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1321 A meeting of the Board of Governors of the Federal Reserve SYstem *was held in Washington on Tuesday, September 5, 1944, at 11:00 PRESENT: Mr. Er. Mr. Mr. Eccles, Chairman hansom, Vice Chairman Draper Evans Er. Bethea, Assistant Secretary Er. Carpenter, Assistant Secretary Er. Clayton, Assistant to the Chairman The 4ter action stated viith respect to each of the matters herein- referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Peri,Lerea Re serve System held on September 4, 1944, .r .ere approved unani— ' 1°144. Menlorandum dated September 4, 1944, from Er. Bethea recommend— that u kargaret M. McGarvey be appointed as a file clerk in the 4eNtar,, l -4 8 tolith tlIrte.e ckti -s be Office on a temporary basis for a period of not to exceed 8, with basic salary at the rate of ;4,1,440 per annum, effecof the date upon which she enters upon the performance of her after having passed satisfactorily the usual physical examination, the ree:derstanding that if her services are satisfactory she Will encled for a permanent appointment. Cora Approved unanimously. Letter to the board of directors of the "Union County Trust aizabeth, New Jersey, stating that, subject to conditions 1322 9/5/44 °t Inembership numbered 1 to 6 contained in the Board's Regulation H, the /30ard approves the bank's application for membership in the Federal Reserve System and for the appropriate amount of stock in the Federal Reserve lasIlik of New York. The letter also contained the following special c°mment: "It appears that the bank possesses certain powers egl?h are not being exercised and which are not neces— b lY required in the conduct of a banking and trust i l-lness, such as the powers to act as surety and to thetee real estate titles. Attention is invited to hof act that if the bank desires to exercise any powers ,: a ctually exercised at the time of admission to mem— eti ' ;s 113, it will be necessary under condition of member— cf4.13 numbered 1 to obtain the permission of the Board th G°vernors before exercising them. In this connection, 'arcl understands that there has been no change in the 1/14 si scope 1 the corporate powers exercised by the bank nes the date of its application for membership." Approved unanimously, together with a letter to Ir. Sproul, President of the Federal Reserve Bank of New York, reading as follows: telt "The Board of Governors of the Federal Reserve Sys— CotnaPProves the application of the 'Union County Trust Ped:anY'' Elizabeth, Net Jersey, for membership in the ser:Tsal Reserve System, subject to the conditions pre— to f,"Jeel in the enclosed letter which you are requested IT0-°rward to the Board of Directors of the institution. re°Pies of such letter are also enclosed, one of which to f°r Your files and the other of which you are requested tor-ard to the Commissioner of Banking and Insurance Ile State of New Jersey, for his information. 0pers2nclosed is a letter approving the retention and of the branch at Cranford, New Jersey, which Ott;: requested to forward to the board of directors aPPlicant bank. Enclosed also is a copy of the -r for your files. 9/5/44 "It is assumed that you will follow the natter of the -ank's bringing into conformity with the provisions O ' a law and the Board's regulations the savings accounts time deposits, open account, listed on page 16(1) of the report of examination for membership." Unanimous approval was also given to the following additional letter to the board of directors of the Union County Trust Company: • "In connection with the application for membership tfLthe Federal Reserve System, the Board of Governors of D:ederal Reserve Systeniapproves the retention and op— J:tl°n by the Union County Trust Company, Elizabeth, New cr ' seY, after admission to membership, of the branch at hala15°rd, New Jersey, the establishment of such branch T,_lng been approved by the Commissioner of Banking and '11rance of the State of New Jersey on November 23, 1936." Letter to the "Brattleboro Trust Company", Brattleboro, Vermont, teat:tit g as follows: all "The Board is glad to learn that you have completed Fed a'rrangements for the admission of your bank to the herel'al Reserve System and takes pleasure in transmitting elv th a formal certificate of your membership. 'It Vill be appreciated if you will acknowledge re— of this certificate." Approved unanimously. Letter to Ir. Harris, Vice President, Detroit Branch of the Fed— Bankof Chicago, reading as follows: closi"This refers to your letter of August 21, 1944, en13e.rik a copy of a letter from The Manufacturers Naional riecti 1 Detroit inquiring whether escrow funds held in con— triist°11 with the servicing of FHA Title II mortgages are arldi.pfunds under section 11(k) of the Federal Reserve Act sc) , 1Nhether collateral is required to be pledged 1324 9/5/44 -4,"' security with the trust department if such funds are deposited in the bank's commercial department. "The answer to this inquiry depends upon .whether or not the funds involved are held by the bank in a fiduciary AetPacitY. It is recognized that as a matter of economy convenience, national banks sometimes handle in their just departments certain transactions which they could 'egaly handle in another department without having been anted authority to exercise trust powers under the pro°n8 of section 11(k) of the Federal Reserve Act, and ,.11 certain circumstances this may be true of escrov, 'e°11nts. Accordingly, it is possible that the funds under 8?dsration are not trust funds and therefore are not : LI II:red to be secured when they are deposited in the comfl,:clal department. However, it is the Board's view that rial7c1 .8 of any account handled in the trust department of a f,I'l°nal bank should be regarded as trust funds and therere should be secured if they are deposited in the bankth'g department awaiting investment or distribution unless the facts and circumstances indicating the character of th,:,Particular transaction and the intention of the parties ar' eto are such as to clearly establish that the funds riot held by the bank in a fiduciary capacity within the provii.le ning of the pertinent statutory and regulatory to ill ,sI°ns- In this connection your attention is called let.-e ruling published in the 1936 Federal Reserve Bul1114t Page 691 (F.R. L.S. #4132). the reference to the insurance of trust funds by the ;,ederal Deposit Insurance Corporation, please advise tit uank that the provisions of section 11(k) do not pertect exception to be made with respect to funds so pro- r g2 Approved unanimously. Thereupon the meeting adjourned. Assistant Secretary. 4PPr Chairman.
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