19330919_minutes.pdf

A meeting of the Federal Reserve Board was held in Washington

on Tuesday, September 19, 1933, at 3:40 p.m.

PRESENT: Er. Black, GovernorEr. HamlinMr. MillerEr. JamesEr. ThomasEr. SzymczakEr. O'Connor

Er. Merrill, SecretaryEr. Bethea, Assistant SecretaryEr. Martin, Assistant to the Governor (part

of meeting)Er. Viyatt, General Counsel (part of meeting)

Governor Black presented a letter addressed to the Federal Re-

serve Board under date of August 22, 1933, by Honorable Wilbur J. Carr,

lissistant Secretary of State, stating that the Consul General at havana,

Cuba, had reported to the Department that the Havana Agency of the Fed-

eral Reserve Bank of Atlanta charges a commission of 1,/10 of 1% on all

Treasury checks issued by the disbursing officer in Mexico City in pay-

1115511t of salaries of foreign service officers and employees stationed at

Havana, and inquiring whether it would be possible for the Board to

authorize the liavana Agency to waive this charge on salary checks. It

Ilas stated that such letter upon its receipt had been referred to Er.

j°1111s, Acting Governor of the Federal Reserve Bank of Atlanta, with the

rsquest that he give the Board his views regarding the natter, and that

wider date of September 7 a reply had been received from Johns in-

el"InC a copy of a letter dated September 5 directed to him by Er.?razor,

Manager of the Havana Agency, which indicated that Er. Carr had

"idettly been erroneously informed with respect to the practice of the

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

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aavana Agency. Mr. Frazer stated that the Agency has only paid United

States Treasury checks and checks drawn by other disbursing officers

on one occasion, that being during the banking holidays of this year,

and at that time such checks were handled at par, no commission being

Charged thereon. Yr. Frazer reported that this action was taken by

the Agency upon cable authority from the Governor of the Federal Reserve

sank of Atlanta and that as soon as the Havana banks resumed operations

the Agency discontinued the practice, the authority covering such activ,-

ities being only for the period of the emergency.

After discussion, it was the consensus of the

members of the Board present that, while the Board

was glad to have the Havana Agency assist in the

matter during the banking emergency in Earch of

this year, it would not be desirable for such

Agency under normal conditions to cash Treasury or

other checks for foreign service officers and em-

ployees and thus enter into competition with the

local commercial banks.

At this point Lire Wyatt joined the meeting.

Governor Black stated that, pursuant to the action taken by the

Board at its meeting on September 9, 1933, requesting that he discuss

with the Comptroller of the Currency an application filed by the Old

ilational Bank and Union Trust Company of Spokane, Washington, for permis-

ion to reduce its capital stock from 0.'500,000 to 500,000 as a part

of a plan of reorganization, and submit his recommendation to the Board,

he had conferred with the Comptroller regarding the matter and it was

his recommendation that the Board approve the proposed reduction in the

4LPital stock of the bank and issue a voting permit to the Old National

Corporation for the sole purpose of enabling it to take such action as


i-so9/19/33 -3-

rIlaY be necessary to consummate the plan of reorganization involving

the Old National Bank and Union Trust Company and certain other sub-

diary banks.

After discussion, the Board, on the basis of theinformation and recommendations submitted to it, in-

cluding the recomendation of the Comptroller of theCurrency, approved a reduction in the capital stock ofthe Old National Bank and Union Trust Company ofSpokane, Washington, from 0,500,000, to 500,000,subject to the conditions imposed by the Comptroller

of the Currency and the following additional conditions:

(1) That before the proposed reduction in capital be-comes effective, waivers of 60 per cent of theunsecured creditors of the bank shall have beenobtained with the approval of the Comptroller of

the Currency and pursuant to the provisions of

section 207 of the Bank Conservation Act;

(2) That none of the funds released by the reduction

in capital be returned to stockholders but that

all such funds be used for the purpose of eliminat-

ing undesirable assets from the bank;

(3) That before the vote to reduce the capital is ac-

tually taken by the shareholders of the bank, theOld National Corporation shall obtain a votingpermit from the Yederal Reserve Board pursuant tothe provisions of section 5144 of the RevisedStatutes as amended.

The Board also agreed to issue a voting permit tothe Old National Corporation for the sole purpose ofenabling it to take such action as may be necessary toconsummate the plan for the reorganization of the OldNational Bank and Union Trust Company and certain othersubsidiary banks, which was submitted to the Comptroller

of the Currency and approved by him, and authorized theissuance of a permit to the Old National Corporation to

vote the stock of the Old National Bank and Union TrustCompany and of its other subsidiary member banks solely

for the purpose of consummating said plan, if and whena proper application for such permit is filed with the

Board.

Governor Black inquired whether the Committee on District No.

7 Inus ready to submit a recommendation with respect to the proposed


9/19/33 -4-

increase of Q1,000 per month in the salary of Er. h. P. Preston which

vila..s voted by the board of directors of the Federal Reserve Bank of

Chicago in connection with the action taken by such board on August 25,

1935, in appointing him Acting Governor of the bank. la-. Szymczak pre-

riented a copy of the following telegram directed to Lir. Simpson, Deputy

Chairman of the Federal Reserve Bank of Chicago, by la-. Lynn P. Talley,

luhieh had been furnished to him by Mr. Talley:

"Having been advised of your return to Chicago I requestthat there be no further consideration of no for Governor ofthe Federal Reserve Bank of Chicago I am mAking this requestin view of developments since the conference between youLeavell Traylor and me on July twenty-fourth which I attendedat your suggestion Also in the light of the fact that I havenever been a candidate for the position am not now and havenever sought the support of anyone in connection with iteither before or since I was invited to give it considerationstop Notmithstanding the definite character of the conferenceon July twenty-fourth and the assurances given no that the se-lection of a governor would not be on a competitive basis andout of consideration for the members of the Federal ReserveBoard my great respect and loyal interest in the Federal Re-serve System and from a sincere desire to be always free fromany obligations I feel that in the circumstances I could notnow accept the position if tendered me by action of your BoardLet me assure you however of my great appreciation of the con-fidence shown in the pursuit of this matter with MB"

Mr. Szymczak stated that the Committee which consisted of Mr.

1-'Jaaler and himself, had given the matter careful consideration and that

it reconnended that no action be taken on the matter until after

the meeting to be held by the board of directors of the Federal Reserve

4nk of Chicago on Friday, September 22, 1933, at which noting it is

411ticipated definite action will be taken with respect to the appoint-

of a successor to Governor McDougal.

After discussion, the Board approved therecommendation of the Committee.

At this point Er. Martin joined the meeting.Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1499/19/33

Govornor Black then inquired whether the Committee on District

lo. 10 consisting of 1.Ir. James and Mr. Thomas, as a provisional mem-

ber, which had been appointed to consider and submit a recommendation

with respect to the selection of a successor to hr. H. L. Langworthy,

resigned, as a Class C director of the Federal Reserve Bank of Kansas

eitY, was ready to report. hr. James stated that when he end rr.

Thomas went to Kansas City with the view to selecting a man for ap-

Pointment as Class C director, he was guided by the policy previously

established by the Board of requiring the selection of a Kansas City

Inall for appointment to that position, lie said that, with this general

Principle in mind, he had conferred with Lir. E. F. &Annoy, Chairman

of the board of the First National Bank of Kansas City, and with other

leading bankers in order to obtain their recommendations as to a man

having qualifications similar to those of Mr. Langworthy and in other

respects being best qualified for appointment. lie said that, as a re-

sult of his investigations, and having in mind the general principle

referred to, it was his recommendation that 1,1r. R. B. Caldwell, of

ICalisas City, 1.1issouri, be appointed. Mr. James said that hr. Thomas,

il°17ever, had not joined in the recommendation because he evidently did

llot concur in the view that the field for the selection of Class C di-

rectors in the Tenth Federal Reserve District should be confined to

residents of Kansas City. lie stated that, in the circumstances, it was

his opinion that the question whether or not the policy established at

the time hr. Langworthy succeeded Er. V. L. Petrikin as a Class C di-

rector at Kansas City is to be continued in effect, is one which should


J -120/19/33 -6-

be decided by the Board before consideration is given to any individuals

luho may be suggested for appointment. Mr. Thomas reported that his in-

dependent investigations in Kansas City led him to believe that not

more than two Class C directors of the Federal reserve bank should be

selected from that city and that, in his opinion, Er. John B. Doolin

of Alva, Oklahoma, who is at present a director of the Oklahoma City

bratch of the Federal Reserve Bank of Kansas City, is better qualified

for the position than Er. Caldwell and that his appointment had been

urged by a large majority of the bankers and others with wham he had

come in contact. He said that he felt the selection of Class C directors

should not be limited to residents of Kansas City if it were possible

to find better qualified men in any other part of the Federal reserve

district. hr. Miller stated that, since Colorado had been informed at

the time of the election of Er. Langworthy that Mr. Petrikin was not

being reappointed for any other reason than the desirability of having

42 a director a man located in Kansas City who could attend directors'

Meetings regularly and in other respects participate actively in the

rnellagement of the bank, he thought that the Board could not reverse it-

self by deviating from the established practice and appointing a man

from Oklahoma without subjecting the Board to widespread protests and

criticism. Mr. James stated that in the event the principle previously

laid down was relaxed he would be inclined to recomrend the appointment

Of r. Wayland I.:age° of Bennington, Nebraska, as Class C director,

rather than Mr. Caldwell.

After full discussion, upon motion of hr.Miller, which was unanimously adopted, the Boardenlarged the Committee on District No. 10


9/19/33

On

1, for

-7-

to include three members, appointed hr. Szymczak as thethird member of the committee, and referred back to thecommittee the question of selecting and submitting arecommendation with respect to the appointment of aClass C director of the Federal Reserve Bank of KansasCity. Governor Black thereupon requested the membersof the Board present to express their views informallyon the question whether the selection of Class C di-rectors at Kansas City should be limited to residents ofthat city and its environs or be permitted from anywherewithin the Federal reserve district. Governor Blackpolled each member individually with the result that all,with the exception of Mr. O'Connor who dissented, heldthe view that the selection of Glass C directors for theTenth Federal Reserve District should be confined toresidents of Kansas City, Missouri, and its environs un-less the Board's investigations disclosed that the ser-vices of a better qualified man who would actively inter-est himself in the affairs of the bank and devote therequisite time to the performance of his duties as aClass C director, could be obtained from elsewhere inthe district. Mr. O'Connor stated that he did not agreewith this view principally because he felt that the Fed-eral reserve bank should have the benefit of the adviceand experience of men from all parts of the district re-gardless of whether Class C directors essentially repre-sented the public interest and were selected by the FederalReserve Board.

Mr. Hamlin referred to the action taken by the Board at its meet-

September 9, 1933, in referring to the Committee on District No.

reconmendation to the Board, a letter dated September 6, 1933,

Mr. Curtiss, Chairman of the Federal Reserve Bank of Boston, re-

questing that the Board approve the reimbursement by the bank of members

of the Committee on Reserve Bsnk Directors for expenses incurred by them

attending meetings of the Committee held at the bank, and he stated,

a member of the Committee on District No. 1, that when he was in

oston recently he had discussed the matter with Governor Young of the

lederal Reserve Bank of Boston, and that Governor Young had requested


9/19/33 -8-

that the Board leave the matter open until he can come to -Washington

the near future and discuss the question with the Board.

Upon motion by Lr. Hamlin, the Board votedto defer action on the matter in accordancewith Governor Young's request.

The Board then considered and acted upon the following matters:

Lemorandum dated September 5, 1933, from Jr. Paulger, Chief of

the Division of Examinations, recommending the appointment of Mr.

Clarence C. hostrup and his designation as an assistant Federal reserve

examiner, with salary at the rate of 4,200 per annum, effective as of

the date upon. -which he enters upon the performance of his duties.

Hostrup was appointed an examiner forall purposes of the Federal Reserve Act, asamended, and of all other acts of Congress per-taining to examinations made by, for, or underthe direction of the Federal Reserve Board; andwas designated an assistant Federal reserveexaminer, with salary at the rate of c4,200 perannum, all effective as of the date upon whichhe enters upon the performance of his duties.

Memorandum dated September 5, 1933, from Mr. Paulger, Chief of

the Division of Examinations, recommending the appointment of Mr. George

14 'Folsom and his designation as an assistant Federal reserve examiner,

with salary at the rate of ,I2,800 per annum, effective as of the date

11100n which he enters upon the performance of his duties.

Mr. Folsom was appointed an examiner forall purposes of the Federal Reserve Act, asamended, and of all other acts of Congress per-taining to examinations made by, for, or underthe direction of the Federal Reserve Board; (Ind

was designated an assistant Federal reserve ex-aminer, with salary at the rate of c2,800 perannum, all effective as of the date upon whichhe enters upon the performance of his duties.


9/19/33 -r-

Memorandum dated September 16, 1933, from Yr. Paulger, Chief

of the Division of Examinations, requesting the appointment of 'Jr. Ed-

S. 1,,yers as a stenographer in the Division of Examinations, with

8Elary at the rate of 0.,600 per annum, effective as of the date upon

'which he enters upon the performance of his duties.

Approved.

Telegraphic reply on September 18, 1933, approvod by five men-

of the Board, to a telegram of that date from Mr. Stevens, Federalbers

Reserve Agent at Chicago, requesting approval of the appointment, on a

temporary basis, of six examiners in the Federal reserve agent's depart-

ment of the bonl-, with salary range of from 33,600 to ,t,5,000 per Prrum,

End stating that the Board's immediate approval is desired so that the

temporary men may be included on a list to be submitted to the Board

for transfer to the Federal Deposit Insurance Corporation. The reply

8tated that the Board approves the temporary appointments referred to

With salary range as stated above.

Approved.

Reply on September 18, 1933, approved by six members of the

to a letter dated September 6 from Mr. Peyton, Federal ReserveBoard,

&Cent at Minneapolis, stating that, in view of the largely increased

duties of his office, he had employed the following individuals, at the

zalaries and for the duties designated:

August 1August 24August 29September 5September 5September 5

A. P. HeinenMargaret OgdenB. C. GrangaardMarguerite BurkeJohn CarlanderGeorge Nerum

33,600960

1,2001,0202,4002,400

Field manStenographerClerkStenographerAssistant examinerAssistant examiner


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9/19/33 -10-

The reply stated that the Board approves the appointments, effective

September 5, 1933, of Lessrs. Carlander and -,Corum as assistant ex-

aminers in the Federal reserve agent's department of the bank, and

that the Board desires, however, to call the agent's attention to its

letter of July 8, 1933, in which it is stated that, since the Federal

Reserve Act provides that appointments of examiners are subject to the

approval of the board, proposed appointments to these positions should

be submitted to the Board for consideration before becoming effective.

the reply also stated that appointments to other positions in the

agent's department which are provided for in the personnel classifica-

tien plan do not require the specific approval of the Board, as for

e748'n1Ple, the appointments to the position of stenographer referred to

ill the agent's letter of September 6; that it does not appear, however,

that the positions of "field man" and "clerk" in the Federal reserve

Etellti s department are covered by the personnel classification plan;

11.4d that if the appointments of Lessrs. Heinen and Grangaard as "field

111411" and "clerk", respectively, have resulted in the creation of new

13°1-Liens in the agent's department, it is requested that revised FormA p x,a

,)es reflecting the chan,;es made be submitted to the Board for con-

Approved.

Letter dated September 16, 1933, to 1,r. Worthington, DeputyGo or iter]:

1 of the Federal Reserve Bank of Kansas City, approved by six

Illeillbers of the Board, stating that, in accordance with the recomenda-tin-

-44 contained in his letter of September 5, the Board approves changes


1189/19/33 -11-

in the personnel classification plan of the bank to provide for the

establishment of three new positions, the discontinuance of one posi-

tion, and changes in the salary ranges of two positions, all in vari-

ous departments of the Denver branch. The letter also stated that it

is noted from the Form A pages inclosed with id.. Worthington's letter

that the salary range for the position "typist clerk (credits)" is in-

creased from 901-$1,200 to c'?1,901-‘2,400 per annum, and that the de-

scription of work given for this position indicates that typing is of

relative minor importance, the salary range provided being necessary

because the qualifications required for the position include the abil-

ity to analyze financial statements; and suggested that the title of

the position be changed by eliminating the word "typist" or that such

Other change be made that mould more clearly indicate the character of

the qualifications required. The letter stated further that, in sub-

raittinL; future requests for changes in the bara-'s personnel classifica-

tion plan, it will be appreciated if Li-. Worthington will indicate the

necessity for each of the changes recommended.

Approved.

Letter dated September 16, 1933, to the board of directors of

the "State Bank of Alcester", Alcester, South Dakota, approved by six

Zembers of the Board, stating that, subject to the conditions prescribed

the' etter, the board approves the bank's application for membership

ill the Federal Reserve System and for the number of shares of stock of

the Federal Reserve Bank of Minneapolis to which the bank will be en-

titled upon the basis of its capital and surplus as of the date upon


9/19/33 -12-

which its membership becomes effective.

Approved.

Letter dated L;eptember 18, 1933, to the board of directors

Of the "Farmers State Bank", sinner, South Dakota, approved by six

nembers of the Board, stating that, subject to the conditions pre-

scribed in the letter, the Board approves the bank's application for

membership in the Federal Reserve System and for the number of shares

Of stock of the Federal Reserve Bank of Minneapolis to which the bank

vill be entitled upon the basis of its capital and surplus as of the

date upon -which its membership becomes effective.

Approved.


Board, to a letter dated September 8 from Yr. McClure, Federal Reserve

Agent at Kansas City, recommending that The Goawrcial Bprik, Grand

Island, irebraska, be granted an additional extension of time from

October 1, 1933, to October 5, 1933, in which to comply with the con-

of membership set out in the Board's letter to the applicant

bank on August 1, 1933. The reply noted that the bank proposes to

hold its directors' meeting on October 1, 1933, at which time consid-

eration w-ill be given the acceptance of conditions of membership, and

stated that the hoard is willing to extend until October 5, 1933, the

tine within which the bank may comply with the conditions and complete

its admission to membership.

Approved.

Letter dated September 18, 1933, to r. Hoxton, Federal Reserve


FO9/19/33 -13-

Agent at Itichmond, approved by six members of the Board, replying to

Assistant Federal Reserve Agent Fry's letter of August 18, and in-

closures, detailing certain improvements Nhich have been effected in

the unsatisfactory features in the condition of the Citizens Bank &

Irust Company, Blackstone, Virginia, as disclosed in the report of its

examination as of June 8, 1933. The reply stated that it appears that

the institution continues to own twenty shares of its own stock and is

carrying several loans partially secured by other shares of its own

stock, which stock the bank states vas acquired in protection or satis-

faction of debts previously contracted; and requested that, if he has

not already done so, the agent call to the attention of the Citizens

Bank & Trust Company the provisions of section 9 of the Federal Reserve

Act, under which the bank is required to dispose of these shares of its

°I'm stock within six months from the date of acquisition thereof, and

advise the Board when the disposition of such stock has been effected.

Approved.

Letter dated September 16, 1933, to la-. Stevens, Federal Reserve

Agent at Chicago, approved by six members of the board, replying to

4asistant Federal Reserve Agent Young's letter of June 12, 1933, trans-

an application for trust powers made by the organizers of the

Proposed "The Union National Bank and Trust Company of Bloominston",

13100mington, Illinois. The reply stated that the Board is in receipt

of a letter from the Comptroller of the Currency stating that the Chief

4tional Dank Examiner at Chicago has advised the Comptroller's office

that, in his opinion, the organization of the proposed bank to succeed


4 *)

9/19/33 -14-

the First I:ational Bank and Trust Company of Bloomington, Illinois,

will not be accomplished; that the Comptroller's office, therefore, re-

gards the organization of the proposed Union National Bank and Trust

Company of Bloomington as abandoned for the present; and that, in view

of this information, the Board will tale DD action on the application

for trust powers for that institution.

Approved.

Letter dated September 16, 1933, to ir. Stevens, Federal Reserve

Agent at Chicago, approved by six members of the Board, replying to

Assistant 10ederu1 heserve Agent Youn's letter of August 31 transmit-

tinc a copy of a latter from the President of the Larion National Bank,

riarion, Indiana, in regard to fiduciary powers exercised by it, the

i'°ard having, on August 14, 1933, granted that institution limited trust

Powers and deferred action upon its application for full powers until

the bank has been in operation at least one year and a report of examin-

ation made subsequent to the expiration of that period has been received.

The reply stated that, in view of the circumstances in the case, the

Board requests that the agent bring the matter to its attention again,

With his recoLvendation in the premises, as soon as the next examination

Of the bank has been made by the national bank examiners and a report

t4Groof is available, without awaiting the expiration of the one year

Period specified in the Board's letter of August 14, 1933.

Approved, together -aith a letter dated September16, 1933, to the Comptroller of the Currency, alsoapproved by six members of the Board, transmitting,for his information and file, a copy of the letterfrom the Mt-trion National Bank and a copy of the


9/19/33 -15-

Board's letter to Lr. Stevens; and stating that it willbe noted that the Board is willing to consider the mat-ter after the next examination has been completed bythe Comptroller's department, without awaiting the ex-piration of the one year period originally stipulatedin its letter of August 14, 1933; that it is assumedthat such examination will include an examination ofthe trust department; and that, when a report thereofhas been received by the Comptroller's office, it willbe appreciated if the Comptroller will furnish theBoard with information regarding the condition of thebank, the character of its management, particularlywith reference to the supervision of the trust depart-ment, and any other matters which will be of assistanceto the Board in considering the bank's application forfull fiduciary powers, and also with his recommendationin the premises.

Letter dated September 18, 1933, to la.. O'Connor, ComptroDer

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

his memorandum of August 11 recommending approval of a reduction in

eaPital of The First National Bank and Trust Company, New Egypt, lievr

Jersey, from •4:10°,000 to :,;50,00° in accordance with a plan of reorgnni-

zation. which provides, among other things, for the surrender of such

bank's present capital stock of ,)100,000, the resale of ,;50,000 of

such surrendered stock at a premium of ,12,500 which will be credited

tc surplus, a voluntary cash contribution by shareholders of ,50,000,

the utilization of a presently existing directors' guaranty of S39,330,

e-nd a waiver by creditors of 33`, of their net unsecured claims in ac-

cordance with the provisions of section 207 of the Bank Conservation

'Act; the released capital in the amount of ;100,0°0, together with the

besak's present surplus and undivided profits amounting to -25,251.03,

funds in the amount of .,;50,000 provided by the shareholders' cash


9/19/33 -16-

contribution, funds in the mount of approximately "39,330 made avail-

able through final settlement of the presently existing directors'

guaranty, funds in the amount of approximately 'J42,117.73 provided by

the waiver of 33 of unsecured liabilities, and funds in the amount of

aPproximately •,,109,160 to be derived from the sale of substandard bonds,

to be used to eliminate unacceptable assets in the amount of approximate-

ly 65,358.76, such assets to be trusteed for the benefit of -waiving

creditors. The reply stated that the records of the Board indicate

that, on larch 29, 1927, the First Fational Bank of New Egypt, which on

June 8, 1927, changed its title to include the words "and Trust Company",

14148 authorized to exercise trust powers, and that it is noted that the

Proposed reduction will result in a capital which is c;50,000 less than

that required by the laws of the State of New Jersey of banks and trust

ccmPanies exercising such powers. The reply also stated that the Board

4PProve5 the proposed reduction in capital, in accordance with the Con-

troller's recommendation and subject to the conditions set forth in the

reply, effective only if and when the institution has signified its de-

airs to surrender its rif;ht to exercise trust powers in the manner out-

linedin the 2oard's Regulation Section XIV, and has received a cer-

tificate from the Board terminating its right to exercise trust powers;

44d that, in this connection, it is assumed that the Comptroller's office

76-11 require the elimination of the words "and Trust Company" from the

title of the reorganized bank, and will advise it regarding the steps

necessary to be taken to effect such elimination.

Approved.


9/19/33 -17-

Letter dated September 18, 1933, to Lii'. O'Connor, Comptroller

of the Currency, approved by five msmbers of the Board, replying to

his memorandum of July 21 recommending approval of a reduction in

capital of the First National Bank, Hempstead, New York, from c5OO,0O0

to 300,000 in accordance with the terms of a proposed plan of reor-

ganization, which plan was amended as of August 27, 1933, and provides

for a waiver by creditors of 455 of their net unsecured claims, the

surrender of the present capital stock by the stockholders, and the

resale of 300,000 of such surrendered stock for 450,000; the released

caPital of ,500,000, together with the present surplus, undivided prof-

its and reserves for contingencies in the amount of :346,600 as uell

" the funds amounting to approximately .;1,277,800 obtained through

the 'miver by unsecured creditors of 455 of their net claims, to be

used to eliminate losses, depreciation and criticized assets aggregat-

ing approximately c,2,124,400, such assets to be trusteed for the benefit

of waiving depositors. The reply stated that the Board approves the

Proposedreduction in capital under the plan submitted, subject to the

• conditions set forth in the reply. The reply also stated that, in a

ease of this kind, where it is contemplated that the depositors will

130 called upon to waive a substantial part of their unsecured deposits,

aIleunting in this instance to 45%, and the stockholders are not being

1138essed but are required merely to surrender their stock, the Board

t°els that, although the examiner was unable to estimate accurately

the collectibility of the assessment, special consideration should be

'1.170/1 to the question -whether it is advisable to waive the assessment


r

9/19/33 -13-

for the purpose of reorganization, or whether the depositors' inter-

ests could be better protected through liquidation of the bank; and

that, while the Board assumes that the practical aspects of making an

assessment and of reorganizing the bank in a city of 12,000, which

already has two operating institutions, have received the Comptroller's

caref, ul consideration, it feels that it should stress the importance

of the question involved in releasing the stockholders from their statu-

tory liability. The reply stated further that the plan of reorganiza-

tion does not contain any provision giving the reorganized bank the

right of substituting assets taken over for assets held by the trustees

for -waiving depositors, and that it is felt that such substitution

Privilege should be granted for a reasonable period.

Approved.

Letter dated September 13, 1933, to Jr.l Stevens, Federal Reserve

Ag°nt at Chicago, approved by six members of the Board, inclosing copies

of letters exchanged betmeen the State Exchange Bank of Culver, Indiana,

Congressman George R. Durgan and the Federal Reserve Board, with respect

tO the question whether the State Exchange Bank may become a member of

the Federal Reserve System and retain a branch which it has in operation

in Argos, Indiana, without complying with the requirements applicable to

the establishment of out of town branches of national banks. The letter

tated that the Board understands that under the Acts of Indiana of

1921 branch banks not chartered before the date of that statute were pro-

that, if the Board's information in this respect is correct, it

w°111d seam that the branch at Argos, which -was not chartered until 1931,


1269/19/33 -19-

hat in operation on February 25, 1927, "in conformity with the

State law" within the meaning of section 9 of the Federal Reserve Act;

and that, accordingly, it appears that the branch office at Argos may

not be retained by the State Exchange Bank, if it should become a mem-

ber of the Federal Reserve System, unless it complies with all of the

requirenents which are applicable with respect to the establishment of

out of tom branches of national berIrs. The letter also stated that,

before expressing a definite opinion in the matter, the Board wishes

to be advised of the views of counsel for the Federal reserve bank

vith respect to the matter with particular referonce to the question

Whether the branch at Argos may be considered to have been established

and in operation in conformity with the law of the State of Indiana

wa February 25, 1927, and that it will be appreciated, therefore, if

the agent will have counsel consider the matter and furnish the Board

With a

Board,

of the

copy of his opinion with respect thereto.

Approved.


to a letter addressed under date of June 27 to the Comptroller

Currency by Mr. J. K. Beretta, President of the National Bank

of Commerce, San Antonio, Texas, and referred to the Board for reply,

the letter stating that one of the directors of the national bank is

a director of another national bank and a director of the San Antonio

branch of the Federal Reserve Bank of Dallas, and that la.. Beretta is

als°a director of another national bank, and inquiring whether section

84 of the Clayton Antitrust Act, as emended by section 33 of the


2'7

9/19/33 -20-

Ban1d.ng Act of 1933 renders these relationships unlawful after Janu-

arY 1, 1934. The reply stated that this section applies to a service

of a director of a national bank as a director of any corporation,

whether or not a banking institution, vthich shall make loans secured

by stock or bond collateral; that mutual savings banks, and organiza-

tions which make such loans only to their own. subsidiaries, are ex-

cepted; and that, however, under the provisions of section 8 of the

Clayton Antitrust Act, the Board is authorized to issue permits cover-

ing the service of not more than three banking institutions coming

vithin the provisions of section 8A. The reply also stated that, in

IrieN7 of the fact that Federal reserve banks make loans secured by bonds,

the service of one of the directors of the national bank as a director

of the San Antonio branch of the Federal Reserve Bank of Dallas would

e°.me within the provisions of section 8A, since such bank, of course,

is "organized and operating under the laws of the United States". The

reply stated further that regulations and forms in this connection are

11°17 in the course of preparation and will be forwarded to the Federal

Reserve Agent of the Federal Reserve Bank of Dallas who will be in a

Position to advise Er. Beretta further as to the nocessity for a permit

614d aS to the procedure to be followed in making application for such

permit.

Approved.


board, to a letter addressed under date of August 16 to the Comptroller

°-1 the Currency by flr. A. II. larblo, President of The Stock Growers


1289/19/33

1 I-21-

National Bank, Cheyenne, Wyoming, and referred to the Board for reply,

the letter stating that id'. ljarble is a director of five commercial

banks as well as the Omaha branch of the Federal Reserve Bsnk of Kansas

City and the Denver Joint Stock Land Bank of Denver, and inquiring

*ether the provisions of section 8A of the Clayton Antitrust Act, as

anlended by section 33 of the Bsnking Act of 1933, apply to his service

Of these institutions. The reply stated that this section applies to

the service of a director of a national bank as a director of any cor-

Poration, whether or not a banking institution, which makes loans se-

cured by stock or bond collateral; that mutual savings banks, and cor-

porations which make such loans only to their own subsidiaries, are

excepted; that, however, under the provisions of section 8, the Board

is authorized to issue permits covering the service of not more than

three banking institutions coming within the provisions of section SA;

and that it should be noted, therefore, that in the event :r. Larble is

serving more than three bnnking institutions which make such loans, it

111-11 be necessary for him to sever his connection with all but three of

such institutions, or else sever his connection with all banks organized

or operating ilnder the laws of the United States, since, as stated above,

the Board may grant a permit covering only three such banking institu-

tions* The reply also stated that, in view of the fact that Federal

reserve banks make loans secured by bonds, i]r. Llarble's service as a

director of the Omaha branch of the Federal Reserve Bank of Kansas City

111°uld cone within the provisions of section 8A, since such bank, of

"uree, is "organized or operating under the laws of the United States".


9/1S/33 -22-

129

The reply stated further that regulations and forms in connection with

aPplications for permits are now in the course of preparation and will

be forwarded to the Federal Reserve Agent of the Federal Reserve Bp-rik

Of Kansas City mho will be in a position to advise Lr. Marble further

a$ to the necessity for a permit and as to the procedure to be followed

in making application for such permit.

Approved.


Board, to a letter dated August 22 from Governor Seay of the Federal

Reserve Bank of Richmond; the reply reading as follows:

"Receipt is acknowledged of your letter of August 22, 1933,with regard to a statute of the State of North Carolina enactedMarch 17, 1933, which requires the stockholders of any bank there-after organized under the laws of North Carolina to pay in casha surplus fund equal to 50% of the capital stock of the bank inlieu of the double liability imposed upon the stockholders ofbanks of that State. The statute provides that such surplusfund shall be used for the purchase of bonds of the State ofLorth Carolina or of the United States, equal in face value to50i. of the par value of the capital stock of the bank and thatsuch bonds shall be deposited with a Federal Reserve bank orother bank approved by the Commissioner of Banks of North Carolina.The bonds alail be held by the receiving bank, together with allbonds substituted or exchanged therefor, for the sole benefit ofthe creditors of the depositing bank in case of liquidation. The

statute further provides that interest on the bonds shall be in-vested in bonds of the State of North Carolina or the UnitedStates until the original investment and subsequent investmentsshall equal, in face value of such bonds, the total amount of the

capital stock of the bank, after which time the interest on suchbonds shall be paid to the bank. It is also provided that exist-ing banks may comply- with the requirements of the statute and thus

release their stockholders from double liability, and you request

advice whether compliance with such statute by a State member bank

mould result in a violation of the conditions of membership towhich it is subject.

"As you were advised in the Board's letter of August 28, 1933,

(X-7568), the Board does not require that the capital stock of


9/i9/33 .17

"State banks admitted to membership in the Federal Reserve Systemshall be subject to assessment where under the laws of the Stateunder which the bank is organized non-assessable stock may lawful-ly be issued, and it does not appear that compliance with the pro-visions of the statute of the State of North Carolina referred toabove by a state member bank would result in any violation of theprovisions of the Federal Reserve Act, the Board's regulations orthe conditions of marabership prescribed by the Board. However, itappears that under the North Carolina statute surplus funds of abank invested in bonds as required by the provisions of that stat-ute, to the extent necessary to relieve the stockholders of doubleliability, would be for the protection of the depositors in theevent of liquidation of the bank and would not be available foruse by the bank while it remains in business to provide for anylosses which might be incurred. In these circumstances it is as-sumed that in any such case such additional amounts as may appearreasonably necessary would be maintained by the bank in the formof surplus or undivided profits in order to permit the charge offof losses which may occur. In this connection, considerationshould be given to whether the capital and surplus of the bank,other than surplus invested in accordance with the requirements ofthe statute referred to above, are adequate within the meaning ofthe Board's usual condition of membership numbered 15 set out inthe Board's letter of June 30, 1933, (X-7469) and also mhether thesurplus invested in accordance with the requirements of the stat-ute referred to above may properly be included in determiningwhether a bank has the amount of surplus contemplated by theBoard's usual condition of membership number 10. The Board willnot undertake to pass definitely on these phases of the matter atthis time, but it will be interested in receiving advice as toyour views with regard thereto.

"You also requested advice with regard to whether the FederalReserve Bank should receive and hold bonds purchased with surplusfunds of a member bank in North Carolina for the purpose of reliev-ing stockholders of the bank of double liability. As noted above,it appears that under the provisions of the statute of North Caro-lina in a case of this kind, the depositary bank approved by theCommissioner of Bsrks of North Carolina holds the bonds for thesole benefit of the creditors of the depositing bank in case ofliquidation. It further appears that the interest on bonds so de-posited shall be invested in other eligible bonds until the originalinvestment and subsequent investments shall equal, in face valueof such bonds, the total amount of the capital stock of the de-positing bank, after which time the interest on the bonds shallbe paid to the bank. In view of these facts, it would not seemto be an appropriate function of a Federal Reserve Bank to act asdepositary for the purpose contemplated by the North Carolina Stat-ute. However, before taking any definite action on this matter,


9/19/33

"the Board Board would like to have an expression of your views andthe views of the Board of Directors of your Bank with regardthereto. In this connection, it mould seem advisable to obtainan opinion from the counsel for your Bank with regard to theduties of a Federal reserve bank or other depositary bank act-ing under the provisions of the Statute of North Carolina re-ferred to above and with regard to the liability which night beincurred by such a depositary bank acting under that statute.The Board would like to have a copy of any opinion rendered byyour counsel with regard to this matter."

Approved.


Board, to a letter dated August 17 from Kr. John T. Walker, President

of The Atlantic National Bank of Jacksonville, Florida; the reply read-

it as follow:A

"This refers to your letter of August 17, 1933, inquiringwhether you may continue to serve as a director of the PalatkaAtlantic National Bank of Palatka, Florida, as a director of theSanford Atlantic National Bank of Sanford, Florida, and as of-ficer and director of the Atlantic National BArar of Jacksonville,Florida.

"On Larch 6, 1930, the Federal Reserve Board issued to you aPermit to serve the banks named above; and such permits continuein force until revoked.

9-i;hi1e Section 8A of the Clayton Antitrust Act, as amended bySection 33 of the Banking Act of 1933, forbids certain relation-ships which were not forbidden by the provisions of Section 8 ofthe Clayton Antitrust Act, nevertheless permits heretofore is-sued covering services within the prohibitions of Section 8authorize the person to whom they were issued to serve the sanebanks, although such banks are now within the prohibitions ofSection 8A, as well as Section 8. It will not be necessary,therefore, for you to obtain a new permit covering the servicesdescribed in your present permit."

Approved.


13"-rd, to a letter dated September 7 from Lr. John T. ';;alker, Jr.,

?resident of The Atlantic Rational Bank of Jacksonville, Florida; the


Pirst

First

9/19/33 -25-132

reply reading as follows:

"Receipt is acknowledged of your letter of September 7, 1933,addressed to the Governor of the Federal Reserve Board, with re-gard to the Board's Regulation Q, relating to the payment of de-posits and interest thereon by member banks of the Federal ReserveSystem.

"This regulation was approved by the Federal Reserve Board onAugust 29, 1933, and becare effective immediately, except that,in accordance with Sections I1I(c) and V(c) of the regulation,the limitation on the rate of interest which may be paid on timedeposits or savings deposits will become effective on November 1,1933.

"Regarding your comments with respect to savings accounts, theFederal Reserve Board does not feel that it should undertake atthis time to define in detail the words 'bona fide thrift purposes'or further to define the term 'savings deposit' as used in theregulation. (.1.he Board suggests that each member banic exercise itsbest judgment in determining whether deposits are of such a naturethat they may properly be classified as savings deposits withinthe meaning of the Board's definition and, if a case arises inWhich the bank is in doubt as to the correctness of its conclusion,that it submit the matter to the Federal reserve bank of its dis-trict for advice on the question. If the Federal reserve bankfeels the question is one which should properly be considered bythe Federal Reserve Board, it will submit the matter to the Boardfor a ruling."

Approved.

Reports of Standing Committee dated September 16 and 1S, 1933,

recommendins approval of the following changes in stock at Federal re-

serve banks:

A41Laation5 for ORIGINAL Stock: Shares Dlstrict No. 5.Citizens National Bank in Gastonia, N. C. 135Garrett National Bank in Oakland, Md. 45 180

A 14, --Lcations for SURRENDER of Stock:ho. 4.

First National Bank,(Insolvent)

National Bank,(Insolvent)National Bank,(Insolvent)

Hicksville, Ohio

Kansas, Ohio

Stockport, Ohio

Total 180

36

18

30 84


133

9/19/33 -26-

Cations for SURREUDER of Stock (Continued) District No. 5.Garrett National Bank: Oakland, Md.

(Being liquidated through conservator)

IpAlltiEL40* 7*Grand Rapids Naional Bank, Grand Rapids, Mich.

(Being liquidated through conservator)

District No. 10eFirstialBank, Garden City, Kansas

(Insolvent)

App ovedt

Approved.

Thereupon the meeting adjourned.

Governor.

Shares

150 150

900 900

36 36Total 1,170

0.4 A k 0.Secretkry.


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