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FR 609
Rev. 10/59
Minutes for
To:
April
5, 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.
Chin. Martin
Gov. Szymczak
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
11.4(
.-)
Minutes of the Board of Governors of the Federal Reserve System
on Wednesday, April
5, 1961.
PRESENT: Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
The Board met in the Board Room at 10:00 a.m.
Balderston, Vice Chairman
Szymczak
Mills
Robertson
Shepardson
King
Sherman, Secretary
Kenyon, Assistant Secretary
Thomas, Adviser to the Board
Shay, Legislative Counsel
Fauver„ Assistant to the Board
Hackley, General Counsel
Noyes, Director, Division of Research
and Statistics
Mr. Farrell, Director, Division of Bank Operations
Mr. Solomon, Director, Division of Examinations
Mr. Hexter„ Assistant General Counsel
Mr. Chase, Assistant General Counsel
Mr. Conkling„ Assistant Director, Division of
Bank Operations
Mr. Goodman, Assistant Director, Division of
Examinations
Mr. Leavitt, Assistant Director, Division of
Examinations
Mrs. Semis., Technical Assistant, Office of the
Secretary
Mr. Gem ill, Economist, Division of International
Finance
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Items circulated or distributed to the Board.
The following
Items, which had been circulated or distributed to the Board and copies
Of 'which
are attached to these minutes under the respective item numbers
indicated, were approved unanimously:
Item No.
Letter to Bankers Trust Company, New York City,
aPProving an extension of time to establish a
branch at 101 West 66th Street, Borough of
Manhattan.
1
4/5/61
Item No.
Letter to Virgin Islands National Bank, Charlotte
Amalie, St. Thomas, Virgin Islands, approving a
change in the location of its branch in Christiansted.
2
Letter to Bank of America, New York City, amending
the Board's letter of March 23, 1961, relating to the
organization of United Overseas Corporation and United
Overseas Bank.
3
Letter to State Bank of Crowell, Croswell, Michigan,
approving the establishment of a branch at 5482 Main
Street, Lexington.
4
Publication in Federal Register of calls for condition reports
(Item No. 5).
A memorandum dated April 4, 1961, from the Legal Division
had been distributed in connection with a suggestion by the General
Counsel of the Federal Deposit Insurance Corporation that the three
Federal bank supervisory agencies jointly publish calls for reports of
condition in the Federal Register.
The Corporation had long made a
practice of publishing its calls in the Register, since it considered
that the terms of the Federal Register Act required it to do so.
Further,
under legislation enacted last year, the Corporation's assessments upon
insured banks were now based on condition reports.
Therefore, the
Corporation proposed to continue the practice of publication and
suggested that the other two agencies do likewise.
The Board had not
PUblished its cRlls in the Register; its Legal Division, after a study
of the question in 1937, concluded that such publication was not
technic'
0..J_Ly required because the call emanated from the Federal Reserve
12
4/5/61
-3-
Banks rather than from the Board and because State member banks had
actual notice from the Reserve Banks in all cases.
Although those
conclusions were still believed to be valid, it was suggested in the
Division memorandum that in the interest of uniformity it might be
desirable for the Board to join in the publication.
Although the
Division of Bank Operations felt that publishing of the calls would
serve no useful purpose, it had no particular objection.
It was under-
stood that the Chief Counsel to the Comptroller of the Currency took
the same attitude
and would so advise the Comptroller, who had not
previously followed the practice of publishing his calls in the Register.
There was a discussion during which the general view was expressed
that no significant purpose would be served by the proposed joint
publication.
However, since the matter was considered to be of relatively
little importance, it was agreed that the Board would go along with the
suggestion.
Accordingly, it was understood that a letter would be sent
to the Federal Deposit Insurance Corporation in the form attached as
Item No, 5•
Mr. Chase withdrew from the meeting at this point and Mr. Robinson,
Adviser, Division of Research and Statistics, entered the room.
Proposed amendment to section 19 of the Federal Reserve Act
(Item No.
-/-
A memorandum dated March 29, 1961, from the Legal Division
had been
distributed, accompanied by a draft of letter responding to a
request from the Senate Banking and Currency Committee for a report on
tr-)1'orN
_I_#* 104
4/5/61
-4-
S. 1413, a bill to remove any interest rate ceiling on time deposits
of foreign governments and certain foreign or international authorities.
The bill was the
same as the proposed draft bill with respect to which
the Board
informed the Bureau of the Budget, on March
3, 1961, that it
did not object,
except that the bill as introduced (1) referred only to
time deposits instead
of time or savings deposits and (2) included an
additional provision amending section
18(g) of the Federal Deposit
Insurance Act so as similarly to remove the interest rate ceiling on
foreign time deposits carried with insured nonmember banks.
The proposed
letter to the Committee stated that the Board did not object to enactment
of the bill.
However, it pointed out that interest rate limitations
are contained
in the laws or regulations of a number of States, and that
the
purposes of the bill could not be accomplished unless supporting
action was also taken by the authorities of those States.
Governor Shepardson recalled that when the Board was considering
what report it
should make to the Budget Bureau on the bill in draft
form, Chairman Martin expressed to the Treasury Department certain
doubts and
questions in regard to the proposal.
In the end, however,
the Budget
Bureau was informed that the Board would not object to the
Proposed legislation.
that
He asked if it would be deviating too much from
position to indicate in the letter now under consideration that,
although the Board did not object to enactment of the legislation, it
had grave doubts
as to its efficacy.
4/5/61
_5..
Governor Mills expressed the view that a change of emphasis
such as Governor Shepardson had suggested might be of concern to
Chairman Martin, and Governor Balderston concurred.
Governor Shepardson then made the further comment that he
VW
not sure as to the extent to which the Board should go on matters of
this kind even in the interest of harmony.
There were occasions, he
agreed, where the Board might take the position that in the light of all
the
circumstances it did not care to register objections.
However, an
indication simply that the Board did not object seemed to him to go
further than might be desirable.
Governor Mills stated that he would accept the letter as drafted.
Governor Robertson stated that he would dissent for the reasons
he had
expressed when the Board had under consideration advising the
Budget Bureau, in respect to the draft bill, that it did not object.
However, the proposed letter followed the position that the majority of
the Board had
agreed upon in responding to the Budget Bureau, and from
that standpoint
he felt that the letter would be appropriate.
There followed a discussion of the last paragraph of the proposed
letter, relating to the effect of State statutes or regulations, during
which Mr. Shay stated reasons why he felt that this facet of the matter
Igas appreciated by persons in the Congress concerned with the proposed
legislation.
V5/6i
-6Reference also was made to the effect of removal of the authority
Of the Board to
exercise restraint on the rate of interest paid on certain
classes of foreign-owned time deposits on occasions when such restraint
might be desirable.
It was noted that this aspect of the matter had
been mentioned in discussions with the Treasury, and that the Treasury
reportedly had considered it.
Mr. Shay referred to the possible alternative of legislation in
form that would permit the Board to fix a higher maximum rate of
interest on foreign than on domestic time deposits.
He assumed that
Probably the Board would prefer to have the authority removed entirely
than put on such a basis.
In further discussion it was brought out that the effect of
removal of the Board's authority in respect to the rates paid on
foreign-fl
time deposits had been discussed previously in connection
With the report to
the Budget Bureau, and that the question had been
resolved in favor of the position taken in the report that was made to
the Bureau.
Governors King, Szymczak, and Balderston then indicated that
they would
favor sending the letter to the Banking and Currency Committee
in the form in
which it had been submitted to the Board.
Accordingly, it was agreed to send the letter in such form,
Governor Robertson dissenting.
Governor Shepardson stated that he went
along with this decision reluctantly, and only because he had gone along
With the report
made previously to the Budget Bureau on the draft bill.
I,21;5
4/5/61
-7A copy of the letter sent to the Chairman of the Senate Banking
and Currency Committee pursuant to this action is attached as Item No.
6.
Messrs. Goodman and Gemmill left the meeting at this point.
Inspection of examination reports by Department of Justice.
At
its meeting on March
22, 1961, the Board decided, with Governors Mills
and King dissenting, to permit representatives of the Department of
Justice, upon request by that Department, to have access to examination
reports of certain member State banks for the purpose of obtaining leads
but not for use
in evidence.
Subsequently, the Board received a letter
from the Assistant Attorney General requesting an opportunity to examine
the reports of examination of two member State banks in Lexington,
Kentucky, in connection with an antitrust suit brought by the Department
With regard to a
merger of two banks in that city.
A memorandum dated April 4, 1961, from the Legal Division had
been distributed in connection with that request.
It was pointed out
in the memorandum
that at the March 22 meeting the Board also decided
that the
Comptroller of the Currency and the Federal Deposit Insurance
Corporation should be informed of the Board's position in order to give
those agencies an opportunity to moke representations to the Board on
the
aUbject, if they wished to do so, before the Board sent a favorable
reply to
the Department of Justice.
The memorandum went on to say
that Mr.
Englert, Chief Counsel to the Comptroller of the Currency, had
informed the Legal Division that, although the Comptroller would "deplore"
4/5/61
-8-
the Board's
action in making the reports of examination available, the
Comptroller did not urge the Board to reconsider its decision.
Mr.
Coburn, General Counsel of the Federal Deposit Insurance Corporation,
informed the Legal Division that the Corporation "urges strongly that
the Board
reconsider its decision."
This apparently reflected Mr.
Coburn's belief that if the reports were made available to the Department
Of Justice
they also should be made available to the defendants in
antitrust suits, and that the language of the letter from the Department
Of Justice
indicated the possibility that the Department might make
"a strong effort" to use the reports in evidence.
Mr. Coburn had also
said that one or
more directors of the Corporation might wish to discuss
the matter
with members of the Board.
A draft of letter to the Depart-
ment of Justice acceding to its request accompanied the Division
m
emorandum.
In discussion, Mr. Hackley pointed out that the last sentence
of the draft
letter, to the effect that the reports were being made
available for use in developing information and not for disclosure in
connection with the trial of the case or otherwise, was in conformity
with the language of
the Board's Rules of Organization and Procedure.
It vas
then suggested that the last sentence of the letter be expanded
to include
specific reference to provisions of the Board's Rules under
which the request
was granted.
20';
4/5/61
-9Governor Mills recalled that when the matter of providing
reports of examination to the Department of Justice in connection with
antitrust suits was before the Board on March 22, 1961, he had recorded
his dissent.
That dissent still stood.
In the circumstances, he saw
no point in taking a position on the letter now under consideration and
therefore he would abstain from voting.
Governor King referred to the understanding at the Board meeting
on March
22 that Mr. Hackley would inform the Comptroller of the
Currency and the Federal Deposit Insurance Corporation of the response
the Board
anticipated making to the Department of Justice if access
to examination
reports should be requested in connection with antitrust
Proceedings.
The minutes for that meeting indicated that if the other
banking agencies wished to make any representations to the Board, they
should be permitted to do so.
since
Governor King raised the question whether,
representatives of the other agencies had replied in the terms
stated in the memorandum
from the Legal Division, the Board should
r
econsider its previous position.
At Governor Balderston's request, Mr. Hackley then reviewed his
conversation
with Mr. Coburn, during which the latter had said that one
°I' more of the
directors of the Corporation might wish to discuss the
matter with
the Board.
A discussion followed as to whether it should
be expected that the
Corporation's directors would take the initiative
in expressing their views
or whether the Board should contact them.
4/5/61
-10-
It was the
general view that the initiative might be expected to rest
With the Corporation's directors; since they had not come forward, the
Board should feel free to go ahead with its response to the Department
of Justice.
It was suggested, however, that it might be appropriate
as a
courtesy to cell Chairman Cocke and inform him that the Board was
prepared to accede to the request from the Department of Justice.
After further discussion the letter to the Department of Justice,
in a form
reflecting the change suggested at this meeting, was approved,
Governors Mills and King abstaining, with the understanding that
Governor Balderston would get in touch with Chairman Cocke and inform
him of the
Board's decision.
Secretary's Note: In the absence of Mr. Cocke,
Governor Balderston talked with Mr. Wolcott.
In the light of that conversation, it was
decided not to send the letter to the Justice
Department until Mr. Wolcott's comments had
been reported to the Board. Such a report was
made at the meeting on April 6, 1951.
Messrs. Shay, Hexter, and Leavitt then withdrew from the
meeting.
Review of eligibility requirements under Regulation A (Item
-119:_11
: A draft of letter to Mr. Bryan, Chairman of the Conference of
Presidents, had
been distributed under date of April 3, 1961, in
c°nnection with the understanding reached at the joint meeting of the
Presidents with the Board on March 7) 1961, that the Board would
consider
a proposal, approved by the Conference, that a System staff
4/5/61
-11-
committee undertake a basic review of discount eligibility requirements
with a view to
possible recommendations for changes in law, regulation,
and administration.
The draft letter reviewed the Objectives of the
Proposed study,
expressed the Board's concurrence as to its desirability,
and commented
on further steps that were envisaged with a view to putting
the study in
process.
At this meeting Mr. Sherman distributed a proposed additional
Paragraph regarding
a letter dated March
3, 1961, in which Mr. John A.
Moorhead, Chairman of the Committee on Correspondent Bank Relations
of the
Association of Reserve City Bankers, requested that "steps be
taken to
clarify those areas where doubts and misunderstandings have
arisen" with respect to Regulation
A.
had
Copies of Mr. Moorhead's letter
previously been distributed to the Board.
In discussion, no disagreement was expressed with the view that
the
contemplated study would be desirable.
Comments therefore were
directed principally toward the form of the proposed letter to Chairman
BrYan, and agreement was expressed with certain changes therein.
One
of these
changes had the effect of eliminating from the letter an
indication that a meeting of the discount officers of the Federal Reserve
Banks at an early
date might be useful to the staff committee appointed
to
carrY out the study; according to the revised language, the comments
Of Mr.
Bryan on the desirability and timing of such a meeting would be
re
quested
It was also agreed that the additional paragraph suggested
by Mr. Sherman should
be included in the letter.
V5/61
-12Accordingly, unanimous approval was given to a letter to Chairman
Bryan in the form attached as Item No. 7.
All of the members of the staff then withdrew and the Board
went into executive session.
Travel arrangements.
Chairman
In a memorandum dated April
3, 1961,
Martin advised that he had requested the American Express
C°111ParlY to make all hotel and travel arrangements, except arrangements
for
transportation from Washington to Paris and hotel accommodations
in Paris and London, in connection with the forthcoming trip to be made
by him
and members of the Board's staff, which would include attendance
at the
meeting of the Economic Policy Committee of the Organization for
Economic Cooperation and Development to be held in Paris in mid-April,
visits to several European central banks, and attendance at the May
meeting of the Bank for International Settlements to be held in Basle,
Switzerland.
Following the executive session, the Secretary was advised that
the Board had
authorized payment of the invoice that would be submitted
by the
American Express Company for the cost of all transportation and
hotel
accommodations arranged by that Company, including the service
Crge
involved, which it was unOerstood might be about 25 per cent of
the total
bill.
The meeting then adjourned.
4/5/61
-13Secretary's Note: Governor Shepardson today
aproved on behalf of the Board the following
items:
Memorandum from the Division of Research and Statistics dated
March 30, 1961,
recommending an increase in the basic annual salary of
Ruth H. Clarke,
Editorial Clerk in that Division, from 311,46o to '4,675,
effective April 16, 1961.
Memorandum from the Division of Research and Statistics dated
April 3,
1961, recommending the appointment of Robert Ferber, Research
Professor of Economics at the University of Illinois, as a Consultant
until December 31,
1961, for work in connection with consumer financial
surveys, on a temporary contractual basis with compensation at the rate
of $50 per day for each day worked for the Board, and, in accordance
With the
Board's travel regulations, a per diem in lieu of subsistence
aor the
amount of time spent in a travel status in connection with his
wSSignments,
and transportation. The memorandum stated that Mr. Ferber
alopuld probably
work about six consultant days, which would involve
out three
trips to Washington from Urbana, Illinois.
Letter to Mr. Fulton, President of the Federal Reserve Bank of
Cleveland,
in his capacity as Chairman of the Presidents' Conference
on Systems and Procedures, advising that the following members
2f the
Board's staff would serve as associates of the subcommittees
i
ndicated:
John R. Farrell
John N. Kiley, Jr.
Subcommittee on Electronics
Subcommittee on Methods and
Automation
Secretary
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 1
4/5/61
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
April 5, 1961
Board of Directors,
Bankers Trust Company,
New York, New York.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of New York, the Board
of Governors
of the Federal Reser
ve System extends to May 21, 1962,
the time within which Banke
rs Trust Company, New York,
New York, may establish
a branch at 101 West 66th Street,
Borough of Manhattan, New York, New York.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
I
aa w(04,„4•00
ti
gm
*
0,41
-0
0
dIP
%-„,, •2•-• p, .4
0000***
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No. 2
4/5/61
ADDRESS OFFICIAL CORFIESPONDENCE
TO THE BOARD
April 5, 1961
Virgin Islands National
Bank,
Charlotte Amalie, St. Thom
as,
Virgin Islands,
Gentlemen:
In
ter of March accordance with the request contained in your let9, 1961, addressed to the Federal Reserve Bank
of
,I4,ew York, and
pursuant to the Agreement entered into with the
no
.ar
.c1 of
Governors of the Federal Reserve System under the proof Section 25 of the Fede
ral Reserve Act, the Board of
vernors approves a chan
ge in location of your branch in
.h
ristiansted, St. Croix, Virgin Islands,
from 52 Kingls Street
.(
1,
) 12/13
King's Street, Christiansted. The location of
the
andh may not
be changed, after removal, without the prior
approval of the
Board of Governors.
r
advise the Board of Governors in writing,
through the
e Federal Reserve Dank of New York
, when the branch
is removed
to the new location and opened for business
.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
I
BOARD OF GOVERNORS
, whtcris•r*,4,s,x,
OF THE
*4
VIV
g4
tql,
it,"_
liii
,v7 t%
cm.
:z4gal li*
*
FEDERAL RESERVE SYSTEM
Item No. 3
4/5/61
WASHINGTON 25. D. C.
4
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
April
5, 1961.
Bank of America,
41 Broad Street,
New York 15, New
York.
Gentlemen:
Reference is made to the Board's letter of March 23,
1961 granting consent
to Bank of America and Banca diAmerica e
Italla ("BAI") to take certain actions in connection with the
organizatio
n of United Overseas Corporation ("UOC") and United
Ov‘erseas
Bank ("UOB") and the purchase and/or exchange of stock
01 Banque Africaine Internatio
nale, Societe Congolaise de Banque,
Banque du Ruanda-Urundi and UOB. Sub-paragraph numbered (1) of
the first paragraph
on page 2 of the Board's letter provided:
"(1) Bank of America to contribute one-third of organizational capital expense of UOB and to receive capital
shares of corresponding value, amounting to Swiss
Francs 166,666 (approximately US38,750 equivalent);"
In line with the request contained in your letter of
March 30) 1961, transmitte
d through the Federal Reserve Bank of
New York, and
information received informally from Vice President
Healey of your Bank, sub-paragraph (1) is amended to
read as follows:
"(1) Bank of America to contribute 20 per cent and BAI to
contribute 10 per cent of organizational capital
expense of UOB. It is understood Bank of America
will receive capital shares of corresponding value
amounting to Swiss francs 100,000 and BAI capital
shares amountinL to Swiss Francs 50,000 (aggregating
approximately US.35,000 equivalent);"
It is understood from your letter and the comments of
Vice
President Healey that, while UOB will have capital of Swiss
.'
tcancs 500,000, the exact capitalization of UOC is not known at
time. It is understood further that the valuation of the
ares of the four banks will be subject to review by the Swiss
anking authorities and the actuA capitalization of UGC determined thereafter
.
r
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
1‘)
No--c
;Lk)
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 4
4/5/61
WASHINGTON 25. D. C.
AOORESS OFFICIAL CORRICSPONOENCIE
TO THE BOARD
April 5, 1961
Board of Directors,
State Bank of Croswell,
Croswell, Michigan.
Gentlemen:
Pursuant to your request submitted through
the Federal Reserve Bank of Chicago, the Board of
Governors of the Federal Reserve System approves the
establishment of a branch at 5482 Main Street,
Lexington, Michigan, by State Bank of Croswell, 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.
1216
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No.
5
1415/61
WASHINGTON 25, D. C.
ADORES. OFFICIAL CORRESPONDENCE
TO THE BOARD
April
5, 1961
Mr. Royal L. Coburn, General Counsel,
Federal Deposit Insurance Corporation,
Washington 25, D. C.
Dear Mr. Coburn:
Reference is made to your letter of March 30, 1961,
suggesting that the Board of Governors, the Comptroller of the
Currency, and the Federal Deposit Insurance Corporation jointly
publish in the Federal Register notice of their Calls for
Reports of Condition.
This will confirm the advice given you by telephone
that the Board of Governor
s will have no objection to your
publishing notices in the form enclosed with your letter.
Very truly yours,
t
Merritt Sherma
Secretary
L.. • I \_,
t"*.1
1_401_ r
;,,treif;f:r,
et)iy
c.4.3
—
BOARD OF GOVERNORS
OF THE
Item No.
FEDERAL RESERVE SYSTEM
6
4/5/61
WAS
OFFICE OF THE CHAIRMAN
April
7, 1961.
The
Honorable A. Willis Robertson,
Committee
Chairman,
on
United StatesBanking and Currency,
Senate,
Washington 25, D.
C.
Dear Mr.
Chairman:
This is in response to your
a re
letter of March 23, 1961, requesting
Port on the
bill S. 1.41.3 "To amend section 19 of the Federal Reserve
Act
and
__„
section 18 of the Federal Deposit
Insurance Act to remove the
authority to
limit the rate of interest on time deposits of foreign
t3
governand i
nternational financial institutions."
The bill would amend
Feder
the 14th paragraph of section 19 of the
Act so as to make the provisions of that paragraph
cable to the
inapplirate of interest that may be paid by member
banks
en
time
folits of foreign
tu't?ign governments governments, monetary and financial authorities of
when acting as such, or international financial instibe 1°ns of which the
United States is a member. A similar amendment would
to
de to
section 18(g) of the Federal Deposit Insurance Act with
respect
the rate of
interest that my
m
be paid on such deposits by in
member
insured
nonbanks.
The Board does
not object to enactment of this legislation.
It should be
pointed out that in a number of States, including
New York 3
them
State banks are limited as to the
rate of interest payable by
ve C _ on time deposits, either pursuant to State statute or regulations of
State banking
authorities issued pursuant to statute. Section 24 of the
or`'eral Reserve
Act prohibits any national bank from paying interest on
time
pairvings deposits at a
rate in excess of that authorized by State law to be
is , uPon such
deposits by State banks in the State in which the national bank
(bocated.
Consequently,
enactment of S. 1)l3 would not relieve member banks
tatio 3tat3 and national)
or insured nonmember banks from interest rate limitakenn applicable under
State law or regulations unless appropriate action is
DY the
State authorities.
Sincerely yours,
Wm. McC. Martin, Jr.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No.
7
4/5/61
WASHINGTON 25, D. C.
ADDRESS orriciAL CORRESPONDENCE
TO THE HOARD
April
5, 1961.
Mr. Malcolm
Bryan,
Chairman of the Conference of Presidents,
Federal Reserve Bank of Atlanta,
Atlanta 3, Georgia.
Dear Ar, Bryan:
At the joint meeting of the Presidents of the Federal
Reserve Banks and the Board of Governors on
March 7, 1961, it was
understood that the Board would consider the proposal approved by
the
Conference of Presidents that a System staff coramittee undertake a basic
review of discount eligibility requirements with a
view to possible
reconunendations for changes in law, regulation,
and
administration.
It is the Boardls understanding that the objectives of
such a study
would be (1) to seek to identify present problems in
this field,
including problems resulting from, or that may at some
in the future result from, (a) an insufficiency of paper held
by
member banks that is technically eligible for discount or (b)
i ferences in
interpretatiods among the Reserve Banks as to eligi.111tY of paper for discount; (2) to consider whether the technical
1e quirements
as to eligibility might be relaxed by means of changes
in ad
ministrative
practices, Board interpretations, or amendments
to Board
regulations;
and (3) to consider whether any changes in law
with respect
to this matter may be desirable.
With these objectives in mind, the Board concurs in the
conclusion of the Presidents that a basic review of eligibility requirements by a System staff committee would be desirable.
Since the study may result in proposals for changes in
Board i
nterpretations and regulations or in statutory provisions, it
Would seem
appropriate for the committee to include representatives
,f the staffs
of both the Federal Reserve Banks and the Board; and
is c ontemplated, therefore, that the Board will consult with the
nuairman of the Conference of Presidents as to the designation of
Board
membership of the committee.
In connection with the discount operations of the Federal
Reserve Banks, the Board
believes that a useful purpose would be
Mr. Malcolm
Bryan
served by a meeting of
the discount officers of the Federal Reserve
Banks. At such a meeting,
the agenda might include, in addition to
other matters, a
discussion of eligibility requirements that might
prove to be useful to
the committee appointed to study this matter.
Your comments as
to the desirability and timing of such a meeting
Will be
appreciated.
For your information, there is enclosed a copy of a letter
addressed to the Board under date of March 3, 1961, by the Chairman
Of the
Committee on Correspondent Bank Relations of the Association
Of Reserve
City Bankers. This letter states that there seems to be a
luck of
uniformity among the several Federal Reserve Banks in applying the discount provisio
ns of the Boards Regulation A. Except for
krawledgment the Board has not replied to this letter. The Board
believes that little purpose
would be served by having a committee
established
by the Association of Reserve City Bankers to confer with
.?..System committee on this general subject until after at least pre-um:nary results of
the study of eligibility requirements were
available from the joint committee referred to earlier in this letter.
Jour comments
on this point would be appreciated.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Enclosure.
@FedFRASER