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Minutes for April 16, 1956.
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, if you
vere present at the meeting, please initial in column A below to indicate that you approve the minutes.
If you were not present, please initial in column B
below to indicate that you have seen the minutes.
Chin. Martin
Gov. Szymczak
Gov. Vardaman
Gov. Mills
Gov. Robertson
Gov. Balderston
GoV* Shepardson
74S
Minutes of actions taken by the Board of Governors of the Federal Reserve System on Monday, April 16, 1956.
The Board met in the
Board Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Szymczak
Mills
Robertson
Shepardson
Carpenter, Secretary
Sherman, Assistant Secretary
Kenyon, Assistant Secretary
Vest, General Counsel
Sloan, Director, Division of Examinations
Hackley, Assistant General Counsel
Hexter, Assistant General Counsel
Masters, Assistant Director, Division of
Examinations
Mr. Benner, Assistant Director, Division of
Examinations
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
The following matters, which had been circulated to the members
f the Board, were presented for consideration and the action taken in
"-eh instance was as stated:
Memoranda from appropriate persons concerned recommending actic)),
-8 with respect to the Board's staff as follows:
increases
Name and
title
effective April 22
1956
Division
Basic annual salar
From
To
Research and Statistics
Bernard N. Freedman, Economist
4-ard R. Fry, Economist
.
!!
:tr
14 B. Gavin, Draftsman-Illustrator
"
;
M.
riaaret Hastings, Clerk
$7,250
5,065
4,1480
3,260
$7,570
5,140
4,620
3,1415
749
4/16/56
-2-
§&-Ey increases, effective April 22, 1956 (continued)
Name and title
Division
Basic annual salary
To
From
Research and Statistics
Jo Ann L. Murray, Clerk-Typist
Grace R. Sahm, Draftsman
Charles Trescott, Library Assistant
Philip M. Webster, Economist
$3,260
4,750
4,075
6,605
$3,345
4,885
3,260
4,930
3,415
5,065
4,215
4,525
5,440
5,575
4,075
3,670
4,210
3,805
4,210
6,820
International Finance
Davita C. Leister, Clerk-Stenographer
larleY J. Smith, Economist
Examinations
Francis D. Dargo, Assistant Federal
Reserve Examiner
S. D.
Everett, Assistant Federal
Reserve Examiner
Administrative Services
!
Ii arrY F. Allen, Telegraph Operator
'
441 G. Hutts, Operator, Tabulating
E
quipment
r *1==lIaSZE
Transfer of Ruth B. Willard from the position of Clerk-Stenographer
Secretary in the
Leg: Division of Bank Operations to the position of
salary
from $3,925
annual
basic
t, „,
sion, with an increase in her
- 94,075, effective as of the date of assuming her new duties.
t
Approved unanimously.
Bo„
Letter to Mr. Latham, Vice President, Federal Reserve Bank of
reading as follows:
In accordance with the request contained in your letter of April 3, 1956, the Board approves the designation
7'50
4/16/56
-3-
of the following employees of your bank as special assistant examiners for the Federal Reserve Bank of Boston for
the specific purpose of participating in the examinations
of Rhode Island Hospital Trust Company, Providence, Rhode
Island; The Connecticut Bank and Trust Company, Hartford,
Connecticut; Depositors Trust Company, Augusta, Maine; The
Merrill Trust Company, Bangor, Maine:
Philomena L. Andosca
Eunice S. Wall
John L. Malvey
The Board also approves the designation of Arthur
Stetson as a special assistant examiner for the Federal
Reserve Bank of Boston. The authorization heretofore given
your bank to designate him as a special assistant examiner
is hereby cancelled.
Approved unanimously.
Sari
Letter to Mr. Morrill, Vice President, Federal Reserve Bank of
Francisco, reading as follows:
In accordance with the request contained in your letter of March 21, 1956, the Board approves the appointment of
John J. Lambert as an assistant examiner for the Federal Reserve Bank of San Francisco. Please advise as to the date
Upon which the appointment is made effective.
Approved unanimously.
Letter to Mr. Denmark, Vice President, Federal Reserve Bank of
Atlanta, reading as follows:
In accordance with the recommendation contained in your
letter of April 6, 1956, the Board of Governors extends to
June 15, 1956, the time within which the Peoples Bank of North
Miami Beach, North Miami Beach, Florida, may accomplish membership. Please advise the applicant to this effect.
Approved unanimously.
At this point Governor Vardaman joined the meeting.
4
4/16/56
The following additional items, which also had been circulated
to the members of the Board, were presented for consideration and the
action taken in each instance was as stated:
.
Letter to Mr. McConnell, Vice President, Federal Reserve Bank
of Minneapolis, reading as follows:
Reference is made to your letter of March 29, 1956,
outlining the proposal of the State Bank of Rockville,
Rockville, Minnesota, to change its name to "Plaza Park
State Bank of St. Cloud," and its location to the vicinity
of the junction of Highways numbered 23 and 52, Stearns
County, Minnesota. This location is in a shopping center
in an unincorporated area between St. Cloud and Waite Park,
Minnesota. It is understood that the Minnesota Department
of Commerce has approved the changes in name and location
provided the bank increases common capital to $50,000, surplus to $25,000, and undivided profits to $25,000.
It appears that the change in location and name will
have no material effect upon the general character of the
bankts business; and therefore, the Board will interpose no
objection to the State member bank's proposal.
It is assumed that Counsel for the Reserve Bank
review and satisfy himself as to the legality of all steps
taken in changing the name and location of this bank.
Approved unanimously.
as
Letter to the Presidents of all Federal Reserve Banks reading
follows:
An inquiry has been received from one of the Reserve
Banks regarding the availability of System summaries prepared from the form F.R. 527 series of reports on member
bank borrowings which were requested in the Board's letter
of January 30, 1956.
Summaries are being prepared weekly for central reserve
and reserve city banks and semi-monthly for country banks, as
4/16/56
indicated by the attachments from which individual district
data have been deleted.
It will be appreciated if you will advise us whether
YOU have any objection to figures for your District being
included and transmitted to all Federal Reserve Banks, and
whether you would desire to receive copies of the summaries
regularly.
Approved unanimously.
Letter to Mr. Hall, Chairman, Federal Reserve Bank of Kansas
City, reading as follows:
At the completion of the examination of the Federal
Reserve Bank of Kansas City, made as of January 30, 1956,
by the Board's examiners, a copy of the report of examination was left for your information and that of the directors. A copy was also left for President Leedy.
The Board will appreciate advice that the report has
been considered by the Board of Directors. Any comments
You may care to offer regarding discussions with respect
to the examination, or as to action taken or to be taken
as a result of the examination, will also be appreciated.
Approved unanimously.
In a letter dated March 28, 1956, Mr. W. E. Cosgriff, President
Of The Continental Bank and Trust Company, Salt Lake City, Utah, responded to the Board's letter of March 13, 1956, regarding a proposed inel'ease in the bank's capital by stating that a special meeting of the
bank'S
stockholders would be held in Salt Lake City on May 8, 1956, for
the Purpose
of discussing the proposal.
tior,
The letter extended an invita-
kio have representatives of the Board and the Federal Reserve Bank
4/16/56
-6-
of San Francisco attend the meeting. It also stated that copies of
the notice formally calling the meeting would be furnished the Board
When the notice was prepared.
In a memorandum dated April 9, 1956, copies of which had been
sent to the members of the Board, Mr. Hexter discussed reasons for and
against accepting the invitation.
The memorandum brought out that in
the course of the current examination of the member bank, which was begun
On March 12, Mr. Cosgriff handed to the examiner for the Federal Reserve
Bank of San Francisco in charge of the examination an undated notice of
the stockholders' meeting along with a proxy form.
The notice contained
a statement that the proposal to "increase the capital stock of the
Bank from $1,800,000 to :3,300,000, which is presented at the suggestion
Of the Federal Reserve System" was "opposed by the Board of Directors of
the Bank". The proxy form indicated that unless a stockholder should
a-ffirmatively indicate that he was "for" the increase, the proxy would
be voted against the proposal. It also appeared that a resolution
adopted unanimously on March 28 by the bank's directors, who together
With their close relatives own or control a majority of the outstanding
Stock, stated that the notice to stockholders should indicate "that the
Beard did not approve of the proposal" to increase the bank's capital.
In view of these developments, Mr. Hexter's memorandum recommended that
110 representative of the Board attend the stockholders' meeting and that
A
e3
4/16/56
-7-
the Board suggest a similar course to the Federal Reserve Bank of San
Francisco.
A draft of letter to Mr. Cosgriff taking such a position
was attached to the memorandum, along with a draft of letter which
might be sent if the Board should conclude that Federal Reserve representatives should attend the meeting. It was suggested in the memorandum that the Board might wish to defer sending any letter until it
had an opportunity to discuss the matter with President Mangels of the
Federal Reserve Bank of San Francisco when he was in Washington on
APril 17 and 18 to attend a meeting of the Federal Open Market Committee.
In commenting on the matter, Mr. Hexter pointed out that the
Board's letter to Mr. Cosgriff of March 13, which stated that the Board
or its representatives would be glad to discuss the proposed capital increase with the bank's board of directors and that it felt sure the San
Pl'ancisco Reserve Bank would be willing to discuss the matter at Salt
Lake City with the stockholders or the diroctors of the institution if Mr.
Cosgriff so
requested, wa': predicated on the assumption that something
might h(3 gained through such discussion and that the System might be
helPful in the development of a program for increasing the bank's capital. In the light of the developments mentioned in the memorandum, howe/Ier, it appeared to be a foregone conclusion that the proposal would be
defeated at the stockholders' meeting.
Mr. Vest said that in a discussion last week members of the staff
of the Federal Reserve Bank of San Francisco who were in Washington to
-0E4f
4/16/56
-8-
attend the Conference of Federal Reserve Bank Examiners suggested that
it might be advisable to have Federal Reserve representatives attend
the stockholders' meeting because of the expressions contained in the
Board's letter of March 13.
The staff members of the San Francisco
Bank did not know the views of President Mangels on this point and did
not purport to speak for the Bank.
Governor Vardaman said that in hindsight he deemed it unfortunate
that the Board's letter of March 13 was worded in the form in which it
was sent, since this might indicate that the invitation to the stockholders' meeting should be accepted.
On the other hand, the Board now
was on notice of a decision by the bank's directors which meant in substance that the stockholders' meeting would be nothing but a front, since
the directors, who in effect control a majority of the stock, had already
indicated that they intended to vote against the proposed capital increase.
He went on
to say that in a discussion which he had with Messrs. Vest
and Hexter the suggestion was made that a paragraph might be added to
the letter to Mr. Cosgriff which would mention the nature of steps that
the Board might be expected to take if the capital increase proposal
were acted on unfavorably.
The thought, he said, was to put on record
8(3r49- notice of the further action that the Board might decide upon in
elleh an event.
Governor Vardaman then commented that if the Board were to act
--`"fing the stockholders' meeting to require a capital increase, he
4/16/56
—9—
understood that in accordance with customary procedure the member bank
might be given as long as six months to effect the increase.
It was
his thought that such a period would be excessive if the Board regarded
the bank's capital inadequacy as serious enough to consider action
Under section 9 of the Federal Reserve Act or section 30 of the Banking
Act of 1933.
He then said he wanted to emphasize his feeling that the
Board should at this stage give consideration to the retention of outside counsel so that it might have the benefit of objective advice in respect to the case.
At this point Chairman Martin referred to a memorandum from Mr.
Vest dated March 30, 1956, which had been circulated to the Board, relating to the retention of outside counsel.
He asked Mr. Vest to comment
°n this phase of the matter in the light of his memorandum.
Mr. Vest said that in the opinion of the Legal Division it would
be desirable to have special counsel in this case.
Whether such counsel
Shod come from outside the System or from the Federal Reserve Bank of
San Francisco was in his opinion a rather close question, with considerations on both sides.
Counsel for the Reserve Bank would be more inti-
Mately acquainted with the System's organization and problems, while
°Iltside counsel would be more immediately familiar with procedural probleMs that might come up in a hearing of this kind.
Another question
l'IoUld be whether the San Francisco Bank could spare its General Counsel,
4/16/56
-10-
Mr. OlKane, for a job of this nature; that is, how much the handling
of the case would interfere with his work for the Bank.
Generally
sPeaking, he thought the retention of counsel from outside the System
would have more to recommend it, but it was a matter of judgment.
Governor Vardaman said that after having given much thought to
the matter, it was his view that if the Board's own counsel were not
used it would be preferable to go outside the System.
Governor Mills then made a statement in which he said that he
would favor a letter to Mr. Cosgriff declining to have Federal Reserve
Personnel attend the stockholders' meeting in view of the evidence now
available that the member bank had no intention of adopting the suggested
capital increase program.
As to the proposed additional paragraph which
Governor Vardaman had mentioned, he felt that it might be construed as
in the nature of a threat. Should the stockholders vote unfavorably
011 the capital increase, he thought it necessary to provide a period of
tirile that would give ample opportunity to spell out the Board's legal
P"ition and how the Board would proceed to enforce that position.
the
question of retaining counsel, he felt that
if
On
the Board should de-
cide that it would be advantageous to have special counsel, it would be
Preferable to go outside the System.
He doubted, however, that it was
necessary to resolve the question immediately. It was his feeling that
1. might be retained when the member bank clearly indicated its
"
-i4tentioL
not to increase its capital.
4/16/56
-11Governor Robertson suggested the possibility of replying
to Mr. Cosgriff that Governor Vardaman would represent the Board at
the stockholders' meeting.
He noted that Governor Vardaman had fol-
lowed the case closely over a period of years and that he would be in
a good position to present the System's views to the stockholders.
Governor Vardaman responded by expressing the view that if any°ne from the Board attended it should be a member of the staff because
Participation of a Board member in the meeting might tend to give the
appearance of prejudging the case.
Governor Robertson then suggested that the draft of letter declining the invitation be sent, with a sentence added which would request that the Board be notified of the action taken by the stockholders
at the meeting on May 8.
In the event the capital increase was not ap-
Proved, he would not be inclined to grant a period as long as six
Months to effect the capital increase.
He considered the retaining of
Outside counsel at this point as not being necessary but, on the other
hand, not undesirable.
If the stockholders failed to approve a capital
increase, he would favor giving consideration to the retention of
eclInsel immediately so that the Board might have the benefit of counsel's
review of the case and his recommendations.
In reviewing developments in the matter to date, Mr. Vest brought
°lit that the San Francisco Reserve Bank's letter of February 10 to the
4/16/56
-12-
member bank (sent at the Board's suggestion) which requested submission within 60 days of a capital increase plan, was not a letter which
had strict legal significance.
The other part of the proposal origi-
nally presented to the Board, and which the Board approved, was that
if the bank did not present a plan within 60 days a second letter would
be sent,
as required by Regulation H, Membership of State Banking Institutions in
the Federal Reserve System, which would put the bank
definitely on legal notice that it was required to increase its capital.
The bank not only must provide a plan but it must obtain the
additional capital funds within a prescribed period.
months to obtain the additional capital
A period of six
was not legally required, he
said, and the time could be fixed at the Board's discretion. It would
seem undesirable, however, to fix a period less than 90 days since the
13°ard might then run into questions of whether it had afforded a reasonable time.
Governor Szymczak made a statement at this point in which he
sPressed the view that, generally speaking, it would be advisable to
treat this case in much the same way as any other similar case.
He would
8end a letter to Mr. Cosgriff along the lines proposed stating that the
SYstem would not have representatives at the stockholders' meeting, rethe San Francisco Bank to have its General Counsel prepare himself
a3 fullY as possible, and then, in the event Mr. Olicane needed assistance,
4/16/56
-13-
bring in outside counsel at that point.
He felt that three months
might be sufficient time to give the member bank in which to effect
the required capital increase.
It was his view that as the matter
Progressed the bank might take steps to withdraw from the System.
In a further discussion of the question of employing outside
counsel, it was the consensus that retention of counsel with offices
ill Washington would have much to recommend it, particularly because of
the fact that if the case should go to the United States Court of Appeals it
probably would be heard in Washington.
The suggestion was made
that the Board's Counsel study the situation and present to the Board
the names of persons who might be retained for this purpose.
Chairman Martin then suggested that the alternative draft of
letter to Mr. Cosgriff which would decline to send Board representatives
t° the meeting on May 8 be changed in accordance with Governor Robertson's
suggestion, that the amended draft be discussed with President Mangels
later this week, and that in the absence of developments which would make
s°rne change in procedure seem advisable, the letter then be sent.
This
14°111d be with the understanding that, as suggested previously, the
110arcIt 3 Counsel would present a recommendation to the Board on the retention of outside counsel in this case.
Following a suggestion by Governor
Vardaman which resulted in an additional
minor change in the draft of letter to
Mr. Cosgriff, the procedure suggested by Chairman Martin was approved unanimously.
Mr. Hexter then withdrew from the meeting.
At the meeting on April LI, 1956, the Board deferred for further
consideration an application from The Bank of Tokyo, Ltd., Tokyo, Japan,
for a reaffirmation of the determination made by the Board in 1953 that
the bank was not deemed to be engaged as a business in holding the
st°ek of, or managing or controlling, banks or trust companies within
the
meaning of section 301 of the Banking Act of 1935. Pursuant to
the understanding at that meeting, the file on the matter was recirculated to the members of the Board for review.
In addition, there were
sent to the
members of the Board copies of a memorandum from Mr. Hackley
dated April 6,
1956, discussing (1) the pertinent facts of the present
ease, (2) the nature and purpose of determinations under section 301,
(3) Past
precedents where the holding company was itself a bank or where
the
holding company controlled more than one bank, and (h) outstanding
eases involving such circumstances.
The memorandum suggested as pos-
ble alternatives that the Board might (1) reaffirm its previous determination in this case, reserving the right to rescind the determination
if the
facts should change substantially, (2) decline to make the redetermination on the grounds that The Bank of Tokyo, having ac-
(11111'ed control of The Bank of Tokyo Trust Company of New York, New York,
4/16/56
-15-
in 1955, could no longer be regarded as not engaged in the business of
holding the stock of, or managing or controlling, banks or trust cornPanics, or (3) advise The Bank of Tokyo that the Board was unwilling to
reaffirm the previous determination, but that it would be willing to
consider the matter further if binding assurances were given that The
Bank of Tokyo Trust Company of New York would not engage in any trust
or banking business except for its functions as fiscal agent in servicing
certain Japanese bonds and activities directly related to that function.
Governor Szymczak said he continued of the opinion that the
8°ard should follow the first alternative; that is, reaffirm the previous
dete
rmination.
However, he would not eliminate the possibility of an
approach along the lines of the third alternative if the other members
Of the Board
considered that preferable.
In the discussion which ensued, Governor Shepardson referred to
the cases cited in Mr. Hackley's memorandum and pointed out that most of
the determinations appeared to have been made some time ago and no longer
l'ePresented outstanding cases.
He had received the impression from re-
Cent discussions of the Board that the general situation in regard to
h°1d4.ng
companies had come to assume somewhat different proportions than
rili*It have existed when many of the previous actions were taken.
If
there was now a feeling on the part of the Board that a change in direction should be
made, it seemed to him that the number of prior determinations still outstanding might have been reduced to a point where this
ose,
MINi.
4/16/56
-16-
would not be an unfavorable time to change directions.
With that
thought in mind, he felt there might be considerable merit in the
third alternative suggested in Mr. Hackley's memorandum, particularly
in view of the broad powers contained in the charter of The Bank of
Tokyo
Trust Company.
Governor Robertson then suggested a compromise which might tie
in with past procedure and practices, meet Governor Shepardson's point,
and yet permit The Bank of Tokyo Trust Company to operate in the restricted field for which it was organized; i. e., that the Board might
reaffirm the previous section 301 determination on condition that the
trust Company
would not receive deposits from the public.
In response
t° a question whether this meant that he would not favor including a
condition that the trust company refrain from engaging in any trust business except for functions related to servicing the Japanese bonds and
sirftilaz
activities, Governor Robertson said that for this purpose he
did not
believe there would be the same difficulties with regard to a
trust business as with regard to a deposit business.
In the light of the
ti°11 of the State authorities in granting the trust company's charter,
he th
-ought the Board might be in a better position if it did not make any
e°11dition against the trust company's conducting a trust business restricted to local Japanese residents and Japanese business concerns.
V16/56
-17Mr. Hackley reviewed the nature and purpose of section 301 de-
terminations
and said that if the Board could be assured that the trust
company would not receive deposits, it would be clear to that extent
that The Bank of Tokyo had not expanded its banking business as compared
With the situation when the Board made its previous determination in
1953. He felt that it would be preferable if the Board could be assured,
before reaffirming its determination, that the trust company would not
receive deposits.
Further discussion concerned the question whether anything would
be -...—
sained by requiring assurances from The Bank of Tokyo that the trust
e°mPany would not receive deposits as opposed to reaffirming the deterrainati_on and including language to the effect that the reaffirmation was
1.44cle on condition that the trust company would not receive deposits.
Some Preference was expressed for the first approach on the basis that
the Board would have positive assurances placing The Bank of Tokyo on
l'ecord and that it could then make its determination on the basis of the
facts as represented by that institution.
At the conclusion of the discussion,
unanimous approval was given to a letter
to Mr. Y. Ono, Director and Agent, The
Bank of Tokyo, Ltd., New York, New York,
in the following form, for transmittal
through the Federal Reserve Bank of San
Francisco:
This refers to your letter of October 24, 1955, with respect to the holding company affiliate status of The Bank of
Tokyo,
Ltd. of Japan.
;.
I
4/16/56
-18-
The Board understands that in addition to control by
majority stock ownership of The Bank of Tokyo of California,
The Bank of Tokyo, Ltd. of Japan owns 9,920 of the 10,000
outstanding shares of the capital stock of The Bank of Tokyo
Trust Company of New York. It is also understood that this
trust company was organized in 1955 for the primary purpose
of assisting in the performance of the duties of fiscal and
paying agent for the Japanese Government or any political
subdivision or agency thereof or for the Japanese Government on private obligations; that the trust company proposes
to act as escrow agent and generally conduct a trust and
banking business for foreign principals in connection with
Japanese foreign trade and financing, as well as transacting
similar trust and banking business from other Far East
sources and the various branch agencies, subsidiaries, affiliates, and representatives of The Bank of Tokyo, Ltd. of
Japan throughout the world located outside of New York State;
but that the trust company will not undertake to engage in
local personal trust business in competition with domestic
trust companies in New York City, except for local Japanese
residents and Japanese business concerns, and will not seek
deposits from the public at large in the United States.
On the basis of its understanding of the facts as above
stated, the Board feels that it would not be warranted in reaffirming the determination made by the Board in its letter
of January 8, 1953, that The Bank of Tokyo, Ltd. of Japan is
not engaged as a business in holding the stock of, or managing
or controlling banks, banking associations, savings banks or
trust companies. In accordance with that letter and in view
Of the substantial change in the facts of the situation, the
Board proposes to rescind the determination made at that time.
However, before taking any such action, you are advised that
the Board would be willing to consider favorably a reaffirmation of the 1953 determination upon receipt from The Bank of
Tokyo, Ltd. of Japan of satisfactory assurance that The Bank
of Tokyo Trust Company of New York will not receive deposits
from the public in the United States, including Japanese nationals in this country. It is requested, therefore, that you
advise the Board within a reasonable time and in any event not
more than 60 days from the date of this letter whether or not
The Bank of Tokyo, Ltd. of Japan is willing to give such assurance.
5
764.;
4/16/56
-19At this point Mr. Solomon, Assistant General Counsel, entered
the room and Mr. Hackley withdrew.
Consideration was given to a memorandum from Mr. Solomon dated
APril 11, 1956, copies of which had been sent to the members of the
B°ard, discussing developments in connection with the proposal previously
ec)nsidered by the Board that there be submitted to the Congress a draft
°r legislation which would authorize the Board to enlarge the powers of
foreign branches of national banks.
The memorandum pointed out that
c°Pies of a draft of legislation amended to meet certain comments of the
Federal Advisory Council were sent to the Council following the Board
'eeting on March 13, 1956, that responses had been received from all but
Ir
member of the Council, and that the responses were favorable.
(One
Collneil member who had not been heard from at the time the memorandum
was written subsequently responded favorably.)
The memorandum stated that
1411ile Deputy
Comptroller of the Currency Jennings saw no real need for
the amendment to the draft, he had no objection and continued to favor the
ProP°sal. It also stated that advice had not yet been received from the
-,ral Deposit
Insurance Corporation concerning its views.
There was
slIbMitted with the memorandum a draft of letter to the Bureau of the
BUdg
Which would enclose a draft of proposed letter to the Chairman of
the Senate
Banking and Currency Committee recommending enactment of the
legi
slation.
4/16/56
-20Following explanatory comments by Mr. Solomon, Governor Vardaman
raised a question whether it would be appropriate for the Board to request such legislation, which he referred to as relatively unimportant,
or whether the proposal should more appropriately be made by an organization such as the American Bankers Association.
Other members of the Board expressed the view that the proposal
1148 not an unimportant one in relation to the Board's responsibilities
fcr the foreign operations of American banks.
They pointed out that the
legislation was recommended by the System committee (the Neal Committee)
Which
studied this area extensively at the Board's request. In the cir-
cumstances, they considered it appropriate for the Board to sponsor such
a Proposal. It was also brought out that discussion of the proposal with
the Federal Advisory Council and others had resulted in the matter reaching 4 stage where it would seem highly desirable to go forward.
Governor Vardaman said he recognized the advanced stage of the
niatter, that his inquiry was mainly for the purpose of raising the point
for consideration, and that in all the circumstances he would have no
bjection to submitting the proposal to the Budget Bureau.
Thereupon, unanimous approval was
given to a letter for the signature of
Chairman Martin to the Honorable Percival
F. Brundage, Director, Bureau of the Budget,
reading as follows, with the understanding
that if the Bureau had no objection, the
proposal would be submitted to the Senate
and House Banking and Currency Committees:
Full, Enclosed is a draft of a proposed letter to Senator
,right, Chairman of the Senate Banking and Currency
'
4/16/56
-21-
Committee, transmitting a proposed draft of a bill "to improve the usefulness of national bank branches in foreign
countries", together with an explanatory memorandum.
The Board would appreciate advice as to the relationship of this proposal to the program of the President. It
would be appreciated if such advice could be received as
to
Promptly as possible in order to expedite presentation
Comptroller
the
of
Office
this session of the Congress. The
of the Currency has indicated approval of the proposal.
At this point Messrs. Johnson, Controller, and Director, Divisi°n of Personnel Administration, and Sprecher, Assistant Director, DiIrision of Personnel Administration, entered the room.
At the meeting on April
b, 1956, the Board gave consideration
t° a letter from President Bryan, Chairman of the Special Committee on
StlIclY of the Retirement System, relating to the procedure which should be
t°110wed in evaluating reports submitted by Industrial Relations Coun8el°rs Service, Incorporated, on (1) the retirement and other benefit
Pr°grams of the Board of Governors, and (2) the similar programs of the
Federal
Reserve Banks.
At that meeting it was agreed that the report
relating to the Board's programs should be evaluated and acted upon by
the Board itself. It was also agreed that the Board should not be repre8ellted on the committee which would be established to evaluate and make
rec°111mendations on the report relating to the Federal Reserve Banks.
Governor Mills made a statement in which he brought out that
there remained for decision two points: first, what steps should be taken
V16/56
-22-
to implement the review of the report regarding the programs of the
Board, and, second, what procedure the Board should follow in appointing the two Federal Reserve Bank directors who, according to the suggestion made in Mr. Bryan's letter, would serve with others on the committee to evaluate the report concerning the Federal Reserve Banks.
Governor Balderston, who was not present at the meeting on
April 4, said he concurred wholeheartedly in the recommendation made
by Governor Mills at that time that the Board should not be represented
O? the
committee to evaluate the report on the Federal Reserve Banks.
He vent on to suggest the difficulty of finding two Reserve Bank directors
to
serve on that committee who would be acquainted with the area concerned
and also would have the time at their disposal to participate in the re•
Of the report. He felt that the main burden of the review work
v°41d have to fall upon selected Reserve Bank personnel.
However, when
eilch a review was completed the evaluating committee including the Reserve
Dank directors, might meet for the purpose of appraising the reaUlts and reaching conclusions.
Governor Mills commented that something might be said for having
Reserve Bank directors on the evaluating committee, since they are not
beneficiaries under the Retirement System of the Federal Reserve Banks.
Re understood
the thought of the Special Committee to be, also, that
of the directors would bring into the committee parties having
4/16/56
a
-23-
responsibility for operating policies of the Banks and for following
Reserve Bank operations in the areas of economy and the general welfare
of the employees.
He then cited instances in the past where Reserve
Bank directors had served on System committees in connection with various
Projects.
Mr. Bryan's suggestion contemplated, he felt sure, that the
evaluating committee might draw upon any persons it saw fit, either
Within or outside the Reserve Banks, for such assistance as it might
Following a further discussion of the advantages of having Reserve Bank directors on the committee and of possibilities for reconciling
ee
advantages with the practical problem that Governor Balderston had
nientioned, it was suggested that Governors Balderston and Mills review
the roster of Federal Reserve Bank and branch directors and make a rec°Mm
endation to the Board regarding directors who might most appropriately
be designated by the Board to serve on the evaluating committee.
This suggestion was approved unanimously.
With regard to the evaluation of the report concerning the Board's
retirement and other benefit programs, Chairman Martin suggested that
G°11srnors Szymozak and Shepardson be requested to serve as a subcommittee
fc3r the purpose of making the evaluation and submitting recommendations
to
the Board, with the understanding that they would be free to call upon
4/16/56
-24-
members of the staffs of the Board and the Federal Reserve Banks for
assistance in any way and to such an extent as they deemed desirable.
Following a discussion, during
which Governor Mills suggested that
the nature of the recommendations in
the report might cause the study to
extend over a relatively long period,
Chairman Martin's suggestion was approved unanimously.
Messrs. Sherman, Johnson, Solomon, and Sprecher then withdrew
from the meeting.
There had been sent to the members of the Board copies of a
Memorandum from the Division of Examinations dated February 21, 1956,
ecIlltaining information relative to the status of "problem" member banks
as of December 31, 1955.
Governor Robertson stated that the memorandum had been prepared
all(' distributed for the purpose of providing all of the members of the
8c3ard an opportunity to review the situation and raise any questions
that they
might have.
Following a brief discussion, Chairman Martin suggested that
the
matter be placed on the agenda for another Board meeting at which
ttme
the
would permit appropriate consideration of the general situation and
specific cases referred to in the memorandum.
There was unanimous agreement with this suggestion.
4/16/56
-25The meeting then adjourned.
Secretaryls Note: Pursuant to the recommendations contained in memoranda dated
April 12, 1956, from Mr. Marget, Director,
Division of International Finance, Governor Balderston approved on behalf of the
Board on April 13 the appointments of
Bertha G. Brown and Viola M. Challingsworth
as Clerk-Stenographers in that Division,
with basic annual salaries at the rates of
$3,925 and $3,1751 respectively, effective
as of the respective dates on which they
assume their duties.
Pursuant to the recommendation contained in
a memorandum dated April 12, 1956, from Mr.
Bethea, Director, Division of Administrative
Services, Governor Balderston today approved
on behalf of the Board an extension of the
temporary appointment of Ruth H. Hideout,
Cafeteria Helper in that Division, for a
period not to exceed two months, without
change in her present basic salary at the
rate of $2,600 per annum, effective upon the
expiration of her present appointment.
@FedFRASER