The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
1416 Minutes of actions taken by the Board of Governors of the 1 Re serve System on Wednesday, September 1, 1948. ?RESENT: Mr. Draper, Chairman pro tem. Mr. Clayton Mr. Carpenter, Secretary Mr. Sherman, Assistant Secretary Mr. Morrill, Special Adviser Memorandum dated August 31, 1948, from Mr. Carpenter recomtha.t the resignation of Miss E. Katharine Meiser, Secret4)41 1, p 1( . -eJlImond be accepted to be effective, in accordance 4, 1141 , l''Nllest, at the close of business September 10, 1948, 6,444 helderstandg that a lump sum payment would be made for leltIre remaining to her credit as of that date. Approved unanimously. tto th t4 Meinc)randlua dated August 31, 1948, from Mr. Bethea, Direct ti'd-sion of Administrative Services, recommending that iOlation of Mrs. Ruth M. Williams, a stenographer in that 'be accePted to be effective, in accordance with her reof business August 27, 1948, with the under- tt, ettit she would reimburse the Board for overdrawn annual lekvea "itt Approved unanimously. 4 bilz -alldUm dated August 31, 1948, from Mr. Bethea, Director eic/n of Administrative Services, recommending that the 'Atiort Of Luis F. Banos, a clerk in that Division, be accepted 417 -214 be eff ective at 12:15 1948, with the understand1)-1" August that 312 e. 114:13P sum payment would be made for annual leave remainto -k4 h J-8 credit as of that date. Approved unanimously. Letter to Mr. Wayne, Vice President of the Federal Reserve t Ric , izeond, reading as follows: Lig "This refers to your letter of June 14, 1948, statIlirgt i114 ,4 Staunton Industrial Loan Corporation, Staunton, ' Wishes to apply for membership in the Federal ill "Ye SYstem if it is eligible, and requesting a rule by th this -e Board with respect to the eligibility of in ns titution. 404 Staunton Industrial Loan Corporation is a corporaVirgi,anized under the general laws of the State of NeC'te relating to industrial loan associations. As loe"t t is authorized to conduct a general instalment b. Billiib,118Laees and to sell certificates of investment or Froz ir obligations on a full or partial payment system. PeEtra h,e information submitted with your letter, it apee 4."'hat the institution has approximately $31 500,000 rel::i 4 fioates of investment outstanding; that all but , 1-"'velY small amount of the certificates are partIletit 7, Y111ent certificates in passbook form; that the PlIblicI4Ln customarily accepts funds from the general 4t)tty-d."`" 811Y amount; that, while the right to require 'ok 8:Yet notice is reserved, withdrawals from passeirlee ts are permitted at any time; and that, „'"e institution has approximately 2,100 investzta r,'ertificate accounts, payments and withdrawals by lokt:etomers are reasonably frequent. The institution's thirdati!tal approxiMP tely $3,450,000, with about two"Vid-duellag t real estate loans and the remainder being -14 4 8.b°ut equally between personal instalment loans z lieleallaneous business loans. °.ther tile industrial loan associations, like various .f.l es of financial institutions, are subject to e&ixt -315 te -4-cn and supe • sion in Virginia by the same imt41,1 -uthities as banks, the statutes of that State ;„ra'a orrked distinction between banks and industrial "•1 it.„—eooiations and the laws governing the two types i 11+4 ''"31}3 are quite different. Under its charter 1418 V/ 1 48 _3_ eftkl o d the aPplicable State laws, Staunton Industrial Loan eril'Poration is not authorized to receive deposits or to :P in the banking business and it is forbidden to use title or otherwise in its business any other words ,Itting that it is engaged in the banking business. ttq bankSection 9 of the Federal Reserve Act provides that loci,„ organized under the general laws of any State, ``ting Morris Plan banks and other incorporated bank• torg itstitutions engaged in similar business, may apply tag 1114ership in the Federal Reserve System. In exercisplica.%68 discretion to approve or disapprove such an apract„vi°11, the Board is required to consider, among other nether or not the corporate powers exercised by ?ecle;PP ,1Ying bank are consistent with the purposes of the 4Reserve Act. insSince Staunton Industrial Loan Corporation is not erettin-,,ed bank, it is necessary to give special considReee to the provisions of section 12B of the Federal illati+e Act. The law clearly contemplates that no State era, utiv,u shall be admitted to membership in the Fedthe ni 84el_-7e System unless it is a State bank within 411 of section 12B and, therefore, will become tiler -' 11ed bank upon its admission to membership. Fur:1?,°11 admitting an uninsured State bank to member0 d is required by section 12B to certify the 1148 zederal Deposit Insurance Corporation that it 4Pp4.5.4°48dered, among other factors, whether or not the pur, g, bankt s corporate powers are consistent with ttp, ses of that section. 'ttal inm -I-4n provides for the insurance of Idepos: 14. 10114, t investments' or 'certificates of investment'. ' a4 4/14 78 that for the purposes of that section, the shall mean 'any bank, banking associhicll --te -st company, or other banking institution 4-441 Whira,ben a ed in the business of receivin incorporated under the laws of any State 7 i 144cee The term 'deposit' is defined as 'the unpaid the „°f nioney or its equivalent received by a bank n'sUal course of business and for which it has : getki-I rl'is obligated to give credit to a commercial, ttletlen savings, time or thrift account, or which is rthor bY its certificate of deposit, * * * to' 1%N with such other obligations of a bank as the ot te`vorEtti 'Sectors 5f the Federal Deposit Insurance elklecti °Ili shall find and shall prescribe by its h (34 to be deposit liabilities by general us*I • The regulations of the Federal Deposit 1 2 1419 9/1/48 -4jr;urance Corporation do not include 'certificates of be ::tztlentt in the list of other obligations which shall Itici;`garded as 'deposits'. It is also pertinent that, poeir t section 12B and the regulations of the Federal Deple ; *L4surance Corporation, an insured bank must dis' c'ffice Signs stating that its 'deposits' are insured. its It wouad appear that, in view of the manner in which Loan781nese actually is conducted, Staunton Industrial recei-°rPoration might be considered to be engaged in illg deposits, and to be a bank, for some purposes (see L.s L.0.'"Illton Industrial Loan Corporation v. Commissioner et. bt y-"er eirenue, .120 F. (2d) 930, holding that it was eN'er /4ithin the meaning of a Federal tax statute.) Howthorttthe fact remains that the institution has no autrieor 3, to receive deposits as such; and it is not 1Etv Pcrated and doing business as a bank under State 18 not permitted to represent that it is engaged IlhathLbanking business. It is questionable, at least, 1t would be consistent with State law for the : to ths:'' ,10/1 to become an insured bank and to represent that i+Public through office signs and advertisements t deposits" are insured. The Virginia statutes kerid-+::-une authorized industrial loan associations to PoSit '"eir charters to become banks of discount and desleet °I' trust companies, but this institution did not 13titlItt i ° take such action. As it now operates, the intihe aPpears to. exercise, in substance, some of the t.tvileges of a bank, without subjecting itself to ellb tles, limitations, and restrictions imposed upon sepabl.' State law. Moreover, while its business now I•t8 4.°8 that of a savings bank, the institution under iktie!1'6Bent corporate powers could operate in such a ba,„ -Is that l •t clearly would not be engaged in deposit ' ' 4411iitc7 the circumstances, there is such doubt whether Irldustrial Loan Corporation is the type of in„:4thel,., for which deposit insurance was intended and wers are consistent with the puro-e be81.7: section Federal Reserve Act, that it coroorate 12Bofothe p 011eidneved that the Board should not give favorable 4 c0/.11 -cla to an application by Staunton Industrial vetet.44-°1'ation for membership in the Federal Reserve Approved unanimously. litter to Mr. Denmark, Vice President of the Federal Reserve ” Atlanta reading as follows: 1420 9/v48 —5— 1.94, "Reference is made to your letter, received August 18) ;71 ) 1 submitting the request of the Deposit Guaranty Bank st 4 F°111Pany, Jackson, Mississippi, for approval of the estab1 Ilecti'Bmient of a branch in Clinton, Mississippi, in con118.11C°11 with the proposed absorption through merger of the ° tit Clinton, Clinton, Mississippi. tlors 11 view of your recommendation, the Board of Goveriii the establishment and operation of a branch ) at Con, Mississippi, by the Deposit Guaranty Bank & Iltth th PanY, Jackson, Mississippi, provided its merger Posed e Bank of Clinton is effected substantially as pro(par It is noted that 250 shares of new common stock ,,:tie $100 per share) will be issued on a 3 for 1 basi; . 7111 4)0 of which (value $60,000) will go to the sharestoeCe °f the Bank of Clinton in exchange for its common ‘ the remaining 50 shares will be sold for cash all ncl 415 on htts ) ei 7 1 )0 Since the common stock of the Bank of Clinton vuok value of substantially less than the exchange, t vooka '"PP1 ' 0Priate adjustment should be made on the bank s la when the plan is consummated. The Board!s approval give . bz 11„ with the distinct understanding that there will A 4,0 trA (roz ti 4"e-up in book values of assets to be acquired that :2 e. 8-11k of Clinton, and with the understanding also L'irase1.}.7"881 for the Reserve Bank will review and satisfy ' ite as to the legality of the steps taken to effect rger and establish the branch." Approved unanimously. 41,1 "`ani to Mr. Volberg„ Vice President of the Federal ReOf 88-11 Francisco, reading as follows: 1°ard is prepared to grant Wendell National Bank, if,‘41(1ein11 Idaho, the restricted fiduciary authority ap,_'`ta ca,"“ , ) 12 upon receipt of advice that bank has increased qtroci,,'"al stock to $50,000 under a plan involving the s PitaTetion of at least $25,000 in new money into its jw, structure and upon receipt of a formal applica' the-;:47 executed, together with a favorable opinion reserve bank's counsel." ot Approved unanimously. 'letter 4. 0 Mr. McLarin, President of the Federal Reserve Bank ' tas a ezo '4411g as follows: -6— eio "This refers to your letter of August 11, 1948, en— Augtelin s,g a copy of a letter received by- you under date of 9) 1948, from Mr. Keehn W. Berry, President, th."rleY National Bank, New Orleans, Louisiana, regarding earn' aPPlicability of the Board's Regulation Q to the ab— bY member banks of the costs of shipping currency the c) the private wire system recently inaugurated by kers Trust Company of New York. eith riThe Board has not ruled upon the question whether °f the practices mentioned by Mr. Berry involves ,Payeten4 v of interest in violation of the law. As you ber it has been the Board's general policy for a nun— to Itt) hr,Years not to attempt to pass upon questions as posits constitutes a payment of interest on demand de-. except after 0&e'" the law and under Regulation Q the'84cleration of all the facts and circumstances of attar tr ,ticular case as developed in the course of ex— on the member bank involved. Experience methodas of °Ilstrated lt4 that this is the most practical qso g with questions of this kind and it is believed that t,s 1, 1,1 policy is in the interests of the member to ins lt7ertiselves. While both of the practices referred the 13-11r. Berry's letter have come to the attention of csarci and while it is possible that such practices eer+,4 or corli'ln circumstances may lead to undesirable methods desi abilit, Petition between banks, the question of the r— c1,,ltesti !°I the practices is entirely distinct from the 1,,, c11 of their legality; and, as above indicated, the their ;'.48 not had occasion to pass upon the question of oLegality under Regulation Q. ?Lcier Berry's letter refers to the fact that the ,11,11111411-i,:eserve Banks themselves absorb costs of currency e ),:, In this connection, it might be pointed out t r tes ederal Reserve Banks are agencies created by oeefOr public purposes and that the providing of f-: Of encyshipments for their member banks is simply the .tb.e Services performed by the Reserve Banks in ;thie li t,..14i° interest. One of the principal effects of ' service is to provide member banks not located k4?eciee benera , 1 Reserve Bank cities with the same facilities I5 of the Federal Reserve System in this re— LPect, €t e enjoyed by member banks which happen to in such cities. ih'04 ." 18 suggested that a reply to Mr. Berry's letter the lines indicated above might serve to explain g tion h, of the Board with respect to the questions ohP°8i Presents. 1422 -7seen ft!or your own information, if you have not already by tht'am, there are enclosed copies of letters addressed ,ciere Board to Mr. Chester C. Davis, President of the al Reserve Bank of St. Louis, under dates of January 364C1 a F e tZuary ,ezber 12, 1947, regarding the absorption by s of the costs of shipments of currency." Approved unanimously. Telegrams to Mr. George A. Cohan, Used Car Statistical Bureau, .1 95 Nis sachusetts Avenue, Boston, Massachusetts; Mr. C. A. 1315 04 Ge.--m'ral Manager, National Used Car Market Report, Inc., O. Nesth Michigan Avenue, Chicago 5, Illinois; Mr. W. 4ctir. 'aok Auto Appraisal, 194 Grove Avenue, Detroit, Michigan; Le811 Nlier e Kelly, President, Kelley Blue Book, 1221 South bItt "treet) Los Angeles, California, reading as follows: , „ 4 Zglaation WI as issued effective September 20, /rith%.:41 Part 4 of the Supplement includes a provision ;ZPect to automobile appraisal guides. cle "le Board is considering the designation of ob4Elfc'r , this purpose. In this connection it desires to titit "in the information set forth below, to bring up the material already in the Board's files. r;„:„The dates on which issues are planned during '41e e;744der of 1948 and the first half of 1949, and ill'e°d8 for which each issue is to be effective. complete description of the method by :'°1-ir _ organization arrives at the 'retail' *(44ttions tott The model years to be covered by the issues hilt-stributed in 1948. .4"411i; . nuld be appreciated if this information were 0 Board as soon as possible." Approved unanimously, together with similar telegrams to Mr. T. R. Leonard, N orthwest Publishing Company, 90 UniveritY Street, Seattle 1, Washington, and r. S. F. D. Meffley, Special Representative, Recording and Statistical Corporation, 222 West Adams Street, Chicago 6, Illinois.
@FedFRASER