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Upon call of the Governor a special meeting of the Federal Reserve

Board was held in the office of the Federal Reserve Board on Friday, June

26, 1925 at 11:00 a.m.

PRESENT: Governor Crissinger

Mr. ?lett

Mr. Hamlin

Mr. MillerMr. JanesMr. Noell, Assistant Speretary

The minutes of the meeting of the Federal Reserve Board held on

June 25th were read and approved.

Letter dated June 25th from the Secretary of the Open Market

Investnpnt Committee transmitting copy of the' minutes of the meeting of

the Committee held in New York on June 24th.

Ordered circulated.

The Governor then presented the matter ordered circulated at the

meeting on June 23rd, namely, memorandum from Counsel dated June 19th

on the subject of the eligibility of an officer of an insurance company

for election as Class "5" Director of the Federal Reserve Bank; Counsel

expressing the opinion that a person whose sole occupation is that of of-

ficer of an insurance company is not eligible for election as a Class "B"

Director of a Federal Reserve bank; because (1) he is not actively engaged

in "commerce, agriculture or same other industrial pursuit" within the

meaning of that language as used in the Federal Reserve Act, and (2) it is

contrary to the policy of Congress for a person so closely identified with

the financial interests to be permitted to serve as a Class "B" Director

Of a Federal Reserve bank.

After discussion, upon motion by Mr. Hamlin,

it was voted to adopt the opinion expressed in

Counsel's memorandum and ordered that a letter

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of advice of this action be transmitted to all

Federal deserve banks.

Letter dated June 24th from the Federal deserve Agent at Boston

suggesting that the salary of his Assistant Federal Reserve Agent be

charged to general overhead rather than allocated to the several depart-

ments under the supervision of the Federal Reserve Agent.

deferred to the Committee on Salaries,

Expenditures and Efficiency.

The Governor then presented for consideratiim the application of

.the Lincoln Bank and Trust Company of Louisville, Kentucky, for permis-

sion to broaden its functions by conducting the business of guaranteeing

the principal and interest of real estate mortgage loans which it sells to

the public and issuing its om obligations secured by real estate mortgage

loans; together with the following draft of a letter to the bank prepared

by the Committee on Examinations:

"The Federal deserve Board does not look with favor upon

the intermingling of too many distinctive kinds of banking in

one institution. It has generally been regarded as rather

dangerous for a banking institution which accepts deposits to

sell debentures or to place its guaranty upon mortgages or other

securities. In case the guaranty had to be made good by failure

of the guaranteed security, the funds for payment would either

come directly from the money of depositors or would weaken their

security.In an institution where such business is carried on by

a distinct department with careful segregation this criticism

would perhps not alaoly, but the Board does not understand that

the laws of Kentucky provide for such segregation of assets.

Despite the fact that the Board does not look with favor

upon the mingling of deposit banking and debenture sell.ing or

guaranty of mortgages in one institution, in view of the fact

that your competitors are doing this business and in view of

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"the fact that your records show that you have had

no losses in your dealings in the class of mortgages

which you nropose to take, the Board will not object

to your proposal provided you will inform us in some

detail how you proms° to handle this business, what

limitations you propose to place upon it, and how the

liabilities, whether contingent or direct, will be

shown in your statements."

After discussion, Mr. Hamlin moved that

the Board approve the application of the Lincoln

Bank' and ?rust Company and the letter submitteu

by the CoEznittee, reserving the rir,ht to revoke

the permission granted in the event that an ex-

amination at any time should indicate that the

condition of the bank is being adversely af-

fected by the business in question.

11r. Hamlin's motion being -out by the

chair was carried, Mr. Miller voting "no".

At this point, 1:,r. McIntosh entered the meeting.

The Governor then presented the special order business for this

morning's meeting, namely, the application of the Mercantile Trust Company

of San Francisco for permission to purchase the Bank of Burlingame and to

operate branches in its premises, valich was disapproved by the Board on

October 28, 1924 and which the Board on June 3, 1925 voted to reconsider

and the application of the bank to purchase the Bank of Palo Alto and to

establish a branch in its premises which has not been forwarded to the

Board by the Federal ileserve Agent at San Francisco because of disapproval

of the Burlingame application.

:Ir. Platt submitted the following memorandum

and moved adoption of the resolution contained therein:

"In vieu of the fact that the Mercantile Trust

Company filed its blanket applications for additional

branches in December 1923, before the Board's resolutions

h

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"of January 7th, and in view of the fact that

Mr. Drum has shown at a hearing before Messrs.

Crissinger and Miller, members of the Board's

Executive Committee, on May 6th, last, arid by

his letter of May 18th, that included in the

afplications of December 1923 were banks at

Palo Alto and Burlingame which he had already

made commitments to take over, and in view of

the fact that when notified of the Board's

resolution of January 7th he proceeded as rapid-

ly as possible to complete his arrangements for

consolidation with these banks expecting to be

able to file specific final applications before

August 1, 1924, while the territory in which

they are located was declared by the Board to

be contiguous to San Francisco, and in view of

the fact that he did complete the consolidations

and filed the applications only a few weeks later.

Resolved: That the Board finds that the

applications of the Mercantile Trust Company for

branches at Burlingame and at Palo Alto are in sub-

stantial conformity with its resolutions of November

7th and Jamary 7th and therefore approves the ap-

plication for the consolidation with the Bank of

Burlingame and the conversion of this bank and its

branch into branches of the Mercantile Trust Company,

and will arnrove the application for Palo Alto when

submitted."

After discussion, Mr. Platt's motion was

put by the chair and lost on a tie, the members

voting as follows:

Mr. Platt, "aye"

Mr. Hamlin, "aye"

Mr. Miller, "aye"

Governor Crissinger, "no"

Mr. James, "no"

Mr. McIntosh, "no"

REPO-2S OT SmArDING CO1'.2.1ITTE73:

'Dated, June 25th, ecommending approval of

Price for permission to

director and officer of

as director of the King

Seattle, Washington.Approved.

the application of Mr. Andrew

serve at the same time as

the Marine National Bank, and

County State Bank, both of

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imm s OF STANDING COMMITTEES: (Cont'd)

Dated, Jung 25th, Recommending approval of the application of Kr. A.Brygger for permission, to serve at the same timeas director and officer of the Marine National Bankand as director of the King County State Bank, bothof Seattle, WashinTton.

Approved.

APproved:

?he meet inn: adjourned at 12:30o cloc::.

ird Assistant Secretary.

.11Govorn

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