2082

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

1148 held in Washington on Monday, October 14, 19560 at 11:30 a. m.

The

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

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

Board acted upon the following matters:

Memorandum dated October 11, 1935, from Mr. Van Fossen, Assistant

Chjef Of the Division of Bank Operations, recommending that Mrs. Flora S.

Dever—"u4) a statistical clerk in the Division, be granted an additional

leave

for a

of absence with pay, because of illness and a death in her family,

period of five days beginning October 7, 1935.

Approved unanimously.

Telegram to Mr. Sargent, Assistant Federal Reserve Agent at theP d

eral Reserve Bpnk of San Francisco, reading as follows:

"Your wire October 11. Board's requirement relatingincrease in capital and surplus of 'Peoples Bank and Trust

°mPany', Seattle, Washington, contemplated the provision ofadequate capital and surplus by bank for protection of itslepositors and other creditors and that capital notes andQebentures might be included in complying with Board's re-

Approved unanimously.

Memorandum dated October 10, 1935, from Mr. Parry, Chief of the

alon of Security Loans, transmitting:

(1) the following proposed letter to the Securities andExchange Commission:

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"The Commission has submitted to the Board of Governorsof the Federal Reserve System the provisions regardingmargins which it plans to incorporate in its proposed rulesfor the registration of unissued warrants and unissued securi-ties for 'when issued' dealing on national securities ex-changes.

"The Board interposes no objection to these provisions,but reserves the right to issue in the future such regulationscf its own as will fix margin requirements on unissued securi-ties and unissued warrants. The adoption of such regulationsis being studied by the Board.

"All or any part of this letter may, in appropriatecontext, be quoted in any release to the press issued by theCommission in connection with the promulgation of its rules.

"Copies of the provisions regarding margins which weresubmitted to the Board are attached."

"Proposed Margin Provision in S.E.C. Rule JD 6Entitled 'Denial of Registration of an Unissued Warrant for "When Issued" Dealing'.

"(b) The Commission may deny registration of an unissuedwarrant or certificate for 'when issued' dealing on a nationalsecurities exchange unless the Commission after such notice and0PPortunity for hearing finds that

(6) the rules of the exchange on which such unissuedwarrant or certificate is to be registered for'when issued' dealing provide substantially thatthe amount of margin (in addition to the amountrequired to cover any unrealized loss) which mem-bers of such exchange shall require on anycommitment in such unissued warrant or certificateshall be (A) in respect of a net long commitment,the current market value of such unissued warrantor certificate in such net long commitment; and (B)in respect of a net short commitment, the marginwhich would be required on an equivalent shortcommitment in the issued warrant or certificate,except that so long as the security, in respect ofwhich an unissued warrant or certificate is to beissued, is in the account of a person by whom orfor whose account such unissued warrant or certifi-cate is to be received, no margin need be requiredon a contrect to sell such unissued warrant orcertificate or"

"Proposed Margin Provision in S.E.C. Rule JD 9

Entitled 'Denial of Registration of an Unissued

Security for "When Issued" Dealing'.

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"(b) The Commission may deny registration of an unissuedsecurity for 'when issued' dealing on a national securitiesexchange unless the Commission after such notice andoPportunity for hearing finds that

(6) the rules of the exchange on which such unissuedsecurity is to be registered for 'when issued'dealing provide substantially that the amount ofmargin (in addition to the amount required tocover any unrealized loss) which members of suchexchange shall require on any commitment in suchunissued security shall be (A) in respect of anet long commitment, 45 percent of the currentmarket value of such unissued security in such net•long commitment; and (B) in respect of a net shortcommitment, the margin which would be required onan equivalent short commitment in the issuedsecurity, except that so long as the security inrespect of which an unissued security is to be issuedis in the account of a person by whom or for whoseaccount such unissued security is to be received, nomargin need be required on the contract to sell suchunissued security; or"

(2) a proposed amendment (No. 6) to Regulation T, reading as follows:

, "Section 5 of Regulation T is hereby amended by adding atOle end thereof a new subsection reading as follows:

I(i) Warrants. - Notwithstanding any other pro-vision of this regulation, the maximum loan value ofany warrant or certificate which evidences a right tosubscribe to or otherwise acquire any security andWhich by its terms expires within ninety days ofIssuance shall be nothing: Provided, That in any casein which an account contains, in addition to suchwarrant or certificate, the security in respect ofwhich such warrant or certificate has been issued,the current market value of such security shall, forthe purpose of calculating its maximum loan value, beIncreased by the current market value of such warrantor certificate:"

(3) a telegram to the Federal reserve agents at all Federal reserve

quoting the amendment to Regulation T referred to above and request-

that upon receipt of the telegram the agents print the amendment, and,

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after checking it against the confirmation of the telegram to distribute

copies to interested persons.

There was also attached to the file, which had been circulz,ted

eri1(3ng the members of the Board, a memorandum dated October 10, 1935, from!Ar. 0

''enediet, Assistant Counsel, written in connection with the memorandum

fr°rn Mr. Parry,

B()ard

The letter to the Securities and ExchangeCommission was approved by four members of theBoard on October 12, 1935, and the proposedamendment to Regulation T and the telegram tothe Federal reserve agents were approved with theunderstanding that the amendment would be issued,(to become effective 10 days later) and the tele-gram to the Federal reserve agents would be sent,Upon receipt of advice from the Securities andExchange Commission of the issuance of its pro-posed rules for the registr.tion of unissuedwarrants and securities.

Letter dated October 12, 1935, approved by three members of the

' to Mr. Allan Sproul, Assistant to the Governor of the Federal Re-

Bank of New York, reading as follows:

19 irReceint is acknowledged of your letter of October 7,0;5, 7,ith inclosures, with respect to the payments due as

October 18, 1935, on the participations of the Federalf.eserve banks in the second central bank credit to theNational Bank of Hungary.

. "The Board notes that you have advised the Bank for Inter-atlonal Settlements that, with respect to the interest pay-ment

due on October 18 under the second syndicate credit, you

4je willing to have the payment converted into United States11ars at the current rate of exchange and that, upon receipt

th tae proceeds, you will credit as interest 02,418.47, ande balance as a partial repayment of principal.

4 . "Your letter of September 24, 1935, to the Bank for Inter-I1°nal Settlements requests full information concerning the"?ntion of the Hungarian National Bank with respect to theaPltal repayment due on October 18, 1955, on the second

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syndicate credit and also with regard to the similar paymentdue.on October 18, 1934, the transfer of which was postponed.It is assumed that when the interest payment referred to above!las been made and the information requested in your letter haspeen received, you will advise the Board further regarding thematter."

Approved unanimously.

Letter dated October 12, 1935, approved by four members of the

to Honorable Burton K. Wheeler, United States Senate, reading asfollows:

"Reference is made to your letter of September 27 in whichY°11 inclosed a letter you had received from Mr. Raymond Ehlers°f the Sun Produce Co., Inc., Helena, Montana, regarding hisPPlication for a loan which was rejected by the Federal Reservemank of anneapolis.

"We are informed by the Federal Reserve Bank of Minneapolis,in response to our request for information, that the Sun ProduceCs°mParlY, Inc., in applying for a loan of e2,500 offered no„?5arity, and that the only security available was the machinery

;7:uu 2,700fixtures in a leased building valued by the applicant atv .

Re "Both the Industrial Advisory Committee and the Federalserve bank gave careful consideration to the application and

,E141e to the conclusion that the bank would not be justified in"PProving the loan for the reason that the operating records and9j0spects of the Company did not give sufficient assurance of's ability to repay the loan from the profits of the business,

mad that, accordingly, it did not appear that the loan could be

t,ade on a reasonable and sound basis, as Section 13b of the4'ederal Reserve Act reqaires.c "The Board regrets that the application could not have re-

favorable action, but it appears to have been giventhe'!refu consideration by the Industrial Advisory Committee and

Federal Reserve bank, and since they concurred in the con-that it could not he approved, there appears to be no

'sis for further action by the Board in the matter.

Approved unanimously.

Letter dated October 12, 1935, approved by four members of the

' to Mr. Peyton, Chairman of the Federal Reserve Bank of Minneapolis,

g as follows:

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"The Board of Governors of the Federal Reserve Systemnotes with approval from your letter of October 8, 1955, thatT'?11 have discussed the Banking Act of 1935, in the manner out-

in the second paragraph of your letter, before Minnesota,a114ers Association Group Meetings on September 24 and October

and that you will discuss the same subject at Hutchinson ontu ober 12, at Owatonna on October 15 and at Anoka on October18.1!

the,'la-Ee-proof of the Federal Reserve Bulletin for October, 1935 is ready

return to the Government Printing Office for final printing, but thatbefore doing,.

so Mr. Goldenweiser, Director of the Division of Research andStatist" sl

c desired to know whether the Board approves the proposed review

fthe month as submitted with Mr. Morrill's memorandum.

The review of the month was approved unani-mously.

There were then presented the following applications for changes

stock of Federal reserve banks:

:tl

J.cations for ADDITIONAL Stock:Thjet No. 2.

Pit.84"enovia National Bank, Cazenovia, N .York. 117Citizens Bank and Trust Company of Utica,

ti c49 New York. 1 050

f().r.

Approved unanimously.

Memorandum dated October 10, 1935, from Mr. Morrill advising that

Shares

bict No. 5.

132cearl County National Bank of Point Pleasant141e Point Pleasant Beach, New Jersey.

Per%1;tanitnsk of Royersford, Royersford,

biet ..a.ct No. 4.11nonal Exchange Bank of Wheeling,--"ing, West Virginia.

30

24

1,167

54

3

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021-14LIIOns for ADDITIONAL Stock:

rlrst National Bank of Appleton,APpleton, Tisconsin.

Dist+Tr41.11.4IL 9.The e Fairmont National Bank, Fairm ont,Minnesota. 3

v_ ZilZoNtaat.ional Bank of Kiester, Kiester,

ne First National Bank of Preston, Preston,Llinnesota. 11

tritiet No. 10.erCY NE.tional Bank and Trust Company of

illainsas City, Kansas City, Missouri.111,,12nal Bank of Topeka, Topeka, Kansas.

National Commercial Bank of Liberty,Liberty, Missouri.

Th 'let No.

I/tat11.e

l

/1rst National Bank of Cleveland, Cleveland,Sotjijxae•

'I Ter, Texas. 300

cial National Bank of Houston,The sR°11st

"and National BaWc of Houston, Houston, Texas. 30Total

Shares

2

605

2

A 1iN4Vntions for SURRENDER of Stock:h T'let No. le

8011th Side National Bank of Butler,Butler,

Pennsylvania.

T t.Thriet No. 10.zirst

National

-sario NatiZI Bank, Ontario, Oregon. 54

Total

Conttd)

3

84

Bank of Pender, Fender, Nebraska. 50

Approved unanimously.

Thereupon the meeting adjourned.

-43:67=1.1e

2088

3

16

67

3331,643

84

50

54188

Secretary.

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