The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
)609
Minutes for
To:
Members of the Board
From:
Office Of the Secretary
April 29,, _1363
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. King
Gov. Mitchell
Minutes of the Board of Governors of the Federal Reserve
System on Monday, April 29, 1963.
The Board met in the Board Room
at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Balderston, Vice Chairman
Mills
Robertson
Shepardson
King
Mitchell
Mr. Sherman, Secretary
Mr. Kenyon, Assistant Secretary
Mr. Johnson, Director, Division of
Personnel Administration
Mr. Hexter, Assistant General Counsel
Mr. Conkling, Assistant Director, Division
of Bank Operations
Mr. Leavitt, Assistant Director, Division of
Examinations
Mr. Thompson, Assistant Director, Division
of Examinations
Mr. Sprecher, Assistant Director, Division
of Personnel Administration
Mr. Mattras, General Assistant, Office
of the Secretary
Miss Hart, Senior Attorney, Legal Division
Mr. Collier, Chief, Current Series Section,
Division of Bank Operations
Circulated or distributed items.
The following items, copies
Of which are attached to these minutes under the respective item
lumbers indicated, were approved unanimously:
Item No.
Letter to the Bureau of the Budget reporting
on a draft bill to amend the Bretton Woods
Agreement Act to authorize the United States
Governor of the International Bank for
Reconstruction and Development to vote for
an increase of $1 billion in the authorized
capital stock of the Bank.
1
,11-'713
-2-
4/29/63
Item No.
Letter to Walker Bank & Trust Company,
Salt Lake City, Utah, approving an extension
Of time to establish a branch at Washington
and Eighth South Streets, branch operations
how conducted at 450 South Second West
Street to be discontinued simultaneously
with the establishment of the new branch.
2
Letter to City National Bank of Beverly
Hills, Beverly Hills, California, granting
its request for permission to continue
to maintain reduced reserves.
3
Order for hearing on a request by The Otto
Bremer Company, St. Paul, Minnesota, for a
determination under section 4(c)(6) of the
Bank Holding Company Act.
4
Letter to the Federal Reserve Bank of Atlanta
regarding a request from Commercial Associates,
Inc., Pensacola, Florida, for certification
by the Board of the establishment of a
reserve pursuant to section 5144 of the Revised
Statutes.
5
the Federal Reserve Bank of St. Louis
a revision in the employees' salary
at the head office and branches
July 1, 1963.
6
Letter to
approving
structure
effective
The action taken by the Board on Item No.
4
included the
designation of Mr. Charles W. Schneider, Associate Chief Hearing
Examiner for the National Labor Relations Board, as Hearing Examiner
for the purpose of conducting the hearing on the application of The
Otto Bremer Company for a section
4(c)(6)
determination.
With respect to Item No. 5, drafts of two alternative letters
had been presented by the Legal Division for the Board's consideration,
the Division having concluded that it would be possible to support legally
4/29/63
either an affirmative or a negative reply to the request of Commercial
Associates, Inc., that the Board make a certification under section 601
of the Internal Revenue Code of 1954 for the benefit of the holding
company.
The decision reached by the Board in favor of the negative
reply reflected a view that the more important considerations were in
the direction of not providing a possible loophole for tax avoidance.
While the instant case was not in itself of great significance, it was
the consensus of the Board that from the standpoint of precedent the
negative reply would be more appropriate.
With respect to Item No.
6,
Mr. Johnson pointed out that the
revised salary structure of the St. Louis Reserve Bank would be the
first to take specifically into account the $1.25 per hour minimum
wage that was to become effective September 1, 1963.
He recalled that
When the $1.15 minimum wage went into effect the Board had taken the
not
Position that the salary structures of the Reserve Banks should
figure.
provide annual salaries equivalent to a lower per hour
Follow-
ing the same line of reasoning, it seemed likely that Reserve Banks
would now be considering adjustment of their salary structures to conform
to the new minimum wage.
Unless the Board felt differently, it would be
the intent of the Personnel Division to indicate to Banks making inquiry
that there would be no objection to their submitting salary structure
d to the
revisions to raise the bottom of the structure to correspon
minimum wage.
n
The members of the Board agreed that such an indicatio
on the part of the Personnel Division would be appropriate.
-4-
4/29/63
With regard to the broader question of the validity of the
Principles followed in determining the salary structures of the Reserve
Banks, there was a brief discussion at the instance of Governor Mitchell
concerning the relationship between such principles and the Board's
general position in opposition to furtherance of the wage-cost spiral.
During the discussion it was pointed out that this question had been
considered by the Board periodically over the past several years, and
that the Reserve Banks recently had been following a more conservative
approach in relating their salary structures to community wage levels.
The concern evidenced by the Board on occasions in the past when the
problem had been considered continued to be reflected in comments made
by members of the Board at this meeting.
On the other hand, reference
likewise was made to the practical problems involved in recruiting and
maintaining satisfactory Reserve Bank staffs under competitive conditions.
Governor Mitchell indicated that it had been his thought, in raising
the question, that the Personnel Division might, upon further study,
be able to suggest modifications of the techniques presently used that
might help to resolve the seeming inconsistency to which he had referred.
Report on competitive factors (Johnstown-Windber), Pennsylvania.
There had been distributed a draft of report to the Comptroller of the
Currency on the competitive factors involved in the proposed purchase
Of assets and assumption of liabilities of Windber Bank and Trust Company,
Windber, Pennsylvania, by United States National Bank in Johnstown,
Johnstown, Pennsylvania.
V29/63
-5After discussion, the report was approved unanimously for
transmission to the Comptroller with the understanding that the
conclusion would be revised to read as follows:
The proposed purchase of assets and assumption of
liabilities of Windber Bank and Trust Company by United
States National Bank in Johnstown would increase the
size of the area's largest bank. U. S. National holds
roughly one-half of Johnstown's commercial bank IPC
deposits and one-fourth of those held by commercial
banks headquartered in Cambria and Somerset Counties.
The proposal would eliminate the significant amount
of competition existing between these two institutions,
and might have adverse competitive effects on other
banks in the area.
Report on competitive factors (Boise-Kellogg, Idaho).
There
had been distributed a draft of report to the Comptroller of the Currency
on the competitive factors involved in the proposed purchase of assets
and assumption of liabilities of Weber Bank, Kellogg, Idaho, by First
Security Bank of Idaho, National Association, Boise, Idaho.
After discussion, the report was approved unanimously for
transmission to the Comptroller with the understanding that the conclusion
'would be revised slightly to read as follows:
The proposed purchase of Weber Bank, Kellogg, Idaho,
by First Security Bank of Idaho, N.A.,Boise, Idaho, would
apparently have little effect on other banks nor would it
eliminate any significant degree of competition between the
two named above, since the nearest offices of these two banks
are about 40 miles apart with little or no competition between them.
There exists a heavy degree of concentration of banking
resources in Idaho where the two largest banks operate over
half of all commercial bank offices and hold almost two-thirds
of all commercial bank deposits. Any increase in concentration of banking resources in these two banks must be considered as seriously adverse to the preservation of banking
competition.
Fic)
4/29/63
-6The meeting then adjourned.
Secretary's Note: Governor Shepardson
today approved on behalf of the Board
a memorandum from the Division of Research
and Statistics recommending the appointment of Irene Marie Fender as Statistical
Clerk in that Division, with basic annual
salary at the rate of $3,925, effective
the date of entrance upon duty.
„.1
Sec
BOARD OF GOVERNORS
OF THE
Item No. 1
4/29/63
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
April 29, 1963
Mr. Phillip S. Hughes,
Assistant Director for Legislative Reference,
Executive Office of the President,
Bureau of the Budget,
Washington 25, D. C.
Dear Mr. Hughes:
This is to advise, in response to your request
of April 8, 1963, that the Board has no objection to the
Treasury draft bill amending the Bretton Woods Agreements
Act to authorize the United States Governor of the
International Bank for Reconstruction and Development to
vote for an increase of $1 billion in the authorized
capital Stock of the Bank.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
Item No. 2
4/29/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
April 29, 1963
Board of Directors,
Walker Bank & Trust Company,
Salt Lake City, Utah.
Gentlemen:
The Board of Governors of the Federal Reserve
System extends to August 21, 1963, the time within
*which Walker Bank & Trust Company may establish a branch
at the southeast corner of the intersection of Washington
and Eighth South Streets, Salt Lake City, provided that
branch operations now conducted at 450 South Second
West Street, Salt Lake City, are discontinued simultaneously
with the establishment of the new branch.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
4.77'
Item No.
BOARD OF GOVERNORS
3
4/29/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
April 29, 1963
13°ard of Directors,
F,ItY National Bank of Beverly Hills,
zeverly Hills, California.
Gentlemen.:
Pursuant to your request submitted through the Federal
serve Bank of San Francisco, the Board of Governors, acting
114der the provisions of Section 19 of the Federal Reserve Act,
cE''Vcants permission to the City National Bank of Beverly Hills to
21t1nue to maintain the same reserves against deposits as are
equired to be maintained by banks located in nonreserve cities,
:
'
'
015011 the opening of its additional branch (Fairfax Office) in the
ItY of Los Angeles.
Your attention is called to the fact that such permission
eUbject to revocation by the Board of Governors.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
1 38,1
Item No. 4
4/29/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
NOTICE OF REQUEST FOR DETERMINATION
PURSUANT TO SECTION 4(c)(6) OF
BANK HOLDING COMPANY ACT OF 1956 AND
ORDER FOR HEARING THEREON
Notice is hereby given that request has been made to the
Board of Governors of the Federal Reserve System, pursuant to section 4(c)(6) of the Bank Holding Company Act of 1956 [12 U.S.C. 1843]
and section 222.5(b) of the Board's Regulation Y [12 CFR 222.5(b)], by
The Otto Bremer Company, St. Paul, Minnesota, a bank holding company,
for a determination that the activities of the following corporations:
The Walsh County Insurance Agency, Inc., Grafton, North Dakota
Lisbon Insurance Agency, Inc., Lisbon, North Dakota
Detroit State Agency, Inc., Detroit Lakes, Minnesota
Farmers & Merchants Breckenridge Agency, Inc.,
Breckenridge, hinnesota
Polk County State Agency, Inc., Crookston, Minnesota
Alexandria State Agency, Inc., Alexandria, Minnesota
411 Minnesota corporations, are of the kind described in the aforementioned
sections of the Act and the Regulation so as to make it unnecessary for
the prohibitions of section
4
of the Act with respect to shares in
noribanking organizations to apply in order to carry out the purposes of
the Act.
Inasmuch as section 4(c)(6) of the Bank Holding Company Act
°f 1956 requires that any determination pursuant thereto be made by the
Board after due notice and hearing and on the basis of the record made
at
such hearing,
1 385
-2-
IT IS HEREBY ORDERED, That pursuant to section 4(o)(6) of
the Bank Holding Company Act of 1956 and in accordance with sections 222.5(b) and 222.7(a) of the Board's Regulation Y [12 CFR
222.5(h), 222.7(a)], promulgated under the Bank Holding Company Act
of 1956, a hearing with respect to this matter be held commencing on
May 15, 1963, at 10:00 a.m., at the offices of the Federal Reserve Bank
of Minneapolis, Minneapolis, Minnesota, before a hearing examiner
selected by the Civil Service Commission, pursuant to section 11 of the
A dministrative Procedure Act, such hearing to be conducted according to
the Rules of Practice for Formal Hearings of the Board of Governors of
the Federal Reserve System [12 CFR Part 263].
The right is reserved to
the Board or such hearing examiner to designate any other date or place
for such hearing or any part thereof which may be determined to be
necessary or appropriate for the convenience of the parties.
The Board's
Rules of practice for Formal Hearings provide, in part, that "All such
hearings shall be private and shall be attended only by respondents and
their representatives or counsel, representatives of the Board;
witnesses„ and other persons having an official interest in the proceedings; provided, however, That on the written request of one or more
respondents or counsel for the Board, or on its own motion, the Board,
When not prohibited by lay', may permit other persons to attend or may
°rder the hearing to be public". [12 CFR 263.2(c)]
Any person desiring to give testimony in this proceeding
Should file with the Secretary of the Board, directly or through the
Federal Reserve Bank of Minneapolis, on or before May 10, 1963, a written
:1386
request containing a statement of the nature of the petitioner's
interest in the proceedings and a summary of the matters concerning
Which said petitioner wishes to give testimony. Such request will
be presented to the hearing examiner for his determination. Persons
submitting timely requests will be notified of the hearing examiner's
decision.
Dated at Washington) D. C., this 29th day of April, 1963.
By order of the Board of Governors.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
(sE2,L)
,8i7+
f11
,
BOARD OF GOVERNORS
•.....
._s_•\)0VG01/4../i.
4O
.
;
Tr.%
*()
Item No.
OF THE
5
4/29/63
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
oc,
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
So
,74LREss:•'
April 29, 1963
Mr. J. E. Denmark, Vice President,
Federal Reserve Bank of Atlanta,
Atlanta 3, Georgia.
•
Dear Mr. Denmark:
This refers to the letters of January 21 and January 23,
to you by Mr. Raymond A. Hepner, Chairman of the
addressed
1963,
Board of Commercial Associates, Inc. ("Associates"), a registered
holding company affiliate of Pensacola, Florida, holding a general
voting permit issued by the Board, copies of which have been transmitted to the Board for its consideration. Mr. Hepner asks three
questions, (1) whether his corporation, pursuant to 12 U.S.C. 61(b)
and (c) (section 5144 of the Revised Statutes, or "section 5144"),
may devote an amount up to 2 per cent of the aggregate par value of
the bank stocks which it owns to the acquisition of readily marketable
assets other than bank stocks prior to May 31, 1963, the close of its
fiscal year; (2) if so, will the Board make a certification pursuant
to 26 U.S.C. 601 ("section 601"), to the effect that Commercial
Associates has devoted the amount in question to creation of a reserve
"in compliance with" section 5144; and (3) if the answer to the second
question is affirmative, how will the certification be accomplished
and how and when will Commercial Associates be notified that it has
been accomplished?
The first question, if answered in the negative, will dispose
of the other two as well. As you point out, statutory liability is not
imposed on the holders of stock in banks controlled by Commercial
Associates, and for this reason, "compliance" in the case of Mr. Hepner's
holding company is measured by section 5144(c) rather than section 5144(b). It follows that the "27 ... of the aggregate par
value of its owned bank stocks" which he mentions in his letter of
January 21 does not apply to Commercial Associates. The maximum amount
Which the holding company could accumulate in any year would be measured
rather by net earnings not in excess of taxable income for the year in
question, computed as provided in section 601, with the additional
limitation, imposed by that section, that the aggregate of all credits
allowable under this section "shall not exceed the amount required to
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Mr, J. E. Denmark
-2-
be devoted under such section 5144 • • •H (in this case section 5144(4)
H. . to such purposes". As you also point out, Commercial Associates
•
is not "required" to accumulate any amount in the reserve provided for
in section 5144, since it does not appear that its net earnings for the
fiscal year in question will exceed 6 per centum per annum ,on the book
Value of its own shares outstanding.
Section 601 is applicable in a very limited number of
circumstances, and the Board has made no certifications under that section since 1941. The Board's staff has made a careful study of the
matter, and the Board is of the opinion that, although the question is
not entirely.free from doubt, the better view is that "compliance"
under section 601 is measured by the amount which a holding company
affiliate is "required" to accumulate under section 5144, and that, for
this reason, it would not be appropriate to issue a certification in
the case described by Mr. Hepner. It may be of interest to note that
the Commissioner of Internal Revenue apparently reached a similar conclusion in his Regulations § 601-1. In view of this conclusion, it is
not necessary to reach Mr. Hepner's second and third questions.
It would be appreciated if you would advise Mr. Hepner of
the Board's views.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
OF THE
Item No. 6
FEDERAL RESERVE SYSTEM
4/29/63
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
April 29, 1963
CONFIDENTIAL (FR)
Mr. Harry A. Shuford, President,
Federal Reserve Bank of St. Louis,
St. Louis 66, Missouri.
Dear Mr. Shuford:
As requested in your letter of April 11, 1963, the Board
Of Governors approves the following minimum and maximum salaries
for the respective grades of the employees' salary structure at the
head office and branches of the Federal Reserve Bank of St. Louis,
effective July 1, 1963.
Memphis
Louisville
Little Rock
St. Louis
Maximum
Minimum
Maximum
Minimum
Maximum
Minimum
Maximum
Grade Minimum
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
$ 2,640 $ 3,540 $ 2,600 $ 3,120 $ 2,600 $ 3,360 $ 2,600 $ 3,120
3,360
2,700
3,360
2,700
3,540
3,780
2,700
2,820
3,660
2,820
3,660 2,880 3,840
2,820
14,020
3,000
3,180
31 480
3,780
4,200
4,620
5,100
51 700
6,360
7,020
7,860
8,760
9,780
10,860
4,320
14,680
5,100
5,640
61240
61900
7,680
8,580
9,480
10,560
11,820
13,180
141620
21940 3,960 3,060
3,120 14,200 3,360
3,360 14,560 3,720
3,720 5,040 14,080
4,140 5,580 4,560
14,560 6,180 4,980
51040 6,840 5,460
5,580 7,560 6,00o
61240 8,400 6,660
6,960 9,360 7,440
71800 10,560 8,280
8,820 11,860 9,240
9,900 13,360 10,260
4,140
4,560
5,040
5,520
6,120
6,720
7,380
8,100
9,000
21940
3,120
3,480
3,900
4,320
14,860
51340
51940
61540
3,960
4,200
14,680
5,280
5,820
61540
7,200
7,980
8,820
10,020
7,320
9,840
8,160 10,980
9,060 12,280
12,500
13,900 lo,o8o 13,620
11,160
The Board approves the payment of salaries to the employees,
Other than officers, within the limits specified for the grade in
which the positions of the respective employees are classified. All
To:
Mr. Harry A. Shuford
-2-
employees whose salaries are below the minimum of their grades as a
result of this structure increase should be brought within appropriate
ranges by October 1, 1963.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
@FedFRASER