Evening star., 1933-03-26
R. F. c. EXPED|T|NG
| BANK AID PLANS
Instructions Are Issued on
| Preferred Stock Sub
scriptionS.

Preparation to expedite the reorgani-
EEation of banking facilities along the
lines employed in the case Of Detroit
1 was disclosed yesterday by the Recon-
tstruction Finance Corporation, with the
issuance of a circular giving detailed
instructions for making applications to
1.-THE corporation for subscriptions to pre-
fferred stock of banks or loans thereon.
The circular, designated mo. g." set
forth information regarding subscrip-
itions for preferred stock or loans upon
;preferred stock by the Reconstruction
Finance Corporation as authorized in
the act of Congress, approved March
se, 1888"
| R.F. c. Will Assist.
The emergency banking act, 1t was
pointed out. gives an opportunity to
communities In which national banks
ARE located or may be located, to assist
in the organization or reorganization
of such institutions by the purchase of
stock which does not carry the usual
double liability. 1t authorizes the Re-
construction Finance Corporation to
purchase such non-assessable preferred
stock or make loans thereon and thus
assist in particular instances where 1t
may be impossible to raise locally all
OF the required capital.
Further than this, the R. F. c. may
also subscribe for preferred stock of
State banks and trust companies in
those States in which such institutions
are authorized to issue preferred stock
and may make loans on such stock. The
laws of most States at present do not
permit the issuance Of preferred stock
by State banks and trust companies.
The circular sets forth that applica-
tion may be made for subscription to
the preferred stock of an open bank
closed bank which contemplates re-
organization or a bank to be newly
formed. The applicant institution
issuing the stock must be authorized by
law TO issue preferred stock. National
banking associations are authorized to
issue preferred stock by section 301 of
the act Of March 9, 1888.
Information to Be Required.
Application should be made direct to
the loan agency of the corporation
serving the territory in which the ap-
plicant is located, the announcement
said, and should include and be ac-
companied by the following information
and documents:
A copy of the charter and any pro-
posed amendment thereto under which
the preferred stock offered for sub
scription is to be issued.
A copy Of the States from which the
applicant derives its authority to issue
preferred stock Cif the applicant is
other than national bank.
A copy Of a resolution already
adopted or proposed to be adopted by
the board of directors of the applicant
authorizing the sale of such stock
A copy of the latest report of exami-
nation of the applicant; and state
ment of the applicants condition as of
the close of business on the date the
application is forwarded
Schedules in adequate detail showing
assets pledged to secure borrowed
money, public funds, or other liabilities.
statement of any plan reorganiza-
ton which the applicant proposes to
put into operation.
Information relating to the approval
by the supervisory authority of the pro-
posed plan and the conditions under
which such supervisory authority is
willing to permit the applicant to re-
0ume normal business.
The applicant also must show that
its earning capacity will be sufficient at
least to enable it to pay dividends on the
preferred stock at the rate of per
cent per annum after meeting all other
expenses and making proper provisions
for elimination of losses and doubtful
assets, and required contributions to
surplus and reserve.
Must Give Vote Privilege.
tnr,,,c of Tho y,r,farrod eto,I~ nf
3ered must give the corporation substan-
tial voting privileges and reasonable
protection of and provision for the re-
tirement of its investment or secured
interest in the stock.
When the applicant is governed by
State law as to the issuance of preferred
stock. and when under the law such pre-
ferred stock is asseSsable, the corpora
tion will not subscribe for the stock
The corporation will, however, give con-
sideration to making loans upon the
pledge of such stock provided the loan
is otherwise we'll secured or signed by
parties of adequate financial response
bility.
1T is anticipated" the announcement
said, that the corporation will be asked
to participate in preferred stock issues
in the following situations: Where capi-
tai is partially impaired; capital is elm
mated by losses, and where the deposits
are impaired after total elimination of
the capital structure. 1t is pointed out
that before the corporation will sub
scribe for or lend on the preferred
stock of any bank. it shall be deter
mined by acceptable examinations and
or appraiSals that the sound-value of the
assets is at least equal to the deposit liza
bilities and other liabilities in the bank
or to be assumed by the reorganized
bank. In addition, there should be pro-
vided reasonable margin of protection
for the preferred stock to be taken by
the corporation, represented by common
stock. or by class Of preferred stock
subordinated to that to be taken by the
corporation, or otherwise.
Based upon an acceptable examina-
ton and on appraisal, the corporation
will determine, in the case of capital
partially impaired, whether the remain
ing capital structure is sufficient to
furnish such reasonable margin of pro-
lection. In the case of capital elimi-
mated by losses, the applicant may pro-
vide the margin of protection for the
preferred stock held by the corpora
tion through the purchase of common
stock or subordinated preferred stock
by stockholders, depositors and others:
or the voluntary reduction or subordina-
tion by depositors and other creditors
of q part of their claims against the
bank
ANY scaling of liabilities or use of
the funds belonging to depositors or
other creditors, whether in connection
with a reorganization or otherwise, If
not actually consented to by the de-
poSitorS or other creditors affected,
must be undertaken in strict conformity