19330926_minutes.pdf

181

A meeting of the Federal Reserve Board was held in Washington on

IlesclaY, September 26, 1933, at 11:00 a. in.

PRESENT: Mr. Black, GovernorMr. HamlinMr. MillerMr. TamesMr. SzymczakMr. O'Connor

Mr. Bethea, Assistant SecretaryMr. Martin, Assistant to the GovernorMr. Wyatt, General CounselMr. Paulger, Chief of the Division of

ExaminationsSmead, Chief of the Division of Bank

OperationsMr. Vest, Assistant Counsel.

ALSO PRESENT: Yr. Frederic A. Delano, Deputy Chairman andClass C director of the Federal ReserveBank of Richmond

Ur. Charles E. Rieman, Class A director of theFederal Reserve Bank of Richmond

Mr. Charles C. Reed, Class B director of theFederal Reserve Bank of Richmond.

Governor Black stated that on September 19, 1933, he received atel

from Mr. Frederic A. Delano, Deputy Chairman and Class C director

(31* the Federal Reserve Bank of Richmond, inquiring whether the Board would

'"eive a committee from the Federal Reserve Bank of Richmond, of which he

le chairman, to consider a proposal for the acquisition of a small area of

lelld adjoining the present bank property. Governor Black said that, in the

ell'el44etances, he had advised Mr. Delano, on behalf of the Board, that the

could be presented this morning. Mr. Delano introduced Messrs.

elle'Qes E. Rieman and Charles C. Reed, Class A and B directors respectively,

h° v/ith himself comprised the committee representing the Richmond bank,

44c1 Pl'°ceeded to read the following memorandum which he said containedthe 1,

ecommendation of the committee:

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

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3 60

tiOur Committee is here at the request of the Board of Direc-

tors of the Reserve Bank of Richmond to present a question ofPolicy in connection with the purchase of land adjoining ourBank property. The decision involves forecasting for the nextfew years the probable requirements of our Bank. It requires adecision as to policy upon which the Reserve Board is in abetter position to decide than we.

"A brief retrospect of the Bank's history indicates ourexperience in the past nineteen years. The Bank began businessin rented quarters in the center of the banking district in abuilding decidedly deficient in many ways but the best avail-able. It was an old bank; it was neither fireproof nor burglar-Proof; it soon proved so deficient in capacity that the staffwee quartered in several localities before better arrangementscould be worked out. The original purchase of the corner of9th and Franklin Street, 93 feet by 120 feet in depth, was madein 1916 for $122,000.-. The building contract was let duringWar times and the work done at great expense under a 'Icost-plus"contract. A monumental structure six stories high was thenProvided, but before it was finished it was evident that wartiMe requirements demanded a great deal more space. An annexlot was bought, 38 feet by 120, in the rear and a simple steelframe building was constructed connected with the main buildingbY a bridge across a 20 foot alley. This annex building proveda life saver at the time, but was not an efficient plan and in1930 your Board authorized our Bank to purchase the adjoiningland known as the Foster property, 75 x 120 feet, for $150,000.-,n?t a bad purchase but nevertheless considerably more costlytaan it might have been if we had been more forehanded.

Mowever, the great advantage of the purchase of the FosterProperty was that we were able to rearrange and greatly enlargeoUr original Bank plan and at the same time rectify some errorsin the early layout. Our new Bank building with its frontageof 168 feet on Franklin Street and depth of 120 feet comparesfavorably, we believe, with any building of its size. We felt

that we were housed for all time when this building was comPleted and offered the annex building for sale. Fortunately,

11° sale was consummated, for in less than two years a great

change has taken place.6 "The annex was rented by the U. S. Postal Department at

!30,000.- per year and though vacated by this bureau several,lonths ago, is again fully occupied by R.F.C. Agency and-a'xaminers of the Comptroller's Department. The two spare

floors in the enlarged office of the main Bank reserved for

future growth came into active demand to accommodate our

Otletodian Department set up in connection with the R. F. C.

work, and in the last year or more our own Bank work has re-

quired putting on 133 additional employees, thus gradually


9/26/33

"pushing out our friends of the R. F. C. into the annex asalready stated.

"To sum up the situation, the facilities deemed two yearsago entirely adequate for another ten years is 'full-up' andwe come to ask your judgment, first as to whether this growthle simply temporary or whether we may fairly expect furthergrowth under the recent changes in the banking act?

"The special reason for bringing up this subject now isthat we are offered a lot adjoining the annex (110 feet fronton 8th Street and 120 feet in depth) directly back of ourenlarged Bank building as shown in the plat annexed at '185,000.-net, that is plus commissions. This price is we think aboutPro of its fair cash value in normal times and on a basis( 6.63 per square foot) very considerably less than any propertybought by us heretofore.

"Our entire plant in Richmond up till now has cost in roundfigures $3,500,000.-, but has been written down by depreciationCharges to two million dollars, so that our Board of Directorsare of the opinion that to spend now 87,500.- for the adjoininglot assessed for $72,442.- and now rented as a gas station forfive years for more than the taxes is a small price to pay forinsurance.

"To make a long story short, we ask on behalf of the Rich-mond Reserve Bank the authority to close the purchase upon theterms suggested.

Respectfully submitted,

Committee:(Signed) Frederic A. Delano

Charles E. RiemanChas. C. Reed"

Delano submitted a plat, photographs, and additional data, all

Of Which have been placed in the Board's files. The individual members of

the °()Mmittee amplified the information contained in the above memorandum

by stating that, in view of the provisions of the Glass-Steagall

41.2t1 it was anticipated many additional banks in the Fifth District would

be1/4kraitted to membership in the System, with a resultant increase in the

4148 Of the reserve bank's examining staff. The committee explained that

the additional property which the bank desires to acquire is held by an

eatate and the bank has a thirty day option on such property which will

on or about October 13, 1933; that, while the option specifies a


1 64

9/26/33 -4-

Purchase price of 485 000, it is anticipated that the bank may be able to

obtain the property for $75,000 or 480,000; that the property would doubt-

less enhance in value after being purchased by the Federal reserve bank;

snd that the location was one in which real estate values had been stabil-

ized. I. James inquired whether the committee and the directors of the

Pecleral Reserve Bank of Richmond had considered the provisions of section

244 of the Federal Reserve Act, as amended by the Banking Act of 1933,

Itld-ellt in his opinion, answered the question of policy that seemed to be

confronting the committee. Er. Tames read the section in question which

is as follows : "Hereafter no national bank, without the approval of the

ecOPtroller of the Currency, and no State member bank, without the approval

°t the Federal Reserve Board, shall (1) invest in bank premises, or in the

Stock, bonds, debentures, or other such obligations of any corporation

41cling the premises of such bank or (2) make loans to or upon the

BecIlrity of the stock of any such corporation, if the aggregate of all

811ch investments and loans will exceed the amount of the capital stock of

ell°4 bank." Er. lames stated that the Federal Reserve Bank of Richmond

44(1) as of December 31, 1932, expended on bank premises, including

l'e'illts) furniture and equipment, 45,489,950, and that on that date the

1541d-in capital of the bank was only $5,150,000. He stated also that,

174ile the Richmond bank had a surplus as of December 31, 1932, in the

411411" of 411,617,000, under the provisions of the Banking Act of 1933,

the bsnk would be required to subscribe for Class B stock in the Federal

tleP0m44.".." Insurance Corporation to an amount equal to one-half of the bank's

3111'Plu 8 011 Xanuary 1, 1933. Mr. Tames stated further that, although the


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Provisions of the law referred to do not apply to Federal reserve banks,

he thinks the law establishes a very definite principle. Mr. Delano said

that, although 45,489,950 had been expended for fixed assets, the book

78-1-11e of such assets on December 31, 1932, amounted to :3,237,318, the

difference between these two figures having been charged off by the bank

°Iit or its earnings. Yr. Rieman added that in his opinion the Board should

ec)naider the situation from the standpoint of the book value of the bank's

1311°PertY rather than on the basis of the cost figures.

Messrs. Delano, Rieman, and Reed thereupon withdrew from the

meetine.

After discussion, Mr. Miller made a motion tothe effect that the Board approve the proposed pur-chase by the Federal Reserve Bank of Richmond, whichwas put to a vote and lost, Messrs. Hamlin, Millerand O'Connor voting in the affirmative, and Messrs.Black, Xames and Szymczak voting in the negative.

Governor Black then referred to the application of The abase

National Bank of the City of New York, New York, for permission to estab-

liala a branch in the City of San Juan, Puerto Rico, and to the letters

Wh1Ch the Board had addressed under date of September 12, 1933, to Mr.

48es Federal Reserve Agent at New York, Mr. O'Connor, Comptroller of the

(4/1‘enoY, and Honorable George H. Dern, Secretary of War, requesting an

":14'eesion of their views on the question whether it would be in the

PlIblic interest to permit The Chase National Bank to establish a branch

t he City of San Juan. He stated that letters have now been received

14 IlesPonse to the Board's inquiries of September 12, and it is recam-

Ilellaed unanimously that the Board approve the application of the national

bellk f°r permission to establish a branch in the City of San Juan, Puerto


186

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Rico.

The Board Board thereupon adopted the followingorder, and authorized the Assistant Secretaryto transmit a certified copy thereof to TheChase National Bank of the City of New York:

"ORDER AUTHORIZING THE CHASE NATIONAL BANK OF

THE CITY. OF NEW YORK TO ESTABLISH A. BRANCH

IN TRF, CITY OF SAN JUAN, PUERTO RICO.

"WHEREAS, The Chase National Bank of the City of New Yorkhas made application, pursuant to the provisions of Section 25of the Federal Reserve Act, for permission to establish abranc h in the City of San Alan, Puerto Rico; and

"WHEREAS, it appears that said application is properlymade under the law and may properly be approved;

"'NOW, THEREFORE, IT IS ORDERED that the said application11!(3 and it hereby is approved, and that the said bank be and itT3robY is authorized to establish a branch in the City of San'Juan, Puerto Rico; upon condition, however, that, unless theauthority hereby granted is exercised and such branch actuallyis established and opened for business on or before March 26,1934, all rights hereby granted shall be deemed to have beenabandoned and the authority hereby granted shall automaticallyterminate; but, if said branch shall be established and openedfor business on or before said date, the said bank may operateand maintain the same subject to the provisions of Section 25Of the Federal Reserve Act."

Governor Black stated that he had received a letter dated Septem-

her 231 1933, from the Honorable Frances Perkins,, Secretary of Labor,

tating that his cooperation is desired in distributing a questionnaire

the Department of Labor is using in its study of the cost of living

Or Paderal civilian employees in Washington; that she is having delivered

to the Board a number of schedules which bear upon a cost of living study

r°1' eovernment employees; and that it is requested that one schedule be

rillea out by every civilian employee in Washington under the Board's

illtisdiction. He stated also that the information requested is needed by


9/26/33

the Bureau

Department

to be used

"cordance

67

-7-

of Labor Statistics and the Bureau of Home Economics of the

of Agriculture for their study of changes in the cost of living

in connection with a proposed salary adjustment, presumably in

with the provisions of the Act of March 20, 1933, on this sub-

Ject; that, in his opinion, the provisions of this act regarding the

l'eduction in compensation of employees are not applicable to the compensa-

tion of employees of the Board by reason of an amendment to the Federal

Reserve Act contained in the Banking Act of 1933; that employees of the

13°ard, moreover, are not in the classified civil service; and that the

ilurPose of the questionnaire referred to would not seem to be applicable

to employees of the Board. Governor Black stated further that he thought

4 l'ePlY should be sent to the Secretary of Labor, which would embody

84b8tantially the thoughts he had expressed, and that a copy of such

letter should be transmitted to the Commissioner of Labor Statistics who

11" ale° written to the Board in this regard under date of September 25,1933.

After discussion, the Board referred thematter to the Governor with power to act, withthe understanding that a letter would be addressedto Secretary Perkins embodying the substance ofhis remarks.

Governor Black stated that Governor Harrison of the Federal Reserve

41Ik c)f New York had discussed with him the advisability of having a

°°Iternorst conference at an early date to consider particularly open

rc"ket operations and other pressing matters of importance. Governor

Said that he thought it would be desirable to call a conference in

llear future so that the governors might be fully informed as to recentthe


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developments. He inquired as to the Board's views on the subject and

24ggested that October 10, 1933, would be a suitable date if such a meeting

were to be held.

After discussion, the members of the Boardpresent approved Governor Black's suggestion andauthorized him to call a conference of theGovernors of the Federal reserve banks to be heldin Washington on October 10, 1933.

111 this connection, Governor Black said that Mr. Stevens, Chairman of the

Feclellal Reserve Bank of Chicago, had written the Federal Reserve Board

114(ler date of September 23, 1933, with regard to the possibility of having

4 Joint conference of the chairmen and governors sometime this fall and

illqUiring as to the Board's plans in this respect. Governor Black said

that he felt it would not be desirable to disturb the agents at this time

the purpose of calling them to Washington, by reason of the fact that

their time is fully occupied in holding conferences with representatives

'45.111ber banks and others in connection with the emergency program of the

edel'al Deposit Insurance Corporation, and that, in the circumiRtances, it

W°434 seem desirable to postpone the consideration of any pinns looking

to s conference of Federal reserve agents until later in the year.

After discussion, the members of the Boardpresent concurred in the views expressed byGovernor Black and authorized the AssistantSecretary to advise Mr. Stevens accordingly.

1.1r. Bethea presented a letter dated September 21 and a telegram

aftted September 25, 1933, received from Mr. McClure, Federal Reserve Agent

at411sez City, stating that Mr. Walter T. Cummings, Chairman of the Fed-


(p 9/26/33-9--

"el Deposit Insurance Corporation, had requested the reserve bank to loan

to such Corporation for a period of ninety days, the services of Mr. N. R.

Oberwortmann, who is in charge of the bank's examination department, to

essist in connection with the emergency program which is confronting the

Corporation. Attention was called to the fact that the Board yesterday

4PProved the designation of Mr. Oberwortmann as Assistant Federal Reserve

43'ent, effective October 1, 1933, and also to the statement of Mr. McClure

that, Inasmuch as the bank's examining staff consisted of only Mr.

Oberwortmaan and three examiners, his services were particularly valuable

to the bank at this time and his absence would necessarily handicap the

17°Isk of the bank's examination department, but that, in view of the

exigencies of the situation, the bank was willing to grant the leave of

etbsence requested if such action, in view of all the circumstances, met

With the aPproval of the Federal Reserve Board. Governor Black stated

th"' in his opinion, the Board should cooperate to the fullest extent with

the Federal Deposit Insurance Corporation and that he felt the Board should

obi ect to the proposed lending of Mr. Oberwortmennts services.

After discussion, it was the consensus ofthe members of the Board present that Ur. McClureshould be advised that the Board would interposeno objection to the compliance by the bank withM. Cummings' request for a loan of Mr. Oberwortmann'sservices for a period of ninety days.

The Board then considered and acted upon the following matters:

Il randum dated September 18, 1933, from Mr. Paulger, Chief ofthe M4

4J4.v1si0n of Examinations, recommending the appointment of Mr. WarrenX, Lie cie

lland and his designation as an assistant Federal reserve examiner,


lb

g/26/33 -10-

With salary at the rate of Q3,000 per annum, effective as of the date upon

which he enters upon the performance of his duties.

Mr. McClelland was appointed an examiner forall purposes of the Federal Reserve Act, as amended,and of all other acts of Congress pertaining to ex-aminations made by, for, or under the direction ofthe Federal Reserve Board; and was designated anassistant Federal reserve examiner, with salary atthe rate of :0,000 per annum; all effective as ofthe date upon which he enters upon the performanceof his duties.

Memorandum dated September 20, 1933, from Mr. Paulger, Chief of

the Division of Examinations, recommending the appointment of Mrs. Rose

1)* 11°°t as a file clerk in the Division of Examinations, with salary at

the rate of '1,560 per nnnum, effective as of the date upon which she

et/tell3 upon the performance of her duties; the recommendation having been

41D131'°ved by six members of the Board on September 25, 1933.

Approved.

Memorandum dated September 22, 1933, from Mr. Paulger, Chief of

the 3Division of Examinations, recommending the appointment of Mr. Harold

?* Stmae asa stenographer-clerk in the Division of Examinations, with

483-arY at the rate of $1,600 per annum, effective as of the date upon

Which as enters upon the performance of his duties; the recommendation

heolIi been aPproved by six members of the Board on September 25, 1933.

the .4-'1:vi810n of Examinations,

lealstor,- as a stenographer in the Division of Examinations, with salary at

4te of .4,560 per annum, effective as of the date upon which she

the 1,

Approved.

Liemorandum dated September 23, 1933, from Mr. Paulger, Chief of

requesting the appointment of Miss Marjorie


9/26/33 -11-

enters upon the performance of her duties.

Approved.

Memorandum dated September 23, 1933, from Mr. Ftulger, Chief of

the Dtvision of Exandnations, stating that, when Mr. L. A. A. Siems,

Peders1 Reserve Examiner, was transferred from the field force of the

Division of Examinations to the office in Washington it became necessary

to change his headquarters fromBaltimore, Maryland, to Washington, D. C.,

4114 recommending, inasmuch as he has returned to the field force, that

Stems' headquarters be changed fran Washington, D. G., to Baltimore,

144/71and, his place of residence, the change to becone effective

tnizediately.

Approved.

Reply on September 25, 1933, approved by six members of the Board,

tc a letter dated September 16 from Lir. McClure, Federal Reserve Agent

Et-4431"a City, stating that the resignation of Lir. N. R. Oberwortnann

4a Assistant Cashier of the Federal Reserve Bank of Kansas City was

r°11441.111r accepted by the board of directors of the bank at its regular

toasting on September 14, to be effective as of the close of business

Septezber „30, 1933; and to two letters dated September 16 from Mr. McClure,

e'ddre8aed to the Federal Reserve Board and Governor Black, respectively,

l'"°41caending the appointment of Mr. Oberwortminn as Assistant Federal

1168erve Agent, with salary at the rate of :,;6,800 per annum, effective as

ot October11 1933. The reply stated that the Board approves the action

or the boexaOf directors in accepting the resignation of Mr. Oberwortmann

e'a Assistant Cashier of the bank, effective as of the close of business


9/26/33 -12-

September 30, 1933, and also approves his appointment as Assistant Fed-

"al Reserve Agent, with salary at the rate of 46,800 per annum, effective

48 of October 1, 1933.

Approved.

Telegraphic reply on September 22, 1933, approved by six members

or the Board, to a telegram dated September 20 from Mr. Newton, Federal

ileserve Agent at San Francisco, requesting approval of the appointment of

11/.. R. 0. Voget as an examiner in the Federal reserve agent's department

r the Federal Reserve Bank of San Francisco, with salary at the rate of

4351° e month, effective September 23, 1935. The reply stated that the

13°"d approves the appointment of Mr. Vbget with salary at the rate stated.

Approved.

Letter dated September 22, 1933, to the board of trustees of

The New Britain Trust Company", New Britain, Connecticut, approved by

eiX IlleMbers of

3"ibed in the

tc3r 4embership

°t stock of the

be entitled upon

Which it membership

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

letter, the Board approves the trust company's application

in the Federal Reserve System and for the number of shares

Federal Reserve Bank of

the basis of its

Boston to which the company will

capital and surplus as of the date upon

becomes effective.

Approved.

Letter dated September 25,

"West New Brighton Bank", West New

tastabera of the Board, stating that14 the

letter, the Board approves

1933, to the board of directors of the

Brighton, New York, approved by six

, subject to the conditions prescribed

the bank's application for membership


9:3

9/26/33 -13-

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

the Federal Reserve Bank of New York to which the bank will be entitled

111304 the basis of its capital and surplus as of the date upon which its

1716121berehip becomes effective.

Approved.

Letter dated September 22, 1933, to Mr. Case, Federal Reserve

4eent at New York, approved by five members of the Board, replying to

Iteeistant Federal Reserve Agent Dillistin's letter of August 4 advising

that the reorganizations of the Perth Amboy Trust Company and the Raritan

Ust Company, both of Perth Amboy, New Jersey, did not involve a

l'eduction of the capital stock of either of such companies. The reply

etated that, in view of this fact, there was no violation of the condition

Dielmbership applicable to these companies with regard to reduction of

thejcePital stock which was referred to in the Board's letter of July

le, 1933.

Approved.


to 4 letter dated September 6 from Mr. McClure, Federal Reserve Agent at

44aas City, transmitting an analysis of the report of credit investiga-

tion °I' The State Bank of Winfield, Kansas, made as of Tune 24, 1933, in

cIlljlin"ion with the regular examination by the State banking authorities.

1118 rePlY stated that the analysis of the report of credit investigationdiaci

c/88e e most unsatisfactory condition, and that the Board is in

"eolld with the agent's suggestions to the bank, as shown in his letterOf

SePtc her 6, 1933, to that institution. The reply also stated that, in


9/26/33 -14-

accordance with the agent's suggestion, the Board will take no action at

this time toward the termination of the membership of The State Bank of

Winfield in the Federal Reserve System; that the Board, however, desires

to be informed of developments in the condition of the bank and in the

euggested plans for reorganization or other correction; and that, as soon

as conditions warrant, and in all events by November 1, 1933, the Board

de8ires to be advised of the corrections effected in the condition and

rtianagement of the bank, together with the agent's recommendation as to

what action should be taken on the question of terminating the bank's

1116111berehiP in the Federal Reserve System.

Approved.


t° 4 letter dated August 8 from Mr. Fry, Assistant Federal Reserve Agent

" RichIllond, with regard to the branches which may lawfully be retained

14 the Eastern Shore Citizens Bank of Onancock, Virginia, if it should

Ilecc'e a member of the Federal Reserve System.

aPPears that the Eastern

laws of Virginia in 1906

t4 19°9, under authority

Painter, which it was

The reply stated that it

Shore Banking Company was organized under the

with its home office at Keller, Virginia, and

of the law of Virginia, it established a branch

operating on February 25, 1927; that, subsequent

to the latter date, it established a branch at Melfa, Virginia; that the

Cit12ene Savings Bank of Onancock was organized in 'Larch, 1928, under the

14741 °I' Virginia and was authorized to ope

Virginia; and that on April 29, 1933, the

4b°Ve Were consolidated, apparently under

rate a branch at Accomac,

two banking institutions mentioned

the title "Eastern Shore Citizens


g/26/33 -15-

in the manner authorized by sections 4149 (10), 3821 and 3822 of the

°(:)cls of Virginia. The reply also stated that, inasmuch as the branches at

4"cmac and Melte were established subsequent to February 25, 1927, the

4etern Shore Citizens Bank may not lawfully become a member of the Fed-

"41 Reserve System and continue to operate either of these branches un-

less it possesses the requisite capital stock and complies with all of the

"her requirements applicable with respect to the establishment of out-of-

tQwn branches of national banks, which are set forth in section 5155 of

the Revised Statutes; that, although the Eastern Shore Banking Company

has its home office located at Keller, and a branch of the consolidated

c°11110ration is now in operation there, it does not appear that a branch

either of the institutions involved in the consolidation was located

" that Place; that it is the view of the Board that the office at Keller

1°144Y not be regarded as a branch established prior to February 25, 1927;

44C1 that, accordingly, the Eastern Shore Citizens Bank may not become a

4"3" of the Federal Reserve System and continue to operate a branch at

Xelle,-' unless( it complies with the requirements applicable to the estab-

1181111ent of out-of-town branches of national banks. The reply stated

er that, in the circumstances set forth therein, it is the view of

tile 13(lard that the branch of the Eastern Shore Citizens Bank at Painter,

Which was established in 1906 by the Eastern Shore Banking Company, was

4 branch established and in operation on February 25, 1927, within the

-"g of section 9 of the Federal Reserve Act; and that, accordingly,the"tern Shore Citizens Bark may lawfully operate its head office at

%late

(3C) and its branch at Painter, if it should become a member of the


z

9/26/33 -16-

Federal Reserve System, without complying with the requirements applicable

to the establishment of out-of-town branches by national barks.

Approved.


to a letter dated September 15 from Congressman George R. Durgan,

142aYette, Indiana, with further reference to the question whether the

State Exchange Bank of Culver, Indiana, may become a member of the Federal

Reserve System and retain a branch which it has in operation at Argos,

illdialaa. The reply stated that the Board has also received a letter from

the cashier of the State Exchange Bank with regard to this subject; that

Olme ce the

eiclered to

14171 or the

questions involved is whether the branch at Argos may be con-

have been established and in operation in conformity with the

State of Indiana on February 25, 1927; that the Board has re-

ed the Federal Reserve Bank of Chicago to obtain an expression of

the views of its counsel on the question; and that, as soon as this has

been obtained, the Board will give further consideration to the matter

411d Will advise Congressman Durgan as soon as possible.

Approved.

Reply on September 22, 1933, approved by seven members of the

Board) to two telegrams dated August 23 from Mr. Conniff, Deputy Governor

of +1,_""" Federal Reserve Bank of Atlanta, pertaining to the question whether

4-1an banks which are not members of the Federal Reserve System

obtn4---Lu direct loans from Federal reserve banks under the provisions

°t eection 404 of the Act of March 9, 1933, as amended by the Act of

141.°11 24) 1933. The reply stated that the term "bank" is broad enough


11 9/26/33 -17-

to include Morris Plan banks; that the Board has ruled that they are bank

Within the meaning of section 8 of the Clayton Antitrust Act and sections

4 :45'D4 19 of the Federal Reserve Act; but that the Act of Larch 24, 1933,

When read in its entirety, indicates that Congress intended to grant to

14°rris Plan banks the privilege of obtaining capital funds through the

841e of preferred stock to the Reconstruction Finance Corporation but did

hot intend to grant them the privilege of obtaining direct loans from

Pederal reserve banks; that this appears from the fact that section 404

(3 the Act of March 9, 1933, as amended by the Act of March 24, 1933, con-

a. definition of the term "State bank or trust company" as used both

t4 that section and in section 304 of the Act of March 9, 1933, and that

this definition makes no reference to Morris Plan banks, whereas the Act

OrMa.ch 24, 1933, also amends section 304 of the Act of March 9, 1933,

to define the term "State bank or trust company", as used in that

4ection. alone, as including, "other banking corporations engaged in the

bilsifless of industrial banking and under the supervision of State banking

(1e1)"tliente or of the Comptroller of the Currency", which is taken to

)21644 Ilorris Plan banks and other banks engaged in similar business. The

l'el)1 also stated that, after careful consideration the Board is of the

ion that Morris Plan banks which are not members of the Federal R -

441"g*e SYstem may not obtain direct loans from Federal reserve banks under

the 13r°visions of section 404 of the Act of March 9, 1933, as anended by

the Act of 'larch 24, 1933.

Approved.

Telegram dated September 23, 1933, to the Federal reserve agents


198

g/26/33 -18-

8:4 ail Federal reserve banks, approved by five members of the Board,

referring to the Board's telegram of September 10, 1932, with regard to

a l'eclassification of member banks for electoral purposes, and stating

that no change will be made this year in group classifications for elec-

ti°118 of Class A and B directors, and that the Board will take up with

the agents later the question of reclassification of directors for the

3.934 elections.

Approved.

Letter dated September 23, 1933, to the governors of all Federal

reserves banks, approved by six members of the Board, stating that, upon

eLe'reeroant between the Federal reserve banks affected, the Board has

ePProved the following changes in the inter-district time schedules:

Kansas Cityft

ft

Oklahoma City

itit

ft

ft

Ozaliait

ft

It

New York

toIt

tt

ft

It

It

if

ft

ft

it

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II 9/26/33 -19-11Reply on September 22, 1933, approved by six members of the Board,

to a letter dated September 11 from //r. Stevens, Federal Reserve Agent at

Chicago, requesting advice as to whether an individual or an "estate" may

be a "holding company affiliate" of a member bank within the meaning of

the Banking Act of 1933. The reply referred to the provisions of section

2) subdivision (c) of the Banking Act of 1933, and stated that the act

4akes no reference to ownership or control by an individual, and that it

71°111d seem clear that an individual may not be a "holding company

4tfiliate" of a member bank within the meaning of the act, notwithstand-

tag that he may own or control a majority of the stock of a member bank

()1' Illore than 50 of the number of shares voted for the election of direc-

t°1*8 at the preceding election or may control the election of a majority

c)r the directors of such bank. The reply also stated that the Board does

licIt have sufficient information to enable it to rule at this time on the

cilleetion whether the "estate" to which the agent has reference COMBS within

the Purview of the act relative to holding company affiliates, and that if

e41:Y. 'teorporation, business trust, association, or other similar organiza-

ti°44 holds the stock belonging to such estate, and such stock represents

tilleiority of the shares of stock of the member bank or more than 505 of

the Illimber of shares voted for the election of directors at the preceding

leetion, and if such organization actually controls such stock, it would

411Pear to be a holding company affiliate and subject to the provisions of

tile act relative thereto. The reply stated farther that, in this

e°141ection, however, attention is directed to an opinion by the Attorney

Of the United States, a copy of which VISB inclosed with the reply,


11 9/26/33 -20-

14 which he states that "it does not seem objectionable to say that I

Perceive the force of your Solicitor's conclusion that ownership and

control through majority stockholding does not include a holding by a

benk merely as executor or in some other such fiduciary or representative

caPacity, subject to control by a court, or by a beneficiary or a

1)114cipal, and without the incentive and opportunities which might arise

141'ci.4 a holding of the stock by the bank as its own property"; and that,

PlIrsuant to this opinion, the Board will not consider an organization

Wilich holds the requisite amount of stock of a member bank as executor

(11' truetee to be a holding company affiliate of the member bank, provided

th4t such organization holds such stock subject to control by a court, or

bY 4 beneficiary or other principal, and that the organization may not

11111141111Y exercise control of such stock independently of any order or

direction of a court, beneficiary, or other principal.

Approved.

Telegram dated September 25, 1933, to nr. Stevens, Federal Re-

"6 Agent at Chicago, approved by six members of the Board, replyingto

Qt -Letter dated August 1 from Assistant Federal Reserve Agent Young

etati4 that the majority of the stock of the Amalgamated Trust & Savings

13e411C$ Chicago, Illinois, a member bank, is held by trustees for the

bellerlt of the Chicago Joint Board, Amalgamated Clothing Workers of

kerica, and inquiring as to whether the Chicago Joint Board is an

eXriliate or a holding company affiliate of the member bank. The reply

etated that it would appear that the Chicago Joint Board, Amalgamated

C1"1114g Workers of America, is a holding company affiliate of the


201

9/26/33 -21-

Ailleag8mated Trust Cr, Savings Bank if it controls directly or indirectly

rasjority of the shares of the capital stock of such bank or more than

5()% Of the number of shares voted for the election of directors of such

ballk at the preceding election, or if it controls in any manner the

electi031 Of a majority of the directors of such bank, or if it is

affiliated with such bank in any other mnriner set forth in section 2,

8/113Paragraph (c) of the Banking Act of 1933.

Approved.


or the Board, to a telegram dated September 19 fronillr. Harold C. Timber-

441) Assistant Statistician at the Federal Reserve Bank of Minneapolis,

Ile/4tive to reports of affiliates of State member banks. The reply stated

thatwhere a group consists of a large number of member banks and non-

affiliates, it would appear that the furnishing by each nonmember

4rtiliate of a report containing requisite information in regard to the

l'el"i°nahiP between such affiliate and each member bank in the group

W°4341 constitute a substantial compliance with the provisions of section

9 af.the Federal Reserve Act, as amended, which requires each member bank

to t4Illish to the Board a report of each of its affiliates other than

lexilber banks; that, however, each such report should set forth as separate

1tel3aa the information in regard to the relationship between such affiliate

44c1 each member bnrk; and that each State member bank in the group should

eh that part of the report of each affiliate which pertains to the

1104t4che between such affiliate and the member bank making the publica-tio, ,

-1 lf the publication of reports of such member bank is required by


9/26/33 -22-

State law. The reply also stated that, if a member bank has already

Published its own report as of ,Tune 50, it should publish it again with

the report of its affiliate.

Approved.


t° a telegram dated August 3 frori/a'. McClure, Federal Reserve Agent at

4118as City, in which he raised certain questions in connection with the

Pl'ovisions of the Banking Act of 1933 relative to reports of affiliates of

State member banks. The reply stated that, although the information fur-

rushed to the Board is very meager, the Board understands that shareholders

°t the Commerce Trust Company of Kansas City control four nonmember banks

till*°11gh the medium of trustees, and that the condition report of each

1311°4 nonmember bank was published by the nonmember bank pursuant to call

ot the State Finance Commissioner as of Tune 30. The reply also stated,

14 reSPOnse to the agent's inquiry as to whether, under the provisions

(31' t• he Banking Act of 1933, it will be necessary for the Commerce Trust

C°111PanY to publish the reports of these nonmember banks, which presumably

eLl's 4fr111ates of the member bank., or whether the Board will accept the

134131J-cations already made as a compliance with the law; that section 9

°I' the Federal Reserve Act, as amended by section 5(c) of the Banking Act

°t 1• 9331 Provides in part that the reports of affiliates of a State member

hallk 8113.11 be published a the bank under the same conditions as govern

its °wn condition reports; that it would seem that publication of the

l'ePc)rt of an affiliate /a the affiliate would not satisfy the requirements

°r t• he Law; that since the act does not authorize the Board to waive

PlIblieEltion by a member bank of the reports of its affiliates, it is the


9/26/33 -23-

°Pinion of the Board that the Commerce Trust Company must publish the

rsPorts of the nonmember banks if they are affiliates of the member bank

4id if the member bank is required by State law to publish its awn con-

report notwithstanding that such reports were published by the

llotmember banks pursuant to call of the State Finance Commissioner as of

3.11116 30; and that, moreover, in order to carry out the purposesof the

4") it Would seem that when the reports of condition of its affiliates

as of June 30, 1933, are published, the Commerce Trust Company should also

PUblish inthe same newspaper a statement of its own condition as of the

same date, even though its own report as of that date already has been

The reply stated further, in response to the agent's statement

that "each of these banks" owns all of the stock of a corporation

°P"ating safety deposit boxes, and that "one or more own all the stock

ta '1 corporation holding Government securities"; that, if the member bank

°V1112 all of the stock of a corporation operating safety deposit boxes, it

14)111d seam clear that such corporation is an affiliate of the member bank

44cler section 2(b) (1) of the Banking Act of 1933, and that the member

butics required to publish the report of such affiliate under the same

e°174itions as govern its own condition reports; that if each nonmember

bealkIS an affiliate of the member bank and owns a corporation operating

e4tetY deposit boxes, it would appear that each such corporation is one

or174ich control is held indirectly by the shareholders of the member

that it is an affiliate of the member bank, and that the provisions

or tile act relative to reports of affiliates are applicable thereto. The

l'e131Y added that, for a similar reason, it would appear that the corpora-


-Na

9/26/33 -24-

tion which holds Government securities may be an affiliate of the member

bank and subject to the provisions of the act requiring reports of

affiliates, and publication thereof; that, however, the Board does not

have sufficient information to enable it at this time to rule definitely

°n these questions; and that the expression of its views with regard

thereto is not to be understood as a final determination of such questions.

Approved.

Telegram dated September 22, 1933, to Mr. Newton, Federal Reserve

Agent at San Francisco, approved by six menbers of the Board, replying to

a letter dated August 31 from IS. Sargent, Assistant Federal Reserve

Aeent at San Francisco, stating that the Utah Trust and Savings Bank, Salt

1444 City, Utah, a member bank, has a capital issue of 3,000 shares of

Which the Zion's Savings Bank and Trust Company owns 1,434 shares and the

11(3rillon Church 320 shares, and that the Mormon Church in turn owns control

t the Zion's Savings Bank Li Trust Company; and requesting advice as to

whether the Mormon Church or the Zion's Savings Bank and Trust Company is

44 affiliate of the Utah Trust and Savings Bank, or a holding company

atfiliate thereof. The reply stated that the Board was not furnished

with sufficient information to enable it to rule on the question

131.asented; that it would appear, however, that the Zion's Savings Bank

eM Trust Company is an affiliate of the Utah Trust and Savings Bank

114cler section 2(b)(2) of the Banking Act of 1933, since apparently it is

rolled by a shareholder of the member bank, the Mormon Church, which

131'e4144ablY controls directly or indirectly 1,754 shares or a majority of

144 stock of the member bank; that, if a majority of the directors of the


2)59/26/33 -25-

Ziows Savings Bank and Trust Company are directors of the Utah Trust and

887ings Bank, the former institution is an affiliate of the latter under

section 2(b)(3) of the act; and that, if the 1,434 shares of stock of

the Utah Trust and Savings Bank owned by the Zion's Savings Bank and Trust

0°1113ahlr represent more than 50% of the number of shares of stock of the

fc)rmer institution voted for the election of directors of the member bank

at the preceding election, the Zion's Savings Bank and Trust Company would

be a holding company affiliate of the member bank under section 2(c)(1)

°I' the act. The reply also stated that, in regard to the Mormon Church,

Lt appears that it controls directly 320 shares of stock of the Utah Trust

arid Savings Bank, that it controls the Zion's Savings Bank and Trust Corn-

and presumably thereby controls indirectly the 1,434 shares of the

Utah Trust and Savings Bank owned by the Zion's Savings Bank and Trust

C17'41PanY, and, accordingly, that it controls, either directly or indirectly,

a Maiority of the shares of the capital stock of the member bank; that,

ta such circumstances, it would appear that the Mormon Church is a

h01dinC company affiliate of the member bank, if the church is a "corpora-

business trust, association, or other similar organization" within

the Meaning of the act; and that, however, the Board is unable to rule on

th" latter point due to a lack of information in regard to the nature of

the °rganization of the Mormon Church.

Approved.


°I* the Board, to a telegram dated September 18 from Yr. Newton, Federal

Reserve Agent at San Francisco, inquiring as to whether the provisions of


9/26/33 -26-

206

"ction III of the Boardts Regulation P will be complied with if a State

member bank affiliated with a holding company affiliate files with the

Federal reserve agent, rather than the Federal Reserve Board, on or

before October 1, 1933, an agreement that such holding company affiliate

Will be subject to the same conditions and limitations as are applicable

to holding company affiliates of national banks under section 5144 of the

Revised Statutes. The reply stated that if a State member bank obtains

fl'am its holding company affiliate an agreement on Federal Reserve Board

1)-51 and files such agreement with the proper Federal reserve agent

(311 or before October 1, 1933, such filing will constitute a compliance

with section III of Regulation P, and will satisfy the requirements of

the statute.

Approved.

Letter dated September 23, 1933, to La% Case, Federal Reserve

4-eent at New York, approved by six members of the Board, stating that

tile Board has received a letter from the Assistant Secretary of State,

With which was inclosed a copy of a note from the Ambassador of Argentina

44(1 e r4enorandum addressed by the Etbassy to the Board, with respect to

the PaYment of interest on deposits of the Argentine Government by the

14'kitt ic)nal City Bank, T. P. Morgan and Company, The Chase National Bank,

Loeb and Company, and the City Bank Farmers Trust Company. The

lettor inclosed copies of the documents referred to, and stated also that

°Ile or the questions involved is whether, under section 19 of the Federal

Re8"ve Act, interest may lawfully be paid by member banks of the Federal

ilsael've System on these deposits after Tune 16, 1933, in accordance with


9/26/33 -27-

contracts in force on that date; that before replying to the inquiry of

the Argentine Embassy, the Board wishes to give the member banks concerned

0PPortunity to submit their views with respect to the matter; and re-

the agent, therefore, to conmunicate these facts to the banks

above mentioned, which are members of the Federal Reserve System, in

°rdar that they may submit to him, or directly to the Board if they

Prefer) such information as they may desire on the subject.

Approved.


(If the Board, to a telegram dated September 21 from Governor McKinney of

the Federal Reserve Bank of Dallas, requesting the Board's advice in

ec1/1351ection with an inquiry received from a member bank as to whether the

131'°718ions of the Banking Act of 1933 will permit the issuance of a

dellland certificate of deposit with the proviso that, if no demand has

been'lade prior to six months, interest shall be paid for the six months

that the money has been on deposit. The reply stated that, in the

11°4d98 °Pinion, a certificate of deposit payable on demand is not con-

verted into a time deposit merely by reason of the fact that no demand

t°1' the withdrawal of the deposit is made for a period of six months or

44Y other stated period; that, accordingly, in view of the prohibition

(3t 8"tion 19 of the Federal Reserve Act, on the payment of interest on

4 cleP°8it payable on demand, no interest may be paid by a member bank on

a demand certificate of deposit; and that, if after the expiration

Of4 certain period, the terms governing the certificate of deposit are

13"itied s0 that it then complies with the definition of a time deposit


2089/26/33

-28-

the Boardts Regulation Q, interest may be paid thereon in accordance

With the provisions of the regulation for the period during which it con-

stitutes a time deposit, but not for the period prior thereto when it is

Pe%Yable cn demand. The reply stated also that the Board has no informa-

ti°n regarding the representation that blanks in the east or elsewhere

are Paying interest on such demand certificates or are handling them in

the manner described in Governor EcKinney's telegram.

Approved.

Reply on September 23, 1933, approved by six members of the

Board to a telegram dated September 8 from 1.1r. Hale, Cashier of the Fed-

eral Reserve Bank of San Francisco, stating that it is the bank's opinion

that +1,_ullu regulations of the Postmaster General governing the deposit of

P°stal savings funds in banks are so worded that such deposits would

beccMe demand deposits after the expiration of .the calendar month next

following the month in which the funds were deposited, and requesting the

Board's advice in the matter. The reply stated that the Board under-

that the Postmaster General has amended his regulations governing

the deposit of postal savings funds in banks; that the Board has had

114der consideration the question whether deposits made under the amended

lieg44tions would constitute time deposits within the meaning of the

ckardt. Regulation Q; and that, in view of the possibility that the Post-

1°148ter General may desire again to amend his regulations on this subject,

4 cle2ihite ruling on the question raised by Mr. Hale will be delayed

Pellaing further advice from the Postmaster General.

Approved.


0

9/26/33 -29-


to a letter dated September 14 from Honorable Augustine Lonergan, United

States Senator, requesting advice as to (1) the amount of money on deposit

bY the average depositor in savings banks and in commercial banks, and (2)

the Percentage of depositors who will be protected by the insurance

feature of the Banking Act of 1933. The reply stated that the deposit

figures for national banks as of 'Jay 13, 1933, published on pages 454 and

455 of the July, 1933, issue of the Federal Reserve Bulletin, were

collected at the request of the Senate Committee on Banking and Currency;

tliel the Federal Reserve Board at the sane time collected corresponding

Cleures from State bank members of the Federal Reserve System; that the

11°"cl hae not collected similar data for banks not members of the Federal

Reeerve System, and, so far as the Board knows, such data are not available;

that, in the eireumstances, the only figures which the Board can furnish re-

flecting the average amount of money on deposit in commercial banks are

the 1141°her bank data for Nay 13, 1933, given in the July issue of the Fed-

"el- Reserve Bulletin; and that it is very doubtful, however, whether more

uP-to-date statistics for member banks would show any material

difference in the distribution of deposits by size of accounts. The reply

""ed also that the latest complete figures available for mutual savings

bezk,which are concentrated largely in the State of New York and the

17" P4Igiand States, are those for Tune, 1932, published in the 1932 Annual

Relp°" of the Comptroller of the Currency; that total deposits of these

1544 e at that time were $10,021,852,000, the number of deposit accounts

12'521'750: and the average size of deposit accounts 0800; that it will


c

9/26/33 -30-

be observed that the latter figure is slightly above the average of $770

811(lwn in the July Bulletin for member banks; that, in this connection,

Senator Lonergan is doubtless aware that in Some States there are limita-

t"ne on the size of deposit accounts that can be carried in mutual

se.vings banks. The reply stated further that, as to the percentage of

depositors who would be protected by the insurance features of the Banking

4ct of 1933, the act provides that during the first six months of 1934 the

°17aer of each deposit in banks which belong to the fund will be protected

4 to 42,500; that, on the basis of the figires compiled for member banks,

it would appear that approximately 96.510 of depositors will be fully pro-

tected; and that the remaining depositors will, of course, be protected

413 to $2,500 on each deposit account. The reply added that, under the

PcrIllanent insurance provisions of the Banking Act of 1933, the owner of

each deposit will be protected in respect to any claim arising out of the

10e1ng of a bank insured thereunder in the following percentages: 100%

Or the net amount not exceeding .:)10,000 due to the owner of the deposit,

7° of the amount, if any, by which the net amount of the claim exceeds

010 onnbut does not exceed $50,000, and 50% of the amount, if any, by

hich the net amount of the claim exceedsrs;50,000; and that, on the basis

the figures published for all member banks as of May 13, 1933, it

17°111(1 appear that under the pernanent provisions of the insurance fund

413Prox1matel7 99.3',7D of all depositors will be fully protected, while the

laeilleirder will be protected in full up to 410,000 and in part for the

l'enleinder of their deposits, depending on the size of their accounts.

Approved.


9/26/33-31-

Reply on September 22, 1933, approved by six members of the

B°srd, to a letter dated July 19 from Mr. Curtiss, Federal Reserve Agent

Boston; the reply reading as follows:

"Reference is made to your letter of July 19, 1933, headedinquiry No. 30, submitting to the Board a request of thePresident of The New England Trust Company, Boston, Massachu-setts, for permission not to publish a report of condition ofThe David Sears Real Estate Trust.

"From the information which you have furnished to theBoard, it appears that certain property was conveyed totrustees, in accordance with the terms of an instrument oftrust, to be held and managed for the benefit of such personsaS might from time to tine be the holders of transferablecertificates issued by the trustees. This arrangement isknown as The David Sears Real Estate Trust, and a majority ofthe trustees of this trust are directors of The New England TrustCompan-J, a member bank of the Federal Reserve System.

"Under Section 9 of the Federal Reserve Act, as amended by

Section 5(c) of the Blanking Act of 1933, each State member bankis required to obtain a report of condition from each of its

affiliates, and to publish such report under the same conditionsas govern its own condition reports. Section.2, subparagraph(b), subdivision (3) of the Banking Act of 1033, provides,sfliong other things, that the term 'affiliate' shall includeanY business trust of which a majority of its trustees are

directors of any one member bank. It would seem clear thatThe David Sears Real Estate Trust is a business trust, as thatterm is used in said section; that it is an 'affiliate, of theMember bank within the language of the Act, since a majority

.?_f its trustees are directors of the member bank; and thatthe member bank is required by said Section 9 to obtain areport of such affiliate and to publish the report under thesame conditions as govern its own condition reports.

"Your attention is called to the requirements that eachstate member bank must publish the reports of its affiliates

under the same conditions as govern its own condition reports'.

In view of the fact that the Federal Reserve Act does not re-quire the publication of reports submitted to the Federal

Reserve Board and Federal reserve banks by State member banks,

the only reasonable construction that can be given to thatrequirement is that reports of affiliates of State member banks

Imast be published only if the State law requires such State

banks to publish their awn reports, and accordingly, it willnot be necessary for The New England Trust Company to publish

he report of The David Sears Real Estate Trust unless publica-

tion of its own condition report is required under State law.


9/26/33-32-

"You are further advised that there will be no objectionto The New England Trust Company publishing with any reportof The David Sears Real Estate Trust an explanatory state-ment as to the actual relationship which exists between theMeMber bank and its affiliate."

Approved.

Telegraphic reply on September 22, 1933, approved by five members

Of the Board, to a telegram dated September 19 from Mr. McClure, Federal

Re8arve Agent at Kansas City; the reply reading as follows:

"Referring your wire September 19, National Bank Act as?mended by Banking Act of 1933 requires capital stock of atleast .4;50,000 for organization of new national bank in placehaving Population not exceeding 6,000 inhabitants. If locatedIri Place exceeding 6,000 inhabitants and not in excess of°u,000 inhabitants new bank would be required to have capital,5 at least ,100,000 and if located in place which exceeds00,000 inhabitants new national bank would be required to have

Revised of at least 200,000. Under provisions Section 5143

l_tevised Statutes of United States, a national bank may notfaduce its capital to any sum below amount required for organ-

of new national bank. Accordingly, a national bank nowIn existence with capital of 25,000 would not, under law, beec.Uthorized to reduce such capital and a national bank havingJtPital exceeding ;25,000 may not reduce its capital below!00,000 when located in place with population not exceeding

1;°00 inhabitants. However, if any such bank should increase. a capital by issuance of preferred stock to an amount ini;4ceee of amount required for organization of new nationalnaak in place in which it is located it might then reduce its:0111mon stock if it so desired provided that after such reductionPregete amount of its common and preferred stock was not less.7.L'an minimum amount required for organization of new bank. In

830L7 such case bank should issue additional common stock if andl'ben its preferred stock is retired in an amount equivalent to

l/ieferred stock so retired so as to maintain minimum capital;equired. A State bank organized on or after June 16, 1933,w'te of enactment of Banking Act of 1933, and situated in place

Population not exceeding 3,000 inhabitants is eligible for

1""rliesion to membership in Federal Reserve System if entitled° benefits of insurance under Section 12B of Federal ReserveA:” and has capital of not less than ilii25,000 at time of ad-

to Federal Reserve System.”

Approved.



9/26/33 -33-

2 1

to letters dated TUly 7 and 11 from Ur. Walter W. Schneckenburger,

Executive Vice-President, Marine Midland Group, Inc., Buffalo, New York;

thereply reading as follows:

. "Reference is made to your letter of July 7, 1933, inwaich you requested to be advised whether each bank con-trolled by the Marine Midland Corporation is an 'affiliate?,as that term is used in the Banking Act of 1933, of eachOther bank controlled by such corporation, and of yourletter of July 11, 1933, supplementing your letter of July7, 1933.

"Since you have not submitted to the Federal ReserveBoard any information as to the form, manner, or extent ofcontrol by the Marine Midland Corporation of the banks inquestion, the Board is unable to rule definitely on thequestion which you have presented. However, the copy of theletter from Messrs. Kenefick, Cooke, Mitchell, Bass andLetchworth, which was inclosed with your letter to the BoardOf J1111, 7, 1933, indicates that it is your contention, and,u,hat of your conrsel, that the banks controlled by themtrine Midland Corporation are not affiliates of the memberlenks in the group solely on the theory that subdivisionk2), subparagraph (b), Section 2 of the Banking Act of 1933,contemplates control by 'shareholrlers' of a member bank otherthan a /holding company affiliate', and that, since the banksin question are controlled by a /holding company affiliate',as distinguished from 'shareholders', the banks are notaffiliates of the member banks in the group within the mean-ing of the Banking Act of 1933. In their letter of July 11,

1933, Your counsel contend that, if banks controlled by a

4°1d1ng company affiliate were to be regarded as 'affiliates'Of the subsidiary member banks within the meaning of the Act,subdivision (4), paragraph (a) of Section 5144 of the Revised

8!Ittutes, as amended, which requires a holding company

to agree that individual or consolidated statements of'As banks may be required, would be superfluous and serve no

Useful purpose."The Board is unable to concur in the conclusion that the

term 'shareholders', as used in Section 2, sub-paragraph (b),subdivision (2) of the Banking Act of 1933, should be inter-preted to exclude from the scope of its meaning a 'holding

?PanY affiliate'. There is no obscurity or ambiguity in:le language of this particular section, and there is, there-lore, no occasion or justification for considering the word'shareholders' except in its ordinary and usual signification.

Lloreover, it does not appear that, as a result of such inter-

the provisions of subdivision (4), paragraph (a)


9/26/33t)

"Of Section 5144 of the Revised Statutes would be renderedsuperfluous. Sections 5(c) and 27 of the Act do not requirePublication by a member bank of reports of condition of itsaffiliated member banks, but, under the provisions of sub-division (4), paragraph (a) of Section 5144, publication ofstatements of all banks which are subsidiaries of a holdingcomPany affiliate, both member banks and nonmember banks,'TAY be required, if deemed advisable. In addition, suchProvisions of Section 5144 provide a means whereby the Boardor other duly constituted authority may require publicationOf consolidated statements, in contradistinction to indi-vidual statements, of such banks.

. "It should also be noted that, if the construction forwhich you contend were adopted, Section 13 of the BankingAct of 1933, and the sections requiring reports, and pub-lications thereof, would be subject to ready evasion. Itis the Board's opinion that the construction which youfavor would tend to frustrate the clear purposes of the Act,and that the law cannot properly be construed in such manner.

"The Board., therefore, is of the opinion that the wordshareholders', as used in Section 2, sub-paragraph (b), sub-division (2), of the Banking Act of 1933, means any personor organization of any kind whatsoever which holds stock ina member bank, including a 'holding company affiliate' ofsuch bank. Accordingly, if the Earine :Midland Corporationholds the requisite control of the banks in question, eachncumember bank in the group would appear to be an 'affiliate'Of each member bank in the group, and the member banks would

aPPear to be 'affiliates' of each other, within the meaningOf the Banking Act of 193o.

"Under date of August 7, 1933, the Board advised you thatit understood that a question similar to that discussed abovehad been submitted by the Comptroller of the Currency to theAttorney General of the United States for an opinion. TheAttorney General has now rendered an opinion, but you willaote from the inclosed copy thereof that he refused to ruleon the matter in question.

"For your information, there are also inclosed a copy of

a Press release relative to the publication of reports of

Ffiliates of member banks, and a copy of a telegram relativeto the furnishing of reports of such affiliates. It isbelieved that the procedure set forth therein will amelioratesomewhat the inconvenience and expense involved in the makingarid publication of such reports."

-34-

Approved.

Reports of Standing Garnittee dated September 22, 25 and 26, 1933,

teeozzaending approval of the following changes in stock at Federal reserve


9/26/33 -35-

-2-P14a1Lbi___•ons4 for ORIGINAL Stock: District No. 1.National Bank of Calais, Calais, Maine.

41.14.2.1119. 4.-dxst NatUnal Bank at Derry, Pennsylvania.

1.4.1ct No. 7.114)11 7-537Ety National Bank of Red Oak,

Red Oak, Iowa.

A lications for SURR- DENER of Stock: District No. 1.Safe Deposit National Bank, New Bedford, Vass.

(Decrease in surplus)• tland County National Bnnk, Rutland, Vermont.

(Decrease in surplus)▪ esque Isle National Bank, Presque Isle, Maine.

(Being liquidated through conservator)

44• c4ange National Bank, Marietta, Pennsylvania.(Insolvent)

National Bank, Orrville, Ohio. (V.L.Suc.yi by The National Bank of Orrville, Ohio.)"1170.1r National Bank, Midway, Pennsylvania.

(Insolvent)

4°°11e National Bank, Madison, West Virginia.(Decrease in surplus)

°cIt Yards National Bank, Denver, Colorado.(V.L. Terminal)

4.1431.0ved:

...•••••••••

Approved.

Shares

106

36

36

106

36

36Total

30

15

120

105

99

48

30

210

178

165

105

147

30

210Total

Thereupon the meeting adjourned*

-Governor.

657

Assistant Secretary.


19330926_minutes.pdf

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