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265 A. meetin of the Federal Reserve Board was held in Washington on WechlesclaY, October 5, 1932, at 12:45 p. m. PRESENT: Mr. Magee, Presiding Mr. Hamlin Mr. James Mr. Mr. Mr. Mr. Mr. Mr. Morrill, Secretary McClelland, Assistant Secretary Harrison, Assistant to the Governor Wyatt, General Counsel Wingfield, Assistant Counsel Siems, Federal Reserve Examiner. The Secretary stated that the meeting had been called as a meeting Of the B oard with the acquiescence of Governor Meyer (who is in New York), 81"r* Miller (who is ill at home), as well as of the members present, for the Pose of giving consideration to a pending application for the issuance Permit to the City National. Bank and Trust Company of Chicago to exer"-se tidlleiarY powers, because of the fact that the organizers of the bank clealte to open it for business with such powers on the morning of Thursday, Oetal5 or 6 '1932, and that both the Federal Reserve Agent at Chicago and the ATtirif, C°mPtroller of the Currency had submitted favorable recommendations. t 448 tePczted to the members present that Mr. Miller wished to be advised er the telephone as to the attitude of the members present before making 4441 d ecision. It appeared that the bank would have in cash an initial 4'Ditej . cpt 44,000,000 and surplus of'41,000,000 paid in; that it was contetnPlat d e- that the barjk would assune the deposit liabilities of the existing Ciktrea. „0. '40Public Bank and Trust Company of Chicago, a State member bank, ea4°44tf ct 11- 4° aPproximately $72 000 000, and would receive from that bank an tIcItki. eta °II "of cash; that thereupon the new bank would purchase from the Ile°11-at tlle--on Finance Corporation 415,000,000 of paper selected from among the e°11ater l Pledged with the corporation to secure advances made by it to 266 1Mi/32 -2- the Central Republic Bank and Trust Company, and that it would probably ihveet aPPreximately .40,000,000 in United States Government obligations. It aim l'yeared also that in connection with the acquisition from the Reconatruetion Finance Corporation of the paper mentioned there would be an egteeMent which would give to the City National Bank and Trust Company the ight to require substitution during a period of sixty days with respect to .,NR y-9000,000 of the paper purchased, and for an additional period of ttlittY d• alre, or ninety days in all, with respect to $2,500,000 of such In this connection it was stated that the Chief National Bank 4ItUner had reviewed the paper which it was contemplated would be purchased bYth. -- new bank, of which he had classified ,'$4,000,000 as being slow, and it Was pointed out that the City National Bank and Trust Company under its proDOEjed agreement would have the right to require substitution for such slow Nler. In addition, it appeared that the new bank contemplated entering n• anagement contract with the Central Republic Bank and Trust Company 111 /3Y the trusts held by the latter would be serviced by the new bank for Qc3tIlelleetion to be paid by the old bank, and that all new trust business 17°414 130 taken into the trust department of the new bank, together with such tIllate e• s might be transferred from time to tine from the old bank under :11111 (3tdere or by the consent of the interested parties. It was stated itle't While the latest complete examination of the affairs of the old bank, -111.11cling the trust department, was made by the Auditor of Public Accounts tlie state of Illinois in May, 1931, a partial investigation of the trust ciel)litriaelit was made in connection with an examination of the bank in ellIber, 19 31, and that the Chief National Bank Examiner had inspected the l*ek1114 of examinations of the trust department made by the Auditor of 267 10/5/32 -3- Public Accounts of the State of Illinois and had reported that they were 84tisfactorY, except as to certain trusts of the form National Bank of the Republic which had been absorbed by the Central Republic Bank and Trust CiprapanY and on which liabilities aggregating possibly as much as c)500,000 ill One case and , 100,000 in another case might develop. However, it aPpeared that attorneys who had considered the matter were not clear that 8Uch existed, and in any event that there would be no such 114bilitY assumed by the new bank in connection with these trusts. It was raPorted that the present trust officers of the Central Republic Bank and TZ4Elt c °111.PanY who are to be connected with the trust department pf the new institution, were not responsible for the existence of these contingent 114bilitias, and that both the Chief National Bank Examiner and the Federal 116861 ' ve Agent at Chicago were of the opinion that the officers who had been ated to handle the affairs of the trust department of the new bank Were competent men Find that they stood well among bankers in Chicago. In- n -4,-Lch had been obtained by the Federal Reserve Agent at Chicago 1°reeardi„ the personnel of the board of directors and management of the new we's also submitted to the Board, in connection with which it was stated thet th a Acting Comptroller of the Currency had been advised that the eelaction Of a President of the bank was not necessarily permanent and that tlieb tzd of directors expected to give consideration to the possibility of °bibelilling someone else for the position. During the discussions which ensued Mr. F. G. Awalt, Acting C°40ller of the Currency was invited to attend the meeting and partici14ttecl in the further discussion. It was p ointed out that according to the tiltorm.4. which had been obtained by the Board it appeared that the et1(1 surplus would have a relation of about one to fourteen of 268 10/5/32 -4- dePosit liabilities and that this would be considerably beyond the maximum ratio that normally would be regarded as advisable in a going banking institution. Ex. Await stated that he was in full accord with this view 44a that it had been his intention at the time of issuing a charter to address a letter to the institution regarding this aspect of the matter and stating that it was understood and expected by the Comptroller's Office theA the capital of the bank would be increased as soon as practicable so tilat it would bear a ratio of not more than one to ten of deposit liabilities. It 1148 8.180 pointed out that although it appeared that there would be no l'e8Pcnsibility assumed by the new bank for any liability that might have cielrel°Ped with respect to the administration of the existing trusts in the trust departme nt of the old bank, the fact that such trusts were to be serviced 11Y°trieials of the new bank might lead to some misunderstanding on the 13'&11 or the public which might become embarrassing at SOEB future time. In the circumstances, the view was expressed that it would be desirable for the 4111)431k at the tine of opening to issue a statement informing the public 42 t° the relation of the new bank to the trusts held in the trust departet the old bank. In addition, the view was expressed that it would be 481talae to obtain from the directors of the new bank written or telea ssurance that the understanding of the Acting Comptroller of the erency with respect to increasing the capital of the bank would be carried °Ilt• The Acting Comptroller and the Board's General Counsel were requested to Qoafer for the PurPose of formulating an appropriate form of communicaetweea the bank and the Board or the Acting Comptroller with respect t° t48 "matters for the benefit of the records of the Board. 10/5/32 Thereupon a brief recess was taken. Upon reconvening the members of the Board were advised that during the recess the Acting Comptroller of the Currency had communicated by telePhons with officials of the new bank with the result that telegrams as t°1101ws had been received: "Await Comptroller of Currency Wadhn "Be assured that as soon as practicable the new banks capital and surplus will be increased to not less than one tenth of the deposit liability. Charles G Dawes" "Federal Reserve Board Washington We can assure you that at the earliest practical moment a joint letter will be sent by the old and new banks to beneficiaries under all trusts of the old bank explaining relations between the two banks and calling attention to the fact that the new bank assumes no responsibility for trusts in the old bank. J. E. Otis, President, Central Bank and Trust Company Philip R. Clarke, President, City National Bank and Trust Company Charles G. Dawes." u bsembers were advised that the procedure outlined in the second telegx. em had been suggested by the Chicago banks because it was believed tils.t would accomplish the purpose desired by the Board in a more effectivetum Iler than a public statement and at the same time would avoid an 1111414 •••ee88 41'Y the relation between the old and the new misunderstanding as to bolak. The assurances given in these telegrams being acceptable to the memIs `J ezia _ th -e Board present, they requested the Assistant Secretary to 270 1C/5/32 -6Over the telephone with Mr. :Miller. The Assistant Secretary Withdrew fran the meeting for this purpose and upon his return reported thatlg- Miller stated that he joined with the other members of the Board IllaPPr"Ing the application before them. Mr. Harrison advised the Board that Governor 1,Ieyer would also join in such action. Thereupon the Secretary was a uthorized to send the following telegram to the Federal Reserve Agent at chicago: "'Effective if and when City National Bank and Trust Company of Chicago, Illinois, is authorized by Comptroller of the Currency to commence business with Paid-in capital and surplus of $4,000,000 and $1,000,000, respectively, Federal Reserve Board approves application Made on behalf of such proposed national bank for permission to exercise, when not in contravention of State or local law, all fiduciary powers authorized by provisions of section 11(k) of Federal Reserve Act, the exercise of all such rights being subject to provisions Of that Act and Regulations of Federal Reserve Board. Et°ard's approval of such application is also subject to condition that board of directors of such proposed national bank shall, after its organization is completed, pass a resolution ratifying action taken by organizers in making aPPlication for trust powers on behalf of such national bank. A certified copy of resolution adopted in this connection should be forwarded to Board as soon as possible. When all requirements described above have been complied with and a !oPy of such resolution is received by Board a formal cerificate covering right of City National Bank and Trust ! , :411PsnY of Chicago to exercise trust powers will be forward' e to bank. Please advise organizers of that bank of Board's action in this matter." Consideration Was then given to an application of Mr. George F. t()1. Permission to serve at the same time as a director of the ,t4 le t Ile"al Illinois Bank and Trust Company, Chicago, Illinois, the Upper ,,aze cf Chicago, Illinois, and the City National Bank and Trust ChiceCo, Illinois. ee(I The Secretary reported that he had been ad- bY. the Federal Reserve Agent at Chicago that n% Getz, at present a ILIt°1 '°I% the first named institutions and the Central Republic Bank and 10/5/32 -7- Company, was a substantial subscriber to the capital stock of the new 134nk and, having been approached to serve as a director of the latter bastitnfl -.ion, had agreed to resign as a director of the Central Republic and Trust Company and serve the new bank in that capacity, provided the necessary permit is granted by the Board. After discussion, it was decided to grant the permit aPPlied for by Mr. Getz, advising him, however, that under the provisions of the Clayton Anti-Trust Act all Permits are subject to revocation by the Board after reasonable notice and hearing; that the Board is now considering certain general questions affecting a number of aPPlications and permits; that some of these questions may have a bearing upon the permit issued to him and that, a ccordingly, the Board may again consider his case when it has reached a decision upon the general questions referred to. This action was communicated to Mr. Miller over the telephone by the Az sietant Secretary, who reported that Ur. Miller concurred in the Eetiot, taken, but desired to have the following statement made in the ' lecord: "Mr. Miller stated that he voted for the application because of his understanding that la*. Getz was regarded as aa important factor in perfecting the organization of the °JAY National Bank and Trust Company and in consideration the emergency circumstances surrounding the organization the bank. He stated, however, that he felt the case was an extremely doubtful one and that only in the most urgent .T1siderations of emergency would he vote for a renewal of 4-G at the time it comes up for review by the Board." Thereupon the meeting adjourned. la)04X:LAJ 4Ato 11, Executive Committee_ 10-tUP Secretary-.
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