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275 A meeting of the Executive Committee of the Federal Reserve Board was held in Mashington on Thursday, October 5, 1933, at 11:30 a.m. Mr. Szymczak, Presiding Mr. Hamlin Yr. Dialler PRESENT: Mr. Morrill, Secretary Mr. Carpenter, Assistant Secretary Ur. Eethea, Assistant Secretary The Committee considered and acted upon the following matters: Telegrams dated October 4, 1933, from Er. Curtiss, Chairman of the Federal Reserve Bank of Boston, Yr. Austin, Chairman of the Federal Reserve Bank of Philadelphia, and Yr. Wood, Chairman of the Federal Reeerve Bank of St. Louis, all advising that, at meetings of the boards °f directors on that date, no changes mere made in the banks' existing olledules of rates of discount and purchase. Without objection, noted with approval. Reply on September 30, 1933, approved by five members of the hoard' to a letter dated September 27 from Yr. Williams, Chairman of the pederal Reserve Lank of Cleveland, stating that the executive comTnitteo of the bank, at its meeting on September 22, appointed 1::r. A. C. pos ter, formerly Assistant Auditor, as Assistant Cashier of the bank to 114/7e direct charge of the Reconstruction Finance Corporation Custodies 4P4rtment, and that, subject to the approval of the Federal Reserve Li. Foster's salary vas fixed at the rate of C6,000 per annum, "feetive October 1, 1933. 4tlary The reply stated that the Board approves the fixed for Mr. Foster. Approved. 276 10/5/33 -2- Letter dated October 4, 1933, to Lir. Stevens, Federal Reserve Agent at Chicago, approved by four members of the Board, replying to Assistant Federal Reserve Agent Young's letters of September 28 and 30 advising of the temporary appointment of idessrs. ,krthur S. Knudson and 4,"Kimlin as examiners in the Federal reserve agent's department of the Federal Reserve Bank of Chicago, with salaries at the rates of e%A and $3,600 per annum, respectively, effective as of the dates atated in the individual letters. The reply stated that it is assumed that the temporary appointment of Messrs. Knudson and Kimlin as examiners ill the Federal reserve agent's department was covered by the authcrity re quested in the agent's telegram of September 21, approval of which was in the Board's wire of that date, and that, with that understan dt' the Board approves the temporary appointment of Nessrs. Knudson and 4imlin as examiners in the Federal reserve agent's department of the ballk vdth salaries at the rates stated. Approved. Telegraphic reply on October 3, 1933, approved by four members Or the Board, to a letter dated September 29 from hr. Wood, Federal Re"rye Agent at St. Louis, requesting approval of the appointment of Nr. Leger Grindon as an examiner in the Federal reserve agent's department Of the Federal Reserve Bank of St. Louis, with salary at the rate of ' 600 per annum. The reply stated that the Board approves the appoint- referred to with salary at the rate stated, on the condition that 141., G l'indon will promptly liquidate his indebtedness in the amount of ''`JO to the lacsiscippi Valley Trust Co., St. Louis, rissouri, a 277 10/03 -5- Member institution. Approved. Reply on September 50, 1933, approved by five members of the Board, to a letter dated September 22 from Ur. Peyton, Federal Reserve Agent at Minneapolis, stating that he has employed, as of the dates stated in the letter, Messrs. L. H. Bakken and H. R. Horn as assistant examiners, and Mr. I. J. Iverson as utility clerk, with salaries at the rates of $2,400, 03,000 and 0900 per annum respectively. The reply stated that the Board approves the appointment of Messrs. Bakken and 11°111 as assistant examiners in the Federal reserve agent's department the bank, with salaries at the rates stated, both effective as of SePtember 18, 1933, but that, as the agent vas advised in the Board's letters of July 8 and September 18, 1933, the Federal Reserve Act prothat appointnents of examiners are subject to the approval of the clltrd, and proposed appointments to these positions should be submitted to the Board for consideration before becoming effective. The reply etated also, in connection with the appointment of Mr. Iverson as utility cleric in the agent's department, that this position cones within the proof the personnel classification plan of the bank and, therefore, dee not require the specific approval of the Board. Approved. Telegraphic reply on October 4, 1933, approved by four members °I 'the Board, to a letter dated September 30 from Mr. McClure, Federal 48erve Agent at Kansas City, requesting, for the reasons stated in the letter, that the Board approve an increase fram',:2,700 to $3,000 per 10/5/33 -4- annum in the salary of 11r. L. F. Mills, an examiner in the Federal reserve agent's department of the Federal Reserve Bank of Kansas City, effective October 1, 1933. The reply stated that the Board approves the increase in Lr. Mills' salary as requested. Approved. Reply to a letter dated Oeptember 23, 1933, from Mr. Peyton, Federal Reserve Agent at Minneapolis, transmitting statements submitted by officers and employees of the Federal Reserve Bank of Minneapolis with regard to outside business affiliations. The reply noted from the statement submitted by Er. G. Brudvik, field representative, that he ten shares of stock in the Renville County Bank of Lohall, North bak°ta, and is an inactive vice president and director of that instituti"' and stated that it appears that this affiliation is within the Scope of the Board's letter of April 29, 1933; that it is felt that should terminate his official connection with the institution 13r°111PtlY and dispose of the stock of the bank held by him as soon as it 4 Possible to do so without resulting in undue hardship on his behalf; 8'Ild that it will be appreciated if the agent will advise the Board of the action taken by Mr. Brudvik in this connection. The reply noted 'so that certain other employees of the bank receive remuneration for ervices rendered outside the bank, and stated that it is assumed that the agent has satisfied himself that such services do not interfere in 411Y waY with the efficiency of the employees concerned, and do not inVe any financial or other relations that night be embarrassing to the F ederal reserve bank, but that it will be appreciated if the agent 2,79 10/5/33 will confirm this assumption. Approved. Reply to a letter dated September 27, 1933, from :dr. Newton, Pederal cserve Agent at San Francisco, written in response to the 4ard'5 letter of August 29 with regard to outside business affiliations Of officers and employees of the Federal Reserve Bank of San Francisco. The reply noted that, with he exception of the Federal reserve agent, none of the officers or employees in the agent's department of the bank connected in any way with outside business interests, and stated that "Ireful consideration has been given by the Board to the information contried in the agent's letter with regard to his service as a director of the Union Oil Company of California; that the Loard feels, however, that the affiliation is clearly within the scope of its letter of April 29; 411d that the agent should give careful consideration to the advisability Of terrinating the connection as soon as possible, advising the Board of the decision reached by him in the matter. "stated The reply stated also that, in its letter of August 29, 1933, the Board's letter of April 29 requested that the Board be advised with regard to outside business e°1111ections of all officers and employees occupying responsible positions .4 the various departments of the bank; that the agent's letter makes no 7Jith regard to the business affiliations of officers and employees (lePartments of the bank other than the Federal reserve agent's departInelit; and that it is assumed that this information will be submitted as °c)11 as available. Approved. 280 10/5/33 -6- Letters dated September 30, 1933, to the boards of directors Of "The Southington hank and Trust Company", Southington, Connecticut, and the "Commercial State Bank", Afton, RAM, approved by five members of the Board, stating that, subject to the conditions prescrit9d in the individual letters, the Board approves the banks' applications for Merlbership in the Federal Reserve System and for the number of shares of stock of the Federal Reserve Banks of Boston and Chicago, respectiveto which each of the banks will be entitled upon the basis of its capital and surplus as of the date upon which its membership becomes effective. Approved. Letter dated October 2, 1933, to the board of directors of the 1/4,1tizen5 Bank", irxrshall, North Carolina, approved by four members of the Board, stating that, subject to the conditions prescribed in the letters the Board approves the bank's application for membership in the Pederal Reserve System and for the number of shares of stock of the FedReserve Bank of Richmond to which the bank will be entitled upon the basis of its capital and surplus as of the date upon which its membel'chip becomes effective. Approved. Letter dated October 4, 1933, to the board of directors of "The 443tern Security Bank", Sandusky, Ohio, approved by four members of the 4 u, statinr; that, subject to the conditions prescribed in the letter, the 13 oard approves the bank's application for membership in the Federal ' I've System and for the number of shares of stock of the Federal 2ei 10/5/33 -7- Reserve Bank of Cleveland to which the bank will be entitled upon the baeis of its capital and surplus as of the date upon which its memberShip becomes effective. Approved. Letter to the board of directors of "The Bank of Forest", Forest, 141seissippi, 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 stock of the Federal Reserve Bank of Atlanta to which the bank will be entitled upon the basis of its capital and surplus as of the date upon which its membership becomes effective. Approved. Letter dated September 30, 1933, to Lir. Stevens, Federal Reserve ' / 1 4ent at Chicago, approved by four members of the Board, stating that the Board has reviewed the information submitted with the application (31 'the ie.st ::.cHenry State Bank, West Y.,cHenry, Illinois, for membership 1/1 the Federal Reserve System; that, in the circumstances set forth in the letter, the Board feels that it would not be justified in approving the aPplication of the bank at present, and, in accordance with the l'ee°111mendation contained in Assistant Federal Reserve Agent Young's letter of September 6, 1933, requests that the agent communicate with the bero, and suggest the withdrawal of its application from further considerati°11 at this time; and that, in such event, although the application itand the accompanying papers will remain a Dart of the Board's files, 4° adverse action thereon will be taken. The letter also stated that if, 22 10/5/33 at a later date, the agent feels that the Board would be justified in considering the matter again, the Board will be glad to do so upon his recommendation accompanied by a new application and a current report of examination. .Approved. Telegram dated September 30, 1933, to Mr. -flood, Federal Reserve Agent at St. Louis, approved by four members of the Board, referring to the application made on behalf of the Manufacturers Bank and Trust Corn- St. Louis, Dissouri, for membership in the Federal Reserve System, and statinq that it has been found that a question of policy of general application to numerous banks which may hereafter apply for membership i4 the Federal Reserve System is involved in this case; that careful con- ei deration is being given to the position the Board should take on such Tlestion of policy; that any action on the application on behalf of the la„ -.1.11facturers Bank and Trust Company has, accordingly, been deferred by the Board; and that the agent will be advised as soon as the question of Zerlsral policy is determined and action is taken an the application. Approved. Reply on October 2, 1933, approved by four members of the Board, to a letter dated September 18 from Li-. Hoxton, Federal Reserve Agent at --"Iond, transmitting the request of the Planters Bank and Trust Company Parmville, Virginia, which became a member of the Federal Reserve Yste.sil on /born 21, 1933, for an extension of time of six months from OctOber 21, 1933, within which to comply with the T2oard's condition of Inelithership numbered seventeen which provides that "Such bank shall within 10/5/33 -9.- 81x months from the da,e of its admission to membership increase its unimpaired capital stock to at least 75,000." The reply noted that the condition could be met by declaring a stock dividend of :25,000 but that the president of the bank prefers to increase the capital through sale of stock rather than through declaration of a stock dividend, and stated that, in view of the existing satisfactory ratio of the bank's caPital and surplus to deposit liability, the agent's comatents regarding the inadvisability of attempting to sell additional stock at this time and his recommendation in the matter, the Board extends until APril 21, 1934, the time -within which the Planters Bank and Trust ComPallY may comply with the Board's prescribed condition numbered seventeen, With the understanding, however, that until such time as the provisions c3f such condition have been fulfilled, the present surplus of 00,000 shall be decreased for no other purpose than for the payment of a stock dividend in an amount sufficient to increase the capital stock of the ba* to 4;75,000. Approved. Letter dated October 2, 1933, to . Stevens, Federal Reserve 4Cent at Chicago, approved by four members of the board, replying to 4sistant Federal Reserve Agent Young's letter of September 13 transIllitting a letter from The home State Bank, South 3a1waukee, ';asconsin, dated September 9, 1933, requesting reconsideration of condition numbered eteen under which it was admitted to membership, which provides that: ".kfter admission to membership, such bank shall not engage in the business c3i' selling insurance either directly or indirectly through its officers 10/5/33 11or 284 -10- otherwise, even though it may be authorized to do so under the laws under which it is organ ized". The reply stated that this condition was Prescribed on the basis of the statement contained in the report of exazdnation made by the examiner for the Federal reserve bank as of May 23 '1933, to the effect that, while the bank did not condu ct an insurance El enoY, such an agency was conducted by Cashi er Logan, the proceeds of which were refle cted in the earnings of the bank; that it now appea rs, however, that the earnings of the agency, as such, are not refle cted in the earnings of the bank, but that regular payments of 375 per month TO been made to the bank for rental and for clerical services rendered; that whether the insurance agenc y is being run as an individual enterPrise for the benefit of the cashier as an individual, as is claimed, Irld the Payments to the bnnk are actually bona fide payments for rent and clerical services rendered, or whether the insurance agency is being run t'or the benefit of the bank., is a matter of fact to be determined ; and that one of the factors to be taken into consideration is whether, in the eliallt of resi:rnation, the prese nt cashier mould retain the business, or Ildiethar he mould be expected to turn the agency over to another repreentative of the bank. The reply stated also that the agent is requested to illake such further investigation of the matter as will enable him to Zive the Board a firm recommendation as to whether or not the arrangemen t Of feet at The Honk) State Bank comes within the prohibitions prescribed for that bank. Approved. Telegraphic reply on October 3, 1933, approved by four membe rs 10/5/33 -11- 26.) cf the Board, to a telegram dated September 29 from Mr. McClure, Federal Reserve Agent at Kansas City, recommending approval of a reauest Of the Sylvan State lank, Sylvan Grove, Kansas, for a further extension Of time from October 1 to November 15, 1933, in which to comply mith the conditions of membership imposed by the Board in its letter of July 17 advising of approval of the bank's application for membership in the Federal Reserve System, the basis for the request being the same as for the ori:inal request for an extension of time, that the laws of Kansas d° not Permit a State bank to participate in the Federal Deposit Insurance Qorporation. The reply stated that the Board grants the extension requested. Approved. Reply on September 30, 1933, approved by five members of the Board, to a letter dated September 25 from Mr. Peyton, Federal Reserve AZent at Minneapolis, inclosing a copy of a letter dated September 22, 1933, from Mr. IT. H. Rahn, President of the Farmers State Bank, Winner, 801-ith Dakota, requesting reconsideration of the provision in condition nuinberedeighteen requiring a reduction of ,)5,000 in the carrying value of the banking house prior to admission of the bank to membership in the S8tem. The reply stated that such requirement vas prescribed in ac- cordance with the definite recommendation of the reserve bank committee; e'lld that, -while the bank will have an investment of c21,800 in banking house, furniture and fixtures, and other real estate, after giving effect to the prescribed adjustments in connection with the outstanding In°1‘te;ages and the recent reduction of ;1,000 in other real estate, as 286 10/5/33 -12- compared with capital of .25,000 and surplus of .5,000, it is noted that the examiner does not classify any part of the carrying values of such assets as doubtful or loss, and that the original recommendation for the reduction of .)5,000 in the carrying value of the banking house 18as based upon the excessive investment in fixed assets, rather than uPcn the value of the property. The reply stated also that, in view of the otherwise satisfactory condition of the bank, the recent substantial contributions by the president, and the agent's recommendation, the board has amended conditions numbered sixteen and eighteen to eliminate the requirement of an immediate charge-off of :)5,000 on the banking h°115e, substituting therefor the requirement that the charge-off shall 134Yt be less than :A,000 a year until the carrying value has been reduced Approved. aeply on October 2, 1933, approved by four members of the Board, to a letter dated September 2 from ,Ir. Case, Federal Reserve Agent at lielsr York, relative to the procedure in connection with applications for Membership in the Federal Reserve System. The reply stated that the " 13 -rd agroes with the agent that it is desirable to avoid as far as posible holding applications in abeyance for considerable periods of tine 1:4311ding discussions regarding possible revisions of plans of reorganizati°11 or possible corrections of unsatisfactory conditions by other means; and that it is noted that the agent believes that there would be less for misunderstanding and possible controversy if, as far as possible, 11 applications for membership 7Jhich are received by him be either (1) 287 10/5/33 -13- Promptly forwarded to the Board, whether his recommendation is favorable or unfavorable, or, (2) definitely and promptly withdrawn by the applybank if it desires to do so because discussions with the officers Of the Federal reserve bank have indicated to the officers and directors of the applying bank that the application will probably not be granted. The reply stated also that, of the two alternatives which the agent sug" ts, it seems more desirable that the applying bank withdraw its apPlioation if the agent's investigation indicates that the condition of the bank is such that the Federal reserve bank committee would not feel justified in recommending that the application be granted, and that, of course, if in any case the applying bank requests that its application be submitted to the Board, the Board will be glad to consider the appli- clIttion upon receipt of full information as to all of the facts in the ease and the recommendation of the Federal reserve agent, together with that of the committee of his bank, as to the action which should be taken. Approved. Reply on September 30, 1933, approved by five members of the bon,, to a letter dated July 21 from 141r. Wood, Federal Reserve Agent Ett St. Louis, making inquiry regarding the manner in which real estate 1Of1 "41s, w'riere such loans would not conform to section 24 of the Federal '"erlre Act were the loaning bank a national banking association , should be *"died in the case of banks applying for membership in the System, e'll4 also whether the Board feels that holdin;s of "other real estate" *1°Uld be eliminated before an applicant bank is admitted to membership. The x— ' 131Y stated tha',, the question raised in the agent's letter with 10/5/33 respect to "ether real estate" was discussed at the recent conference of Federal reserve agents and the results of the discussion as to the r-70 eral policy in connection with applications for membership were incorporated in the Board's letter of September 11, 1933 (X-7581). The reply stated also that, while it would be desirable to have real estate loans it State banks admitted to membership in the System conform to section 24 of the Federal Reserve Act, which is applicable to national banks and which provides that loans made by a national bank on real estate security shall not exceed 50 fered as of the actual value of the real estate of- security, the Board does not feel that loans made by State banks which do not so conform should be classed as unacceptable merely because Of that fact if such loans are otherwise good and collectible and are 11°t held in violation of the laws of the State in which the bank is located. Approved. Reply to a letter dated August 8, 1933, from Mr. W. O. Osburn, CaP'4 '11.1.1ar of the State Exchange Bank, Culver, Indiana, wlth further regard to Inembership of that institution in the Federal Reserve System and the retention of the branch now operated by it at Argos, Indiana. The reply 4°ted that the branch in question was established and operated prior to lebruar_ .Y 25, 1927, but that it was not operated under a charter from the State until 1931, when the legislature of Indiana expressly authorthe establishment of branch banks within the State; that no security is kePt at the branch at Argos; that no loans are made by it; and that the e xtent of its business is to receive deposits and make change. The 10/5/33 -15- letter stated that the Board understands that under Indiana Acts of 1921, which were in force on February 25, 1927, State banks in Indiana ''ere prohibited from having branches except in cases where charters for such branches had been granted before 1921, and that, accordingly, the brunch operated at Argos by the State Exchange Bank prior to FebruarY 25, 1927, was not operated "in conformity with State law" unless it was chartered before 1921, and it is understood from Ix. Osburn's letter that such branch was not chartered until 1931. .he reply further stated that the Board is of the opinion that the office at Itrgos must be considered a "branch" within the meaning of section 9 of the Federal Reserve Act and that, in the circumstances, the State Exchange Barar Would be eligible for membership in the Federal Reserve System while retaining the branch office now operated by it at Argos only if it Should comply with the terms and condition s applicable to the establish14814 of out of town branches by national banks, which terms and conditi°ns were set forth in the Board's letter of July 31, 1933, which was addressed to Honorable George R. Durgan, and which the Board understands " 4 been referred to Yr. Csburn. Approved, together with a letter to honorable George R. Burgan, Lafayette, Indiana, replying to his letters of August 15 and September 15, 1933, and stating that after careful consideration of the question of the eligibility of the State Exchange hank for membership, it is the view of the Board that the bank may become a member of the Federal Reserve System while retaining its branch office at Argos only if it complies with the requirements applicable to the establishment of branches by national banks. Reply on September 30, 1933, approved by five members of the 290 4 1o/5/33 -16- Board, to a letter dated September 19 from Mr. Hoxton, Federal Reserve Acent at Richmond, advising that The Flat Top National Bank, Bluefield, West -Virginia, has been continuously deficient in its required reserves for SiX months. The reply stated that it is noted that, in the agent's °Pillion, the bank's continuous reserve deficiencies have been due to its inability to maintain its reserves rather than to any wilful disreZard O. the requirements of the le.w, and that representatives of the Federal reserve Lank are endeavoring to assist in the rehabilitation of the institution; that, in view of these circumstances, and in accordance with the agent's recommendation, the Board will take no action in the ratter of the bellies continuous reserve deficiencies at this time, other than to forward copies of the agent's letter to the Comptroller of the ClUirelleY for the infornation of his office, but that, it will be a.pprecited if the agent will advise the Board, within a reasonable time, as t° vthether the bank has restored and is maintaining its required reserves. Approved. Letter dated October 3, 1933, to hir. O'Connor, Comptroller of the currency, approved by three members of the Board, replying to his Inern°ranclua-a of September 29 recomending approval of a reduction. in c4Pite-1 of The First National Lank of Ritzville, Ritzville, Washington, tr.°111 'n-00,000 to $50,000, in accordance with a plan of reorganization 11}lic1 provides for the sale of the eliminated assets for 074,131.74 to the T 117estment and Securities Company; the released capital in the ' 8411°Illit of :'350,000, together with undivided profits of ,',g,936.12, and in the amount of ;';74,131.74 made available by the sale of unaccept- 291 10/5/33 -17- able assets to the Investment and Securities Company, to be used to eliminate unacceptable assets and depreciation of 0132,067.86. The l'ePly stated that the Board approves the proposed reduction under the Plan submitted, subject to the conditions set forth in the reply. Approved. Letter dated October 4, 1933, to Mr. O'Connor, Comptroller of the Currency, approved by three members of the Board, replying to his rftlorandum of September 9 recommending approval of a reduction in the °11.Pita1 of The Comnercial National Bank, Kansas City, Kansas, from °750,000 to 0300,000 in accordance with a plan of rehabilitation, which Pliovides for a reduction in the par value of the present common capital fl*°In 0100 to $40 a share; and the sale of 0350,000 class A preferred 8t°ek to the Reconstruction Finance Corporation and 0100,000 class B Preferred stock locally, at a par value of $100 a share; the released caPital in the amount of 0450,000, together with funds in the amount of 11°0,000 from the bank's surplus account and approximately 039,300 from Ilt4ivided profits, to be applied toward the elimination of unacceptable 4"ete aggregating approximately 0589,300. The reply stated that the 8°4rd aPProves the proposed reduction under the plan submitted, subject to the conditions set forth in the reply. The reply stated also that, Illth°uCh the introduction of the nevrcapital funds will make possible the , e4imination of a material amount of criticized assets, and is there- t°re a desirable step, the Board feels that the plan submitted is in., Me and that, if the institution is to prosper, further substantial elillittations and corrections will be necessary; that there will remain t; • (-.00 10/5/33 -18- Lathe assets of the bank after the proposed adjustments are effected a large amount of past due paper and other slow, and doubtful assets, including an excessive proportion of loans predicated on real estate, a ' lean' investment in banking premises and other objectionable features; and that it is assumed that the Comptroller's office is fully aware of the bank's condition and that its need for further strengthening is reeeiving consideration. Approved. Letter to Mr. O'Connor, Comptroller of the Currency, replying t° Ills memorandum of September 6, 1933, recommending approval of a redUetion in capital of the Citizens-Farmers National Bara,-, Chickasha, °kis-llama, from $200,000 to 150,000, under a plan which provides also a contribution of $50,000 from the present shareholders; the released 4.Pita1 in the =aunt of C60,000, together with the contribution of 06MOO received from the shareholders and approximately $8,100 of the 14"Peent surplus and undivided profits, to be used to eliminate substandard "Bete aggregating approximately $108,100, such eliminated assets to re4411 the property of the bank. The reply stated that the Board approves the proposed reduction under the plan submitted, subject to the conditions set forth in the reply. Approved. Letter dated September 30, 1933, to the "American National Bank at I4dianapolis", Indianapolis, Indiana, approved by three members of •00ard, stating that the Board approves the application filed in the bk4k, 6 behalf for permission to act, when not in contravention of State 293 10/5/33 -19- 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 companjes or other corporations which come into competition with national banks are permitted to act under the laws of the State of 14diana, the exercise of all such rights being subject to the provisions of the Federal Reserve Act and the regulations of the Federal Reserve Board. The reply stated also that it appears that the trust depaiLment of the Fletcher American National Bank of Indianapolis is carrying soyrusts which are unprofitable and that the applicant bank contemPlates acquiring some of the more desirable business of that department, and that the Board feels that if the bank is tendered any of the trusts 11017 held by the Fletcher rnerican rational Bank of Indianapolis, it should carefully scrutinize the condition of these trusts, which, through their assumption, may prove unprofitable or be detrimental to the inter- "t8 of the applicant institution. The reply stated further that it is noted that the trust committee of the Fletcher American National Bank of Indianapolis consisted of three members, two of whom were trust officers, and that such committee was not required to report to the board of directors or to any committee appointed by it; and that the Board feels that it would be desirable to appoint a trust committee from the board °t d irectors, the majority of whose members are not connected in any ofCapacity with the trust department and that such committee should be required to make a periodic report to the board of directors or to a c)/11Inittee appointed by it. Approved. 10/5/33 Letter dated September 30, 1933, to "The First National Bank of Baker", Baker, Oregon, approved by five members of the Board, stating that the Board approves the bank's application for permission to act, -"hen not in contravention of State or local law, as trustee, executor, 4chninistrator, 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 corPcrations which come into competition with national banks are permitted to act under the laws of the State of Oregon, 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. Reply on October 3, 1933, approved by four members of the Board, to a letter dated September 21 from Er. Thomas C. Lynch, President of the "Carthage National Exchange Bank", Carthage, New York, requesting 4a7ice as to whether it would be possible for the Board to grant permission to the Carthage National Exchange Bank to act as trustee and exeelator Pursuant to the provisions of a will naming the national bank in 811ch capacities, under the permission granted to the national bank by the Board in its letter of March 1, 1932, authorizing it to act as trustee executor and in certain other fiduciary capacities "only in the allscific trusts in which the Carthage National Bank and the National Exchange acti g Bank and Trust Company of Carthage had been appointed and were on December 30, 1931." The reply stated that, in the circumstances 10/5/33 -21- set forth in the reply, the Board does not feel that it would be justified in granting further authority to the Carthage National Lxchange l ank.' to act in a fiduciary capacity until a correction has been effected in the unsatisfactory features of the condition of the bank 'which constituted the basis of the board's deferment of the bank's application for full trust powers. Approved. Reply on October 2, 1933, approved by four members of theoard, to letters dated 6eptember 2, 6, and 18 from Peyton, Federal ae- serve Agent at lanneapolis, relative to the examination of the Federal Reserve Bank of Linneapolis made by the Board's examiners as of .1arch 26, 1933. The reply noted the agent's comments and suggestion that the Pederal reserve bank and its branch be permitted to hold securities in "l'ekeeping for the account of nonmember banks which have applications for membership in the System on file with the agent's office or which 41'e in the process of merger with and under the charter of a member inuntil such time as the application for membership has been 'acted on adversely by the Board or plans for merging with a member in. 0.1tion have been abandoned, and stated that, as a practical matter, the Leard will interpose no objection to the retention of the securities Eit Present held for such nonmember banks provided the securities so held will be withdrawn immediately if the bank's application for membernot approved or if the plans for merger with and under the of a member institution are abandoned, but that the Board's acon Should in no wise be construed as sanctioning the acceptance of 10/5/33 -22- other securities for safekeeping by the Federal reserve bank from nonxember institutions which have applications for membership on file 'With the agent's office, or which contemplate merger with a member bank. The reply also noted that securities held in safekeeping for other nonIllember banks have been, or are in the process of being withdrawn, that the First National Bank & Trust Company of Helena, Montana, has withits securities from the vaults of the Helena branch, and that the to Bank & Trust Company of Helena has made alterations in its vaults to provide the necessary facilities, and that its securities will be 'Withdrawn from the Helena branch by the end of September; and stated that it will be appreciated if the agent will advise the Board when the /lithdramal of these securities and the securities of the nonmember banks referred to has been accomplished. Approved. Telegram to the Federal reserve agents at all Federal reserve 4114 stating that as Thursday, October 12, 1933, is a holiday in seven Pederal reserve bank cities, the Board's meekly press statements on the "ndition of Federal reserve banks and meekly reporting member banks in eentral reserve cities, as of October 11, will be issued Friday, October Approved. Telegram dated October 2, 1933, to Er. Newton, Federal Reserve Itexit at Atlanta, approved by four members of the Board, stating that the Board approves the application of Ferry G. Thompson, Special Agent l*cer the State Mararing Department of Louisiana, and John F. Finke, 297 10/5/33 -23- Liquidator, for the cancelation of 4,995 shares of stock of the Federal Reserve Bank of Atlanta outstanding in the name of the Canal Bank and Trust Company, New Orleans, Louisiana. Approved. Reply on September 30, 1933, prepared in accordance with the action taken by the Board at its meeting on September 28 and approved by four members of the Board, to a letter dated September 15 from 1:r. 1.1sh, Federal eserve Agent at Dallas, inclosing a statement of the Advisory Committee of the Federal Reserve Employees Savings and InvestMent Association, composed of Yr. Walsh, Governor McKinney and Jr. troud, Counsel for the Federal reserve bank, with respect to the poiand operations of such association. Ihe reply stated that the boarA , has given careful consideration to the comments contained in the ' 4Zent's letter and its inclosures, but does not see its may clear to recede from the position taken in its letter to the agent of August 25, 1933, that the association should confine its loan activities strictly to the members of the bank's staff. The reply stated also that the mat- ter was discussed informally with Mr. J. h. Frost when he WAS in hash- the early part of last week to attend the meeting of the Federal Ad1r;-.ory „ Council and it was pointed out to him that it might be well for counsel for the Federal reserve bank to consider whether or not 1144er the lam of '12exas such an association may engage in the business r ecelving deposits and of making loans generally without authority 'a-che State supervisory authorities and without supervision and exby them; that, since this question would involve the construction 10/5/33 -24- of State statutes, the Board would be glad to have the benefit of an ()Pinion of counsel for the Federal reserve bank in this connection; and that the board will offer no objection to the continued operation of the association if its loans are hereafter made only to officers and eMPloyees of the Federal reserve bank and its branches, with the underof course, that its operations are legal in every respect. Approved. Letter to the Federal reserve agents at all Federal reserve banks 8t tinc, that the Board has recently reviewed its procedure relating to the granting of permission to member banks in outlying districts of central reserve and reserve cities to carry reduced reserves, as authorized by section 19 of the Federal Reserve Act, and has decided not to require (as provided in its letter X-3977 of February 26, 1924) that it shall be a condition precedent to the filing of an application by a member l'ank for reduction in its reserve reouirements that the applicant shall have been a member of the Federal Reserve System and in operation a8 such for a period of at least one year prior to the date of such ap- Plieation; that, as a natter of general policy, the Board is disposed to , r rp„ 6'" permission to any member bank located in an outlyin7, district cf a central reserve or reserve city, as defined in Regulation D, to IllsrY reduced reserves, provided the character of its business is typical llkis located in and serving primarily outlying comunities in such 0f be ' cities; and that, in submitting the application of a member bank for perkiss; -Lon to carry reduced reserves, however, a full statement should be hod of the facts upon which the board or executive committee of 299 WV33 -25- the Federal reserve bank bases its recommendation, with particular r eference to the location of the bank and to the character of business c°nducted by it and by other banks located in the same general neighborhood. The letter stated also that, in the review of the situation as of the end of each year, in accordance with the Board's letter X-4739 Of December 4, 1926, it is reauested that, in addition to such other data and comments as the agent may deem it desirable to submit, there be furnished the following information for each bank in lieu of that sPecified in the letter referred to: 1. 2. 3. 4. 5. 6. 7. 3. The Net demand deposits* Time deposits* Bank deposits (items 2 and 3 of Schedule J, item 4 in Schedule K and item 2 in Schedule L, of call report)* Total deposits* Vault cash* Amount of debits to individual deposit accounts for the four-week period ending on the last lednesday in December for each bank that reports debit figures to the Federal reserve bank. :thether there has been any change, since the previous annual review, in the ;;eneral character of the bank's business. Distance of the bank from what is generally regarded as the downtown business and financial district of the city. As of the last call date in the year. 'otter stated further that it is also requested that in the annual lv consideration be given to the question whether there has been ""Uch ettl'r caange in the district in which any bank having permission to reduced reserves is located that it might no longer be regarded 141 411 °Iltlying district, and that appropriate comment thereon be in'U the agent's letter to the Board. Approved. 10/5/33 -26- Telegraphic reply on October 2, 1933, approved by four members of the Board, to a telegram dated September 27 from Mr. Case, Federal Reserve Agent at New York, referring to the Board's letter of September 21, 1933 (X-7598-a), with regard to the liability of banks on deferred certificates issued to depositors, and requesting permission to furnish "Pies of such letter in replying to inquiries involving similar circumstances. The reply stated that the Board has no objection to the agent f°11affing this procedure, provided that in each such case the name of the State, the State officer and the bank involved in the Board's letter be eliminated from any copy which is made of such letter. Approved. Telegram dated October 2, 1933, to hr. O'Hara, Manager of the 11.1fralo branch al the Federal Reserve Bank of New York, approved by t°Ur members of the Board, requesting that he advise Mr. U. U. SchneckenbUrger, EXecutive Vice President of the Marine Midland Group, Inc., Illuffalo, New York, as follows: "Referring your letter September 28 reextension of period within -which each member bnnir which is subof Marine Midland Corporation may file reports of its affiliates 48 Of June 30, 1933, Comptroller of Currency and Board extend time Ilithin which each such national bank and each such State member bank, r85Pective1y, may transmit such reports until October 10, 1933". Approved. Reply on October 2, 1933, approved by four members of the Board, to a letter dated July 11 from Mr. Paddock, Deputy Governor of the ?sclera). Reserve Bank of Boston, stating that a member bank proposes to 10/5/33 -27- sell to one of its customers, a :iassachusetts cooperative bank, certain Government bonds under a contract whereby the member bank would agree to repurchase the bonds at the price paid for them by its customer, and that, under the terms of the agreement, tho customer would receive, in 4ddition to a sum equal to the original purchase price, interest on such 111°IleYs at the rate of 1 1/2,; per annum for the period during which the customer retained title to the bonds; and requesting advice as to whether anY such arrangement mould come within the prohibition of section 19 of the Federal Reserve Act, as amended by section 11(b) of the Banking Act Of 1933, which forbids the payment of interest, directly or indirectly, (34 deposits payable on demand. The reply stated that the statement of facts contained in Lir. Paddock's letter is not sufficiently complete to enable the Board to advise definitely whether such a transaction would eorne within the prohibition of section 19 of the Federal Reserve Act, as 4141°13ded; that if the member bank should obligate itself to repurchase the bonds on demand, or within thirty days after notice from its customer, Or within thirty days from the date of consummation of the original purchase, it would appear that the transaction might amount to an indirect PaY) Ilent of interest on a deposit payable on demand or might be regarded a device to evade the prohibition against the payment of interest on deP°sits payable on demand and therefore unlawful; but that if such a tl ' arisaction represented a bona fide borrowing by a member bank, it would 11.0 t aPPear to come within the prohibitions contained in section 19 of the Fed_ 'rill Reserve Act; and that the burden would be upon the member bank to shaw to the satisfaction of the Board, to the examiners duly authorized 302 10/5/33 -20- to examine the bank, or to other duly constituted authorities, that the arrangement was a bona fide transaction and not an attempt or device to 87ade the prohibitions of the Act. Approved. Reply on September 30, 1933, approved by five members of the Board, to a letter dated September 22 from Er. Gilbert H. Perkins, Vice Pr esident of the Chemical Bank. and Trust Company, New York, New York, inquiring as to whether, under certain circumstances stated in Mr. Perkins' letter, a loan may be made upon the security of time certificates of dein view of the provisions of section IV of the Board's Regulation Q. The reply stated that it is assumed that the interest charged by the balkk on the loan in question will be at the same rate as that charged °n other loans of the some general class at the time the loan is made; that, with this understanding and on the basis of the peculiar facts of the case described by la-. Perkins, it is the view of the Board that a 1°8-4 made under the circumstances described would not constitute a violaOf the provisions of the Board's regulation; but that the Board's P°8ition in this case should not be considered a precedent with respect e‘ny other case in which the facts may not be in all respects substantiallY the same as those stated in Er. Perkins' letter. Approved. Letter to LT. Logan, Deputy Governor and General Counsel of the Ilederal Reserve Bank of New York, replying to a letter dated September 6, 1°33, from 1.2-. Herbert H. Kimball, Assistant Counsel for the bank, relatilIC to the right of the Irving Trust Company of New York City to pay 10/5/33 -29- interest on demand deposits consisting of funds held by it as custodian, receiver, and/or trustee in bankruptcy proceedings under appointment of the United States District Court for the Southern District of New York, and deposited with itself under a rule of the court; inclos111C a copy of an opinion of Mr. Alfred A. Cook, counsel for the Irving Trust Company in -which the view is expressed that interest may be paid (311 such deposits which were made prior to June 16, 1933, until the 1i°11eY5 shall have been duly expended or disbursed; and stating that it is underctood that Er. Logan agrees with this conclusion. The reply stated also that, under the rule of court quoted in the reply, it apPearS to be contemplated that the Irving Trust Company shall retain on dsP°sit moneys deposited with itself pursuant to such rule and pay interest thereon until the moneys have been duly expended or distributed bY the trust company as custodian, receiver, or trustee in the administration or settlement of the estate in whose account the funds are deP°sited; and that, after careful consideration of the matter and, in .7Ls170f the peculiar circumstances of the case, the Board's Counsel ads. O that he sees no reason to differ from the conclusion expressed by 14r. Cook in his opinion, with which Mr. Logan concurs, that interest may be Paid on deposits made by the Irving r.Lrust Company with itself prior t° june 16, 1933, pursuant to the rule of the court, until such deposits hav. , e ueen duly expended or distributed in the administration or settleme mit of the estate in whose account the funds are deposited. Approved. aeply on September 30, 1933, approved by five members of the 604 10/5/33 -30- Board, to letters addressed under dates of September 7 and 26 to the Comptroller of the Currency and the Board, respectively, by Li.. C. E. Te rwilliger, President of The Walikill National Bank, Wallkill, New York, stating that on June 1, 1933, the bank gave its depositors notice that interest at the rate of 3 0/0 mould be paid on savings accounts for the period commencing July 1, 1933, and ending December 31, 1933, 4114 inquiring whether, in view of the provisions of the Board's Regula- ti°11 Q. the bank may pay interest on such accounts accruing after October 31, 1933, at the rate stated in the notice given to its depositors. The reply referred to the provision of the Board's Regulation Q as to the rate of interest which may be paid on savings deposits with respect to Which a contract was entered into in good faith prior to June 16, 1933, and stated that it mould appear from the facts submitted that the 1141* is legally entitled to terminate or modify its contract with deP"itors at its option and without liability, and that it is the view Of the board that the bank may not lawfully pay interest on savings dePosits accruing after October 31, 1933, at a rate in excess of the 416°c141um prescribed in Regulation q, viz., 3% per annum compounded semi- 841,1331Et1 y• Approved. Reply to a letter dated October 2, 1933, from Mr. Charles E. lerVilliger, President of The Wallkill National Bank, Wallkill, New Y1414 stating that his attorney has advised that the bank has entered ilat° a contract with its depositors under which the bank is obligated to 1°81.Y interest at the rate of 3 0% on special interest department C. 05 10/5/33 -31- accounts for the period from July 1, 1933, to December 31, 1933. The reply stated that Mr. Terwilliger presents no additional facts with regard to the matter, however, and that the Board is uroble to add anything to the statement in its letter of September 30 on this subject, that "On the basis of the information at hand * * * it is the view of the Board that your bank may not lawfully pay interest on savings dePosits accruing after October 31, 1933, at a rate in excess of the /41axlzum prescribed in Regulation q, viz., 3 per cent per annum compounded eftli-annually". Approved. Reports of Standing Committee dated October 2, 3, and 4, 1933, recommending approval of the following changes in stock at Federal reserve banks: A lications for ORIGINAL Stock: ZELrict No 1. Grovetoit.Zional Bank, Groveton, N. H. First National Bank of Reading, Reading, Mass. First National Bank at Canonsburg, Pa. Vali Wert National Bank, Van Vert, Ohio Za1,2:12ILEal_EL Pirst National Bank of Chestertown, Ed. 'ezmers National Bank of Belton, Texas Shares 42 72 114 150 66 216 42 42 36 Total 36 408 licatione for ADDITIONAL Stocks °Iserville National Berk, Somerville, Ease. (Increase in capital, preferred, partly offset by decrease in surplus) 225 ;106 10/5/33 32- for ADDITIONAL Stock: (Continued) District No. 1. (Conti7lja77— 1"kltham National Bank, Waltham, Mass. (Increase in capital, preferred, partly Offset by decrease in surplus) Lerchants National Bprik, Manchester, N.H. (Increase in capital) Central National Bank, Rutland, Vt. (Increase in capital, preferred, partly offset by decrease in surplus) Windsor County National Bank of Windsor, Vt. (Increase in capital and surplus) District No. 4. Peoples City Bank, McKeesport, Pa. (Increase in surplus) District Ko. 10. Colorado National Bank, Denver, Colo. (Increase in capital, preferred, partly offset by decrease in surplus) A 1 ications for SURRENDER of Stock: uistrict ro. 3. °I.I.roe County ational Bank of East Stroudsburg, Pa. (Decrease in surplus) Di strict No. 4. irst National Bank, Mt. Vernon, Ohio ,, (Decrease in surplus) .21rst National Bank, Elmore, Ohio (Insolvent) ir!i; National Bank, Bruin, Pa. (tllsolvent) p Di strict No. 6. irst Rational Bank, Oberlin, La. (Insolvent) ri'County National Bank, Oliver Springs, Tenn. (Insolvent) tistrict No. 7. ra4d Rapids Savings Bank, Grand Rapids, Mich. p (Insolvent) irst National Bank, Coal City, Ill. (Decrease in surplus, partly offset bY increase in capital) 'Iltgo State Bank, Osmego, Ill. (lasolvent) Shares 30 30 21 36 342 6 300 /Xotal 39 300 648 39 6 38 21 65 15 21 36 1,200 30 21 1,251 307 10 /33 -33- lications for SURRENDER of Stock: (Continued) strict io. 8. Citizens National Bank, Monticello, Ky. ,,. (Insolvent) rirst National Bank, Ripley, Tenn. (Insolvent) District No. 11. Pirst National Bank, Gainesville, Texas. (Voluntary liquidation, succeeded by Gainesville National Bank) Shares 30 21 180 Total 51 180 1,622 Approved. Thereupon the meeting adjourned. Secretary. 4Provedt --2 )7 Chairman, 16,4,41./ ivo .ttee •
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