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Minutes for To: April 25, 1961 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. Chm. Martin Gov. Szymczak Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Minutes of the Board of Governors of the Federal Reserve System °11 Tuesday, April 25, 1961. etihSENT: Mr. Mr. Mr. Mr. Mr. Balderston, Vice Chairman Mills Robertson Shepardson King Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Discount rates. Reserve The Board met in the Board Room at 10:00 a.m, Sherman, Secretary Kenyon, Assistant Secretary Fauver, Assistant to the Board Solomon, Director, Division of Examinations Johnson, Director, Division of Personnel Administration Kelleher, Director, Division of Administrative Services Harris, Coordinator, Office of Defense Planning Hexter, Assistant General Counsel Furth, Adviser, Division of International Finance Goodman, Assistant Director, Division of Examinations Leavitt, Assistant Director, Division of Examinations Landry, Assistant to the Secretary The establishment without change by the Federal Bank of Atlanta on April 24, 1961, of the rates on discounts and 84114LIInes in its existing schedule was approved unanimously, with the Uticlerstanding that appropriate advice would be sent to that Bank. Items circulated or distributed to the Board. The following itellas, which had been circulated or distributed to the Board and copies or ith.ich are attached to these minutes under the respective item numbers were approved unanimously: 121 4/25/61 -2Item No. Letter to Rhode Island Hospital Trust Company, Providence, Rhode Island, approving the establishrent of a branch at 11 Kilvert Street, Warwick. Letter to The Chase Manhattan Bank, New York, ew York, approving the establishment of a branch at 156-02 Cross Bay Boulevard, Howard Beach. 2 tter to Philadelphia International Investment °rPoration, Philadelphia, Pennsylvania, granting ,11.e Board's general consent to purchase and hold °ek in generally designated types of corpolItions subject to specified conditions. 3 Letter to Bank of Smithfield, Smithfield, Virginia, Proving an investment in bank premises. 11. Letter to mountain Trust Bank, Roanoke, Virginia, )1/roving the establishment of a branch at 4920 Illiamson Road. 5 L tter to the Federal Reserve Bank of Chicago j wing the payment of salary to an officer at e rate fixed by the Bank's Board of Directors. 6 Z e With reference to Item No. 3, Governor Mills noted that although he would not oppose the application by Philadelphia International Vestment Corporation, because approval would be consistent with 4etions taken previously by the Board on similar applications, he 1184 'erious reservations concerning the general consent procedure. Governor Robertson indicated that his views were similar to th08e of Governor Mills. Mr. Goodman withdrew from the meeting at this point. 141-5 4/25/61 -3Application by Southern Arizona Bank and Trust Company. A memoran.dum dated March 27, 1961, from the Division of Examinations had been circulated in connection with an application by Southern Arizona Ilank and Trust Company, Tucson, Arizona, a Western Bancorporation sl tsidiary, for permission to estalish a branch in Phoenix. When the file was in circulation, Governor Mills questioned the recommendation made in the Division's memorandum, which recommendation, like that of the Federal Reserve Bank of Dallas was favorable. The Division memorandum pointed out that Western Bancorporation (formerly Firstamerica Corporation) was already represented in Phoenix by another subsidiary, The First National Bank of Arizona. Except for thr ee small independent banks, competition in Phoenix was supplied by the Valley National Bank and its associated institution, The Arizona 11:411k (formerly the Bank of Douglas). The latter two banks, together, 44 62 per cent of the deposits of individuals, partnerships, and c°rPorations in Maricopa County and 4S compared with 57 per cent of the banking offices, 35 per cent and 33 per cent, respectively, for The Plret National Bank of Arizona. Southern Arizona Bank and Trust Co4 rttr,— -t'llY heretofore had confined its operations to Tucson and an acil°Ining county. Total deposits of the two Western Bancorporation st1b8idiaries (First National and Southern Arizona) were substantially 1e88 than the combined deposits of Valley National and The Arizona Bank. 4/25/61 -4Governor Mills stated that in his view a serious question was liaised by the application of Southern Arizona Bank and Trust Company /61101, as a unit of the Western Bancorporation group of banks, was seeking to extend its facilities into Phoenix, where another unit of the same system, The First National Bank of Arizona, was already in °Peration. In view of the problem with respect to the concentration of bsriking resources in Arizona, he could see no logic in permitting Southern Arizona Bank and Trust Company to enter an area where another eUbsidiary of the same holding company had a substantial number of Offi ces. Accordingly, Governor Mills said, he would vote to disapprove the aPplication. Governor Robertson said that he had sympathy with the point of Viell expressed by Governor Mills. However, he was inclined favorably t°41kmi the application on the ground that approval would give Western ilszteorporation one more office in Phoenix to compete with the larger VsaleY National Bank group. He noted that if there appeared to be any P°88Th1lity of stimulating competition for the two large banking urn. zbanizations by refusing to approve the application, he would so vote. Dht ortunately, this did not appear to be the case. Governor Robertson on to say, in response to a question from Governor Shepardson, that there might be some hope of stimulating banking competition in 4114Ma, by independent interests provided the Comptroller of the Currency 443 'the Board took a firm position against further expansion of the V25/61 -5- National Bank group and the Western Bancorporation units. Rowever, in the absence of any such meeting of the minds, he did not see how the Board could justifiably restrict expansion of Southern Arizona Bank and Trust Company, which was the only State member bank Governor Shepardson said that he would be sympathetic toward tl7ing to curb expansion of the two organizations that, between them, controlled almost all of the banking resources of the State. However, his reasoning with respect to this particular application was the same as that of Governor Robeson. In the absence of a joint approach on the Part of the Board and the Comptroller of the Currency, he doubted whether much could be accomplished. In the discussion that ensued, Governor Mills expressed the \1.ew that it was the Board's responsibility to focus its attention on aPPlications coming before it and to take whatever action it thought 4 correct, without reference to the attitude taken toward similar 414)11cations by another supervisory agency. In this connection, he ailed that the Board recently rejected the application of BancOhio e°11°0ration to acquire The Hilliard Bank, Hilliards, Ohio, even though the Comptroller of the Currency had previously authorized the establish- nt of certain branches in the area by the banking subsidiary of 4.4e°13.10 in Columbus. -6- V25/61 In reply to a question raised in further discussion, it was stated that apparently Western Bancorporation had elected to expand its °Perations in the Phoenix area via Southern Arizona Bank and Trust 2 C°131Pa ay rather than via First National Bank of Arizona because the tormer desired to begin to establish offices outside the Tucson area. 14 addition, it had been suggested by the applicant that competition "isted between the subsidiary banks, but this contention was not given 4 great deal of weight by the Division of Examinations. Question also was raised as to whether First National Bank of Allzorla might have been precluded from establishing additional branches 14 Phoenix, and it was decided to defer action on the application of S°11thern Arizona until it had been ascertained from the Office of the ectiPtroller of the Currency whether any such applications by First National had recently been denied. Mr. Noyes, Director, Division of Research and Statistics, joined the meeting during the foregoing discussion. Application of United California Bank (Item No. 7). There had been circulated under date of April 17, 1961, a memorandum from the tivision of Examinations relating to an application by United California Los Angeles, California, for permission to establish a branch 4dieLeent to the Los Angeles Producers Stock Yards, Los Angeles County. II/el-lb:led in the file was a draft of letter to United California Bank that would approve its application, on which both the Division of L; 4/25/61 -7- 441anations and the Federal Reserve Bank of San Francisco had recommended favorably. When the file was in circulation, Governor Robertson indicated that he had a question concerning the application. Governor Robertson said that although he would not oppose this Pellticillar application, he wished to call attention to the expansion Plans of this bank, as well as other large banks in California, and etallhasize the importance of expediting the factual study regarding bliallch banking in California and related matters currently being undert54n by the staff pursuant to the understanding at the Board meeting on 144rell 10, 1961. He drew attention to the fact that the applicant bank 1446 now operating 122 branches, had approval for eight others not yet established, and in addition had pending 22 applications for new branches, Of which involved bank mergers. It was his view, Governor Robertson 11414, that the stated intentions of the large banking organizations in Caairornia to expand branchwise must be watched carefully. Therefore, he "4-13nted to throw out a word of caution about the whole program, and to eXPress the hope that the current survey would be expedited. Governor King indicated that he could not get too disturbed the Publicly expressed intention of the large banks to expand. He it desirable that other banks beside the largest, Bank of ker ice. National Trust and Savings Association, expand their operations 4° aa to provide effective competition. Although he believed it 141881ble that the number of branch banking offices in an area such as 4/25/61 -8- California might tend to become excessive, he was favorably impressed by statements that he had heard about the good treatment and service being provided their customers by large California banks. It was his gerleral philosophy, Governor King said, that if the customers of banks / ere satisfied, this was a factor that should be considered carefully before any decision was made to clamp down on further expansion. The letter to United California Bank approving the establishment 't a branch adjacent to the Los Angeles Producers Stock Yards was then 1.'4S.2Y11. unanimously. A copy of the letter is attached hereto as Messrs. Johnson and Leavitt then withdrew from the meeting. Operation Alert 1961. At the request of the Board, Mr. Harris °Ixtlitled the procedures contemplated to be followed in connection with °Peration Alert 1961, Phase I of which was scheduled to be conducted tro,, — Wednesday, April 26, through Saturday, April 29. Phase II, the 114ture of which he described briefly, was to be conducted in the latter l'a4t of August, and Phase III was to be conducted in October. As bEtekground to his comments on the forthcoming exercise, Mr. Harris —4marized some of the more recent developments in connection with the of the defense planning program relating to banking and monetary Itttairs, All of the members of the staff except Messrs. Sherman, Kenyon, 4114 Landry then withdrew. V25/61 .9... Visit by group of Kentucky bankers. Governor Shepardson reported lseeipt of a letter from a representative of the Kentucky Bankers ' Association relating to a trip to the Washington area in July that was being planned for a group of country bankers under the auspices of the Association's Agricultural Committee. The letter raised the question 'Whether the visiting group of bankers might visit the Board's offices Oh t Tuesday, July 11, for an economic presentation. After discussion, during which distinctions were drawn between a ViSit by a group of this kind and those made during the first part Of each calendar year by officers of various State bankers associations, lt was agreed that it would be appropriate for Governor Shepardson to "tend an invitation to the group of country bankers to visit the 1c)alld's offices on the date indicated, and in that connection to make 411'angements for a suitable presentation by a member or members of the Ilc'ard's staff. The meeting then adjourned. Secretary's Note: Governor Shepardson today approved on behalf of the Board the following items: Letter to the Federal Reserve Bank of New York (attached Item J approving the appointment of Lawrence E. Schembri as assistant ebajz4 8 Letter to the Federal Reserve Bank of Atlanta (attached Item approving the designation of W. James Montgomery as special sistant examiner. 4/25/61 Memoranda fram from appropriate individuals concerned recommending increases in the basic annual salaries of the following persons on the Board's staff, effective April 30, 1961: Basic annual salary To From Division jtle Office of the Secretary $5 170 Alberta L. Thorley, Senior Records Clerk $5 5 Research and Statistics lialleY A. Milner, Statistical Clerk 4,250 4,355 4,285 41390 9,735 9,995 7/095 5l005 7,260 5,170 3)865 4,285 3)970 4,390 Bank Operations W. Lucius Thalley, Clerk Personnel Administration 44e A. Stetter, Administrative Assistant Administrative Services rald W. Moon, Supervisor, Procurement Section ,l e ra i : cH. Norris, Head, Mall and Messenger Z jarbara „.... Kay, Operator, Key Punch "ies T. Stewart, Mail Clerk Secretary BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. Item No. 1 4/25/61 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD April 25, 1961 Board of Directors, Rhode Island Hospital Trust Company, Providence, Rhode Island. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of Boston, the Board of Governors of the Federal Reserve System approves the establishment of a branch at 11 Kilvert Street, Warwick, Kent County, Rhode Island, by Rhode Island Hospital Trust Company, Provided the branch is established within one year from the date of this letter. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 14 BOARD OF GOVERNORS ,ietItnttejO il OF THE *44 S0°11 .s1) ** g* FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ,o2.4 0 Item No. 2 4/25/61 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD *ifklgto April 25, 1961 Board of Directors, The Chase Manhattan Bank, New York, New York. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of New York, the Board of Governors of ,t,he Federal Reserve System approves the establishment of a illanch by The Chase Manhattan Bank, New York, New York, at ;561-02 Cross Bay Boulevard, Howard Beach , Queens County, 'ew York, provided the branch is established withi n one Year from the date of this letter.' Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 14.c.,() BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 215, D. C. ADORCIIII Item No. 3 4/25/61 orriciAL CORRESPONOIENCI: TO THE BOARD April 25, 1961 l'hiladelphia International Investment °rPoration, "aladelphia, Pennsylvania. Ge4t1errien: Consideration has been given by the Board of Governors to the quest " the contained in your letter of March 21, 1961, transmitted through Fe sellijderal Reserve Bank of Philadelphia, for the Board's general conchas to Philadelphia International Investment Corporation (PIIC) to pure and hold stock in generally designated types of corporations. On the basis of the information furnished as to investment Mic; -.,Les to be pursued by PIIC, the Board grants its general consent, for t, "Purposes of the first sentence of Section 211.9(c) of Regulation K, to , ,4140 PIIC to purchase and to hold shares of stock of any foreign corporkrid Provided the aggregate investment in any one foreign corporation the -L's subsidiaries (on a combined basis) shall not exceed 5 per cent of eaPital and surplus of PIIC, subject to the following conditions: (1) This authorization she:11 be applicable only to investments made on or before December 31, 1961. Options to acquire stocks subsequent to the termination date (December 31, 1961) Of the general consent may not be exercised unless specifically approved by the Board or permitted under a then effective general consent. (2) The Board of Governors shall be informed promptly in writing, through the Federal Reserve Bank of Philadelphia, when any such investment is made, together with pertinent details regarding such investments, and the Board of Governors shall be furnished within thirty days after acquisition: (a) a balance sheet of the corporation whose stock has been acquired, Showing the financial position of the corporation as of a recent date, together with an income statement for the preceding fiscal period; (b) a brief description of the business of the corporation; (c) a list of officers and directors, with addresses and principal business affiliations; (d) a description Naadelphia International Investment Corporation -2- of the stock acquired; (e) information concerning the rights and privileges of the various classes of stock of the corporation outstanding; (f) a list of all stockholders holding 5 per cent or more of any class of stock of such corporation and their holdings; and (g) a brief description of any loan or credit transaction with the corporation in connection with which the stock was acquired. If, upon review of such information, the Board of Governors determines that an investment is contrary to the investment program of PIIC as submitted to the Board in your letter of March 21, 1961, or is otherwise objectionable to the Board of Governors, PIIC shall take the necessary steps to divest itself of such investment, upon notice to that effect and within such time as the Board may Specify. (3) Investments by PIIC under this general consent shall be made in accordance with sound financial policies, including, among others, (a) appropriate diversification of its loan and investment portfolios so as to avoid undue concentrations In loans to, and investments in, individual enterprises, Industries, or otherwise, and (b) proper regard to the relationship between its assets and the maturities of its obligations. (4) PIIC shall be expected to dispose of its holdings of stock of such foreign corporation, as promptly as practicable, in the event that such foreign corporation should at any time (a) engage in the business of issuing, underwriting, selling or distributing securities; (b) engage in the general business of buying or selling goods, wares, merchandise, or commodities in the United States or transact any business in the United States except such as is incidental to its international or foreign business; or (c) conduct its operations in a manner which, in the judgment of the Board of Governors, is inconsistent with Section 25(a) of the Federal Reserve Act or regulations thereunder. (5) Such investments shall not be made in the shares of financial corporations or holding companies. (6) The investment in any such foreign corporation shall not include more than 49 per cent of its voting shares or other'wise enable PIIC to designate a majority of the foreign corporation's board of directors or similar management group. 1427 Philadelphia International Investment Corporation (7) The aggregate equity investment (at cost) in, foreign corporations engaged in the same business (i.e., the manufacture or mining of similar products or—tHe carrying on of similar activities) shall not exceed 25 per cent of Pile's capital and surplus. (8) The aggregate equity investment in all foreign corporations doing business in any one country, colony, possession or dependency shall not exceed 25 per cent of PIICis capital and surplus. (9) . Under this general consent, shares shall be acquired only from the issuer directly. 1.1trie The right is reserved to terminate this general consent upon days' written notice to PIIC. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 14%", BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 4 4/25/61 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD April 25, 1961 Board of Directors, Bank of Smithfield, Smithfield, Virginia. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of Richmond, the Board of Governors of the Federal Reserve System approves, under the provisions of Section 24A of the Federal Reserve Act, an investment by Bank of Smithfield, Smithfield, Virginia, of $91,500 in bank premises for the purposes of constructing enlarged banking quarters and improving parking facilities. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS OA*** OF THE *4 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS h4i Nis% Item No. orrtciAL CORRESPONDENCE TO THE BOARD April 25, 1961 Board of Directors, Mountain Trust Bank, Roanoke, Virginia. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of Richmond, the Board of Governors of the Federal Reserve System approves the establishment by tIountain Trust Bank, Roanoke, Virginia, of a branch at 4920 Williamson Road, Roanoke, Virginia, provided the branch is established within six months from the date of this letter. ,Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 5 4/25/61 14 BOARD OF GOVERNORS 440"*.4 OF THE Item No. FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADORE'* ornamiL4313111111E11/0140E NEE Ta THE SOAR° April 25, 1961 CONFIDENTIAL (FR) 11r. Carl E. Allen, President, Federal Reserve Bank of Chicago, P. 0. Box 834, Chicago 90, Illinois. Dear Mr. Allen: The Board of Governors approves the payment of salary to Mr. Joseph B. Lederleitner as Assistant Counsel and Assistant Secretary of the Federal Reserve Bank of Chicago at the rate of !:)14,000 per annum, which is the rate fixed by your Board of Directors as reported in your letter of April 13, 1961, effective the date of his appointment through December 31,'1961. It is understood that his appointment will be errect•axe July 1, 1961, or on such earlier date as may be mutually agreed upon by your Bank and Mr. Lederleitner. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, ,Secretary. 6 4/25/61 • BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 7 4/25/61 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD 440* ' April 25, 1961 130ard of Directors, United California Bank, L°s Angeles, California. Gentlemen: Pursuant to your request submitted through the Reserve Bank of San Francisco, the Board of G°vernors of the Federal Reserve System approves the tstablishment of a branch adjacent to the Los Angeles 1Toducers Stock Yards in the vicinity of the intersecon of South Street and Carmenita Avenue, Dairy Valley, Angeles County, California, by United California rank, provided the branch is established within 6 months r°m the date of this letter: Federal Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 14,142 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 8 4/25/61 ADOIRICSIS OFFICIAL CORRZOPONDIENCIL TO TPICC ODOARO April 26, 1961 Mr. Howard D. Crosse, Vice President, Federal Reserve Bank of New York, New York IS, New York. Dear Mr. Crosse: In accordance with the request contained in Your letter of April 20, 1961, the Board approves the appointment of Lawrence E. Schembri as an assistant examiner for the Federal Reserve Bank of New York. Please advise us of the effective date of the appointment. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 9 4/25/61 WASHINGTON 25. D. C. ADDRESS orruciAL CORRESPONDENCE TO THE BOARD April 25, 1961 Mr. Geo. W. Sheffer, Jr., Chief Examiner, Federal Reserve Bank of Atlanta, Atlanta 3, Georgia. Dear Mr. Sheffer: In accordance with the request contained in Y°ur letter of April 19, 1961, the Board approves the designation of W. James Montgomery as a special assistant examiner for the Federal Reserve Bank of Atlant a for the Purpose of participating in examinations of State Member banks only. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary.
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