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1444 A, meeting of the Board of Governors of the Federal Reserve Yet held in Washington on Tuesday, October 26, 1937, at 11:00 PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Szymczak McKee Davis Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman Co nsideration was given to each of the matters hereinafter referred to and the action stated with respect thereto was taken by the 13°a d The minutes of the meeting of the Board of Governors of the hderal Reserve System held on October 25, 1937, were approved unanioIxely. Telegram to Mr. Gilbert, First Vice President of the Federal °141811re Bank of Dallas, stating that the Board approves the establishIvithout change by the bank today of the rates of discount and Dilrehase jn 1- ts existing schedule. Approved unanimously. the ti le or St M emorandum dated October 22, 1937, from Mr. Smead, Chief of 11810n of BAnk Operations, submitting a letter dated October Attebery, First Vice President of the Federal Reserve Bank L---e, which requested approval by the Board of changes in the 13e1.80,_ '"Iel classification plan of the Louisville Branch of the Federal 1445 10/26/37 4-1 vogjo... Reserve Bank of St. Louis to provide for changes in the maximurr salaries for the Positions of "Head of Department" and "Assistant Bead 01 DePartnent", in the R.F.C. Collateral and Collection Department, and r°r the creation of the new positions of "Note Custodian" and "Super- visor of Remittances and Accounting", in the R.F.C. Collateral and Col- lecti011 Department. The memorandum stated that the proposed changes bed been reviewed and recommended that they be approved. _Approved unanimously. Letter to the "Peoples Bank and Trust Company", Seattle, Washreading as follows: has :The Board of Governors of the Federal Reserve System &Nen consideration to the application for permission o exercise fiduciary powers made on behalf of the national wank into which the Peoples Bank and Trust Company, Seattle, bnl_ineton, is to be converted, and grants such national T'ulz authority, effective if and when the Peoples Bank and associati rlIst Company is converted into a national banking °I1 and is authorized by the Comptroller of the Currency r commence business as Peoples National Bank of Washington 0 11 Seattle to act, when not in contravention of State or ()peel law, as trustee, executor, administrator, registrar ' ce.stocks and bonds, guardian of estates, assignee, reril d ver, committee of estates of lunatics, or in any other or ucial'Y capacity in which State banks, trust companies ti other corporations which cane into competition with nast°nal banks are permitted to act under the laws of the sutte of Washington, the exercise of all such rights to be ject to the provisions of the Federal Reserve Act and the Re regulations of the Board of Governors of the Federal serve System. "fter the conversion of the Peoples Bank and Trust Com,— be into Peoples National Bank of tashington in beattle thecoes effective and the Comptroller of the Currency au°11-2,es the national bank to commence business, you are 'qUested to have the board of directors of the national t 1 1446 10/26/37 -3_ "?alak adopt a resolution ratifying your application for perto exercise trust Dowers, and a certified copy of the resolution so adopted should be forwarded to the Federal Reserve Bank of San Francisco to be forwarded to the Board ? 1 .f Governors of the Federal Reserve System for its records. hen a copy of such resolution has been received by the Board, e formal certificate covering your authority to exercise trust powers will be sent to you." Approved unanimously, together with a telegram to Mr. Sargent, Vice President of the Federal Reserve Bank of San Francisco, reading as follows: "Fiduciary application 'Peoples Bank and Trust Company', S eattle, Washington, has been approved by Board, effective 11)on completion of conversion. Usual letter to applicant Dank being mailed today." Letter to "The National Metals Bank of Hancock", Hancock, Michi‘Itlis reading as follows: "Phis refers to the resolution adopted on May 26, 1937, by the board of directors of your bank signifying the bank's l ire to surrender its right to exercise the trust powers s'lch have heretofore been granted to it by the Federal ReFerve Board, now known as the Board of Governors of the "ere' Reserve System. ch "The Board understands that your bank has been disarged or otherwise properly relieved in accordance with the; law of ell of its duties as fiduciary. The Board, therei:e) has issued a formal certificate to your bank certr t, Yine: that it is no longer authorized to exercise any of 3p fiduciary powers covered by the provisions of section t4 1,9 1 of the Federal Reserve Act, as amended. This cer'lleete is inclosed herewith. "In this connection, your attention is called to the IV that, under the provisions of section 11(k) of the 81 Reserve Act, as amended, when such e certificate ha" :been issued by the Board of Governors of the Federal Re 10, ,erve System to a national bank, such bank (1) shall no th'ger be subject to the provisions of section 11(k) of Federal Reserve Act or the regulations of the Board of Governors of the Federal Reserve System made pursuant thereto, 1447 10/26/37 -4“(2) shall be entitled to have returned to it, any securities which it may have deposited with the State or, similar authorities for the protection of private or court trusts, anA (3) shall not exercise any of the powers conferred by section 11(k) of the Federal Reserve Act except with the Permission of the Board of Governors of the Federal Reserve SYstem.” Approved unanimously. Letter to Mr. Young, Vice President of the Federal Reserve Bank Of Chico reading as follows: from "AB You know, there have been admitted to membership Your district durina the recent past a number of recrganized banks whose earnings are pledged for the benefit waiving depositors for specified periods covered in the '. ac)rganization agreements. Each of these banks is subject t° a condition of membership requiring it to establish and rnaintain during such periods a 'Trustees' profit account' ' 4.. ch should be separate and apart from the undivided profaccount and should reflect clearly at all times the net of earnings due to the trustees or agents for the waiving depositors. "There is some lack of uniformity among the banks in the ,o manner of treating undivided profits in condition rel'_ rts and published statements, and a question arises as ' es) whether the practice of some of the banks may not be innsistent with the condition of membership. It is underth006 that in some of the banks subject to the condition tie earnings are no longer pledged by reason of the expireOf the agreements, but according to the Board's records agreQnents are still in effect in the following cases. ulle d bEinks are grouped according to the manner of treating me ivided profits in condition reports and published state1t , and the date shown after the name of each bank is date to which the earnings are pledged under the reornization agreement. Dansard State Bank, Monroe, Michigan (7-22-38) American State Savings Bank, Lansing, Michigan (4-29-38) thrhere is apparently no question as to the correctness or 4, 80 manner in which these banks treat their earnings, in ctil'er as the conditions of membership applicable to the inIltions are concerned. Transfers are made periodically Y Z 4 4/P. 10/26/37 -5Undivided profits to the trusts for waiving depositors ! Ind in condition reports and published statements any remainUndivided profits are either excluded from capital ac?ounts and shown in other liabilities as being amounts due trusts, or are included in capital accounts with note! ions to the effect that the amounts are for the benefit of uh e aiving depositors. In other words, the condition rePerts and published statements properly show that earnings °fl the dates of the statements do not accrue to the banks. Central State Bank, Muscatine, Iowa (Earnings are Pledged until the sum of $125,000 has been paid einn7.liquidating agents of two predecessor 13(3 , "Transfers of specified sums have been made periodicalJ-Y to the segregated assets held for the benefit of the deP°sitors irne teen of the predecessor banks, a total of V75,000 havtransferred up to June 30, 1937, but in condition 4 ePorts remaining balance in undivided profits is included 4..L.the bank's capital account and with no notation to indi','"e that the earnings are for the benefit of the old bank's uePositors. The Mount Clemens Savings Bank, Mount Clemens, ,Michigan (11-15-38) 00persville State Bank, Coopersville, Michigan (12-7-37) The Home State Bank of Lawrence, Lawrence, Michigan (1-3_38) The Peoples State Bank of Holland, Holland, Michigan (6-28-38) wai "Apparently these banks transfer to the trusts for encj ing depositors the entire net profits on hand at the °f earning and dividend periods, June 30 and December 31, hUt tan condition reports and published statements in the inejlIns the net profits are included in the banks' capital Illits and with no Qualifying notations to the effect that - the amounts are for the benefit of waiving depositors. that "The condition of membership in question contemplates ba„ it. all condition eports and published statements the b ''s involved should not overstate their capital accounts incl A. -IluanR therein earnings which under reorganization egr EIQMero-, are to accrue to waiving depositors; unless, of e er'a, auj qualifying notations are made in the reports to the . de eet that such earnings are for the benefit of the waiving t°ra- Accordingly, it is requested that the Central St - ve Bank, Muscatine, Iowa, and the four banks listed in the - 10/26/37 -6"last group be informed of the manner in which the earnings sh°111d be shown in all future reports of condition and published statements. If there are any other member banks in r..6 c1.strict reorganized under a similar plan which are inpledged earnings in their capital accounts in condi°11 reports and published statements, their attention should to the proper manner in which such earnings steh be j Isitn the"In this connection, it has been noted that in most of reports of examinations of those banks whose earnings are ledged, the examiners have included the net undivided profits 111 the banks' capital accounts. It is requested that in the t ture the reports of all such banks, whether or not subject . the condition, be prepared in such a manner as will rethe true condition of the capital accounts." 4 Approved unanimously. Memorand dated October 16, 1937, from Mr. Morrill submitting rneznorandurn dated October 12 from Mr. Koppang, which had been pre141recl. in accordance with the request made at the meeting of the Board O keust 23, 1937, that an investigation be made as to the types of 111811rElnee that it would be desirable to carry on the Board's new buildend in connection with its operation. Mr. Morrill's memorandum recom mended: (1) 'Filet no general fire insurance on either the build;r e or contents be provided at this time but that Personnel Committee be authorized to purchase, 11 an investigation shows it to be advisable, a Fine ts Policy on the contents of such of the rooms and in such amounts as the Committee may decide; such Policy to insure not only against fire but also against water damage, theft and malicious destruction. That elevator and public liability coverage each in the amount of 50,0004200,000 limitation be provided. That such machinery coverage be obtained as in the °Pinion of the Board's Building Manager should be 1450 • 10/26/37 covered, subject, of course, to the approval of the Personnel Co ittee. (4 That no flood insurance be carried but that, if possible, protection against water damage of the machin in the basement be included in the policy described next above. (5) That coverage against riot, civil commotion, malicious mischief and vandalism and insurance against other such miscellaneous risks and in such amounts be obtained as the Personnel Committee may deem advisable. Approved unanimously. Thereupon the meeting adjourned.
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