2196

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

was held in Washington on Saturday, October 26, 1935, at 10:30 a. m.

PRESENT: Mr. Thomas, Vice ChairmanMr. HamlinMr. MillerMr. JamesMr. Szymczak

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

The Board acted upon the following matters:

Letters to the chairmen of the Federal Reserve Banks of Minne-

41301is and Dallas, advising that the Board notes with approval that the

bellke on October 21 and 23, 1935, respectively, established without change

the rates of discount and purchase in effect at the banks.

Approved unanimously.

Memorandum dated October 23, 1935, from Mr. Goldenweiser,

Director of the Division of Research and Statistics, recommending the

Ointment of Mrs. Elizabeth Player Tappy as a clerk in the Division,

with salary at the rate of $1,440 per annum, effective as of the date upon

hieh she enters upon the performance of her duties after having passed a

salaefactory physical examination.

Approved unanimously.

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

twkOf New York, reading as follows:

"By letter dated July 10, 1935 The Chase Bank, a corpora-tion organized under section 25(a) of the Federal Reserve Act,requested the Board's permission to participate in a planwhich was designed to make it easier for the French investingPublic to deal in American securities and under which The ChaseBank would issue in France bearer certificates evidencing the

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

2197

10/26/35

"deposit with it in New York of certificates for shares ofcertain stocks listed on the New York Stock Exchange.

"Although in the same letter The Chase Bank also re-quested the Board's permission to perform in Paris, France,general 'corporate agency' powers, it was understood thatthe only activities in which the Bank had any definite in-tention of participating in the immediate future were thoseincidental to the specific plan designed to facilitate thePurchasing and selling in France of listed American stocksand it was accordingly only with respect to this specificPlan that the Board's letters of July 31, 1935 and September9, 1935 were written.

"In the last paragraph of its letter addressed to yourbank under date of September 25, 1955 The Chase Bank hasexplained that the burden of French taxes and regulationswould be so great that the issue of bearer certificates asPreviously contemplated would be impracticable and that thePermission desired in respect to the specific plan referredto above would not be needed. While it is thus clear thatthe specific plan has been abandoned for the present, it isequally clear from the final sentence in the letter that theBank still does desire the Board's permission to exercisethe so-called 'corporate agency' powers which were referredto in the Bank's initial letter of July 10, 1955 in thefollowing language:

'To accept and hold securities deposited withit in Paris, France, in safekeeping or as custodianor under deposit agreements or as agent; and toissue in Paris, France, in its own name or as agent,certificates and receipts in Bearer and registeredform for securities so deposited.'"The Board is of the opinion that it is not justified

in granting The Chase Bank permission to engage in activitiesof the character referred to if it is not the Bank's definiteintention, should the permission be given, to proceed promptlyto engage in such activities or to hold itself out to thePublic as ready to do so. Accordingly, you are requested toascertain whether the Bank's request relates to a programWhich has been definitely formulated and to advise the Bank thatthe Board is unable to grant its application if the permissionis desired merely because the Bank wishes to be able to under-take all or some of such activities at an indefinite time inthe future without the necessity of obtaining at that time thePermission of the Board on the basis of its plans as thenevolved.

"Assuming that the permission of the Board is sought withrespect to activities in which the Bank wishes to engage in

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

2198

10/26/35 -3-

"the immediate future, it will be apprecipted if you will ob-tain information from the Bank on the following points:

"1. The Board desires further information as to thenature of certificates which will be issued by The ChaseBank to evidence the deposit of securities received in theexercise of its 'corporate agency' functions. As is indicatedby the Board's letter of September 9, 1935 the propriety ofthe issue of certificates, capable of being classified as'securities', by an organization which is at the same timeengaged in the business of receiving banking deposits must beconsidered in the light of several prohibitions contained inthe Banking Act of 1933. It is not understood whether thestatenent in the Bank's letter of September 25, 1935 that theburden of French taxes and regulations makes the issue ofbearer certificates impracticable referred only to thespecific plan which has now been abandoned or whether it wasintended to mean that in the exercise of general 'corporateagency' functions it would be impracticable for the Bank toissue certl'icates of this kind. The Board wishes to knowWhether the Bank proposes to issue transferable certificatesin bearer form or whether it intends to evidence the depositof securities with it by issuing safekeeping or similarreceipts which will presumably not pass from hand to hand.It is evident that if the Bank will exercise the 'corporateagency' functions without the issue of certificates which con-stitIte 'securities' within the meaning of the Banking Act of1933 no further consideration need be given to certain of thequestions arising under that Act.

"2. The Board believes that the information which hasbeen submitted to it should be supplemented in order to showwhether the 'corporate agency' functions which the Bank desiresto exercise are, in the words of section 25(a) of the FederalReserve Act, 'usual * * * * in connection with the transactionof the business of banking or other financial operations' inFrance. In its letter of July 10, 1935 The Chase Bank enumeratedseveral cases in which there had been issued in France bearercertificates of deposit similar to those which it intended toissue against the receipt in New York of shares of listed stocks.The 'corporate agency' functions with respect to which theBoard's permission is now requested are broader in scope thanthe activitios under the specific plan with respect to which thePermission of the Board was previously desired and it is apparentthat with respect to certain of the activities now in question noinformation has been submitted to the Board indicating that suchactivities are of a character usual in the conduct of financialoperations in France.

"3. In its letter dated July 31, 1935 the Board requestedYou to obtain from The Chase Bank certain assurances with respect

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

2199

10/26/35 _4—

"to the nature of the Bank's interest in securities depositedWith it under the now abandoned plan calling for the issuanceof bearer certificates in France. The assurances given inthe letter dated August 8, 1935 from The Chase Bank related tothis specific plan and the Board now desires to receive similarassurances with respect to the role which the Bank will play in

relation to securities deposited with it in the event of itsexercise of the 'corporate agency' functions which constitutethe basis of the present application.

"It is believed that complete answers to the foregoingmatters will furnish the Board the specific information whichis necessary in order that it may possess a more accurateconception of the activities which the Bank wishes to exercisethan is obtainable from the general language in which the de—sired permission was phrased in the Bank's letter of July 10,1935. If after receiving a reply from the Bank it seems toyou that the information available is still so general inCharacter as not to afford a satisfactory idea of what the BankProposes to do, it will be appreciated if you -ill obtain suchfurther information as to you seems desirable."

Approved unanimously.

Memoranda dated October 23, 1935, from Mr. Owens, Assistant

C°1111sel, recommending that there be published in the next issue of the

l'ederal Reserve Bulletin statements, in the form attached to the memoranda,

Itith resnect to (1) thP Board's recent rulings regarding the type of

Indebtedness which must be reported by executive officers under the pro—

of section 22(g) of the Federal Reserve Act, and (2) the making

°f a determination by the Board, under the provisions of section 301 of

the Banking Act of 1935, that an organization is not engaged, directly or

irIclirsctly, as a business in holding the stock of, or managing or con—

t:,3.1ing, banks.

Approved unanimously.

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

44111,-- or Minneapolis, reading as follows:

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

2200

10/26/35 -5-

era1

"Receipt is acknowledged of your letter of October 11,1955, in which you refer to your intention to appoint Mr.0. S. Powell as Assistant Federal Reserve Agent at your bankto succeed Mr. Bailey, who will become eligible for retirementon November 7, 1935, and in which you suggest that the bondnow in effect covering Mr. Powell in acting for the FederalReserve Agent in the performance of certain duties be left ineffect until the matter of the appointment of Mr. Powell isdetermined.

"In view of the circumstances set forth in your letter,the Board of Governors of the Federal Reserve System will inter-pose no objection to the continuance of Mr. PoNell's presentbond in accordance with your suggestion. Should the appoint-ment of Mr. Powell as Assistant Federal Reserve Agent not bemade as proposed in your letter, and it is desired to have himcontinue to act for the Federal Reserve Agent in certain •capacities, a new bond in the form inclosed -ith the Board'sletter of October 8, 1955, should be executed promptly and for-warded to the Board for approval in the usual way."

Approved unanimously.

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

Reserve Bank of Cleveland, reading as follows:

"There is inclosed a copy of a letter dated September 11,1955, from Ir. S. M. Jamison, Cashier of The First NationalBank of Apollo, Apollo, Pennsylvania, addressed to theComptroller of the Currency and referred to the Board for replyWith respect to the inquiry contained in the third paragraphthereof regarding the service of an employee of The MellonNational Bank of Pittsburgh, Pittsburgh, Pennsylvania, as adirector of The First National Bank of Apollo.

"In view of the fact that the banks involved are said tobe thirty miles apart, it seems probable that section 3 of theClayton Act as amended by the Banking Act of 1935 is notapplicable to the relationships involved. However, the Boardis without sufficient information to determine the questiondefinitely, and therefore it -ill be appreciated if you willascertain such facts as you may deem necessary in the light ofthe Board's letter of October 11, 1955 (X-9541), and adviseThe First National Bank of Apollo. Of course, if you areunable, with the assistance of counsel for your bank, todetermine whether section 8 is applicable to the relationshipsinvolved, the Board will be glad to consider the matter upon

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

2201

-6-

"receipt of full information, together with "sueh commentsas you may desire to make."

Approved unanimously.

Thereupon the meeting adjourned.

- )

Secretary.

Vice Chairman.

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