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Minutes for April 10, 1961 1 To: Members of the Board From: Office Of the Secretary Attached is a copy of the minutes of the Board of Governors of the Federal Reserve System on the above date. It is not proposed to include a statement With respect to any of the entries in this set of minutes in the record of policy actions required to be maintained pursuant to section 10 of the Federal Reserve Act. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, please initial below. If you were present at the meeting, your initials will indicate approval of the minutes. If You were not present, your initials will indicate only that you have seen the minutes. Chin. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov, Shepardson Gov. King Gov. Mitchell 1 191) Minutes of the Board of Governors of the Federal Reserve System on Wednesday, April 10, 1963. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Balderston, Vice Chairman Mills Robertson Shepardson Mitchell Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Sherman, Secretary Kenyon, Assistant Secretary Fauver, Assistant to the Board Hackley, General Counsel Farrell, Director, Division of Bank Operations Solomon, Director, Division of Examinations Shay, Assistant General Counsel Sammons, Adviser, Division of International Finance Kiley, Assistant Director, Division of Bank Operations Leavitt, Assistant Director, Division of Examinations Mattras, General Assistant, Office of the Secretary Hill, Attorney, Legal Division Report on competitive factors (Adairville, Kentucky). 11:414 been There distributed a draft of report to the Federal Deposit Insurance C°1100ration on the competitive factors involved in the proposed acquisiti°11 of assets and assumption of liabilities of The Peoples Bank, Aciairville, Kentucky, by Adairville Banking Company, Adairville, Kentucky. After discussion, the report was approved unanimously for trans4118810n to the Corporation with the understanding that the conclusion 1c)11-1c1 be modified to read as follows: t, 4/10/63 -2The proposed acquisition of assets and assumption of liabilities of Peoples by Applicant would eliminate existing competition between the two local institutions. However, the community of Adairville is quite small as evidenced by the fact that the two banks located there have combined deposits of only $1.4 million. Consummation of the proposal would result in a bank whose increased resources would permit it to improve services in Adairville and to compete more effectively with the larger banks in Russellville, Kentucky, and Springfield, Tennessee. Circulated or distributed items. The following items, copies °f which are attached to these minutes under the respective item numbers indicated, were approved unanimously: Item No. Letter to the Center for Latin American Monetary Studies regarding the designation °r James K. Nettles as lecturer in the eleventh regular training program of the enter to be held in Mexico City, Mexico, in 1963. 1 Letter to the Presidents of all Federal Reserve Banks revoking the request that the Board be advised in advance of the Pr°Posed acquisition of costly electronic equiPment at the Banks and branches. 2 Letter to the Federal Reserve Bank of Illadelphia regarding the eligibility " °f an individual who is president and uirector of a small business investment e°mPany that is a wholly-owned subsidiary a member bank to serve at the same time s 4 director of two open-end investment , -°mPanies. 3 In connection with Item No. 1, the Board authorized Mr. Nettles to travel to Mexico City for approximately one week beginning July 27, 1963, with per diem allowed in accordance with the standardized Governtravel regulations. The meeting then adjourned. /I Secreta 1.192 BOARD OF GOVERNORS ottit,*, 4 4, : w 6°P 444 OF THE FEDERAL RESERVE SYSTEM * MA. 1 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD April 10, 1963 AIR MAIL Mr. Fernando Rivera, Assistant Director, Center for Latin American Monetary Studies, San Juan:de Letran No. 2 - Piso 320 Mexico 1, D. F. Dear Mr. Rivera: This is in reply to your letter of March 26 requesting that the Board of Governors furnish a lecturer to participate in the eleventh regular training program of the Center for Latin American Monetary Studies. The Board has designated Mr. James K. Nettles, Economist, Division of International Finance, for this assignment. He will be available to give three lectures during the week of July 28 on the general subject "Current Monetary Developments in the United States." The Board of Governors is pleased to continue its cooperation with the Center for Latin American Monetary Studies in this way. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Item No. 2 4/10/63 S-1868 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRIEISS OFFICIAL CORRESPONDENCE TO THE BOARD April 10, 1963. 1)ear Sir: In its letter of November 16, 1961, (S-1816) the Board reqUegt,,_3 cu that it be advised specifically before any Reserve Bank made a eq. commitment for the acquisition of any unit or system of office of 1Pment having a purchase price of as much as $50,000 or a rental cost to: 8 much as $4,000 per month. At that time this arrangement was felt tione i desirable because of a belief that neither the budget nor funcwitP expense reporting procedures were adequate to provide the Board %,,s ufficient information concerning contemplated acquisitions of 'V electronic equipment. Since 1961, however, the budgets have been changed from an to a semiannual basis; the functional expense reports have been thernued to show in each function all of the important costs applicable atici-e0; all of the Reserve Banks now have data-processing computers, leasil of them have also received the Board's approval to acquire at fea5k°11e unit of electronic check-processing equipment; and the economic 4.410'ility of selected applications of electronic equipment has been fielnstrated and the Banks have gained considerable experience in this 014' In the light of these developments the Board is now of the befol°n that there is no longer any necessity for it to be advised re commitments are made to acquire any office equipment. aorniai Qxpa j aoqui Accordingly, special advice of contemplated office equipment %ay bsltions, as requested in the Board's letter of November 16, 1961, repo e d iscontinued. In the future the Board will rely on the budget Qtitrte for information concerning contemplated acquisitions of major iofos °f office equipment, and on the functional expense reports for rneojrnation with respect to the effectiveness of the use of such equipAs indicated in its earlier letter, the Board believes that the eq!responsibility for decisions concerning the use of electronic thatr ' ent rests with the management of each Reserve Bank, and it assumes careful attention will continue to be given to such matters. 94 -2- S-1868 For the reasons set forth above, the Board's letter of November 16 '1361 (S-1816), is revoked. Very truly yours, Merritt Secre THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS Item No. 3 4/10/63 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO TI-IE BOARD April 10, 1963 Rarl R. Bopp, President, Federal Reserve Bank of Philadelphia, Philadelphia 1, Pennsylvania. near M±. Bopp: The Board has received a letter of March 6, 1963, from A. Pf,-"lard Young, Jr., Esq., of the Philadelphia law firm of Stradley, R 2-n°n, Stevens, and Young. In this letter Mr. Young inquired whether individual who is president and a director of a small business bnvestment company, which is a wholly-owned subsidiary of a member : 1.k, would be eligible to serve at the same time as a director of open-end investment companies in view of the prohibition of etion 32 of the Banking Act of 1933, as amended. Section 32 prohibits an officer, director, or employee of a co_ rporation primarily engaged in the securities business as debed therein from serving at the same time as an officer, director, 0 emPloyee of a member bank. As the Board has uniformly regarded kl.,Ien-end investment companies as primarily engaged in business of a nd covered by the statute, the question is whether the individual thIleerned should be regarded as an officer, director, or employee of the member bank which owns all the stock of the small business investscr 4 tlt company A copy of M±. Young's letter was sent to M±. Murdoch Goodwin, t : ners1 Counsel of your Bank, who consulted with M±. Young. Mr. Goodwin 4 1 forwarded letters of March 19 and March 26 from Mt. Young, who ilarertook to clarify certain aspects of the situation. In a letter of expressed the opinion that no violation of sect 20, Mr. Goodwin 32 of the Banking Act of 1933 would result if the individual '4=erned were to serve in the dual capacities indicated above. From the information that has been submitted, it is understood that /neat) Prior to his becoming associated with the small business investtee company, the individual concerned was an officer of the member bank. ause of his former position with the bank, he retains his interest BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Mr, Karl R. Bopp -2- in the pension fund provided by the bank for the retirement security °f its employees, and he will receive payments therefrom in accord:nee with the provisions of the pension trust relating to employees 1h0 separate from service with the bank prior to retirement and bec°me employees of subsidiaries of the bank. It is understood also that the small business investment involved is e licensee under the Small Business Investment t of 1958, as amended (15 U.S.C., 661 et seq.), and that as a licensee it is authorized to engage only in the activities set forth the statute, namely, to provide capital and long-term loans to mall business concerns. The Small Business Investment Act of 1958 authorizes a member bank to invest not more than two per cent of its capital stock and surplus in the shares of a company licensed under the Act, such as the one in question. company A r r The names of the small business investment company and of the , member bank in question are understood to bear a definite identity ,1:th each other, and the offices of the corporation and certain offices : b't the bank are located on the same floor of a Philadelphia office ' :ui"ing which also houses one of the principal banking offices of the member bank. This building, however, is said to house several sitside tenants, as well, and it is indicated by Mr. Young that confu4°4 of the small business investment company with the bank would not se likely, that the operations of the member bank and company are Lyarate and distinct, and that the individual concerned acts only in "ls capacity as officer and director of the small business investment company. On the basis of the foregoing and of its understanding of the 4 40_ 1-nrormation submitted, the Board is not inclined to regard sec1 32 as prohibiting the proposed relationship as described by , be Ioung. However, if the proposed interlocking relationship should ci consummated, the question shoul be again presented for review if he'reumstances different in any material respect from those outlined l'ein should develop. the It would be appreciated if you would convey to Mr. Young substance of the views set forth herein. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary.
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