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Minutes for
To:
Members of the Board
From:
Office of the Secretary
April 24, 1964.
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.
Chm. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. Mitchell
Gov. Daane
Minutes of the Board of Governors of the Federal Reserve System
°11Priday, April 24, 1964.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
The Board met in the Board Room at 10:00 a.m.
Mills, Acting Chairman
Robertson
Shepardson
Mitchell
Daane
Sherman, Secretary
Kenyon, Assistant Secretary
Broida, Assistant Secretary
Young, Adviser to the Board and Director,
Division of International Finance
Mr. Noyes, Adviser to the Board
Mr. Fauver, Assistant to the Board
Mr. Holland, Associate Director, Division of
Research and Statistics
Mr. Koch, Associate Director, Division of
Research and Statistics
Mr. Partee, Adviser, Division of Research
and Statistics
Mr. FUrth, Adviser, Division of International
Finance
Mr. Katz, Associate Adviser, Division of
International Finance
Mr. Spencer, General Assistant, Office of the
Secretary
Mr. Axilrod, Chief, Government Finance Section,
Division of Research and Statistics
Mr. Eckert, Chief, Banking Section, Division of
Research and Statistics
Mr. Gemmill, Economist, Division of International
Finance
Mr.
Mr.
Mr.
Mr.
Economic review.
There were distributed a table on U. S. capital
rlove.
° and data relating to monetary developments in the four-week period
elidLeci APril 22, 1964.
Mr. Axilrod reported on recent developments in the Government
ties market, after which Mr. Partee commented on bank reserves, bank
) and the money supply.
Mr. Gemmill then discussed recent foreign
J1,46 ,
4124/64
-2-
exchange market developments and the capital flows table that had been
dis
tributed.
Following discussion based on those reports, all of the members
°I' the staff except Messrs. Sherman, Kenyon, Fauver, and Spencer withdrew
tret the meeting and the following entered the room:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Hackley, General Counsel
Farrell, Director, Division of Bank Operations
Solomon, Director, Division of Examinations
Shay, Assistant General Counsel
Goodman, Assistant Director, Division of Examinations
Smith, Assistant Director, Division of Examinations
Leavitt, Assistant Director, Division of Examinations
Hricko, Senior Attorney, Legal Division
Egertson, Supervisory Review Examiner, Division of
Examinations
Ratification of actions.
Actions taken by the available members
or the Board at the meetings held on Tuesday, April 21, 1964, and Wednesday,
1131 22) 1964, as recorded in the minutes of those meetings, were ratified
1:11419•1111nou5 vote.
Discount rates.
"re
at.
The establishment without change by the Federal
Banks of New York, Philadelphia, Cleveland, Richmond, Chicago,
Kansas City, and Dallas on April 23, 1964, of the rates on
dizeo
lInts and advances in their existing schedules was approved unanimously,
th
he understanding that appropriate advice would be sent to those Banks.
Circulated or distributed items.
The following items, copies of
%/hieh
are attached to these minutes under the respective item numbers
144c
Elted, were approved unanimously:
1422
4/24/64
-3Item No.
r
ietter
to Newton-Waltham Bank and Trust Company,
c 3;tham, Massachusetts, approving the establishment
:
a branch in Natick.
1
Letter to Manufacturers and Traders Trust Company,
0) New York, approving the establishment of
"ranch at 2210 Military Road, Town of Niagara.
2
t&tter
New
York to The Marine Trust Company of Western
3
or 'Buffalo,
New York, approving the establishment
branch at 4381 Military Road, Town of Niagara,
to'lb the understanding that the bank's capital structure was
be increased.
4.
to
Wells Fargo Bank, San Francisco, California,
4
:rving. the establishment of a branch in the San Ramon
;
4443e Shopping Center, Alameda County.
I
tter 60 Bamerical International Financial Corporation,
tieliv
shal,„“)rk, New York, granting consent to the purchase of
pea of Promotora de Inversiones, S. A., Barcelona, Spain,
14:
"4cces5 of 10 per cent of Bamerical's capital and surplus.
5
Letter
tetter
,A) Counsel for Peoples Trust & Savings Bank, Green
' w isconsin, responding to a request for a copy of the
t44L
1 li s report to the Federal Deposit Insurance Corporation
011 j
0.Q,he competitive factors involved in the bank's proposed
ollsition of assets and assumption of liabilities of Bank
l'een Bay, Green Bay, Wisconsin.
6
With respect to Item No. 1, Governor Mills pointed out that
Nellt
°II-Waltham Bank was a subsidiary of Baystate Corporation and that
the,
1"roPosed establishment of the Natick branch by the bank was, in effect,
4,
l elletration by the holding company into a new area of Massachusetts.
'
114
thi
's connection, he inquired whether the Federal Reserve Bank of
kston-
should have some indication from the Board that it should follow
kore
Closely the trend of bank holding company expansion in the State.
;1,.)
e‘t
4/24/64
-4-
Itr. Leavitt, responding to Governor Mills' comment, noted that the
Reserve Bank memorandum on the branch application recognized the holding
e°11113411Yts majority interest in the Newton-Waltham Bank.
In connection with Item No.
4, it was noted that the application
Wells Fargo Bank for a branch in the San Ramon Village Shopping Center,
ed4 County, had been protested by Mr. Harry J. Harding, President of
The
Pirst National Bank of Pleasanton, which was operating a trailer
bt.gh,
—en in the area, as mentioned at the Board meeting on April 3, 1964.
11*'Leavitt indicated that the views presented by Mr. Harding had been
.tLicilecl- closely.
However, it appeared that Mr. Harding's branch was
troviding the community with adequate banking facilities, and it
14 e°11cluded by the Division that the Pleasanton bank should not be
4411)aated from competition.
In connection with Item No.
V%11,4
6, Governor Mills commented that he
favor complying with the request of Counsel for Peoples Trust &
41,111r.
Bank for a copy of the Board's report on competitive factors be-
Q411_,
14 release of the report in this instance would come after, rather
thall
Prior to, the Federal Deposit Insurance Corporation's adverse decision
(111the
aPplication involved.
On the general subject of release of reports on competitive factors,
ShaY stated that a letter expressing the views of the Department of
atiEtic,4
- on the Board's tentative proposal had been received.
In addition,
v''
' ° discussed the matter informally with representatives of the Federal
;
_5_
tellosit Insurance Corporation, and he expected the Board would hear from
the Corporation rather soon.
No word had yet been received from the
%DP-troller of the Currency.
Report on competitive factors (Fords-Woodbridge, New Jersey).
There had been distributed a draft of report to the Comptroller of the
encY on the competitive factors involved in the proposed merger of
'
eilll
Wolools
—urldge National Bank, Woodbridge, New Jersey, with and into First
tank
and Trust Company, National Association, Fords, New Jersey.
During discussion, a change in the conclusion was agreed upon,
"ter which the report was approved unanimously for transmittal to the
e°41Pt
roller.
The conclusion in the report, as approved, read as follows:
Prior to the recent acquisition of approximately 97
l'er cent of outstanding stock of Woodbridge National Bank
an individual who represents the controlling interest
III First Bank and Trust Company, a significant amount of
orapetition existed between these two banks. So long as
!
'his common ownership exists, there is little potential for
e°mPetition between the two banks. Consummation of the
,roPosal would forever foreclose any potential for corn)
!
and would deny residents of the area an alternative
ource of banking service. The competitive aspects of the
!
vroPosed merger are clearly adverse.
l!aort on competitive factors (Charleston-Darlington, South
.•
There had been distributed a draft of report to the Comp-
'ler of the Currency on the competitive factors involved in the
tl"
-4 veed merger of Citizens Bank of Darlington, Darlington, South Carolina,
'
irlto rms
-,ue
Citizens and Southern National Bank of South Carolina, Charleston,
Skth
Carolina
142r.
4/211./64
-6During discussion, Governor Mitchell noted a reservation as to
lie
'Wording of the part of the report's conclusion that stated that the
el7gsr would represent a further step toward concentration of banking
i*esclurces in South
Carolina.
He had expressed a similar view on a
ecialiDetitive factor report considered at the Board meeting on April 15,
196k
because such wording conveyed the impression that an extension of
serbvices over a broader area of South Carolina by Citizens would be
illiclesirable and not in the public interest.
In his opinion, if the bank
eloped further, this might be helpful from the standpoint of the State's
ec°11°mY.
However, his had been a minority view.
similar
Governor Mills suggested that a future report on a somewhat
altilation might use wording, as a variation of expression, to the effect
that
such a merger represented a further grouping of commercial banking
res°11rces into a single unit and a consequent erosion of independent
bawl_
—4ang outlets.
At the conclusion of the discussion the report was approved for
ran
—smittal to the Comptroller with the conclusion reading as follows,
,
Qove
'
flOr Mitchell's reservations having been noted and Governor Shepardson
114111_
'441g indicated that his views were along somewhat the same lines as
those
of Governor Mitchell:
Consummation of the proposed merger would eliminate
thp-. competition existing between The Citizens and Southern
vational Bank of South Carolina and Citizens Bank of
larlington, as well as potential for more competition
Detween them. While the proposed merger would not significantly alter Southern National's competitive capabilities
F
4/214-/64
-7-
in the areas in which it currently operates, nor alter its
position in relation to other banks in the State, it would
expand its geographical coverage into another county and
would represent a further step toward concentration of
banking resources in South Carolina.
.112port on competitive factors (Portland-Bath, Maine).
Pursuant
to the understanding at the meeting of the Board on April 17, 1964, there
hacibeen distributed a revised draft of report to the Comptroller of the
encY on the competitive factors involved in the proposed consolidation
'
Clill
°r Canal National Bank, Portland, Maine, and The Bath National Bank, Bath,
MEtirie.
In discussion of the matter, Mr. Leavitt reviewed the history of
mergers in the State of Maine in recent years and the present banking
Etzlzet
lAre in the State. In summary, it seemed to the Division of Exami44ti°n8 that there had not been undue merger activity in the State since
the
Passage of the Bank Merger Act. In the revised draft of report, a
13e'llagraPh had been inserted in the body of the report regarding the degree
or
e°11centration of banking resources in the hands of the larger commercial
14414
and it had been noted that the concentration of commercial banking
re804r
cee would be increased slightly through consummation of the current
However, no reference to that factor was made in the conclusion
°r the revised draft.
Governor Shepardson stated that although he would not dissent
rtot
the sending of the revised draft report, he preferred the wording
Or the
conclusion of the original draft, which stated that the proposed
4124/64
-8-
c°11solidation would eliminate limited competition and that the competitive
etreets of the proposal would not be adverse.
A minor change in the wording of the conclusion was agreed upon,
allter which the report was approved for transmittal to the Comptroller.
The
conclusion in the report, as approved, read as follows:
While the proposed consolidation of Canal National Bank,
Portland, Maine, and The Bath National Bank, Bath, Maine,
*would remove the only bank headquartered in the BrunswickBath area, it would eliminate only slight competition.
Messrs. Shay, Goodman, Leavitt, Hricko, and Egertson then withdrew
tr'c'til the meeting.
Conference of General Auditors (Item No. 7).
During a review
°I' the,
-ePort of the most recent examination of the Federal Reserve Bank
O
Ati-anta
at the Board meeting on March 25, 1964, certain aspects of the
ing procedures followed at the Reserve Banks were discussed.
It
14.4s
illggested during that discussion there might be a degree of built-in
8tance on the part of the Banks and their Auditors to recommendations
b
Y independent public accountants some of the Banks had consulted, in
elllar those recommendations addressed to the use of testing and
41N.
ing techniques.
411clit
The public accounting firms that had reviewed the
-g function at some Reserve Banks were generally of the view that
th e.
ting procedures applied to the verification and review of accounts
44i
°Perations
might be more detailed than necessary to provide satisfactory
aA41.t
assurance.
si)e
It was therefore suggested at the March 25 meeting that
conference of General Auditors be convened to discuss the subject.
4/24/64
-9In this connection, there had now been distributed a memorandum
4ted April 20, 1964, from the Division of Examinations.
The memorandum
Nigssted that because of the special interest and responsibility of the
Clictirmen of the Federal Reserve Banks in respect to the audit function,
letter be sent to Mr. Atherton Bean, Chairman of the Conference of
Clial
-"Len, with regard to the plans for the convening of the special
e°11farence.
A draft of letter was attached to the memorandum, along
it a
tentative agenda that would be enclosed with the letter.
Mr. Smith commented that the Conference of Chairmen had discussed
in 1961 the responsibilities of the Reserve Bank Chairmen, acting through
'
the
o-
4- Audit Review Committees, for the internal auditing function of the
"ve Banks.
The Conference had adopted a resolution stating that it
Vag
4esirable that the Board of Directors of each Federal Reserve Bank
'
aPpropriate steps to have the Audit Review Committee make a study,
In c
c)nsultation with the President and General Auditor of the Bank, of
the 4
/1cliting function and upon conclusion of the study to submit a report
t"he Board of Directors. The directors had shown a particularly active
illtel'e8t in the auditing function since that time.
For this reason
815eciallY, it was suggested that a letter such as the one distributed
%Ilth the Division's memorandum be sent to Chairman Bean.
Mr. Smith went on to say that from his conversations with some
44- Auditors he found a rather widespread opinion that outside public
Elee0411
tants made a mistake in equating commercial bank auditing with
4/24/64
-10-
N.eral Reserve Bank auditing.
The Auditors seemed to feel that commercial
banks, operating with a profit motive, were likely to accept sampling
techniques out of consideration of savings in auditing costs.
On the
basis) however, that the Reserve Banks should maintain the best possible
image, the General Auditors tended to be of the view that modifieati°r1 of stringent auditing procedures might be dangerous.
During the discussion that followed Mr. Smith's comments,
Clover
,
"or Robertson remarked that this was the very reason why the special
e°11terence was desirable.
The Auditors should weigh their desire to do
4 el.reet job against the advantages of doing a good testing and sampling
kbat
substantially lower cost.
The matter was one that required Board
leMership.
Governor Mills suggested that the Board's staff should not, of
8e) stifle
expressions of opinion by the General Auditors.
Mt. Solomon remarked that as he understood it the Board wished
to
l*:Y to steer a course that would exert leadership and influence without,
o/1
the other hand, going so far that the General Auditors and their Audit
kyle
Committees would institute modified audit techniques unwillingly,
°II the
ground that the Board had taken over the responsibility.
Discussion then turned, at the instance of Governor Mitchell, to
the l)
°88ibi1ity of including on the proposed agenda consideration of
°Ileratin
--g costs, as contrasted with auditing costs, that were involved
14 1'01,
4-44)1./ing methods or procedures specified by the Auditors.
He
11
4/24/64
li
the
-11-
gnized that probably the most fruitful exploration of this phase of
Matter would not come from discussion with the Auditors, however.
The question of broadening the agenda to take into account the
Pl'c)blein mentioned by Governor Mitchell was explored at some length.
It
/148 recognized that although there might be some limitations, as he had
84ggested, in reviewing this point with the General Auditors, on the
°I*Ler hand the Auditors presumably gave weight to operating costs involved
11113r°cedures they recommended.
be
Governor Mills suggested that the question
-LIQroduced along the lines of asking to what extent the Auditors were
e°st-conscious in working out the procedures they recommended for operating
clePari- -Ments, as measured against the net gain involved in following such
1:11'°eeclures, and there was general agreement that a question to such effect
811°11141 be included on the agenda.
During further consideration of the tentative agenda, question was
t4ilaed. Yhether representatives of the Reserve Bank Planning (Methods and
84iterils) Departments should be invited to the forthcoming meeting, since a
131'°13c)sec1 agenda topic would inquire whether it would be desirable or appro1)tlate to undertake operational audits in the light of possible conflicts
lith
""e Planning Departments in the Reserve Banks. Discussion suggested
that
jf
-- probably would not be appropriate to invite Planning Department
-sentatives to this particular meeting.
However, general agreement
%tate
cPressed, in this connection, with a suggestion by Governor Robertson
that
he topic be changed to one that would inquire about the need
4/24/64
-12-
Auditing Departments to engage in operational audits in view of the
activities of the Planning Departments.
There was also general agree-
nlent that it would not be appropriate to ask the Auditors about the
attitude of the management of the Reserve Banks toward this type of activity
°Ilthe part of the Auditing Departments, and that this question therefore
should be dropped from the agenda.
At the conclusion of the discussion, unanimous approval was given
to the Proposed letter to Chairman Bean, with the understanding that the
elerlda for the special conference of General Auditors would be revised in
the light of the views expressed by the Board at this meeting. A copy of
the
letter, with enclosed agenda, in the form transmitted is attached as
'tern
Subject to the concurrence of Chairman Bean, it was understood
that
t
he special conference of General Auditors would be called by the
13041,a
) probably for dates in the latter part of June.
It was also under-
atoco
that
the Division of Examinations would proceed in appropriate manner
the proposed conference with the Standing Committee of General
Alld[itors.
Payment of the cost of a dinner for the representatives of the
lieterv
e Banks attending the special conference was authorized, along with
th
esUltant overexpenditure in the pertinent account of the Board's budget
*
theR
It was understood, in this connection, that the attendance from
eserve Banks at the conference would probably be more limited than
_f
4124/64
t
-13-
/41481, and that attendance of members of the Board's staff at the dinner
'
818° would be quite limited.
Coin shortage in Bermuda.
Mr. Farrell reported on a telephone
trom the State Department inquiring about the possibility of supplying
a441tional American coin for use in Bermuda.
The State Department was in
eee4-t of a cable from the American Consulate stating that American coins
el'e in wide usage in Bermuda and that there was a distinct shortage of
a4ell Coin.
Mr. Farrell had discussed the matter with the Treasury and
the Federal
Reserve Bank of New York, but the difficulty of alleviating
the
,
situation was evident.
However, it was understood that Mr. Farrell
°124 communicate with other Federal Reserve Banks to ascertain whether
'
lelief could be offered.
The meeting then adjourned.
Secretary's Notes: Attached as Item No. 8 is a
copy of a letter sent to Chairman Pathan of the
House Banking and Currency Committee on April 23,
1964, with regard to his request of November 7,
1963, that certain information from bank reports
of condition be furnished to Professors Polakoff
and Sawhill for use in a study to be made for the
Committee. It had been understood at the Board
meeting on March 17, 1964, that this letter would
be sent if the other Federal bank supervisory
agencies were agreeable to the data being provided,
on a basis that would prevent disclosure of data
for individual banks. Advice from those agencies
indicated that they had no objection.
Pursuant to recommendations contained in memoranda
from appropriate individuals concerned, Governor
Shepardson approved on behalf of the Board on
April 23, 19614., the following actions relating to
the Board's staff:
14'
op.,1
Roberta M. O'Rourke, from the position of Secretary in the Division
Bank Operations to the position of Secretary in the Office of the
-elletary, with no change in basic annual salary at the rate of $5,585,
effective April 26, 1964.
k"-.12EApyment following maternity leave
vitL Anne T. Roberson as Secretary, Division of Research and Statistics,
basic annual salary at the rate of $6,770, effective April 27, 1964.
Governor Shepardson today approved on behalf
of the Board the following items:
ttlirote
.tter to the Federal Reserve Bank of Philadelphia (attached Item No. 0)
ving the designation of 16 employees as special assistant examiners.
roll Memoranda from
appropriate individuals concerned recommending the
ng actions relating to the Board's staff:
A
intment
8.1.402,1e1vin Goldstein as Summer Law Clerk, Legal Division, with basic
salary at the rate of $4,690 effective June 15, 1964.
saa.
kip
increase
D. Ring, Technical Assistant, Division of Bank Operations, from
970 to $11,725, effective April 26, 1964.
_
Seer ta
C
BOARD OF GOVERNORS
Item No.
1
4/24/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
April 24, 1964.
Board of Directors,
Newton-Waltham Bank and Trust Company,
Waltham, Massachusetts.
Gentlemen:
The Board of Governors of the Federal
Reserve System approves the establishment by
Newton-Waltham Bank and Trust Company, Waltham,
Massachusetts, of a branch in a shopping center
located at the northwest corner of Speen Street
and Route 9 (Worcester Turnpike) in Natick,
Massachusetts, provided the branch is established
Within one year from the date of this letter.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)
BOARD OF GOVERNORS
Item No. 2
4/24/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
April 24, 1964.
Board of Directors,
Manufacturers and Traders Trust Company,
Buffalo, New York.
Gentlemen:
The Board of Governors of the Federal
Reserve System approves the establishment by
Manufacturers and Traders Trust Company, Buffalo,
New York, of a branch at 2210 Military Road, town
of Niagara, Niagara County, New York, provided
the branch is established within one year from
the date of this letter.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
Of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
Of November 9, 1962 (S-1846), should be followed.)
1436
BOARD OF GOVERNORS
Item No.
3
4/24/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE HOARD
April 24, 1964.
Board of Directors,
The Marine
Trust Company
of Western New York,
Buffalo, New York.
Gentleme
n:
The Board of Governors of the Federal Reserve System
approves the establishment by The Marine Trust Company of
stern New York, Buffalo, New York, of a branch at 4381
-9itarY Road, Town of Niagara, Niagara County, New York, provided the branch is established within one year from the date
Of
this letter.
Z
It is understood that, in accordance with conditions
irn
Posed by the State Banking Department at the time of its
4 Proval of the proposal, the bank's capital structure will be
c creased by the sale of not less than $7 million of new
aPital stock.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
,(The letter to the Reserve Bank stated that the
board also had approved a six-month extension
Of the period allowed to establish the branch;
nd that if an extension should be requested,
he Procedure prescribed in the Board's letter
Of November 9, 1962 (S-1846), should be followed.)
Z
BOARD OF GOVERNORS
Item No.
4
4/24/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
April 24, 1964.
Board of Directors,
Wells Fargo Bank,
San Francisco, California.
Gentlemen:
The Board of Governors of the Federal
Reserve System approves the .establishment of a
branch by Wells Fargo Bank in the San Ramon
Village Shopping Center at the intersection of
Amador Valley Drive and Highway 21 in an unincorporated area of Alameda County, California,
Provided the branch is established within six
months from the date of this letter.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
Of the period allowed to establish the branch;
and that if an extension Should be requested,
the procedure prescribed in the Board's letter
Of November 9, 1962 (s-1846), should be followed.)
BOARD OF GOVERNORS
Item No.
OF THE
FEDERAL RESERVE SYSTEM
5
4/24/64
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE ROAD
April 24, 1964.
8americal International Financial Corporation,
41 Broad Street,
New York 15, New York.
Gentlemen:
Reference is made to your letter of March 16, 1964,
transmitted through the Federal Reserve Bank of New York, in'
.(prIlling the Board of Governors that your Corporation has agreed
to
invest approximately US$83,333 equivalent in the capital
Stock
of a new financing corporation to be known as Promotora
s Inversiones S.A. ("PDI"), which is being formed in Barcelona,
de
Jain. You further advised that your Corporation had agreed to
nvest a second amount equivalent to about US$83,333 when rebyr
PDI. You have requested the Board's consent to
:vest
I
a possible total of the equivalent of US$333,333, rePresenting 20 per cent of the total authorized capital of PDI.
Section 211.8(a) of Regulation K grants general consent
;
If)
er
s anY Corporation organized under section 25(a) of the Federal
or erve Act "to acquire . . . and hold the shares of corporations
toganized under foreign law if such acquisition (1) is incidental
1,711 an extension of credit by the Corporation to the corporation
bace shares are acquired, (2) consists of shares in a foreign
Un?'`' Or (3) is otherwise likely to further the development of
lted States foreign commerce; . .
From the information submitted, it seems clear that the
Pron
pp
-°sed acquisition of shares of PDI would not come within the
ral consent provisions of clause (1) or clause (2) of Section
211
11:1I (a). However, as it would appear that the activities of
for 14°111d be "likely to further the development of United States
(3)elgn commerce," the shares of PDI could be acquired under clause
th of Section 211.8(a) up to the equivalent of US$200,000. As
- Proposal contemplates that your Corporation may invest a
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Bamerical International
Financial Corporation
PcIssible total of the equivalent of USS333,333, the Board
grants specific consent, in accordance with your request
on the basis of the information furnished, for your
‘4)rPoration to purchase and hold 20 per cent of the shares
°f PDI at a cost not to exceed approximately US$333,333,
1,:ovided such stock is acquired within one year from the
'ate of this letter.
The Board also approves the purchase and holding
shares of PDI within the terms of the above consent in
-=ss of 10 per cent of your Corporation's capital and
surPlus.
of
"
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
14411)
BOARD OF GOVERNORS
Item No.
6
4/24/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
April 24,
1964.
Minahan, Esq.,
luluYta: R
irschboeck, Minahan1
'8 Harland 2
1O Jug
2- Marine
PlazaIlthiaukee,sC0
53202
be4t
Minahan:
tit. sha This refers to your letter of April 20, 1964, to
It the Board's staff, requesting a copy of the Board's .
!ePort '
qve t '0 the Federal
Deposit Insurance Corporation on the compettkmnt°re involved in connection with the application under the
rqs•coti-:ger Act of 1960 of Peoples Trust & Savings Bank, Green Bay,
114at -841) to acquire the assets and assume the liabilities of the
Green Bay, Green Bay, Wisconsin.
S
A
Copy
of the requested report is enclosed herewith.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
Item No.
7
4/24/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL. CORRESPONDENCE
TO THE BOARD
April 29, 1964
ConfAtherton Bean, Chairman,
el erence of
Chairmen,
Federal Reserve Bank of Minneapolis,
—41eapolis, Minnesota. 55440
44 Mr. Bean:
As you know, in accordance with a resolution adopted by the
41717snce of Chairmen on November 30 - December 1, 1961, the Audit
Itese
:
4 Committees of the Boards of Directors of the several Federal
futiej
e Banks each caused a special study to be made of the auditing
in their respective Banks. In four of the Reserve Banks, the
Review Committees availed themselves of the assistance of outside ,
stud i-onsultants,
engaging certified public accountants to conduct
aes for them. Copies of the reports submitted by the various pubbeet ccounting firms have been made available to the Board and have
analyzed by its staff.
111414_
For the past several years, the Board has been employing a
Niti; ac
counting firm to make an annual survey of the examination pro/1444 8 applied by the Board's staff in examining the Federal Reserve
and the Board has had, of course, the benefit of opinions and
-4nen
dations of such firms.
w
The Comments of the various public accountants raise the queskw rehether the
internal auditing procedures applied to the verification
of the accounts and operations in the Federal Reserve Banks
,Y
144 be'v,
more
;ore
detailed than necessary to provide satisfactory audit assur11
:
m Or example, such activities on the part of the Auditing Departthe:
involve the keeping of records that should be maintained in
'
101:ittaZating departments or records that substantially duplicate those
ed in the latter departments. The public accountants also emsizj
Y a„ the
desirability of procedural reviews by the auditors, augmented
the PProhrriate
audit testing and sampling, for obtaining assurance that
114t °Illar operating procedures and routines of the Banks provide adebe e internal
controls and safeguards. Such reviews and tests, it has
gested, would permit considerable curtailment of detailed yen Procedures without loss of audit effectiveness.
O
lir.
-2-
Atherton Bean
The Board believes that the views of the professional accountof
such as outlined above, merit the careful attention and consideration
of e General Auditors of all the Reserve Banks and the Board's Division
e,,e4xaminations. It is felt that a useful purpose would be served by a
tilial Conference of General Auditors in the near future at which there
the d be a full discussion of the possible advantages or disadvantages in
alr rec°mmendations and suggestions that have been advanced, looking toward
13;Zment among the members of the Conference on any revisions of auditing
tices in the Banks that would be of benefit to the System.
4
A possible agenda of the topics that might be discussed at the
sup,.
°6ested Conference is attached.
The Board would appreciate knowing whether you concur in having
the b
collsi°0ard of Governors call such a Conference at a date to be selected in
the
IV,tation with the Standing Committee of General Auditors, probably in
rob a ter part of June. If you agree, arrangements for the Conference
of ce neld in the Board's building would be made by the Standing Committee
kreenerel Auditors, with the assistance of Mr. James C. Smith, Assistant
bla ulTr of the Board's Division of Examinations, and the Conference would
--er the chairmanship of the Chairman of the Standing Committee.
Sincerely yours,
Merritt Shbrma
Secretary.
hitter"t
POSSIBLE TOPICS FOR AGENDA
Are the auditing procedures now in effect in the Reserve Banks more
extensive than necessary to provide reasonable assurance of the
validity of the account balances and the existence of adequate
safeguards in the accounting and operating procedures of the Banks?
Are the
audit frequency schedules actually in effect in the Banks.
greater than reasonably necessary in relationship to the assurances
mentioned in item 1 preceding?
What are the advantages and disadvantages of a minimum frequency
schedule for System-wide application as illustrated by the recommendations heretofore adopted by the Conference of General Auditors
and now in effect, in comparison with frequency schedules tailored
tO the particular situation existing in each Reserve Bank?
4,
5,
1/
What are the advantages and disadvantages of procedural audits,auPPlemented by appropriate testing and sampling, as compared with
the detailed verification procedures that have been traditionally
followed in the Reserve Banks? '
In
connection with audit recommendations for changes in operating
methods or procedures, what consideration is given to over-all
c°st factors that may be involved, are evaluations made of the
ad vantages to be gained from such changes as compared with the
NIssible additional costs imposed?
6_ In
view of the activities of the Planning (Methods and Systems)
Departments in the Reserve Banks, to what extent, if any, would
be
or desirable for Auditing Departments to engage
in o appropriate
perational auditing2I?
oocedural audit as used here is intended to mean a review of the
:crating procedures in effect in a departmental activity and of ,
rk conformance with such procedures with a view to evaluating
age integrity of the operation from the standpoint of the controls
As 1r safeguards provided.
a'efined by one of the public accounting firms which studied the
Bank, "'operational auditing' would
b e c ting function in a Reserve
o
oncerned with evaluating the effectiveness of the various
aPerating and staff Departments of the Bank in discharging their
lgned responsibilities in accordance with prescribed policies
ei;,Procedures; it would not be limited to an evaluation of the
'
of lciency of existing controls but would extend to an evaluation
trp,,the efficiencies of procedures and operations." The same firm
:
a.ue the further comment: "Operational audits can be an important
'
cI art of
management's over-all system of control and as such they
ion keeP management informed as to whether its directives are folwed. Their value is recognized by industry generally as a
resuit of
constructive suggestions for reducing costs and increasug the effectiveness of operations."
j
Z
Item No.
BOARD OF GOVERNORS
4/24/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE OF THE CHAIRMAN
April 23, 1964.
The
Honorable
Wright Patman, Chairman,
11411
:118 and Currency Committee,
of Representatives,
4—ingt°n, D. C. 20515
141L-
I/14Lr Mr.
Chairman:
This is in further reply to your letter of November 7, 1963,
reque
st•
444, lng that certain information from reports of condition be furProfessors Polakoff and Sawhill for use in a study to be made
the
Committee. My letter of November 15 stated that this request
of voeen referred to staff for further study to determine the magnitude
to thtlk involved in making these compilations, priority to be assigned
violaet.Project, and whether the desired data could be compiled without
lhg usual disclosure restrictions.
C
%east
Si,nce that time, the Board's staff has conferred on several
ns with your staff and with Professor Sawhill regarding these
:
,Probje
I:
. * Pursuant to these discussions, Professor Sawhill submitted
ter of December 20, explaining the nature and purpose of his
hopo,
—,
qtidecie Study in some detail and expanding the request for data into lir. in your letter of November 7. A copy of this letter was sent
4py cj°huson, formerly of your staff. For your ready reference, a
this letter is enclosed.
Ntr f?°mPilations requested by Professor Sawhill would require a
lear f:;'Ort that could not be performed by the Board's staff in the
the —ure in an orderly manner. However, in view of your interest
o pr- Proposed study, the Federal supervisory agencies are agreeable
ricling the requested data to Professor Sawhill on a basis that
,,
,,Ptevo°11
111,
-8
vidual bank disclosure. The data in question will be
lid
a'ailable for use on the Board's computer for up to 50 hours on
"eeke
h
coss-s) as time permits, provided Professor Sawhill will develop the
z .Y computer program and furnish administrative assistance needed
-or ,4
cessing these data.
7
this
It will be appreciated if you will inform the Board whether
angement is agreeable with you and Professor Sawhill.
'
Sincerely yours,
Wm. McC. Martin, Jr.
8
Item No.
BOARD OF GOVERNORS
9
4/24/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE HOARD
April 24, 196)4..
J"eph R. Campbell, Vice President,
I:eral Reserve Bank of Philadelphia,
4adelphia, Pennsylvania. 19101
bear),
- 4r.
Campbell:
1);
In accordance with the request contained in your letter
22) 1964, the Board approves the designation of the folemPloyees as special assistant examiners for the Federal
exitriZe Bank of Philadelphia for the purpose of participating in
at
of State member banks.
of Ati
4
Joseph G. Breen
Thomas J. Laughlin
4hn M. Sanders
Robert J. Anusky
tdgar W. Hewitt
Joseph M. Mason
William A. McCarrin
Charles J. Sullivan, Jr.
William O'Connor
Ralph W. Curry
Edward Fitzpatrick
James Walsh
Ronald DiMarco
William Gillingham
Dwight Spickler
ki a
The Board also approves the designation of Partick R. Harris
assistant examiner for your bank for the purpose of
'
ellrtsyiPating in examinations of State member banks except The First
"Ilia Banking and Trust Company, Philadelphia, Pennsylvania.
D
SPee
1
114ttici
14...
the
bAppropriate notations have been made on our records of
e deleted from the list of special assistant examiners.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
@FedFRASER