19310106_Minutes.pdf

A meetin(T, of the Federal Reserve Board was held in the office of the

federal ieserve 73oard on Tuesday, January 3, 1931, at 11.:15 a. ra.

PRESENT: Gover:lor

IiillerKr. JamesKr. foleKr. .i_cClelland, Assistant Secretary.

.leport of -xecutive Committee on letter dated January 2nd from the

federal lieserve Agent at Kansas City, recommending approval of the a-3plication

Of the Oklahoma National Bank, Oklahoma City, Oklahoma, an outlying institu-

tion for a reduction in its reserve requirements from 10 to 7:3 of demand

deposits, tIi oard's Connittee also recommending approval.

Unanimously approved.

Memorandum from Counsel dated I,ovember 18th, with further reference to

the or:Anization, under Section 25(a) of the federal Keserve Act, of the

Proposed American lankin; and Industrial Corporation of the iear dis-

approval of which was recommended by the 'ederal userve ar;ent at Mew Mork

for reasons stated in a letter addressed by him to the ioard under date of

i.ovenber 7th and ordered circulated among the members of the Board at the

meeting on :.ovember 10th; Counsel submittin.7, in accordance with a request

Made by the Governor, draft of a resolution for adontion by the Board in the

event it decides not to approve the organization papers of the proposed

corporation nor to issue to it a permit to commence business.

After discussion, upon motion, theresolution submitted with Counsel'smemorandum was adopted as follows:

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

1/6/31

JHEREAS, William 2ellowes Morgan, William S. Ladd,r- -

Albert W. Staub, Henry Herberman, F. H. Schall, Joseph B. Cotton,Frank E. Hagemeyer, David A. Himadi, Fayad H. Tabara, W. F.Southirt, Charles A. Moser and Henry C. Ulen, have, as organ-izers, submitted for the approval of the Federal Reserve Boardthe articles of association and organization certificate of acorporation proposed to be organized under the provisions ofSection 25(a) of the Federal Reserve Act under the name of'American Banking and Industrial Corporation for the 1;ear East.'

wWHEREAS, the Federal Reserve Board, after having causedan investigation to be made as to the character and financialresponsibility of the organizers of the proposed corporation andas to their qualifications for the operation of such a corpora-tion and after having made inquiry as to the reasonable chancesfor the successful operation of such a corporation in accordancewith the proposal of the organizers, has given careful and im-partial consideration to the question whether the articles ofassociation and organization certificate of the proposed cor-poration should be approved and a permit for it to begin businessshould be issued, in the light of all the information obtainedthrough such investigation and inquiry and all the informationsubmitted by the organizers of this proposed corporation;

'ralMREAS, it is intended that this proposed corporationwould transact the ordinary business of a bank of discount anddeposit and at the same time would invest a substantial amountof its funds in the stock of subsidiary conpanies, which wouldbe controlled by the corporation and which would engage in thedevelopment of a variety of enterprises including public utility,

real estate, and industrial projects, in a number of foreigncountries at a great distance from the United States of America;

r/HEREAS, such a combination of the business of a bankof discount and deposit with that of a holding company of thestock of corporations engaged in various enterprises would in thejudgment of the Federal Reserve Board be inconsistent with thebest interests of the depositors of the bank;

"WEEREAS, under the conditions described a close sup-ervision by the Federal Reserve Board over the activities andcondition of the proposed corporation and its subsidiary com-anies would be extremely difficult, if not actually impossible;

flUEDEREAS, it appears from the information received bythe Board that the Board of Directors of the proposed corporation

in this country would act principally in an advisory capacityand would have little to do with the actual administration of theaffairs of the corporation in the foreign countries;

warEREAS, upon inquiry the Federal Reserve Board has re-ceived information from which it appears that while the organ-izers of the Proposed corporation are men of character and stand-

ing only a few of them have had experience in international bankingor finance or possess qualifications which would make them especial-ly valuable in managing a corporation of this kind; that there is

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"no assurance of a sufficiently colapetent and experienced managementfor the propdsed corporation; and that accordingly the successful

conduct of the business of the proposed corporation would be doubtful;

"WHEREAS, it is Proposed that one of the organizers of the

corporation would receive a promotion fee of 400,000 to be paidout of a fund provided for the purpose by the sale of the capital

stock at an amount in excess of its Par value; and

"ViliEREAS, in view of these and other considerations, itis the opinion of the Vederal Reserve Board that the entire project

is so hazardous and its chances of success so dubious that it would

not be in the Public interest for the Board to approve the proposed

articles of association and organization certificate of the proposed

American Banking and Industrial Corporation or the Lear East;

"FO?!, THIPREFORE, ILii IT RESOLVED by the 2ederal Reserve

Board that the articles of association and the organization certifi-

cate of the proposed hmerican Banking and Industrial Corporationfor the Lear East be not approved.

"BE IT gUliTELR iZESOL/ED, that a permit for such a cor-)orationto bein business be not issued."

Upon motion, it was also voted to a().prove

a letter, submitted with Counsel's memorandum,

to the organizers of the Proposed American

Banking and Industrial Coruoration for the

Lear Last, advising of the Board's action.

Bond in the amount of ,:100,000, executed by Er. Eugene Li. Stevens as

- ederal ,eserve Agent of the ]2ederal ieserve Bank of Chicago, under date of

a-anuary 2, 1931.

Approved.

Liemorandum from Counsel dated :Tanuary 5th, recowending that his office

be authorized to prepare and have published a new edition of the federal

Ileserve Ect as amended 1.11) to and including Larch 4, 1931.

Upon recommendation of the Law Comittee,

the authority requested by Counsel was

granted.

lemorandum from Counsel dated ::anuary 3rd submittin- draft of rePly to

letter dated December 30th from the .:,ssistant federal Leserve Lent at Chicago,

advisin-; that the first Jterling'ational Sank of Jterli:12, Illinois, has

not yet applied to the federal Aeserve Board for the surrender of its trust


151/6/31 -4-

Powers, nor has it obtained a certificate certifyint: that it is no loner

authorized to exercise trust powers; the letter also su-gestinc that the bank

and the Auditor of 'ublic Accounts of the 3-bate of Illinois be advised that

if the bank desires to surrender its trust Powers, it should proceed in the

Inanner prescribed in the last paragra-di of section 11(k) of the ederal -e-

serve ."ct and in accordance with the orovisions of 2ection Y.IV of the Board's

Regulation

Upon recommendation of the LawCommittee, the proposed letter wasapproved.

nenorandum from Counsel dated January 2nd, submitting draft of re)ly to

a letter dated 13ecenber 26th from the Office of the .;Pecial Assistant to the

:3eeretary of the ?reasury with regard to the elimination, as obsolete, from

the united states -)ode, of 3ections 201 and 284 of Title 12 thereof (repre-

sentin'; portions of iection 2 of 'the federal iieserve Act dealin'; with the

"..-Pital of federal heserve banks at the time of organization); the Proposed

IbeDly aLvising that the ederal ,eserve Board has no objection to the elimina-

tion o: the two sections referred to.

Upon recommendation of the LawCommittee, the proposed rePly submittedwith Counsel's memorandum was approved.

4:lemorandum from Counsel dated January 5th, submitting, draft of reply to

letter dated Decenber 30th from the Ohio rational 3ank of Columbus, raising

the cuestion whether the )rovision of section 11(k) of the Federal ieserve

t, authorizing certain officers of a national bank to take oaths and

ezecute affidavits on 'oe Lalf of the bank, is mandatory, or whether the bank

IlaY continue to follow the ,:rovisions of 3ection 710-163 of the General

Code of Ohio; the proposed reply stating that the section of the Ohio Code

referred to applies only to trust ca.)anies and not to national banks; and


li( ,

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that while the provisions of Section 11(k) could not be said to be mandatory,

in the absence of a state law soecifically authorizing an officer of a

national bank to take oaths and execute affidavits re.-uired by state law,

the safer course would be for the officers specified in the Federal deserve

Act to take such oaths and execute such affidavits, since they are the only

ol?ficers expressly authorized to do so.

U.)on recommendation of the LawCommittee, the proposed letter wasapproved.,

Lemnrandum from Counsel dated J'anuary 2nd with regard to communications

received from the assistant -Federal deserve Agent at Chicago, with reference

to the L:e::bershiT) of the dent State Bank, ientland, Indiana; the ::ssistant

2ederal deserve agent advising that it is understood that the charter issued

to tilis bank has expired and that a new charter has been issued in the name

Qf "The Kent State Bank", inquiring whether membership has not been

automatically terminated and reeuesting a ruling with regard to the Federal

l'eserve Bank's position in dealing with the institution which is indebted to

the Federal deserve bank; ,Counsel stating that the Assistant Federal deserve

Agent at Chicago has been advised, over the signature of the Governor, that (1)

• '"ere the charter of a State member bank expires and its business is taken

Qver by a newly organized bank, such new bank is not automatically a member of

the Federal deserve System but must a-Tly for and obtain membership in the

sakle manner as any other nonmember State bank; (2) where the charter of a State

lalerflber bank is extended upon expiration without the creation of any new

bellk, such bank remains a member of the System and continues to be entitled

to all privileges of membership; and (3) if an emerency exists, the Feder-

al reserve bank should consult its own counsel and use its own judgment.


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1/6/31 *WO

The memorandum further suggested the desirability of Federal Reserve banks

maintaining records showing the date of expiration of the charters of all

state banks, and outlined a suggested procedure to be followed in maintain-

tag' such a record, and in dealing with state member banks with expiring

charters.

Upon recomendation of the Law

Committee, a letter to the Governor of the

Federal Reserve Bank of Chicago, conveying

the suggestions outlined by Counsel as to

the proper procedure to be followed; a

letter to the iissistant Federal Reserve

Agent at Chicago more definitely answering,

his question, and a circular letter to all

Federal Reserve banks, suggesting that they

set up a record showing the date of expira-

tion of the charters of all state member

banks in their respective districts, and

outlining the procedure suggested by Counsel,

which letters were submitted with Counsel's

memorandum, were approved and ordered trans-

mitted.

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Memorandum from Counsel dated October 22nd with regard to a request

l*eoeived from the Federal Reserve Bank of I:ew York for the opinion of the

80ard on the question of the classification as deposits for reserve purposes

or liabilities arising from transactions whereby foreign currency is paid

into an account maintained by a member bank with a foreign correspondent,

the amount being repayable by the member bank in foreign currency with

interest on a specified later date; the memorandum submitting draft of letter

to the Deputy Governor of the Federal Reserve Bank of Eew York advising that

the opinion of the Board a liability arising in the manner described

Mast under the law be regarded as a deposit liability and subject to the

corresponding reserves.

Upon recommendation of the Law

Committee, the proposed letter was approved

and ordered transmitted.


1/6/31 -7_

Lemorandum from the Examiner in Chare dated December 29th, submitting

report of examination of the international Acceptance Bank, Inc., 7ew York7

City, 7Jew York, as at the close of business :oveMber 6, 1930.

Ordered circulated.

The minutes of the meetins of the Executive Ooranittee of the - ederal

deserve board held on 2,ecenber 29, 1930 and ,Tanuary 2, 1931 were read and-

aDProved and the actions recorded therein -,:ere ratified.

The minutes of the meetings of the Executive Corviittee of the federal

deserve Board held on Jecember 31, 1930 and ‘i-anuary o, 1931 were read and

aPproved as amended, and the actions recorded therein were ratified.

'deference was then made to the memorandum submitted by the Governor at

the meeting of the Executive Committee on January 2nd, in which he reported

that he had advised the Deputy Governor of the few 'fork Bank that he felt,

in the li:ht -o2 all circumstances, that the Board would not object to the

PlIrchase of approximately ;,15,000,000 of Government securities acr;uired from

the :-anufacturers Trust Company and the l'ublic lational Bank, both of : ew

York jity, or to the purchase of .,132,000,000 of Government securities recently

made 'by the , pen :_arket Miley Conference for iysteri Account because of bank-

lXlf and credit strain over the :-ear-end period.

APProved:

Mien motion, it was voted to approvethe action of the Governer in so advisircthe few 7ork Bank.

The meeting adjourned at 12:15 p. m.

Governoi.

Zil Pl,feratiAssistant Secretary


Documents

19310106_Minutes.pdf