frsbog_mim_v36_0482.pdf

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; 4 8 2

X-7177

Apri l

7, 1932

Mr. I). R. Bounds, Deputy Governor,

Federal Reserve Bank

of New

York,

New

York,

New

York.

Dear

M r.

Hounds;

I

have examined

t h e

forms prepared

by M r.

Logan

f o r u s e

i n

connection with loans under Sections

10(a) and 10(b) o f the

Federal Reserve

Act and

have ce rt ai n suggestions

t o

o f f e r

i n c o n -

nection with those prepared

f o r u s e

under Section 10(a).

I

inclose

herewith

o n e s e t o f

those forms

on

which

I

have noted

a

number

of

suggest ions, and I wish t o o f f e r t h e fo llo win g ad di ti on al comments.

In our

discussions

of

th i s sub jec t ,

I

th ink

a l l o f u s

agreed that ,

i f t h e

provisions

of

Section

1 0 ( a ) a r e

avai led

of to

an y materi al ext ent , there a r e tw o d i f feren t types of groups which

might

b e

organized,

( 1 )

groups organized

f o r t h e

specif ic purpose

of

af fo rd ing ass i s t a nce

t o

particular banks which

a r e i n

d i f f i c u l t i e s ,

and (2 )

more

o r

less permanent groups organized

f o r t h e

mutual bene-

f i t of a l l t he i r members without re fe re nc e to any p a r t i cu l a r ap p l i -

cat ion

f o r a

loan.

I

think

w e a l l

agreed that

t h e

f i r s t type probably

wi l l

b e t h e o n e

most frequently organized

and

that

t h e

forms should

b e prepared with a view t o being used by such groups. I th ink we

also agreed that

i t i s

unlikely that

an y

groups

o f t h e

second type

wi l l

b e

organized

and

t h a t ,

i f an y

groups

of

this type

a r e

organized,

t h e

at torneys

f o r t h e

banks involved will have their

own

ideas

as t o

t h e

provisions which should

b e

incorporated

i n t h e

reso lu t ions

of

di re ct or s, organiza t ion agreements

an d

other forms

an d

tha t

i t

would

n o t b e worth while t o endeavor t o prepare i n advance an y forms f o r

u s e b y

such groups.

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X - ™

4 8 3

0

I t seems to me, however, that a middle course h a s been adopted

i n t h e p repara t ion of the forms an d that they would n o t h e en t i r e ly

s u i t ab l e

f o r u s e b y

groups

of

e i ther c l ass .

I f

permanent groups

a r e

organized, i t would seem th a t pro vi si on should b e made f o r a loan conw

mit tee

o r

some other machinery

f o r

ac t ion

on

behalf

of the

group

a s

a whole i n applying f o r a n d obtaining loans from th e Federal Reserve

Bank and t h a t i t would b e poss ib le t o avoid having separate action

by the d i r ec t o r s of every bank i n t h e group on each appl icat ion f o r a

loan .

On th e

other hand,

i f

groups

a r e

organized

f o r t h e

s p e c i f i c

p u r -

pose of assist ing part icular banks which a r e i n d i f f i c u l t i e s , t h e s i t -

uation probably would require prompt action

a n d i t

would

b e

appropriate

and des i rab le t o have each bank adopt only one resolut ion covering

t h e ent ire case.

Under t h e procedure proposed i n t h e forms that have been

prepared , t h e board of d i r ec t o r s of each bank joining a loan group

would f i r s t meet

a n d

adopt

a

reso lu t ion au thor iz ing

t h e

bank

t o

jo in

t h e group a n d , subsequently, a t t h e time o f the ap p l i ca t i o n f o r a group

loan , i t would b e necessary f o r t h e board of d i r ec t o r s of each such

bank t o meet again and adopt a reso lu t ion au thor iz ing t h e appl icat ion

f o r t h e

loan from

t h e

Federal reserve bank

and

approving

t h e

applicap-

t i o n of the borrowing bank f o r a loan from t h e group. The necess i ty

f o r this second meeting would result i n much delay i n obtaining advan-

c e s from t h e Fe dera l r es er ve bank under Section 1 0 ( a ) a n d might f r e -

quently make i t impossible t o obtain t h e necessary credi t i n time

t o meet t h e emergency co nf ro nt in g t h e borrowing bank. I n order t o elim-

i n a t e

t h e

necess i ty

f o r

this second meeting,

i t i s

suggested that

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*-3 *

the two

proposed resolutions

be

consolidated, into

one

arid adopted

a t t h e

time of the formation of the group• i n addi t ion t o author iz ing t h e bank

t o

become

a

member

o f the

group such

a

resolution could also authorize

/

ce r t a i n o f f i c e r s o f the bank t o approve an app l i ca t ion of the borrowing

bank

f o r a

loan from

t h e

group,

t o

j o i n

i n

making

a n

app l i ca t ion

t o

t h e Reserve Bank f o r a group loan and to execute on behalf o f the bank

a group note evidencing such loan.

I do not understand t h e theory underlying t h e provis ions i n

t h e

f i r s t p a r t

of

paragraph

6 on

page

6 of the

agreement covering

the

organizat ion of the loan group and espec ia l ly t h e r e f e r en ce t o funds

under t h e cont ro l o f the trustee which a r e s ecu r i t y , o r represen t the

proceeds

of any

s ecu r i t y ,

f o r a

note

o f the

borrowing bank .

I

thought

tha t i t was contemplated that a l l secu r i ty f o r t h e note o f the borrowing

bank would b e pledged and del ivered t o t h e Federal reserve bank and that

no security would b e l e f t i n t h e hands of the t r u s t e e . I f t h i s i s t he

case, then i t would seem that t h e Federal reserve bank would b e en t i t l ed

t o a f i r s t cl aim on the proceeds o f the note and should apply such p r o -

ceeds

t o t h e

indebtedness represented

by the

note

o f t h e

borrowing bank

and a l so t o t h e reduct ion o f the p r o r a t a l i a b i l i t y o f a l l banks on the

group note. I f , however, t h e t rus tee ho lds any funds o r securi ty other

than that del ivered t o t h e Federal reserve bank a s secu r i ty f o r t h e note

of the borrowing bank, i t would seem that t h e proceeds should b e applied

f i r s t t o t h e payment or reimbursement o f the t r u s t e e f o r a n y expenses

incurred by h im in connection with t h e performance of any of h is duties

and that anything remaining should b e paid t o t h e Federal reserve bank

and

appl ied

i n t h e

manner suggested above.

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X

7177

485

- 4 -

Both

t h e

note

of the

borrowing bank

and. the

note

of the

group provide

f o r t h e

payment

of

i n t e r e s t

a t

maturi ty

a t a

cer ta in

r a t e

p e r

annum from

t h e

date

of the

note*

I t

seems pr oba bl e,

how-

ever, that

i n a

great majori ty

of

cases, advances under Section

1 0 ( a )

would

b e

handled

on a

discount basis

and

in te re st deducted

i n a d -

vance;

a n d i t

would seem de si ra bl e

f o r

these note forms

to be

changed

s o

that they will

b e

appropr ia te

f o r u s e i n

cases where

t h e

notes

a r e

discounted

a s

well

a s i n

cases where interest

i s

paid

a t

maturi ty .

These forms seem

t o

contemplate that

t h e

note

of the

group

an d t h e secur i ty therefor wi l l n o t b e forwarded t o t h e Federal r e -

serve bank u nt i l a f t e r t h e reserve bank h a s considered t h e app l i ca -

t ion an d h as actually made t h e loan . I t would seen advisable t o

have t h e note an d t h e col la tera l secur ing i t accompany t h e ap p l i -

cat ion

t o t h e

Federal reserve bank,

i n

order that

t h e

l a t t e r

may

inspect

t h e

co l l at er al before approving

t h e

loan

an d i n

order that

t h e

proceeds o f t h e loan may be made available a s soon a s i t i s

approved. I understand that this i s t h e established procedure r e -

garding discounts and advances t o member banks under Section 13

a n d i t

seems

to me

that

i t

should pro per ly

b e

followed

i n

thi-s

case also.

The

form

of

note

o f t h e

borrowing bank, which

h a s

been

rev ised so as to omit many of the provisions which were included

i n t h e

note

a s

f i r s t d r a f t ed , s t i l l co nt ai ns

a

number

of

p rov i -

sions which

do no t

appear

t o me to b e

e s s en t i a l .

As I

have

p r e -

viously wr i t ten

M r.

Logan,

I

feel that

i t

would

b e

advisab le

t o

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4 8 6

X-7177

5

use a simple, s t raight note, incorporat ing i n t h e app l i ca t ion a l l

necessary provisions a s t o t h e r i g h t s of the ho lder , e f f ec t o f i n -

solvency,

e t c . T he

second paragraph

of the

note especially seems

to me t o be unnecessary. The re fe rence to the group agreement i n

t h e f i rs t sen tence of that paragraph might affect t h e nego t i ab i l i t y

of the note i n some jur i s d i c t io ns , a nd the cer t i f i ca t ion con ta ined

i n t h e

second sentence

o f the

paragraph

a s to t he

amount

of

e l ig ib le

and acceptab le assets of the borrowing bank seems unnecessary i n

view of the fa c t th at such a c e r t i f i c a t i o n i s contained i n t h e ap p l i -

cat ion of the borrowing bank. The f i rs t paragraph of the note states

that copies o f the app l i ca t ion f o r t h e loan and of the schedule of

co l l a t e r a l s ecu r i t y a r e at tached t o t h e note and made a par t ther eof .

This would appear t o have t h e same effect upon t h e n eg o t i ab i l i t y of

t h e

note

a s t h e

spec i f i c inc lus ion

of

each

of the

provisions

of the

app l i ca t ion a n d , a s this provision does no t seem necessary, I think

i t might wisely b e omitted.

The note of the Member Bank Loan Group provides tha t any

member except a borrowing bank may pay the amount o f i t s l i a b i l i t y a t

any

time

and

s h a l l

n o t

t h e r e a f t e r

b e

l i a b l e .

I se e no

reason

why a

borrowing bank should

no t be

permit ted

t o

a n t i c i p a t e

an d

discharge

a l l o r a n y par t o f i t s l i a b i l i t y t o t h e Federal reserve bank.

I t might b e provided, however, that any payment made by the

borrowing bank shall

b e

applied

o n i t s

individual note

t o t h e

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X-7177 4 8 7

group rather than o n i t s p r o rata share of the l i a b i l i t y on th e group

note an d sha l l a l so b e applied i n reducing p r o r a t a t h e l i a b i l i t i e s of

a l l

banks

on the

group note.

I t

might also

b e

well

to a dd

t h a t ,

i n t h e

event

of

such an t ic i pat ion

of

l i a b i l i t y

by any

member

o f the

group,

the

note

and

other agreements shall remain

i n

f u l l f o r c e

and

e f f e c t

a s to

a l l other members o f the group and tha t any r i g h t s o f the bank which

h a s an t i c i p a t ed i t s l i a b i l i t y i n t h e co l l at er al s ecu ri t y pledged with

t h e Federal reserve bank shall be subordinated t o t h e r i g h t s of the

l a t t e r .

These suggestions a r e submitted f o r your consideration, and

I think they deserve ca ref ul at te nt io n; b u t , i n order t o avoid further

delay,

I

suggest that

you

t ransmi t d i rect ly

t o t h e

other Federal

r e -

serve banks a ny fur ther modif icat ions o r rev i s ions of these forms

which you o r your committee may decide upon and that they no t be held

f o r fur ther considerat ion by t h i s o f f i c e . F or th e Board's information,

however, we would like t o have copies of any further conraonications on

this subject which

you or

your committee

may

transmit

t o t h e

other

banks.

With kin des t pers onal reg ar ds, I am,

Cordially yours,

(Signed*) Walter Ttyatt

General Counsel

WW/gc/4/7/32

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35-7177-a

4 8 8

March

9, 193 2.

M r.

Walter

S.

Logan, Counseli

Federal Reserve Bank

of Mew

York,

Mew

York,

Mew

York.

Dear Walter;

Confirming

t h e

conversations

you and I had

yesterday

and today, regarding t h e forms f o r u s e i n connection with loans

under Sections

10(a ) and 10 (b ) o f t h e

Federal Reserve

Act as

amended

by t he Act o f

February

27 , 1932, I

have

n o t y e t

f in ished

my study o f these forms; b u t , i n order to expedite matters, I

am

sending

yo u

herewith such suggestions

a s I

have ready

a t t h e

pr ese nt moment. There

i s

inclased

a

memorandum making detailed

suggest ions regarding certain

o f t h e

forms,

and I

shall incorpor-

a t e i n

t hi s l e t t e r more genera l suggestion s reg ard ing oth er forms.

I n

view

o f t h e

fact that these forms

a r e

being prepared

f o r u s e

throughout

t h e

United States,

i t

would seem that,

as s u g -

gested

b y

Governor Calkins,

t h e

form

of

note

to b e

used

b y a

bank

borrowing from

a

group should

b e a

simple, straight note,

i n

order

that there might no t be any question about i t s n eg o t i ab i l i t y , an d

t ha t

t h e

provisions regarding

t h e

pledge

of

c o l l a t e r a l

an d t h e

other deta i l s

o f t h e

cont ract

o f t h e

borrowing bank should

b e

incorporated

i n a

se pa ra te agreement. Inasmuch

a s i t i s

probable

that these notes will b e discounted, like member bank 15-day

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4 8 9

X-7177-a

Mr. W. S. Logan -

notes under Section

1 3 , i t

would seem that they should provide

f o r

t h e payment of in te re st af te r maturi t y rath er than in te re st from t h e

date o f t h e note.

Assuming that t h e provisions regarding t h e pledge o f

c o l l a t e r a l a n d other similar provisions wil l b e t r an s f e r r ed to a

separate document (which might b e t h e appl icat ion o f th e borrowing

bank t o t h e group), I would suggest that, wherever t h e payee i s r e -

f e r r ed

t o i n t h e

provisions which

are now

incorporated

i n t h e

body

of the note , t h e holder of the note rather than t h e payee b e r e -

f e r r e d t o .

I n

view

o f th e

provis ions

o f the

s ta tu te regard ing

t h e

pledge

of

secu r i ty

f o r t h e

p ro tec t ion

of the

group

o f

banks,

i t

would also seem advisable to make i t c lea r tha t such se cu ri ty may

n o t b e applied on other indebtedness t o t h e Federal reserve bank

u n t i l a f t e r t h e borrowing bank's obligation to the group h a s been

s a t i s f i e d i n f u l l . I t would also seem that t h e borrowing bank

should speci f ical ly au thor ize t h e group o r t h e t rus tee represen t ing

t h e group to pledge t o t h e Federal reserve bank a l l c o l l a t e r a l o r

othe r sec ur it y pledged by the borrowing bank t o t h e group, in order

tha t t h e borrowing bank might b e e stopped from cla imin g th at such

secu r i ty was intended only f o r t h e p ro tec t ion o f the group and not

f o r t h e p ro tec t ion o f the Federal reserve bank.

Since t h e group's note will b e made payable d i r e c t l y

t o t h e Federal reserve bank and presumably will no t be t r ans fe r red

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X-7177-a

49

Mr. Wt S<

Logan

- 3

to any other holder , i t would n o t seem important f o r i t t o b e n e -

go ti ab le . The ref ore, the re would seem to be no ob jec t ion t o incor-

po ra t ing i n t h e note o f the group t h e various provisions regarding

t h e

pledge

of

c o l l a t e r a l

and

certain additional provisions which

a r e

discussed below;

b u t I

think th at c are ful consi derat ion should

b e

given t o t h e question whether i t would n o t b e more advisable t o

inco rpora te such pro vis ion s in the appl icat ion o f t h e group to

t h e Federal reserve bank f o r a loan. On th is que sti on, however,

I

havo

no

def in i te op in ion .

During

o u r

discussions with

t h e

Committee

on

Sunday,

March 7 t h , i t w as tentat ively agreed that t h e note, app l ic at io n

o r some other agreement o f the group of banks with t h e Federal

reserve bank should contain provisions along t h e fol lowing l ines;

1 .

That, with re sp ec t

to the

note

o f the

borrowing bank

and

t h e secur i ty therefor t h e Federal reserve bank may exercise a l l o f

t h e powers of ownership without foreclosure.

2 .

That

t h e

group assigns

t o t h e


a l l

o ther r igh t s and claims against t h e borrower arising ou t o f such

borrowing.

3 . That, i n t h e case o f the insolvency o f th e borrowing

bank, t h e Federal reserve bank i s authorized t o f i l e a claim against

t h e borrowing bank in i t s own name a nd f o r i t s own b e n e f i t f o r t h e

f u l l amount o f t h e p r i n c i p a l and i n t e r e s t o f the group note and

that f o r this purpose, t h e group assigns t o t h e Federal reserve bank a l l

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X-7177-a

4 9 1

Mr. W. S.

Logan

- 4

o f i t s

r igh ts agains t

t h e

borrowing bank; Provided, however, That

th e

Federal reserve bank shall hold

t h e

note

o f t h e

borrowing bank

as a

holder

in due

course

an d n o t a s

assignee.

( I

have

n o t

attempted

to

s t a t e th i s

i n

proper legal form

b u t

have simply dictated

i t

from

t h e

rough notes which

I

made

a t o u r

meeting

on

Sunday.

The

-ouroose

of th e

provis ion ,

of

course,

i s t o

enable

t h e


to

f i le wi th

t h e

rece iver

o f t h e

borrowing bank

a

claim

f o r t h e

f u l l amount

of the

borrowing, since otherwise

t h e

claim

o f t h e

Federal reserve bank against

t h e borrowing bank o n t h e note o f t h e grdtap would only b e f o r t h e borrow-

i n g

bank 's

p r o

rata share

o f t h e

amount

o f t h e

group note.

Of

course,

t h e

Federal reserve bank, af ter foreclosing

on the

c o l l a t e r a l ,

and

taking over

t h e

note

o f t h e

borrowing bank

in i t s own

r ig ht , could

f i l e

a

claim

on

that note with

t h e

receiver

o f t h e

borrowing bank;

b u t

i n

some States

an d

under some circumstances this might

b e

undesirable.

I t

might also

b e

claimed that

t h e

Federal reserve bank would have

to

c r ed i t

t h e

amount realized

i n

this manner against

t h e p r o

r a t a l i a b i l i t y

o f t h e

other banks

in t h e

group.)

4. The above pr ov is io ns , however, s hal l n o t a f f e c t t h e

r i g h t

o f t h e


to

enforce

t h e

l i a b i l i t y

of the

other banks

i n t h e

group

on the

group note without f i r s t proceeding

against

t h e

borrowing bank.

5. The


may

gran t renewals, exte nsio ns

and

othe r indulgence s

to any

member

o f t h e

group without affecting

i t s

r igh ts agains t

an y

other member

o f t h e

group.

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Mr. W. S.

Lbgan

5

X- 71?7- a

4 9 2

I t

would, seem also that

t h e

cont ract

of

both

t h e

borrowing bank

and the

cont ract

o f t h e

group with

t h e

Federal reserve bank should

provide that , af ter t h e borrower 's obl igat ion an d t h e ob l iga t ion o f

t h e

group have been satisfied

in

f u l l ,

any

remaining col lateral held

b y t h e


may be

u t i l i z e d

b y i t t o

s a t i s f y

an y

other

obl igat ion o f t h e borrowing bank. I n both agreements, i t would also

seem advisable

t o

provide that

any

other security held

b y t h e

Federal

reserve bank

f o r

other obl igat ions

o f t h e

borrowing bank

may

f i r s t

b e

applied on other indebtedness o f t h e borrowing bank t o t h e Federal

reserve bank,

b u t

that

any

surplus remaining after

a l l

such ot he r

i n -

debtedness

h a s

been sa t i s f i ed

in

f u l l

may , in the

d i sc re t ion

o f t h e Fed -

eral reserve bank, b e u t i l i z e d to s a t i s f y t h e obl igat ion of the group

o r t h e

obl igat ion

o f t h e

borrowing bank.

I t

would also seem advisable,

i n t h s

contract

o f t h e

group,

to

p rov ide spec i f i ca l ly

f o r t h e

r igh t

of any

bank

to

an t i c ipa te

and

discharge

i t s

l i a b i l i t y

t o t h e

Federal reserve bank;

b u t

with

a

proviso that ,

i n

such event,

t h e

note

an d

other agreements shall remain

i n

f u l l f o r ce

and

e f f e c t

a s t o a l l

other members

o f t h e

group

and

that

an y

r i g h t s

of

such bank ( i . e . ,

t h e

bank which anticipates

and

discharges i t s l i a b i l i t y ) i n t h e co l l a t e r a l o r other se cu ri ty pledged

with

t h e

Federal reserve bank shall

b e

subordinated

t o t h e

r i g h t s

of

t h e

Federal reserve bank.

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X-7177-a

4 9 3

Mr. W. S.

iQgan

- 6

I n t h e

note

o f t h e

loan group

i t

would seem advisable

t o

provide

f o r t h e

payment

of

in t ere s t af te r matur i ty, ins tead

of

in teres t f rom t h e date o f t h e note, f t t h e reasons indicated

above

i n

connection with

t h e

note

o f t h e

borrowing bank*

I n t h e

note

o r

other contract

o f t h e

group,

t h e

provisions

regarding

t h e

method

of

determining

t h e p r o

r a t a l i a b i l i t y

o f

each

member o f t h e group should b e changed in accordance with t h e change

recommended

i n t h e

in cl os ed memorandum wi th re ga rd

to t h e

agreement

to

form

t h e

loan group.

I n t h e

app l i ca t ion

o f t h e

loan group

to t h e

Federal reserve

bank f o r a loan (paragraph I I ) y o u apparently contemplate that t h e

note

of the

group

an d t h e

security therefor would

n o t b e

forwarded

t o t h e

Federal res erv e bank un ti l a f t e r

t h e


h a s

considered

t h e

app l i ca t ion

an d

approved

t h e

loan.

In

accordance with

t h e

establ ished procedure regarding rediscounts

an d

advances

t o

member

banks under Section 1 3 , would i t n o t b e b e t t e r to have t h e note and

collateral accompany t h e app l i ca t ion to t h e Federal reserve bank, i n

order that t h e Federal reserve bank may inspect t h e c o l l a t e r a l b e -

fore approving

t h e

loan

and in

order that

th e

proceeds

may be

made

immediately available

a s

soon

a s t h e

loan

i s

approved?

I n t h e app l i ca t ion f o r a loan under Section 10(b), i t would

seem that,

i n

view

o f t h e

fact that

t h e

Federal Reserve Board probably

wi l l

n o t

p r e s c r i b e

an y

regulat ions def in ing

t h e

c lasses

of

assets which

may be

pledged

a s

c o l l a t e r a l ,

i t

would

b e

advisable

to

s t r i k e

o u t t h e

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. 494

X-7177-a

Mr. W. S.

Logan

- 7

c e r t i f i c a t e t o t h e ef fec t t ha t t h e c o l l a t e r a l l i s t e d i n Schedule A is

e l i g i b l e And to subs t i tu t e the re fo r a statement t o t h e ef fec t t ha t

none

o f th e

c o l l a t e r a l l i s t e d

i n

Schedule

A i s t h e

ob l iga t ion

of any

fore ign government, indi vidual , par tner shi p, a sso cia t ion , o r corpora-

tion organized under

t h e

laws thereof.

I t

would also seem advisable

t o in ser t i n this form a c e r t i f i c a t e t o t h e ef fec t t ha t t h e statement

of the exceptional and exigent circumstances which i s incorporated i n

t h e

app l i ca t ion

o r

at tached thereto

i s a

true statement

a n d i s

believed

to be s u f f i c i e n t to j u s t i f y t h e grant ing of the advances applied f o r .

As soon as I can complete my study o f your tentat ive drafts

of the forms, I s ha ll forward such add iti ona l suggestions as m^y occur

to me; and I

would like

to

have

you

cons ider them be fo re

you

del iver

your f inal draft of the forms to the Committee. I t i s also understood,

o f

course, that

t h e

Committee will submit

a l l o f t h e

forms

to the F e d-

eral Reserve Board f o r i t s consideration before transmitting them to

t h e Federal reserve banks.

Regret t ing that we were unable to se e more of you during

o u r recen t v i s i t to New York and with kindest personal regards, I

am

Cordially yours,

Walter Wyatt,

General Counsel.

In

closur e.

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X-717?-b

4 9 5

March 9 , 1932*

(Mr. Wyatt 's Tentative Suggestions r e forms f o r

u s e i n making Advances under Sections 10(a) and

10(b) .)

RESOHJTION AUTHORIZING BANK

OB

TRUST

COMPANY TO BECOME MEMBER OF LOAN GROUP.

Last l ine of f i r s t par agr aph , omit word unanimously ,

since

t h e

r e so lu t i on

may not be

adopted unanimously.

AGREEMENT TO FORM LOAN GROUP

Suggest amission of f i r s t two Whereas clauses,

a s being unnecessary a n d unduly lengthening th e agreement.

Suggest that la t ter par t of f i r s t paragraph on page 2

b e changed to read a s fo ll ow s; deem i t advisable t o fonn

themselves into a group of member banks f o r th e purpose o f

avail ing themselves of the b e n e f i t s of Section 10(a) o f the

Federal Reserve Act*

Page 2 , paragraph numbered 1$ Change l a t t e r p a rt t o

read a s fo ll ows : When t h i s agreement h a s been properly execu-

t e d b y a l l members named in t h e next succeeding paragraph

he reof . I t would seem inadvisable to requi re t h e approval

o f

such agreement

b y t h e

Federal reserve bank; since such

approval might b e considered to carry with i t an implied

commitment

t o

make loans

t o t h e

group organized thereunder.

Page 3 , paragraph numbered 3s Commencing with th e

word unless change t o read unless the re i s a no t a t i on t o

th e

contrary fol lowing

i t s

name

i n

paragraph

2

he reof .

Paragraph numbered

4 on

page

3 :

change

t o

read

a s

follows;

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4 9 6

X-7177-1

4. The l i a b i l i t y of each member of the loan group f o f

advances made by the reserve bank to t h e loan group shall b e

l im i t ed , i n accordance with t h e provis ions of Section 1 0 ( a )

of the Federal Reserve A c t , * t o such proportion of the to t a l

amount advanced

t o

such group

a s t h e

d e p os i t l i a b i l i t y

of the

respective banks bears t o t h e aggregate depos i t l i a b i l i t y of

a l l banks i n such group'; and the l i a b i l i t y o f each member on

each note o f t h e Loan Group shall be determined on the bas i s o f

i t s g r o s s d e p o s i t l i a b i l i t i e s a t t h e opening of bus iness on the

date

of the

wr i t t en app l i ca t i on

b y t h e

Loan Group

t o t h e

Federal

Reserve Bank f o r t h e advance evidenced by such note, which shall

be computed b y adding together , ( l ) i n t h e case of a na t iona l

bank, th e f igures corresponding to those called f o r b y items

21, 22 , 2 3 an d 24 on th e

Comptroller

o f t h e

Currency's Call Report

Form No. 213 0 , a s revised i n November, 1931 , o r (2 ) in the case of

a State member bank, th e figures corresponding to those cal led f o r

b y

items

1 9, 20 , 21 and 22 on th e

Federal Reserve Board's Call

Report Form No. 105 , a s revised i n November, 1931.

Page 3 , paragraph numbered 5 : St r ike o u t t h e words and

agent

in two

places .

Page 3 , paragraph numbered ( a ) : St r ike o u t t h e words co l l at er -

a l a n d place quotation marks before and a f t e r th e words Borrowing

Bank .

Page 4 , l i n e s 1 and 2 : Str ike o u t t h e words co l l at er al

an d subs t i t u t e t he re fo r t h e word se cu ri t i es . St r ike o u t t h e

words

a s

secu r i t y .

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- 3 -

X-7177-&

Page 4 , l i n e 3 : St fi kd gtit t h e words ' 'not tin'

1

and s ub -

s t i t u t e t h e word no .

Page

4 ,

paragraph

( b )

l ine

2 :

Af ter word appl icat ions

in s e r t

Ir

by

or on

behalf .

Page 4 , paragraph ( b ) l ine 7 ; Af te r word aggre gate

in s e r t word amount .

Page 4 , paragraph ( b ) l ine 9 : Change word a r e t o shall

b e .

Page

4 ,

paragraph

( b )

l ine

1 4 :

St r ike

ou t

words secure d

by t he c o l l a t e r a l a nd s u b s t i t u t e and the secur i ty .

Page 4 , paragraph (b ) l ine 1 5 : St r ike ou t words a s

secur i ty . S t r ike o u t word co ll at er al and subs t i tu te the re for

t h e

word se cu ri ty .

Page 4 , paragraph (b ) l ine 1 8 : St r ike o u t words Loan

Group an d su bs ti tu te Federal reserve bank .

Page 4 , paragraph ( b ) , five l ines from t h e bottom:

Str ike o u t word co l l a t er a l .

Page 4 , paragraph (b) : At end of paragraph, add the

following: When a member h a s signed and de l ive red t o t he t rus tee

a

note

o f t he

Loan Group, such members shall,

by

such action,

be deemed t o have authorized o r r a t i f i e d , ( l ) t h e making of a loan

o r loans by t he loan group t o t he member o r members named in the

appl ica t ion of such Loan Group to the Federal reserve bank, and

(2) the s ign ing a nd d e l i v e r i n g to the Federal reserve bank on

behalf o f t he Loan Group o f t h e app l ica t ion of such Loan Group f o r

t h e

loan described

i n

such application

on the

terms

a n d

condit ions

s t a t e d t h e re in .

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~4~ X-7177*-b

Page 5 , paragraph (ti) lifted 5, 6 and 7} Str ike ou t

t h e words co l l at er al off er ed a s secu r i ty f o r said note oi* notea

of the

borrowing bank

o r

banks

a n d a n d

subs t i tu t e the re fo r

the

word se cu ri ty .

Page

5 ,

paragraph

( c )

l ine

1 2 :

St r ike

o u t t h e

words wi th-

o u t

recourse .

Page 5 , paragraph ( c ) l i n e s 16 and 1 7: St r ike o u t words

with co l l a t er a l secur i t y f o r said loan o r loans and subs t i tu t e

there fo r

t h e

words secu ri ty th er ef or .

Page 5 , paragraph ( d ) : Str ike o u t t h e word co l l at er al

i n four p la ce s . Also a f t e r t h e word re tu rn i n t h e f i f t h l i n e

of the paragraph, ins er t th e words o r re l ea se .

Page 6 : Immediately bef ore paragr aph 6 , i n s e r t a new

paragraph absolving th e trustee from a l l per sona l l i ab i l i t y

f o r a n y a n d a l l acts done by him on behalf o f the Loan Group

pursuant t o t h e terms o f this agreement and within t h e scope of

h i s au t h o r i t y .

RESOLUTION OF BORROWING BANKS.

Immediately after t h e words NOW, THEREFORE, BE IT

RESOLVED, i n s e r t th e follo wing that

(name

and

t i t l e

of

o f f i c e r

________________________ i s authorized

other than the one s ig ni ng a t t ach ed ce r t i f i c a t e . )

and d i r e c t e d :

At end of paragraph 2 , s t r i k e ou t t he word an d .

At end of paragraph 3 , in ser t th e word and .

Add a new

paragraph

a s

follows, immediately after paragraph

3 :

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- 5 -

X-7177-b

4 9 9

4. To

give such othei? aM iM fi la i se cu ri ty a s

may be

necessary f o r t h e purpose of obtaining such advance.

t

frsbog_mim_v36_0482.pdf

Documents

i ca t i

t i e s

agreed tha t i t i s

t ha t

r t i c u

f i r s t type

s i t ua t ion

i r ab