19331115_Minutes.pdf

A meeting of the Federal Reserve Board was held in Washington

malVednesday, rovamber 15, 1933, at 10:30 a. m.

The

PRESENT: Yx. Black, GovernorMr. HamlinMr. JamesMr. Thomas

Szymczak

Mr. LIorrill, SecretaryMr. Carpenter, Assistant SecretaryEr. Bethea, Assistant SecretaryEr. Martin, Assistant to the Governorla-. Wyatt, General Counsel

Paulger, Chief of the Division ofl'xaminaUons

la-. Leonard, Federal Reserve ExaminerViingfield, Assistant Counsel

minutes af the meetings of the Federal Reserve Board held

°II October 31 and November 1, 1933, were approved.

The loard then considered and acted upon the following matters:

Telegram dated November 15, 1933, from Mr. Austin, Chairman ofthe Federal Reserve Bank of Philadelphia, stating that the board of di-l'ectorn

- of the bank, at its meeting today, voted to establish a redis-Count

r4te of 2 1/2„, effective the first business day following that onWhich

a-Pproved by the -..ederal Reserve Board.

The rate of 2 1/2 , fixed by the directorsof the Philadelphia bank, was approved effectiveilovamber 16, 1933, it being understood that thenew rate applied to rediscounts of eligible paperfor member banks and advances to member banksunder the provisions of sections13 and 1301) ofthe Federal Resorve Act, as amended.

Letter dated November 10, 1933, from ;Ir. Clark, Secretary of theileral

Reserve .D'ank of Atlanta, advising of the establishment at thebEtrlk, as of October 21, 1933, of the following schedule of effective11111-1.1',-,' rates on bankers' acceptances:

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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1 to 90 days91 to 120 days121 to 180 days

1/2%3/47;1,;

Without objection, noted with approval.

Telegrams dated November 13, from Mr. Peyton, Chairman of the

edoral Reserve Bank of Minneapolis, and i:ovember 15, 1933 from 12r.

V41)°(1, Chairman of the Federal Reserve Bank of St. Louis, both advising

that, at meetings of the boards of directors on the dates stated, no

IlanCes were made in the banks' existing schedules of rates of discount

and purchase.

Without objection, noted with approval.

Reply on November 14, 1933, approved by five members of the

130ard, +'0 a letter dated November 9 from Er. Case, Chairman of the Fed-

Reserve Bank of New York; the reply reading as follows:

."Receipt is acknowledged of your letter of :dovember 9, 1933, in

rl° 11 you state that it has been your view that the Federal Reserves approval on February 16, 1933, of a minimum buying rate of1, for the purchase of bankers' acceptances by the Federal

Reserve Lank of New York was still in force, since it was nevercha.,nged, and that the only changes made since that time had been ins.11(3 minimum buying rates fixed by your directors at or above which;-'11 rently effective buying rates are fixed by the officers of youroank.

, "In his letter of March 2, 1933, Sproul advised that therard of directors of your bank had established, effective fron the ,Pening of business on larch 3, 1933, a minimum buying rate of 2 1/2

,

for the purchase of bankers' acceptances and in my reply of March 10You Were advised that that rate had been approved by the Federal Re-serve Loard. The Board's action was taken with the understanding

at the approval of the new minimum authorized buying rate super-t!,.• (Id its approval of the rate previously in effect. The actionInr?n by the Board on Larch 21, 1933, in approving for your bank aa 111211um authorized buying rate of 1 1/2 and on April 10, 1933, ins2r"ing a minimum authorized buying rate of was taken with the.7Le understanding, so that at the time the rate of 1/2 of

,

VIES;ZIablished by your directors on October 19, 1933, the minimumlc/ horized buying rate in effect with the approval of the Board was/' rather than a rate of 0 of 1i.; as stated by you.


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"It is noted from your letter that hereafter when a change ismade in the minimum authorized buying rate fixed by your directorsfor purchases of bankers' acceptances, the new rate will be sub-flitted to the Federal Reserve Board for approval, and it is under-stood that such rate will not become effective until you have re-celved advice of approval thereof by the Board, and that the newrate, when approved, will supersede the rate previously in effect,regardless of whether it is higher or lower than the previous rate."

Approved.

Lemorandum dated November 3, 1933, from Lr. Paulger, Chief of

the Division of Examinations, recommending the appointment of :iss Julia

13°14°11 Hopkins as a clerk in the division, with salary at the rate of01,50n- per annum, effective as of the date upon which she enters uponthe Performance of her duties; the recommendation having been approvedbYsi x Members of the hoard on November 13, 1933.

Approved.

Liamorandum dated November 13, 1933, from Lir. Paulger, Chief ofthe Di. vi si on of

?- aminations, requesting the appointment of La.. Robert

84 Elleritt as a stenographer in the division, with salary at the rate ofnsv2° Per annum, effective as of the date upon which he enters upon the

Perfofloe of his duties.

Approved.

Lemorandum dated November 10, 1933, from 1.1r. Lorrill recozuntendingthe

PP ittment of La-. Scott Douglas Kellogg as a file clerk in theLoar,ta

gerleral files, with salary at the rate of 1.,500 per annum, ef-f.'oetive as

of the date upon which he enters upon the performance of his(Ittbien; the

recommendation having been approved by five members of thej31)41'cl 04 Lovember 14, 1933.

Approved.


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Memorandum dated November 13, 1933, from iIr. 1yatt, General

Counsel, recommending the appointment of Liss Kathleen B. Pendleton as

a stenographer in his office, with salary at the rate of 1,800 per

82112141, effective as of the date upon which she enters upon the perform-

of her duties; the recommendation having been approved by five mem-

bers or the Board on November 14, 1933.

Approved.

Memorandum dated November 13, 1933, from Mr. Goldenweiser, Di-

✓oot__or of the Division of Research and Statistics, recommending the

'4141°111tment of Lr. Lewis N. Dembitz as junior research assistant in thedivis.

lon. with sa1ary at the rate of :,;1,800 per annum, effective December

; the recommendation having been approved by five members of the

on November 14, 1933.

Approved.

Telegraphic reply on November 14, 1933, approved by five membersthe

Beard, to a telegram dated Lovember 8 from 1C,r. Peyton, Federal

Re"rve kent at Linneapolis, with regard to the appointment of Mr.

4411°1d LioConnell as an examiner in the Federal reserve agent's depart-

' of the Federal Reserve Bank of Linneapolis, with salary at the rate

Or "s2°° Per annum, and his temporary assignment to the Board's DivisionOf

L:r44111-1.1Ettiona, and to a telegram dated November 9 from Mr. Peyton stat-

that Mr. McConnell is indebted to the National Citizens Bank, Mankato,

laklesota, in the amount of 01.4°°' which is being paid off at the rate

a month. The reply read as follows:

"Your wire November 9 Board approves appointment Harold G. McCon--ell as ex 'nor in the Federal Reserve Agent's department of your


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"bank at the salary rate of )4,200 per annum with understanding hewill continue systematic reduction indebtedness with lankato bankStop Kindly advise date he will report in 7iashington."

Approved.

Telegraphic reply on November 13, 1933, approved by six members

ct the :3oard, to a letter dated October 31 from Kr. :IcClure, Federal Re-

"rye Agent at Kansas City; the reply reading as follows:

"Your letter October 31 Board approves temporary appointment ofEllis U. Vencill and C. W. Fielder as assistant examiners in theFederal Reserve Agent's department of your bank with salary at therate of ,";1,896 and C2,496 per annum respectively effective upon as-sunPtion of duties with the understanding that Mr. Fielder willsever his connection mith the Fitzpatrick Mortgage Company if and!hen his appointment is made permanent Stop Please forward further

formation concerning Fitzpatrick Mortgage Company including names°f any other institutions with which it may be affiliated Stop12?ard assumes that Mortgage Company will pay no salary to la..Ylelder during any period of his service as examiner on your staff8t010 Please advise dates on which appointments become effective."

Approved.

Telegram dated November 14, 1933, to Mr. 'Walsh, Federal Reserve

Age/lt at Dallas, approved by five members of the Board, stating that itis 8 .

stIsfactory to the Board for him to arrange a vacation as suggested

his letter of November 10, 1933.

Approved.


13°41'4, to a letter dated November 8 from 1.1r. Johns, Acting Governor of

th° Federal Reserve Lank. of Atlanta; the reply reading as follows:

ileceipt is acknowledged of your letter of November 8, 1933, in-Closing copies of letters from Mr. Jas. A. Goethe, Assistant Manager

Your Savannah Agency, and Li'. L. W. Starr, Assistant Cashier ofYour Nashville branch, and stating that Er. Goethe, who has an in-

,erest in a produce store, and Kr. Starr, who is interested in astore in Conelson, Tennessee, have decided to disposo of these

Jalterests as soon as it is possible to do so without incurring a


12/1

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"material loss. It is noted from your letter of July 18 that Mr.Starr Gives nono of his time to the operation of the drug store,and that the time given by 1,:r. Goethe to the produce store islimited, and your letter of July 24, 1933, expressed the opinionthat the activity does not interfere in any way with Yr. Goethe'sduties at the Savannah Agency.

"In cases where there is no official connection with the outsidebusiness interest, and where the affiliation is represented by afinancial investment and any service rendered in connection withsuch interest is of a character which will not interfere in any wayWith the officer's or employee's service to the Federal reservebank or result in any financial or other relationships which mightbe embarrassing to the Federal reserve bank, the Board has not takenthe position that such affiliation should be discontinued.

"It does not appear from the information contained in your let-ters that, from the standpoint of the best interests of your bank,and from the standpoint of the policy referred to in the Board's. etter of April 29, 1933, there is anything in the affiliations ofLE2ssrs. Goethe and Starr which would require that they be discon-tlnued, and unless your directors have taken the position that theysh?uld be terminated, the Board will interpose no objection to theirbelng

retained."

Approved.

Letter dated I:ovember 13, 1933, to the board of directors of "The

--'' of ':15.11Cox", iIillcox,Arizona, approved by five members of the

13ollrd' stating that, subject to the conditions prescribed in the letter,

the 1)°8-rd approves the bank's application for membership in the Federal

4e"r7e ystem and for the number of shares of stock of the Federal Re-

"r7e Bank of Dallas to which the bank will be entitled upon the basis ofitn C.

—43.4tal and surplus as of the date upon which its membership becomes

"ective.

Approved.

Letters dated November 13, 1933, approved by six members of the

13°E'Isd, to the boards of directors of the following named State banks,e4ch

letter

lott°rs the

stating that, subject to the conditions prescribed in the

Board approves the bank's application for membership in the


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Federal Reserve System and for the number of shares of Federal reserve

bablik stock to which the bank will be entitled upon the basis of its cap-

and surplus as of the date upon mhich its membership becomes effec-

tivel

Applicant Bank

"The Citizens Bank of Locke, N. Y.",Locke, New York.

"Peoples State Savings Bank of Kewanee",Kewanee, Illinois.

Federal Reserve Bank

New York

Chicago

Approved.

Letters dated November 14, 1933, approved by five members of the

1 to the boards of directors of the following named State bankinL;

_t t. each letter statins that, subject to the conditions pre-

aerib A .in the letter, the Board approves the institution's application

fOr nlembership in the Federal Reserve System and for the number of shares

Of pederal reserve bank stock to which the institution will be entitled

4°4 the basis of its capital and surplus as of the date upon which its

14°Ilthership becomes effective:

Applicant Bank Federal Reserve Bank

"Ilyannis Trust Company", Hyannis,liassachusetts. Boston

"Idechanics and Merchants Bank", Richmond,Virginia. Richmond

Savinss Bank", W Iowa. illiams, Chicago

Approved.

Letter dated November 13, 1933, to Jr. Wood, Federal Reserve

kerri-at St. Louis, approved by six members of the Board, stating that

the Loard has approved the application of the "Sedalia Bank and Trust

c('InPfacTko,, Sedalia, Missouri, for permission to exercise the fiduciary


126

Approved.

Letter dated November 14, 1933, to L:r. O'Connor, Comptroller of

ClIrren°Y, approved by five members of the Board, replying to his140kor—

1̀1clum of November 8 recommending approval of a reduction in the

4 caPital stock of "The Fort -Worth National Bank", Fort Worth,

:8"3, from 2,500,000 to 1,500,000. The reply stated that the Board

11/15/33 -8-

13°Ivers authorized under its charter and the laws of the State of Ylissouri,

Provided that prior to the exercise of any of these powers the board of

directors of such bank shall adopt an appropriate resolution accepting

the three condidons set forth in the letter and shall transmit to the

c)ard, through the agent, a copy of such resolution.

Approved.

Letter dated November 14, 1933, to the "First National Bank of

kterville",ilaterville, Maine, approved by five members of the Board,

r°8-dinc as follows:

"Reference is made to your application for permission to exercise

flduciary powers under the provisions of Section 11(k) of the FederalReserve Act.

"The Federal Reserve board has considered the application andauthorizes your bank to act, Ilion not in contravention of State orlocal law, as trustee, executor, administrator, registrar of stocksand bonds, guardian of estates, assignee, receiver, committee oftatee of lunatics, or in any other fiduciary capacity in which

State banks, trust companies or other corporations which COMO intoconpetition with national banks are permitted to act under the laws

r the Otate of Maine, only in the specific trusts in which the

b"Ple e-Ticonic National Bank of Waterville, Vlaterville, Maine had

aPpointed and was acting on the date the First National Bank ofwaterville was authorized by the Comptroller of the Currency to com-Inence business, the exercise of all such rights to be subject to thePrevlsions of the Federal Reserve Act and the regulations of the Fed-eral Reserve Board. Action has been deferred upon your application

J1 full fiduciary powers until your institution has been in opera-at leact one year and a report of examination made subsequent

the expiration of that period has been received."

the

C01111110


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1141:34i

ticx4under the plan submitted, subject to the conditions set forth in the

reply.

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4Preves the proposed reduction under the plan submitted, subject

the conditions set forth in the reply.

Approved.

Letter dated November 14, 1933, to Lr. O'Connor, Comptroller of

the Currency, approved by five members of the Board, replying to his

inelli°randvan of November 1 recommending approval of a reduction of

'25,000 in the common capital stock of "The First National Bank of Hynest;

liY1100, California. The reply stated that the Board approves the proposed

l'eduction under the plan submitted, subject to the conditions set forth

14 the reply.

to

Approved.

Letter dated November 14, 1933, to Ir. O'Connor, Comptroller ofthe c

enurrcy, approved by five members of the Board, replying to hisfier„or' andum of October 10 recommending approval of a reduction of .,;40,000

"e common capital of "The First National Bari, of Okanogan", Okanogan,

lagton. The reply stated that the Board approves the proposed reduc-

Approved.

Letter dated November 11, 1933, to "The Savannah Corporation",1110-11, Georgia, approved by five members of the Board, reading as

fellovt:

"193 l 1e Board has considered your application dated September 14,for a voting permit under authority of Section 5144 of the

jvleed Statutes, as amended, entitling you to vote the stock ofc" Savannah Bank and Trust Company, Savannah, Georgia, which youft°11trol, and approves Your application as filed. The voting permit'Plated for is here inclosed."

Approved.


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Letter dated 1:ovember 13, 1933, to the "First Security Corpora-

Of Ogden", Ogden, Utah, approved by five members of the Board, read-

as follows:

"The Board has considered your application dated September 25,

1933, for a voting permit under authority of Section 5144 of the

Revised Statutes, as amended, entitling you to vote the stock whichYou control of certain member banks therein specified. It is under-stood that you now wish the Board to treat the application at thistine as an application for a voting permit limited to the sole pur-Pose of entitling you to vote the stock which you control in First.eourity Bank of Boise, Boise, Idaho, First Security Bank of Foca-

Pocatello, Idaho, and Anderson Brothers Lank, Idaho Falls,Idaho, in connection with a plan involving the merger of these banksand the establishment in Idaho of 15 branches of the bank resultingfrom such merger. The details of the plan of reorganization pre-sented to the Board are more fully set out in Exhibit K of your ap-Plioation.

"The Board approves your application for a voting permit limitedT0 the sole purpose above specified, subject to the following con-diti ons:

"1. Prior to the issuance of the limited voting permit, theComptroller of the Currency shall approve the establishment andoperation of the 15 proposed branches at the places and in themanner indicated in Exhibit K of your application.

2. Prior to the issuance of the limited voting permit, FirstSecurity Ban, Hailey, Idaho, shall either deliver to the FederalReserve Agent at San Francisco three original counterparts ofEbalibit L properly executed and of Exhibit N properly consentedto by it or there shall be presented to the Agent evidence satis-factory to him that such bank is neither a subsidiary of yourCorporation nor affiliated with your Corporation or with any sub-sidiary of your Corporation within the meaning of the Board'sRegulation P."3. Prior to the issuance of the limited voting permit you

shall execute and deliver to the Federal Reserve Agent at Sanrrancisco, three counterparts of an agreement in the form hereto9:ttached marked Exhibit A."The Board has referred to the Comptroller of the Currency the

( estion of the establishment and operation of branches mentioned in1/41) above.

ttr,ihe agreement referred to in (3) above should be executed on

_r_oUr beha

%71 lf by George S. Eccles, Vice President, and the corporate

att ested by G. I. Canfield, Assistant Secretary, the officersn led in the resolution of authorization constituting Exhibit C ofYotT application prl 1.4. copy of this letter has been forwarded to the Agent at Sane_ kneisce with instructions to advise the Board when the foregoingurlditions numbered (2) and (3) have been complied with in a manner


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"satisfactory to him. The hoard authorizes the issue of the limitedvoting permit requested upon receipt of such advice and of noticefrom the Comptroller that he approves the establishment and operationOf the branches mentioned in (1) above, and upon the issue of suchpermit you will be advised accordingly."

Approved, together with a letter dated rovember13, 1933, to the Federal Reserve Agent at San Fran-cisco, also approved by five members of the Board,requesting that he advise the Board by telegram assoon as conditions numbered (2) and (3) in the letterto the First Security Corporation have been compliedwith to his satisfaction and to forward to the Boardtwo original counterparts of each document filedwith him.

Letter dated November 13, 1933, to Lr. O'Connor, Comptroller of

th6 Currency, approved by five members of the Board, reading as follows:

"There is transmitted herewith for your consideration an appli-"'tien of the First Security Corporation, Ogden, Utah, filed onbehalf of the proposed First Security Bank of Idaho, Boise, Idaho,for permission to establish fifteen branches in the State of Idaho."t- he First Security Corporation, Ogden, Utah, owns and controls

the banking institutions, sixteen of which are located in

'he State of Idaho, nine in the State of Ltah, and two in the Stateof 'iiyoming. It is proposed to consolidate the sixteen banks located-L.n the State of Idaho into a branch banking unit with the main of-fice in Boise, Idaho, and branches in the other fifteen cities nowserved by the affiliated Idaho banks. Of the sixteen Idaho banks,Three are members of the Federal Reserve System and the proposed plan

1)!*evide8 for merging these three affiliated State member banks,..;.lret Security Bank, Boise, Idaho, First Security Bank, Pocatello,-Ldaho, and Anderson Brothers Bank, Idaho Falls, Idaho, under theCharter of Anderson Brothers Bank, Idaho Falls, retaining member-ship in the Federal Reserve System, changing the name to First Se-curity Bank of Idaho, moving the main office to Boise, Idaho, andc

Fc)arlIrsreting into branches the member banks at Pocatello and Idaho

"Simultaneously with the consolidation of the three merber banksie proposed to absorb the thirteen affiliated nonmember banks by

.'ne purchase of acceptable assets and the assumption of liabilities'1.1 to establish branches at their respective locations in Idaho,Lf113a-tftZt,arc as follows: L'ampa, Payette, aamett, Lountain home, Ashton,

Halley, Shoshone, Gooding, Jerome, Rupert, Montpelier,and Preston.t, "The plan under consideration also provides for the rocapitalisa-i%%1: proposed branch banking unit, First Security Bank of

e, Idaho, through an increase in its common capital toG,000; the sale of ,750,000 of preferred stock to the Reconstruc-

4-an inance Corporation; the establishment cf a surplus account of


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%250,000, and adequate reserves against securities depreciationand doubtful assets.

"A credit investigation of each affiliated bank has been madeby an examiner for the Federal -.Ieserve Bank of San Francisco inconjunction mith the examiners of the Reconstruction Finance Corpor-ation, and the attached files contain copies of the examiners' re-Ports on each of the affiliated banks, together with a consolidatedreport shoving the various steps in the proposed transaction, theeliminations to be made, and a pro forma statement after charge-Offs and recapitalization of the proposed main office.

"The Federal Reserve Agent and Executive Committee of the FederalReserve Bank of Sun Francisco have recommended the conversion ofthe affiliated banks into a branch banking unit subject to the con-ditions that the capital adjustment include V150,000 preferred stocksubscription by the Reconstruction Finance Corporation, that all108ces, other real estate, claims and judgments anC depreciationon lower grade securities be eliminated and that a specific reserveof not less than 3150,000 be set up to provide for losses that mayaccrue in assets classified as doubtful.

Ihe Board is of the opinion that the establishment and opera-On of the fifteen proposed branches, at the places and in the

'Danner indicated, is in accordance with the provisions of the Fed-eral Reserve Act governing the establishment of branches by a Stateinclmber bank, provided your approval thereof be given. It is under-!tood that the merger of banks and the establishment of branches re-erred to, have been approved by the State banking authorities and

Reconstruction Finance Corporation. In view of such approvalt,!Id the apparently satisfactory condition which will exist in the-1rst Security Bank of Idaho and its proposed branches if the plan

unthder consideration is consummated, the competent management of

holding company and the affiliated banks, and the favorableroemariendation of the Federal Reserve Agent and Executive Committee

17 the Federal Reserve Lank of San Francisco, the Federal Reservec ard is of the opinion that the application of the First Securitycorporation, Ogden, Utah, filed on behalf of the proposed First Se-5.11r?.tY Bank of Idaho, for permission to establish fifteen branches11 the State of Idaho, should be approved, subject to the followingconditions:

_."1. Prior to merger the First Security Bank, Boise, Idaho,iiirst Security Bank, Pocatello, Idaho, and Anderson Brothers Bank,Idaho Falls, Idaho, shall, if they have not already done so,.?harCe off or othervise eliminate losses in loans of $126,048.87,t°8ses in overdrafts of $116.76; claims and judgments of0,864.36; other real estate of 71,715.94, and depreciation in8?curities other than those in the four highest grades as classi-fied by a recognized investment service organization regularlyen-Caged in the business of rating and grading securities, aggro-C4tinG 364,568.30, all as shown in the reports of credit investi-ption made by an e::e.r.iiner for the Dederal Reserve Bank of Sanlirancisco as of dates between July 25, 1933 and August 25, 1933.


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2. The bank resulting from such merger shall have capitalstock of not less than 1,250,000 and surplus of .y250,000, andshall establish reserves of not less than 300,000 for depreci-

ation and any losses mhich might accrue in assets classified asdoubtful."3. Prior to absorption by the First Security Bank of Idaho

by the proposed purchase of acceptable assets and assumption of

liabilities, the thirteen non-member banks shall, if they havenot already done so, charge off or otherwise eliminate lossesin loans of 014,498.26; claims and judgments of 04,535.44, otherreal estate of 39,993.46 and depreciation in securities otherthan those in the four highest grades as classified by a recog-nized investment service organization regularly engaged in thebusiness of rating or grading securities, aggregating 0261,915.63,all as shown in the reports of credit investigation made by anexaminer for the Federal Reserve bank of San Francisco as ofgates between July 25, 1933, and August 25, 1933.In view of the emergency nature of the application, it will be

aPpreciated if you will advise the Board at your earliest conveni-ence mhether ar not you approve of the establishment and operation°f the branches referred to.

Approved.


Iklard to a letter dated October 12 from Lir. wood, Federal Reserve

Ae'e:lat at St. Louis; the reply reading as follows:

"Receipt is acknowledged of your letter of October 12, 1933, inliPich you request to be advised mhether a proposed new bank to bet°rThed for the purpose of taking over the assets of another banking!listitution may lawfully acquire, in connection with such transac-;'10n, notes of executive officers of the latter institution. It

understood that application for membership has been made in be-of_ the proposed new bank by the organizers thereof, and youdesire to know whether the acquisition by the new bank of the notes

!f: the executive officers of the old bank, who will also be execu-Are officers of the new institution, will be in violation of Sec-

l'101122 (6) of the Federal Reserve Act, as amended. It does notpear whether the new bank is to acquire such notes before or afterIt becomes a member of the System and subject to the provisions of

'413:1:7 to 'which reference has been made.fi "In view of the fact that Section 22 (g) provides a penalty of

orthne imprisonment for violations and that the determination oftie question whether persons should be prosecuted for such viola-ju(Te is a matter within the jurisdiction of the Department of

the Poderal Reserve Board, as stated in its letter of'4Y 11, 1933 (X-7493a), does not feel that it would be appropriate


Approved.

Telegraphic reply on 'november 14, 1933, approved by five mert

11/15/33 -14-

"for it to undertake to express opinions upon questions of thiskind. For your information, however, there is inclosed herewitha copy of an opinion of the Attorney General of the United Statesrendered under date of August 18, 1933, and your attention is di-rected to page 2 of said opinion, wherein the Attorney Generaldiscusses the legality of a proposed acquisition by a new nationalbank of notes evidencing indebtedness of its executive officers toclosed banks whose assets were to be taken over by the new bank.ihe Board cannot undertake to express an opinion as to whethersuch ruling of the Attorney General constitutes a precedent forthe situation to mhich you have reference, but feels that this isa natter mhich should be determined by the new bank or its attorneys."

Approved.

Telegram dated november 13, 1933, to idr. Curtiss, Federal Re-

Agent at Boston, approved by six members of the Board, reading

az follows t

Ilyie are in receipt of the following telegram from Winchester

:l ust Company, 'Vie request extension of fifteen days time for fil-lng reports of affiliates and holding company affiliates unable toCet signatures on time.' If satisfied that this extension is neces-sarY you are authorized under our letter of September 26 (B-923)to grant same."

Approved.

Reply on 'november 13, 1933, approved by six members of the Board,to a ,

letter dated november 6 from Er. Dillistin, Assistant Federal Re-

'bent at Hew York; the reply reading as follows:

b "In conpliance withthe reconwiendation in your letter of Kovem-6' 1933, the Loard extends to December 9 the time within which

.11e. Central Hanover Bank and Trust Company of New York City may"le the report of its affiliate domiciled abroad."

berz of

the Board, to a letter dated November 6 from Lir. Case, Federal

ACent at .now York; the reply reading as follows:

"tour letter hovember 6. You are authorized to grant Amalgamated1311k of Raw York extension of time to obtain and file agreement of


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"holding company affiliate Amalgamated Clothing Workers of Americaon F. R. B. Form P-5, to and including November 20, 1933, providedsuch extension is, in your opinion, warranted."

Approved.

Telegraphic reply on lovember 14, 1933, approved by five members

of the Board, to a letter dated November 3 from hr. Sargent, Assistant

Federal Reserve Agent at San Francisco; the reply reading as follows:

"Your letter November 3. As Zion's savings Bank and Trust Com-Pally has submitted and published its condition report as of June

on form 221 showing information which would have been containedln form 220 had its report been submitted on that form Board willnot in the circumstances require the resubmission or republicationof. revised report of the Zion's Savings Bank and Trust Company af-filiate of the Utah Trust and Savings Company."

Approved.

Letter dated November 13, 1933, to jr.L O'Connor, Comptroller ofthe Currency

approved by six members of the Board, reading as follows:

"The Federal Reserve Board desires to expedite in every way pos-sale its action upon matters which require its consideration,_prticularly in connection with cases which involve the recapitaliza-"ticT and reorganization of state and national banks.4. In this connection there is attached a copy of a letter which;I?e Board has transmitted to the Chairman of the ReconstructionInane° Corporation for the purpose of obtaining the cooperationof the corporation with the view of avoiding the recurrence of Some°J. the difficulties which have been encountered heretofore by reason

Etnnouncements that have been made of plans or commitments or13fr?°sed meetings of shareholders before the Board vas informedvu'LLY as to the exact details of the matters upon which its actioni ll:1:4n°ceesarY. As pointed out in the letter to LIr. Jones, in some

been it has appeared that the institutions concerned have not

4en advised of the necessity of the Board's approval or had assumed

been such approval VMS a more matter of form, and the Board hasb' importuned to p;rant applications immediately without independent

h dY ar investigation, upon the ground that final considerationti already been given to them by the Reconstruction Finance Corpora-on, the Comptroller of the Currency and others, and that the con-

of any further time or any possibility of adverse action"le board would result in serious inconvenience or embarrassment.

v, „You know, in some of these cases the Board has found that it mustIts approval, or condition its approval upon the observance

certain requirements, or at least, in connection with its approval,


13411/15/33 -16-

Point out certain unsatisfactory conditions."In an effort to avoid to some extent the recurrence of such

difficulties, steps have been initiated by members of your staffand of the staff of the Federal Reserve Board which, if carriedout, will result in the Comptroller's office and the division ofexaminations of the Federal Reserve Board being informed promptlyof recomi.lendations of the division of examinations of the Recon-struction Finance Corporation before action thereon or announce-ment of any commitment with respect thereto by the corporation ine°nnection with applications of national banks for subscriptionsto preferred stock under plans involving reductions in existingcapital stock. It is understood that the details of this arrange-meritt, are now being worked out.. If comparable arrangements could be made with respect to all ofthe.classes of cases referred to in the letter to Lir. Jones, it is12?lleved that considerable progress could be made in the elimina-QAT a difficulties of the nature which have occurred heretofore.

Therefore, it will be appreciated if you will designate somem?mber of your staff to confer with Li-. Paulger, chief of the divi-

sf;hoe fr theecinations of the Federal Reserve Board, to develop

details of measures of cooperation between your organi-!at?-0n and that of the Federal Reserve Board so that the Board's7t1,,n upon matters in which you are concerned as Comptroller ofti,lo currency may be facilitated."

Approved.

Telegraphic reply on November 14, 1933, approved by five members

°f tho 130ard, to a telegram dated October 20 from Governor Mc:inney ofthe m

deral Reserve Bank of Dallas, stating that the bank has receivedl'rora the

--,14inr code committee of the American Bankers Association a

e°4 Of the Banker's Code of Fair Competition reported to have been ap-

P1'°17°d effective October 16, 1933; that advice will be appreciated as

t°17118ther the applicable provisions of such code include the Federal

r"erve 14Inks and, if so, whether it is necessary for the Federal Re-

tl./11c of Dallas to execute any agreement other than the blanket

'°Inent executed on August 1, 1933; that there are several provisions

3anker's Code that are more satisfactory from the standpoint of

th0 ?"era1 reserve bank than the provisions of the blanket agreement;


135

11/15/33 -17-

and that the bank would like to observe them if it is in order for it

to do so. The reply read as follows:

"Your wire October 20. Board understands from informal conver-sations that all banks subject to Banker's Code of Fair Competi-tion are expected to conform thereto in lieu of reemployment agree-ment previously executed by such banks and that it is not necessaryfor then to execute any documents in this connection. Definitionof term 'bank' in Code includes all national banks, state banks,savings banks (except mutual savings banks) trust companies andprivate bankers accepting deposits, in the United States proper,and accordingly, Code mould not seem by its terms to apply to Fed-eral Reserve Banks. However, it would seem desirable that your

B!'nk consider advisability of conforming to the provisions of Codew4ich are of a nature applicable to Federal Reserve Banks andBoard has no objection to Federal Reserve Banks conforming to suchprovisions."

Approved.

Reply on november 14, 1933, approved by five members of the

Zoar,Ato a letter dated I:ovember 9 from la'. Curtiss, Federal Reserve

4tent at Boston; the reply readinc, as follow:

"Receipt is acknowledged of your letter of november 9, 1933,feCarding the applicability of the Clayton Antitrust Act as amended,-co directors of your bank and its branches, and it is noted that./,011 will forward to the Board information in this connection re-6arIng all such directors.

Lou inclose a copy of a letter from Mr. Allen Hollis, who is aje_ass C director of your bank, from which it appears that none ofre corporations of which he is an officer or director make loans'0.e red by stock or bond collateral, with the exception of the'a -co Fire Insurance Company, and that the treasurer of that corn-

who is its principal executive officer, has assured Mr. Hol--Ls:that the company will make no such loans in the future.

Accordinz;ly, pursuant to the principle stated in the Board'sletter of October 27, 1933 (X-760), Section 3A of the Clayton Act11 not be applicable to Ar. Hollis' service to that corporation."

Approved.

Letter dated november 14, 1933, to Mr. Austin, Federal Reserve'1/4ent rs,at Philadelphia, approved by five members of the Board, reading

" rOlicpar,


136

11/15/33-18-

"Several applications under the provisions of the Clayton

Antitrust Let had been forwarded to the Federal Reserve Board byYour office and were pending at the time when the Board adoptedits revised Regulation L and accompanying forms. Considerationof some of these applications had been delayed by the necessityof obtaining further information, and mhen the Banking Act of1933 was enacted, consideration of all pending applications was

PoGtponed pending the determination of a number of questionsarising under section SA of the Clayton Act and pending the issu-ance of revised regulations and forms.. "In view of the fact that section SA applies to certain rela-

tionships to which section 8 did not apply, and in view of thefact that the revised forms call for additional information whichls nou necessary and mhich was not called for by the Board's forms

heretofore in use, and, further, in view of the fact that, becauseof the length of time during -which some of those applications have

ITen pending, the circumstances surrounding them may have changedel-F-laer as a result of a change in the banking situation in the corn-Tunity or by a change in the banking connections of the applicant,it is thought desirable that the applicants be requested in all

Za?es.to file new applications on the revised forms, thus not onlyAF1.11G1ns the information down to date but supplying the Board with-cae additional information required because of the enactment ofsection 8A.:/Certain of these applications have been the subject of consid-

?ramie correspondence and study, but for the reasons above statedis felt that it mould be preferable to have new applications inplace of the pending applications.tior your information the Board's files indicate that the fol-

1°IlinS applications, received from your office, are now pending:

Atterbury Director Philadelphia National Bank ofPhiladelphia, Pennsylvania

Director Guaranty Trust Company of NewYork, New York

Director Continental Illinois National Dankand Trust Company of Chicago,

liarold

Illinois

Schutt Schutt Director Wilmington Trust Company of Wil-mington, Delaware

Director Market Street National Bank ofPhiladelphia, Pennsylvania

hilliarfl . Bodine Director The First rational Bank of Phila-delphia, Pennsylvania

Director Provident Trust Company of Phila-delphia, Pennsylvania

Arthur C. Dorrance Director Philadelphia 1.ational Bank of Phil-adelphia, Pennsylvania


137

11/15/33 -19-

"Manager Girard Trust Company of Phila-

delphia, Pennsylvania

Director Guaranty Trust Company of 14awYork

C. Jared Ingersoll Manager Girard Trust Company of Phila-delphia, Pennsylvania

Director Central-Pena National Bank ofPhiladelphia, Pennsylvania

George S. Patterson Eanager Girard Trust Company of Phila-delphia, Pennsylvania

Director Bank of the Lanhattan Company ofNew York, New York

Director Central-Penn National Dank ofPhiladelphia, Pennsylvania"

130ard.,

Approved.


to a letter dated October 31 from Mr. James A. Baker, Chairman

Of the Guardian Trust Company, Houston, Texas; the reply reading as

f°11owt.:

, "Receipt is acknowledged of your letter of October 31, 1933,Inquirins as to the applicability of Section 8A of the Claytonrl,ntitrust Act to the service of certain directors of the Southlexas Commercial National Bank of Houston, who are also directorsof L,11e Guardian Trust Company of Rouston.

Permits issued by the Federal Reserve Board under the provi-sions of the Clayton Antitrust Act remain in force until revoked,1!-Ild authorize the parsons to whom they were issued to serve the'Institutions named, notwithstanding the fact that such institutionsIllaYvnew come within the provisions of Section 8A of that Act.s The Board's files showthat you have been granted a permit to„!rve as an officer and director of both of the institutions named'cl7°70, and you may, accordingly, continue to serve as officer and,lrector of both of those institutions, in spite of the fact thatcion OA was enacted after the permit was issued.'Of course what has been said above is applicable to any of

theoth -er directors of your bank to whom permits have been issued."

4.4ra' to a letter dated November 1 from hr. J. C. Persons, President

Approved.



138

11/15/33-20-

of The First National Bank of Birmingham, Alabama; the reply reading

as follows:

"Reference is made to your letter of November 1, 1933, ad-dressed to Governor Black of the Federal Reserve Board. You re-quest to be advised whether officers or directors of your bankinaY lawfully continue to serve as officers or directors of theWoodlawn American National Bank, the Leeds American National Bank,the Fairfield American I:ational Bank, the North Birmingham AmericanBmk, a nonmember institution, the Tarrant American Savings Bank,a nonmember institution, mad the Insley Bank and Trust Company, anonmember institution. You state that in each case a permit cover-

ti the services in question has previously been obtained from theFederal Reserve Board in accordance with the provisions of Section8 of the Clayton Antitrust Act, and, in view of this fact, youfurther request to be advised whether it will now be necessary toObtain additional permits.

"Section 8A of the Clayton Antitrust Act prohibits an officer,director, or employee of a national bank from serving, after Janu-aY 1, 1931, as an officer, director, or employee of any corpora-tion (other than a mutual savings bank) which shall make loans se-cured by stock or bond collateral other than to its own subsidiaries.-°1:115 section applies to all corporations, including banking institu-tians, and it therefore prohibits the services to which you refer,after January 1, 1934.

"However, while Section 8A of the Clayton Antitrust Act forbidscer tain relationships mhich were not forbidden by the provisionsOf Section 8 of that Act, permits heretofore issued covering ser-vices within the prohibitions of Section 8 authorize the person to!hora they were issued to serve the same banks, notwithstanding therIlet that such banks are now within the prohibitions of Section 8A,

well as Section S. It will not be necessary, therefore, for of-

tl"" and directors of your bank who are serving other institutions

obtain new permits covering the services described in their pre-cent permits.10 "Of course it is possible that officers and directors of yoursank who have received permits from the Federal Reserve Board areaervinc banking institutions not covered by those permits, becauseb..lber of such institutions which did not COMB within the prohi-h ons of Section 8 of the Clayton Act will come within the pro-

off Section 8A. In all such cases it will be necessarytiff '/10 officer or director to obtain a new permit; coveringall of134!.1nstitutions which he is serving which come within the prohi-'T)ns of the Clayton Act, as amended.•s riowever, your attention is called to the fact that the Boardti authorized to grant a permit covering the service of not mare0̀7!/.1 three banking institutions, with the result that if any such001- cer or director is serving more than three banking institutions

211111{; 'within the prohibitions of the Clayton Apt, it will be


1_39

11/1.5/33 -21-

"necessary for him to sever his connections with all but threeof such institutions, or else to sever his connection with allnational banks."

Approved.

Letter dated November 14, 1933, to Ir. Newton, Federal Reserve

Agent at San Francisco, approved by five members of the Board, reply-

to a letter dated October 26 from Assistant Federal Reserve Agent

4rgent; the reply reading as follow:

"Reference is made to LI.. Sargent's letter of October 26, 1933,in which he states that subsequent to June 16, 1933, the First Se-curity Bank of Boise, Boise, Idaho, a member bank, issued timecertificates of deposit bearing interest at a rate in excess of3 Percent and such member bank now maintains that it cannot repudi-ate these contracts and that such certificates must bear the higherrate of interest until they nature.

"Section 19 of the Federal Reserve Act was amended by the Bank-ing Act of 1933 so as specifically to require the Federal ReserveBoard to limit by regula-don the rate of interest which may bePaid by member banks on time deposits. The Banking Act of 1933ns enacted on June 16, 1933 and it follows as a matter of lawthat the rate of interest which may be paid by a member bank ona time deposit under the terms of any certificate or contract is-5ued or entered into after that date may, not exceed the rate as+imited by the Federal Reserve Board from time to time pursuant tothe statute. The Board in its Regulation q has limited the ratevillich may be paid by a member bank on a time deposit for any periodsubsequent to October 31, 1933 to three per cent per annum corn-Pounded semiannually and, accordingly, no member bank may pay in-terest accruing after the latter date on a time deposit, at a rate

exoecs of that prescribed in Regulation Q, under the terms of7TY certificate or contract entered into after June 16, 1933, eventhough such a certificate or contract may provide for the payment

interest at a rate in excess of that stated. In the circumstancesi8 suggested that you Rdvise the First Security Bs?* af Boise

4. the Board's views on this question as expressed herein."

Approved.

Telegraphic reply on November 14, 1933, approved by five membersOf the

Beard, to a telegram dated October 31 from Mr. Hale, Cashier ofthe Federal Reserve Bank of San Francisco; the reply reading as fol-1017E4, I


14()

11/15/33 -22-

"Retel October 31. Payment of 3 percent interest on thirty daycertificate of deposit even though reissued at or after maturitynot in violation of Regulation Q for reason that each certificateis a separate contract. In case of reissue of certificate no in-terest may be paid for period between date of maturity of originaland date on which renewal certificate actually issued as providedin X-7656 October 24, 1933. Same principle not involved in pay-ment of interest on savings deposits as such deposits are subjectto one continuing contract without definite maturity. Credit ofinterest at rate of three percent per annum and addition thereofto principal amount of savings deposit at quarterly intervals wouldtherefore constitute compounding of interest quarterly and paymentef interest at a rate in excess of maximum prescribed in RegulationQ."

Approved.

Reply on :iovember 13, 1933, approved by six members of the

Bon-,to a letter dated November 1 from Lr. Paul P. Brown, Secretary

Of the North Carolina Bankers Association, Raleigh, North Carolina, the

relay reading as follows:

"Reference is made to your letter of November 1, 1933, inclos-1.1,1,C a copy of a bulletin with an attached summary of the provisions13.' the Federal Reserve Board's Regulation Q, which you advise youhave transmitted to all banks in North Carolina.

"It has heretofore been suggested that the Board should itselfPrepare a statement with regard to the provisions of Regulation Q,1Dit the Board stated that it did not believe that it would be ad-7asable to do so. the regulation was carefully prepared and the30ard did not feel that it should undertake the task of restatinglts.provisions in a different form at this time, except in so far

interpretations based on the facts of particular cases may be131.0003earY, and such interpretations, to the extent that their pub-

may seem helpful, will be published in the Federal Reserveuletin. For like reasons, the Board feels that it would not be'cliasable for it to review the bulletin and summary submitted with

.rur letter with a view to expressing any opinion with regard there-to.hi1e the sumalry is, of course, of a non-technical character,

would nevertheless be regarded as an authoritative interpretationof the law and the regulation if approved by the Federal Reserve

,-ard. One or two points may be mentioned, however, which have sug-?.eeted themselves in reading the bulletin and summary which you have!oabmItted. It is noted that the statement is made that the rate offnterest of 3 per cent on savings and time deposits applied to allT_elTlbers of the Federal Reserve System on June 16, 1933; but, asYou Will observe from Regulation Q, he maximum rate of 3 per cent


11/15/33-23-

per annum on time and savings deposits became effective on1;ovember 1, 1933. Items 4 and 5 under the caption 'savings ac-counts' in the summary are so worded that it is believed they maybe subject to misinterpretation and they do not seem to conformfully to the requirements of the regulation uhich are containedln Sections V (a) and VI. Other statements contained in your sum-illary do not appear to be entirely accurate but it is assumed thatthis is due in part to a desire to anphasize the main points ofthe summary through the use of brief statements.. The Bankers' Code of Fair Competition is a matter -which is notvathin the province of the Federal Reserve Board, and accordingly,the Board is not in a position to make any comment on any of thestatements contained in the inclosures with your letter regardingthe Code or the interpretation thereof."

Approved.

Reply on rovember 13, 1933, approved by five members of the

L°e.rd, to a letter dated October $ from Mr. Clyde D. Merchant, Vice

'-'4ent and Trust Officer of The First hational Bank of Wenatchee,

ngton; the reply reading as follows:

"Referenco is made to your letter dated October 3, 1933, inl'41hich you ask to be advised -whether the rules of your bank govern-

savings deposits, a copy of which you inclose, are in conform-"1r with the Board's Regulation Q.

It is noted from the copy of the rules submitted that each847in18 deposit is divided into three portions; the first portionconsisting of the first ,100 of the savings deposit, the second?ortion consisting of the next ,200, and the third portion embrac-Ilg the balance thereof, and that written notice of intended mith-awi ef thirty-one, ninety and one hundred and eighty days re-

is required with respect to all or any part of eachportion. It is also observed that 'each such portion of every

,1 1171-11Cs account shall be considered and held to be separate and'lstinct from the other two portions thereof, and that separate

distinct rules and regulations may be made for each portion,vovi.lIch rules when made shall have no effect whatsoever upon anythr

portion.'i The Board has heretofore ruled that the word 'portion' as used811, section VI of Regulation Q is to be interpreted as including ar„fecified amount and that a member bank may pay any specifiedI'41:?1.111t of the savings deposit of any depositor 'without requiring1.ltice of intended withdrawal provided that, upon request and with-

requiring such notice, it shall pay the same specified amountt, the savings deposits of every other depositor which are subject' the same requirement. The period during which such specified


142

11/15/33 -24-

I!amount may be -withdrawn, under the conditions stated, may be pre-scribed by the bank but the requirements of paragraphs (b) and (c)of section VI of the Regulations relating to changes in the prac-tice of a member bank with respect to the withdrawal of savings de-posits, as well as the other provisions of this section, must be

Observed."In this connection it is noted that your rules do not specify

the terns and conditions of a waiver of notice of -withdrawal but

merely reserve to the bank the right, in its discretion, to waivesuch notice as to any one or all of the three portions of a savingsaccount. If, therefore, under your rules as presented, your bankShould, for example, waive notice of withdrawal as to the firstportion of each savings account, after the withdrawal of the amountof 0.00 from the savings account of any depositor without notice nofurther -withdrawals without notice from such account would be per-missible unless and until the bank should take proper action toauthorize withdrawals of additional amounts from all savings ac-c°unt8 without requiring notice. In this connection the provisionsOf section VI of Regulation Q must be observed and your attention18 called particularly to subsections (b) and (c) of that section?•elating to changes in the practice of a member bank with respectte the requiring or waiving of notice of intended withdrawals ofsa-v1/168 deposits. Your bank may, however, as indicated above andAbject to the conditions stated, prescribe a period during which

Tjle first portion or any other specified amount may be withdrawn12.:°111 a savings deposit without notice, in which event the adjustment

the several portions of the savings deposit could be made atstated intervals.s. It is assumed that you have submitted only a part of the provi-ions of the rules of your bank governing savings deposits and that

?../1 other provisions of these rules there is a provision, as required

a .t,the definition of savings deposits contained in Regulation q,a the savinos pass-book be presented to the bank whenever a with-

dra.vial is madec:"

Approved.

Reply on november 13, 1933, approved by five members of the

.°E1rd, to a letter dated October 3 from :r. J. D. Stocker, Cashier ofthe

Ctoe County attional Lank, nebrasha City, 1:ebraska; the reply read-

an follows:

ihe Comptroller of the Currency has referred to the Eoard your!,tter of October 3, 1933, in which you request to be advised

rather you may pay a time certificate of deposit issued to thelounty Judge of your County covering funds consisting of unclaimedegaeles of lost and missing heirs which according to law become


143

11/15/33

"the property of the County after they are held for ten years.You state that a portion of these funds should now be transferredto the County Treasurer and the County Judge is desirous of sur-

rendering this certificate and making the transfer.

"Under the law no member bank of the Federal Reserve System may

lawfully pay any time deposit before its maturity and the FederalReserve Board is not authorized to make any exception to this pro-

of the statute. Your bank, therefore, may not lawfullyPay the amount of the time certificate of deposit concerning whichYou inquire before the date of its maturity.

"You suggest that there is an exception to this prohibition infavor of funds of political subdivisions. Deposits of public fundsof States, counties, school districts or other subdivisions or

Illunicipalities with respect to which the payment of interest is re-quired under State law are excepted from the prohibition upon thePayment of interest on deposits payable on demand but are not ex-eoPted from the prohihition upon the payment of any time depositbefore its maturity."

Approved.


clarcl, to a letter dated November 6 from Nr. Dillistin, Assistant Fed-

era).Reserve Agent at New York; the reply reading as follows:

"This refers to your letter of November 6, inclosing copies ofletters received from the Continental Bank and Trust Company andthe Central Hanover Bank and Trust Company, both of New York, re-pasting rulinf,s as to the manner in which certain deposits shouldbe reported in Schedule Q, Number of Depositors and Amount of De-Posits.

."As you doubtless know, the information called for by Schedule18 being collected for the use of the Federal Deposit Insurance2rporation, of which the Comptroller of the Currency is a direc-

- Accordingly, as the Comptroller's office has receivedtfllar inquiries from national banks, the questions raised wereja:en 1113 with that office. On the basis of the information re-elnd therefrom you aro advised as follow,:„, L?posits in the banking department of a bank or trust company''anding to the credit of its trust department should, for the pur-Po8es of Schedule Q, be treated as the deposits of one depositorfor each account shomn by the books of the trust department. i; Ac-cordingly, in the example given in the letter of the Continental

T3g.,Trust Company, the 'Jones' account and the four 'JonesU1d accounts should be treated as constituting the depositsof tivo different depositors.

Outstanding dividend checks issued by a bank or trust company4er the account of a corporation and, pending payment thereof,


144

4/15/33

included in the deposits of the banking department should be con-

sidered as part of the deposits of that corporation. In other

words, the aggregate amount of such checks outstanding should be

combined with whatever deposits appear on the bank's books to the

credit of the corporation. As indicated by Schedule Q, the total

of all deposits reported therein must agree with the total of items14 to 18, inclusive, of condition report Form 105."

-26-

Approved.

Telegraphic reply on November 14, 1933, approved by five mem-

bers of the Board, to a telegram dated October 31 from Lr. hoxton, Fed-

ers1 Reserve Arent at Richmond; the reply reading as follows:

"Referring your mire October 31 Board is of opinion that certif-icate of deposit payable upon notice in writing which is actuallyrequired to be given by the depositor not less than thirty days be-fore repayment and containing also reservation by bank of right tocall certificate for payment upon notice in writing to depositor ofnot less than thirty days is time certificate of deposit providedit otherwise conforms to the definition contained in Regulationand such a certificate may lawfully be paid at the expiration ofthe Period of notice given by the depositor or by the bank in ac-cordance with the terms of the certificate. In this connection, itis suggested that it would be desirable to include in forms of timecertificates of deposit a clause substantially as follow: QUOTEThe rate of interest payable hereunder is subject to change by thehpank to such extent as may be necessary to comply with requirementsof tile Federal Reserve Board made from time to time pursuant to thexederal Reserve Act. ITAQUOTE"

Approved.

Reply on November 14, 1933, approved by five members of theoarA

tO a letter dated October 28 from lir. Li. B. L:cClintock$

°r The Charlotte rational Bank, Charlotte, North Carolina; the

rem.lig ,

as follows:

Cashier

reply

. "Reference is made to your letter of October 28, 1933$ TnakiriC.tquiry as to the payment of 4 percent interest on outstanding;'-1110 1933 certificates of deposit mhich were issued prior to a= 16,.

"The Federal Reserve Board's Regulation Q does not prohibit thePaYment of interest in excess of 3 percent per annum, compoundedserli-annually, on tine certificates of deposit which were entered


145

11/115/3s -27-

"into prior to the date of enactment of the Banking Act of 1933,June 16, 1933, and in effect on that date and which may not lavp.fully be terminated or modified by the member bank at its optionor without liability; but no such certificate of deposit may berenewed or extended unless it be modified to conform to the provi-sions of the regulation, and every member bank is required to takesuch action as may be necessary as soon as possible consistentlywith its contractual obligations to bring all such certificates ofdeposit into conformity with the provisions of the Board's Regula-tion Q. Accordingly, it is the duty of your bank to terminate ormodify the certificates of deposit concerning which you inquireSO as to eliminate the provision for the payment, of interest there-on at a rate in excess of 3 percent per annum, if this may lawful-ly be done at the option of the bank and without liability. It is,ssumed from your letter that notice to the holders of such cer-tificates would lawfully effect a modification of the contract inaccordance with the provisions of such notice and if this is trueYour bank may not lawfully pay interest on such certificates inexcess of 3 percent per annum subsequent to the effective date ofa modification of the certificates which eliminates the provisionfor the payment of interest at a rate in excess thereof."

Approved.

lele Gram dated -.November 13, 1933, from Mr. Hamilton, Governor

the Federal Reserve Bank of Kansas City, reading as follows:

. "Local chapter American Institute of Banking desires to place1.1? nomination for Hational Vice President of organization our as-

i=1;ashier W. E. Park stop. Election as Vice Presidentmeans election to presidency the following year stop.

Year of encumbency as 2resident requires about one third of en-,!umbent's time stop. Have made inquiry at St. Louis and Dallas;anks, and Governors report that in case of their Messrs. Ilan and',a-vans respectively executive training received while president wasJ?rth much more to these individuals and to banks than loss of

,a?-me from banking duties stop. Inasmuch as A I B is educational171sion of American Bankers Association, our directors have voted

It11.1anlmously that they will interpose no objections to the nomina-011)°n of Park provided Federal Reserve Board does not interposeJeetien stop. "Would appreciate early advice from Board as local,‘,apter desires to place :r. Park in nomination at earliest pos-

31ble moment."

Er. James moved that the Board interpose noobjection to the placing of Li.. Park's name innomination for Lational Vice President of theAmerican Institute of Banking.

Carried.


z ,-

11/15/33 -28-

Governor Black referred to the draft of letter to the Secretary

c't the `.4.reasury with regard to the preparation of fully engraved plates

or the printinE of Federal reserve bank notes for Federal reserve banks,

was discussed at he meeting of the Board on October 17, 1933, and

he stated that he had considered the natter further with Ir. Smead,

Chief' of the Division of Bank Operations, and that it .was felt that, in

\riew of the possibility that large mounts of Federal reserve bank notes

be issued in the future, the plates referred to should be prepared.

After discussion, the proposed letter tothe Secretory of the Treasury was approved inthe following forms

"The Board has deferred replying to 1..r. Douglas' letter of Eay6 with regard to the preparation of fully engraved plates for theProduction of Federal Reserve bank notes for the twelve FederalReserve banks, pending a decision as to whether any material volumec='' such notes should be printed in the near future. Mile no de-?lsion has yet been reached on this point, the Board is of the opin-!?n that, in the circumstances, it is desirable to proceed, at this

with the preparation of fully engraved plates for the produc-Z°n of Federal Reserve bank notes of the 5, 0.0 and c20 denonina-l?nes The Board has been advised by the Bureau of Engraving andrrinting that these plates will cost approximately 0.5,000.

43.t1I regard to textual changes in the notes, to which referencele made in Er. Douglas' letter, the Board feels that a number of,,I1c11 changes should be made, and if it meets with your approval the1"°ard will be glad to have its staff discuss such changes

withrepresentatives of your Department."

Reference Was then made to a review of branch banking in the

1--" States as of December, 1932, prepared in the Division of Bank

(1/)°4-tions under date of October 23, 1933, copies of which had been

tc all members of the Board by Er. Smead, Chief of the Divi-

41*°11 Of Bank Operations, with the suggestion that copies of the menoran-

c1141be sent to all Federal reserve banks.

The Secretary was requested to send copiesof the memorandum to the Federal reserve agent ateach Federal reserve bank.


147

11/15/33 -29-

Reference was then made to the discussion at the meeting of

the Eoard on October 9, 1933, with regard to a possible application for

illemLership from the Banco de .once, Ponce, Alert() Rico, and to the sug-

estion made at that meeting that it would be advisable for the bank

te take up the question of membership in the Federal Reserve System

Irith the Federal Reserve Bank of New York, and Mr. ibrrill stated that:dr , Case, Federal Reserve Agent at 1:ew York, had advised that the mat-ter had progressed to a point where the next step would be to send

e:':e'rairlers to Puerto Rico for the purpose of making an examination of

the bank and the necessary survey of banking and business conditions in

Ilert° Rico in connection with the application, but that, before such

tien is taken, flr. Case would like to be advised whether the Board,

4 Inatter of policy, would be willing to admit to membership banksitu 4.

at'ed outside of the continental United States. hr. Morrill alsoSte.teri

- that the same question with regard to membership of banks in41asl-n •

ls presented as a result of inquiries by the First itational Bank

cf Ket11.e 1-

1,an, Alaska, of the Federal Reserve Agent at San Francisco,

With r ecard to membership of the national bank in the Federal ReserveSYsterie

soke ofA discussion ensued, during which the opinion was expressed by

the merbers of the Board that, in view of the provisions of Sec-tiQ4 19 of the :'ederal Reserve Act, the Board should not take the posi-

t411 that it will not admit a bank to membership for the reason that itiz

located outside of the continental United States.

• Jame5. stated that, in view of the difficulty in obtaining


14811/15/33

trained examiners,

-30-

with sufficient knowledge of local conditions, to

Je examinations of banks located in Alaska and in the dependencies

414 insular possessions of the United States, and because of the ad-

effect which examinations would have on the public confidence in

sUch banks if their applications for membership were not approved, the

c:ottrd, at this time, should not entertain applications from such banks.

At the conclusion of the discussion, Mr.James moved that the Board take the position thatit is not inclined at this time to admit to member-ship banks situated in Alaska or in the dependen-cies and insular possessions of the United States.

Szymczak moved as a substitute for la-.James' motion that the Federal reserve agents atNew York and San Francisco be requested to submitto the Board all of the information which theyhave and that in their opinion should be consid-ered in connection with the question as to theadvisability of considering the applications ofthe Bank of Ponce and the First National Bank ofXetchikan, respectivoly, and that the .agents beadvised that after this information has been con-sidered by the Federal Reserve Board they will beadvised as to whether examinations of the banksshould be made.

Mr. Szymczak's substitute motion was put bythe chair and carried.

?(51,4.Federal Reserve Agent at Minneapolis, and Er. Newton, Federal

Reser-ACent at San Francisco, with regard to the discontinuance of

theelena and Spokane branches, which were considered at the meeting of

the 8(311'd on October 26, 1933, but action on the matter was deferred

text Monday.

11r. Thomas then stated that he had discussed with the repre-%L.bati

7" of the Dissenting Depositors' Committee the revised plan of

Further reference was then made to the proposed letters to Mr.


149

tiort

11/15/33 -31-

l'ec4rganization of the Union Trust Company of Baltimore, Maryland, and

that the representatives had only one minor change to suggest in the

PN/losed contract between the trust company and the City Certificates

Corporation.

At the suggestion of the other members present, Governor Black

left the room to ascertain from Mr. Miller, who was confined to his

11Qfte by illness, mhother he mould have any objection to the Board acting404 the application of the Union Trust Company for membership in his

Abs.—'"°e. Upon his return to the meeting Governor Black stated that Mr.

1411er had advised that he had discussed the matter with Mr. Thomas and

that he mas in favor of approval of the application by the Board and

Wished to be so recorded.

Mr. Hamlin then moved that the application ofthe Union Trust Company of Baltimore for membershipin the Federal Reservo System be approved, subjectto conditions suggested by the Board's Division ofExaminations, by the Legal Division, and by Mr.Thomas.

Further discussion followed, during which Mr. James referred to

the tact that the revised plan provides that all dividends on the stockOf th e trust company shall be turned over to the City Certificates Cor-

P°r4tion and used to pay the certificates of beneficial interest whichIt

be issued in the total amount of approximately $10,000,000 tolAtiiriliz d

epositors, and he stated that under this arrangement the stockthe

eithtrust company mould have very little, if any, value and the

°Lders mould have no material interest in the success of the trust--wttriv

and that, in his opinion, the bank would not be a sound institu-

a44 its opening mould not be in accordance with the position of the


15011/15/33 32-

of the United States that only sound banks should be permit-

to reopen. He stated that it would appear that the management of

the bank would be largely in the hands of those responsible for its

Present unsatisfactory condition and that he felt the responsibility of

the Board goes beyond the point of requiring the restoration of the con-

of a bank, and that before approving an application for membership

the hoard should have definite assurances as to the bank's management.

In connection with the question whether there is any liability

On the Part of the trust company with regard to the payment of the cer-

tificates of beneficial interest proposed to be issued to waiving de-

Mr. ,:yatt stated that, under the proposed contract between the

trustcompany and the City Certificates Corporation, the former would be

n°blirr+()-,Leou to pay to the corporation the proceeds of all recoveries on

71ritten-off and charged-down assets and any other funds that it would

for distribution to shareholders, Whenever the board of directors

c) the bank and the State bank comthssioner felt that such payments

could be made without impairing the financial condition of the bank, and

that th15 obligation would be a contingent liability on the part of the

tru L't „--111Pany, but that as a matter of law it did not constitute an in,

Dkirment of the trust company's

reviewed a list of points which

e°42ideration of the matter andtho

results of the negotiations

capital in any way. Mr. Szymczak then

had been covered in the Board's previous

Governor Black and ::Jr. Thomas outlined

that had taken place with respect to each

At tho conclusion of the discussion, Mr.Hamlin's motion was put by the chair and carried,Messrs. James and Szymczak voting "no".


151

11/15/33-33-

There wore then presented the following applications for original

stock of Federal reserve banks:

4 lications for ORIGINAL Stock; SharesDistrict No. 5.Pirst National Bank in Orangeburg, South,

Carolina4ational Bank of Keyser, West Virginia

District No. 7.0 ester ational Bank of Rochester,Michigan

4PrOyedt

Approved.

6875

36 Total

Thereupon the meeting adjourned.

Governor.

143

36179

a


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