33 of the Banking Act 46410/203 -43- of 1933 is applicable to the officers and directors of that company. The reply stated that, on the basis of the facts stated in Ir. side's letter, it mould seen that the Massachusetts Hospital Life Insurance Company is a cerpert,tion subject to the prohibitions of section BA of the Clayton Antitrust Act; that, therefore, it will be unlawful after January 1, 1934, for its directors or officers to serve at the sesrie time as directors or officers of a national bank; and that such service, however, would not be unlawful if the Lassachusetts Hospital Life Insurance Company should actually make no loans secured by stock or bond collateral after January 1, 1934. The reply stated also that, under section 8 of the Clayton Antitrust Act, the Board is authorized, Under certain caaditions, to grant permits covering relationships otherprohibited by any provision of the Clayton Antitrust Act, including aection 8A; that such authority, however, extends only to relationships betwe en banking institutions; end that, inasmuch as it would seem on the basis of the facts submitted that the Massachusetts Hospital Life surance Company is not a "bank, banking association or trust company", the board would not be authorized to grant its officers or directors Permission to serve as officers or directors of a national bank. The l'eP1Y stated further that it is possible that there are circumstances i4 the case which have not been called to the Board's attention and eh might have a bearing upon the matters discussed above; that if, 41'ter reading the reply, the agent or the iassachusetts Hospital Life Inallranoe Company feel that further facts or legal considerations should b° Brought to the Board's attention, the Board will be glad to give them 465' 10/25/33 -44- consideration; and that, in such event, it will be appreciated if the agent will also submit the opinion of counsel for the Federal reserve Approved. Reply on October 23, 1933, approved by six members of the Board, toO letter dated SeptemLer 25, 1933, from Lr. Williams, Federal Reserve ACent at Cleveland, inclosing a copy of an opinion rendered by counsel for the Federal Reserve Bank of Cleveland and copies of statements of the Ingram-Richardson Investment Company of Beaver Falls, Pennsylvania; .tating. that several directors of the Farmers National Bank of Beaver 40.1s are also directors of the Investment Company; and inquiring as to Whether either section 32 or section 33 of the Banking Act of 1933 is 4PPlicable to such directors. The reply stated that the Board is in ac- 0°d with the conclusions stated by counsel for the Federal reserve bank With respect to both sections; that, in the circumstances referred to in the reply, and in the light of the statements which the agent has fur- it does not appear that the Investment Company should be reas "engaged primarily in the business of purchasing, selling or 40Cotiating securities" within the meaning of section 32 of the Banking of 1933; that, on the other hand, it appears that the Investment C°111Pany occasionally makes loans secured by stock or bond collateral; cr/C1 that this fact would make the provisions of section 8A of the ClayOn Antitrust Act applicable to it. The reply stated also that the 13°11rd is authorized under certain conditions to issue permits covering l'eltItionchips -which come ithin the provisions of the Clayton Antitrust 10/25/33 -45- 4°t; that its authority in this respect, however, is limited to the issuance of permits covering the service of banking institutions; that if the Investment Company is not a "bank, banking association, or trust comPanY", within the meaning of section 8 of the Clayton Antitrust Act, the Board would be without authority to issue permits covering the services or the directors referred to; and that the information which the agent has submitted, and the opinion of counsel for the Federal reserve bank, dc not indicate that the Investment Company is a "bank, banking association or trust company" within the meaning of section 8; but that, in the event that the agent feels that it may be classed as such, it mould be appreciated if he mould submit the information on which he bases his conaccompanied by an opinion of counsel on the question. The reply stated further that it should be noted that, since section 8A refers to 4 corporation which "shall make" loans secured by stock or bond collat- eral, the section mould be inapplicable to the Investment Company if it ell°uld make no such loans after January 1, 1934. Approved. Reply on October 19, 1933, approved by five members of the Board, t° a telegram dated October 5 from Mr. Peyton, Federal Reserve Agent at 14411eapolis, requesting advice as to whether the Federal Reserve Bank of 4fleapolis may continue to hold in custody securities of a national bank illthe hands of a conservator, receiver, or liquidating agent, or whether the agent must insist on the removal of such securities when stock in the Pederal reserve bank has been surrendered. The reply stated that it is the 'dew of the Board that there is no objection to retaining for a -46- 10/25/33 reasonable period after the surrender of capital stock in the reserve bank by member banks in the hands of receivers, liquidating agents, or conservators, securities held in safekeeping for such banks on the date of suspension, until other arrangements can be made, but that new deposits of securities should not be accepted from conservators, receivers, or other officials in charge of such banks; and that it is felt, hoviever, that an exception to this Policy may properly be made in instances 'where the trust is indebted to the reserve bank and it is considered desirable temporarily to furnish this service when the receiver, conservator, or liquidating agent is cooperating in the liquidation of the paper held by the reserve bank. In response to the agent's inquiry as to whether the bank may hold in custody securities of the credit union of the emof the Federal reserve bank, the reply stated also that, inasIlluoh as this is considered a benefit for the bank's own employees, the 130ard raises no objection to the bank holding such securities in safe- Approved. Telegraphic reply on October 21, 1933, approved by six members °11 the Board, to a letter dated September 27 and a telegram dated Septellber 30 from Mr. Newton, Federal Reserve Agent at San Francisco, inquirin ,as , to whether a receiver or conservator of a national bank or a StA+ -ye member bank is eligible to serve as a Class A director of a Fedreserve bank in view of the provisions of the Board's circular iO. 21, . Series of 1915, with regard to the eligibility of persons holding P°1itical or public otTice for service as directors of Federal reserve 488 10/25/33 banks. -47- The reply stated that, if a Class A director is otherwise qualified in all respects, the Board will offer no objection to his serving as such by reason of the fact that he is actin: as a receiver or conservator of a member bank. Approved. Telegraphic reply on October 23, 1933, approved by four members of the Board, to a telegram dated OctoLer 20 from Mr. ilevten, Federal Reserve Agent at San Francisco, inquiring as to when action may be expected on the application of the First Securities Corporation, Ogden, Utah, for a voting permit and as to the status of the membership application of the Monterey County Trust and Savings Bank, Salinas, California. The reply stated that only one copy of the application for a voting pert of the First Securities Corporation was received by the Board; that 0°11s1deration of the application, accordingly, has been delayed; and that it is impossible to predict the time of the Board's action. In "flnection with the membership application of the Monterey County Trust CI Savins " Bank, the reply stated that the Board understands that the CcmPtroller of the Currency has requested the Attorney General, in connection with a question under consideration by the latter as to the le ality of the establishment of out-of-town branches by national banks 14 another State, to include a statement of his views with respect to Ileh branches in California; and that, in the circumstances, action on the application of the honterey bank is being deferred pending receipt °r a reply from the Attorney General. Approved. ev4 1'0/25/33 -48- Telegraphic reply on October 24, 1933, approved by six members Of the Board, to a telegram dated October 13 from hr. l'ewton, Federal Reserve Lgent at San Francisco, with regard to affiliates of the Utah Trust and Savings Bank, Salt Lake City, Utah. The reply stated that, in view of the information furnished, the Board cannot concur in the opinion of counsel for the Federal reserve bank that the Zion's Savings 1441c and Trust Company is not an affiliate of the Utah Trust and Savins kak, since the former institution is a corporation of which control is held 'by a shareholder of the member bank, namely, the idormon Church, /1hich controls directly 320 shares of the member bank and in addition ellidently controls indirectly 1,434 shares of the member bank, in view of the agent's statement that the church owns control of the trust cornThe reply stated also that it would seem, therefore, that the liormon Church controls a majority of the shares of the member bank, and that the Zion's Savings Bank and Trust Company is an affiliate of such Iller:Iber bank within the meaning of section 2(b)(2) of the Banking Act of 133; and that, on the basis of the information submitted, the Board kll°ws no reason to dica,-,ree with the opinion of counsel for the Federal Nserve bank that the Mormon Church is a corporation and a holding corn11Y affiliate of the Utah Trust and Savings Bank within the meaning of 0 3ecti ll 2(c)(1) of the Banking Act of 1933 and subject to the requireof the act and the Board's Regulation P applicable thereto. Approved. Reply on October 2 1933, approved by six members of the Board, to a letter daLod October 3 from Er. A. R. Ecllermott, Vice President of -.49- 10/25/33 The 1.iontana .National Bank: Billings, 2Jontana, stating that he is serv- ing as a director of the :ontana National Bank of Billings, of the 1.1on- tana Nttional Development Company, a corporation which does not make loans on stock or bond collateral, of the Scandinavian American Dank of Big Timber, Montana, which is now in the process of liquidation, and of the Security Building and Loan Association of Billings, which makes loans only to its own stockholders on its awn stock; and inquiring as to *ether he may continue to serve as a director of these corporations. The reply referred to the provisions of section SA of the Clayton Antitrust Act as amended by section 33 of the Banking Act of 1933, and stated that, for the reasons set forth therein, it would appear that the Banking Act of 1933 would not prevent 11.r. rieDermott from serving on the boards of directors of the corporations referred to in his letter. Approved. Reply on October 24, 1933, approved by six members of the Board, tO . Jotter addressed under date of September 25 to the Secretary of the t, casury by 1.1r. H. J. Dolling, Assistant Secretary of the Spokane and Eastern Trust Company, Spokane, Washinr;ton, which was referred to the ecioral Reserve Board for reply, with regard to the withdrawal of sayA CS ,, eposits. The reply stated that paragraph (1) of subsection (a) of section Y of the Board's Regulation Q provides with respect to a savA umposit that "The passbook or other form of receipt evidencing such dePcsit must be presented to the bank whenever a withdrawal is made"; tha.t. . . this requirement is applicable to any withdrawal of a savings dePosit however small the amount; and that in a case in which a depositor • 1O/25/33 -50- has lost or mislaid his savings passbook and the bank has issued to him a flew passbook in lieu of the one lost or mislaid, withdrawals of say.s deposits may be permitted only upon presentation to the bank of the new passbook. Approved. Reply on October 24, 1933, approved by six members of the Board, to a letter dated October 3 from lir. T. C. 1:.cCreary, Manager of the 8411k of America national Trust and Savings Association, Santa Cruz, California, requesting a ruling as to the right of the bank to pay interest at the rate of 3 0/, on a time certificate of deposit issued on julY 3, 1933, to Mr. Thomas Pedersen; and stating that, in accordance with the provisions of the Board's Regulation Q, hr. McCreary has notiti d Mr. Pedersen that it will be necessary for him to file a written hotice of intended withdrawal at least thirty days in advance of payIteat, and that the rate of interest to be paid on the certificate of clePosit issued to him would be reduced to d.Lhat after October 31, 1933, Er. Pedersen contends that the bank is bound by its contract to IDItY interest at the rate of 3 1/2% until the maturity of the certificate Of dePosit in question. deposit The reply stated that, if the certificate of referred to is a time certificate of deposit as defined by sec- III(a)(1) of Regulation q, no interest may be paid thereon after C)tober 31, 1933, in excess of 3% per annum compounded semiannual*. The reply stated also that member banks which issued certificates of deor other time deposit contracts subsequent to June 16, 1933, did 40 Presumably with knowledge of the provisions of the Banking Act of 4H2 10/25/33 -51- 1933, requiring the Board to limit by regulation the rate of interest Which may be paid by member banks on time deposits; that such certificates and contracts, therefore, must be considered to have been made in contemplation of this requirement of the law and with notice that the rate of interest provided therein would be subject to chance to conform to the rate to be prescribed by the Board; and that, accordingly, it is the opinion of the Board that member banks may not pay interest accruing after October 31, 1933, at a rate in excess of that prescribed in Regulation Q, in accordance with certificates or contracts which were entered into after June 13, 1933, although such certificates or contracts Provide for the payment of interest at a rate in excess of that prescribed in the regulation. Approved. Letter to Mr. John A. Sibley, Atlanta, Georgia, of counsel for The Trust Company of Georgia, Atlanta, Georgia, reading as follows: "On June 30, 1933, First National Associates, by J. K. Ottley, President, submitted to the Board by telegram a request for a permit to vote its stock in each of its five subsidiary national banks. Under date of July 1, 1933, the Board's General Counsel advised Mr. Ottley that it would be necessary for the First rational Associates to file a formal application with the Board, and that, since it apPeared that all the stock of First National Associates was owned by The Trust Company of Georgia, it might also be necessary for The Trust Company of Georgia, as well as FirsL ilational Associates, to Obtain a voting permit before the stock in the national banks controlled by First National Associates and The Trust Company of Geor7ia could lawfully be voted. "Under date of July 11, 1933, an application for a voting permit 74113 filed by First National Associates, but the Board's General Counsel took the position that The Trust Company of Georgia, as Well as First National Associates, was a holding company affiliate, and that it was necessary for each such institution to obtain a voting permit from the Board before the stock in the national banks controlled by such holding company affiliates could lawfully be voted. 10/25/33 -52- "Thereupon, First National Associates withdrew its application and subsequently, you submitted to the Board a memorandum, entitled 'Memorandum for General Counsel's Office of Federal Reserve Board', in mhich you requested a reconsideration of the general question whether a member bank, which OTIM or controls or is otherwise affiliated with another member bank in any manner set forth in section 2, subsection (c) of the Banking Act of 1933, is a 'holding company affiliate' of the latter institution and subject to the provisions of the Act relative to holding company affiliates of member banks. Specifically, you presented the question whether The Trust Company of Georgia, which owns all of the capital stock of First National Associates, a non-banking corporation, which latter corporation owns a majority of the stock of each of five national banks, is a 'holding company affiliate' of each such national bank within the meaning of the Act. "After careful consideration of this natter, it is the opinion of the Board that a member bank may be a holding company affiliate of another member bank, and that The Trust Company of Georgia, as well as First National Associates, is a holding company affiliate of each of the national banks in question, and that The Trust Company of Georgia and First National Associates must each obtain a voting permit from the Board before the stock in the national banks controlled by such holding company affiliates may lawfully be voted. For your information, there is inclosed herewith a copy of an opinion of counsel on which this ruling of the Board is based." Approved. Reply on October 20, 1933, approved by six members of the Board, to a letter dated September 21 from Mr. LcClure, Federal Reserve Agent at 1 n33s City; the reply reading as follows: . "Receipt is acknowledged of your letter of September 21, 1933, in which you requested advice as to whether an existing State bank with a capital of ,)25,000 which moves its location to another town having a population of 3,000 or less inhabitants will be eligible for admission to membership in the Federal Reserve System. You called attention to the Board's ruling of July 22, 1933, (X-7521), to the effect that under the provisions of the Banking Act of 1933 a State bank organized on or after June 16, 1933, in a place with a Population of 3,000 or less inhabitants with a capital of not less than :,;25,000 is eligible for admission to membership in the Federal Reserve System if it is at the time entitled to the benefits of insurance under Section 12B of the Federal Reserve Act. "In the circumstances, you are advised that an existing State balak with a capital of not less than 325,000 and located in a town °f not exceeding 3,000 inhabitants will be eligible for admission tc membership in the Federal Reserve System after its removal to 104/25/33 -53- "another town having a population of not exceeding 3,000 inhabitants, if the removal was authorized by and in accordance with the law of the State, provided, of course, that the bank complies with all other requirements for admission to membership. If such a bank should decide to apply for membership in the System while not entitled to the benefits of insurance under Section 123 of the Federal Reserve Act, it should arrange to furnish to the Board a copy of an opinion of the Attorney General of the State, or other State authority having jurisdiction of the matter, with respect to the question whether it was 'organized' at the time of removal or at a date prior thereto. In any such case, the Board would also wish to be fully informed as to the facts regarding the removal with particular reference to the question whether it was in contemplation of an application for membership, or for the Purpose of evading the requirement that a new State bank situated in a town of 3,000 inhabitants or less upon becoming a member of the Federal Reserve System must be entitled to the benefits of insurance at the time of admission to membership unless it has a capital of at least ,50,000. "In connection with the last paragraph of your letter, the Comptroller of the Currency has been requested to advise you as to the position of his office with regard to the removal of a national bank to another town." Approved. Reply on October 20, 1933, approved by six members of the Board, to a letter dated September 30 from Li.. Kewton, Federal Reserve Agent at can Francisco; the reply reading as follows: "Reference is made to your letter of September 30, 1933, transmitting with your favorable recommendation the application of the American Trust Company of San Francisco for permission to establish a branch in Sacramento and inclosing certain related documents. "Under the provisions of Section 9 of the Federal Reserve Act, the question whether a State member bank. in California may establish a branch outside of the city in which it is located depends upon Whether the statute of the State of California authorizes a State bank to establish such out of town branches 'by language specifical1Y granting such authority affirmatively and not merely by implication or recognition' within the meaning of Section 5155 of the Revised Statutes relating to branches of national banks. The Board understands that the Comptroller of the Currency has requested the Attorney General, in connection with a question under consideration by the latter as to the legality of the establishment of out of town branches by national banks in another State, to include a statement of his views with respect to the legality of such branches in the State of California. In the circumstances the Federal 10/25/33 -54- "Reserve Board feels that it should not attempt to determine the question whether a State member bank in California may lawfully establish and operate out of town branches and should not express its views to the Comptroller of the Currency with respect to an application for permission to establish such a branch, until the Attorney General has replied to the request of the Comptroller of the Currency in this connection. "The came question as to the establishment of branches is involved in the application of the Lonterey County Trust and Savings Bank, Salinas, California, for membership in the System and action on that application accordingly will also be deferred pending a decision in this matter. "It is noted that you have requested that the requirement that a copy of the latest report of examination of the American Trust Company accompany the application to establish a branch be maived, inasmuch as the report is quite voluminous and no extra copies are available. In considering an application of a State morber bank to establish a branch beyond the limits of a city, town or village in which the bank is located, a complete copy of the latest report of examination is essential, both for the use of the Board and the Comptroller of the Currency, and no exception to the requirement can be made in this instance. You will be advised as to the decision which may be reached on the question of the legality of the establishment of out of town branches by State member banks in California, and if the decision is in the affirmative, a complete copy of a current report of examination of the American Trust ComPany of Son Francisco should be forwarded for the consideration of the Board and the Comptroller of the Currency. "In this connection it is noted that the latest report of examination available is the report of examination as of April 4, 1932, which is too old to serve as the basis for determination of the bank's condition at this time. Action on the application will be deferred, therefore, pending receipt of a copy of the report of examination scheduled for this month. The necessity for having a current report of examination before action upon the application, assuming that the other questions are satisfactorily adjusted, was dlscussed by Lr. Paulger, Chief of the Board's Division of Examinations, with Governor Calkins during his recent visit. "The Board also has under consideration the question whether the capital stock of the American Trust Company is sufficient for the establishment of an additional branch in view of the require//lents of subdivision (d) of Section 5155 of the Revised Statutes. Under the requirements of this section, taken in connection with (3ction 9 of the Federal Reserve Act, the aggregate capital of a State member bank and its branches must, in the event of the estab11shment of an out-of-town branch, be not less than the aggregate ralnimum capital required by law for the establishment of an equal number of national banks in the various places where the State member bank and its branches are situated. Under the law no national bank may be organized in a city having a population of more than z--;(-1 10/25/33 -55- "50,000 persons with a capital 13ss than ‘200,000 except that in the outlying districts of such a city, where the State law permits the organization of State banks with a capital of 100,000 or less, rational banks may, with the approval of the Comptroller of the Currency, have a capital of not less than 0_00,000. This question, therefore, depends in part upon the provisions of the law of California and possibly also upon whether some of the branches of the American Trust Company are situated in the outlying districts of the cities in which they are located. In the circumstances and in the event of an affirmative decision on the question whether the statute of California regarding branches is such that a State member bank in California may lawfully establish out-of-town branches, the Board will wish to have you submit an opinion of counsel of your bank with respect to the question whether the capitol of the American Trust Company will be sufficient under the requirements of the law if a bralch is established in Sacramento, before transmitting its views to the Comptroller of the Currency with respect to the application for permission to establish such branch. "It is noted that the American Trust Company has a branch in Albany, California, which appears to have been established on October 16, 1932. Inasmuch as this institution mas a member of the Federal Reserve System at that time and in view of the prohibition of Section 9 of the Federal Reserve Act upon the establishment of branches by a State member bank beyond the limits of the city in which it is located, it will be appreciated if you will ascertain and advise the Board in more detail as to the facts with respect to the establishment of this branch." Approved. Reply on October 21, 1933, approved by six members of the Board, t° a letter dated October 7 from iJr. V. S. Whitesides, President of The l'eoPles Bank and Trust Company, Tupelo, Mississippi; the reply reading "f011owst "Reference is made to your letter of October 7, 1933, to Ur. " B. Pollard. It is understood that your bank has a branch established prior to February 25, 1927, located beyond the limits of Tupelo, Mississippi, where the head office of The Peoples Bank and Trust Company is situated, and that you desire to be advised v/hether, if such branch is now removed to another town, it will 1/1 any may affect the eligibility of The Peoples Bank and Trust Company of Tupelo, Eississippi, for membership in the Federal Reserve System. "Under the provisions of Section 9 of the Federal Reserve Act, a State bank may not retain or acquire stock in a Federal Reserve bank except upon the relinquishment of any branch or branches 10/203 -56- "established after February 25, 1927, beyond the limits of the city, town or village in which the parent bank is situated, unless any such branch is established and operated on the same terms and conditions and subject to the same limitations and restrictions as are applicable to the establishment of branches by national banks. The Federal Reserve Board has ruled that a removal of a branch from one town to another in -which the parent bank had no branch constitutes the establishment of a branch within the meaning of section 9 of the Federal Reserve Act. Accordingly, if your bank should at this time remove its branch from one town to another in which it has no branch, it would result in the establishment of a branch in the town to which it is removed, and unless such branch should be established and operated on the same terms and conditions and subject to the same limitations and restrictions as are applicable to the establishment of braaches by national banks, the bank would not be eligible for admission to membership in the Federal Reserve System so long as it retained and operated the same. "There is inclosed for your information a copy of the Federal Reserve Act, and in section 9 thereof you will find the provisions of law with regard to branches of State member bank's. If you desire any further information in this matter it is suggested that You communicate with the Federal Reserve Agent of the Federal Reserve Bank of St. Louis and he will be glad to advise you." Approved. iteply on October 24, 1933, approved by six members of the Board, to a letter dated uctober 9 from r. Larry D. Jones, Cashier of The State hational Bank, Frankfort, Kentucky; the reply reading as follows: "Reference is made to your letter of October 9, 1933, requesting an interpretation of Section III(e) of the Federal Reserve Board's Regulation Q, regarding payment of interest on time deposits after maturity. "The Federal Reserve Board is of the opinion that a member bank may not lawfully pay interest for the period intervening between the maturity date of a certificate of deposit and the date on which a renewal certificae of deposit is actually issued, even though such renewal certificate is dated back to the date of maturity of the original certificate." Approved. Reports of Standing Committee dated October 19, 20, 21 and 24, 1933, recommending approval of the following changes in stock at Federal l'eserve banks: 10/25/33 -57- APplications for ORIGINAL Stock: District ITo. 4. First National Bank of Freeport, Pennsylvania First hational Bank in Harrisville, Harrisville, Pennsylvania Shares 33 36 69 District ho. 7. :.ayne rational Bank, Fort "ayne, Indiana 564 564 District No. 10. irj liational lank in Albuquerque, New lexico 360 360 993 AD lications for ADDITIONAL Stock: District 17-17 a711W777ational Bank, Hot Springs, Arkansas (Increase in capital, preferred, partly offset by decrease in surplus) Salem National Lank, Salem, Illinois (Increase in capital) Taylor National Bank, Campbellsville, Kentucky (Increase in surplus) Lialcoln National Bank, Hodgenville, Kentucky (Increase in surplus) Seuthmest Bank, St. Louis, Lassouri (Increase in capital, partly Offset by decrease in surplus) hird National Bank, Union City, Tennessee 0 (Increase in surplus) P• Burnett & Sons, Eldorado, Illinois (Increase in capital) 108 15 6 2 114 1 30 276 38 38 120 120 F District No. 6. "Iprs 4erchants National Bank, headland, Alabama acing liquidated through conservator) 72 72 ketrict ho. 7. Pirst National Bank, Crescent City, Illinois (Insolvent) 29 licaticns for SURRLIDER of Stock: strzet 1.0. 4. First National Bank, Dunkirk, Ohio (Insolvent) A 4ZZLELLP i . 5. 'rederick County National Bank, Frederick, Llaryland (Voluntary liquidation, succeeded by Frederick County National Bank of Prederick, 1.1rxryland) 10/25/33 -.58- plications for SURRENDER of Stock (Continued) L0*-7•____Stinued) EirrA771T-717717I-aa, Ridgefarm, Illinois (Insolvent) First national Bank, Sidell, Illinois (Insolvent) iational Bank, Covington, Indiana (Insolvent) kerican :dome Security Bank, Grand Rapids, Lichigan (Insolvent) Shares 45 30 42 765 911 District No. 8. T17::st -ThAionaf-Bank, Carrier Lills, Illinois (Insolvent) 20 20 1,1s net 1100 " r irst-757:3737=-Bank, Ironton, Idinnesota (Insolvent) 19 19 Di • ct .„,EITi 1,o. 10. Dlrst Iational lank, La Harpe, Kansas (Insolvent) 4tiona1 Bank of Doniphan, Nebraska (Voluntary liquidation, absorbed by First 1:ationa1 Bank of Grand Island, Nebraska) city 1.:.tional Bank, York, Nebraska (Voluntary liquidation, absorbed by First hational Bank of York, Nebraska) t'lrst liational Bank in Cement, Oklahoma ,. (Insolvent) 1.ationa1 Bank, Okmulgee, Oklahoma (Voluntary liquidation, succeeded by Citizens 14ationa1 Bank in Okmulgee, Oklahoma) 20 18 111 16 180 iotal 345 1,525 Approved. Thereupon the meeting adjourned. crN.A. ASecreary. ItI3PrOved.
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