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Volume 368 - Bank of America, February 21 – March 20, 1940
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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Book 368
Bank of America
February 21 - March 20, 1940
Regraded Unclassified
Bank of America
Book
Page
Conference: present: ENJ:, Bell, Seymour, Foley,
Sherbondy, Delano, Folger, and Mulroney -
2/23/40, 2/26/40
368
10,36
a) Program as submitted to Bank of America
2,6
b) Report as finally sent - 2/23/40
24,83
1) Crowley approves - 2/26/40
46
2) Federal Reserve Board's resolution -
2/26/40
47
Conference: present: Eccles, McKee, Dreibelbie (Federal
Reserve Board); Crowley (Federal Deposit Insurance
Corporation); Bell, Seymour, and Sherbondy (Treasury);
Delano, Upham, Folger, and Mulroney (Comptroller's
office) - 2/23/40.
22
a) Program as drafted by office of Comptroller and
as drafted by Federal Reserve Board discussed
Timetrust, Incorporated: Securities and Exchange
Commission wine on every point at issue in court
order - 2/24/40
23
Loans secured by stock of Transamerica - 2/28/40
56
Conferences; present: Bell, Eccles, McKee, Crowley,
Delano, Foley, L.M. Giannini, Cushing, and Ferrari -
2/28/40, 3/1/40.
59,76
Key Pittman's letter to FDR suggesting that controversy
be referred to Federal Reserve Board for adjudication -
2/24/40,
133
a) Suggested answer
154
Jones to be asked to do his part in a little conference
at White House with HMJr, Eccles, and Delano present,
if HMJr has his way - 3/6/40
139
a) HMJr's conversation with FDR reported to Foley
and Bell - 3/8/40
159
Conference; present: Bell, Bccles, McKee, Crowley,
Delano, and Foley - 3/6/40
145
a) Draft (page 148) discussed and signed by Treasury,
Comptroller's office, Federal Deposit Insurance
Corporation, and Federal Reserve Board; approval
of Giannini assured by Cushing
155,224
Securities and Exchange Commission-Transamerica to be
settled before actual acceptance by Gianninie - 3/8/40
159
a) Treasury position discussed by HMJr, Bell,
Sullivan, Foley
160
1) Cushing told of Treasury position by Bell
and Foley
174
Bank's Premises: Vice President Clark (Federal Reserve
Bank of San Francisco) reports to McKee (Federal Reserve
Board) on steps taken to carry out Comptroller's
requirements - 3/11/40
179
Regraded Unclassified
Bank of America - 2
Book
Page
Public statement by L.M. Giannini prior to obtaining
commitment from Reconstruction Finance Corporation
and clearing with Comptroller's office: Delano advises
against - 3/13/40
368
181
a) Discussed by HMJr, Bell, Sullivan, and Foley
186,200
b) Giannini's telegram advising of meeting of
Board of Directors to discuss - 3/14/40
194
1) Delano's answer
193
2) Giannini reports on approval of program by
Board of Directors
212
Victory discussed by Treasury group and Comptroller's
group - 3/15/40
213
a) Jones sent copy of Comptroller's requirements;
request that Reconstruction Finance Corporation
make $30 million available to Bank included
220
1
BANK OF AMERICA
NATIONAL TRUST & SAVINGS ASSOCIATION
SAN FRANCISCO CALIFORNIA
Mayflower Hotel,
Washington, D.C.
February 21, 1940
Honorable Preston Delano,
Comptroller of the Currency,
Washington, D.C.
Dear Comptroller Delano:
At our meeting yesterday you reqi ested a
statement of our position in United States Government
securities as of a recent date.
On December 30, 1939, we held $412,337,000
par value United States Government and Guaranteed Issues.
on February 20, 1940, we held $368,972,925 par value,
representing a net reduction of $43,365,075 par value.
Kind: r egards,
Very truly yours,
/s/ L. M. Giannini
L. M. Giannini, President
Bank of America N.T.& S.A.
2/23/40
RESPONSE TO MESCRANDUM PRESENTED
Regraded Unclassif
If OFFICIALS OF
BANK OF AMERICA, 1. To & 8. 4.
.....
1. Bank is to increase its capital stock by $35,000,000. Within thirty days
is to get a commitment from the RFC to underwrite any or all of the issue)
(this underwriting commitment may be reduced in a - equal to the 40+
gate par value of the stock sold to private interests). The terms and
conditions of the proposed amendments to the bank's articles of association
shall be agreed upon by April 15, 1940 by the bank and the committee and
also by the RFC if any part of the funds are to be made available through
the RFC for the purchase of any of the new capital stock. The increase is
capital stock 10 to be consumated within ninety days, if possible, but in
no event later than June 30, 1940.
2. On or before the date of the increase in capital stock, the bank is to set
up an unallocated reserve of $7,400,000, such reserve not to be reduced if
the Comptroller of the Currency objects thereto. (See memo. attached)
3. All bond profits must be kept in a special reserve account to take care
of losses in bonds, and amortisation of bond premiums, until the total
of that reserve account shall equal the total bond premium. If in any
given seai-annual period the total added to the reserve is insufficient
to cover amortization of bond premiums for the period, then such reserve
anst be augmented, in the amount of the deficit, from current earnings.
4. Furnish the Comptroller complete information, satisfactory to nim, with
respect to the original cost of each banking premises, including future and
former premises, and the depreciation which has been taken thereon.
Adequate depreciation will then be determined and any necessary adjustment
3
2
will than be made.
5. Charge off all items classified M lass in the last report of consination,
not otherwise diseased herein, which have not heretofore been charged off.
Fature losses, except those reserved for, must be charged est of future
earnings) and presently existing undivided profits, as wall as any anount
that my later be released from reserves herein established, my not be
used for any purpose except the setting up of reserves and charging est of
leases not provided for by future carnings.
6. Bank is to obtain from California Lands, Ima., and Capital Company with
cient additional collateral, satisfactory to the Comptroller, to casure
the discharge of the obligations of these corporations to the bank, includ-
ing the agreement of Capital Company covering the future and former bank
premises nov carried by Merchants National Realty Corporation. In any
event, the value of such additional collateral will be equal to 25% of the
remaining balance due under the contracts plus 25% of the carrying value
of future and former premises.
% Continue to treat real estate currently acquired by fereclesure, or in
satisfaction of debt, as Other Roal Estate, and carry the case at cost or
appraised value, whichever is the Lower, and in no instance is the carry-
ing value of Other Real Estate to exceed the book value of the loan at the
time of foreclesure.
8, Eliminate the amount of investment in stock under option at a rate not less
than the program now in effect.
9. Bank is to continue program of liquidation with regard to all commitments
Regraded Unclassified
4
- 3
of Trensenaries and its subsidiary and related companies at substantially
the same rate M has been accomplished in the past year.
10. Bank is to eliminate, as seen as possible and within a reasonable pariod,
any leans carried is excess of the legal limits.
11. Bank is to give vigorous attention to the elimination of any real estate
holdings or real estate loans that my not conform to statutory requirements.
12. The bank shall initiate steps, satisfactory to the Comptroller, to accertain
whether it is entitled to recover any part of the - paid by the bank to
Transamerica General Corporation in connection with fidelity losses and if
it is concluded that the bank is entitled to recover, it shall take stops
satisfactory to the Comptroller to recover the MM.
This nemerandum is submitted without prejudice to the right of the Comptroller
of the Currency to require full and complete compliance with his criticisms
and suggestions previously specified is reports of examination and in letters
to the bank, to resort to senstions provided w law, or to continue to list
in reports of examination assets that are subject to criticism, until such
criticisms have been corrected or eliminated. Neither this aesorandua or
its contents shall be used by the bank or anyone also on its behalf for any
purpose except for its information unless and until the provisions hereof are
accepted and complied with by the bank,
Regraded Unclassified
5
Memerandum Covering Unallocated Reserve of
$7,400,000, referred to in Item 2.
This reserve 10 made up of losses estimated on
Occupied Premises
$6,926,000.00
Future Premises
488,500.00
(Phoenix & Roolings Bldg.)
$7,414,500.00
Losses estimated in the August report of $585,000 on
future and former bank premises carried in Merchants
National Realty Corporation is provided for is Item 6
of the agreement.
Regraded Unclassified
6
y
TO Houseton Mary 1940
8-83-1149
Confidential
1. As - as possible in my over mate later them April
18th add $35,000,000 actual nov capital w the issumes of - w
preferred stock or both, with the understanding that w March 10th
the board of directors of the bak will have approved - entire progress
herein outlined and the Bank will have obtained the approval of -
Comptreller of the Currency to and increase, In the overs any part of
said increase is to be obtained w the sale of preferred stock to the
ReF.C. a consitment from the ReFeCe on such terms as the secretary of
the Treasury will request 10 to purchase such stock must be obtained
and an agreement with the ReFaCe and the Comptreller of the Currency
- the terms the manded articles of association, including the
terms governing the disposition of caraings, retirement of propped
stock, etc. must be had by March 18th.
4. Immediately upon obtaining the - capital the Bank will
est w as allocated receive or $6,928,065.36 against the carrying value
of the individual banking premises criticised in the report of commination
of August 81, 2000, including these shown a the Bank's besks and in the
invoitment in Merchants National Realty Corporation. Ats the and of -
year this reserve shall be used to reduce the carrying values of such
banking premises or the earrying value of the hunk's investment in
Merchants National Realty Corporation, as the case my no, waless in the
Regraded Unclassified
7
-
meties the Bank shall have to the Comptraller of the Outpo
I Information I I s $ a s I
actual cost of sash such banking promise to the lask w any of the
affiliated, accosiated w related companies when originally asquired
whether by the Bank or by any et the affiliated, associated # related
compenise, my capital expenditures which have boom mis, and the -
provided 1 1 I I 1 1 $ I I review
ing mith ovidence within the - year, the reserve shall be used to
redute the carrying value of cash banking premise w the -
of adognite depreciation during the overship of the building w the
last or my of the affiliated, accordated or related computer, not
Amount I 1 1 I I I n $ I 1
I I 1 z and 1 8 I a B I
of oath recerve, if may, my be returned to the undivided profite -
comb. All depresiation - buildings, funditure, fixtures end oguipe
met shall be calculated a the basis of depreciation allowed the back
B 8 I I any I I i
I s 1 I I I 1 THE I The &
I I The 5 Retails = il THE I purposed
by forealorare or in antinfaction of dobt will be treated M Other Roal
Retate and conried at cest w approised wine, whichever is - This
will not apply to the Rollins property.
a s 1 I I 1
I i Copital 1 I 3 the # 1 a I
I s I I $ die # I I I
Realty Corporation. but additional collateral will be in a - ogeal
8
# I I
in value to the difference between the wgold purchase price - the
contracto of the valuation of the property Movember 40 mith vulustion
appears in the otherwise contained in the reports of emination began
August n, 1000. All of outh embracts will to oliminated tris the
Bank's areets w December 18, 1945.
6. All bonds in the Healt's investment partfolio will be
mertised out of current caraings to naturity # w call date if callable
comer, Current bend profite will be used to take - of current leases
and any bend profits not ⑉ wod will be passed to a reserve for lesses
of my character witil such receive to adagesto in the Julgers of the
Comptreller of the Currenty.
4. Leans to Treasmerion Corporation and the allied Interesta
will be brought within the legal limit allowed to - toborest as -
M provible and not later this July 16, 1048, entryt that this paragraph
shall not apply to the combrasts of the Bank with California Lands, Inc.
and Capital Company. the contract of National Realty Corporation
with Capital Company. and the option agreement of Transmerica with respect
to the stock of Mational city Bank ut New York engaired by the Bank, all
s I i disposed 5 to I a r I must .
in effect with regard to the consituate of Treasmerion and its subsidi-
arise will be continued, the stock of any allied interest of Transamerion
covering Lease of Transamerion w any of the allied interests will be
eliminated by July 16, 2945 and me similar pledge will hereafter be
accopted. Further extensions of credit by the hask tor the purpose of
purchasing or earrying Transamarise stock will be discontimed and to
Regraded Unclassified
9
1
- 4 -
cellateral value will be assigned to my work stock hereafter pledged
to secure say less mb by the Bank,
% the Bank will charge off all Items eleasified as loss in
the last report of commination not otherwise diseaseed herein which
have not heretefere boon charged off.
8. The Bank will eliminate the mount of investment in steek
under option a the basis of the program - in effect, the amount
reduction emounting to $545,380.
9a The Bank will give vigarous attention to my real estate
holdings or real estate loans that may net conform to statutory require-
into
10. The Bank will initiate stops to assortain whether the Bank
is entitled to recever my part of Transameries General Corporation's
reserve for fidelity losses and to recover my part thereef to which the
Bank may be cutitled.
Regraded Unclassified
10
RE BANK OF AMERICA
February 23, 1940.
11:30 a.m.
Present:
Mr. Bell
Mr. Delano
Mr. Seymour
Mr. Foley
Mr. Folger
Mr. Sherbondy
Mr. Mulroney
H.M.Jr:
What is it, as of today?
Bell:
Well, as I told you, we submitted a program
to these - to the Bank and Giannini and his
counsel came back with a counter program which
we were to take and study and which satisfied
no one. We have been together the last two
days trying to get a minimum program that would
be agreeable to the three agencies and when we
left here yesterday afternoon we thought we had
one pretty well in the rough, and that was to
be written up last night and go to Delano and
Crowley this morning.
Delano:
You mean Eccles and Crowley.
Bell:
Excuse me, Eccles and Crowley. I understand
from Mr. Delano when he came in that Eccles
called up and isn't quite satisfied yet.
Delano:
He wants some further changes in the thing.
He wants the adoption of that alternative,
rather than the one that we took of that
alternative, the thirty and five, as opposed
to our thirty-five and six, nine, and then
move something. That is all technical, Mr.
Secretary, but inasmuch as that still remains
now, we haven't a completely unified front.
He wants that change and I think we will have
to see him again, we will have to talk further.
Bell:
The Bank wanted to - we asked for 35 million
capital and eight million reserve. The Bank
came back with this 30 million capital and
five million reserve. Ecoles said his mini-
mum program - that he would accept the 30
million capital and the five million reserve
if they transferred six million of their
undivided profits to the surplus account,
Regraded
11
- 2 -
which would make their present capital and
surplus equitable, before they put in any
capital, three million each.
Delano:
It would also tie up their dividends to a
certain extent.
Bell:
Yes, I thought he changed around and said
we would go back to our original 35 capital
and six million nine reserve, which would
tie it in with the banking property only.
Delano:
He left it as rather an alternative.
Seymour:
I understood him to be agreeable to put forward
as the ultimate program whichever of those two
we preferred, and we preferred the 35 million
and the six million and no covering in the
surplus and now he takes the view it is easier
to negotiate on the other one, but I think 1f
we have a reasonable preference in the matter
that he could probably be persuaded to stick
to what he said yesterday, at least I hope 80,
H.M.Jr:
Well, not having lived with this thing, but
having the same privilege that you gentlemen
have, I wouldn't attempt to comment as to -
I mean, you people, living with this from
minute to minute --
Delano:
Mr. Secretary, we hoped to be able to give
you that program this morning to discuss it
and give you a recommendation on it, but I
don't believe that we are in that position at
the moment.
H.M.Jr:
Just let me ask this: Bell said he was sending
over a rough draft to Giannini last night. Did
you do that?
Bell:
We didn't get it ready. We are going to have
this further meeting at 2:30 and then meet
Giannini at 3:00. The reason we didn't -
then we were going to have this conference
with you, 80 we thought we had better not send
anything to Giannini to study over night.
Regraded Unclassified
12
- 3 -
H.M.Jr:
Just let me ask this thing that I was interested
in. One of these talks I had - whatever the
capital is, whether it 18 30 or 35, the dis-
cussion as to whether it 18 to be preferred or
common, is that clear?
Delano:
Well, it has gone to this extent: We were very
anxious - I think all our minds run the same.
We preferred the preferred stock. We are in
this position, Mr. Secretary in regard to that,
that never, when we have asked a bank to in-
crease its stock have we denied them the privi-
lege of putting in common, as a matter of prac-
tice, and I didn't want to single this bank
out to do that. There is only one case --
Bell:
You have no right to require it, have you?
Delano:
We really haven't got the legal right, no. I
suppose we could make it a negotiatory right,
but we haven't the legal right. We were trying
to walk B. path so they couldn't say we were
singling them out in this manner. I appreciate
the implications in this common stock thing,
the SEC thing and all that, but we are up against
practice. We have never done it, Mr. Secretary,
except in the case of insolvency.
H.M.Jr:
I would be the last one to suggest that you do
anything that isn't the usual. Let me just ask
you this. Leaving the optional to them, I also
heard some discussion about the date. You spoke
something about a date. I am interested in that.
Delano:
The date we had in here was that they must have
a commitment from the RFC underwriting whatever
they do by April first.
H.M.Jr:
Oh?
Bell:
That is just a commitment, you see. In other
words, the Board of Directors would have passed
on it and the RFC will have passed on it and
everything will be ready on April first.
Delano:
It will be so sewed up in our judgment that it
cannot be pulled back. We have to have about
Regraded Unclassified
13
4 -
thirty days for the pure mechanics of it.
H.M.Jr:
Thirty days of mechanics - what, up to April
first, then?
Delano:
That is right.
H.M.Jr:
And then if they - let's say they got this on-
the 31st of March. Would they then have to
go up to April first and then go before --
(Mrs. Klotz handed letter to the Secretary)
Where was I?
Upham:
April first.
Seymour:
There were two steps there that are contemplated
in this program. Before April first, they must
have the Bank Board approval, they must get the
Comptroller to approve the increase in stocks,
they must get a commitment from the RFC and they
must agree on their articles, on the changes in
their articles, and then, having done that
before April first, they must actually get the
capital into the Bank before June first.
Delano:
And they have to have both the Directors' approval
and the stockholders' approval within that period.
Seymour:
No, the stockholders' approval would be the
thing that came between April first and June
first.
Delano:
I understood the stockholders' approval came
before April first.
Foley:
Only the Directors'.
Delano:
Do they need more than ten days?
Folger:
Ten days.
Seymour:
The opinion seemed to be that if they got all
those things before April first there would be
B. pretty definite assurance that we would get
the rest and it would be almost impossible to
work faster than the months of April and May
14
- 5 -
to get the whole thing in, and that is the
reason June first was adopted. My own feeling
is that if you had all those things that
have to be done by April first done, you would
be mighty sure that everything else would be
done.
Folger:
That 1s correct, I think.
H.M.Jr:
The April first date 18 a new date to me.
Bell:
That was decided on yesterday.
Seymour:
That is to get everything done that is possible
before the ninety days run, within which you
have to wait to publish the report. Now, I
think I ought to mention, or somebody ought
to mention one thing to the Secretary about
this: Eccles said that before the Bank was
asked to agree to this, the Bank ought to be
assured that the RFC and the Secretary would
agree to their getting the funds from the RFC
if that was what they wanted to do and what
they proposed to do, apparently, is something
which has not been a welcome thing to have done
in the past, and that is they propose somehow
to have the money borrowed not by the Bank but
by the stockholders and have the stock put up
as security, so that by no possibility will the
RFC have any voice in the control or management.
I think it is Eccles' notion that if there 1s
any difficulty with that program that that
ought to be stated to the Bank at this time.
H.M.Jr:
Now, just the way Delano said, that we didn't
want to do anything which wasn't usual as
demanding that they take preferred stock, I
insist that we won do anything unusual when
the RFC underwrites it. That cuts both ways.
Now, the last time they did it was the matter
of that famous December 15 thing. It was
with the exception of & case back there in
'33, I think it was, which was the case of
the Anglo-California Bank, where they found
a way of forming a corporation.
15
- 6 -°
Foley:
A September corporation.
H.M.Jr:
In the Anglo-California Bank, and I didn't like
that at all at that time and I would insist -
and they might just as well know it now - that
the RFC in underwriting whatever the security
is, would follow exactly the same procedure
that they do in every other bank and no exception
be made. Those things have to cut both ways.
Delano:
That is perfectly right.
H.M.Jr:
They might just as well know that and I personally
wouldn't change from that. I don't know if you
know how this stock is done on the RFC.
Seymour:
I have only a general idea.
H.M.Jr:
The way it is done, the power is vested in the
President of the United States, who gives me
power of attorney for him, and I, acting as his
agent, write a letter to the RFC, asking that
they subscribe to this money. That 18 the pro-
cedure. The power 1s vested in him by Congress
and I act as his agent. I make the move. I
am not going to sign my name as power of attorney
for the President of the United States on a thing
like this except in the usual way and any way
of trying to avoid that is just out and I wouldn't
even argue about it.
Seymour:
Well, I think that bridge ought to be crossed
so that there won't be any misunderstanding
about that before this proceeding is put to the
bank.
H.M.Jr:
I won't even argue about it.
Bell:
In '38, was that 8. corporation or an individual
matter?
Delano:
Corporation.
Bell:
The only time it came up was when we first started
the meetings with the representatives of the
bank. Giannini said that he thought he could sell
ten or fifteen million dollars of stock, either
capital or preferred, and we asked him if it
16
7 -
would be done through any funny arrangements,
if there were any of these corporations that
they owned or controlled, and he said absolutely
not, that they wouldn't be in any way involved.
He intimated that he had some people who would
underwrite it.
Delano:
What they ultimately did was set up this dummy
corporation and then the various stockholders
were given preempted rights to work through the
corporation.
Foley:
That is what the Secretary objects to.
Delano:
That is right, and that is very clear and I
think we could tell that to Eceles, because I
think they probably have some such scheme. We
have got to make that clear.
Seymour:
Would it be appropriate to suggest any dis-
cussion with the RFC, preliminary to coming
back to find out what our position is on it?
If the RFC should say, "You have got to do it
this way," it would be better to have them
say it, wouldn't it?
Foley:
I think that there ought to be an understanding
between Mr. Jones and the Secretary before they
start talking to Mr. Jones and Mr. Jones says,
"Why certainly, I will underwrite it through the
corporation and you can peddle it." If he does
that, then we are going to be over the barrel
again.
Seymour:
Yes.
Foley:
So I think that before we go out and talk to
them about giving them a firm commitment to
put new capital into this bank on behalf of
the RFC, we had better clear with the RFC
the method that we are going to suggest, so
that we won't get a division there.
H.M.Jr:
That is right. But Jones can't do it, you
know.
Foley:
I know he can't do it, but I don't want him to
say so until he knows your feeling about it.
17
- 8 -
H.M.Jr:
And find the way it has been done before, I
am not going to - after all, when I asked that
the records be searched, we had to go back to
the September corporation, which was in 133,
and from that date there hasn't been any devia-
tion from that.
Foley:
Well, I think that definitely Mario has that in
mind.
H.M.Jr:
You mean the September corporation?
Foley:
Sure, and I think he ought to be told that right
now, 80 there won't be any misunderstanding and
accusations on the part of the Bank that we
broke faith with them. I think the use of the
corporate method to get capital into this Bank
will determine whether or not you are going to
put - whether they are going to sell common
or they are going to sell preferred. Now, if
you tell them there 1s a flat commitment on
the part of the RFC to purchase 35 million dollars
of preferred stock in that Bank - but they have
until the first of April to determine whether or
not they can sell common without any commitment
from the RFC. That means that they will have
to go to the RFC and take down the commitment.
On the other hand, if they feel that the commit-
ment is such that they can set up a corporation
and through the corporation peddle common stock
by RFC help, they are going to try to do it that
way and we are going to have the same difficulties
about what we intended later on with them, and
I think that bridge has got to be crossed now
and I think we have got to have it out with Mr.
Jones before we talk to the Bank and give them
any program.
H.M.Jr:
O. K. I am glad at least you got that out of
this meeting.
Seymour:
Well, it seemed to me that there ought to be
no doubt about that.
H.M.Jri
Is there any question in your mind?
Delano:
No.
18
- 9 -
H.M.Jr:
Gus?
Folger:
No. I think Mr. Foley 1s correct on that.
Bell:
Is there any way that RFC could loan money
to the individual stockholders so that they
could subscribe to this preferred stock?
Upham:
Sure, they do that.
Bell:
That was mentioned in one meeting, I don't
think for the Bank, but with the "
Delano:
I don't understand the Secretary objects to
that procedure.
H.M.Jr:
I don't object to anything that has been done
& number of times before. Just the way you
said, we can't tell them they have got to
have preferred stock. I don't want to do any-
thing in this thing that, as I put it, if you
look up the record . - I said, "I want this thing
handled the way 99 out of 100 times it has been
handled and not the one time." Now, that is
all. If there are precedents for any of these
procedures in conducting this negotiation,
that you can say this has been done & half dozen
times, 0. K., but if it is one in a hundred, no.
And the September corporation is one in ten
thousand. You made that search for me, Cy,
remember?
Upham:
Yes.
Seymour:
The other general question that we might discuss
while we are here is this program of laying down
& minimum and telling the Bank having all the
agencies tell the Bank that they must take this
program and that we are not going to sit around
talking with proposals and counter proposals
any longer.
Bell:
In other words, this is final.
Seymour:
And I asked Eccles yesterday whether that was
what he was prepared to come to and he said
Regraded Unclassified
19
- 10 -
yes and that is what he wanted to come to and
so he is agreeable that whatever program we
do finally agree on, it 18 to be on sort of &
basis of take it or leave it. If you don't
take it, then we will go ahead and take all
the steps available, and the question I think
we ought to settle here 1s whether we really
want to proceed that way, because it 18 up
to us to do it some other way if we want to.
Foley:
Well, I think that we have reached the point
now where we have to make that decision and
I feel very strongly that that is the only
thing for us to do. Now, before we give it
to the Bank, I think we have got to have
assurances from the Federal Reserve Board
that - not Mr. Eccles and Mr. McKee, but the
whole Board is willing to stand bohind that
irreducible program and that that 1s what
they are going to tell - the Federal Reserve
Board 1s going to tell this Bank when the Bank
comes around and says, "What do we have to do
to become a State bank member?" I think we
ought to also have assurances that the FDIC
agrees by action of its Board that that is an
irreducible program and the Treasury should
agree, the Comptroller of the Treasury, every-
body, and I think that the RFC should be con-
sulted in so far as the method 1s concerned
as to putting new capital into this Bank.
H.M.Jr:
And they have & Board.
Foley:
And they have & Board, and we get a commitment
from them and then when we give it to them,
it is given to them as a final expression from
all of the agencies concerned. I don't think
we get anywhere by just talking to them.
H.M.Jr:
I think we have been - well, certainly patient,
if anything, over-patient, and sooner or later
you have got to say, "This is it."
Seymour:
I think the time has come.
Bell:
Yes, I thought that maybe we were acting a
little hasty, but after listening to the argu-
ments yesterday morning in that meeting, I
think probably they are right.
Regraded Unclassified
20
- 11 -
H.M.Jr:
You think they are right?
Bell:
Yes. Yesterday morning I didn't feel that
way about it.
H.M.Jr:
I think you will find, from my past experience
with Mr. Eccles, unless you have it that way
that he will keep trading with you indefinitely.
Bell:
Well, he has threatened at about every meeting
now to make this the last one and not come back.
Nobody would care very much.
Delano:
You had better go on and say what you said,
Danny.
Bell:
I asked him if that was a definite promise.
Foley:
I asked Whitney if he wanted to say anything
at this time about action that we might take
1f the Bank doesn't come along and agree with
this program. Maybe that is premature.
Seymour:
I think it is a little premature. Dean Bates
is busily engaged in an accoutrement of his
report and I think that will be out probably
in the next couple of weeks and I think it
would be - then we will pretty well know what
the Bank's attitude is toward this ultimatum.
I think it is time enough to decide. I feel
very strongly that we ought not to do any-
thing outside of the Treasury which would
indicate that we propose to follow one course
or the other prior to April 15. I mean, I
don't think we ought to commit ourselves
morally to anybody to side in with the Federal
Reserve Board, for example, and thus give any
encouragement to the Bank to feel that that
which is the least dangerous from their point
of view is the one we are going to adopt.
Foley:
I agree with you.
H.M.Jr:
And I think when we get to that point, when
we get this report and everything else, I
certainly would want to re-check with the
Regraded Unclassified
21
- 12 -
President at that time, provided that the
Bank wouldn't go along or the Federal Reserve
wouldn't go along, when we reach that point.
I think at such a crucial point he ought to
be consulted. So far, I haven't thought it
necessary other than what I have kept him
posted. When we reach that position, I think
he ought to be consulted.
Delano:
I have been asked by the Federal Reserve Board,
and I think by Leo, too, 8.8 to what are the
probable sanctions that might be withdrawn
and I have said that so far as I was con-
cerned, my mind was completely open and fluid
and I didn't know.
Seymour:
Well, if the Bank refuses to go along with this
program, then the time has come for everybody to
sit down and decide in what order they are going
to let all the sanctions go, but I don't see
how you can decide that now.
H.M.Jr:
All right. Thank you all.
22
Regraded Unclassifie
REPORT or CONFERENCE HELD IN MR. WILL'S 07/10
FRIDAY. FEBRUARY 23. 1940
Those in attendance were Messrs. McKes, Ecoles and Draibalhis from the
Federal Reserve Board, Mr. Crowley from the Federal Deposit Insurance Cor-
poration, Messrs. Ball, Seymour and Sherbondy, end Messrs. Delane, Uphase,
Folger and Mulroney.
The program drafted by the office of the Comptroller of the
Currency as of February 22, 1940 and the program of the Federal Reserve
Board dated February 23, 1940 were discussed. Copies of those programs
are attached hereto. In item 1 the amount of ser capital was reduced from
$35,000,000 to $30,000,000. The meaning thereof me clarified, and mention
of specific matters to be included in the articles of association were
excluded. In item 2, the anount of the reserve was reduced to $6,900,000.
Changes of items 3, 5 and 8 were made in the language only, having no material
effect on the substance thereaf.
During the meeting, Mr. NoKes objected quite strenuously to
the inclusion of the figure of $6,900,000, stating he had agreed to a re-
serve in the SUM of $5,000,000. Mr. Eccles admitted that the figure of
$6,900,000 odd originated in the Federal Reserve Board, and be was therefore
precluded from making the name objections as voiced by Mr. McKee. There ml
apparently, except for the objection voiced by Mr. McKee, an agreement as
to the substance of the final draft of the program, and after the meting
Messrs. Dreibalhis, Seymour, Folger, Upham, Williams, McLeen and Mulroney
prepared the final draft dated February 23, 1940, & copy of which is attached.
Mr. Dreibelhis took several copies with him, and copies were given to
Messrs. Sherbondy, Bell, and one copy we sent to Mr. Crowley.
February 24, 1940
AJMOVE
23
1940
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24
February 24, 1940
MEMORANDUM FOR MR. BELL
Undersecretary of the Treasury
original filed
There are attached hereto, for your information, three
copies of final draft dated February 23, 1940 of memorandum of
requirements of the Comptroller of the Currency with respect to
Bank of America, National Trust & Savings Association, San
Francisco, California.
PlentiDelans
COMPTROLLER OF THE CURRENCY
25
2/23/40
Regraded Uncla
REQUIREMENTS OF THE COMPTROLLER
OF THE CURRENCY
1940
1. As soon as possible, and in any event not later than June 1, the bank
30
shall add $30,000,000 of additional capital stock by the issuance of
common or preferred stock, or both, with the understanding that by
April 1 the board of directors of the bank will have approved the
entire program herein outlined and the bank will have obtained the
approval of the Comptroller of the Currency to such increase. In the
event that any part of said increase is to be obtained by the sale of
preferred stock to the RFC, & commitment from the RFC, on such terms
as the Secretary of the Treasury will request the RFC to purchase such
stock, must be obtained, and an agreement with the RFC and the Comptroller
of the Currency upon the terms of the amendments to the articles of
association, including its terms governing the disposition of earnings,
retirement of preferred stock (including a provision that this will only
be done with the consent of the Comptroller), etc., must be had by April 1.
2. Immediately upon obtaining the new capital, the bank shall set up an
6,900,000
unallocated reserve of against the carrying value of
individual occupied banking premises criticised in the report of examina-
tion of August 31, 1939, including those shown on the bank's books and
with
in its investment in Merchants National Realty Corporation. At the and
X one year n this reserve shall be used to reduce the carrying values
of such banking premises or the carrying value of the bank's investment
in Merchants National Realty Corporation, as the case may be, to the
26
-2-
extent determined by the Chief National Bank Examiner of the Twelfth
Federal Reserve District; and for the purpose of making that determi-
nation the bank agrees to furnish to such Chief Examiner all information
and records respecting said banking premises which may be requested by
him. The remainder of such reserve, if any, may be returned to the
undivided profits account.
3. The bank shall obtain additional collateral, satisfactory to the Comp-
troller, to secure the contracts of California Lands, Inc., and Capital
Company with the bank, and the contracts of Capital Company with Merchants
National Realty Corporation. Such additional collateral shall be in an
amount equal in value to the difference between the unpaid purchase price
upon such contracts and the value of the property thereunder, as such
value appears in the schedule contained in the report of examination
begun August 31, 1939. All of such contracts shall be eliminated from
the bank's assets by December 15, 1943.
4. All bonds in the bank's investment portfolio shall be amortized out of
current earnings (other than bond profits) to maturity, or to call date
if callable sooner. Current bond profits shall be used to take care of
current losses, and any bond profits not so used shall be passed to a
reserve for losses of any character until such reserve is adequate in the
judgment of the Comptroller of the Currency.
Regraded Unclassified
27
-3-
5. The bank shall continue the program of liquidation now in effect with
regard to the commitments of Transamerics and its allied interests.
The stock of any allied interests of Transamerica securing loans of Trans-
america or any of its allied interests shall be eliminated by July 15,
1945, and no similar pledge shall hereafter be accepted. / No dollateral
for the commitments of Transamerica and its allied interests shall be
withdrawn from the bank without payment to the bank of a sum equal to
the value of such collateral on account of such commitments; nor shall
substitutions or changes of collateral be made which reduce the value of
the collateral securing any such commitments. Further extensions of credit
by the bank for the purpose of purchasing or carrying Transamerica stock
shall be discontinued, and no collateral value shall be assigned to any
such stock hereafter pledged to secure any loan made by the bank.
6. The bank shall eliminate the amount of investment in stock under option
on the basis of the program now in effect.
7. The bank shall give vigorous attention to the elimination or correction
of any real estate holdings or real estate loans that may not conform
to statutory requirements.
8. The bank shall initiate steps, satisfactory to the Comptroller, to ascer-
tain whether it is entitled to recover any part of the sums paid by the
bank to Transamerica General Corporation in connection with fidelity
losses, and if it is concluded the bank is entitled to recover, it shall
Regraded Unclassified
28
take steps, sating
llar, to recover the same.
This memorandum is submitted without prejudice to the right to
require full and complete compliance with the Comptroller's criticisms and
suggestions, to resort to sanctions provided by law, or to continue to list
in reports of examination assets that are subject to criticism, until such
criticisms have been corrected or eliminated. Neither this memorandum nor
its contents shall be used by the bank or anyone else on its behalf without
the consent of the Comptroller, for any purpose except for its information,
unless and until the provisions hereof are accepted and complied with by
the bank.
Feb 22-1940
Regraded Unclassified
29
REQUIREMENTS OF THE COMPTROLLER
OF THE CURRENCY
1. As soon as possible, and in any event not later than June 1, 1940, the
bank shall add $30,000,000 of additional capital funds by the issuance
of common or preferred stock, or both, with the understanding that by
April 1 the board of directors of the bank will approve the entire pro-
gram herein outlined and the bank will obtain the approval of the Comp-
troller of the Currency to such increase. Any preferred stock sold
must be issuable at par and be retirable at par. A commitment from the
RFC to purchase preferred stock in the amount of $30,000,000 must be
obtained prior to April 1, and if preferred stock is to be sold, an agree-
ment with the Comptroller of the Currency upon the terms of the amendments
to the articles of association must be reached by April 1.
2. Immediately upon obtaining the new capital the bank shall set up an
unallocated reserve of $6,900,000 against the carrying value of individual
occupied banking premises criticised in the report of examination of
August 31, 1939, including those shown on the bank's books and in its
investment in Merchants National Realty Corporation. Within one year
after this reserve is set up it shall be used to reduce the carrying
values of such banking premises or the carrying value of the bank's in-
vestment in Merchants National Realty Corporation, as the case may be,
to the extent determined by the Chief National Bank Examiner of the
Twelfth Federal Reserve District; and for the purpose of making that
determination the bank agrees to furnish to such Chief Examiner all
3/40
Regraded Unclassified
30
-2-
information and records respecting said banking premises which may be
requested by him. The remainder of such reserve, if any, may be returned
to the undivided profits account.
3. The bank shall obtain additional collateral, satisfactory to the Comp-
troller, to secure the contracts of California Lands, Inc., and Capital
Company with the bank, and the contracts of Capital Company with Merchants
National Realty Corporation. Such additional collateral shall be in an
amount equal in value to the difference between the unpaid purchase price
upon such contracts and the value of the property thereunder, as such
value appears in the schedule contained in the report of examination
begun August 31, 1939. All of such contracts shall be eliminated from
the assets of the bank and Merchants National Realty Corporation by
December 15, 1943.
4. All bonds in the bank's investment portfolio shall be amortised out of
current earnings (other than bond profits) to maturity, or to call date.
Current bond profits shall be used to take care of current losses, and
any bond profits not so used shall be passed to a reserve for losses of
any character until such reserve is adequate in the judgment of the
Comptroller of the Currency.
5. Loans to Transamerica Corporation and its allied interests not otherwise
provided for herein shall be brought within the legal limit allowed to
one interest, as soon as possible and not later than July 15, 1942. The
stock of Transamerica or any of its allied interests securing loans of
Regraded Unclassified
31
Transamerica or any of its allied interests shall be eliminated by
July 15, 1945, and no pledge of such stock shall hereafter be accepted.
Further extensions of credit by the bank for the purpose of purchasing
or carrying Transamerica stock shall be discontinued, and no collateral
value shall be assigned to any such stock hereafter pledged to secure
any loan made by the bank.
6. The bank shall eliminate the amount of investment in stock under option
on the basis of the program now in effect.
7. The bank shall give vigorous attention to the elimination or correction
of any real estate holdings or real estate loans that may not conform
to statutory requirements.
8. The bank shall initiate steps to ascertain whether it is entitled to
recover any part of the sums paid by the bank to Transamerica General
Corporation in connection with fidelity losses, and if it is concluded
the bank is entitled to recover, it shall take steps to recover the same.
This memorandum is submitted without prejudice to the right
to require full and complete compliance with the Comptroller's criticisms
and suggestions, to resort to sanctions provided by law, or to continue to
list in reports of examination assets that are subject to criticism, until
such criticisms have been corrected or eliminated. Neither this memorandum
nor its contents shall be used by the bank or anyone else on its behalf
without the consent of the Comptroller, for any purpose except for its
information, unless and until the provisions hereof are accepted and com-
plied with by the bank.
February 23, 1940
betras 32
2/23/20
REQUIREMENTS OF THE COMPTROLLER
OF THE CURRENCY
1. As soon as possible, and in any event not later than June 1, 1940, the
bank shall add $30,000,000 of additional capital funds by the issuance
of common or preferred stock, or both, with the understanding that by
April 1 the board of directors of the bank will approve the entire pro-
gram herein outlined and the bank will obtain the approval of the Comp-
troller of the Currency to such increase. Any preferred stock sold
must be issuable at par and be retirable at par. A commitment from the
RFC to purchase preferred stock in the amount of $30,000,000 must be
obtained prior to April 1, and if preferred stock is to be sold, an agree-
ment with the Comptroller of the Currency upon the terms of the amendments
to the articles of association must be reached by April 1.
2. Immediately upon obtaining the new capital the bank shall set up an
unallocated reserve of $6,900,000 against the carrying value of individual
occupied banking premises criticised in the report of examination of
August 31, 1939, including those shown on the bank's books and in its
investment in Merchants National Realty Corporation. Within one year
after this reserve is set up it shall be used to reduce the carrying
values of such banking premises or the carrying value of the bank's in-
vestment in Merchants National Realty Corporation, as the case may be,
to the extent determined by the Chief National Bank Examiner of the
Twelfth Federal Reserve District; and for the purpose of making that
determination the bank agrees to furnish to such Chief Examiner all
Regraded Unclassified
33
information and records respecting said banking premises which may be
requested by him. The remainder of such reserve, if any, may be returned
to the undivided profits account.
3. The bank shall obtain additional collateral, satisfactory to the Comp-
troller, to secure the contracts of California Lands, Inc., and Capital
Company with the bank, and the contracts of Capital Company with Merchants
National Realty Corporation. Such additional collateral shall be in an
amount equal in value to the difference between the unpaid purchase price
upon such contracts and the value of the property thereunder, as such
value appears in the schedule contained in the report of examination
begun August 31, 1939. All of such contracts shall be eliminated from
the assets of the bank and Merchants National Realty Corporation by
December 15, 1943.
4. All bonds in the bank's investment portfolio shall be amortized out of
current earnings (other than bond profits) to maturity, or to call date.
Current bond profits shall be used to take care of current losses, and
any bond profits not 80 used shall be passed to a reserve for losses of
any character until such reserve is adequate in the judgment of the
Comptroller of the Currency.
5. Loans to Transamerica Corporation and its allied interests not otherwise
provided for herein shall be brought within the legal limit allowed to
one interest, as soon as possible and not later than July 15, 1942. The
stock of Transamerica or any of its allied interests securing loans of
Regraded Unclassified
34
Transamerica or any of its allied interests shall be eliminated by
July 15, 1945, and no pledge of such stock shall hereafter be accepted.
Further extensions of credit by the bank for the purpose of purchasing
or carrying Transamerica stock shall be discontinued, and no collateral
value shall be assigned to any such stock hereafter pledged to secure
any loan made by the bank.
6.. The bank shall eliminate the amount of investment in stock under option
on the basis of the program now in effect.
7. The bank shall give vigorous attention to the elimination or correction
of any real estate holdings or real estate loans that may not conform
to statutory requirements.
8. The bank shall initiate steps to ascertain whether it is entitled to
recover any part of the sums paid by the bank to Transamerica General
Corporation in connection with fidelity losses, and if it is concluded
the bank is entitled to recover, it shall take steps to recover the same.
This memorandum is submitted without prejudice to the right
to require full and complete compliance with the Comptroller's criticisms
and suggestions, to resort to sanctions provided by law, or to continue to
list in reports of examination assets that are subject to criticism, until
such criticisms have been corrected or eliminated. Neither this memorandum
nor its contents shall be used by the bank or anyone else on its behalf
without the consent of the Comptroller, for any purpose except for its
information, unless and until the provisions hereof are accepted and com-
plied with by the bank.
35
RE BANK OF AMERICA
February 26, 1940.
10:00 a.m.
Present:
Mr. Delano
Mr. Foley
Mr. Seymour
Mr. Upham
Mr. Mulroney
Mr. Sherbondy
Mr. Folger
Mr. Schwarz
H.M.Jr:
I think I am going to take a minute to read this,
if I may.
I have one question. Where I said, "A commit-
ment from the RFC to purchase preferred stock
in the amount of 30 million dollars must be ob-
tained prior --" So you are definitely saying
preferred stock?
Delano:
We are using that as an underwriting medium,
Mr. Secretary.
H.M.Jr:
Supposing they wanted common stock.
Delano:
They can go ahead and do that.
H.M.Jr:
Does it say so?
Bell:
The first sentence says, "common or preferred,"
but there must be a commitment to purchase, you
see, in order to be sure.
H.M.Jr:
You give them plenty of time to straighten out
their loans with Transamerica, don't you, July
15, 1942.
Bell:
That was the original understanding, wasn't it?
That has been in the picture right along. It
hasn't been changed.
Delano:
They have been doing a pretty fair job, Mr. Secre-
tary.
H.M.Jr:
I think that is a very statesmanlike document.
When you boil that down in the layman's language,
what does that mean? If they carried out this
thing just the way - how much dividend could
they pay? Is the next dividend March 15?
36
- 2 -
Delano:
Yes.
H.M.Jr:
And after that what could they pay?
Delano:
It would depend upon their earnings. This
does put a mighty strong control on it. I
think it is not as strong as the first one we
had, but it is very close to it and I think
Mr. Folger would speak on that point.
Folger:
I think it 1s as strong as the first one, Mr.
Delano.
H.M.Jr:
What do you mean by the first one?
Folger:
On that particular point.
Delano:
First draft, he is talking about.
Foley:
You don't mean the one that was agreed to in
December, '38?
Folger:
No.
Delano:
The first draft out of our present conferences.
Bell:
We had percentage figures in that first draft.
Delano:
We froze the undivided profits and we prohibited
bond profits to be used for any purpose except
excess reserves. Setting aside the bond profits
for the reserve - the technical people, Mr.
Secretary, will give us a very strongly improved
condition.
Seymour:
As 8. practical matter, though, won't it enable
them to pay, if their earnings continue, pretty
close to the same dividend they have been paying?
Folger:
That will depend upon their earnings. I don't
think they could pay it if they have the losses
they have been having.
Delano:
Not if the picture remains the same as it has
been.
Folger:
I was speaking of freezing of the bond profits
as being as strong as it has been.
37
- 3 -
Bell:
of course they have had pretty big bond profits
in the past. They can't expect to have those
year in and year out, either.
H.M.Jr:
Well now, everybody, I take it, in the room, is
in favor of this plan.
Bell:
I think so.
Seymour:
Well, I am in favor of 1t as a compromise. I
think everybody recognizes that if you didn't
have to compromise or you weren't considering
a compromise wi th a united front, that something
more than this might be demanded of the Bank.
H.M.Jr:
Do you think that 8.5 a minimum it is all right?
Seymour:
From the point of view of a compromise, I think
it is.
H.M.Jr:
Gus?
Folger:
Yes, I think we have more in this than I expected
to get.
H.M.Jr:
What is that?
Folger:
This is more than I really expected to get in the
way of a compromise.
Seymour:
You haven't got it yet.
Bell:
You haven't got it, yet, Gus.
Folger:
Well, the three agencies --
Bell:
You mean between the agencies?
Folger:
That is right.
Bell:
Well, I think that is right.
Folger:
And I think if the Bank accepted this in good
faith, that we would have improved conditions
a great deal.
H.M.Jr:
You do?
38
- 4 -
Folger:
Yes.
H.M.Jr:
Cy?
Upham:
I agree with that, with the necessity of getting
everyone to agree on something. I think this is
about all you could expect.
H.M.Jr:
Ed?
Foley:
It seems to me we haven't any alternative, Mr.
Secretary, but to pick out the best possible
arrangement between the three agencies and
insist upon it. This is all right.
H.M.Jr:
How about you?
Delano:
I feel the same way. In all the circumstances,
I think this is the best we could do.
H.M.Jr:
Well, under those conditions, you can consider
that I am favorable to it. I will have to
commit the President to it unasked, and he will
have to take my word for it.
Bell:
What we plan to do is to let Mr. Delano deliver
this to Mr. Cushing and Mr. Giannini right after
this meeting. Have you got the FDIC yet?
Delano:
Well, Leo and I have talked about it over the
phone.
Bell:
We will want that in the record. He will deliver
this to the Bank's representatives in town.
H.M.Jr:
You mean they will call on him?
Bell:
We told them we would send up this program and
if they wanted a meeting afterward, we would
be glad to give it to them.
Delano:
We think they ought to have a few hours on it
before they come into 8. meeting.
H.M.Jr:
Do they have to see that this sort of dissension
on the part of the Federal Reserve is between --
Bell:
No, they won't see any of it. They will just
be told that the three agencies are together on
Regraded Unclassified
39
- 5 -
this program and that the program has been
passed upon by the Boards of the two agencies,
plus the Secretary of the Treasury.
Delano:
And they will be told this is B. united front
and a united demand.
Bell:
And it 1s final.
H.M.Jr:
And it 1s final.
Bell:
Yes.
H.M.Jr:
Will you say so in the letter?
Delano:
I think what we will do is just drop this in on
them and then when they come to talk to us --
H.M.Jr:
I should think it ought to be final, wouldn't
you?
Seymour:
Yes, I should think so.
Sell:
That has been the purpose of these last con-
ferences.
H.M.Jr:
I should think we are at that point now.
Seymour:
I think that this action of the Reserve Board
may indicate that we ought to reserve with them
the right to go back to a higher capital demand
in the event that the Bank comes down to a
five million dollar reserve demand.
H.M.Jr:
Well, that isn't indicated. Has it been by
word of mouth?
Bell:
We haven't answered that letter. You mean in
the document between the Federal Reserve --
Seymour:
No, I don't mean in the document at all. The
Reserve Board reserves the right to favor the
acceptance of 8 five million dollar reserve
1f the Bank offers that. Now, 1f the Bank
comes back with that proposition, in view of
the attitude of the Reserve Board, I think
we ought to register with the Reserve Board
Regraded Unclassified
40
- 6 -
a position that in the event we come to B.
five million dollar reserve, we have the
right to insist on a 35 million dollar capital,
or something of that sort, so that we don't
get traded out of both the 35 million capital
and the six million nine hundred thousand
reserve.
Delano:
Personally, I don't want to come down to a
five million dollar reserve, anyhow, but I
think Whitney's point is that 1f we decide
to do that, as a trading point, we ought to
increase the capital five million. That is
just B. question of opinion there. I would
rather stick on the six, nine. How do you
feel?
Bell:
You might tell the Secretary of your conversa-
tion with Eccles, just so he will have the
background on this five million.
Delano:
Eccles called me last night and told me this
letter was coming over and that the Board had
passed this thing and that the reason they had
made that five million exception in there was
on account of John McKee. John McKee in all
his conferences has been very insistent that
the six million nine should be reduced by B.
million and he has been very much, 1f I may use
the phrase, 8 bull on holding that point. He
got himself so far out, according to Eccles,
when he came down before, the Board didn't
want to put him in the position of - the em-
barrassing position of not making his point.
Now, Eccles said that he stood with us com-
pletely on the situation.
H.M.Jr:
Did he?
Delano:
Yes.
Bell:
It is his figure, Mr. Secretary.
Delano:
He said he wanted it understood that this was
done just for John McKee rather than have him
vote against the program and the Board. The
Board thought it was better to do that. Eccles
41
- 7 -
was quite sure in his statement that McKee
was alone in the matter. The Board felt,
as Eccles felt, that they didn't want to
adopt that position to Mr. McKee's embarrass-
ment and that is the reason for this reserva-
tion in there. Eccles said as far as he 1s
personally concerned he will stand with us,
H.M.Jr:
I think it is only due you gentlemen who have
been working so hard on this thing to offer
you my compliments that you have been able to
arrive as far as you have and I am very much
pleased that we have got an agreement amongst
the three agencies. It is quite unique.
Bell:
The only thing that worries me about that five
million is that it will get back to the Bank.
Seymour:
That is the point.
Bell:
Then we will be back in the negotiation stage
again.
Seymour:
Against the possibility that somehow the Bank
may have found out about this, it seems to me
that it would be well to register with Mr. Eccles
the point that if the Bank should come back wi th
a five million dollar offer as the limit that
they would go on this point and the Board should
take the view that under this action we couldn't
turn down the proposal, we ought to be free, if
we then determine to do it, to renew our original
insistence on 35 million as a basis for accepting
that five million compromise.
Delano:
It would be a question as to how the Secretary
would feel, whether he would want us to do that
or bring it to him again.
H.M.Jr:
I will give you the latitude. I think that Whit-
ney Seymour is making a good point. I think
that the time to get Eccles committed would be
this morning before the Giannini crowd have a
chance to do anything.
Delano:
You mean committed to the raising of the capital?
42
- 8 -
H.M.Jr:
Yes, if you have to lower the six, nine. I
think it is a good point. I think it should
be done immediately.
Foley:
You had better do it in writing by reply to
that letter.
H.M.Jp:
I think you could do it - don't you think you
could do it verbally and then say if it is
agreeable you can send it over? I will leave
it to you to call him up. If you write him
such a letter, would he accept it? You wouldn't
want him to turn it down.
Delano:
I will write it.
Bell:
0. K.?
H.M.Jr:
0. K.
43
REQUIREMENTS OF THE COMPTROLLER
or THE CURRENCE
1. to soon as possible, and in any event net later then June 1, 1940, the
bank shall add $30,000,000 of additional capital funds by the income
of common or proferred stock, or both, with the understanding that by
April 1 the board of directors of the bank will approve the entire pro-
grea herein outlined and the bank will obtain the approval of the Coup-
troller of the Currency to such increase. Any proferred stock cold
must be issuable at par and be retirable at par. A commitment free the
RFC to purchase preferred stock is the amount of $30,000,000 must be
obtained prior to April 1, and if preferred stock is to be sold, an agree-
ment with the Comptroller of the Currency upon the terms of the enendments
to the articles of association must be reached by April 1.
2. Immediately upon obtaining the new capital the bank shall set up an
unallocated reserve of $6,900,000 against the carrying value of individual
occupied banking premises criticised in the report of examination of
August 31, 1939, including those shown on the bank's books and in its
investment in Merchants National Realty Corporation. within one year
after this reserve is set up it shall be used to reduce the carrying
values of such banking premises 02 the carrying value of the bank's is-
vestment in Merchants Mational Realty Corporation, as the case my bo,
to the extent determined by the Chief National Bank Imasiner of the
Twelfth Federal Reserve District; and for the purpose of making that
determination the bank agrees to furnish to such Chief Kraniner all
44
- 2 -
information and records respecting said banking premises which my be
requested w kim. The remainder of such reserve, if any, my be returned
to the undivided profits account.
3. The bank shall obtain additional collateral, natisfactory to the Comp-
troller, to secure the contracts of California Lands, Inc., and Capital
Company with the bank, and the contracts of Capital Company with Merchants
National Realty Corporation. Sach additional collateral shall be in an
emount equal in value to the difference between the unpaid purchase price
upon such contracts and the value of the property thereunder, as such
value appears in the schedule contained in the report of examination
begun August 31, 1939. All of such contracts shall be eliminated from
the assets of the bank and Merchants National Realty Corporation by
December 15, 1943.
4. All bonds in the bank's investment pertfolio shall be amortised out of
current earnings (ether than bond profits) to maturity, or to call date.
Current bond profits shall be used to take care of current losses, and
any bond profits not so used shall be passed to a reserve for losses of
any character until such reserve is adequate in the judgment of the
Comptroller of the Currency.
5. Loans to Transaserica Corporation and its allied interests not otherwise
provided for herein shall be brought within the legal limit allowed to
one interest, as BOOD as possible and not later than July 15, 1942. The
stock of Transamorica or any of its allied interests securing loans of
Regraded Unclassified
45
3
Transamerion or use of its allied interests shall be eliminated m
July 15, 1945, and no pledge of such stock shall hereafter be accepted.
Further extensions of credit by the bank for the purpose of purchasing
or carrying Transameries stock shall be discontimed, and me collateral
value shall be assigned to any such stock hareafter pledged to secure
any loan made by the bank.
6. The bank shall eliminate the asount of investment in stock under option
on the basis of the program now in effect.
7. The bank shall give vigerous attention to the elimination or correction
of usy real estate holdings or real estate loans that may not conform
to statutory requirements.
8. The bank shall initiate steps to ascertain whether it is entitled to
recover any part of the suas paid by the bank to Transamerica General
Corporation in connection with fidelity Leases, end If 14 is concluded
the bank is entitled to recever, it shall take stops to recover the MM,
This mecrandes is submitted without prejudice to the right
to require full and complete compliance with the Comptroller's criticisms
and suggestions, to resort to sanctions provided by law, or to continue to
list in reports of examination assets that are subject to criticies, until
such criticisms have been corrected or aliminated. Neither this emergendum
nor its contents shall be used by the bank or enyone also on its behalf
without the consent of the Comptroller, for any purpose except for its
information, unless and until the provisions hereaf are accepted and
plied with by the basik.
February 23, 1940.
46
February 26, 1940.
Hon. Preston Delano,
Comptroller of the Currency,
Washington, D. C.
Dear Sir:
I wish to acknowledge a copy of your proposal
to be submitted to the Bank of America National Trust
and Savings Association, San Francisco, California,
with respect to certain of the bank's problems.
The proposal sets forth the requirements for
correction which have been developed after 8 series
of conferences in which I participated, and with which
I as in accord. This matter has been considered also
by By associates in the Federal Deposit Insurance Corpo-
retion and it meets with their approval.
If the bank will take steps to meet these require-
ments in a proper spirit, I believe that substantial in-
provement in its condition will result.
Very truly yours,
(Signed) Leo T. Crowley
THIND
Chairman.
47
COPY
I the F
- Chester Nerrill, Secretary,
Board of Governore,
Federal Reserve System,
Washington, D.O.
bur Mr. Marrille
I have reseived your letter of February si, 1940,
malesing a copy of the resolution adopted by the heard
-
February 24.
- visa of the - paragraph of the reselution,
I wish to confirm 17 understanding with Bester
the telephone today that as, for - remon, u should
because motorney to consider the acceptance the
the requirement of $6,900,000 in paragraph (2) of
statement of requirements, this office reserves the right
to instet 35,000,000 in lim of as stated
is
to insisted upon, under these eircumstences, 16 préme #
stall have the expert of your Beard in that regard.
Very sincerely yours,
jay Preston Delano
Comptreller of the Currency
out 2-26-40
Regraded Unclassified
48
COPY
COPY
BOARD OF GOVERNORS
of the
FEDERAL RESERVE SYSTEM
February 26, 1940
Honorable Preston Delano
Comptroller of the Currency
Washington, D. C.
Dear Mr. Delano:
Chairman Eccles asked me this morning to
send you a copy of the resolution which the Board
adopted during its meeting on Saturday and I am
attaching one herewith in the form as it was
written up at the time of the Board's action.
Very truly yours,
s/d Chester Morrill
Chester Morrill,
Secretary.
Enclosure
Regraded Unclassified
49
February 24, 1940
The Board authorizes its representatives to join with
the representatives of the Federal Deposit Insurance Corporation,
the Treasury, and the Comptroller of the Currency in agreeing
upon the proposed requirements of the Comptroller of the Currency
and in presenting a united front in support of these requirements.
The Board, however, requests its representatives to advise
the Comptroller of the Currency that the Board feels that the
proposed requirements should not be allowed to fail in case
the Bank of America is unwilling to agree to the requirement of
$6,900,000 in paragraph 2, but is unwilling to accept a require-
ment of some other amount in lieu thereof which is not less
than $5,000,000.
In connection with this action, the Board understands
that if the representatives of these agencies should agree
upon any material modification of the Comptroller's require-
ments the matter will be brought back to the Board for further
consideration.
Federal Reserve Board
Regraded Unclassified
50
February 26, 1940
Honorable Marriner S. Eccles,
Chairman, Board of Governors,
Federal Reserve System,
Washington, D.C.
My dear Mr. Chairman:
In accordance with our conversation
over the telephone this morning, I hand you here-
with copy of a letter with its enclosure which
was delivered to Mr. L. M. Gignnini this morning
at the Mayflower Hotel.
Very sincerely yours,
Preston Delano
51
February 26, 1940
Honorable Leo T. Crowley, Chairman,
Federal Deposit Insurance Corporation,
Washington, D.C.
My dear Mr. Chairman:
In accordance with our conversation
over the telephone this morning, I hand you here-
with copy of a letter with its enclosure which
was delivered to Mr. L. M. Giannini this morning
at the Mayflower Hotel.
Very sincerely yours,
Preston Delano
52
COPY
February 26, 1940
Mr. L. M. Giannini, President,
Bank of America National Trust and
Savings Association,
San Francisco, California.
My dear Mr. Giannini:
I send you herewith, without prejudice
to the position heretofore taken by this office, a
statement of minimum requirements for the correction
of conditions in the Bank of America National Trust
and Savings Association which must be complied with
by the Bank.
This statement of minimum requirements
has been agreed upon by the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance
Corporation and the Treasury Department. If an
adjustment of the differences between the Bank and
this office is to be made, it must be made promptly
upon the t erms set forth in this statement.
Very sincerely yours,
COMPTROLLER OF THE CURRENCY
Forwarded to Mr. Giannini
c/o Mayflower Hotel,
Washington, D.C.
53
REQUIREMENTS or THE COMPTROLLER
OF THE CURRENCE
2. As goom as possible, and in any event not later then June 1, 1940, the
bank shall add $30,000,000 of additional capital funds by the
of common or preferred stock, or both, with the understanding that by
April 1 the board of directors of the bank will approve the entire -
gream herein outlined and the bank will obtain the approval of the Comp-
treller of the Currency to such increase. Any preferred stock sold
must be issumble at par and be retirable at par. A comitaint from the
RFC to purchase preferred stock in the amount of $30,000,000 must be
obtained prior to April 1, and if preferred stock is to be sold, an agree-
met with the Comptrollar of the Currency upon the terms of the envolume
to the articles of association must be reached by April 1.
2. Immediately upon obtaining the any capital the bank shall set up as
unallocated reserve of $6,900,000 against the carrying value of individual
occupied banking premises criticised in the report of examination of
August 31, 1939, including those shown on the bank's books and in its
investment in Merchants National Realty Corporation. Within one year
after this reserve is set up it shall be used to reduce the carrying
values of such banking premises or the carrying value of the bank's is-
vestment in Merchants National Realty Corporation, as the case may be,
to the extent determined by the Chief National Bank Examiner of the
Twelfth Federal Reserve District; and for the purpose of mking that
determination the bank agrees to furnish to such Chief Emainer all
Regraded Unclassified
54
information and records respecting said banking premises which may be
requested by him. The remainder of such reserve, if say, may be returned
to the undivided profits account.
3. The bank shall obtain additional cellateral, satisfactory to the Comp-
troller, to secure the contracts of California Lands, Inc., and Capital
Company with the bank, and the contracts of Capital Company with Merchants
National Realty Corporation. Such additional collateral shall be in 4a
amount equal in value to the difference between the uspaid purchase price
upon such contracts and the value of the property thereunder, as such
value appears in the schedule contained in the report of examination
begun August 31, 1939. All of such contracts shall be aliminated from
the assets of the bank and Merchants National Realty Corporation w
December 15, 1943.
4. All bonds in the bank's investment portfolio shall be amortised out of
current earnings (other than bond profits) to maturity, or to call date.
Current bond profits shall be used to take care of current losses, and
any bond profits not so used shall be passed to a reserve for losses of
any character until such reserve is adequate in the judgment of the
Comptroller of the Currency.
5. Loans to Transamerica Corporation and its allied interests not otherwise
provided for herein shall be brought within the legal limit allowed to
one interest, as soon as possible and not later than July 15, 1942. The
stock of Transamerica or any of its allied interests securing loans of
Regraded Unclassified
55
Transamerica or my of its allied interests shall be eliminated by
July 25, 1945, and no pledge of such stock shall hereafter be accepted.
Further extensions of credit by the bank for the purpose of purchasing
or carrying Transamerica stock shall be discontinued, and as collateral
value shall be assigned to any such stock hereafter pledged to secure
any loan made by the bank.
6. The bank shall eliminate the amount of investment in stock under option
on the basis of the program now in effect.
7. The bank shall give vigerous attention to the elimination or correction
of any real estate holdings or real estate loans that any not conform
to statutory requirements.
8. The bank shall initiate stape to ascertain whether it is estitled to
recover any part of the - paid by the bank to Transamerica General
Corporation in connection with fidelity losses, and if it is concluded
the bank is entitled to recover, it shall take steps to recover the same.
This memorandum is submitted without projudice to the right
to require full and complete compliance with the Comptroller's criticisms
and suggestions, to resort to senctions provided by law, or to continue to
list in reports of examination assets that are subject to criticism, witil
such criticisms have boen corrected or aliminated. Neither this membership
nor its contents shall be used by the bank or anyone also on its behalf
without the consent of the Comptroller, for any purpose except for its
information, unless and until the provisions hereef are accepted and COM-
plied with by the bank.
February 23, 1940
Regraded Unclassified
FIRST VICE PRESIDENT
REDERAL RESERVE BANK OF SAN FRANCISCO
Mr. Clerk would like you to read this before the
10:30 meeting
56
10ANS SECURED BY STOCE of TRANSAMERICA CORPORATION
3,508,269.30
(See page 8, insert 6, March 31, 1939)
Dele loans are numerous and videly neattered throughout the various
branches and may of the individual leans, 80 occured, are classified is
the branch reports of examination. The mount as above represents, la the
aggregate, the extension of credit dependent upon the stock of Transacrios
Corporation. In the majority of cases they are loans sade in prior years
and many are workout problems dependent entirely on the security and are
carried in as attempt by the management to effect 4 recevery on partially
charged off asseta through market approciation is the value of Transaceries
Corporation stook. The fellowing is a comparative schedule of the total
mount of loans accured by this stock:
COMPARATIVE SCHEDULE or LOANS SECURED BY BTOCK or TRANSAMINICA CORPORATION
Date of
Shares
Shares
Shares Pleased
singtion
"A"
Pledeed
T
Pleired
4
m.31-29
$40,064,358.69
1,697,165
$17,057,610.19 6
453,650
No record kept.
m.10-30
26,683,141.24
1,500,318
12,496,757.48 -
361,680
4a
10.28-31
20,941,703.76
1,609,120
30,413,252.16 e
822,536
do
m.31-31
15,104,423.35
1,609,553
10,271,027.96
863,937
141,161
kr.31-32
11,010,253.77
1,416,385
9,524,571.37
816,025
115,041
w.9-32
9,594,093.07
1,389,460
7,916,201.29
658,342
218,552
pr.10-33
8,831,763.24
1,386,502
8,155,215.68
808,806
252.549
pp.18-33
7,418,552.89
1,197,656
6,936,943.43
780,793
192,610
-
0.22-34
5,110,770.65
997,685
4,634,967.39
701,936
234.849
00.11-35
3,984,154.79
804,396
4,489,748.47
-
684,794
257,161
11.7-35
3,640,856.30
778,195
3,950,531.21 #
542,068
161,830
5,828,887.814
972,383
3,575,540.49
as
429,300
264,437
#14-36
938,663
2,798,243.26
$0
6,026,140.944
330,449
232,559
pr.20-37
5,684,006.32
09,984
3,203,483.49
-
350,105
195,925
$
4,786,941.33
***
M.31-37
1,370,361.05
156,852
530,976
⑉
-
18.28-38
564,803.17
101,013
4,252,420.82
522,373
w.21-38
674,261.49
110,600
4,037,044.77
$
501,525
$
Ar.31-39
2,735,293.38
⑉
772,975.92
441,493
I
132,130
"A" Locas secured by transuries Corporation stock only.
ago Loans secured by transameries Corporation stock and other collateral.
Doller enomit represents balance of loans dependent upon Transamaries
Corporation stock.
"0" Shares of Transamories Corporation stock hold as collateral, upon
which no porties of the loss is dependent.
(*) Indicates total loans which are received by Transanaries Corporation
stock and other collateral, and not the balance of loan dependency
upon Transamaries Corporation stock W indicated above under "1".
Regraded Unclassified
57
large
Line
-
control
Insurance
( Basis for figuring the dependency of the less upon Treas-
america Corporation stock hold as collateral changed to
the proportions That the value of the Transameries Car-
peration stock has to the total value of all the collateral
securing the lease, instead of, as fernarly used, figuring
the entire meetered belonce of the lean as dependent upon
9/8 collaterel.
( Now includes proportionate amount dependent upon TAG stock
regardless of the sollateral position with respect to other
securities hold as cellaterel.
n It is significant that, contrary to ennounced policy in
regard to leans made upon Transmarion Corporation stock,
both the number of shares end the dollar essumt increased
during 1936, uses the stock makes experienced accelerated
activity and & decided market value subsecement for Treas-
emerioa Corporation steek.
Regraded Unclassified
is **
1
Ave
59
I Yes
I
IISENTE
I
tabe to the afternoon - Classics advised the Comptembler
- - doughber had tem aparated ⑉ and that he - Leaving a
the alterna e'clisch glane for - This secting me,
therefore, hastily selled to arder to penis consideration of the
sereral. polato which revised monthled - & result of the meeting
- Telenuary 26, 2040.
- Below prevented s re-denit of the proposed repirements
of the ComptemBler of the (cready which had bose werked m is -
I 6 I I 1 I I a I I
treatly - the telephone. s one of the proposed requirements is
I
r I $ I I á I s I & I
procedure, and as - explained to Mo ml Mo collengues that the
treasury world request the - to increase the capital that of the
Bank to the - of $30,000,000 - attpdated. m Mill stabet
I 1 I $ I 1 1 I 1 I 1 I #
contactives of the Bank would - with the - the details and
the mothell to to capityed. thether the noter should be hundled
Regraded Unclassified
60
I I E I a e z $ w I I 1 n
s 1 I E I I 1 ! 4 b s b I
particure world be cuttled to - between the - and
representatives of the - Materie - - - in these
conversations would be entisfactory to the treasury, only
to the Treasury's right, neting through the Comptembler of the
currently, to paso upon the articles of accosiation.
é
Terreri reland the question that - of these articles of accesto-
ties esstained requirements which wild be to the
and asked that the projected articles of asseciation should -
form in spirith and letter to the agreement - under consideration
between the parties.
M this point Mr. Malreney orbered the monting and
ensured several technical questions the articles of
I
In smarel, - were given to the Sentr's regure-
sentatives w Name: 261, Milline and Balance that the articles of
association muld be the well ml enstomery articles and would
not departs tra the entimery practice which muld be employed
in mooking or statlar situation with my other bank. This -
agreesble all areas, and 11 we understand the after the
Treasury had format the request to - espital to the are,
a I a E I I 1 I $
faitlate discression a this point.
I
them
s
I
the
in
I
1
I
I
an
1
8
1
I
I
$
I
I
I
1
I
to
I
no
the
I
I
is
I
I
I
I
in
I
-
I
I
I
Regraded Unclassified
62
Items s(a) and s(b) the proseders to be fallowed
in setting - charges against the unallocated resure of $6,980,000
provided for in item tm. The Bank asked for - change and a
interprotative valing w to the prostice to to followed in we
sizing the valuation of the bank premises herein involved. m.
Classini requested that consideration be given w monthing the
provision of 5(b) to permit M appeal to the Comptrollar from the
findings of the proposed condition. n - pointed m to m.
and his associates that while there we no objection
should he really desire such a - that this would again
place the matter in the hands of the Comptraller without courting
for the Bank a binding desision of a beend which instruted -
sentatives of the Federal Receive and the van. After -
debate Mr. Classini and his atterneys agreed that they would
prefer to accept the language as drewn and penis a declarem of
the najurity of the nambers of the currittee to be Mating without
I Mila 8 1
I I 1 B É I I I a
and w a request that the condition should be appointed - start
to function imediately, with the understanding that my of the
findings which were complete could be taken date consideration
the the mallecated reserve - ⑉ w after obtaining the Bank's
- expital. 2m other words, the condition provided for in s(a)
1 1 an June $ B и 1 1 1 Instituter 1
- the - capital decision had bom reached as to the
Regraded Unclassified
63
wite-sffs that should be taben in the case of my of the bank
premises under discussion the - of the mallorated Nom
should be adjusted in covertance with the sundition's findings.
IN, I 1 I I I I de emmittee i
start imediately, and furthermers that the wallcomented recerve,
when net me, could be adjusted in accurdance with the condition's
interin findings, provided always is - underwtood that the -
allocated reserve should not only be returnd in - the connittee
found for the Bank in my particular case but also attend be in-
creased whenever the comittee decided that my sharge-off as not
" by the under - insufficient.
there wes extranded debate conserning the six and -
as Mr. Mannini was foreed to leave to eatch de plane it m agreed
that further discussion conserning this item should be pet -
THE I 1 + a i I elgented
to the use of the word "sbligations" Americad of "Lass" throughout
this item and also to the direct limitation of them obligations
to Transamaries Corporation and its misidiaries to 2015 of the
Denk's capital and surplas w July 15, 1942. IB was arged w
them that this provision was in conflist with item three providing
that the contracto of California Lands, Ins., and Capital Company
should be eliminated by Recember 15, 1943. Mr. diamini we of
the opinion that there THE certain statubery compliens to this
limitation of 30% which was very important and which instated
Regraded Unclassified
64
+
- ------
Regraded Unclassified
65
Final Draft - 2
March 1, 1940
REQUIREMENTS OF THE
COMPTROLLER OF THE CURRENCY
1. is soon as possible, and in any event not later than June 30, 1940,
the Bank shall add $30,000,000 of additional capital funds by the
issuance of common or preferred stock, or both, with the understanding
that by April 1, 1940 the Board of directors of the bank will approve
the entire program herein outlined and the bank will obtain the
approval of the Comptroller of the Currency to such increase. A
commitment from the RFC to purchase preferred stock in the amount
of $30,000,000 shall be obtained prior to April 1, 1940, and if
proferred stock is to be sold, an agreement with the Comptroller of
the Currency upon the terms of the amendments to the articles of
association shall be reached by April 1, 1940.
2. Immediately upon obtaining the new capital the Bank shall set up
an unallocated reserve of $6,900,000.
3. The Bank shall obtain additional security satisfactory to the
Comptroller to secure the contracts of California Lands, Inc.,
and Capital Company with the Bank, and the contracts of Capital
Company with Merchants National Realty Corporation. Such
additional security shall be in an amount equal in value to the
difference between the unpaid purchase price upon such contracts
and the value of the property therennder, as such value appears
in the schedule contained in the report of examination begun
August 31, 1939. All of such contracts shall be eliminated
66
from the assets of the Bank and Merchants National Realty Corporation
by December 15, 1943.
4. All premiums on bonds in the Bank's investment portfolio shall be
amortimed out of current earnings (other than bond profits) to
maturity, or to call date, if any, and amortisation previously reserved
on bonds sold at book value or higher my be returned to the undivided
profits account. Current bond profits shall be used to take care of
current losses, and any bond profits not so used shall be passed to
a reserve for losses of any character until in the opinion of the
Comptroller such reserve is adequate. However, this reserve for
losses, plus the amortisation reserve, need not exceed the total
premium account.
5(a) The Bank shall, as soon as possible, furnish to a committee composed
of the Vice President in Charge of Examinations of the Federal
Reserve Bank of San Francisco, or some officer of the bank designated
by him, the Supervising Examiner of the Federal Deposit Insurance
Corporation for the Twelfth Federal Reserve District, and the Chief
National Bank Examiner for the Twelfth Federal Reserve District,
all obtainable records and information with respect to the acquisi-
tion of each banking premise criticised in the report of examination
of August 31, 1939, including those shown on the Bank's books and in
its investment in Merchants National Realty Corporation, dating back
to the time such premise was acquired either by the Bank of America
or any member (either bank or company) of the group presently or
then comprising the Transamerios organisation.
67
-3- -
(b) The committee shall consider the fair value of each premise at the
time of such acquisition, and the special conditions which had to
be net in fixing the price paid. From these considerations, the
committee shall determine the amount which shall be used by the
committee as the estimated cost amount of each premise to the Bank.
The value of each premise shall than be established at such
estimated cost amount, plus the amount of any expenditures sub-
sequent to acquisition found by the committee to have been appro-
priately capitalized less the appropriate amount of depreciation
at the depreciation rate allowed by the Bureau of Internal Revenue
for each year of ownership. The unallocated reserve set up by
the Bank shall be reduced by the difference between the present
carrying value of each such premise and the value of such premise
as determined by the committee in the manner hereinabove stated.
The decision of a majority of the members of the committee shall
be binding. The remainder of such reserve, if any, may be re-
turned to the undivided profits account.
6. The aggregate amount of obligations of Transamerica and its sub-
sidiaries to the Bank will be brought within the limitation of
ten per cent of the Bank's combined capital and surplus by July
15, 1942. Any existing obligations of Transamerica or its
affiliates or its subsidiaries will be eliminated by July 15,
1945.
68
- 4 -
As long as the Bank of America is deemed to be affiliated with
Transamerica, any obligation of Transamerica or any of its affiliates
or subsidiaries will be in strict conformity with the Statutes
governing loans to affiliates. No new loans will be made secured
by the stock of the affiliates or subsidiaries of Transamerica.
The Bank reserves the right to accept Transamerica shares as security
for small loans to its customers for business purposes where the
borrower demonstrates a capacity to liquidate the loan otherwise
than through the sale of such shares. No speculative loans will
be made on the security of such shares.
7. The Bank shall eliminate the amount of investment in stock under
option on the basis of the program now in effect.
8. The Bank shall give vigorous attention to the elimination or correc-
tion of any real estate holdings or real estate loans that may not
conform to statutory requirements.
9. The Bank shall initiate steps to ascertain whether it is entitled to
recover any part of the sums paid by the Bank to Transamerica General
Corporation in connection with fidelity losses, and if it is con-
cluded the Bank is entitled to recover, it shall take steps to
recover the same.
This memorandum is submitted without prejudice to the right
to require full and complete compliance with the Comptroller's
criticisms and suggestions, to resort to sanctions provided by law,
Regraded Unclassified
69
- 5 -
or to continue to list in reports of examination assets that are
subject to criticism, until such criticisms have been corrected
or eliminated. Neither this memorandum nor its contents shall
be used by the Bank or anyone else on its behalf without the
consent of the Comptroller for any purpose except for its
information, unless and until the provisions hereof are accepted
and complied with by the Bank.
March 1, 1940
70
- no1
I If . I
B . I
1. is - - persible, at in m - mt Inter - Im 20 - the
bank chall all $30,000,000 of additional capital fats to the Annual
of - w proferred stock, w bell, - the - w
April $ the burd of directors of the back will - the attre -
- borein outlined el the both will obtain the approval of the -
trailer of the Currency to no - A am - -
to perchase proferred stude to the - of $30,000,000 stall to
obtained yother to April 20 at if proferred stock is w to onli, a -
and with the Comptrallar of the - - - - of to -
to the orticles of accordation shall be resched w April 1.
20 Imstintely - obtaining - - capital the back stall m 1 -
mallosated resure of $6,900,000.
30 the bank shall debute additional monthly, to a Comptroller,
I 1 / I s a 1 I 8 I
with the back, at the of Capital - de &
times. healty Corporation. Mark additional colleteral shall to in a
- to mine to the difference betrem the ungaid purchase goten
1 I I I a Y a I 1 the a 19
win - to the in - report of -
began August n, 1939. All of 1 shall be eliminated from
the assote of the balk el Reality Corporation w
December 15, 1943.
Regraded Unclassified
71
he All premiums on bonds in the bank's investment portfelio shall be anortined
out of current earnings (other then bond profits) to mturity,ar to call
date, if any, and amortisation previously reserved on bonds sold at book
value or higher try be returned to the antivided profits account. Current
bond profits shall be used to take care of current losses, and my bond
profits not so used shall be passed to a reserve for losses of my character
until such reserve equals the mount of the premium account.
5. (a) The bank shall, as soon as possible, furnish to a committee composed
of the Vice President in Charge of Examinations of the Federal Reserve
Bank of 8am Francisco, or some officer of the bank designated by him,
the Supervising Examiner of the Federal Deposit Insurance Corporation for
the Twelfth Federal Reserve District, and the Chief National Bank-Examiner
for the Twelfth Federal Reserve District, all obtainable records and
information with respect to the acquisition of each banking predue criti-
cised in the report of examination of August 3, 1939, including these
shown on the bank's books and in its investment in Merchants National
Realty Corporation, dating beck to the time such premise was soquired
either by the Bank of America or my number (either bank e company) of
the group presently or them comprising the Transamerica organisation.
(b) The committee shall consider the fair value of each predse at the
time of such soquisition, and the special conditions which had to be net
in fixing the price paid. From these considerations, the committee shall
determine the momt which shall be used by the comdittee as the estimated
cost mount of each premise to the bank. The value of each premise
Regraded Unclassified
72
chall the be established at no estimated ml - plane the -
i I s I I 2 a 8 I s If
- born appropriately capitalized, Loss the appropriate - of deposit
detion at - depresiation - allowed by - Increase of Internal
- for each your of overship. the unalloosted receive ast up w the
back chall be reduced w the difference between the present earrying who
1 a 1 s 1 1 1 I I 1 B r a 3
comitities in the - hereinations stated. - decision of a majority
1 r I a 2 i a I i s 1 s 8
I as I a s I s I If f I
6. the aggragate - of obligations of Transuries at its additional
to the task will be within the lisitation of too pm out of the
2947, I $ IN 1 t n i 1 1
obligations of Transuria w its affiliates w its will
be climinated to July 15, 1945.
is 2mg as the Back of interies so documed w be affiliated with -
emerica, up obligation of w my of the affiliates w -
otheries will be in strict enformity with the Statutes governing lame
a 8 1 w a 1 1 TIP n 3 I 1 2 $
affiliates - of
I I I 3 1 s a a 1 I
I a for I e a I I 1 I and s
a capacity to liquidate the less otherwise - through the
73
mis of 1 - b questive Issue will be - e the
I 1 % 1
1 # % 1 1 I Я a 1 I w I
a the busis of the program - in offect,
& the bank shall give vigarens attention to the clinimation or correction
of any real estate beldings or real estate Issue that my not enterned
1 I 3
n the back shall initiate stops to assuriate whather 16 to catitied to
receiver my part of the - paid w the back to transferios -
Corporation to emetime with fidality Issue, el if $9 so emaluded
a The 1 as a I 1 I s s 3 I I I
This - is submitted without projection to the right
to require full mi emplote empliements with the Comptraller's atticles
and expections, to resert to emetime provided w # to entime
to 2108 is reports of emission - that - mijost to within,
will mish criticions have been corrected w Bolther this
de 1 A a I 2 e 1 I I and # I
the behalf without the ement of the Comptraller, for my payment -
the its information, wine at until w provisions bured ⑉ compted
et complied with w the bank.
New 4 1949
74
5. Any loans to Transamerica or its affiliates or its subsidiaries
that may not conform to statubory requirements will be brought
into conformity by July 15, 1942. Any existing loans to
Transamerica or to its affiliates or subsidiaries will be
eliminated by July 15, 1945, and my new loans to Transamerica or
to any of its affiliates or subsidiaries will be made in strict
conformity with and secured as required by statute, and 80 long
as the Bank of America may be deemed to be affiliates with
Transamerica, no new loans will be mde secured by the stock of
affiliates or subsidiaries of Transamerica.
The Bank reserves
the right to accept Transamerica shares as security for small loans
to its customers for business purposes where the borrower demonstrates
a capacity to liquidate the loan otherwise than through the sale of
such shares. No speculative loans will be made on the security
of such shares.
Note: Above was dictated by Mr. Eccles
during the meeting in the Comptroller's
office on February 28, 1940, and the
principle received general approval
although it was agreed that the Language
would have to be slightly changed.
Regraded Unclassified
$
Regraded Unclassified
76
Abtomied bys Under Secretary of the Treasury Ball
Bestles of the Pederal Reserve Board
- of the Federal Interve Board
I the r mi : á 5
I % s I
Parks of d 1 I é
1 I s si 1 oz
I 1 1 will s of Impries
- Gooking epened the mouting by stating that the Bank
destrad to INSURE - imberprobation of several theme in the proposed
agreement which had been net to them and further explanation of its
i 1 I 1 a I I e I 8
of potuto -
there - early disagrount - the question of preferred
storit, the Bank shjesting to the prevision that mush stock must be sold
at par and returns as per - they obviewing desired to sell at a pre-
du - - a partien into surgine. n - agreed that both the
mothed of - - 532 details conserving the - should be left
to the - the Bank to take those natiors - direct with the RFC.
In the nation of - articles of association, which still N°
askas a responsibility of the office of the Comptealler, -
- give the Bank that there would be as unual of exprisions
provisions repirate
Item a - the Bank - willing to leave the determination
as w the refertion to coveying value of bank premises to the judgest
Regraded Unclassified
77
of the Chief National Bank of the Tealfth Federal Reserve
District but destred that & formals be devised to guide bdas is
midding that judgems.
Mark and Brothells of the
Federal Isserve Board, Felger and billrency of the Comptroller's
office, and Laymen and theirmayer of the Bank efminories were
delegated 6 committee to draft this formis. They worked wall
into the ovening in - attempt to reach - agreement and resembled
the following norning to estima the drafting of wish & formle.
Item , - The word "sellateral" W changed to "decurity".
Item 4 - There was attended debate, particularly in the
afternoon session which - held in the Comptroller's office end
at which vare presents
Chairman Recles of the Federal Isserve Board
General Melice of the Federal Receive Board
Chairman Creeley of the 7. D. I. c.
1. N. Boymour, Commonl for the Comptroller's office
Compereller of the Currency Dalame
L. M. Giamini, President, Bank of Amries
0. K. Cushing, Common, Bank of America
L. M. Ferrari, Counsel, Bank of incries
There use agreement that any amertisation which had been
set aside against bonds purchased at & prede and later sold at &
profit should be recaptured and returned to current earnings. There
was no agreement on the proposal of the Bank that the retirement of
preferred stock as well M the dividents thereon should be payable
out of the reserve not up in Stem 4a
Regraded Unclassified
Regraded Unclassified
79
20
postible, a a 1 2 I 1 1 I ! 1940, deposit 2
the bank shall oil $30,000,000 of additional capital funds by the
issumes of - w proferred stock, or both, with the -
standing that by April 1 the board of directors of the bank will
approve the entire progrem herein outlined and the bank will
ebtain the approval of the Comptrallar of the Currency to such
increase. any proferred steck sald mark be issuable at per at
be retirable at par. A comitant from the RFC to purchase
proferred stock in the - of $30,000,000 must be obtained
prier to April 1, and if preferred steek is to be sold, m
agreement with the Comptroller of the Currency upon the terms
of the mentaints to the articles of association must be reached
by April 1.
20
Imediately upon obtaining the MF capital the bank shall ml w a
wallecated reserve of $6,900,000 against the carrying value of
individual completed hanking premises critical in the report of
examination of August 31, 1930, including these dem a the
bank's books and in its investment in Marchante National Realty
Corporation. Within ⑉ year after this reserve is net up it
shall be used to redute the earrying values of such banklag
produces e the carrying value of the bank's investment in
National Realty Corporation, as the case may ha, to
the extents determined w the Chief National Bask Indo of the
Twelfth Federal Reserve Ristrict, and for the purpose of saking
that determination the bank agrees to furnish to mak Chief
80
Instruct all information and reserds respecting seld bunking produce
which my be requested by kin. The resister of mach reserve, if
my, my be returned to the undivided profits 1
30 The bank shall obtain additional collateral, satisfactory to the
Comptraller, to secure the emizacts of California Landa, Dis., and
Cepital Company with the bank, and the contrasts of Capital Company
with Marchants National Realty Corporation. Such additional
cellateral shall be in - - equal in value to t be difference
between the unpaid purchase price upon mah contracts and the value
of the property theremder, as such value appears in the scholule
contained in the report of examination began August 31, 1939. All
of such contrasts shall be eliminated from the assets of the bank
and Norchants National Realty Corporation by Recember 15, 1943.
40 All bonds in the bank's investment partfolio shall be markinst
out of current earnings (ether than hand profits) to extradity, -
to call date. Current heads profits shall be used to take care
of current leases, and any hand prefite net ao used shall to
passed to a reserve the lesses of my character until such reserve
is adequate in the Julgmant of the Comptroller of the Currency.
50 Leans to Transmerica Corporation and its allied interests net
otherwise provided for herein shall be brought within the legal
limit allowed to one interest, as seen as possible and not later
than July 15, 1942. the steek of Transumerica or my of its
Regraded Unclassified
81
allied Interesto couring I of Transmerios or my of the elited
interests shall be climinated w any 25, 1045, and - of
THE I 1 1 2 I I I r
1 1 a B any a I Y I I a
transmerios stock shall be disconsimed, at - collsteral value
1111 2 3 payment 1 1 I I I s I
1 law. b the 1 If
s 1 1 distante a a I I y a I il
option a the basis of the paper - in effect.
% The bank shall give vigime attention to the elimination or -
time of my real estate holdings e real estate lease the my ml
2 I I I
& the bank shall initiate stops to bother is to entitled to
, des 1 1 r il $ I a I 1 to I
Corporation in competion with fidelity I and if it is contlaint
the bank 10 entitled to recever, 19 shall take stope to zonsver the
1
This member is submitted without projection to the right to require full
at complete complimes with the Comptroller's criticians and mygestions,
to reart to smoking provided by 1m, R to esatime to list importe
of conduction assets that an subject to criticien, will -
have been currented of eliminated. Neither this - me the
- shall be used by the bank e expens also a its behalf without
the - of the Comptroller, the any purpose amount for the information,
J 1 # 1 I 1 ] 1 die I &
, de 1
Polevery 23b 2049
Regraded Unclassified
sen
+
-
was
83
E
f 2040
I all d á
I 1 1 of I 1
Sevings Association,
time Francisco, California.
my dear Mr.
progrates states I 1 H E
to the position haretofure taken w this office, a
statement of minimum requirements for the correction
of conditions in the Bank America National Trust
and Surdage Association which met be complied with
w the -
This statement of sistem requirements
Ims been agreed - by the Hard of Coverners of the
Federal Insure System, the Federal Deposit Insurance
Corporation and the Treasury Department. If an
adjustment of the differences betwom the Bank and
this office is to be made, is must be nade premptly
upon the $ - not forth in this statement.
I I É
COMPTROLLER w THE current
I for s Proveded
a/o Mayflower
Backington, D.C.
Regraded Unclassified
84
Policy as, -
w m
OF THE surneot
10 M seen as pensible, and is my - not later then - 2. - the
- shall old $30,000,000 of additional capital from by - Issues
of - or proferred steek, w both, with the unformienting the w
April 1 the board of directors of the task will approve - cutize yrs
- herets outlined and the back will obtain the approval of the Comp-
treller of the Currency to such increase. - proferred stock outd
must be iscuable at per and be returable of yours A consiterent from the
IFC w parchase preferred abook in the - of $50,000,000 - be
obtained prior to April so and if proferred abook to to to call, on
agreement we the comptroller of the Currency upon the - of the
ensuluents to the crticles of association met w reached by April 2.
& upon obtaining the - capital the bank shall not up a
mallocated reserve of $6,900,000 against the purrying value of in-
dividual compled banking prenises criticies is the repart of -
instion of August 32, 2939g including these alsows - the bank's bests
and is its investment in National Realty Curporation, -
is - year after this receive to not - 10 shall w used w return
the carrying values of such banking presises w the eurrying value
I 1 I s # i $ I s I
I 1 I a a z I 1 k $ a I I
Reminer of the Twifth Federal Becarve Notricts and to the purpose
of nableg that determination the bonk agrees to furnish w such thief
Regraded Unclassified
85
- I -
Imminer all information and records respecting said benking proud.com
which my be requested by hime the resainer of such reserve, if eny,
my be returned w the undivided profits account.
3. the bank shall obtain additional cellateral, satisfactory to the -
treller, to scoure the contracts of California Lands, Inc. and Capital
Company with the bank, and the contracto of Capital Company with Merchants
National Realty Corporation. Such additional collateral shall to in an
amount equal is value to the difference between the unpaid purchase price
upon such contracts and the value of the property theremfer, as mah
value appears in the schedule contained in the report of expaination
begun August 31, 1939, All of cush contracts shall be eliminated from
the assets of the bank and Norehants National Bealty Corporation by
December 15, 1943.
4. All bonds in the bank's investment pertfolio shall be markised out of
oursest carnifige (ether than bond profits) to naturity, or to call date.
Current boad profits shall be used to take care of current lessee, and
my bond profits not as used shall be passed to a receive for lesses of
my character until such receive is adoquato in the judgeon's of the
Comptreller of the Currency,
5. Lease to Transamerios Corporation and its allied interests net otherwise
provided for herein shall be brought within the legal limit allowed to
one interest, w com as possible and net later - July 15, 1942. the
stock of w my of its allied interests securing 1 of
Regraded Unclassified
86
- ,
transmerion w my of its allied latervate shall be eliminated by
July 150 1965, end M piedge of such stock shall w accepted.
Purther extensions of credit w the best to - purpose of purchastog
w earrying Transmistion stock shall to discontimed, of m colleteral
value shall be nesigned to my with stock hereifter pladged w -
$ B 1 1 in I
4. the bank shall clininate the - of investment in atock under option
- the basts of the program - in offect.
To the bank shall give vigerens attention w the elimination w currection
of my real estate holdings w real estate Some that my not endern
to statubery requirements.
& the bank shall initiate stops to assertain whether it to catitled to
receive any part of the - paid by the bank w transmeries General
Corporation is commention with fidelity and if at so consluded
the bank is entitled to receive, 10 stall take abope to reserver the -
This is submitted without projedice to the right
to require fall and complete empliance with - Comptraller's criticious
and ouggestions, w recert to constitue provided by 1000 w to continue
to list in reports of commination casete that are subject to critician,
untill mah criticisms here been currected w eliminated. Nother this
membership not its contants shall be used by the benit w - class en
its behalf without the consent of the Comptroller, for my purpose -
cops for its information, unless and untill the provisions herest -
accepted and complied with w the tomito
Regraded Unclassified
87
COPY
February 26, 1940
Mr. Chester Marrill, Secretary,
Board of Governors,
Federal Reserve System,
Washington, D.C.
Door Mr. Marrill:
I have received your letter of February 26, 1940,
melesing a copy of the resolution adopted by the Board on
February 24+
In view of the second paragraph of the resolution,
I wish to confirm By understanting with Chadress Recles
are the telephone today that if, for my reason, is should
Unit lass 8 the endose I $ I
the requirement of $6,900,000 in paragraph (2) of the
statement of requirements, this office reserves the right
to insist upon $35,000,000 in lieu of $30,000,000 as stated
in paragraph (1) of the requirements. If $35,000,000
is insisted upon, under these circumstances, we promo w
shall have the support of your Heard in that regard,
Very sincerely yours,
Comptreller of the Currency
Regraded Unclassified
88
COPY
COPY
BOARD OF GOMERNORS
of the
FEDERAL RESERVE SYSTEM
February 26, 1940
Honorable Preston Delano
Comptroller of the Currency
Washington, D. C.
Dear Mr. Delano:
Chairman Eccles asked
me this morning to send you a copy of the
resolution which the Board adopted during its
meeting on Saturday and I am attaching one
herewith in the form as it was written up at
the time of the Board's action.
Very truly yours,
3/d Chester Morrill
Chester Morrill
Enclosure
Secretary
Regraded
89
the Hund authorises the to join with
the representatives of the Federal Supends Insurance Corporation,
the treasury, and the Comptete/Lear of the Currency is agreeding -
the proposed requirements d the Comptemiller of the - and
I I I a I s I a I e
8 I I I # I If
advise the Compteroller of the - that the - feds -
the proposed requirements should - be allowed to fail to -
the Bank of America to unilling to agree to the repirement rep of
$6,900,000 in paragraph (2)s - to willing to anough a require-
- of - other 1 in lien thereof which se net less
them $5,000,000.
Da connection with Made action, the Beard understands
that if the representatives of these agencies should agree -
any material motification of the Comptroller's requirements
the matter will be bank to the hard for forther mail-
I
I I I
--
Regraded Unclassified
90
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON
February 26, 1940
Hon. Preston Delane
Comptroller of the Currency
Washington, D. c.
Dear Sir:
I wish to seknowledge a copy of your proposal
to be submitted to the Bank of America National Trust and
Savings Association, San Francisco, California, with respect
to certain of the bank's problems.
The propesal este forth the requirements for
correction which have been developed after & series of -
forences in which I participated, and with which I a in
accord. This matter has been considered also by my semeistes
in the Federal Deposit Insurance Corporation and 11 mosts
with their approval.
If the bank will take stops to meet these
requirements is a proper spirit, I believe that substantial
improvement in its condition will result.
Very truly years,
a/a
Las T. Crewley
Lee To Creeley
Chairesn
Regraded Unclassified
91
COPE
COPY
February 26, 1940
Homerable Leo To Crossey, Chairman,
Federal Deposit Insurance Corporation
Washington, D. Co
By dear Mr. Chairmans
an accordance with - conversation
over the telephone this merning, I hand you
herewith my of alletter with the enclosure
which was delivered to Mr. L. No Ciamini this
meening at the May flower Metcl.
Very sincerely yours,
Presten Delime
Regraded Unclassified
92
Poternary m,
Honorable Marrinor s.
Chairman, hard of Government,
Federal Reserve System,
Washington, D.C.
/ I any à
a i I I I I
the telephone this morning, I hand you herewith copy
of a letter with the entlosure which - delivered
to Mr. L. M. Gismini this marning as the Neyther
Motal.
1 I [
Prosten balane
Regraded Unclassified
nimbe
AND
-
3
X
many -
94
Regraded Unclassified
REPORT OF CONFERENCE HED IN E. BELL'S OFFICE
FRIDAY FEBRUARY 23 1940
These in attendance were Numers. Makeo, Issues and Draibalbis from the
Federal Reserve Beard, Mr. Crealey free the Federal Deposit Insurance
Corporation, Messrs. Ball, Saymer and Shartenty, and Messro. Daleno,
Uphon, Folger and Malremay.
The program drafted by the office of the Comptroller of the
Currency as of February 22, 1940 and the program of the Federal Reserve
Board dated February 23, 1940 were dismassed. Capies of these program
are attached herets. In Item 1 the empust of - capital was reduced
from $35,000,000 to $30,000,000. The meaning thereof was clarified,
and aention of specific matters to be included in the articles of
association were aminded. In item 2, the mount of the reserve was
reduced to $6,900,000. Changes of item 3, 5 and 8 were made in the
language only, having DO material effect on the substance thereof.
During the meeting, Mr. Makes ebjected quite stremously to
the inclusion of the figure of $6,900,000, stating be had agreed to a
reserve in the - of $5,000,000. Mr. Recles admitted that the figure
of $6,900,000 odd eriginated in the Federal Reserve Board, and be was
therefore procluded from making the - objections as voiced by Mr.
McKee. There was apparently, except for the objection voiced by Mr.
McKee, an agreement as to the substance of the final draft of the
program, and after the meeting Mossrs. Draibelhis, Saymour, Felger,
Upham, Williams, NoLeen and Mulroney prepared the final draft dated
February 23, 1940, a copy of which is attached. Mr. Draibelbie took
several copies with him, and cepies were given to Mossrs. Sharbondy,
Bell, and - copy was sent to Mr. Crewley.
95
15, 1940
ENQUIREMENTS or THE COMPTECELLE
OF THE GURRENCY
20 w - as provible, and in my - not later - - 10 200mg -
- shall old $50,000,000 of additional capital fants w the Insurance
of - w proferred steak, w both, with the understanding - by
April 1 the beard of directore of the bask will approve the catize proo
gren herein outlined and the bank will obtain the approval of - Campo
treller of the Currency to such increase. my proferred stock said
must be issuble at per and be retirable at par. A consitment from the
RPC to purchase proferred abook in the - of $50,000,000.xet - be
obtained guier to April 20 and if proferred stock to to be cold, -
agreement with the Comptealler of the Currency upon the terms of the
associate to the articles of association - be reashed by April 1.
a. Imediately upon obtaining the new capital the bank shall not w as
mallecated receive of $6,900,000 against the (terying value of in-
dividesl occupied benking premise criticised to the report of -
instion of Ingre's 31, 1999. including these about an the bank's been
end is its invostment in Harehants National Realty corporation. -
is - your after this receive is est up 10 shall to used to retuce
the carrying values of such banking premises w the currying value
of the bank's Lurrestment in Norchante National Realty Corporation, as
the - my w, to the carbon determined by the Chief National foot
of the Twifth Federal Incorvo Districts and for the purpose
I 1 s s 1 I $ I % I 1
Regraded Unclassified
96
2 -
transfer all information and recerds respecting code building produces
which my be requested by Mane the respinder of - I if my,
my be returned to the undivided prodite account.
30 the bank shall obtain additional colleteral, to the -
treller, to secure the contracts of California Lande, Inter and capital
Company with the bank, ml the contracts of Capital Company with Marchante
National Realty Corporation, Bush additional collatoral shall be is a
movet equal is value to the difference between the unpoid purchase price
upon own's emirate and the value of the property theremater, as math
value appeare is the schedule contained in the report of manication
began August 31, 1999, All of outh contrasts chall be eliminated from
the assets of the bank and Nerchante National Realty Corporation by
December 15, 2943.
he All bends is the bank's investment pertfulio shall be anartiend on of
current certifies (ather than bend profite) to naturity, of to call date.
Current beat profite shall be used w take on of current Income, and
my bend profits net # used shall be persod to 6 receive for Issues of
any character until such receive Le elequate in the julgets of the
Comptrellor of the currency.
50 Lease to transmories Corporation 1 the allied Interests not otherwise
provided for herein shall be brought within the Zegal limit allowed to
one internet, as com as pensible one - later wills July 25, - the
stock of transmerios w my of its allied interests covering Issue of
Regraded Unclassified
97
3 -
transmerios w any of its allied Internate shall be chiminated -
July 15, 1945, and - pårdge of outh stock shall hereafter be accepted.
Purther extensions of credit by the benis for the purpose of purchasing
or carrying Transmortes stock shall be discontinued, of - colleteral
value shall be assigned to my math stock hereifter plodged to -
my lean made by the bank,
6. the bank shall eliminate the - of investment in stock - option
a the basis of the program - in effect.
7. the bank shall give vigerous attention to the elimination w correction
of my real estate holdings w real estato Income that my net ensform
to statutery requirements.
0. the bank stall initiate stops to accordain whether 14 to entitled to
receive my part of the - paid by the bank to transmories General
Corporation is commention with fidelity leases, and If 10 Le consluied
the back is cutitled to receive, it shall - stops to - the -
This amerentes to submitted without projudice to the right
to require fall and complete compliance with the Congtroller's criticisms
and ouggestions, to recort w constions provided w 100, w w continue
to list in reports of essabletion assote that are subject to within,
until cash criticisms have been envested or eliminated. Mother this
membership MP its contents chall be used by the bank w - also #
its behalf without the consent of the Comptraller, for my purpose -
copt the its information, whose and with the previsions heread -
assopted and complied with by the -
Regraded Unclassified
98
REQUIREMENTS OF THE COMPTROLLER
OF THE CURRENCY
1940
1. is soon as possible, and in any event not later than June 36 the bank
shall add $35,000,000 of additional capital stock by the incumence of
common or preferred stock, or both, with the understanding that by
April 1 the board of directors of the bank will have approved the
entire program herein outlined and the bank will have obtained the
approval of the Comptroller of the Currency to such increase. In the
event that any part of said increase is to be obtained by the sale of
preferred stock to the RFC, a commitment from the AFC, on such terms
as the Secretary of the Treasury will request the RFC to purchase such
stock, must be obtained, and an agreement with the RFC and the Comptroller
of the Currency upon the terms of the amendments to the articles of
association, including its terms governing the disposition of earnings,
retirement of preferred stock (including a provision that this will only
be done with the consent of the Comptroller), etc., mut be had by April 1.
2. Immediately upon obtaining the new capital, the bank shall set up an
unallocated reserve of 06,926,845.36 against the carrying value of
individual occupied banking premises criticised in the report of examine-
tion of August n, 1939, including those shown on the bank's books and
in its investment in Merchants National Realty Corporation. At the end
of cas year this reserve shall be used to reduce the carrying values
of such banking premises or the carrying value of the bank's investment
in Herebanks National Realty Corporation, as the case may be, to the
Regraded Unclassified
99
- 2 -
extent determined w the Chief National Bank Examiner of the Twelfth
Federal Reserve Districts and for the purpose of making this deteral-
nation the bank agrees to furnish to such Chief Examiner all information
and records respecting said banking premises which may be requested by
his. The remainder of such reserve, if any, may be returned to the
undivided profits account.
3. The bank shell obtain additional collateral, satisfactory to the Coup-
troller, to secure the contracts of California Lands, Inc., and Capital
Company with the bank, and the contracts of Capital Company with Merchants
National Realty Corporation. Such additional collateral shall be in an
amount equal in value to the difference between the unpaid purchase price
upon such contracts and the value of the property therounder, 48 such
value appears in the schedule contained in the report of examination
begun August 31, 1939. ALL of such contracts shall be eliminated from
the bank's assets by December 15, 1943.
4. All bonds in the bank's investment portfelio shall be amortised out of
current earnings (other than bond profits) to naturity, or to call date
if callable sconer. Current bond profits shall be used to take care of
current losses, and any bond profits not so used shall be passed to a
reserve for lesses of any character until such reserve is adequate in the
judgment of the Comptreller of the Currency.
Regraded Unclassified
100
- , -
50 The bank shall continue the program of liquidation now is offect with
regard to the consitments of Transenceries and its allied interests.
The stock of any allied interests of Transomerica securing Loans of from-
america or any of its allied interests shall to eliminated by day 15,
1945, and no sinilar pledge shall hereafter be accepted. No collateral
for the consitments of Transamerion and its allied interests shall be
withdrawn from the bank without payment to the bank of & - equal to
the value of meh collsteral on account of such commitments) nor shall
substitutions of changes of collateral be made which reduce the value of
the collateral securing any and commitments. Purther extensions of credit
by the bank for the purpose of purchasing or currying Transamerion stock
shall be discontimed, and no collateral value shall be assigned to any
such stock hereafter pledged to secure city Loan made by the bank.
6. The bank shall eliminate the amount of investment in stock under option
on the basis of the program nov in effect.
7. The bank shall give vigerous attention to the elimination or correction
of any real estate holdings or real estate leans that my net conform
to statutery requirements.
6, The bank shall initiate stops, antisfactory to the Comptroller, to ASSIE-
tain whether 12 is entitled to reserer any part of the - paid w the
bank to Transamerion General Corporation in commention with fidelity
Lesses, and if 11 is concluded the bank is extitled to recover, " small
Regraded Unclassified
101
- 4 -
take steps, satisfactory to the Comptroller, to recever the same.
This manorandum 10 submitted without projudice to the right
1
to require full and complete compliance with the Comptroller's criticisms
and suggestions, to resert to sametions provided by law, or to contimue to
list in reports of examination assets that are subject to criticism, until
such criticisms have been corrected or eliminated. Neither this memorandum
nor its contents shall be used by the bank or anyone also on its behalf
without the consent of the Comptreller, for any purpose except for its
information, unless and until the provisions hereof are accepted and -
plied with by the bank.
JEL221940
Regraded Unclassified
2-23-40
Confidential
REQUIREMENTS or THE COMPTROLLER OF THE CURRENT
102
Regraded Unclassified
1. as - M passible, and in my event not later them June 1, the bank
shall add $35,000,000 of additional capital stock by the issumes of
- or preferred steck, w both, with the understanding that w
April 1 the beard of directors of the bank will have approved the entire
program herein outlined and the bank will have obtained the approval of
the Comptroller of the Currency to each increase. In the event that my
part of said increase is to be obtained by the male of preferred stock
to the RFC, & commitment from the RFC, en much terms as the Secretary
of the Treasury will request the RFC to purchase such stock, must be
obtained, and an agreement with the RFC and the Comptroller of the
Ourrency upon the terms of the medemts to the articles of associa-
tien must be had by April 1.
2. Impliately upon obtaining the new capital, the bank shall set up 80
mallecated reserve of $6,926,845.36 against the carrying value of
individual occupied banking predses criticised in the report of -
instion of August n, 1939, including those shown en the bank's backs
and in its investment in Merchants National Realty Corporation. n
the end of one year this reserve shall be used to reduce the carrying
values of such banking premises or the carrying value of the bank's
investment in Merchants National Realty Corporation, as the case my
be, to the extent determined by the Chief National Bank Insurer of
the Twelfth Federal Reserve District) and for the purpose of saking
that determination the bank agrees to fernish to such Chief Readner
n information and reserds respecting said banking prendses which
may be requested by him. The reminder of such eserve, if my, my
be returned to the undivided profits nocount.
103
20 The bank shall obtain additional sellateral, satisfactory to the
Compareller, to secure the contracts of California Landa, Inc., and
Capital Company with the bank, and the contracts of Capital Company
with Marchants National Realty Corporation. Bash additional
cellateral shall be in a arms equal in value to the difference
between the unpaid purchase price upon such contracts and the value
of the property thereunder, as such value appears in the schedule
contained in the report of examination begun August 31, 1939. All
of such combracts shall be eliminated freathe assets of the bank
and Merchants National Realty Corporation by December 15, 1945,
the reduction in all of much contrasts to be net less then $4,000,000
in my one year.
4. All bonds in the bank's investment partelis shall be mortined est of
current earnings(ether than band prefits) to naturity, or to call date
if callable demer. Current beat profits shall be used to take care
of current lesses, and my bond profite net ao wed shall be passed
to a reserve for lesses of my darecter until such , eserve is
adequate in the julgat of the Comptroller of the Gurrenay,
50 the stock of my allied interest of Transmeries securing leans of
Transmerica or any of its allied interest shall be climizated w
July 15, 1945, and no similar pledge shall hereafter be accepted.
Further attensions of credit by the bank for the purpose of purchasing
or carrying Transanceies steck shall be discontineed, and no collateral
value shall be assigned to any such stock hereafter pledged to secure
my lean más w the bank.
Regraded Unclassified
104
6. the bank shall climinate the momt of Investment in stock wie
option on the basis of the program new in offect.
7. The bank shall give vigerous attention to the disination w surrection
of my real estate holdings or real estate leans that may not confern
to statutory requirements.
8. the bank shall initiate steps, satisfactory to the Comptraller, to
assertain whether it is entitled to recever my part of the - paid
by the bank to Transamerica General Corporation in connection with
fidelity Leases, and it is concluded the bank is entitled to recever,
it shall take steps, satisfactory to the Comptroller, to recever the
same.
This is submitted without prejudice to the right to require
full and complete compliance with the Comptroller's criticisms and
suggestions, to resort to sanctions provided by law, or to continue
to list in reports of commination assets that are subject to criticism,
witil such criticisms have been corrested or elixinated, Neither this
memerandem me the contents shall be wed W the bank e engene also
on its behalf without the consent of the Comptraller, for my purpose
except for the information, unless and until the previsions hereef
are accepted and complied with by the bank.
Federal Reserve
Regraded Unclassified
w
106
1 so 5 I I $ I
Chatomen file of the Federal insurve hard
Chadyum of the F. D. I. C.
I I Totani I if :
V. 5. Department, Attorney
Comptraller of the Currency Delano
- Policy - invited but mable to attend.
the discussion contered around a presented w Mr.
Medico which was - strengt to provide a medification of the
Comptraller's requirements in the light of the proposal made by
the Bank a February x, 2340. Copy of Mr. - (marked
1) to attached, as is also a service propered in the
effice of the Comptroller of the Currently drafted the the -
di 1 I
Mr. Beclee expressed the opinion that, - a matter of
negotiation, 10 would be wise to accept the Bank's proposal
for a $30,000,000 capital insurance and a $5,000,000 reserve
against lecess in bank premises - that in return we could damand
the transfer of $6,000,000 from untivided profits to surpline account
which would have the effect of froming that much of undivided
profite. Invover, after considerable debete Mr. Beals' proposal.
for a $35,000,000 insurance in capital and a reserve of $6,989,200
without my transfer to employe from undivided profits - agreed
- and 6 - mbodying these changes and - others
diseased during the day w propared in the afterneon in the office
of the Compterslor with - procent. Copy of that
- » to attached.
Name 23, 2040
Regraded Unclassified
107
EDQUIREMENTS or - COMPTROLLER
OF THE
1940
1. As soon as possible, el in my event net later the June 36 the back
shall add $35,000,000 of additional capital stock by the issuesce of
- or proferred stock, or both, with the understanding that w
April 1 the board of directors of the bank will have approved the
entire program herein outlined and the bat will have obtained the
approval of the Comptroller of the Currency to such increase. In the
event that any part of said increase is to to obtained by the sale of
proferred stock to the EPC, a commitment from the are, a mach terms
as the Secretary of the Treasury will request the RFC to purchase make
stock, must be obtained, and a agreement with the RPC and the Comptroller
of the Carrency upon the terms of the medemts to the articles of
association, including its governing the disposition of earnings,
retirement of preferred stock (including a prevision that this will only
be done with the consent of the Comptraller), does, must be had w April 4.
2. Imediately upon obtaining the - capital, the bank shall set up -
mallocated reserve of $6,926,845.36 against the carrying value of
individual compled banking premises criticised in the report of -
tim of August n, 1939, including those shorm a the bank's books of
is its investment in Marchants National Realty Corporation, At the and
u - year this receive shall be used to reduce the carrying values
of - baking premises or the carrying value of the bank's investment
in Marchents National Realty Corporation, as the case my be, to the
Regraded Unclassified
108
extent determined by the Chief National Bank Imminer of the Tealfth
Federal Reserve Districts and for the purpose of making that detend-
mation the bank agrees to forsish to make Chief all information
and resords respecting said banking premises which my be requested by
hime the remainder of each reserve, If cay, my be returned to the
undivided profits account.
3. The bank shall obtain additional collateral, satisfactory to the Coup-
traller, to secure the emtracts of California Lands, Inc., and Capital
Company with the bank, and the contracts of Capital Company with Herchants
National Realty Corporation, Such additional collateral shall in in a
amount equal in value to the difference between the unpaid purchase price
upon each contracts and the value of the property theremier, as main
value appears in the schodule exatained in the report of emaination
began August n, 1939. All of ná contrasts shall be eliminated from
the bank's assets by December 15, 1943.
4a All bonds in the bank's investment partfulio shall be amertised out of
current earnings (other the bond profits) to naturity, or to call date
if callable secure. Current bend profits shall be used to take care of
current leases, and my bond prefits not n used shall be passed to a
reserve for lesses of my character until such reserve is adequate in the
judgest of the Comptroller of the Currency.
Regraded Unclassified
109
50 The bank shall continue the progrem of liquidation are in effect with
regard to the conditions of Transameries and its allied interests.
The stock of any allied interests of Transmeries securing loans of Trans-
america - any of its allied interests shall be eliminated w July 15,
1945, and - similar pledge shall hereafter be accepted. No collaterol
for the conditions of Treasmerios and its allied interests shall be
withdrawn from the bank without payment to the bank of a - equal to
the value of such collateral a account of mah conditionstry nor shall
substitutions or changes of collateral be sade which reduce the value of
the collataral securing say such countrants. Further extensions of credit
by the bank for the purpose of purchasing or carrying Transameries stock
shall be dispontismed, and no collateral value shall be assigned to my
such steck hereafter pledged to secure any lean made w the bank.
6. The bank shall eliminate the amount of investment in stock under option
an the basis of the program nov in effect.
7. The bank shall give vigerous attention to the elimination or correction
of my real estate holdings or real estate leans that may not enform
to statutory requirements.
6. The bank shall initiate stops, satisfactory to the Comptroller, to asset-
tain whether it is entitled to recever any part of the - paid by the
bank to Transameries General Corporation in connection with fidelity
lesses, and if it is concluded the bank is entitled to recever, it shall
Regraded Unclassified
110
take stops, misfastery to the Comptraller, to - the -
This american is submitted without projectice to the right to
require full and emplete compliance with the Comptroller's within at
suggestions, to resert to senstions provided by 1m, or to emtime to list
in reports of emainstion assets that are subject to criticism, until 1
criticians have boen currested or oliminated, Heither this -
its contents shall be used w the bank or - due a its behalf
the coments of the Comptroller, for any payment ensept for its information,
miss and will the provisions heres? are accepted and complied with w
the bank,
74l22-1940
make
111
RESPONSE TO PRESENTED
BY OFFICIALS OF
BANK OF AMERICA N.T. & S.4.
........
1. Bank 1a to increase its capital stock by $35,000,000. Within
thirty days is to get a commitment from the KFC to underwrite
any or all of the issues (this underwriting consitment may
be reduced in a as equal to the aggrogate par value of the
stock sold to private interests). Theyterms and conditions
of the proposed asendments to the bank's articles of associa-
tion shall be agreed upon by April 15, 1940 by the bank and
the committee and also by the RFC if my part of the funds
are to be made available through the RFO for the purchase of
any of the new capital stock. The increase in capital stock
is to be consumented within ninety days, if possible, but in
no event later than June 30, 1940.
2. On or before the date of the increase in capital stock, the
bank is to set up an unallocated reserve of $7,400,000, such
reserve not to be reduced if the Comptroller of the Currency
objects therete. (See maso, attached).
3. All bond profits must be kept in a special reserve account
to take care of losses to bonds, and amortisation of bond
premiums, until the total of that reserve account shall equal
the total bond predua, If in my given sexi-annual period
the total added to the TORRITO is insufficient to cover -
tisation of bond premiums for the pariod, then such receive
must be augusted, in the amount of the deficit, from current
earnings.
Regraded Unclassified
112
2 -
4a Furnish the Comptroller complete information, asticfactory to
him, with respect to the original cost of wash banking premise,
including future and former premises, and the depreciation
which has been taken thereon. Mequate depreciation will then
be determined and any necessary adjustment will then be made,
5. Charge off all items classified as lose in the last report of
examination, not otherwise discussed herein, which have not
heretofore been charged off. Future losses, except those 26-
served for, must be charged out of future earnings; and
presently existing undivided profits, as well as any amount
that may later be released from reserves herein established,
my not be used for any purpose except the setting up of
reserves and charging out of losses not provided for by
future earnings.
6. Bank is to obtain from California Lands, Inc., and Capital Co.
sufficient additional collateral, satisfactory to the
Comptroller, to assure the discharge of the obligations of
those corporations to the bank, including the agreement of
Capital Co. covering the future and former bank premises now
carried by Marchants National Realty Corporation. In any
event, the value of such additional collateral will be equal
to 25% of the remaining balance due under the contracts plus
25% of the carrying value of future and former premises.
7. Continue to treat real estate currently acquired by forselosure,
or in satisfaction of dobt, as Other Roal Estate, and carry
Regraded Unclassified
113
- 3 -
the same at cost or approised value, whichever is the lever,
and in no instance is the carrying value of Other Real Estate
to exceed the book value of the Issue at the Size of foréclosure,
8. Eliminate the amount of investment in stock under option at a
rate not less than the program now in effect.
9. Bank is to continue program of liquidation with regard to all
commitments of Transamerios and its subsidiary and related
companies at substantially the date rate as has been accom-
plished in the past year,
10. Bank is to eliminate, as soon as possible and within a reason-
able period, my loans carried in excess of the legal limits.
11. Bank is to give vigorous attention to the elizination of any
real estate holdings or real estate loans that may not can
form to statutory requirements.
12, The bank shall initiate steps, satisfactory to the Comptroller
to ascertain whether it is entitled to recover my part of the
- paid w the bank to Transamerion General Corporation in
commection with fidelity lesses and if 10 10 concluded that
the bank is entitled to recever, 18 shall take stops catte-
factory to the Comptroller to recover the -
Regraded Unclassified
114
- 4 -
This memorandum is submitted without projudice to the right
of the Comptroller of the Currency to require full and -
plete compliance with his criticises and suggestions pro-
viously specified in reports of emainstion and in letters
to the bank, to resort to senctions provided by law, w to
centinue to list in reports of emaination assets that an
subject to criticism, until such criticisms have been 002->
rected or aliminated. Neither this assorandum or its -
tests shall be used by the bank or anyone else - its behalf
for any purpose except for its information unless and until
the provisions hereof are accepted and complied with w the
bank.
Regraded Unclassified
115
Memorandus Covering Unallocated Reserve of
$7,400,000, referred to in Item 2.
This reserveds made up of losses estimated on
Occupied Premises
$6,926,000.00
Future Premises
488,500.00
$7,414,500.00
Losses estimated in the August report of $585,000 on future
and former bank premises carried in Merchants National Realty
Corporation is provided for in Item 6 of the agreement.
Regraded Unclassified
116
distress -
- s I 1 I ! 1 s s $ I
19th and $35,000,000 actual - copital w the farence of - or
and I I 1 1 B I $ 1 purchased b
the beard of directors of the Bank will have appowred the entire
progrem herein outlined - the Shank will have obtained the approval.
of the Compteroller of the Currently to such insurance. In the -
my part of said insurance to to be obtained w the sale of proferred
stock to the R.F.O. a comittment from the R.F.C. a - - to the
Secretary of the treasury will request 29 to purchase work stock -
be obtained - - agrounces visa the B.F.S. and the Comptersller of the
Oursenty upon the - of the and articles of amountion,
including the - graming the disposition of earnings, retirent
of propered steek, ste., must be had by March 1994.
1 and I and I I d B
will net - an resurve of against the
carrying value of the individual banking premises criticised in the
report of commination of Angust n 3030, instruding these show -
the Bank's being onl is the investments in Marchants Mational
Corporation. n the ond of - your this reserve shall be used to
reines the earrying values of such building premise w the corrying
value of the Denk's terestment in Marchanks National healthy Geryers-
- as the - my - whom in the - the Bank shall have
furnished to the Comptereller of the (eventy complete teleration
1 % 1 1 1 $ s I i a 1 3
Regraded Unclassified
117
bening premise to the Bank w my of the effiliated, turesdated
w related companies the evigibly corpotered thether - the Bank
w w m of the affiliated, consected w velated emperier, my
capital which have been nate, - the dispreciation
which has boom taken - - - pennise, Upon twiching
ansh evidence within the - your, the reserve shall be well to
reduce the carrying wine of - much middle premise w the
- of adopate deprestation during the - of the building
W the Bank w my of the affiliated, associated w related -
1 I I I I I I I 1 5
with - healting prostices, and by the - of m -
the restater of such reserve, if - my to returned to the -
I I I a I 1 1 $
fixtures at shall be culmisted a the Imple of depresio-
tion allowed the Bank by the Treasury Department w issue -
I
s Fature and formar bonking problem and an other real.
estate - curried - other Doal Natate and real estable bereafter
asquired was or in settafestion of debt will be tratell
w - Roal Natate and curried n - or aggenized value,
to - this will mb applicable to the Bellins property.
4a the - will obtain additional colleteral -
I I I 3 I I [ 1 /
Regraded Unclassified
118
contracto with the Bank and of depital Company to - the
contract with the Marchants National Realty Corporation. Bank
additional collatoral will be in a - squal is value to the
difference between the usped purchase price - the contracto
and the valuation of the property theremise as wash valuation
appears in the schodule contained is the report of examination
began August x, 1939. All of such contracts will be eliminated
tree the Bank's assets by Desember 15, 1943.
so All bonds in the Bank's investment partfolio will be
amortined out of current carnings to naturity or to call date if
callable - Oursent burd profits will be need to take our
of current leases and my bond profits not as used will be passed
to a reserve for lesses of my character until math receive is
adequate in the julgares of the Comptereller of the Currency.
6. Loans to Transmeries Corporation and the allied interesta
will be brought within the legal limit allowed to - interest #
seen as possible and net later then July 15, 1942, emerge that this
paragraph shall not apply to the contracto of the Ank with
California Lands, Inc. and Capital Company, the contract of -
chamts Mational Realty Corporation with Capital Company, and the
option agreement of Transmerise with respect to the stock of
National City bank of New York asquired w the Dark, all of which
are otherwise disposed of hereding The program of liquidation
Regraded Unclassified
119
with regard to the conditments of Transamerica and the subsidiar-
in will be continued. the stock of my allied interest of
Transmerios securing Issue of Transmeries w my of the allied
interests will be elinianted by July 15, 1945 and no sinilar
pledge will hereafter be accepted. Further extensions of crudit
w the Bank for the purpose w carrying Transmirtes
stock will be discontinued and no collateral value will be assigned
to my onth stock hereniter pledged to - my lean made by the
1
% The Dank will charge eff all them elassified as less in
the last report of examination not otherwise diseased hards
which have not heretefare bom charged off.
8. The Bank will eliminate the mouth of invostment in steek
wir option en the basis of the program - is effect, the -
reduction mounting to 0543,360.
9. the Bank will give vigarous attention to - real estate
holdings w real . state loans that My net conform to statubetry
requirements.
20. the Bank will initiate stops to accuriain whether the fash
to entitled to my part of Transmerios General Corporation's
reserve for fidelity Lenses md to receiver my part thereof to wideh
the Bank my be entitled.
Regraded Unclassified
3
468
Feb
3
20
121
Attended hgt Under of the Treasury Ball
of the Federal Insurve Heard
the of the Federal Reserve Beard
Grenday of the F.D.I.C.
Comptrailer Balance
n. Follay entered the neeting later
1 y $ James I of of si
0. R. Ouslding, Counsel for the Bank of America
the meeting - eyened w Mr. Oushing, who presented a
outlining the postition of the Bank of instru in regard to the current
discussions between the York and the Condition representing the Treasury,
the Federal Incurre Seard, and the Federal Deposits Insurance Corporation.
(Geggr of M. Oushing's - is attacked). the amerender we read
w Mr. Cushing. The discussion which followed w confined to inquiries
as to its provisions and further explanation of the Bank's position.
B. Qualding and M. Memini left the meeting with the win-
standing that the Comptraller would call m. Custring a the telephone
when the treasury - realy to continue the discussion with them.
After mr. Cuslding and m. Classint left the meeting, there was a retier
exhanded amriungo of views between the representatives of the three
agencies, Mr. - entering the meeting at this point. Mr. Isline
of the Federal Receive hard presented a must which be had
propered commiting - m. Gushing's - (copy of Mr. Malloe's -
is attached).
Regraded Unclassified
122
B. Becles informed the conformence that no bed opent considerable
time with Mr. Cismini since the last meeting and had Mr.
Mannini from returning to California last verk, B. Necles further
expressed the opinion that both Mr. 4. P. Ciemini and m. L E.
Glannini falt very strengly that they were being singled out for harsh
treatment and that if a program was net evalved which they could accept
without loaing prestige anong their stockholders end in California
banking circles generally, they would refuse to - along and weld
simply let the Federal authorities apply whatever senstions they
desired. Mr. Becker falt that 96 should try to make is possible far
them to accept a program. Mr. Saymer pointed out that there - a
question of policy here in regard to the properstion of 007 and
proposal as to whether it should be considered & negatistory document
or a final minimum which we should present as an ultimatum. Mr.
Foley preferred that it should be presented as our final position and
⑉ which no would not further modify.
There was general diseaseion of the three najor questions of
DES capital, dividend control and the loss its net up by the Comptroller
to depresiate the value of bank previses M curried - the Dank's books.
These questions were considered in the light of the nonerander processed
by the Bank and the possibility of recensiling the Comptroller's require-
name with the Bank's pesition W explored at some 1ength. It me
agreed that the various agencies would review the matter with their m
Regraded Unclassified
123
staffs during the next sev, Wednesday, February n, end needs
again the morning of Thursday, the I for a further -
of views.
February n, 1940
124
Upon asseptance of the following is . pregram, -
with the express understanding that the setters pending be
fore the S.E.C. will be disposed of at the - time, the
President of the Bank will recomend to its Board of Diposters
that the Banks
1. Increase its capital strusture by $30,000,000,
to be done within 90 days, if possible, but in no event later
then Time 30, 1940. This will be done by the issuance of -
or preferred stock # part - and part preferred as my be
decided upon w the Bank, Steps to this and will be initiated
presptly. Amount to the Bank's articles of association ter
this purpose shall be agreed upon w the Imale and the Comdittee,
and also by the R.F.C. if my part of the funds are to be usde
available through the R.F.C. either by my of purchase of any
such stock w by making lease on the security thereof.
2, Imediately upon obtaining the new capital, net
up an mallecated receive of $5,000,000.
o
30 institise bond premiums is accordance with state-
tory provisions and regulations of the Comptroller applicable
to all national banks,
4 Furnish to the Comptraller complete information
with respect to the actual cost to it of each bening presise,
Regraded Unclassified
125
- 2 -
including future and forwer previses, end the depresiation
wish it has taken threes, creak information to owe the
history of each banking preadse from the time of its asquate
tion w the bank. Adequate depresiation from the time of
acqusition will the be determined and my necessary adjust=
not will be made through the unallocated reserve. All depres
ciation on buildings, furniture, fixtures and equipment shall
be calculated 05 the basis of depresiation allowed the Bank
w the Treasury Department for income tax purposes.
5. Charge off all items classified as loss is the
last report of examination not otherwise discussed herein
which have not herebofore been charged off. (For your information,
this has already been done.)
6. Insist that California Lands and Capital Co.
furnish property to additionally secure their contracts. Such
property will be in an amount equal to the difference between
the unpaid purchase price under the contracts and the valuation
of the property thereunder as such valuation appears in the
schedule contained in the report of examination begun August 31,
1939. (For your information, sales of real estate to California
Lands and Capital Co. under contrast were discontinued as of
June 1, 1938.)
% Continue to treat real estate currently sequired
w forselesure or in satisfaction of debt as Other Roal Estate
and earry the name at cost or apprained value, whichever is
I
Regraded Unclassified
126
- , -
s. Eliminate the anount of investment in stock under option
on the basis of the program now in effect, the annual reduction amounting
to 8543,360.
9. Require continuation of the program of liquidation new in
effect with regard to the commitments of Transameries and its subsidiaries.
10. Eliminate, within a reasonable period, any loans
carried in - of legal limits if any such exist. (It is the Bank's policy
not to permit loans to exceed legal limits.)
21, Give vigorous attention to any real estate holdings of
real estateloans that may not conform to statutory requirements,
12, Initiate steps to ascertain whether the Bank is entitled
to recover any part of Transamorios General Corporation's reserve for
fidelity losses and to recover any part thereof to which the Bank may
be entitled.
The foregoing response to presented as an expression of the
Bank's sincere desire to cooperate constructively in arriving at an
understanding. It shall not be deemed or construed as admitting any
statement or implication in the Counittee's nono omjassenting to
anything therein emeept as herein expressed, or as admitting that
there is any legal requirement or factual necessity for my change
suggested therein or harein. This IMEMO is not to be used for any
other purpose or by my other agency.
Regraded Unclassified
McKee memo
Response to Memo Presented by
Comments upon Bank's Response
the Committee with regard to
to Comptroller's Proposed
Bank of America N. T. &S. A.
Requirements
Upon acceptance of the following
85 a program, and with the express
understanding that the matters pending
before the S.E.C. will be disposed of
at the same time, the President of the
Bank will recommend to its Board of
Directors that the Bank:
1. Increase its capital struc=
1. Offer of capital increase, either com-
ture by $30,000,000, to be done within
mon or preferred, in the total amount of
90 days, if possible, but in no event
$30,000,000 capital funds. Amount seems
later than June 30, 1940. This will
inadequate in consideration of entire
be done by the issuance of common or
program offered.
preferred stock or part common and part
(a) Would suggest preferred stock
preferred as may be decided upon by the
for any increase in capital, whether sold
Bank. Steps to this end will be
to shareholders, the public, or the Govern-
initiated promptly. Amendment to the
ment, because (1) it should be cheaper
Bank's articles of association for this
capital and would provide more cushion
purpose shall be agreed upon by the
from earnings for other corrections, and
Bank and the Committee, and also by the
(2) the sale of preferred stock would create
R. F. C. if any part of the funds are to
less problem with respect to representa-
be made available through the R.F.C.
tions than would the sale of common stock,
either by way of purchase of any such
and (3) preferred stock carries with it
stock or by making loans on the
certain rights or privileges of retirement
security thereof.
and conversion which are to the advantage
of the management and the common stock-
holders.
Regraded Unclassified
128
2. Immediately upon obtaining the
2.
Interpose no objection to unallo-
new capital, set up an unallocated
cated reserve of $5,000,000 for a
reserve of $5,000,000.
correction of write-ups and inadequate
depreciation as determined by a complete
survey and analysis of the banking
premises, including future and former
premises, with the understanding that
in case the facts as subsequently de-
veloped indicate that $5,000,000 is in-
adequate, the deficiency will have to
be met out of current earnings.
3. Amortize bond premiums in accord-
3. No comment if it is understood that
ance with statutory provisions and
amortization applies to entire port-
regulations of the Comptroller
folio. In addition one-half of net bond
applicable to all national banks.
profits to be set aside as additional
reserves to accelerate the elimination
of the premium account until such re-
serve is adequate as determined by
the Comptroller's office.
4. Furnish to the Comptroller complete
4. See No. 2
information with respect to the actual
cost to it of each banking premise.
Regraded Unclassified
129
50 Charge off all items classified
5. No comment.
as loss in the last report of -
instion not otherwise discussed
herein which have not heretofore been
charged off. (For your information,
this has already been done.)
6. Insist that California Lands and
6. Proposed additional collateral con-
Capital Company furnish property to
sisting of free assets of these
additionally secure their contracts.
companies should be in an amount
Such property will be in an amount
equal in value to at least 25% of the
equal to the difference between
unpaid balance of their respective
the unpaid purchase price under the
contracts with the bank.
contracts and the valuation of the
property thereunder as such valuation
appears in the schedule contained in
the report of examination begun
August 31, 1939. (For your infor-
mation, sales of real estate to
California Lands and Capital Co.
under contract were discontinued as
of Julap 1, 1938.)
7. Continue to treat real estate
3. No comment, provided "costs" are
currently acquired by foreclosure
defined and understood by committee.
or in satisfaction of debt as Other
Prefer "book value of loan" to "cost."
Real Estate and carry the same at
cost or appraised value, whichever
is lower.
Regraded Unclassified
130
8. Elimiate the amount of invest-
8. No comment.
ment in stock under option on the
basis of the program now in
effect, the annual reduction
amounting to $543,360.
9. Require continuation of the pro-
9a We still recommend the treatment
gran of liquidation now in effect
of large lines substantially as
with regard to the commitments of
suggested in the Comptroller's original
Transamerica and its subsidiaries.
requirements, with proper safeguarding
language.
10. Eliminate, within a reasonable
10. No comment.
period, any loans carried in excess
of legal limits if any such exist.
(It is the Bank's policy not to
permit loans to exceed legal limits.)
11. Give vigorous attention to any
11. No comment.
real estate holdings or real estate
loans that may not conform to
statutory requirements.
12. No comment.
12. Initiate steps to ascertain
whether the Bank is entitled to re-
cover any part of Transamerica General
Corporation's reserve for fidelity
losses and to recover any part thereof
to which the Bank may be entitled.
Regraded Unclassified
131
The foregoing response is pre-
The Bank's response, to which
sented as an expression of the Bank's
the foregoing comments have been
sincere desire to cooperate con-
directed, does not cover the following
structively in arriving at an under-
points, which should be included:
standing. It shall not be deemed
1. The Bank should take immediate
or construed as admitting any state-
steps through Merchants National
nent or implication in the
Realty Company to obtain the pledge by
Committee's memo or assenting to
Capital Co. of collateral equal in
anything therein except as herein
value to at least 25% of the amount
expressed, or as admitting that there
of the contracts between it and the
is any legal requirement or factual
Realty Company. To cover any
necessity for any change suggested
deficiency in additional collateral, the
therein or herein. This memo is not
Bank shall set up a reserve from its
to be used for any other purpose or
undivided profits in an equivalent
by any other agency.
amount.
2. Other real estate carried as such
on the books of the Bank. There should
be set up an additional reserve from
undivided profits equivalent to 25%
of the carrying value of such other
real estate.
Regraded Unclassified
132
THE WHITE HOUSE
WASHINGTON
March 4, 1940
MEMORANDUM FOR
HENRY MORGENTHAU, Jr.
FOR PREPARATION OF REPLY.
F. D. R.
Enclosure
-
Regraded Unclas
133
BEY PUTTMAN an. -
1
I di I
€
1
$
I I I
F.
1
é
-
surren if di all 1
0 I 1 é 1
É
- a - -
I 1 of I of
-
1
- - -
1 di 1 I
-
- a MR. a MIL
Mnited States Senate
1
á
COMMITTEE ON FORDER NATIVE
1
1
di
L
É il di
di di 1 di
1 1
-
1 5 1
Washington, D. c.,
- & - -
I 5 I d I
February 24, 1940.
My dear Mr. President:
The controversy that has been raging for over e year
between the Treasury Department and A. P. Giannini relative to his
banks is having its repercussions among the Italians and others of
my State. The Giannini interests established the First National Bank
of Nevada at Remo, Nevada, two or three years ago. This bank now has
several branches throughout the State. This bank has about 35,000
stockholders, and deposits around $32,000,000. This is quite a
large banking institution for a State of 100,000 population. Ciennini's
stockholders and depositors have been peouliarly loyal to him. Without
regard to the merits of the controversy, they sincerely believe that
Gianmini is being persecuted. I of course do not believe enything
of the kind.
The dispute, as I understand it, involves a construction
of our benking law. I believe that the law provides that in the
event of a controversy over an order made to a bank the Secretary of
the Treasury may direct the Comptroller to refer the controversy to
the Federal Reserve Board for adjudication. Would not such reference
result in the final settlement of the matter? This matter should
certainly be settled because the controversy has already resulted in
great loss to the stockholders of the banks and has threatened the
solidity of the Bank of America National Trust and Savings Association.
I know the dominating character of Giannini and the hersh
language he frequently indulges in, and I don't blame Henry for being
sore.
I hope that you are getting a good rest, and enjoying your
association with a different kind of fish.
Sincerely,
1
The President,
The White House.
Regraded Unclassified
134
March 6, 1940
No. 4
REQUIREMENTS OF THE COMPTROLLER OF THE CURRENCY
1. As soon as possible, and in any event not later than June 30, 1940,
Bank of America National Trust and Savings Association will add
$30,000,000 of additional capital funds by the issuance of common
or preferred stock, or both, and the Bank will, prior to April 1,
1940, apply for the approval of the Comptroller of the Currency to
such increase. The Bank will endeavor to obtain a commitment from
the Reconstruction Finance Corporation to purchase or lend upon
preferred stock in the amount of $30,000,000 prior to April 1, 1940,
and if preferred stock is to be sold, will endeavor to obtain an
agreement with the Comptroller of the Currency upon the terms of
the amendments to the articles of association by April 1, 1940.
2. Immediately upon obtaining the new capital the Bank shall set up
an unallocated reserve of $6,900,000.
3. The Bank shall obtain additional security satisfactory to the
Comptroller of the Currency to secure the contracts of California
Lands, Inc. and Capital Company with the Bank, and the contracts
of Capital Company with Merchants National Realty Corporation.
Such additional security shall be in an amount equal in value to
the difference between the unpaid purchase price upon such
contracts and the value of the property thereunder, as such
value appears in the schedule contained in the report of -
Regraded Unclassified
135
+
ination begun August 1, 1939. All of such contracts shall be
eliminated from the assets of the Bank and Merchants National
Realty Corporation by December 15, 1943.
40
All premiums on bonds in the Bank's investment portfolio shall
be amortised out of current earnings (other than bond profits)
to maturity, or to call date, if any, and amortisation previously
reserved on bonds sold at book value or higher may be returned
to the undivided profits account. Current bond profits shall
be used to take care of current losses, and any bond profits
not so used shall be passed to & reserve for losses of any
character until in the opinion of the Comptroller of the
Currency such reserve is adequate. However, this reserve
for losses, plus the amortisation reserve, need not exceed the
total premium account.
50 The Bank shall, as soon as possible, furnish to a committee
composed of the Vice President in Charge of Examinations of the
Federal Reserve Bank of San Francisco, or some officer of the
bank designated by him, the Supervising Examiner of the Federal
Deposit Insurance Corporation for the Twelfth District, and
the Chief National Bank Examiner for the Twelfth Federal
Reserve District, all obtainable records and information
with respect to the acquisition of each banking premise criti-
cised in the report of examination of August 31, 1939, including
those shown on the bank's books and in its investment in
Regraded Unclassified
136
- 3
Regraded Uncla
Merchants National Realty Corporation, dating back to the time
such premise was acquired either by the bank or any member (either
bank or company) of the group presently or then comprising the
Transamerica organisation.
The committee shall consider the fair value of each premise at
the time of such acquisition, and the special conditions which had
to be net in fixing the price paid. From these considerations,
the committee shall determine the amount which shall be used by
the committee as the estimated cost amount of each premise to
the bank. The value of each premise shall then be established
at such estimated cost amount, plus the amount of any expenditures
subsequent to acquisition found by the committee to have been
appropriately capitalized, less the appropriate amount of depre-
ciation at the depreciation rate allowed by the Bureau of Internal
Revenue for each year of ownership. The unallocated reserve
set up by the bank shall be reduced by the difference between
the present carrying value of each such premise and the value
of such premise as determined by the committee in the manner
hereinabove stated. The decision of 8. majority of the members of
the committee shall be binding. The remainder of such reserve,
if any, may be returned to the undivided profits account. A
partial release of the reserve, or a decrease in the amount of
the reserve to be set up, may be made as soon as that procedure
is justified, in the opinion of the comittee.
137
- 4 -
6. The aggregate amount of obligations, as defined in Section 5200,
United States Revised Statutes, of Transmerica Corporation and
all subsidiaries in which it owns or controls a majority interest,
to the bank, will, be brought within the limitations and exceptions
of Section 5200, United States Revised Statutes, for any one
borrower by July 15, 1942, and thereafter the aggregate amount
of such obligations will not be permitted to exceed such limita-
tions and exceptions. The existing obligations of Transamerica
or its subsidiaries now held by the bank will be eliminated by
July 15, 1945, and no new Loans will be made to Transamerica or
its subsidiaries secured by the stock of subsidiaries of
Transamerica. This paragraph shall not apply to obligations of
Capital Company and California Lands, Inc. arising out of real
estate sales contracts, which contracts are covered in misbered
paragraph (3) hereof.
The bank may accept Transamerica shares as security for small loans
for business purposes where the borrower demonstrates a capacity
to liquidate the loan otherwise than through the sale of such shares.
No loans for speculative purposes will be made on the security of
such shares.
7. The bank shall eliminate the amount of investment in stock under
option on the basis of the program now in effect.
138
-5-
8. The bank shall give vigorous attention to the elimination or
correction of any real estate holdings or real estate loans
that may not conform to statutory requirements.
9. The bank shall initiate steps to ascertain whether it is entitled
to recover any part of the sums paid by it to Transamerica General
Corporation in connection with fidelity losses, and if it is con-
cluded the bank is entitled to recover, it shall take steps to
recover the same.
10. The Board of Directors of the bank will approve the foregoing by
April 1, 1940.
This memorandum is submitted without prejudice to the right
to require full and complete compliance with the Comptroller's
criticisms and suggestions, to resort to sanctions provided by
law, or. to continue to list in reports of examination assets
that are subject to criticism, until such criticiams have been
corrected or eliminated. Neither this memorandum nor its con-
tents shall be used by the bank or anyone else on its behalf
without the consent of the Comptroller of the Currency for any
purpose except for its information, unle 88 and until the pro-
visions hereof are accepted and complied with by the bank,
For the Federal Reserve System
For the Federal Deposit Insurance
Corporation
Ley, Circulo
For the Comptroller of the Currency
DwBill E.H. foling h.
Regraded Unclassified
139
RE BANK OF AMERICA
March 6, 1940.
2:30 p.m.
(This discussion took place during
the Open Market meeting but was
transcribed separately for clarity
of the record)
Present:
Mr. Bell
Mr. Seymour
Mrs Klotz
H.M.Jr:
Seymour has asked to see me. I have got
him outside.
I want you to take this thing over and tell
Eccles there is 8. possibility of my asking
the President and saying, "Now, Mr. Presi-
dent, this has been a long fight and we
have accomplished it and I think it would be
nice if you would receive Mr. Delano and Mr.
Eccles and myself and Mr. Jones, at which
time we can explain conditions, before my
letter goes to Mr. Jones. I would like to
do it in your presence. You can ask us and
we will say, 'All right, Jesse, it is up to
you to do this whole thing. I think that
would be swell, have a meeting there of the
agencies, including Jones and maybe Frank.
I could say, "Now, we have accomplished this
thing. I expect this trouble and therefore
I think - I never could have got it if I had
had Jones in. I have accomplished what you
wanted through these people all working to-
gether so beautifully. In order to bridge
this thing, I want to do it in your office,"
and it is worth the President giving us a
half an hour, if necessary.
Bell:
Yes, because you really want his approval
anyhow.
H.M.Jr:
Just think that over, 800. I think we ought
to have a little window dressing, put on a
little act in front of the President.
(Mr. Seymour entered the conference)
I was a little bit late but Mr. Eccles was
telling me how you have done.
Regraded Unclassified
140
- 2 -
Seymour:
Oh.
Bell:
He was talking about the RFC.
H.M.Jr:
I was just telling Dan in view of everybody
being so afraid of Jones, I think the thing
to do is when this is all signed and sealed
and delivered, that I ask the President to
receive the gentlemen who have been doing the
work and that we walk over there and after all,
I sign by authority of the President, plainly
saying to him - and have Jones there, see, and
do it in front of the President and prepare
the President 80 that he can give Jones a
little talk and say, "I want this to be kept
secret."
Seymour:
I should think that ought to do it.
H.M.Jr:
These are the agencies that have done what is
wanted. "Now, it is up to you, Jesse, to lend
the money, but using this agreement as the basis.
You can't change the agreement. That is the
jumping off spot."
Bell:
Also you thought it might be well to have the
SEC there.
H.M.Jr:
Possibly. I don't know. They might consider
they are being high-pressured.
Seymour:
I think that ought to be done separately.
H.M.Jr:
I don't know.
Bell:
Aside from that suggestion, what I thought we
might do --
H.M.Jr:
On second thought, I don't think the SEC should
be there. They are two separate cases.
Seymour:
I don't think you ought to give any recognition
to the bank's position.
H.M.Jr:
On second thought, no, but if we do go over to
the President, I ought to have on top of his
Regraded Unclassified
141
- 3 -
desk a piece of paper explaining what I want
him to say to Jesse, see, just a summary and
just have it on top of his desk 80 he can
read it.
Bell:
You don't think he will hold it up and say,
This is what I an supposed to say," do you?
H.M.Jr:
He never has. Don't worry.
Bell:
I thought we might do this: After we get this
understanding this afternoon, go back to our
original basis of our meetings and call in the
whole group, including the SEC and say that
we had gone through these negotiations now and
80 far as the Treasury and the other two bank
examination agencies and the bank are concerned,
we have come to an agreement on the points at
issue and we are willing to give a copy of
our memo on which the agreement is based to
the SEC for its information and from here on
it is up to them to negotiate with them.
H.M.Jr:
I personally am just thinking -
Bell:
They were in the original meetings, you know.
That is all right, but I think it would be a
mistake to take SEC over to see the President,
because after all, we haven't been negotiating
with the offices of Transamerica. We have been
negotiating with the offices of the Bank of
America. Is that right?
Seymour:
That is right, and counsel for the Bank.
Bell:
And they have had separate attorneys, too.
H.M.Jr:
I think it perfectly proper to have SEC over
here and explain to them when we go to the
President for this little show I don't think
they ought to be there. I am throwing my own
idea down.
Bell:
Well, you threw it out for consideration.
H.M.Jr:
Now, you had something in mind.
142
- 4 -
Seymour:
I came up because Ed and I pretty well agree
that the point has been reached where there
isn't any use in my staying around any more.
The next steps are all inter-agency steps
and involve personnel that B. simple retired
Notary Public doesn't know anything about,
80 therefore it would be all right for me to
go up to New York, with the understanding
that I come back on call if anything came
up that you should want me to come back on,
80 on that basis I wanted to come in and
tell you how much I appreciated the oppor-
tunity to come down and work with you on
this thing and that it has been 8. most
agreeable experience to have the splendid
cooperation that I have had everywhere, 88-
pecially from the lawyers, and I know you
realize how fortunate you are in having such
a wonderful legal staff.
H.M.Jr:
Well, my only regret 1s that I haven't had a
chance to get personally acquainted, but
everybody has been 80 busy. I have carefully
kept myself in the background because the
Gianninis have built me up into a character
which is just --
Seymour:
It is very hard to live up to.
H.M.Jr:
I felt inasmuch as they felt I was just - had
this persecution complex, the best thing was
to let them work with people who worked for
me and work it out, 80 I very carefully kept
myself in the background. I have never met
them except once in 133, 80 I am sorry that
I haven't had a chance to get better acquainted.
Seymour:
It has been my loss, but I have had a very good
time.
H.M.Jr:
But everybody has been very enthusiastic about
the work that you did.
Seymour:
I feel that a trial lawyer begins to taper off
in his value after the days of the trial are
over and I think I will get back and I will
come back whenever you -
Regraded Unclassified
143
- 5 -
H.M.Jr:
You are staying here until this 1a finished?
Seymour:
I have to go up to New York this afternoon,
but on the definite understanding that any
time you want me back, I will come back.
H.M.Jr:
Well, I certainly appreciate your help.
Seymour:
Goodbye.
(Mr. Seymour left the conference)
H.M.Jr:
Well, the financing is done and this is done
and the more I think of it, Dan, I think we
had better have a little show before the
President.
Bell:
Well, let us think about it a day or two
before we - we have got to talk procedure
this afternoon anyhow. This isn't going to
be a signed document, you know, because of
the condition they put on it in respect to
the SEC. We can explain to them that we
just can't go along on that. We will agree
on everything else that is in our shop, but
on something that is out of our shop, we have
nothing to do with it.
H.M.Jr:
I've seen Jesse a thousand times and what he
wants to do is show that he is just as 1m-
portant as I am, but the thing to do - but
he will do just what the President tells
him to do, 80 the thing is to get it to the
President what we want him to tell him. I
had Jesse for lunch yesterday and he was very,
very grim.
Bell:
Really?
H.M.Jr:
Oh, yes.
Bell:
Not over this; over many things, I suppose.
H.M.Jr:
He says he is tired.
Bell:
I can believe that.
Regraded Unclassified
144
- 6 -
H.M.Jr:
He says he has taken a terrible beating on
the Hill to get all this stuff through and
he is tired, but I imagine he 1s sore because
I think some day it is going to come out that
he was as much behind Hanes on Associated Gas
as anybody.
Bell:
Was he?
H.M.Jr:
Oh, yes. I think --
Bell:
Well, I would expect that.
H.M.Jr:
You have always got to remember that Jesse
always wanted this job and never got it and
there is all this jealousy business and all
that, but it is --
Klotz:
It is Washington.
H.M.Jr:
Yes. You see, this is the first time there
has been a big bank job that the negotiating
was done here and not by Jesse.
Bell:
Of course, this involved a great many more
questions than just --
H.M.Jr:
This is the way it always should have been
done.
Bell:
than just the capital stock. It has in-
volved many other criticized items in the
balance sheet in which Jesse is not concerned.
H.M.Jr:
The answer is, it looks as though we have
done our job. We have got Eccles all sweetened
up, and so forth.
Bell:
Well, I think the agencies are tickled to death
with it and I think they will go along. I think
we will get their initials this afternoon.
E.M.Jr:
Well, you have got --
Bell:
I will let you know if anything develops.
H.M.Jr:
O. K.
Regraded Unclassified
145
Jeremes hald in the Office of t
Attended by: Under Secretary of the Treasury Bell
Chairman Hooles of the Federal Inserve Board
Governor Molico of the Federal Receive Board
Chairman Growley of the 7. D. I. c.
Comptreller of the Currency Delane
5. H. Foley, m., General Commel
The attached draft of the requirements of the Comptroller
of the Currency, entedying various changes which grow out of the
dismassion of March 5. 1940 between the representatives of the
Bank and the Comptroller, was submitted to the meeting. It TM
stated by m. Delane that the Bank's representatives new in
Washington had given approval to all of its provisions. Final
approval from W. Mamini in San Francisco had not yet been
obtained but Mr. Ouslding and Mr. Perrori falt that Mr. Giamini
was in essential accord. The draft as submitted was signed and
approved by Nears. Ball, Feley and Belano for the Treasury, by
Mr. twonlay for the Federal Deposit Insurance Corporation, and
by Insure. Reales and McKee for the rederal Receive.
Mr. Bell stated that in diseaseing the next stop with
the Secretary of the Treasury the Secretary had suggested 16
might be advisable to have a meeting with the President which
would include representatives from the Federal Reserve, Federal
Deposit Insurance Corporation, the from the
Reconstruction Finance Corporation, with the idea of bringing
Regraded Unclassified
146
the President up to date and covering do approval of the
$30,000,000 addition w the Bank's capital structure. After
I I the I e I s I 2
the Secretary - alternative procedure, the first shop of which
would be for the Beautery to clear with the Products the program
which had been ovelved w this condition in consultation with the
Bank's representatives. The President would then be asked to
approve 8 request for additional capital to be made w the Secretary
of the treasury to the Resenstruction Finance Corporation. This
would be fallowed w the Bank's application to the Reconstruction
Finance Corporation ter milk espital, the Comptruller's office to
endao and approved the to the articles of association.
Mr. Reales stated be had diseased the natter of Mr
cepital for the Bink with the Recretary of the Treasury and had
been contred that the Secretary w willing to Leave to Mr. Imm
the nothed and details of - this w to be handled. Mr. Belane
pointed at that the Comptroller's office had 8 statebery 7'espem-
sibility in the matter of mendemanto to the articles of association,
ml that while every assurance had boen given to the Funk's repre-
sentatives that there would be no and of arbitory conditions
imposed in the projected articles, at the - time be fals that
de office must have a votes in what these articles would be. 10
was generally agreed that this viewpeinh - the currect - and
Regraded Unclassified
147
that as & matter of prestice Mr. Melroney of the Comptroller's
staff would be included in the conversations on this subject
between the representatives of the Bank and the Recenstruction
Finance Corporation, and the whole matter adjusted contemporen-
cously.
There followed general discussion as to what action
should be taken by the committee w by the Secretary of the
Treasury in netifying the Securities & Rechange Commission as
to the progress made to date in the negotiations between the
Bank of America and the Office of the Comptroller. It was
the sease of the meeting that the Bank's representatives must
make their om approach to the Securities & Exchange Commission
if they desired to compose their differences with that body but
that 18 would be entirely proper for representatives of the
Treasury to inform the Commission of the impending under-
standing between the office of the Comptroller of the
Currency and the Bank.
PAWB
March 7, 1940
Regraded Unclassified
148
March 4, 1940
1. is seen as possible, and in my enes not later then June 30, 1940,
Bank of America National Trust and Savings Association will old
$30,000,000 of additional capital funds by the income of -
or proferred stock, or both, and the Bank will, prior to April 1,
1940, apply for the approval of the Comptroller of the Currency to
such increase. The Bank will endorer to obtain & comitant from
the Reconstruction Finance Corporation to purchase or land upon
preferred stock is the - of $30,000,000 prior to April 1, 1940,
and if preferred stock to to be sold, will endor to obtain an
agreement with the Comptroller of the Currency upon the terms of
the mendments to the articles of association by April 1, 1940.
2. Imediately upon obtaining the - capital the Bank shall set up
an unallossted reserve of $6,900,000.
3. The Bank shall obtain additional security satisfactory to the
Comptroller of the Oursency to costro the contracts of California
Lands, Ins., and Capital Company with the task, and the contrasts
of Capital Company with Merchants National Realty Corporation.
Such additional security shall be in - mount equal in value
to the difference between the unpaid purchase price upon and
contrasts and the value of the property theremier, M such
value appears in the schedule contained in the report of -
instion began August n, 1939. All of such contracto shall be
149
climinated from the assets of the Bank and Marchants Retional
Reality Corporation w Insuber 15, 1943.
4.
All produce an bants in the Bank's investment partfulio shall
% E s 1 ! I
to naturity, # to call date, If my, and amartisation previously
reserved on bonds sold at book value # higher my be returned
to the undivided profits account. Ourrent bond profito shall be
med to take care of currest leasue, and my bond profits net as
med shall be passed to a receive for Leases of my character
with is the opinion of the Comptroller n the Currency seah No
ourse is Newever, this receive for leases, plus the
amertimation FORM'TO not not agreed the total premium account.
50
the Bank shall, M - M pessible, funish to a consittee
composed of the Visa President in Charge of Reminations of the
Federal Reserve Bank of 9am Francisco, or - efficer of the
Bank designated by kin, the Supervising Imminor of the Federal
Deposit Insurance Corporation to the Twelfth District, and the
Chief National Bank Imminer for the Twelfth Federal Recerve
District, all obtainable reserds and information with respect
to the sequisition of - banking predee criticised in the
report of commination of August 11, 1939, including these
a the Dank's beeks and in its investment in Merchants National
Realty Corporation, dating back to the time mush premise w
required after by the list or By under (either bank w company)
Regraded
150
of the - presently or then comprising the Transamerise
organization,
The condition shall consider the fair value of coch premise at
the time of such acquisition, and the special conditions which
had to be net in fixing the price paid. From there considere-
time, the coundates shall determine the - which shall be
used w the condition - the octimated doet momt of soth
premise to the Bank. The value of eash premise shall then be
established at such estimated met momt, plus the memt of
my expenditures submequent to asquisition found by the condition
to have hom appropriately espitalized, less the appropriate
- of depresiation at the depresiation rate allowed * the
Buren of Internal Bereame for each year of concership. the
mallecated receive set - w the Bank shall be reduced by the
difference between the present carrying value of each each premise
end the value of such promise M determined by the committee in
the hereinsture stated. The decision of & majority of
the members of the comittee shall be binding. the reminier
of such recerve, if my, may be returned to the undivided profite
assess. & partial release of the recerve, w a decrease in the
- of the reserve to be set we, my be made w - as that
presedure is justified, in the opinion of the comittee.
151
6.
the aggregate - of obligations, 4a defined in Section smo,
United States Revised Statutes, of Transamiries Corporation and
all subsidiaries in which 11 - or 4 majority Interest,
to the Bank, will be bronght within the limitations and emeptions
of Section 5200, United States Revised Statetes, for my cas
borrover by July 15, 1942, and thereafter the aggregate -
of sush obligations will net be penitted to exceed much limite-
tiems and emerytions. The existing obligations of Transmarios
or its subsidiaries - hold w the fack will be eliminated by
July 15, 1945, and no - leese will be made to Transmerion w
the subsidiaries costred by the steck of subsidiaries of
Transmeriss. This peragraph shall not apply to obligations of
Capital Company and California Lands, Inc. arising out of real
estate sales contracts, which contracts are covered is membered
paragraph (3) hereef.
The Bank my assept Transmeriss abares # security for mall
lease to business purpose shore the - demonstrates a
especity to liquidate the lean otherwise the through the sule
of such shares. the Loans for speculative purposes will be
más an the security of and shares.
7.
The Bank shall eliminate the 1 of investment in stock
under option on the basis of the propres MII is effect.
Regraded Unclassified
152
Op
a. The I shall give viguous attention to the elimination #
currestion of my rest estate holdings or real estate lame
that my not main to statehery requirements.
9. the Bank shall initiate stops to exercista whether is is
entitled to reserve my part of the - paid by it to Trans-
america General Corporation in consection with fidality Leases,
and if 11 is concluded the Bank so entitled 10 name, #
shall take stops to possive the -
10. The Board of Directors of the Bank will approve the foregating
by April 20 1940.
d.
This is relatived without projedice to the
right to require full and complete compliance with the Comptraller's
critisisms and aggestions, to reserts to amotions provided w 1m,
or to contime to list is reporte of expiration assets that are
subject to criticism, until areah criticisms have best servected
of eliminated, Neither this service sir its estable shall be
used by the Bank or expens also ef the behalf withint the amount
of the Comptroller of the Ourrency for my purpose - for the
information, unless and will the provisions haven' are accepted
and complied with by the Banks
1
Regraded Unclassified
153
MAR 7 1940
MEMORANDUM FOR THE PRESIDENT:
In accordance with the request contained in your
of March me 1940, 8 return herewith Senator Pittman's Letter
regarding the Bank of America and a draft of reply for your
signature.
Copies to: airs Com. Delano Channery
DWB:ce
2-6-40
AWB
9.14.7L
mh
Regraded Unclassified
154
MAR 7 1940
Dear Regs
I have your Letter of February a, 1940, regarding the
matters under discussion between the Treasury and the Bask
of America.
While the matter which has been unler discussion for
sometime involves more then the construction of our backing
laws on inticated W you, I - stvised w Heary that during
the post month negotiations have book progressing entis-
factorily and 10 10 hoped that - understanding can shortly
be reached.
It would take a long letter to give you all the details
en this whole controversy - $ have adult Newry to dismon the
natter with you is person constine when M visit the treasury.
Reason 1
Nonorable Key Pittern,
United States Smale.
Capies to: Cours. Iniss Channey Arrell
swD DEBice ENTL
thun
Regraded Unclassified
155
-
Attended bys Comptrakler Under Secretary of the of the treasury Mill
I
H
é I w 1 1 y I
I á s I I B I 2 I 1
in commission with - L Me - and had been assisted
a I I 1 # no I I E
to the - and was the Missis world proceed to yet then take
offect foot - promptly as $ could - the differences
I $ I a I 4
sm alla $ á 2020 I I I I 6
i 1 ₫ I 1 I I 1
had a me opportunity to negitiate the a cottlement with the
Something a - Condection, ml further stated - no
1 1 I s I $ I 2 I have 8
1 1 s I $ I I I 1 á
in - for a fer caps, and expressed the hope that #
would be cleared w the first of - 1
1 a s I I I and s a
paragraph as the chose of the - stating so - Me
coveryism that, in - the natter - classe, this
Regraded Unclassified
156
paragraph would be ad thérous true the documents finally e-
changed. to was given assurance that this would be done.
10 w pointed our to m. Oushing that in the mooking
of February 20, 1940, the Bank presented & memorandem which
included in its opening paragraph a recervation as follows:
"Upon accuptance of the following as a program, and
with the express understanding that the matters
pending before the S.B.C. will be disposed of at the
same time, the President of the Bank will recomend
to its Board of Directors that the Banks. .
and a concluding paragraph as follows:
"The foregoing response is presented as an expression
of the Bank's sincere desire to cooperate constructively
in arriving at - understanding. It shall net be
documed or construed as admitting usly statement or in-
plication is the Committee's - or accepting to
anything therein assept as hereda expressed, or as
admitting that there is any legal repirement or fastual
necessity for my change suggested therein - herein.
This name is not to be used for any other purpose or by
any other agency."
and further that these reservations had boen orally
introduced by Mr. Giamini and Mr. Cushing into mest of the
succeeding conferences. Mr. Ball and Mr. Delano wished it
understood that the Treasury could net accept any such endi-
times in other words, it was the Treasury's position that
negotiations with the Bank could not properly be nade contingms
upon the Bank's elearing up its differences with the Securities
& Mushange Commission.
Regraded Unclassified
157
There wes - discussion as to the - cepttal which
it w propered to add to the streeture and a to the
procedure to be followed in the - of - to the
articles of association. 2a this commetion - Balane asked
Mr. Ouslding if be Ind any 14ea that the Bank contemplated in the
matter of a new stock Leave to - the $30,000,000 of addi-
tiemal capital funds. m. Cushing stated be had ne definite
information but that be understand the Bank had in sind adding
convertible preferred of $7,500,000 per value which would be
mid w $30,000,000, the putting $22,500,000 into surplus.
This convertible proferred of a per value of - would them be
share for share for - of to put it mother ver,
conversion would because profitable whenever the - passed a
price of $50 per share. Mr. Ball and M. Balane reserved judgest
M to this plan bet expressed the cydnism that this TM too may
a outbask and placed too large s proportion of the - funds into
surplus. they pointed out that this weld freme the total of
capital and surpline at $124,000,000 Instead of $130,000,000 #
proviously intended, and they expressed the hope that the Bank
would not expert w this - to areas the nessesity of building
- cepital and surples out of carrings to a sizim of $1,0,000,000.
m. Ball stated that he understand the Secretary of the
Treasury was to have today with Chairman Trank of the
Regraded Unclassified
158
I I 4 I I i
at that he would regist to the Secretary that as that time
Mr. Frank should be informed of the progress of these -
versations between the Bank's representatives and the
Comptroller's office; further, that a any of the ameration
attached herewith should be given to M. Frank for his
information. Mr. Cushing thought this would be helpful
and laft with a request for such assistance in the skc
matter as we could properly atent.
-
March % 1940
who
Regraded Unclassified
159
March 8, 1940
HM,Jr told this to Ed Foley and Bell.
"I said to the President, last night, that we
have come to an agreement with the Bank of America
and that I thought it would be nice if the President
would have Crowley, Ecoles, Bell, Delano and myself
over at the time we present the recommendations and
my letter to Jones, which would be in a different form
because it would be a recommendation from me to the
President for the President's approval instead of my
signing it by direction of the President. I said I
thought it would be worth fifteen minutes of his time
to put on a little show. Frank had told him about
the Bank of America and the President knew that the
Gianninis were not going to settle until they settled
with S.E.C. I told him as far as we were concerned,
Trans-America was an entirely different proposal, but
he left me with the felling that he had said something
to Frank that he wanted this thing taken care of."
Regraded Unclassified
160
RE BANK OF AMERICA
March 8, 1940.
(Closing Agreements were also dis-
9:30 a.m.
cussed during the course of this
meeting.)
separately
Present:
Mr. Bell
Mr. Sullivan
Mr. Foley
Mrs Klotz
H.M.Jr:
What is the next move on the Bank of America
thing?
Bell:
The Bank is supposed to contact the SEC today
and start negotiations. Now, they have asked
us to hold up sending a letter to Jesse, but --
H.M.Jr:
Who is "they"?
Bell:
The Bank. I think that in the meantime they
have talked to Eccles and he has convinced
them they shouldn't waste any time, that they
should go shead with their negotiating with
Jesse at the same time they negotiate with
the SEC. I told Marriner that I didn't think
it made a lot of difference to us, but we were
prepared to hold it up for two or three days
if they wanted to. If they wanted to come in
the first of the week and ask us to send it
over, I don't think it makes much difference
to us.
H.M.Jr:
That is what I suggested in the first place.
I would like to ask for an appointment Monday
morning and have the President see this group
and then have 8. letter ready and go over and
make my report to the President and have the
President approve the negotiating and what
they have done will meet with his approval.
"Now, I have written this letter which I am
recommending and you may want to ask some
letter which I want to sign and which the
questions before you approve it." It is B.
President approves.
Klotz:
To Jesse Jones?
H.M.Jr:
Yes. I think the thing to do is Monday morn-
ing and not wait any longer.
Regraded Unclassified
161
- 2 -
Foley:
Mr. Secretary, do you want to do it until
the Bank indicates to you that it will go
along with that program?
H.M.Jr:
I thought they had.
Foley:
No, they haven't.
Bell:
I don't think you need to send it right away,
even though you get it signed.
H.M.Jr:
No, I am not going to - when I go in to the
President of the United States, I want to
say, "Mr. President, after two and a half
years, we have come here and the bank examina-
tion agencies are negotiating with the Bank
of America and have come to an agreement."
Bell:
There is a condition on it, though.
H.M.Jr:
Then I won't go to the President.
Foley:
You see, the three agencies said that was
entirely satisfactory. The Bank said they
were going to hold it in abeyance until they
had a chance to go to the SEC.
H.M.Jr:
Up to now, I have been a hundred percent, but
you can get word to these people that when
this thing comes to me, I won't accept any
conditions and they ought to know that. I
will not accept any conditions and I think
you ought to tell 0. K. Cushing that. Don't this
leave it so later on he can say, "Well,
Mr. Morgenthau say that?" I think 0. K. Cush-
is & repetition of December, '38. Why didn't
will ing not accept any condition affecting another --
ought to know that today. I positively
Bell:
I think the thing to do is to - on the under-
standing between the agencies and the Bank --
H.M.Jr:
I think 0. K. Cushing ought to know that I
will not accept any conditions.
Bell:
You are not accepting them. Well, we have them
reserved our rights on that. We told
Regraded Unclassified
162
- 3 -
we wouldn't accept any conditions, that we
couldn't accept any agreement.
H.M.Jr:
Are you sure?
Bell:
Oh, yes, every conference we have had on the
thing. Isn't that right?
Foley:
Well, I haven't attended all the conferences,
but I signed that agreement because it is
unconditional, but this reservation that was
attached to it last night. --
Bell:
It wasn't, Ed.
Foley:
I know, Dan, it wasn't a part of it, but you
had it tied on the outside and you said you
wanted the SEC to know the whole thing.
Bell:
That 1s right, and I don't think it would
have been fair to take it over there without
that to Jerry. Jerry didn't know that. It
was there for Jerry's information. I think
we have made our position clear.
H.M.Jr:
Jerry must have known it.
Bell:
We have made our position clear, Mr. Secretary,
in every conference that we have been in that
we cannot fight the Bank's battles before the
SEC and we will not accept any conditions to
this agreement; every conference where it has
come up.
H.M.Jr:
Well, Dan, just think this over. This is just
a suggestion. Think it over in your own mind,
if there can be any possible doubt in Mr. Cush-
ing's mind. Would you restate it?
Bell:
Sure.
H.M.Jr:
Would you mind - if there could be any possible
doubt, would you mind sending for Mr. Cushing
and restate the position 80 that I won't find
myself by any hook or crook in the position
that I have to turn this thing down on account
of this condition?
Regraded Unclassified
163
- 4 -
Bell:
I said it to him only yesterday, again.
He came in to thank me for the consideration
we have given and the courteous treatment he
had had and he said, "We are all right on
the memorandum. We don't like the last
statement you put on there where you reserved
all your rights."
"Well, "I said, "you understand our position
in that," and he said, "I do, thoroughly."
I said, "We don't like the condition you have
attached but we have told you we couldn't
agree with it and that 1s all there is to it.
That is the reason we can't sign this thing."
He said, "I understand fully the whole posi-
tion."
H.M.Jr:
Well, why don't you --
Bell:
He said, "I will be glad to do it again."
H.M.Jr:
I wish you would do it again. Why don't you
do 1t this way, tell them that I am waiting
to sign the letter of recommendation to the
President's approval and to go over and see
the President, but I have got nothing to take
over to the President because I have no agree-
ment.
Bell:
Well, I said this to him --
H.M.Jr:
No, I mean - you can bring me in, that I asked
you today where is the agreement and you say
you had no agreement.
Bell:
It is an informal understanding 18 all.
H.M.Jr:
Well, Dan, to protect me so I don't find myself
in that same position, I think 1f you and Ed
would see him once more today and have a - I
am asking you this morning where is the agree-
ment that I can take over to the President
and you say we have none and that I won't
affecting SEC. If you don't mind, I wish the
accept any agreement with any conditions
two of you would see him today, because other-
wise, there is just that possibility that they
Regraded Unclassified
164
- 5 -
will say, "Yes, see, it is the same thing that
happened over again. We had everything ready
and then Morgenthau turned it down." I don't
want to find myself in that position.
Bell:
I don't think you will.
H.M.Jr:
Well, to protect me, will you and Ed see him
once more today? Will you two?
Bell:
Yes. And I asked him yesterday, even though
he had put this condition on, if he were not
able to get an agreement with SEC, does that
mean that the whole thing falls through with.
Could we get back here together again just
on the agencies and the Bank, and he said that
80 far as he is concerned, they will always
come back to us.
H.M.Jr:
You see the thing I am worried about is, I am
afraid from what you tell me that possibly
Eccles or somebody, or Jones, somebody may
have given him the understanding that it 18
all right. We can take care of the SEC.
Now, I want to repeat once more. I have got
a. blood brother agreement with Bill Douglas
on this thing which I am not going to - he
and I started this thing and I am going to
go through with it and I am not in any way
going to put any pressure on SEC to compromise
on Transamerica so we can put this thing
through, 80 I want that thing explained and
I don't want it - anybody put - Eccles or
Jones or Frank, putting pressure on me to
squash the Transamerica business. It is none
of my business.
Foley:
Jerry said just what you are saying last night.
He said, "Well, you are bringing this over and
you are dumping it on our lap. All the agencies
have agreed and now it is up to the SEC," and
was the situation I would not have approved
I said, "Certainly not, and if I thought that
the agreement. I am not putting any pressure
on you at all. What you do is your business."
Regraded Unclassified
165
- 6 -
H.M.Jr:
I want this thing stated, because I am afraid
that these fellows may have jockeyed me into
the position and that when the thing blows
up they will again say,- and may have some
justification to say - "Well, we understood
that Morgenthau, that so and so, killed it
once before,' and I think today is the day to
do it, if you two people could see him. Will
you?
Bell:
Sure.
H.M.Jr:
And you can - and I would say to him that I
am waiting to take this over to the President
and I will walk it over tomorrow, today, but
not with any conditions on it.
Foley:
If the Bank will tell us that they will accept
without reservation.
H.M.Jr:
Yes.
Bell:
Well now, of course they won't.
H.M.Jr:
Then there is no agreement, Dan.
Bell:
I am sorry they haven't made it plan all along,
but I think I have said every time on this
thing --
H.M.Jr:
(Speaking on telephone to Colonel Watson).
Hello, Pa. How is your liver this morning?
Got your suspenders on?
Keep them on.
All right.
The President saw him last night and he would
like to see Arnold and Towers and myself and
Collins together over what the Allied Plane
Purchasing thing 18, see, this morning, if
possible.
What?
166
- 7 -
There isn't?
Well, put it up to him, will you, and if not
this morning, then Monday morning, but I would
like to have it this morning.
Well, put it up - and then also ask him whether
he wants Edison and Woodring there.
Yes. Well, I --
Well, either this morning or Monday morning.
Towers and Collins.
Thank you. (End of telephone conversation)
Well, then we just say this: You say - you kept
telling me that there was to be an agreement,
but you have at no time suggested to me that I
should accept it with any conditions.
Bell:
No, certainly not.
H.M.Jr:
And I have at no time intimated to you that I
would accept it.
Bell:
You have not.
H.M.Jr:
But I think, the more I talk and the more I am
thinking hard, I think it is very important
that you send for Mr. Cushing. I would like
to have a stenographer present and I would like
you to make our position very clear and that
I am getting a little restless.
Foley:
I think we ought to tell them time is running
against them, because we have got to take some
action on this thing. We have got to take some
action with respect to this Examiner's report
that 1s being prepared now.
Bell:
Well, I think they know that the time is running the
deadline. After that, you have got to decide
against them and that April 15 is certainly
what you are going to do. I don't agree that
Regraded Unclassified
167
- 8 -
you have to take any action on the March 15
dividend.
Foley:
I It say we do. We can mention to them
that we are considering it.
Bell:
Well, these negotiations have been very friendly
and on a nice basis and I think when you start
that you get them right back into the cat and
dog fight again, Ed. If you want to put them
on that basis, okay, but I don't think you do.
H.M.Jr:
Well, it gets down to - if this thing means,
Dan, - we are all vague - that they are going
to hold us at arms' length until they settle
Transamerica, I won't be any party to it. I
won't be a party to it.
Bell:
You mean you don't want to hold up this thing
for & few days to see what they can do?
H.M.Jr:
A few days? Yes, but not - but I don't want
to lose whatever our schedule 1s. I don't
know what the time schedule is.
Bell:
April 15 is the deadline. We have given them
until April 1 in the agreement, but April 15
is the 90 days, or somewhere around there.
Foley:
We will have to have a little time before that
to determine what we are going to do.
Bell:
You have allowed yourself 15 days.
Foley:
You mean from the first of April?
Bell:
Yes. They have got to have all these commit-
ments made and approved by the Board of Directors
and this understanding. The only thing we told
them was that there would be a. few days allowed
here for these negotiations. If it looks as
though they can't get together over there --
H.M.Jr:
Want me to make a little prophesy? Want me to
make a little prophesy?
Regraded Unclassified
168
- 9 -
Bell:
There have been a lot of them made in these
negotiations.
H.M.Jr:
Well, I will make a prophesy. I will make a
prophesy that they won't get anywhere with the
SEC between now and the 15th of April.
Foley:
Check.
Bell:
That may be.
H.M.Jr:
And we are just being kidded. I mean, I know
that somebody talked to the President yester-
day, but from the way he talked to me last
night - now, when this thing blows up, by God,
I'm not going to be the goat again and you had
better protect us today.
Bell:
I think we have. I think in this memorandum we
have got our reservations reserving all our
rights, which is drafted by the lawyers, and I
think it is airtight.
H.M.Jr:
Well, Dan, after this talk this morning, please
send for 0. K. Cushing.
Bell:
Glad to.
H.M.Jr:
And state the position and make it perfectly
plain that I am waiting for an agreement, an
uncondi lonal agreement, and anything other
than an unconditional agreement is useless.
Bell:
Now, Jesse, of course, refuses to go ahead on
any basis until he gets a letter from us.
H.M.Jr:
That is all right.
Bell:
Do you want him to not negotiate for this
Articles of Association on an informal basis,
allowing the Comptroller and people to look
at it at the same time?
H.M.Jr:
I don't understand it.
Bell:
You see, after he gets your letter he has got
to draft
--
Regraded Unclassified
169
- 10 -
Foley:
That will be all right, if he will do it.
Bell:
He has got to draft Articles of Association
which have to be approved by the Comptroller.
H.M.Jr:
That would be a time saver, wouldn't it?
Bell:
I should think so, but you see Jesse on the
other hand says, "I won't negotiate with
these people until I get a letter from the
Treasury.
Foley:
And we won't send the letter until the Bank
tells us the program is accepted.
Bell:
So we are at a standstill.
Foley:
I don't think under any condition you ought
to send that letter, Mr. Secretary, until they
tell you they are going to accept the program
and 1f you do, then you have got the letter
over there and they can break off the negotia-
tions and say that they can't get together with
the SEC and this isn't binding on them and then
we are out on a limb, because we recommended
to the RFC that that new capital be put in there
and then the thing breaks down.
Bell:
Providing all these things are accepted.
Foley:
And they say that we have agreed that to the
reservation that they have made that they
settle with the SEC. I feel that way. I
know --
Bell:
I feel there is a chance for settlement, if we
want to.
H.M.Jr:
I am glad I saw the President last night, be-
cause lots of things that I don't know - I
have got a sixth sense and I didn't even know
what you told me now, that Eccles saw the
President and that is why the President sent
for Frank.
Foley:
Well, Mr. Secretary, I don't know that. home After
we saw Frank I put that together going
in the car last night.
Regraded Unclassified
170
- 11 -
H.M.Jr:
Well, after I - after last night I got dis-
turbed and I can see what is going on and I
think we ought to put it right on the line
this morning with Cushing. Right on the
line.
Bell:
I know that Jones saw the President. Whether
about this or not, I don't know, but he saw
the President yesterday morning.
H.M.Jr:
Dan, you will do what I have suggested, won't
you?
Bell:
Sure, I will be glad to.
H.M.Jr:
Let me just say this. I think I am going to
call up Frank and ask him to come over here
and I think I am going to restate my position
to him on this thing (Bank of America).
Foley:
Well, I don't think it is necessary, but I
think it might be a good precaution, just so
that you will --
H.M.Jr:
Well, I just can't afford to get in another
Associated Gas thing.
Klotz:
Neither can we.
Bell:
You would have to go away this time.
Klotz:
No, I would take gas this time before we got
started.
(Telephone conversation with Jerome Frank)
171
March 8, 1940.
10:00 e.m.
Jerome
Frank:
Yes sir.
H.M.Jr:
Good morning, Jerome.
F:
Good morning.
H.M.Jr:
Jerome? Just 80 there can't be any possible scintilla
of misunderstanding between SEC and the Treasury. I
wonder if you'd, on this Bank of America case, I wonder
if you would mind coming over this morning and getting
it directly from the horse's mouth, meaning me.
F:
Well can I - I can't this morning, because I've got a
public hearing. Can I call you after I'm through?
H.M.Jr:
Well I tell you, have you got three minutes now?
F:
Yes.
H.M.Jr:
What?
F:
Yes.
H.M.Jr:
Let me take, Just let me take a minute now.
F:
Yes.
H.M.Jr:
Save time. I just want you to know that as Secretary
of the Treasury I'm not going to be part of any agree-
ment with the Bank of America, that has any conditions
on it.
F:
Yes.
H.M.Jr:
See?
F:
Yes.
H.M.Jr:
And I am not going to sign any letter to Mr. Jones
asking for any money 26 long as there are any condi-
tions.
F:
Yes,
H.M.Jr:
By conditions, I mean the condition which they're
talking about.
F:
Yes, I understand.
Regraded Unclassified
172
2
H.M.Jr:
Settlement, with you people.
F:
Yes, I understand.
H.M.Jr:
And Just 8.6 long as they make conditions I consider
we have no agreement.
F:
Aye, sir.
H.M.Jr:
And 80 that there can be no misunderstanding, Bell and
Foley are seeing Cushing this morning.
F:
Yes.
H.M.Jr:
And stating their position.
F:
Oh that's fine, that's a tremendous relief.
H.M.Jr:
And also letting them know that the time - the
time is running against them.
F:
Yes.
H.M.Jr:
Were you under any misapprehension that there might,
we might be, how should I say, considering any
conditions?
F:
Well Ed told me, made it very plain, he showed me a
little piece of paper that had some language about
conditions and Ed made it very plain that you, your
agreement had nothing to do with any such conditions.
H.M.Jr:
That's right. And I - so that we don't have a
repetition of December '38 Bell and Foley are going
to see Cushing today and tell him.
F:
Yes.
H.M.Jr:
That we don't consider there 18 any agreement as
long as there are any conditions attached.
F:
Thank you very much for telling me.
H.M.Jr:
And I want you to get that.
F:
Thank you.
H.M.Jr:
Goodbye.
173
- 12 -
H.M.Jr:
Well, that clears that up and then if you
will do the same thing with Cushing, then
I will feel happy.
Sullivan:
Excuse me.
H.M.Jr:
Go shead.
Sullivan:
Had you finished?
H.M.Jr:
Yes, go ahead,
174
Regraded Unclassified
CONFERENCE IN UNDERSBORNTART'S OFFICE
March s, 1940 - 2,45 P.M.
PRESENT: D, V. Bell, 0. E. Cushing and
B. N. Foley, Jr.
- - -
MR. BELL. Mr. Cushing, we asked you to come down 50 we could all
understand what we had worked out on the case.
MR. FOLHY, We went over and SEX Mr. Frank last night, Mr. Bell and I,
and gave him the progres which had been worked out by the three
agencies. We teld him the program was satisfactory to the three
agencies. Ye told him also that - understood no action had been
taken by the bank insefar as the agreement was concerned. To
understood that se far as the people representing the bank were
o
concerned, they had no further questions or suggestions in
respect of 1t, but it had not been approved by the bank. To told
Mr. Frank that insofer as we were concerned we were not in any way
suggesting to his that a settlement of the difficulties between
Transamerica and s. 3. c. be influenced by this program. Insofer
as werwere concerned this progres is what the bank had to do in
order to adjust its difficulties with the Comptrollar and the
Treasury Department. the approval of the bank to the progres,
insefar as the Treasury is emeerned, would have to be an
unqualified approval. It could not be conditioned upon the
outcome of the differences with s. 1. C. The thing W want you
to understand is this - there is no connection between the two
agencies; that at the present time we are doing nothings W will
175
- 2 -
give the bank & reasonable time to decide what it wants to do in
respect of that program, Bewever, if at the meeting of the Board
of Directors next Wednesday, I believe the 12th - Tuesday or
Wednesday - this program 10 approved subject to a satisfactory
adjustment of the differences with the S. B. 0. insofer as we
are concerned that will not be satisfactory. Before the seeting
when this is submitted to the Board we want to be absolutely sure
that you understand our position and that our position is presented
to your Board of Directors. The progres should not be put up to
your Board so that the Board would get come idea that the program
might be satisfactory to us provided arrengements could be made
satisfactory to Transamerios with 8. 1. c.
MR. CUSHING, I think you referred in the early part of your state-
sent to an agreement with reference -
B. FOLEY, Program
MR, CUSHING, I will transmit this statement to the bank immediately
sother they will know what you have said, I would like to ask
this, Accuring that the Board of Directors did adjours to a date
later is the month further to ocasider the matter, would there be
any objection to that?
MR. FOLEY: The are willing, as I said, to allow the bank & reasonable
opportunity to usin up its mind. the bank must realise that time
is running against st, that there 10 a report in process of
preparetion w Exeminer Dates that will require the attention of
Regraded Unclassified
176
the Comptroller when it has been subsitted to the Comptraller.
If at that time there 10n't something from the bank in the will
of an unquallified approval of this program, the Comptreller will
be free to take such action as the 1aw permits.
MR. CUSHING: And what that action will be, do you care to indicate
to me now?
MR. FOLEY'S no, 19 are not in position to indicate that to you now,
MR, CUSHING: It is understood in our discussion here - we took the
position from the first that adjustments were involved. So far
as n were concerned any proposition or settlemmt which we
arrived at would involve 8. B. c. In other words we made no
consiteent to accept the program without
IR, BELL. I think we usde our position clear that we could not
be & party to the condition you attached,
MR, CUSHING: I think 10 presented that clearly on both sides.
MR. FOLKY, I think when you approve this propres you should do so
with the understanding that the program is a the four corners
of that abset of paper and there were no other conditions that
were incorporated in the program,
MR. CUSHING, Except 12 will know w everybody here that it we the
benk's position that actilement with So B. Co would be necessary
in connection with settlement with the Comptroller.
MR. POLEY: We look 00 that as being the bank's affair. I visi our
position to be made perfectly clear, that so for M the Comptroller
Regraded Unclassified
177
- 4 -
and the Treasury are conserned this is a progres that must be
approved by the Blok w. thout reservation and 1t cannet be made
conditioned upon settlement of matters with other agencies.
MR. CUSHING, I will transmit that statement to the bank,
MR. BELL, We don't have much control over the S. 8. c.
MR. FOLEY, It in't a question of control, I think it 10 & question
of proper relationship between departments and agencies of the
Government. That 1e an S. B. 0. matter and not a Treasury matter
and your relationship with s. 1. c. must be independent of your
relationship with the Treasury.
MR, CUSHING, That is the Comptroller's and the Treasury's position.
If you will give as & copy of this statement - it is only fair
that I should transmit to the Bank emetly what occurred here.
I think you will agree with - that is fair. Do you want to
take that under consideration?
MR, FOLEY, Yes.
MR, CUSHING, I wouldn't want to take a chance 00 carrying it in w
income
MR, FOLSY, It 10 a simple statement.
MR. CUSHING,- What reason is there that I shouldn't have & copy?
MR. FOLEY. I should like to talk that over with Mr. Boll.
MR. CUSHING, To have discussed this and made a record of what your
position is and to keep 11 in your records without giving no 4
Regraded Unclassified
178
- 5 -
copy desen't - to be proceeding along the lines # have
been presseding along up to this time,
MR. BELL, It would have to be written up, I could give you a
ring at your betel.
MR. CUSHING: All right, I will wait to hear free you before I
talk to w people,
- -
Original to On Delaws
ofies to: dar Cushing ( Sut by In toly by messanger)
am. Zoley
Cdm. Sherboudy
Conise Characey
an Bell
Regraded Unclassified
179
FEDERAL RESERVE BANK OF SAN FRANCISCO
MARCH 11, 1940
Mr. Preston Delano,
Comptroller of the Currency,
Washington, D.C.
Dear Mr. Delano:
There is enclosed a copy of a letter written
today to Governor McKee, informing him of the steps
which have been taken to carry out the provisions of
Paragraph 5 of the "Requirements of the Comptroller
of the Currency" submitted March 6, 1940, to the
Bank of America N.T.& S.A.
With kind regards to you and your assistants
with whom I had so many pleasant associations on the
occasion of By recent stay in Washington,
Yours very truly,
Ira Clark /8/
First Vice President
Regraded Unclassified
180
FEDERAL RESERVE BANK OF SAN FRANCISCO
MARCH 11, 1940
Mr. John K. McKee,
Board of Governors of the
Federal Reserve System,
Washington, D.C.
Dear Governor McKee:
This is to inform you of the steps which have been
taken in effecting arrangements to determine the value of the
banking premises of the Bank of America N. T. & 8. A. criticised
in the August 31, 1939, report of examination.
On Monday, March 11, a meeting to discuss ways and
means of undertaking the task was held with Mr. Irwin D. Wright,
Chief National Bank Examiner of the Twelfth Federal Reserve
District, Mr. W. P. Funsten, Supervising Examiner of the Twelfth
District, Federal Deposit Insurance Corporation, and Mr. R. B.
West, Vice President of the Federal Reserve Bank of San Francisco.
The last named was designated by me to serve on the committee of
three in accordance with Paragraph 5 of the "Requirements of the
Comptroller of the Currency" dated March 6, 1940.
Vice President Russell Smith of the Bank of America
N. T. & S.A. has informed me that & considerable amount of infor-
mation already has been compiled for the guidance of the committee.
As soon as the Comptroller of the Currency and the Chairman of the
Federal Deposit Insurance Corportion instruct their I espective
representatives, the committee is ready to proceed with its duties.
Chief Examiner Wright and Vice President West now are engaged in
collecting information which is available to them independently of
the records of the Bank of America N.T. & S.A.
A copy of this letter has been sent to Mr. Delano,
and to Mr. Crowley.
Yours very truly,
Ira Clark /8/
First Vice President.
Regraded Unclassified
181
March 13, 1940 12:45 A.M.
Mr. Delane's telephone conversation with Mr. L. M. Giannini
tr. Delano: This is Delano, Mario, and TO have given considerable thought
to the matter you discussed with me last evening over the
telephone and we feel here that you ought to carefully con-
sider the advisability of withholding a public statement
until such time as you have obtained your commitment from
the RFC and cleared with the RFC and the Comptroller's
Office, at least a rough outline of the amendments to the
articles of association. Now WD do not anticipate any
difficulties, you understand, on either of those two points,
but, as a matter of precedent, the Comptroller's Office
has never advised a bank to make public any details con-
cerning these changes in its capitalization until this
matter of a commitment and the necessary amendments to
the articles of association have been discussed and essential
agreement reached. No don't like to depart from that
Regraded Unclassified
182
- 2 -
precedent, Mario, you understand, or course, we understand
the position you are in and we want to be of assistance
rather than a drag in the matter but - do feel you
might be put in a false position if there was publicity
before these details have been settled.
Mr. Gianninis You can't give us a clearance now? The could say it is
subject to the contingencies mentioned in the memorandum
itself because in there it specifies that the Bank will
endeaver to work out satisfactory articles and to get
the approval of the Comptroller and & commitment.
Mr. Delano: That's true, but I - putting up to you the advisability
of doing that and making such & contingent statement prior
to having the other matters cleared. Don't you think -
can all get busy on these other matters and get them cleared
and have that firs behind you before you make that statement.
Don't you think you would be in a stronger position?
183
- 3 -
Mr. Giannimi: Well, 4. P. thinks that if the statement is to be made, the
logical time to make it is right after the meeting. They
expect something and if you give it to them now, they've
got it, and if you put it off for a few days they will begin
to feel there was nothing done, nothing required. If TWO
put it off for four or five days it just comes as an un-
expected something. If it cases out now it would be expected.
Mr. Delenos
May I suggest this? Mr. Cushing, as you know, has talked to
us concerning this publicity phase, and you know it is
difficult to talk about it 3000 miles over the telephone.
I en wondering if we could not have Mr. Cushing come in,
and, if possible, give us a draft of what you propose to say.
Mr. Giannini: Well, let no do this first. Let me talk to the committee.
I haven't net with the comittee, and it will take 3/4 of
an hour to get up to San Francisco. Let no meet with them
and if the committee favors the proposal we will prepare a
form of release and then give it to you. It will only be
four or five lines.
184
- 4 -
Xr. Delanos
I understand you want to publish the requirements verbatim
and that you will just introduce them with 8. statement.
Mr. Giannimis The will probably say something like this After several
weeks of discussion the differences between the Comptroller's
Office and the Bank have been composed along the following
lines as expressed in the following list of requirements
of the Comptroller. The Board of Directors has sasapted
the program in principle and will proceed to work out
the details as expressed in the memorandum.
Mr. Delanos
What you propose to do now is to hold the meeting and
see if your comittee is willing to put this before
the Bank's directorate right away.
Mr. Giannimis Yes.
Mr. Delanos
Then if you decide to & along on this basis will you
give me another ring?
Mr. Gianninis I will telephone you again. In any event I will not
release anything without telling you about it.
185
- 5 -
If. Delanos Well, that's fine. I understand you will call no. How,
about this Cushing matter:
the Gianninis I think that would confuse the matter. They are not up
on what TO are doing here, and I don't want them to be
disoussing it until the comittee clears it.
fr. Delanos You won't publish anything without further clearance
from me. All right, I will await your further call.
-000=
«000»
186
RE BANK OF AMERICA
March 13, 1940.
(General discussion on pending
2:30 p.m.
matters occurred during this meeting
and was transcribed separately)
Present:
Mr. Bell
Mr. Sullivan
Mr. Foley
Mrs Klotz
H.M.Jr:
Dan, at your service.
Bell:
Well, last night at 12:00 o'clock Mario Giannini
telephoned Delano.
H.M.Jr:
At 12:00 o'clock?
Bell:
12:00 o'clock last night, saying that he had --
Foley:
It is three hours earlier on the West Coast.
Bell:
had discussed all day with his Board of
Directors this memorandum of agreement and
finally they had appointed 8. committee of
directors, about seven or eight, to have &
meeting today with their lawyers to determine
what effect the acceptance by the Bank of the
terms in this memorandum would have on their
case before the SEC and they came to the con-
clusion that the acceptance of it would not in
any way prejudice their case and he thought he
could get the approval of the Board this evening
on the whole memorandum. Then he asked the ques-
tion, if that turns out the way he hopes it will,
would we object to the publicity of that memo-
randum, saying that he would like to just say
that they have had the conferences with the
people in Washington on the matters in controversy
during the past year or 60 and these are the
results of the conferences held during the past
six weeks and the Bank is going ahead and carry
out this program. Delano said that he couldn't
very well answer that at 12:00 c'clock at night
and he would like to think about it and 80 would
the people in the Treasury. So he called me
this morning at home and I told him to get the
committee together at 10:00 o'clock and I thought
that we would catch you on the way back from
the Capitol and we would tell you about it at
the time we were discussing it.
Regraded Unclassified
187
- 2 -
Well, we went over it and thought it was rather
encouraging to get this news and that we felt
that we ought to tell them that there is no
objection to the publication of the memorandum,
but we certainly didn't want to have anything
published that would have to be answered from
Washington. In other words, the same thing we
told them when they were here week before last.
By the way, I should have said that Delano
promised to call him back before 1:00 o'clock,
our time, because the meeting was set for 10:00
o'clock their time. It would be 1:00 o'clock
here, So that was the reason we had to have
the meeting this morning and get the information.
H.M.Jr:
And you phoned them?
Bell:
Yes, we phoned them about it at a quarter of 1:00.
Then when Ed came back I talked to him and he
thought we ought to tell them that we could not
agree to the publication of the memorandum unless
we saw what they were going to say in connection
with this publication, but there is some feeling
on the part of the committee that we ought to -
should be very careful as to what we do about
what they say or what we tell them they can say.
We ought to put them on their honor and say that,
"We don't want to have to answer anything from
Washington that you say in San Francisco," but
anyway, I told Delano that I thought he ought to
call Mario and tell him that it was a little un-
usual for them to want to publish this memorandum
before they have the whole agreement, the articles
of association and their commitment from RFC, and
that they have never in the past given any Bank
advice other than to hold off on their publicity
before they have the strings tied up.
He said, "Well, I think that is good -- " He told
them that and he said, "I think that is good
advice." He said, "I am on the horns of a dilemma
out here --"
H.M.Jr:
Who was that?
Bell:
Mario. He said, "We have got this meeting going
on and of course it is publicly known and all the
188
- 3 -
stockholders know it and they are all anxious,"
and he said, "There is some feeling that some-
thing ought to be said after this meeting is
over." But he said, "Anyway," he said - and then
Delano said that he wanted to see what he was
going to say in connection with the publicity
and he said, "Well, I will tell you two things.
One is," " he said, "I won't do anything until I
call you back."
H.M.Jr:
Who is this?
Bell:
Mario said this to Delano. He said, "We will
go into this meeting at 10:00 o'clock," 10:00
o'clock their time, "and discuss it," and he
said, "There won't be anything done until I
talk to you further," and he said, "You can
see anything that we say publicly,' and that
1s the way it was left at 10:00 o'clock.
H.M.Jr:
Well, there is one thing that strikes me right
in the face. First is this, and that is, if
I were Jesse Jones, if I were in his shoes, and
this was done without asking him first, I would
feel that all of the agencies were putting
pressure on him, which wasn't fair.
Bell:
Well, that was discussed this morning, too.
H.M.Jr:
I mean, if I was Jesse, I would be good and sore.
Bell:
We raised this question in our meeting this morn-
ing and felt that that was & point that we would
have to clear up before they could go ahead and
publish this, but everybody feels that they have
got some commitment from Jesse.
H.M.Jr:
Well, I know, but --
Bell:
But I think there is a feeling that that should
be cleared up.
H.M.Jr:
If I had to sign this thing all alone, I would
ment with Jones and had the stock and everything
simply say that until they had made this commit-
settled, they should wait.
Bell:
Well, he has --
Regraded Unclassified
189
H.M.Jr:
If I was running this thing alone, I would
simply say, "Now, gentlemen, we have been at
this thing for two and a half years and if there
is any prospect of it being cleaned up, just 88
soon as you have got the money and everything
else, that is the time. Now, if you people
want to say or want us to say that we are making
progress with the management, we are willing to
say that. We have never said anything before.
Or you can say it." But as to what 1s in that
agreement, I would say no. That is the way I
feel about it. I have got & committee set up
to handle it, but I certainly think no matter
what you do, Jesse Jones should be called up.
Bell:
There was B. feeling this morning that he should
be kept advised.
H.M.Jr:
Up to now, I can say to Jesse or anybody else,
"Well, Jesse, the Bank examining agencies were
doing the conferring and the dealing and you
don't belong in this, and I can tell him that
and tell him it was none of his business and
he should keep out of it, but once it gets to
the question of lending the money for preferred
stock, that is his business.
Bell:
That is right.
H.M.Jr:
And that is mentioned in the publicity, so I
think he ought to acquiesce.
Bell:
Well, I think there was a feeling that he should
be kept advised and he should know about this.
H.M.Jr:
Personally, I am just telling you about this.
You can't have more than one person or more than
one group handling this thing. I would rather
see no publicity than that.
Bell:
Well, we are supposed to get another telephone
call this evening after this meeting.
H.M.Jr:
What do you think, Ed?
Foley:
that Jesse won't take any position until we write
I agree. Dan raises the question about Jesse Jones,
him a letter and I still feel very strongly and
Regraded Unclassified
190
- 5 -
I told this to Dan that we should not write any
letter to the RFC until we have an unqualified
approval of the program from the Bank and I
don't think Dan agrees with me on that.
Bell:
No, I can't see --
Foley:
My instincts tell me that is the only wise,
conservative thing to do.
Bell:
I don't think it makes much difference at this
stage of the negotiations, but I can't see much
harm in putting this thing up to Jesse, based
on this memorandum as and when the Bank agrees
to it.
H.M.Jr:
But nothing in writing from me. I won't write
any letter to Jesse until the Bank agrees.
Bell:
That is a decision you have to make and I told
him you wouldn't make that decision until you
have to cross the bridge, because there might
be circums tances --
H.M.Jr:
No, because this letter is going to be different.
It is going to be one of recomendation from me
to the President, with the President writing
approval across the bottom of it and when I get -
I have just reviewed this thing and I am afraid
that I can't be argued out of this. My position
is this: When the Bank gives us an unqualified
approval of this memorandum, then I want the
people who wrote the memorandum to accompany me
to the President, explain the memorandum to the
President, and at that time I will present a
letter addressed to the President, I mean addressed
to Jesse Jones, with my signature, for the Presi-
dent to countersign, but I am not going to cross
the street until I can say, "Mr. President, the
Board of Directors of the Bank of America have
approved this."
Bell:
Well, I think it is unfortunate that we can't
go on with these informal negotiations with
Jones. Now, of course, it is unfortunate that
Jones has taken the attitude he has, but this
whole thing seems to me to be cleaned up and
an agreement all ready to sign, and it would
take but a. few hours to finish it, but because
Regraded Unclassified
191
- 6 -
of his attitude now, we are stymied.
H.M.Jr:
No we are not. You asked me, ding to the air-
port, whether they could be getting ready in-
corporation papers, et cetera, and I said yes.
Bell:
It is all right from your standpoint, but it
isn't all right from his standpoint. You have
never been the stumbling block in this thing.
H.M.Jr:
Wait a minute, just so we understand each other.
The time you and I and Ed rode to the airport
Friday, from that time I haven't discussed this
with anybody, so my position isn't a bit dif-
ferent than it was Friday afternoon after Cabinet
and I haven't discussed it with Ed or anybody
and I said at that time I wouldn't do it. I
am not saying anything new. I haven't discussed
it with anybody. I am just where I was Friday
afternoon.
Bell:
I appreciate that.
H.M.Jr:
Have you talked to Jones since then?
Bell:
No. Jones hasn't called me since the time I told
you about it.
H.M.Jr:
Do you want to make any contribution?
Sullivan:
No, sir, I don't think I know enough about it.
H.M.Jr:
I want you to know about it.
Bell:
Well, there is nothing for us to do at the present
moment until we hear from Giannini, then.
H.M.Jr:
There is only one thing I might suggest. Either
you or Delano call up Jones and say what is going
on and we want to give him the courtesy of letting
him know. Now, would he go along on the publicity,
let this thing be released. Now that is my only
suggestion.
Foley:
Has he seen a copy of the program, Dani
Bell:
Well, not from us. At one time during the ne-
gotiations, about the middle of them, I had lunch
192
- 7 -
with him and he pulled a copy of the program
out of his pocket. Some representative of
the Bank apparently gave it to him. He didn't
get it f us.
H.M.Jr:
You were fearful and had reason for being
fearful, when I asked you to have that meeting
with 0. K. Cushing with a stenographer present,
that that might upset the apple cart, but evi-
dently it didn't.
Bell:
No, I was only fearful of the stenographer, but
I don't think it has made much difference.
H.M.Jr:
Well, I think either you or Delano could tell
Jones what has happened and ask him about the
publicity and how he feels about it. Otherwise,
I have no suggestions, but I think he ought to
be told that.
Foley:
Don't you think, Dan, that in view of what
developed at the meeting of the Board yesterday,
that conversation we had with Cushing didn't
do any harm and it might have done some good?
Bell:
No, I don't think it has done any harm.
Foley:
And it might have resulted in the Board deciding
that they couldn't equivocate and that they had
to face this thing as a separate issue and either
accept or reject the program, independently of
what Transamerica and SEC work out.
H.M.Jr:
That is the way it looks. It looks as though
they saw that we weren't bluffing and that they
had to fish or cut bait and SEC was a separate
matter. That is the way it looks.
Bell:
I think they feel that they are not going to
settle their problems at the SEC.
Foley:
I thought that all along.
Bell:
And John McKee tells me this morning --
H.M.Jr:
Well, does that cover the thing? Is that all right,
Dan?
Bell:
Yes, sir.
Regraded Unclassified
COPI
193
MARCH 14, 1940
L. M. GIANNINI,
PRESIDENT,
BANK OF AMERICA NT&SA,
SAN FRANCISCO CALIFORNIA.
YOUR WIRE DATED MARCH THIRTEEN NINETEEN FORTY RECEIVED STOP
THERE IS NO OBJECTION TO STATEMENT AS OUTLINED THEREIN STOP
UPON RECEIPT OF FORMAL APPROVAL OF PROGRAM ON THE PART OF
YOUR BOARD OF DIRECTORS THE TREASURY WILL INITIATE STEPS WITH
THE RECONSTRUCTION FINANCE CORPORATION LOOKING TOWARD A
COMMITMENT FOR ADDITIONAL CAPITAL AS CONTEMPLATED BY THE
PROGRAM.
PRESTON DELANO
COMPTROLLER
Regraded Unclassified
194
TREASURY DEPARTMENT
TELEGRAPH OFFICE
lw
W 5 M 225 NT
1940 MAR 14 AM 846
San Francisco California March 13 1940
HON PRESTON DELANO
COMPTROLLER OF THE CURRENCY
PURSUANT TO THE UNDERSTANDING BETWEEN MR CUSHING OUR COUNSEL AND YOUR
OFFICE THAT NO PUBLICITY WOULD BE RELEASED BY EITHER SIDE WITHOUT FIRST
SUBMITTING IT TO THE OTHER I WISH TO ADVISE YOU THAT WE HAVE CALLED AN
ADJOURNED MEETING OF OUR BOARD OF DIRECTORS FOR NINE THIRTY TOMORROW
MORNING. AT THAT MEETING WE PROPOSE TO SUGGEST THAT A PRESS RELEASE BE
AUTHORIZED AFTER APPROVAL BY THE BOARD OF THE PROGRAM SUBMITTED TO US AS
BEING QUOTE REQUIREMENTS OF THE COMPTROLLER OF THE CURRENCY UNQUOTE. THE
RELEASE WILL BE IN THE FORM OF A STATEMENT BY ME AS FOLLOWS QUOTE IN LINE
WITH OUR POLICY TO TAKE THE PUBLIC INTO OUR CONFIDENCE I AM PLEASED TO
ANNOUNCE THAT AFTER SEVERAL WSEKS OF DISCUSSION THE DIFFERENCES BETWEEN
THE COMPTROLLER'S OFFICE AND THE BANK HAVE BEEN COMPOSED ALONG THE LINES
AS EXPRESSED IN THE ATTACHED LIST OF REQUIREMENTS OF THE COMPTROLLER.
THE BOARD OF DIRECTORS ON RECOMENDATION OF ITS SPECIAL COMMITTEE HAS
ACCEPTED THIS PROGRAM AND WILL DO ITS PART TO WORK OUT THE DETAILS AS
OUTLINED THEREIN UNQUOTE. FOLLOWING THIS INTRODUCTORY PARAGRAPH WE
PROPOSE TO INSERT IN FULL THE QUOTE REQUIREMENTS OF THE COMPTROLLER OF
THE CURRENCY UNQUOTE WITH THE EXCEPTION OF THE CAVEAT. WILL YOU
PLEASE CONSIDER THIS AND LET ME HAVE THE BENEFIT OF YOUR OPINION REFORE
THE BOARD MEETING IF YOU CAN. REGARDS.
L M GIANNINI PRESIDENT
BANK OF AMERICANT&SA
738 A
Regraded Unclassified
195
March 6, 1940
No. 4
REQUIREMENTS OF THE COMPTROLLER OF THE CURRENCY
1. As soon as possible, and in any event not later than June 30, 1940,
Bank of America, National Trust & Savings Association will add
$30,000,000 of additional capital funds by the issuance of common
or preferred stock, or both, and the Bank will, prior to April 1,
1940, apply for the approval of the Comptroller of the Currency to
such increase. The Bank will endeavor to obtain & commitment from
the Reconstruction Finance Corporation to purchase or lend upon
preferred stock in the amount of $30,000,000 prior to April 1, 1940,
and if preferred stook is to be sold, will endeavor to obtain an
agreement with the Comptroller of the Currency upon the terms of
the amendments to the articles of association by April 1, 1940.
2. Immediately upon obtaining the new capital the Bank shall set up
an unallooated reserve of $6,900,000.
3. The Bank shall obtain additional security satisfactory to the
Comptroller of the Currency to secure the contracts of California
Lands, Ino. and Capital Company with the Bank, and the contracts
of Capital Company with Merchants National Realty Corporation.
Such additional security shall be in an amount equal in value
to the difference between the unpaid purchase price upon such
contracts and the value of the property thereunder, as such
value appears in the schedule contained in the report of exam-
ination begun August 31, 1939. All of such contracts shall be
196
2 .
eliminated from the assets of the Bank and Merchants National
Realty Corporation by December 15, 1943.
4. All premiums on bonds in the Bank's investment portfolio shall
be emortized out of surrent earnings (other than bond profits) to
maturity, or to call date, if any, and amortisation previously
reserved on bonds sold at book lue or higher may be returned to
the undivided profits account. Current bond profits shall be used
to take care of current losses, and any bond profits not 80 used
shall be passed to a reserve for losses of any character until in
the opinion of the Comptroller of the Currency such reserve is
adequate. However, this reserve for losses, plus the amortiza-
tion reserve need not exceed the total premium account.
5. The Bank shall, as soon as possible, furnish to a committee
composed of the Vice President in Charge of Examinations of the
Federal Reserve Bank of San Francisco, or some officer of the Bank
designated by him, the Supervising Examiner of the Federal Deposit
Insurance Corporation for the Twelfth District, and the Chief
National Bank Examiner for the Twelfth Federal Reserve District,
all obtainable records and information with respect to the
acquisition of each banking premise oriticised in the report of
examination of August 31, 1939, including those shown on the Bank's
books and in its investment in Merchants National Realty Corporation,
dating back to the time such premise was acquired either by the Bank
or any member (either bank or company) of the group presently
or then comprising the Transamerica organization.
Regraded Unclassified
197
3
The committee shall consider the fair value of each premise at
the time of such acquisition, and the special conditions which
had to be net in fixing the price paid. From these considerations,
the committee shall determine the mount which shall be used by the
committee as the estimated cost amount of each premise to the Bank.
The value of each premise shall then be established at such
estimated cost amount, plus the amount of any expenditures sub-
sequent to acquisition found by the committee to have been appro-
priately capitalized, less the appropriate amount of depreciation
at the depreciation rate allowed by the Bureau of Internal Revenue
for each year of ownership. The unallocated reserve set up by
the Bank shall be reduced by the difference between the present
carrying value of each such premise and the value of such premise
as determined by the committee in the manner hereinabove stated.
The decision of a majority of the members of the committee shall
be binding. The remainder of such reserve, if any, may be
returned to the undivided profits account. A partial release
of the reserve, or a decrease in the amount of the reserve to
be set up, may be made as soon as that procedure is justified,
in the opinion of the committee.
6. The aggregate amount of obligations, as defined in Section 5200
United States Revised Statutes, of Transamerica Corporation and
all subsidiaries in which it owne or controls a majority interest,
to the Bank, will be brought within the limitations and exceptions
198
-4- -
of Section 5200, United States Revised Statutes, for any one borrower
by July 15, 1942, and thereafter the aggregate amount of such
obligations will not be permitted to exceed such limitations and
exceptions. The existing obligations of Transamerica or its
subsidiaries now held by the Bank will be eliminated by July 15, 1945,
and no new loans will be made to Transmerioa or its subsidiaries
secured by the stook of subsidiaries of Transamerica. This paragraph
shall not apply to obligations of Capital Company and California Lands,
Ino. arising out of real estate sales contracts, which contracts are
covered in numbered paragraph (3) hereof.
The Bank may accept Transamerica shares as security for mall loans
for business purposes where the borrower demonstrates a capacity
to liquidate the loan otherwise than through the sale of such shares.
No loans for speculative purposes will be made on the security of
such shares.
7. The Bank shall eliminate the amount of investment in stock under
option on the basis of the program now in effect.
8. The Bank shall give vigorous attention to the elimination or correo-
tion of any real estate holdings or real estate loans that may not
conform to statutory requirements.
9. The Bank shall initiate steps to ascertain whether it is entitled
to recover any part of the sums paid by it to Transamerica General
199
- 5 -
Corporation in connection with fidelity losses, and if it is con-
cluded the Bank is entitled to recover, it shall take steps to
recover the same.
10. The Board of Directors of the Bank will approve the foregoing by
April 1, 1940.
This memorandum is submitted without prejudice to the
right to require full and complete compliance with the Comptroller's
criticisms and suggestions, to resort to sanotions provided by
law, or to continue to list in reports of examination assets that
are subject to oriticism until such oriticisms have been corrected
or eliminated, Neither this memorandum nor its contents shall
be used by the Bank or anyone else on its behalf without the
consent of the Comptroller of the Currency for any purpose except
for its information, unless and until the provisions hereof are
accepted and complied with by the Bank.
For the Federal Reserve System
For the Federal Deposit Insurance Corporation
For the Comptroller of the Currency
Regraded Unclassified
200
RE BANK OF AMERICA
March 14, 1940.
10:10 a.m.
Present:
Mr. Bell
Mr. Foley
Mr. Delano
Mrs Klotz
Mr. Schwarz
H.M.Jr:
Professor Bell?
Bell:
Well, as I told you yesterday evening, Giannini
had called and said that he was having G. meeting
of this special committee and that they hoped
to conclude last night whatever their recom-
mendation would be and they also hoped that they
could give out some publicity at the end of the
board meeting, which was just adjourned until
this special committee could have their meeting
and get their recommendation. He called Delano
late last night and said that he was sending a
wire this morning as to what he intended to give
out if the board approved this memorandum today,
and they are going to have their meeting at 9:30,
San Francisco time, which means 12:30 our time,
and this 18 the telegram.
"Pursuant to the understanding between Mr. Cushing,
our counsel, and our office, that no publicity
would be released by either side without first
submitting it to the other, I wish to advise you
that we have called an adjourned meeting of our
Board of Directors for 9:30 tomorrow morning."
That is this morning.
"At that meeting we propose to suggest that B
press release be authorized after an approval
by the board of the program submitted to us, as
being 'requirements of the Comptroller of the
Currency.' The release will be in the form of
a statement by me as follows.
"In line with our policy to take the public into
our confidence, I am pleased to announce that
after several weeks of discussion the differences
between the Comptroller's office and the bank
have been adjusted along the lines as expressed
in the attached list of requirements of the
tion of its special committee has accepted this
Comptroller. The Board of Directors in recommenda-
program and will do its part to work out the
details as outlined therein.'"
Regraded Unclassified
201
- 2 -
Then he says, "Following this introductory
paragraph, we propose to insert in full the
'requirements of the Comptroller of the
Currency,' with the exception of the caveat
at the end."
The caveat, as you may remember, was the
reservation that in signing this memorandum
we don't give up any of our rights.
Foley:
That was only to protect us in the event it
was accepted.
Bell:
Yes. Now, if the board is going to approve
this, they want the caveat off.
H.M.Jr:
They don't like the caveat?
Bell:
"Will you please consider this and let me have
the benefit of your opinion before the board
meeting if you can. Giannini, President."
H.M.Jr:
Wouldn't it be nice to have Delano in here?
Bell:
Yes. I think probably Leo Crowley is in there,
too.
H.M.Jr:
Well, what do you think? What have you done
about Jones?
Bell:
I brought Jones up to date last night as to
what we were doing and he still wants the
request.
H.M.Jr:
Jones wants to what?
Bell:
Jones couldn't see that much harm would be done
to the case 1f publicity went out, but I think
he would prefer a request from you so he could
go ahead and work and I don't think he is going
to allow the informal negotiations to go along
without the request.
(Mr. Delano enters the conference)
Delano:
Leo hasn't shown up yet. I am wondering if we
couldn't have him paged.
202
- 3 -
H.M.Jr:
Well, this is after our 9:30 and I just was
talking about this and Bell said you were
waiting and I wanted the benefit of your
advice. Well, the point that I made yester-
day was that I wanted Mr. Jones brought up
to date and Bell was just telling me - but
does he object to this publicity in any way?
Bell:
Well, he hasn't seen it, but I don't think
he would object to some publicity, but I think
we ought to clear that particular language
with him before we say no objection to the
bank. I don't think we want to approve that,
do you, Ed? We will just say no objection.
Foley:
I think that is right.
H.M.Jr:
You want to say what?
Foley:
No objection. We don't want to give an affirmative
approval to that statement. Dan's feeling, I
take it, is that that may precipitate some dis-
turbance on the West Coast and it may result in
actions and we wouldn't want to be tied in.
Bell:
I don't think we ought to get in the habit of
approving the publicity of any bank.
Foley:
That is right.
Delano:
That statement in the first line there isn't quite
accurate. We didn't make an understanding with
them that we would trade publicity.
H.M.Jr:
I was going to ask about that.
Delano:
That is not a direct statement. You remember
what was discussed.
Bell:
We told Cushing that we thought that the publicity
on this matter, after it was accepted all around,
should come from the bank and that the statement
that the bank issued should be in such form that
there would be no necessity for any answer from
Washington on that statement and he fully agreed
with that.
Regraded Unclassified
203
- 4 -
H.M.Jr:
Well, now let me just digress a minute. Here
I have in my hand a clipping, "Bank of America
Votes Dividend for Two Quarters.' How can
they vote the dividend for $2.40 a share to
be paid twice and still live up to this memo-
randum? How do they know that they can?
Delano:
They have got enough in undivided profits to
carry them that far, Mr. Secretary. They can
do it that far. After that, it depends on
the earnings.
H.M.Jr:
Is that keeping faith to declare $2.40 divi-
dends and then they declared two quarterly
dividends now and then they come along and
give you a memorandum to give out publicly?
If they had done one quarterly dividend, that
might be something, but to do the two.
Foley:
They meet twice a year and each time - they
meet in September and in March.
H.M.Jr:
But it just makes me believe that they are not
going to do anything different than they have
ever done.
Foley:
I think everybody expected that this March divi-
dend would be declared and that this program
wouldn't affect a March dividend.
H.M.Jr:
But they are declaring March and June.
Foley:
Well, that is their regular practice.
Bell:
It is a semi-annual meeting and I think we all
expected that would be done and we couldn't
prevent it and if we had tried to prevent it,
these whole negotiations would have fallen
through.
H.M.Jr:
If they are going to give this publicity, why
don't they say, then, give it full force. This
memorandum which they are talking about has been
agreed to by the Board of Directors of the
Federal Reserve and the Board of Directors in
FDIC and the Comptroller. I think that certainly
ought to be in there.
Regraded Unclassified
204
- 5 -
Bell:
Well, of course this memorandum has been
headed at all times, "Requirements of the
Comptroller of the Currency."
Foley:
That is right. This arrangement and the
differences are between the Comptroller and
the Bank. I think you would want to consider
that, Mr. Secretary, tying in Fed and FDIC.
Delano:
I am afraid that would somewhat impugn all
responsibility and our prestige.
H. Jr:
I am raising these points.
Delano:
Don't you think 80, Ed?
Foley:
I do.
Bell:
I wouldn't want the Treasury to be in the
position of having publicly announced that we
had had these other people in here.
H.M.Jr:
I think that is right.
Bell:
I think the differences are, between the Comptroller
and the Bank and not between the other agencies.
Foley:
And the other agencies sat in in an advisory
capacity and helped us work this out and approved
it, but the settlement has to be between the
Comptroller and the Bank.
H.M.Jr:
I think that the chances are better than fifty-
fifty that this publicity will be good.
Delano:
I am going to say this. Down in our shop I
just had our three fellows in on that and they
just can't believe the Bank is going to do this.
It just simply puts the Bank in a confessional,
as far as we are concerned. I think it 1s darned
good publicity from our standpoint.
Schwarz:
It is the best possible means for them to be -
as Mr. Delano says, it is an admission on their
part.
H.M.Jr:
They must be losing business.
Regraded Unclassified
205
- 6 -
Delano:
Something 1a happening there. I just can't
understand this.
Bell:
There is one thing --
Delano:
Something is happening. We are keeping & check
on that, though, Mr. Secretary.
H.M.Jr:
There must have been something happened.
Delano:
I think what has happened, I think there is some
dissension of the Board. I think they are being
forced to do this.
H.M.Jr:
How does it strike you, Public Relations?
Schwarz:
It strikes me fine. On this basis, if we take
the position that it was their original action
which created the situation, that we merely
called attention to it and said this wouldn't
do - now, they are, after all this fussing and
examination, they say, "All right, we have
agreed to mend our ways." It puts us in a
beautiful position.
Bell:
I am just wondering if we can find out if there
will be any talking on the side after this thing
is --
Schwarz:
You will see it soon enough in the papers.
Bell:
There is one thing that happened yesterday that
I am a little curious about and that 18 that
this contract with Giannini came directly from
Giannini and not through Cushing, Cushing has
been the great moderator in this whole negotia-
tion with Giannini and Ferari. He has done a
great job and he doesn't know a thing about
this.
Delano:
Just before I came in here, Mr. Cushing called
me and told me he had a copy.
Foley:
He knows all about this, don't worry. That 1a
a good game, too.
Bell:
He didn't know B. thing about it. He didn't tell
us that, but he told John McKee he hadn't heard
a thing about this special committee and he
Regraded Unclassified
206
- 7 -
didn't know about this telephone call, because
he had a date with John McKee,
H.M.Jr:
Cushing called you?
Delano:
About five minutes before I came in here. I
didn't have a chance to tell you, Dan. He
called me and said he had a copy of this thing
and wanted to know how I felt about it and I
said hat I had no feeling.
H.M.Jr:
There must be something there that I am not
smart enough to see, but my guess is that it is
all right.
Delano:
It looks fine to me, Mr. Secretary. I think it
puts us in an excellent position.
Bell:
The thing that 18 worrying me B. little, Mr. Secre-
tary, they are going to make this public this
afternoon, probably, after a couple of hours
meeting of the Board and the President hasn't
seen it or heard anything about it. You remember
when we were in here that time and discussed the
memorandum, the President was away. He said at
that time --
H.M.Jr:
I will just have to - I told you that I was satis-
fied and agreeable and I will take the responsi-
bility. If the President is displeased, he will
have to be displeased with me.
Bell:
Do you object to this publicity before the Presi-
dent 8068 it?
H.M.Jr:
No. I am taking full responsibility on this. It
1s between the President and me and I don't - I
am just telling you, I will take responsibility
for you (Delano) and for Bell.
Bell:
This thing looks good at the moment.
H.M.Jr:
I mean, if he says anything to mê, I will say I
thought it was all right and I am willing to take
the responsibility. If he doesn't like it, he
can be angry at me but the thing has got to go
through.
207
- 8 -
Foley:
You can explain that it came BO quickly you
didn't have e. chance --
H.M.Jr:
Oh, I wouldn't bother. It is just one of these
things that I have got to go ahead on and do
and he will be satisfied. Then if anything
comes up between the White House - I will take
full responsibility.
Delano:
This thing lifts the weight off me.
H.M.Jr:
After all, the other time when I wasn't satis-
fied in December, I went to the President and
the President wasn't satisfied and I wasn't
satisfied, but I am satisfied now and I am
99 percent sure he will be pleased.
Bell:
Now, in saying that we have no objection to
this publicity, should we say to the Bank that
as soon as we have received formal notice that
the Board has approved or accepted this program,
we will then make the request to the RFC if the
Bank so desires?
H.M.Jr:
Yes, that has been my point. And I wouldn't
move with the RFC until I knew that the Bank
accepted first. Just as sqon as the Bank has
done it, then I will change my suggestion now
in view of the fact that this will be given
out. Then I am not going to bring the whole
gang over because it is too late and I will
simply walk over there, most likely with the
four of us, and simply say, "Now, Mr. President,
here is the thing. These are the men. I have
approved this thing. Now, I am writing this
letter and before it goes out, you might want
to ask some question, " but instead of taking
the whole group over, we will do it this way.
Bell:
That is all right.
Delano:
Now, in drafting this thing to go out, I suppose
it is to be a very simple statement, simply
even date. We have no objection to the course
saying, "We are acknowledging your telegram of
of action you suggest."
Regraded Unclassified
208
- 9 -
H.M.Jr:
Well, you three get together. I have no
objection.
Delano:
Do you want us to contact Mr. Jones first
on this thing?
H.M.Jr:
I don't know what Dan has done.
Foley:
I think Dan ought to call him and read this
telegram.
Bell:
I think 80, keep him up to date now.
H.M.Jr:
I think so, that is the point I made Friday
and I made it again yesterday, that Jones
ought to be kept up to date - I told Dan
yesterday I am willing to say publicly and
privately as long as this was a bank examination
business, it was none of Jones' official busi-
ness, that this was B. matter of the bank
examining agencies negotiating, but once it
gets to the state that it 18 the matter of
money, I admit that it 20 his business.
Foley:
He is directly involved in this statement also,
because there is a reference to the RFC in
this statement.
H.M.Jr:
That is right, 80 I told Dan yesterday that he
ought to tell Jones all about this thing and
bring him up to date. I think you ought to
see this thing is cleared. Up to now, Jones
can't - there is nothing that he can object
to. In fact, he ought to be tickled to death
and I have stood for him in saying that I
wouldn't write the letter until the Bank had
formally approved it. Now, just as soon as
the Bank formally approves it, if 1t happens
today, I will ask for an appointment for him
tomorrow morning before we go over to see the
President. I am not going to do any con-
gratulating yet.
(At 11:35 a.m. the following conversations
took place:)
(Telephone conversation between Mr. Bell and
Jesse Jones)
Regraded Unclassified
209
March 24, 2940.
11:35 a.m.
Dan Bell: Hello,
Operator: Mr. Jones. Go ahead,
Jesse
Jones:
Hello.
B:
Jesse, I Just wanted to read you the draft of
telegram that we've prepared to BR to Giannini.
J:
All right.
B:
Over Delano's signature.
J:
Yes.
B:
"Your wire dated March 13, 1940 received. There
is no ob Jection to statement as outlined therein.
Upon receipt of formal approval of program on the
part of your Board of Directors the Treasury will
initiate stens with the Reconstruction Finance
Corporation looking toward a. commitment for
additional capital as contemplated by the program."
Is that all right?
J:
Perfectly, Now, that's all right. I talked with
Mario, he told me just a while ago.
B:
Yes.
J:
And I told him of your talk and that I was glad
that they had - he calleine last night after I had
gone to bed and I didn't answer. He did exactly
what I asked him to do, suggest that he do, that
is to say acceptance in the fewest words he could
possibly say.
B:
I see.
J:
If one line would do it O.K. If it took two
all right, but not to go more then two or three or
four. That wes my thought about it.
B:
Oh I think they've been wiss to do that.
J:
Well now, he 18 hoping very much that there will be
no publicity from this end regarding preferred stock
because he's going to try to get his money other-
wise.
B:
Yes. Well we're not going to say anything here and
210
2
we hone on the other end they will say nothing
except what's in the statement.
J:
Well that's what they'll say. Now I said to him,
"What are you going to do when fellows ask you
about this thirty million dollars?" "Well", he said,
"we'll say that that's a matter for the stockholders
to determine, we haven't yet decided. We could -"
he said, he don't know what he will say in words,
but he said that they can either sell it preferred
stock, or common stock or whatevermight go to the
RFC. So anyway I think if we can, he'll be pleased
to know and I know I suggested to him that he tell
Friar. He's going to call Friar when they've
finished their meeting and tell him to TO on over
and see Delano.
B:
I see.
J:
And I said, "Well now then let him request that
no publicity be made from this end, about the
preferred stock."
B:
I see. Well we were going to call Cushing over
and ask him to be sure that there'd be no
publicity.
J:
O.K. Well that's fine.
B:
In either place.
J:
O.K.
B:
Thank you.
J:
Goodbye.
211
- 10 -
Bell:
He said Giannini called him last night and he
told him to put this statement in as few words
as possible, see, after they followed out his
suggestion.
H.M.Jr:
Well, he knew äll about it. That is all the
more reason for it.
Bell:
Sure.
H.M.Jr:
He knew all about it.
Bell:
Sure. They all know about it. Everybody in
town that has been connected with it knows
about it.
212
L($) MAR 14 PM 532
WP 193 FC TWS Paid 4 mins
FXD San Francisco Calif March 14 1940 200 P
THE HON PRESTON DELANO
COMPTROLLER OF THE CURRENCY WASHN DC
I AM PLEASED TO ADVISE YOU THAT PURSUANT TO THE RECOMMENDATION OF
ITS SPECIAL COMMITTEE THE BOARD OF DIRECTORS OF THE BANK OF AMERICA
HAS TODAY APPROVED THE PROGRAM DESIGNATED REQUIREMENTS OF THE
COMPTROLLER OF THE CURRENCY RESULTING FROM THE RECENT CONFERENCES
HELD IN WASHINGTON
L M GIANNINI BANK OF AMERICA NT & SA
Regraded Unclassified
213
RE BANK OF AMERICA
March 15, 1940.
Mr. Bell
10:00 a.m.
Present:
Mr. Schwarz
Mr. Tietjens
Mr. Sherbondy
Mr. Crowley
Mr. Delano
Mr. Folger
Mr. Upham
Mr. Mulroney
Mr. Foley
Mrs Klotz
H.M.Jr:
Well, I just want to say, gentlemen, I think
that this is the longest fight I have been in
on the financial front and everybody here in
the room that has lasted during this fight
deserves a tremendous amount of credit. I
am very happy and I am very proud of the
people that have been associated with me. It
has been a long fight. I say, "lasted" ad-
visedly, because it took a different Comptroller -
and I am going to say something here - it took
a different Undersecretary in order to - and a
different President of the Bank in San Francisco
and a different Bank Examiner out there, to get
this thing through and if it hadn't been for
the people in the room and the changes which
took place, we wouldn't have got what we have
today and the last thing that Mr. Oliphant did
as General Counsel before he died was to give
us & letter on this thing. It was the last
thing he did before he went to the hospital
and Ed has carried on in the best tradition.
I will never forget that night.
So, it is encouraging once in a while if 8. fellow
stands up for what is right to know that he will
come out on top. It is the people in the room
here who have helped me, and nobody else. It
was pretty tough going, too.
Bell:
At times.
Foley:
The lawyers over at SEC called up this morning
to congratulate us. They said they thought it
was B. swell victory.
Regraded Unclassified
214
- 2 -
H.M.Jr:
Well, something. when the lawyers congratulate us, it is
Klotz:
You asked for it.
Bell:
The publicity was very good. The Washington Post
carried A little item that the dividend P 1cy
would be continued, but it wasn't a quote, and the
other papers didn't carry it, 50 it must have been
an assumption.
H.M.Jr:
Well, after it is over I may do a little talking.
I will wait until then. I will guarantee to be
good until then, but I won't guarantee what I
will say after that.
Crowley:
Let them get the money in there first.
H.M.Jr:
I have taken an awful lot.
Crowley:
That is right. I will tell you, you took a lot,
but you should have been in the filibuster we
were in and all the conversation we listened to
for days and days and days.
H.M.Jr:
Well, Eccles called me up last night at a quarter
of 4:00 and it is no secret, he said, "We are
awfully glad --" because he had had B. bear by
the tail now for he didn't know how long and he
didn't say it, but I could have said, "You didn't
know whether the bear would eat you.
Foley:
He could only 866 the bear's shadow. He didn't
have him by the tail.
H.M.Jr:
Eccles was 80 worried that the President might
have some fault to find with us and I asked to
see the President and bring you gentlemen over
and the answer was that I should please go ahead
and handle it. That was the purpose of this
meeting, but I did want - I know what you fellows
have been through and it has been hell.
Crowley:
It is the first time that Giannini has ever
recognized any authority in bank supervision.
This 1a the first time.
215
5
H.M.Jr:
Well, it ought to be & great thing for the
permanent staff like what you (Folger) repre-
sent and down the line, and 30 forth and 80
on. When it 1s over we can do a little crowing,
but I can afford to wait. It 1s a happy day
for me.
We have got to get this letter out and I think
it is now up to Cy to get busy.
Klotz:
He doesn't know what you mean.
H.M.Jr:
"Dear Mr. Jonest
"There is enclosed for your information a copy
of the 'Requirements of the Comptroller of the
Currency', dated March 6, 1940, with reference
to the Bank of America National Trust and Savings
Association, San Francisco, California. These
requirements have been agreed upon by the Comp-
troller of the Currency, the Board of Governors
of the Federal Reserve System, and the Federal
Deposit Insurance Corporation, and have been the
subject of recent conversations between the
Comptroller of the Currency and the representa-
tives of the Bank.
"As appears from the requirements, it is concluded
that the capital structure of the Bank should be
strengthened. With the approval of the President,
I, therefore, request that the Reconstruction
Finance Corporation make available to the Bank
additional capital funds in the amount of
$30,000,000. This request is made pursuant to
the authority of Section 304 of the Act approved
March 9, 1933 (Public No. 1 - 73rd Congress), 8.8
amended. This Bank appears on Schedule National
No. 391.
"It is understood that, as is customary, the Bank
will agree upon amendments to its articles of
association satisfactory to the Reconstruction
Finance Corporation and the Comptroller of the
Currency. If the preferred stock is to be sold
and to be retirable at B. premium the usual con-
dition should apply, namely, that in the financial
statements of the Bank the preferred stock item
will be followed by an explanatory note disclosing
the dividend rate payable on such stock and the
216
- 4 -
subscription price upon which dividends will
be based and repayment made in the event of
retirement or liquidation of the stock. This
explanation should appear in all of the Bank's
financial statements, including statements re-
quired to be made and published by law 88 well
as statements made in counter-slips and in all
other forms of advertising and publication."
Now, how much does this differ from the regular
letter that goes?
Delano:
I think it is practically the same thing with the
exception of the introductory paragraph, isn't it,
Ed?
Foley:
Yes.
H.M.Jr:
The introductory paragraph ties it in with this
particular requirement. Otherwise, everything
else is conventional.
Foley:
And that statement in regard to the amendment to
the articles of association is not 8. usual state-
ment. Those two differences are the only differ-
ences.
Bell:
But it is only putting in formal language what is --
Foley:
is understood.
Bell:
must ....is be satisfactory to the Comptroller and the
understood in every other case, that it
RFC.
H.M.Jr:
Now, 1s everybody happy about this letter?
Foley:
I think 30. I think it covers everything that
you usually do. of course, you can go on the
theory, Ed, that by your authority it is im-
plied that you have that right, if you don't
want to spell it out.
Foley:
Well, I thought it would be a little better be to
put it right in here so there wouldn't any
doubt about it.
Crowley:
They make all banks show this cut-back and carry
Regraded Unclassified
217
- 5-
this statement. I think you started that at
the time of the California Bank, didn't you?
Upham:
Yes.
Delano:
That provision 1s purely conventional and it
has been going on always.
H.M.Jr:
Well, I am impressed with the fact that in the
last week or so that by getting a little tough
it seems to be 0. K. When' I sign this, does
the letter just go formally, or are you (Delano)
going to take it?
Delano:
Well, we hadn't talked about it.
Bell:
Oh, I should think somebody in the Comptroller's
office might deliver it.
Delano:
Then we will start some informal conversations,
H.M.Jr:
What I was thinking about, couldn't it be done
in sort of an informal way? I mean, possibly
Bell and Delano calling up Jesse and saying,
"We have a letter and we would like to give it
to you," or something like that.
Bell:
Sure.
H.M.Jr:
Wouldn't that be sort of B. friendly way to do
it, rather than just stick it in the mail?
Delano:
Yes.
H.M.Jr:
Don't you think so?
Bell:
We have been talking to him, so it is all right.
H.M.Jr:
There is no date limit mentioned in this thing.
Foley:
No, they are in the program, Mr. Secretary, which
you made part of that letter.
H.M.Jr:
They have got until when?
Foley:
Until the first of April to make the commitment.
218
- 6 -
H.M.Jr:
And --
Bell:
June 30 to take it down.
H.M.Jr:
I don't think you are going to have any trouble
with Jones.
Bell:
He didn't indicate it over the telephone when
we were talking to him and Leo has since talked
to him and he said he was quite pleased.
Crowley:
I thought 80 last night. I met him in the hotel
and I think he indicated that he was willing to
cooperate.
H.M.Jr:
I didn't hear what you said.
Crowley:
I met Jones in the hotel last night and he in-
dicated every willingness to cooperate.
H.M.Jr:
Well --
Bell:
There is one thing about this letter and I sup=
pose it has to be this way, and that is, we asked
for 30 million dollars of capital. What we want,
more than anything else, is a commitment to buy
30 million dollars worth of stock. Now, it may
be it will be something less than that if they
sell half of it to the public or something like
that. We will be authorized to say later on -
maybe we had better give him another letter.
Foley:
That says make available, Dan, which is a com-
mitment.
Bell:
Well, I say, that 18 what we want more than any-
thing else, is a commitment. When they actually
take the stock, it may be something less than
30 million.
Crowley:
What you mean 18 that they may only want to
borrow 20 from the RFC and furnish some them-
selves?
Bell:
Yes.
Crowley:
Woll, you don't object if they go below your
request. It is only to authorize them to go
up to 30 million, isn't it?
219
Bell:
That 1s right, but we want 30 million.
Foley:
of new capital.
That is what that says, make available 30 million
H.M.Jr:
But they will have 30 million net, though.
Foley:
That is right.
Bell:
That is right.
H.M.Jr:
Well, you say you don't look for any trouble?
Crowley:
No, I think this, Mr. Secretary, your suggestion
that Dan and Mr. Delano go over to Jesse Jones
and then let his office get busy with the RFC
right away and those articles of association --
H.M.Jr:
It seems to me as though it would be a nice way
to do it. It seems as though you two gentlemen
(Mr. Bell and Mr. Delano) - you see, we had an
appointment on housing over at the White House
at 11:15 and that has been called off, 80 Jones
was to have been there, so --
Delano:
You would like to have us get in touch with Jones
immediately?
H.M.Jr:
I think so.
Chick, I think as far as we are concerned, I think
we just have nothing to say.
Schwarz:
That was our position last night.
Delano:
I was called last night by a newspaper man and
said there was no comment for them.
Schwarz:
The announcement was made on the Coast and there
is no occasion for us to - yet.
H.M.Jr:
Yet. Well, thank you again, everybody.
220
March 15, 1940.
Honorable Jesse H. Jones,
Administrator, Federal Loan Agency,
Washington, De C.
Dear Mr. Joness
There is enclosed for your information a copy of the Re-
quirements of the Comptroller of the Currency", dated March G,
1940, with reference to the Bank of America National Trust and
Savings Association, San Francisco, California. These require-
monts have been agreed upon by the Comptroller of the Currency,
the Board of Governors of the Federal Reserve System, and the
Federal Deposit Insurance Corporation, and have been the subject
of recent conversations between the Comptroller of the Currency
and the representatives of the Bank.
As appears from the requirements, it is concluded that the
capital structure of the Bank should be strengthened. with the
approval of the President, I, therefore, request that the Recon-
struction Finance Corporation make available to the Bank additional
capital funds in the amount of $30,000,000. This request is made
pursuant to the authority of Section 304 of the Act approved March 9,
1933 (Public No. 1 - 73rd Congress). as amended. This Bank appears
on Schedule National No. 391.
It is understood that, as is customary, the Bank will agree
upon amendments to its articles of association satisfactory to
the Reconstruction Finance Corporation and the Comptroller of the
Regraded Unclassified
221
-
Currency. If the proferred stock is to be sold and to be
retirable at a premium the usual condition should apply, namely,
that in the financial statements of the Bank the preferred stock
item will be followed by an explanatory note disclosing the divi-
dend rate payable on such stock and the subscription price upon
which dividends will be based and repayment made in the event of
retirement or liquidation of the stock. This explanation should
appear in all of the Bank's financial statements, including state-
ments required to be made and published by law as well as state-
ments made in counter-slips and shall other forms of advertising
and publication.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Enclosure
DJS/EHFJr/fm
Typed 3/14'40
Regraded Unclassified
no record on this kept
in files here - mas
222
March 15, 1940.
Honorable Jesse 1. Jones,
Administrator, Federal Loan Agency,
Washington, D. 0.
Dear Mr. Jonest
There is meloced for your information a copy of the "20-
quirements of the Comptroller of the Oursency", debed March 6,
1940, with reference to the Bank of America National Trust and
Savings Association, Bea Francisco, California. These require-
mate have been agreed upon w the Comptroller of the Oursency,
the Doord of Covernors of the Federal Reserve System, and the
Federal Deposit Insurance Corporation, and have been the subject
of resent conversations between the Comptroller of the Currency
and the representatives of 120 Bank.
As appears from the requirements, it is concluded that the
cepital structure of the Bank should be strengthened. with the
approval of the President, I, therefore, request that the Reem-
struction Finance Corporation miss available to the Bank edditional
capital funds is the amount of $30,000,000. This request to made
pursent to the authority of Section 304 of the ser approved March 9,
1983 (Fublie No. 1 . Thed Congress), as mmdel. This Bank appears
an Schedule National No. 302.
It 10 understood that, as 10 enstomery, the Boak will agree
upon to its articles of association subjefestory w
the Resonstruction Finance Corporation and the Comptrellar of the
Regraded Unclassified
223
- # -
the Currency. If the proferred stock is to be sold and to be
retirable at a premium the usual condition should apply. namely,
that in the financial statements of the Bank the proferred stock
item will be followed by an explanatory note diselosing the divi-
dead rate payable as stock and the subscription price upon
which dividends will be based and repayment mde in the event of
retirement or liquidation of the stock. This explanation should
appear in all of the Bank's financial statements, including state-
ments required to be mde and published by law as wall as state-
ments mde in counter-slips and in all other forms of advertising
and publication.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
ORIGINAL FORWARDED TO ADDRESSEE
FROM OFFICE OF
mr. Foley
Inclosure
This file lent to Jane Cullen
to make notation for her records -
mas
DJS/EHFJr/fm
Typed 3/14'40
Regraded Unclassified
TO:
224
Mrs. Mannen
Attached is a copy of the one actually
signed by M. S. Eccles, and Jno. K.
McKee for the Federal Reserve System;
Leo T. Crowley for the Federal
Deposit Insurance Company; and Preston
Delano, E. H. Foley, Jr., and D. W. Bell
for the Comptroller of the Currency.
MR. FOLEY
225
March 6, 1940
No. 4
REQUIREMENTS OF THE COMPTROLLER OF THE CURRENCY
1. As soon as possible, and in any event not later than June 30, 1940,
Bank of America, National Trust & Savings Association will add
$30,000,000 of additional capital funds by the issuance of common
or preferred stock, or both, and the Bank will, prior to April 1,
1940, apply for the approval of the Comptroller of the Currency to
such increase. The Bank will endeavor to obtain a commitment from
the Reconstruction Finance Corporation to purchase or lend upon
preferred stock in the amount of $30,000,000 prior to April 1, 1940,
and if preferred stock is to be sold, will endeavor to obtain an
agreement with the Comptroller of the Currency upon the terms of
the amendments to the articles of association by April 1, 1940.
2. Immediately upon obtaining the new capital the Bank shall set up
an unallocated reserve of $6,900,000.
3. The Bank shall obtain additional security satisfactory to the
Comptroller of the Currency to secure the contracts of California
Lands, Inc. and Capital Company with the Bank, and the contracts
of Capital Company with Merchants National Realty Corporation.
Such additional security shall be in an amount equal in value
to the difference between the unpaid purchase price upon such
contracts and the value of the property thersunder, as such
value appears in the schedule contained in the report of exam-
ination begun August 31, 1939. All of such .contracts shall be
226
-2,
eliminated from the assets of the Bank and Merchants National
Realty Corporation by December 15, 1943.
4. All premiums on bonds in the Bank's investment portfolio shall
be amortized out of current earnings (other than bond profits) to
maturity, or to call date, if any, and amortisation previously
reserved on bonds sold at book value or higher may be returned to
the undivided profits account. Current bond profits shall be used
to take care of current losses, and any bond profits not BO used
shall be passed to a reserve for losses of any character until in
the opinion of the Comptroller of the Currency such reserve is
adequate. However, this reserve for losses, plus the amortiza-
tion reserve need not exceed the total premium account.
5. The Bank shall, as soon as possible, furnish to a committee
composed of the Vice President in Charge of Examinations of the
Federal Reserve Bank of San Francisco, or some officer of the Bank
designated by him, the Supervising Examiner of the Federal Deposit
Insurance Corporation for the Twelfth District, and the Chief
National Bank Examiner for the Twelfth Federal Reserve District,
all obtainable records and information with respect to the
acquisition of each banking premise criticised in the report of
examination of August 31, 1939, including those shown on the Bank's
books and in its investment in Merchants National Realty Corporation,
dating back to the time such premise was acquired either by the Bank
or any member (either bank or company) of the group presently or
then comprising the Transamerica organization.
Regraded Unclassified
227
The committee shall consider the fair value of each premise at
the time of such acquisition, and the special conditions which
had to be met in fixing the price paid. From these considerations,
the committee shall determine the amount which shall be used by the
committee as the estimated cost amount of each premise to the Bank.
The value of each premise shall then be established at such
estimated cost amount, plus the amount of any expenditures sub-
sequent to acquisition found by the committee to have been appro-
priately capitalized, less the appropriate amount of depreciation
at the depreciation rate allowed by the Bureau of Internal Revenue
for each year of ownership. The unallocated reserve set up by
the Bank shall be reduced by the difference between the present
carrying value of each such premise and the value of such premise
as determined by the committee in the manner hereinabove stated.
The decision of a majority of the members of the committee shall
be binding. The remainder of such reserve, if any, may be
returned to the undivided profits account. A partial release
of the reserve, or a decrease in the amount of the reserve to
be set up, may be made as soon as that procedure is justified,
in the opinion of the committee.
6. The aggregate amount of obligations, as defined in Section 5200
United States Revised Statutes, of Transamerica Corporation and
all subsidiaries in which it owns or controls a majority interest,
to the Bank, will be brought within the limitations and exceptions
228
4
of Section 5200, United States Revised Statutes, for any one borrower
by July 15, 1942, and thereafter the aggregate amount of such obliga-
tions will not be permitted to exceed such limitations and exceptions.
The existing obligations of Transamerice or its subsidiaries now held
by the Bank will be eliminated by July 15, 1945, and no new loans
will be made to Transamerica or its subsidiaries secured by the stock
of subsidiaries of Transamerica, This paragraph shall not apply to
obligations of Capital Company and California Lands, Inc. arising
out of real estate sales contracts, which contracts are covered in
numbered paragraph (3) hereof.
The Bank may accept Transamerica shares as security for small loans
for business purposes where the borrower demonstrates a capacity to
liquidate the loan otherwise than through the sale of such shares.
No loans for speculative purposes will be made on the security of
such shares.
7. The Bank shall eliminate the amount of investment in stock under
option on the basis of the program now in effect.
8. The Bank shall give vigorous attention to the elimination or correc-
tion of any real estate holdings or real estate loans that may not
conform to statutory requirements.
9. The Bank shall. initiate steps to ascertain whether it is entitled
to recover any part of the eums paid by it to Transamerica General
229
- 5 -
Corporation in connection with fidelity losses, and if it is
concluded the Bank is entitled to recover, it shall take steps
to recover the same.
10. The Board of Directors of the Bank will approve the foregoing by
April 1, 1940.
This memorandum is submitted without prejudice to the right
to require full and complete compliance with the Comptroller's
criticisms and suggestions, to resort to sanctions provided by
law, or to continue to list in reports of examination assets that
are subject to criticism until such criticisms have been corrected
or eliminated. Neither this memorandum nor its contents shall
be used by the Bank or anyone else on its behalf without the
consent of the Comptroller of the Currency for any purpose except
for its information, unless and until the provisions hereof are
accepted and complied with by the Bank.
Copied - vls
3/13/40
230
FEDERAL RESERVE BANK OF SAN FRANCISCO
March 16, 1940
Mr. Daniel W. Bell,
Undersecretary of the Treasury,
Washington, D. C.
Dear Mr. Bell:
You may be interested in the following, which
was clipped from the San Francisco Examiner of March 16,
1940.
Business Peace
Settlement of Bank
Controversy Good Act
NORMAL business relations between all
The biggest financial institution in the far
banks and industry and the public will
West and the department of the Federal Gov-
continue with even greater confidence than
ernment charged with regulation of banks
have both gained in stature in the estimation
before, now there has been an adjustment of
of the public.
the differences between the Bank of America
The thousands of customers of the Bank of
and the Federal Treasury Department.
America, fourth largest institution of its kind
Interest in the actual terms of the settle.
in the Nation, appear justified in considering
ment, for the most part involving technical
the settlement of the dispute as & construc-
bookkeeping procedure, is overshadowed by
tive force for all business and of mutual
the satisfaction and cordiality with which the
advantage from the clients' own personal
business world received this tangible evi-
standpoint.
dence of the possibility of adjusting such con-
For this adjustment San Francisco and all
troversies by negotiation.
California should be thankful.
With kindest regards,
Yours very truly,
First Vice President.
This depping went to a Bill.
Read by the Secretary 3/15/40.
Regraded Unclassified