19350301_Minutes.pdf

558

A meeting of the Executive Committee of the Federal Reserve

Board was held in Washington on Friday, March 1, 1935, at 11:30 a. m.

PRESENT: Mr. Hamlin, Acting ChairmanMr. JamesMr. Szymczak

Mr. Morrill, SecretaryMr. Bethea, Assistant SecretaryMr. Carpenter, Assistant Secretary

The Board acted upon the following matters:

Memorandum dated February 26, 1935, from Mr. Morrill, recom-

mending the appointment of Mr. John F. Cassil as a file clerk to be

assigned to the Board's general files, with salary at the rate of

$1,320 per annum, effective as of the date upon which he enters upon

the performance of his duties after having passed a satisfactory

physical examination.

Approved.

Letter to "The Pikeville National Bank", Pikeville, Kentucky,

reading as follows:

"The Federal Reserve Board has given consideration

to your application for permission to exercise fiduciarypowers, and grants you authority to act, when not incontravention of State or local law, as trustee, executor,administrator, guardian of estates, assignee, receiver,committee of estatesof lunatics, or in any other fiduciarycapacity in which State banks, trust companies or other

corporations which come into competition with nationalbanks are permitted to act under the laws of the State ofKentucky, the exercise of all such rights to be subjectto the provisions of the Federal Reserve Act and theregulations of the Federal Reserve Board.

"It has been observed that The Pikeville National

Bank did not apply specifically for the right to act asregistrar of stocks and bonds. This power is specificallymentioned in section 11(k) of the Federal Reserve Act and

it is possible that a specific reference to it was in-

advertently omitted from the bank's application. However,

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

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"since the bank has applied for, and as stated herein theBoard has granted, permission to act 'in any other fiduciarycapacity in which State banks, trust companies or othercorporations which come into competition with nationalbanks are permitted to act under the laws of the State ofKentucky', The Pikeville National Bank may act as registrarof stocks and bonds, under the general power thus granted bythe Board, if competing State institutions are permittedunder the laws of the State of Kentucky to act as registrarof stocks and bonds.

"This letter will be your authority to exercise thefiduciary powers granted by the Board. A formal certificatecovering such authorization will be forwarded to you in duecourse."

Approved.

Letter to Mr. McAdams, Assistant Federal Reserve Agent at the

Federal Reserve Bank of Kansas City, reading as follows:

"This refers to your letter of February 5, 1935, re-garding the application of 'The Citizens National Bank in

Independence', Independence, Kansas, for permission toexercise fiduciary powers, and, pursuant thereto, the Fed-eral Reserve Board has given further consideration to thatapplication.

"As you know, the Board, on August 15, 1934, granted TheCitizens National Bank in Independence permission to actas fiduciary only in the specific trusts in which the FirstNational Bank in Independence had been appointed and wasacting at the time The Citizens National Bank in Independencewas authorized by the Comptroller of the Currency tocommence business. However, in vier of the informationwhich has been submitted to the Board and the adverse recom-mendation of your executive committee, in which recommendationsthe Comptroller of the Currency concur, the Board is un-willing to grant The Citizens National Bank in Independenceany additional authority to exercise trust powers. You arerequested, therefore, to advise the bank to this effect."

follows:

Approved.

Letter to Mr. O'Connor, Comptroller of the Currency, reading as


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"In accordance with Acting Comptroller Awalt's recom-

mendation, the Federal Reserve Board approves a reduction

in the common capital stock of 'The New London City

National Bank', New London, Connecticut, from $200,000 to

$100,000, pursuant to a plan which provides that the bank's

capital shall be increased by the sale of 0_50,000additional preferred stock to the Reconstruction Finance

Corporation, and that the released capital shall be used

to eliminate a corresponding amount of the least desirable

assets in the bank, all as set forth in Mr. Awalt's memo-

randum of February 19, 1935."

Approved.

Letter to Mr. O'Connor, Comptroller of the Currency, reading

as follows:

"In accordance with the recommendation of ActingComptroller Await, the Federal Reserve Board approves a

reduction in the co'lmon capital stock of 'The Mahopac

National Bank', Mahopac, New York, from $75,000 to

$30,000, pursuant to a plan which provides that the re-

leased capital, together with a portion of the bank's

surplus and undivided profits, shall be used to eliminate

all estimated losses and depreciation in group II bonds,

all as set forth in Mr. Awalt's memorandum of February 20,

1935."

Approved.

Letter to Mr. O'Connor, Comptroller of the Currency, reading

as follows:

"In accordance with Acting Comptroller of the Currency

Awalt's recommendation, the Federal Reserve Board approves

a reduction in the common capital stock of 'The FirstNational Bank and Trust Company of Walden', Walden, New

York, from $100,000 to $,50,000, pursuant to a plan which

provides that the released capital shall be used in elimi-

nating a corresponding amount of the least desirable assets

in the bank, including the deficit in earnings shown by the

bank's report of condition as of December 31, 1934, all as

set forth in Mr. Awalt's memorandum of February 21, 1935.

"In considering the plan under which the reduction in

capital is to be effected, it was noted that your examiner


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"seriously criticizes the management and directorate of thebank. It is understood, however, that the matter of strength-ening the management is receiving the attention of your office."

Approved.

Memorandum dated February 23, 1935, from the Committee on

Salaries and Expenditures, inclosing a letter dated February 7 from Mr.

Pett, Manager of the Division of Research and Statistics of the Federal

Reserve Bank of Chicago, which requested approval of a change in the

personnel classification plan of the bank to provide for the new position

of "Special Assistant" in the Securities Exchange Unit of the Division

of Research and Statistics of the bank, an appraised position. The

memorandum stated that the Committee has reviewed the proposed change

and recommends that it be approved.

Approved.

Letter to Mr. Walsh, Federal Reserve Agent at the Federal Re-

serve Bank of Dallas, reading as follows:

"Reference is made to your letter of February 4, 1955,inclosing a copy of a letter dated January 31, 1935, from

W. W. Dees, Vice President of the 'City State Bank and TrustCompany', McAllen, Texas, regarding compliance by the bankwith condition of membership numbered 16 which reads asfollows:

16. Such bank shall increase its paid-up and unim-paired capital within five years after theapproval of its application by the Federal Re-serve Board to t100,000. For the purpose ofproviding for such increase, the bank shall setaside annually, or for any shorter period coveredby each closing of its books, in a fund exclusive-ly applicable to such ca-oital increase, 50 percent of its net earnings for any such period afterproviding reserves for depreciation and deductingall losses until such fund amountL, to $40,000.Thenever such fund shall amount to ,110,000


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"or at such other time as the FederalReserve Board may require, such fund or asmuch thereof as may be necessary shall beconverted into capital by a stock dividendor used in any other manner permitted byState law to increase the capital of thebank to the required amount. Such increasein capital may be provided in whole or inpart by the sale of additional stock.

"The application for membership was approved by the Fed-eral Reserve Board April 21, 1933, and the bank was admittedto membership in the System April 27, 1933. The analysis ofthe report of examination of the bank as of April 12, 1934,shows that operations for the year 1933 resulted in a slightdeficit. You report that although operations for the year1934 resulted in a profit, the bank did not set aside, asrequired by condition numbered 16, 50 per cent of the netearnings in a fund exclusively applicable to a capital in-crease, but transferred $9,000 from undivided profits accountto surplus. It is noted that the amount transferred to sur-plus is in excess of 50 per cent of the net earnings for theperiod, and it is understood that the surplus is certifiedto the Banking Commissioner of the State of Texas and cannotbe used or withdrawn except with the specific permission ofthe Commissioner of Banking. It is noted, also, that Mr.Dees, Vice President of the bank, has stated that the manage-ment believed that the transfer to certified surplus accountwould comply with condition of membership numbered 16 and that

it is the intention of the management to build the surplusup to $40,000 and then convert it into capital.

"In the circumstances, and in accordance with your recom-mendation, the Board will consider the transfer of earningsto the certified surplus account as compliance with conditionnumbered 16, with the understanding, of course, that theearnings so transferred will be used for no other purposethan to increase capital as required by the condition ofmembership. Pursuant to the suggestion contained in yourletter, it is believed desirable that the board of directorsof the bank adopt a resolution to the effect that earningstransferred to the certified surplus of the bank will be usedonly for the purpose of increasing the capital of the bank asrequired by the condition of membership. Please forward acertified copy of such a resolution to the Board for itsrecords when it is obtained from the bank."

Approved.


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Letter to Mr. Clark, Secretary of the Federal Reserve Bank of

Atlanta, reading as follows:

"The Federal Reserve Board has received your letterof February 21, 1935, and internoses no objection to thepayment by the Federal Reserve Bank of Atlanta of thetraveling expenses of Mr. H. Lane Young, member of the Fed-eral Advisory Council representing the Sixth Federal ReserveDistrict, in connection with his attendance at the nextregular meeting of the board of directors of the FederalReserve Bank of Atlanta to be held at your Jacksonvillebranch. It is assumed that the reimbursement of Mr. Young'sexpenses will be on the same basis as the reimbursement ofexpenses incurred by him in connection with his attendanceat meetings of the Federal Advisory Council in Washington."

Approved.

Letter to the Attorney General of the United States, reading as

follows:

"Receipt is acknowledged of the letter dated February15, 1935, (JBK-WHR-29-01-3) which Mr. Joseph B. Keenan,Assistant Attorney General, addressed to the Federal Re-serve Board in your behalf, advising that, in view of theaction taken by the Board in the premises, your Departmentwill take no further action at this time towards obtainingan amendment to section 22(g) of the Federal Reserve Actwhich would eliminate some of the difficulties now beingexperienced in defining and applying the term 'executiveofficer' as used in that section. In this connection, youmay be interested to know that the amendment to section22(g) which the Board recommended to Congress has beenincorporated in section 325(c) of Title III of H. R. 5357,a copy of which is inclosed herewith.

"It has been noted that your Department has noobjection to the Federal Reserve Board furnishing the Fed-eral Reserve Agents with a copy of your Department circularNo. 2640, dated December 20, 1934, containing instructionsto the United States Attorneys regarding the cpnlication ofthe term 'executive officer' as used in section 22(g), and,accordingly, each of the Agents has today been furnishedwith such a copy for his confidential information in connec-tion with matters arising under that section. Since thedate of the Board's letter to you on this subject, one of


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"the Assistant Federal Reserve Agents has advised that hisoffice has received a copy of this circular from one of theUnited States Attorneys to whom that office had reported aPossible violation of section 22(g), and the Assistant Fed-eral Reserve Agent has requested permission to bring thecircular to the attention of the State member banks in hisdistrict. While it is realized that the position taken byyour Department in that circular is intended primarily forthe guidance of the United States Attorneys, it will beappreciated if you will advise whether you have anyobjection to the Federal Reserve Agents communicating thesubstance of that position to a State member bank in anycase in which a question as to who should be considered an'executive officer' is actually involved."

Approved.

Letter to Mr. Case, Federal Reserve Agent at the Federal Re-

serve Bank of New York, reading as follows:

"This refers to your letter of February 61 1935, inwhich you called the Board's attention to the decision ofa lower court of the State of New Jersey, in a suit broughtby the estate of Abraham Fischman against the ClintonTrust Company of Newark, New Jersey, involving the bindingeffect of the statute of New Jersey under which the ClintonTrust Company was reorganized upon a depositor who did notconsent to the plan of reorganization of that trust company.

"It has been noted that the decision of the court wasin favor of the non-assenting depositor and that an appealwill be taken by the trust company to the Appellate Courtof the State of New Jersey. Since it appears that fourmember State banks were reorganized under the statute ofthe State of New Jersey involved in the court's decision,it will be appreciated if you will keep the Board advisedof the developments in this case. It is also suggested thatyou request the Counsel for your bank to lend such informalassistance to the counsel for the member bank involved ashe properly can with due regard to his duties at the Federalreserve bank, in order that, if possible, the final decisionin the case rill be favorable to the validity of the reorgan-izations of the member banks heretofore referred to. Forthe assistance of your Counsel, there are inclosed herewithportions of two memoranda prepared some time ago in theoffice of the General Counsel of the Board containingcitations of cases having a bearing on the question involved.


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"You will observe that these memoranda are not in suitableform for distribution and are intended solely for the in-formation of your Counsel. The attention of your Counselis also called to the case of Miller v. National ChautauquaCounty Bank, 270 N. Y. Supp. 522, involving the validity ofthe reorganization statute applicable to national banks andto the case of Dunn v. Love, 155 So. 331, involving thevalidity of a bank reorganization statute of the State ofMississippi. The opinion of the court in the latter caseis also reported in Volume 92 of the American Law Reports(Annotated) at page 1323, and, on page 1337 of such volume,will be found a Note citing other pertinent cases. Thiscase is being appealed to the Supreme Court of the UnitedStates and it is understood that it will be argued in thatcourt at an early date."

Approved.

Letter to Mr. 0. C. Cartwright, Cashier of "The Central

National Bank of San Angelo", San Angelo, Texas, reading as follows:

"This refers to your letter of February 15, 1935, re-garding the right of your bank to pay interest upon adeposit consisting of 'estate funds', which are to bedeposited in the name of the 'Clerk of the Court, Trustee',and to be held pending the outcome of a law suit in thedistrict court. It is understood that the funds in questionwould constitute a deposit payable on demand.

"Section 19 of the Federal Reserve Act excepts fromthe prohibition against the payment of interest on depositspayable on demand any deposit of public funds made by or onbehalf of any State, county, school district, or other sub-division or municipality, with respect to which payment ofinterest is required under State law. Footnote 2 of theFederal Reserve Board's Regulation Q, a copy of which is in-closed herewith, provides that deposits of moneys paid intoState court by private parties pending the outcome oflitigation are not deposits of public funds made by or onbehalf of any State, county, school district, or other sub-division or municipality, within the meaning of this pro-vision of the law.

"Although your letter does not fully describe the natureof the funds concerning which you inquire, it is understoodthat they are deposits of moneys paid into court by privateparties pending the outcome of litigation. Accordingly, itis the opinion of the Federal Reserve Board that such funds,


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"although deposited in the name of the county clerk astrustee, cannot be regarded as public funds within themeaning of section 19 of the Federal Reserve Act and, there-fore, interest may not lawfully be paid by your bank on de-posits of such funds which are payable on demand."

Approved.

Letter to Mr. Fletcher, Acting Federal Reserve Agent at the Fed-

eral Reserve Bank of Cleveland, reading as follows:

"In Mr. Evens' letter of February 20, relative to theaffiliation of the Geneva Metal Wheel Company with theGeneva Savings and Trust Company, Geneva, Ohio, inquiry ismade as to whether submission and publication of affiliatereports will be necessary now that the affiliation inquestion has been terminated.

"Since it appears that the directors of the bank didnot realize that an affiliation under the terms of theBanking Act of 1933 existed, and since the affiliation hasbeen terminated by the resignation of one of the directorsof the bank as a director of the Geneva Metal WheelCompany, reports of the affiliate as of past call dateswill not at this time be required."

Approved.

Letter to Mr. Walsh, Federal Reserve Agent at the Federal Re-

serve Bank of Dallas, reading as follows:

"Reference is made to your letter of February 9, 1935,inclosing a copy of a letter dated February 7, 1935, fromMr. Marcus Phillips, Kingsville, Texas, requesting recon-sideration of his application for permission under theprovisions of the Clayton Act to serve at the same time asa director of The First National Bank of Kingsville and asa partner of Robert J. Kleberg & Company, both of Kingsville,Texas, which was not approved by the Board as indicated inits letter of January 31, 1935, to you.

"The Board has reconsidered the application of Mr.Phillips and, although the banks involved appear to be en-gaged in the same class or classes of business and solocated as to be in a position to compete substantially,has noted that Mr. Phillips' small interest in the partner-ship of Robert J. Kleberg & Company has been held by him for


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"approximately twenty-five years, that during this time hehas never been authorized to act nor has he acted in anyofficial capacity in such company and that he has noofficial connection with the operation of such company atthis time nor is any such connection contemplated. It hasalso been noted that Mr. Phillips is the largest stockholderof The First National Bank of Kingsville, owning $14,000 of$50,000 capital stock outstanding.

"In view of theFe circumstances the Board has approvedthe application and there are inclosed the original andcopies of the permit granted to Mr. Phillips covering hisservices as director of The First National Bank of Kings-ville and as partner of Robert 3. Kleberg & Company, bothof Kingsville, Texas, for the period ending January 14,1956, for transmittal by you to the applicant and the banksinvolved and a copy for your files.

"Then the permit is sent to the applicant and copies tothe banks involved, please advise them that the permit hasbeen issued so as to expire at the close of January 14, 1956,as there is now pending before the Congress oroposed legis-lation for the purpose of clarifying and otherwise amendingthe provisions of the Clayton Act relating to interlockingbank directorates."

Approved.

There were then presented the following applications for

changes in stock of Federal reserve banks:

Application for ORIGINAL Stock: SharesDistrict No. 7.National Bank of Aledo, Aledo, Illinois. 56 36

Applications for ADDITIONAL Stock:District No. 5.The Farmers National Bank of Annapolis,

Annapolis, Maryland. 47The First National Bank of Mount Airy,

Mount Airy, Maryland. 1The Loudoun National Bank of Leesburg,

Leesburg, Virginia. 9The National Bank of Woodstock,

Woodstock, Virginia. 9 66


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Annlications for ADDITIONAL Stock: (continued) Shares District No. 7. The American National Bank of Kalamazoo,

Kalamazoo, Michigan. 2Community National Bank of Pontiac,

Pontiac, Michigan. 3The First National Bank of Portage, Portage,

Wisconsin. 21The First National Bank of Lawton, Lawton,

Michigan. 1Ida County State Bank, Ida Grove, Iowa. 1

District No. 9. First State Bank

Minnesota.The Fort Pierre National Bank,

South Dakota.The First National Bank of Washburn,

Washburn, Wisconsin.First National Bank in Neche, Neche,

North Dakota.The Peoples National Bank of Hayward,

Hayward, Wisconsin.The First National Bank of Rice Lake,

Rice Lake, Wisconsin.

of Chatfield, Chatfield,1

Fort Pierre,13

3

3

1

33

District No. 10. The First National Bank of Burlingame)

Burlingame, Kansas. 14The First National Bank of Clinton, Clinton,

Oklahoma. 12_ Total

Lp-nlications for SURRENDER of Stock: District No. 3. The First National Bank of Carbondale,

Carbondale, Pennsylvania. 7

568

28

54

26174

District No. 4. The National City Bank and Trust Company of

Marion, Marion, Ohio. 30 30

District No. 6. The First National Bank in Gadsden,

Gadsden, Alabama. 45 45

Pistrict No. 7. The First State and Savings Bank of Howell,

Michigan, Howell, Michigan. 31First State and Savings Bank, Mason, Michigan. 24 55


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APDlications for SURRENDER of Stock: (continued) SharesDistrict No. 9. The First National Bank of Eagle Bend,

Eagle Bend, Minnesota. 21 21

District No. 10. The First National Bank of 0 mond,

Osmond, Nebraska. 45 Total

Approved.

Thereupon the meeting adjourned.

Approved:

Acting Chairman, Executive Committee.

45205


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