19250626_minutes.pdf
TRANSCRIPT
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taLL,U
Upon call of the Governor a special meeting of the Federal Reserve
Board was held in the office of the Federal Reserve Board on Friday, June
26, 1925 at 11:00 a.m.
PRESENT: Governor Crissinger
Mr. ?lett
Mr. Hamlin
Mr. MillerMr. JanesMr. Noell, Assistant Speretary
The minutes of the meeting of the Federal Reserve Board held on
June 25th were read and approved.
Letter dated June 25th from the Secretary of the Open Market
Investnpnt Committee transmitting copy of the' minutes of the meeting of
the Committee held in New York on June 24th.
Ordered circulated.
The Governor then presented the matter ordered circulated at the
meeting on June 23rd, namely, memorandum from Counsel dated June 19th
on the subject of the eligibility of an officer of an insurance company
for election as Class "5" Director of the Federal Reserve Bank; Counsel
expressing the opinion that a person whose sole occupation is that of of-
ficer of an insurance company is not eligible for election as a Class "B"
Director of a Federal Reserve bank; because (1) he is not actively engaged
in "commerce, agriculture or same other industrial pursuit" within the
meaning of that language as used in the Federal Reserve Act, and (2) it is
contrary to the policy of Congress for a person so closely identified with
the financial interests to be permitted to serve as a Class "B" Director
Of a Federal Reserve bank.
After discussion, upon motion by Mr. Hamlin,
it was voted to adopt the opinion expressed in
Counsel's memorandum and ordered that a letter
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of advice of this action be transmitted to all
Federal deserve banks.
Letter dated June 24th from the Federal deserve Agent at Boston
suggesting that the salary of his Assistant Federal Reserve Agent be
charged to general overhead rather than allocated to the several depart-
ments under the supervision of the Federal Reserve Agent.
deferred to the Committee on Salaries,
Expenditures and Efficiency.
The Governor then presented for consideratiim the application of
.the Lincoln Bank and Trust Company of Louisville, Kentucky, for permis-
sion to broaden its functions by conducting the business of guaranteeing
the principal and interest of real estate mortgage loans which it sells to
the public and issuing its om obligations secured by real estate mortgage
loans; together with the following draft of a letter to the bank prepared
by the Committee on Examinations:
"The Federal deserve Board does not look with favor upon
the intermingling of too many distinctive kinds of banking in
one institution. It has generally been regarded as rather
dangerous for a banking institution which accepts deposits to
sell debentures or to place its guaranty upon mortgages or other
securities. In case the guaranty had to be made good by failure
of the guaranteed security, the funds for payment would either
come directly from the money of depositors or would weaken their
security.In an institution where such business is carried on by
a distinct department with careful segregation this criticism
would perhps not alaoly, but the Board does not understand that
the laws of Kentucky provide for such segregation of assets.
Despite the fact that the Board does not look with favor
upon the mingling of deposit banking and debenture sell.ing or
guaranty of mortgages in one institution, in view of the fact
that your competitors are doing this business and in view of
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6/26/25
"the fact that your records show that you have had
no losses in your dealings in the class of mortgages
which you nropose to take, the Board will not object
to your proposal provided you will inform us in some
detail how you proms° to handle this business, what
limitations you propose to place upon it, and how the
liabilities, whether contingent or direct, will be
shown in your statements."
After discussion, Mr. Hamlin moved that
the Board approve the application of the Lincoln
Bank' and ?rust Company and the letter submitteu
by the CoEznittee, reserving the rir,ht to revoke
the permission granted in the event that an ex-
amination at any time should indicate that the
condition of the bank is being adversely af-
fected by the business in question.
11r. Hamlin's motion being -out by the
chair was carried, Mr. Miller voting "no".
At this point, 1:,r. McIntosh entered the meeting.
The Governor then presented the special order business for this
morning's meeting, namely, the application of the Mercantile Trust Company
of San Francisco for permission to purchase the Bank of Burlingame and to
operate branches in its premises, valich was disapproved by the Board on
October 28, 1924 and which the Board on June 3, 1925 voted to reconsider
and the application of the bank to purchase the Bank of Palo Alto and to
establish a branch in its premises which has not been forwarded to the
Board by the Federal ileserve Agent at San Francisco because of disapproval
of the Burlingame application.
:Ir. Platt submitted the following memorandum
and moved adoption of the resolution contained therein:
"In vieu of the fact that the Mercantile Trust
Company filed its blanket applications for additional
branches in December 1923, before the Board's resolutions
h
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6/26/25
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"of January 7th, and in view of the fact that
Mr. Drum has shown at a hearing before Messrs.
Crissinger and Miller, members of the Board's
Executive Committee, on May 6th, last, arid by
his letter of May 18th, that included in the
afplications of December 1923 were banks at
Palo Alto and Burlingame which he had already
made commitments to take over, and in view of
the fact that when notified of the Board's
resolution of January 7th he proceeded as rapid-
ly as possible to complete his arrangements for
consolidation with these banks expecting to be
able to file specific final applications before
August 1, 1924, while the territory in which
they are located was declared by the Board to
be contiguous to San Francisco, and in view of
the fact that he did complete the consolidations
and filed the applications only a few weeks later.
Resolved: That the Board finds that the
applications of the Mercantile Trust Company for
branches at Burlingame and at Palo Alto are in sub-
stantial conformity with its resolutions of November
7th and Jamary 7th and therefore approves the ap-
plication for the consolidation with the Bank of
Burlingame and the conversion of this bank and its
branch into branches of the Mercantile Trust Company,
and will arnrove the application for Palo Alto when
submitted."
After discussion, Mr. Platt's motion was
put by the chair and lost on a tie, the members
voting as follows:
Mr. Platt, "aye"
Mr. Hamlin, "aye"
Mr. Miller, "aye"
Governor Crissinger, "no"
Mr. James, "no"
Mr. McIntosh, "no"
REPO-2S OT SmArDING CO1'.2.1ITTE73:
'Dated, June 25th, ecommending approval of
Price for permission to
director and officer of
as director of the King
Seattle, Washington.Approved.
the application of Mr. Andrew
serve at the same time as
the Marine National Bank, and
County State Bank, both of
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imm s OF STANDING COMMITTEES: (Cont'd)
Dated, Jung 25th, Recommending approval of the application of Kr. A.Brygger for permission, to serve at the same timeas director and officer of the Marine National Bankand as director of the King County State Bank, bothof Seattle, WashinTton.
Approved.
APproved:
?he meet inn: adjourned at 12:30o cloc::.
ird Assistant Secretary.
.11Govorn
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