19390322_minutes.pdf

410

A. meeting of the Board of Governors of the Federal Reserve

SYstem was held in Washington on Wednesday, March 22, 1939, at 4:45

PRESENT: Mr. Ransom, Vice ChairmanMr. Szymczak

McKeeMr. DavisMr. Draper

Mr. Bethea, Assistant SecretaryMr. Carpenter, Assistant SecretaryMr. Wyatt, General CounselMr. Smead, Chief of the Division of

Bank OperationsMr. Dreibelbis, Assistant General CounselMr. Thomas, Assistant Director of the

Division of Research and StatisticsMr. Gardner, Senior Economist in the

Division of Research and Statistics

Dreibelbis stated that this afternoon Mr. Logan, General

C°41leel for the Federal Reserve Bank of New York, called him on the

tel and read a draft of telegram which was being sent to the

13"td immediately stating that the Federal Reserve Bank of New York

1144 been requested by the Bank for International Settlements to ad-

it whether the Reserve bank was prepared to make advances secured

bYin transit to New York on the same terms and conditions as set

t°1'tb ill the Reserve bank's cable of November 28, 1934, (No. 247) to

the'enk for International Settlements, and that the New York bank re-

ed the Board's approval for such advances. Mr. Dreibelbis said

that the immediate occasion for the request of the Bank for Interne-

-III. Settlements was that it desired an advance against approximately

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

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2,250,000, of gold to be placed in transit shortly and that Mr. Loran

had auggested that the Board of Governors might wish to grant the Re-

serve bank continuing authority to make such advances so that it would

40t be necessary to submit each request for an advance to the Board.

Mr. McKee called Mr. Logan on the telephone and raised the

Tlestion whether the Reserve bank would be adequately protected by

11161i-ranee on the shipments. Mr. Logan stated that he would check

the matter with Mr. Knoke, Vice President of the Federal Reserve Bank

°I' New York, and advise the Board. Shortly thereafter Mr. Knoke called

beet.and stated that it was the practice of the New York bank to ob-

t" 1\111 insurance coverage on all such shipments, the expense of

81/e4 insurance to be borne by the borrower, and that if the Board

h° 111d decide to give the Reserve bank a continuing authority to make

°lel' loans it was believed a limit of 420,000,000 outstanding at any

time would be adequate to take care of any situation that could

be r°reseen at this time. Mr. Knoke also read the draft of telegram

it was proposed to send to the Bank for International Settle-

in the event the Board authorized the New York bank to make the

Ill'oPosed loan. A transcript of the draft of telegram to the Bank for

Illt°rnational Settlements as read by Mr. Knoke has been placed in the

?%d's files.

At the conclusion of a discussion, thefollowing telegram to the Federal ReserveBank of New York was approved by unanimousvote:


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"Your telegram date. Board of Governors hereby au-thorizes your bank to make advances of not to exceed$20,000,000 outstanding at any one time to Bank for In-ternational Settlements secured by gold actually in transitto New York on terms and conditions your cable number 247dated November 28, 1934, any such advances to bear interestat discount rate in effect at your bank. Participationin such loans by any other Federal Reserve banks is ap-Proved and they will be advised accordingly."

While no time limit was placed on theauthority granted in the telegram it wasunderstood that the matter would be placedon the docket for further considerationnot later than June 1, 1939.

Mr. Bethea stated that Howard A. Loeb, Vice President of the

l'edsral Advisory Council had called his office today and stated that

he had just learned that a new trust indenture bill (H.R. 5220) had

be en introduced by Mr. Cole of Maryland in the House of Representatives

alicl referred to the Committee on Interstate and Foreign Commerce and

that ,-" he (Mr. Loeb) was authorized by the Council to request the Board

to send to the Chairman of the house Committee a copy of the statement

llith respect to the Barkley Trust Indenture Bill (S. 477) which was

slnYzatted by the Council at the meeting with the Board on February 14,

193Q," and at the request of the Council sent by the Board to the Chair-

of the Senate Committee on Banking and Currency.

By unanimous vote Mr. Bethea was au-thorized to comply with the request of theFederal Advisory Council.

At this point Messrs. Wyatt, Smead, Dreibelbis, Thames and

Iler left the meeting and the action stated with respect to each


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Of the matters hereinafter referred to was then taken by the Board:

The minutes of the meeting of the Board of Governors of the

Pederal Reserve System held on March 21, 1939, were approved unani-

ta011s137..

Letter to Mr. Brainard, Federal Reserve Agent at the Federal

Reserve Bank of Cleveland, reading as follows:

"In accordance with the request contained in yourletter of March 16, 1939, the Board approves the appoint-ment of Mr. Elmer F. Fricek as Alternate Assistant Fed-eral Reserve Agent at your bank at his present salary of4,680 per annum, effective April 1, 1939, with the under-standing that Mr. Fricek will be placed upon the Agent'sPayroll and will be solely responsible to you, or, during,a vacancy in the office of Agent, to the Assistant FederalReserve Agent, and to the Board of Governors, for theProper performance of his duties. When not engaged inthe performance of his duties as Alternate Assistant Fed-eral Reserve Agent he may, with the approval of the Fed-eral Reserve Agent, or, during a vacancy in the office ofthe Agent, of the Assistant Federal Reserve Agent, end thePresident, perform such work for the bank as will not beinconsistent with his duties as Alternate Assistant Fed-er al Reserve Agent.

"Mr. Fricek should execute the usual oath of officeand surety bond in the amount of 4.50,000, and he shouldnot enter upon the performance of his duties as AlternateAssistant Federal Reserve kzent until the bond has beenexamined by your counsel to determine whether its executioncomplies fully with the rules printed on the reverse sideof rorm of bond 182, following which the bond should beforwarded to the Board promptly for approval.

"It is noted that Mr. Lester J. Henk, the presentAlternate Assistant Federal Reserve Agent, will be re-lieved of his agency functions on April 1, 1939. Pleaser°rward his resignation to the Board promptly after re-ceipt thereof so that an appropriate letter may be writtento the bonding company involved, releasing it from liability


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"on the bond executed by Mr. Henk as Alternate Assistant led-eral Reserve Agent."

Approved unanimously.

Memorandum dated March 21, 1939, from Mr. ead, Chief of the

Division of Bank Operations, submitting a letter dated March 17 from

UaYS, Assistant Vice President of the Federal Reserve Bank of

Cleveland, which requested approval by the Board of changes in the

Pel'eonnel classification plan of the bank to provide for the creation

or new position of "Assistant Department Manager" in the Provision

"Personnel. Department and "Control Clerk" in the Noncash Collection

teplirtment, for the discontinuance of the position of "Assistant Head

" DePartment" in the Expense Accounting Department, for a change in

the Position of "Expense Ledger and Voucher Clerk" in the Expense Ac-

co Denartment with a maximum salary of a,500 per annum to

ternational Business Machine Accounting Clerk" in the Provision of

Perc,'4)nnel Department with a maximum salary of 42,50 per annum, and

cuanges in the name of department, title of position, or descrip-

ti°r work of six other positions. The memorandum stated that the

131'°Posed changes had been reviewed and recothmended that they be ap-

Dro7ed.

Approved unanimously.

Letter to Mr. Harrison, President of the Federal Reserve Bank

411 York, reading as follows:


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"Under the provisions of paragraph (1), subsection(i), of section 12B of the Federal Reserve Act, as amended,the Board of Directors of the Federal Deposit InsuranceCorporation has found that The Hamilton Trust Company ofPaterson, Paterson, New Jersey, has continued unsafe andunsound practices in the conduct of its business, has soadvised the Board of Governors of the Federal ReserveSystem, and has requested the Board of Governors to fixthe time in which the bank shall make the necessary cor-rections of such practices and to advise the CorporationOf any action taken by the bank to effect such correc-tions.

"There is enclosed a letter the Board has addressedto The Hamilton Trust Company of Paterson, Paterson, NewJersey, together with three copies thereof, advising ofthe findings of the Board of Directors of the FederalDeposit Insurance Corporation and fixing July 20, 1939aS the date not later than which the necessary correctionsOf the unsafe and unsound practices mentioned shall beeffected.

'You are hereby authorized to have the enclosed let-ter, together with a copy of the Federal Reserve Act, per-sonally presented to The Hamilton Trust Company of Paterson,Paterson, New Jersey, the person who does so to make enaffidavit of service in the usual form in which such af-11-davit4 are made in the State of New Jersey. This affi-davit, and a copy of the letter to which it is attached,should be forwarded to the Board.

"One of the copies of the letter to the bank is forYour files, and you are requested to forward the otherec3PY to the Commissioner of Banking and Insurance of theState of New Jersey for his information."

Approved unanimously, together witha letter to The Hamilton Trust Companyof Paterson, Paterson, New Jersey, read-ing as follows:

'Paragraph (1) of subsection (i) of section 12B ofthe, Federal Reserve Act, as amended, reads in part as fol-a.ows:

. . Whenever the board of directors(of the Federal Deposit Insurance Corporation)Shall find that an insured or its directors


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"or trustees have continued unsafe or unsoundpractices in conducting the business of suchbank, or have knowingly or negligently permittedany of its officers or agents to violate anyprovision of any law or regulation to which theinsured bank is subject, the board of directorsShall first give to the Comptroller of the Cur-rency in the case of a national bank or a Districtbank, to the authority having supervision of thebank in the case of a State bank, or to the Boardof Governors of the Federal Reserve System inthe case of a State member bank, a statementwith respect to such practices or violationsfor the purpose of securing the correction there-of. Unless such correction shall be made withinone hundred and twenty days or such shorterperiod of time as the Comptroller of the Cur-rency, the State authority, or Board of Gov-ernors of the Federal Reserve System, as thecase may be, shall require, the board of direc-tors, if it shall determine to proceed further,shall give to the bank not less than thirty days'written notice of intention to terminate thestatus of the bank as an insured bank, and shallfix a time and place for a hearing before theboard of directors or before a person designatedby it to conduct such hearing, at which evidencemay be produced, and upon such evidence the boardof directors shall make written findings whichshall be conclusive. . . . (Statement in paren-thesis supplied.)"Pursuant to the statutory provisions above quoted,

the /ederal Deposit Insurance Corporation has submitted tothe Board of Governors of the Federal Reserve System a state-inent, a copy of which is attached hereto, with respect tocontinued unsafe and unsound practices by The HamiltonTrust Company of Paterson for the purpose of securing car-.:ections thereof, of which you will please take notice.lou are hereby directed to effect corrections of the un-ell,fo and unsound practices enumerated in the enclosed copy°!. the statement of the Federal Deposit Insurance Corpora-t,1°11; and the Board of Governors of the Federal Reserve

Corpora-t,1°11;

has fixed the period ending July 20, 199, 120 daysfrom the date of this letter, as the time within which such


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corrections shall be effected. You are requested to ad-vise the Federal Reserve Bank of New York on or beforeJuly 20, 1929 as to the action which has been taken effect-ing corrections of the unsafe and unsound practices re-ferred to.

"For your information, there is enclosed a copy ofthe Federal Reserve Act, and your attention is called tosection 12B thereof and particularly to the full text ofsubsection (i) of section 12B."

In connection with the above matter,the following letter to the Federal DepositInsurance Corporation was also approvedunanimously:

"This refers to your letter of March 16, 1939, inWhich it is stated that the Board of Directors of theFederal Deposit Insurance Corporation has found that TheHamilton Trust Company of Paterson, Paterson, New Jersey,a State member bank, has continued unsafe and unsoundPractices in the conduct of its business. Pursuant toParagraph (1), subsection (i), of section 12B of the Fed-eral Reserve Act, as amended, your letter contains a state-ment lidth respect to such practices for the purpose ofsecuring corrections thereof.

"The Board of Governors has fixed the period endingJ.1-11Y 20, 1939, 120 days from the date of a letter ad-dressed to the bank on March 22, 1939, serving noticeregarding the required corrections, as the time withinWhich the necessary corrections of the unsafe and unsoundPractices in the conduct of its business recited in yourletter may be effected. You will be informed as promptlyas possible of any advice which the Board receives as to61Y action taken by the bank to effect such corrections."

Letter to Mr. Harrison, President of the Federal Reserve Bank

New York, reading as follows:

,. "Under the provisions of paragraph (1), subsection‘1), of section 12B of the Federal Reserve Act, as amended,the Board of Directors of the Federal Deposit InsuranceC°rPoration has found that the Central Home Trust Company,


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"Elizabeth, New Jersey, has continued unsafe and unsound

Practices in the conduct of its business, has so advisedthe Board of Governors of the ifederal Reserve System,and has requested the Board of Governors to fix the timein which the bank shall make the necessary correctionsOf such practices and to advise the Corporation of anyaction taken by the bank to effect such corrections.

"There is enclosed a letter the Board has addressedto the Central Home Trust Company, Elizabeth, New Jersey,together with three copies thereof, advising of the find-ings of the Board of Directors of the Federal DepositInsurance Corporation and fixing July 20, 1939, as thedate not later than which the necessary corrections ofthe unsafe and unsound practices mentioned shall be ef-fected.

"You are hereby authorized to have the enclosedletter, together with a copy of the Federal Reserve Act,Personally presented to the Central Home Trust Company,Elizabeth, New Jersey, the person who does so to make anaffidavit of service in the usual form in which such af-fidavits are made in the State of New Jersey. This affi-davit, and a copy of the letter to which it is attached,should be forwarded to the Board.

"One of the copies of the letter to the bank is forYour files, and you are requested to forward the othercoPY to the Commissioner of Banking and Insurance of theState of New Jersey for his information."

Approved unanimously, together witha letter to the Central Home Trust Company,Elizabeth, New Jersey, reading as follows:

"Paragraph (1) of subsection (i) of section 12B ofthe Federal Reserve Act, as amended, reads in part as fol-lows:

. . . Whenever the board of directors(of the federal Deposit Insurance Corporation)shall find that an insured bank or its direc-tors or trustees have continued unsafe or un-sound practices in conducting the business ofsuch bank, or have knowingly or negligently

permitted any of its officers or agents to

violate any provision of any law or regula-

tion to which the insured bank is subject, the


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"board of directors shall first give to theComptroller of the Currency in the case of anational bank or a District bank, to the au-thority having supervision of the bank in thecase of a State bank, or to the Board of Gov-ernors of the Federal Reserve System in thecase of a State member bank, a statement withrespect to such practices or violations forthe purpose of securing the correction thereof.Unless such correction shall be made withinone hundred and twenty days or such shorterperiod of time as the Comptroller of the Cur-rency, the State authority, or Board of Gover-nors of the Federal Reserve System, as thecase may be, shall require, the board of di-rectors, if it shall determine to proceedfurther, shall give to the bank not less thanthirty days' written notice of intention toterminate the status of the bank as an insuredbank, and shall fix a time and place for ahearing before the board of directors or be-fore a person designated by it to conduct suchhearing), at which evidence may be produced,and upon such evidence the board of directorsshall make written findings which shall beconclusive. . . . ' (Statement in parenthesissupplied.)"Pursuant to the statutory provisions above quoted,

the Federal Deposit Insurance Corporation has submittedto the Board of Governors of the Federal Reserve Systema statement, a copy of which is attached hereto, with re-sPect to continued unsafe and unsound practices by theCentral Home Trust Company for the purpose of securingcorrections thereof, of which you will please take notice.You are hereby directed to effect corrections of the un-safe and unsound practices enumerated in the enclosedcopy of the statement of the Federal Deposit InsuranceCorporation; and the Board of Governors of the FederalReserve System has fixed the period ending July 20, 1939,1r30 days from the date of this letter, as the time withinwhich such corrections shall be effected. You are re-quest ed to advise the Federal Reserve Bank of New York°11 or before July 20, 1939 as to the action which has


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"been taken effecting corrections of the unsafe and un-sound practices referred to.

"For your information, there is enclosed a copy ofthe Federal Reserve Act, and your attention is called tosection 12B thereof and particularly to the full text ofsubsection (i) of section 12B."

In connection with the above matterthe following letter to the Federal DepositInsurance Corporation was also approvedunanimously:

"This refers to your letter of March 16, 1939, inwhich it is stated that the Board of Directors of theFederal Deposit Insurance Corporation has found that theCentral Home Trust Company, Elizabeth, New Jersey, aState member bank, has continued unsafe and unsound prac-tices in the conduct of its business. Pursuant to para-graph (1), subsection (i), of section 12B of the FederalReserve Act, as amended, your letter contains a statementWith respect to such practices for the purpose of secur-ing corrections thereof.

"The Board of Governors has fixed the period endingJuly 20, 1939, 120 days from the date of a letter ad-dressed to the bank on March 22, 1939, serving noticeregarding the required corrections, as the time withinWhich the necessary corrections of the unsafe and unsoundpractices in the conduct of its business recited in yourletter may be effected. You will be informed as promptlyas Possible of any advice which the Board receives as toaaY action taken by the bank to effect such corrections."

Thereupon the meeting adjourned.

Assistant Secretary.

Vice Chairman.


19390322_minutes.pdf

Documents

new york bank re

federal reserve banki

transitto new york

board of governors

federal reservesystem

international settlements

reserve banks cable

assistant secretarymr