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1923 A meeting of the Executive Committee of the Board of Governors of the Federal Reserve System was held in Washington on Monday, Septem— ber 16, 1935, at 11:30 a. m. PRESENT: Mr. Thomas, Vice Chairman Mr. Hnmlin Mr. James Mt. Bethea, Assistant Secretary The Committee acted on the following matters: Memorandum dated September 14, 1935, from Mr. Vest, Assistant General Counsel, submitting the resignation of 4 Miss Margaret Wisner as secretary in the legal division, effective at the close of business 011 September 16, 1935, and recommending that the Board accept Miss Wisnsr t s resignation effective as of the close of business on that date. Accepted. Letter to Mr. Case, Federal Reserve Agent at the Federal Reserve Bank of New York, reading as follows: "Receipt is acknowledged of Mr. Dillistin's letter of Sep— !,ember 10, 1935, with regard to the establishment of two branches fl East Orange, New Jersey, by the 'Fidelity Union Trust Company', Newark, New Jersey. "As noted in Mr. Dillistin's letter, the approval of the stablishment and operation of these two branches by the Comp— troller of the Currency was given upon the recommendation of the Board, but, in view of the subsequent amendment to the applicable Pl‘civisions of law contained in the Banking Act of 1935 and in to avoid any question, the Board of Governors of the Federal Reserve System hereby approves the establishment and operation of , :Ileh branches in the circumstances and subject to the conditions described in the Board's letter to ,' you of July 31, 1935, relating 0 this matter. Please advise the bank accordingly." Z Approved unanimously. 1924 9/16/35 *NM Letter to Mr. Clark, Assistant Federal Reserge Agent at the Federal Reserve Bank of Atlanta, reading as follows: "This refers to your letter dated September 7, 1935 regarding Regulations Bulletin No. 5, as amended by Supplements A and Bp issued by the State Comptroller of Mississippi, limiting the rates of interest payable upon time and savings deposits by State banks in Mississippi. "In view of the provisions of section 24 of the Federal Reserve Act and of the above mentioned regulation of the State Comptroller, it is the opinion of the Board of Governors of the Federal Reserve System that the rates of interest accruing on and after July 1, 1955, and during the period in which such regulation is legally in effect, which a national bank or other member bank located in Mississippi may lawfully pay on time and eavings deposits are as follows: "(a) Not more than 2 per cent per annum on the portion of 4., tine aggregate amount of the time and savings deposits of any one depositor in the same bank which is not in excess of ',000; not more than 1-3/4 per cent per annum on the portion of such aggreate amount which is in excess of 0,000 and not in excess of 010,000; and not more than 14 per cent per annum on the portion of such aggregate amount which is in excess of 40,000. "(b) Notwithstanding the foregoing, the rate of interest accruing prior to Janimry 1, 1936 which may be paid upon Postal 1S_avings funds on deposit in such banks on July 1, 1935, shall ue not more than 2± per cent per annum. "It will be appreciated if you will communicate with the ,tate Comptroller and ascertain whether, in his opinion, the 4doard has correctly stated the interest rates established by Regulations Bulletin No. 5, as amended. If the State Comptroller should be of the opinion that the Board has not correctly interpreted such regulation, please communicate with the Board before 141kirIL, any further action. If, however, the State Comptroller le of the opinion that the Board has correctly interpreted such : I egulation, please give notice of the above mentioned rates of 3....nterest to all member banks in your district located in the "ate of Mississippi, calling attention to the applicable provii?ne of section 24 of the Federal Reserve Act and to subsection e)(3) of section III and subsection (c)(3) of section V of Reguj ti°n Q, as well as to the applicable provisions of the regula.n P of the State Comptroller. The Board of Governors will not ‘11?1,Ject to the payment of interest by a national bank located in 'Ilseissippi at a rate greater than the rates set Corth above in 4coordance with the terms of, and until the termination of, any contract existing on the date on which such bank receives notice l 1925 9/16/35 -3- "from you of the rates stated above, provided such rate is otherwise in conformity with the provisions of Regulation Q and the contract is terminated as soon as possible under the terms thereof, "It has been noted in section 5 of Regulations Bulletin No. 5, the statement is made that 'The within rulings ***** must be Observed by all state and national banks operating in Mississippi'. In communicati ng with the State Comptroller with regard to the question whether the Board has properly interpreted his regulation flxing the rates of interest, it is suggested that you advise him that, in the opinion of the Board, national banks operating in Mississippi are not subject to all of the regulations prescribed bY the State Comptroller but are merely limited as to the rates of interest which they may pay. Section 24 of the Federal Reserve Act provides that the rate of interest which a national bank may Pay on time deposits or on savings or other deposits shall not c:'eced the maximum rate authorized by law to be paid upon such dedosits by State banks or trust companies organized under the lats of the State wherein such national bank is located, but does not Provide that a national bank shall be subject to all of the reguJations of the State banking authorities regarding the making ano withdrawal of deposits and other similar matters. . "Please furnish to the Board two copies of any notification ich You may send to the member banks in Eississippi in conneculon with the reduction in interest rates." n Approved unanimously, together with a letter to Mr. Wood, Federal Reserve Agent at the Federal Reserve Bank of St. Louis, reading as follows: "This refers to your letter dated September 14, 3935 regardip, 6 Regulations Bulletin No. 5, as amended by supplements A and issued by the State Comptroller of Tvississippi, limiting the rates of interest payable upon time and savings deposits by State banks in Mississippi. "There is inclosed herewith a copy of a letter to the Assistant Federal Reserve Agent at Atlanta instructing him to give n°tice of the change in the rates of interest to all member banks in the 6th t district located in the State of Vississippi, after obailling the opinion of the State Comptroller that the Board has correctly interpreted Regulations Bulletin No. 5, as amended. , "It will be appreciated if you will communicate tith the 'ssistant Federal Reserve Agent at Atlanta asking him to advise you when he receives the opinion of the State Comptroller that the Board has correctly interpreted the regulation in question. Upon , "eiPt of such advice, please give notice of the rates of interest stated in the Board's letter to the Assistant Federal Reserve 1926 9/16/35 "Agent at Atlanta in accordance with the instructions contained in the letter to such Assistant Federal Reserve Agent. "Please arrange with the Assistant Federal Reserve Agent at . 11tlanta for his notice to member banks in the 6th district located in Mississippi and your notice to member banks in the 8th district located in Mississippi to be sent at approximately the same time. Alsc please furnish to the Board two copies of any notification Which you may send to such member banks in connection with the reduction in interest rates." Letter to Yr. Harold H. Umholtz, Cashier, The Gratz National Bank, Gratl,, Pennsylvania, reading as follows: "This refers to your letter of September 5, 1935, in which You ask whether you are correct in interpreting section VI of the Board's Regulation Q to permit your bank, upon properly recorded tion of its board of directors, to allow withdrawal of a sped amount, such as 450, from each savings deposit, without requiring 30 days' written notice of intended withdrawal. "The Board has ruled, as indicated at page 768 of the December, 1933, Federal Reserve Bulletin, of which a copy is in"sod, that the word 'portion' as used in section VI of Regulatlon is to be interpreted as including a specified amount and that a member bank may pay any specified amount of the savings deposits of any depositor without requiring notice of intended withdramal; provided that, upon request and without requiring such notice, it shall pay the same specified amount of the savfl,gs deposits of every other depositor which are subject to the Same requirement, and provided also that the provisions of paraPlaPhs (b) and (c) relating to changes in the practice of a member bank with respect to the withdrawal of savings deposits, as tell as the other provisicns of this section, are observed. Therefore, it is the view of the Board that by complying with these provisions your bank may pay a specified sum, such as (.50, from savings deposits without requiring 30 days' written notice Of intended withdrawal." r Approved unanimously. Letter to Mr. Clark, Assistant Federal Reserve Agent at the Pede , "al Reserve Bank of Atlanta, reading as follows: "This refers to your letter dated September 5, 1935 regardthe deduction from gross demand deposits of cash items in Pls"ess of collection in computing reserves. Inclosed with your 1927 9/16/35 -5- "letter was a copy of a letter to you dated August O, 1935 from The First National Bank of Lake Charles, Lake Charles, Louisiana, and a copy of a reply dated September 4, 1935 to such letter from Mr* t. S. McLarin, Jr., Assistant Deputy Governor of the Federal Reserve Bank of Atlanta. "The First National Bank of Lake Charles stated that until such time as it should broaden its records to include a complete day to day statement of uncollected cash items, as it stated it would eventually have to do because of deposit insurance, the tank would prefer not to avail itself of the deduction from gross demand deposits of cash items in process of collection, inasmuch as its legal reserves are considerably in excess of requirements. The bank also stated that it understood that since the mimeographed formula of the Federal Reserve Bank of Atlanta stated that member 13 /11zs 'may' deduct cash items in process of collection, it is optional with the member bank as to whether it will avail itself of such deduction. "Assistant Deputy Governor Y.cLarin advised the bank that it vais his opinion that the Board of Governors of the Federal Reserve System expects that all member banks' reserves will be computed upon the same basis as otherwise there would be no accurate method of computing member bank excess reserves as of any given time. "Although the Board is of the opinion that it is desirable for member banks to deduct cash items in process of collection in computing reserves in order that accurate statistics may be obtaired, nevertheless, the Board feels that the making of such deduction is optional with the member banks in view of the persive nature of the tenth paragraph of section 19 of the Federal serve Act, as amended by the Banking Act of 1935, which provides at member banks 'may' deduct cash items in process of collection. , "It is conceivable, of course, that the Board, in order to °DtEin accurate statistics, may find it desirable to give consid! ration to the question whether it shoulc require member banks ,!.43 furnish information relating to cash items in process of colJ;?ction or to the aggregate of balances due from banks and cash I stems in process of collection, even though the banks may not .ee fit to deduct either balances due from banks or cash items 1/1 process of collection, or both, from their gross demand dePosits in computing reserves. It seems possible that the statement of The First Naticnal Bank of Lake Charles that it does not wish to deduct cash items .11 Process of collecticn until it shall broaden its records to ! elude a complete day to day statement of uncollected cash items 2r deposit insurance purposes is based upon a mistaken belief ,,nat such items must be segregated from amounts due from other planks or that a separate record must be kept of such items. r 1928 9/16/35 -6-- "Although section 12B(h) of the Federal Reserve Act, as amended by the Banking Act of 1935, which permits the deduction of uncollected items in determining the assessment on insured banks, provides that 'each insured bank shall, as a condition to the right to deduct any specific uncollected item in deterIdning its assessment base, maintain such records as will readily permit verification of the correctness of the particular deduction claimed', the require ment of such section is not applicable to the deduction of cash items in process of collection in computing reserves under secticn 19 of the Federal Reserve Act. "As indicated in item No. 2 of the Federal Reserve Bank of AtlantE mimeographed formula dated August 28, 1935, balances due from other banks and cash items in process of collect ion need not be segrega ted in computing reserves and, for that reason, it is not clear why any member bank should experience difficulty in arriving at the amount of such deducti on. In this connection the subject bank, in common with other member banks, has been reporting in Schedule I of the quarterly call report balances due from banks (includ ing items in process of collection with such banks). "It will be appreciated if you will advise The First National Bank of Lake Charles of the Board's views in this matter, and advise the Board what action is taken by such bank." Approved unanimously. Telegram to Mr. Stevens, Federal Reserve Agent at the Federal Reserve Bank of Chicago, reading as follows: , . "Referring your September 12 telegram, in the event of a aeficiency in reserves of any member bank on one or more days from August 24 to August 31, 1935, inclusive, net demand defor purpose of assessment of penalties may in your discretion be taken on the basis of law prior to enactment of Banking Act of 1935." Approved unanimously. Letter to Mr. O'Connor, Comptroller of the Currency, reading 42 follows. "Under date of September 12 you were advised of the Board's .11)Provel of the application of The Hanover National Bank of "lakeE-Barre, Pennsyl vania, for stock of the Federal Reserve 1929 9/16/35 -7- "Bank of Philadelphia, effective if and when your office authorizes the bank to open for business. "The formal application for Federal Reserve bank stock Which has just been received was made by the Hanover Bank and Trust Company , Wilkes-Barre, Pennsylvania, which is to be converted into The Hanover National Bank of Wilkes-Barre. The Board of Governors of the Federal Reserve System therefore revokes its approval granted on September 12, 1935, of the application of The Hanover Vational Bank of Wilkes-Barre, and approves the application of the Hanover Bank and Trust Company for original Federal Reserve bank stock to be issued in the name of The Hanover Nationa Bank l of Wilkes-Barre, effective if and when your office authorizes the latter bank to open for business. "As you were advised on September 12, the Board is informed that the required payment has been made on the subscription to Federal Reserve bank stock." Approved unanimously. Telegram to Mr. Worthington, Deputy Governor of the Federal Reserve Bank of Kansas City, reading as follows: "Your wire September 12. From informal conversations with representatives of Farm Credit Administraticn it is understood that redemption of bonds of joint stock land banks in certain Other Federal Reserve districts has been handled under a pro?edure recently worked out in which a commerc ial bank is utilized as paying While agent. Board definit has no e advice as to details of this procedure, it is suggested that Iowa Joint :ock Land Bank of Sioux City communicate with Farm Credit Ad"Loalstration to ascertain definitely procedur followe e d in such Other similar cases. If participaticn in such procedure by Federal Reserve bank appears to be lawful it is suggested that consideration be given to possibility of its use in instant case. If it is found that such procedure cannot be utilized , n Instant case or is unsatisfactory to Federal Reserve bank lurther consideration can then be given if desired to request Contained in i your telegram September 12 upon receipt of full fi f°rmation as to functions proposed to be performed by Feder: I- Reserve bank and reasons why such procedure is necessary or desirabl e in this case." Approved unanimously. Telegram to the Federal reserve agents at all Federal reserve 1930 9/16/35 -8- banks, reading as follows: "Inquiry has been made concerning the procedure to be followed by banks desiring a determination by the Board, pursuant to section 301 of the Banking Act of 1935, as to whether their respective holcing company affiliates are engaged, directly or indirectly, as a business in holding the stock of, or managing or controlling, banks, banking associations, savings banks, or trust companies. . "If the holding company affiliate has an application for a voting permit pending before the Board, the determination will be made in connection with such application. Such eases are now being considered by the Board and action will be expedited as much as possible. If a determination by the Board is desired case in which an application has not been filed, the hO1164 company affiliate should file a written request for such determination. Any such request must be accompanied by detailed information concerning all matters having a bearing on the question. The request should be filed with the Federal Reserve Agent for the district in which the principal office of the holding company affilia te is located. If a general voting Permit has been granted, a similar request should be filed and acc°mPanied by current information supplementing that furnished in connection with the application for such permit. Requests forwarded to the Board should be accompanied with an expression f your views and the opinion of counsel for your bank in each Case I? Approved unanimously. Letter to Messrs. Hughes, Schuman & Dwight, Attorneys & Courl, Qellors at Law, New York, New York, reading as follows: "Consideration has been given to the request for a ruling contained in your letter of July 30, 1935, regarding the applicability of section 32 of the Banking Act of 1933 with respect o Bond and Mortgage Guarantee Corporation in the event that that corporation should engage in the sale of mortgages. You state that the corporation is now in a position to 'engage in the sale of whole mortgages to institutional and individual 3nvestorsl, that the business contemplated 'will not include the sale or issuance of any parts or shares of mortgages or of 8°-ca11ed mortgage certificates', but that the busines contems Ated by the corporation will include 'common the only type of direct loan on real estate'. Specifically, you request a ruling Z T 1931 9/16/35 -9- "as to %hether 'the sale of a whole mortgage to a single investor is the sale of a "security" of the kind referred to in section 32.1 "The Board has reached the conclusion that, although there are obligations secured by real estate mortgages which are of the kind referred to in section 320 mortgage notes arising out Of the ordinary type of direct loans on real estate are not securities' within the meaning of that term as used in that section. Under the circumstances, the Board does not believe that the sale of mortgages of the kind referred to in the statements quoted above from your letter would be the sale of 'securities ' of the kind referred to in section 32. "It is believed that this answer disposes of the questions raised in your letter. However, if you desire any further informatien, it is suggested that it may be more convenient for you to communicate with the Federal Reserve Agent at the Federal Reserve Bank of New York." Approved unanimously. Letter to the Federal reserve agents at all Federal reserve 4Lnks, reading as follows: "As you know, section 8 of the Clayton Antitrust Act as amended by section 329 of the Banking Act of 1935 contains the following provision: 'until February 1, 1939, nothing in this section shall prohibit any director, officer, or employee of any member bank of the Federal Reserve System, or any branch thereof, who is lawfully serving at the same time as a private banker or as a director, officer, or emPloyee of any other bank, banking association, savings bank, or trust company, or any branch thereof, on the date of enactment of the Banking Act of 1935, from continuing such service.' "The Board's attention has been called to a case where on August 23, 19350 the date of the enactment of the Banking Act 1935, a person was serving, under a permit issued by the ,rd, °a two banks coming within the provisions of the Clayton ?t and also was serving a third bank which at that time came Aithin the prohibitions of the Clayton Act. At the time of the granting of the permit, the service of the third bank was not prohibited by the Clayton Act and the service of such bank ' las not covered by the permit issued by the Board. After careful consideration of these circumstances it was the view °f the Board that the person was 'lawfully serving' the two °anks covered by the Board's permit in the capacities named r 1932 9/16/35 -10- "in that permit on the date of the enactment of the Banking Act of 1935, and, therefore, under the provision of the Clayton Act, as amended by the Banking Act of 1935 quoted above, could continue such service until February 1, 1939. The Board's decision this matter is called to your attention for your information ln the event that cases involving similar circumstances come to your attention. It will be understood, of course, that in any ease where the service of a bank which is not covered by the permit issued by the Board is prohibited under the Clayton Act, as amended by the Banking Act of 1935, the service of such bank must be terminated." Approved unanimously. Thereupon the meeting adjourned. Assistant Secretary. APPl'oved: Vice Chairman.
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