19380127_Minutes.pdf

117

A meeting of the Board of Governors of the Federal Reserve

SYstem was held in Washington on Thursday, January 27, 1938, at 11:30

8.. in.

PRESENT: Mr. Eccles, ChairmanMr. Ransom, Vice ChairmanMr. SzymczakMr. McKeeMr. Davis

Mr. Morrill, SecretaryMr. Bethea, Assistant Secretary

Mr. Clayton, Assistant to the Chairman

Consideration was given to each of the matters hereinafter re-

teed to and the action stated with respect thereto was taken by the

11°Eird:

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

Pederco'LL Reserve System held on January 25, 1938, were approved unani-

ttrqsly.

Letter dated January 26, 1938, to Mr. Austin, Chairman of the

leder41 Reserve Bank of Philadelphia, reading as follows:

Bo "Referring to your letter of January 24, 1938, the

erd approves a salary at the rate of 25,000 per annum142f,Mr. J. S. Sinclair, President of the Federal Reserve

;4114 of Philadelphia, for the calendar year 1938, which

a..'"- rY is the same as that fixed by your board of direc-uomn

tEtak of

Approved unanimously.

Letter to Mr. Helm, Secretary pro tem of the Federal Reserve

Kansas City, reading as follows:

to "Referring to your letter of January 20, 1938, the

rd approves the reappointment of Messrs. R. L. Gray,

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

118

1/ 27 / 38••••

"Walter T. Berkowitz, D. Bruce Forrester, Ed. S. Miller,3!4c1 L. F. Rooney as members of the Industrial Advisory Com-mittee for the Tenth Federal Reserve District to serve forterms of one year each, beginning on March 1, 1938."


Letter to Mr. Fry, Vice President of the Federal Reserve Bank

0 n1_--'"iaond, reading as follows:

Mr"This refers to your letter of December 22, 1937, to

1-• aulger and to the copy of s letter inclosed therein(1.: ara llir. Heyward E. Boyce, President of the Maryland Trust'an1PanY, Baltimore, Maryland, with reference to the question

whether certain repurchase agreements comply with the re-quirements of the regulation of the Comptroller of the Cur-rency

Roverning the purchase of investment securities."It is understood that the Maryland Trust Company

from time to time purchases on the open market bonds ofthe Houston Oil Company and the Houston Natural Gas Cam-Pally at the request of the companies and pursuant to an

Zp'eement by the companies to repurchase the bonds from4.1,_le trust company on a definite date and at the cost toIle trust company. These purchases are made in order toenable the companies to acquire bonds for retirement pur-3uant to sinking fund provisions., "It is noted that Mr. Boyce suggests that the securi-ties were acquired for the account of the issuing companies:fld not for the account of the Maryland Trust Company and,

;"°rdinglY, that in the transactions referred to the test4-s not the rating given by recognized rating services butrather the credit and ability of the companies to meet theirrepurchase obligations. However, it appears that the trustla°L1PanY used its own funds to acquire the bonds and received

PaYment from the issuing companies until the time ofthe

Purchase by them from the trust company. In such cir-c

,4111stances it seems clear that the securities were purchased'0Tel held during such period by the trust cmpany for itstinl account. Member banks may purchase investment securi-vie for their own account only in accordance with the pro-

of section 5136 of the Revised Statutes and the

'Ptrpller's regulation issued pursuant thereto and, ac-

rdinglY

co

, the provisions of the regulation are applicable


1/27/38-3-

_ 119

"to the purchase of these securities by the Maryland TrustCompany.

"1:dth respect to the question whether the agreementsbetween the trust company and the issuing companies complywith the requirements of subdivision (6) of section II ofthe Comptroller's regulation, it may be said that they donot appear to fall literally within the terms of any oneor the three paragraphs of that subdivision. However, inaabstance though not in form they appear to comply withthe provisions of paragraph (b) of subdivision (6), andaccordingly no objection will be made to the use of such

!greements, if the bonds are eligible for purchase by the.,rust company and the transaction otherwise complies with

requirements of the regulation. This statement re--rs only to the agreements under which the issuing corn-

agree to repurchase the bonds at the cost to the-urast company. Mr. Boyce's letter indicated that some°f the agreements had provided that the bonds were to berePurchased by the issuing companies at par, but it ap-Peers that such agreements would not comply with the re-pirements of the regulation unless the bonds were purchaseduY the trust company at par or less.

l "It will be appreciated if you will advise the Mary-a A- Trust Company of the views expressed herein."


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

reading as follows:

"In view of the statements contained in your letterXanuary 24, with respect to the problematical value of

;1,„ue Premises now occupied by the Helena Branch, the BoardprProves the action taken by your bank in making a charge-, t, ii1,999, sufficient to reduce the book value of thatProperty to 0.."


Thereupon the meeting adjourned.


Documents

19380127_Minutes.pdf