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FR 609 Rev. 10/59 Minutes for To: April 6, 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 1 Minutes of the Board of Governors of the Federal Reserve System on Thursday, April 6, PRESENT: Mr. Mr. Mr. Mr. Mr. 1961. The Board met in the Board Room at 10:00 a.m. Balderston, Vice Chairman Mills Robertson Shepardson King Mr. Mr. Mr. Mr. Mr. Mr. Mr. Discount rates. Sherman, Secretary Kenyon, Assistant Secretary Fauver, Assistant to the Board Hackley, General Counsel Farrell, Director, Division of Bank Operations Solomon, Director, Division of Examinations Landry, Assistant to the Secretary The establishment without change by the Federal Reserve Banks of St. Louis and Minneapolis on April 5, 1961, of the rates on discounts and advances in their existing schedules was approved unanimously, with the understanding that appropriate advice would be sent to those Banks. Items circulated to the Board. The following items, which had been circulated to the Board and copies of which are attached to these minutes under the respective item numbers indicated, were approved U nanimously: Item No. Letter to the Federal Reserve Bank of New York authorizing the Bank to waive the assessment of a penalty incurred by First-City National Bank Of Binghamton, Binghamton, New York, because of a reserve deficiency. 1 Letter to Citizens National Bank of San Antonio, san Antonio, Texas, granting permission to maintain reduced reserves. 2 4/6/61 -2Request by Department of Justice to inspect examination reports. Mr. Hackley referred to approval at yesterday's meeting of a letter to the Assistant Attorney General in charge of the Antitrust Division of the Department of Justice acceding to the request of the latter for an oPPortunity to inspect the reports of examination of two State member banks in Lexington, Kentucky, in connection with the Department's antitrust suit in relation to a recent merger in that community. Approval of the letter reflected the Board's decision at its meeting on March 22, 1961, with Governors Mills and King dissenting, to permit the Justice Department, upon request, to have access to examination reports of certain State member banks for the purpose of obtaining leads but not for use in evidence. Transmittal of the letter was deferred in view of developments subsequent to yesterday's meeting, as explained in the following paragraphs. Mr. Hackley indicated that following yesterday's meeting he received a telephone call from Mr. Coburn, General Counsel of the Federal Deposit Insurance Corporation, advising that he (Mr. Coburn) and Mr• Englert, Chief Counsel of the Comptroller of the Currency, planned to visit the Justice Department in an effort to persuade the Department to withdraw its request for access to reports of examination of national and insured nonmember banks in Lexington. The question, therefore, was Whether it would be appropriate for Mr. Hackley to participate in such a Meeting, particularly in view of the Board's decision to permit Justice t° examine the reports of the State member banks in Lexington. 4/6/61 -3Mr. Hackley went on to say that it might seem awkward to refuse to join Messrs. Englert and Coburn. However, if he should accompany them on the proposed visit, it would be difficult to avoid making the statement, if asked, that the Board was prepared to comply with the reqUest of the Justice Department, and that might hurt the case of the Other two Federal bank supervisory agencies. Governor Balderston stated that pursuant to the understanding at yesterday's Board meeting, he attempted to reach Chairman Cocke of the Federal Deposit Insurance Corporation to advise him that the Board was prepared to advise the Justice Department that it would comply with the Department's request for access to the examination reports of the State member banks in Lexington. In Mr. Cocke's absence, he talked with Mr- Wolcott (a director of the Corporation), who indicated that there had been lengthy discussion at the Corporation regarding the question making examination reports available to the Justice Department. Mr. Wolcott expressed some apprehension that Justice might go further than obtaining leads from the examination reports and, in fact, might almost build its case on information obtained from them. In the discussion of the matter that ensued, Governor Mills indicated that his abstention from voting at yesterday's meeting on the question of acceding to the request of the Justice Department for access to examination reports of the two State member banks in Lexington, Xentucky, extended to the question of Mr. Hackley's attendance at the Proposed meeting under discussion. 4/6/61 -4should Governor Robertson expressed the view that Mr. Hackley not accompany Messrs. Englert and Coburn in their proposed visit to the Justice Department, since the possible harm that might be done to the case of the representatives of the other two Federal bank supervisory Mr. 48encias would outweigh any possible benefit to be derived from Hackleyts participation. In subsequent comments, Governor Robertson noted that in consenting to the request of Justice to make the reports 01 examination available to it, the Board was following a procedure contemplated by its Rules of Organization; a procedure, in fact, that had been followed even before the present Rules were adopted. With respect to the apprehension that had been expressed by Mr. Wolcott as to the possibility of the Department of Justice building its case on the reports of examination, Governor Robertson observed that this was not the way the Department built its cases. The most that could happen, he said, was that Justice would get leads from the reports to subpoena infortlation that would then be available to everyone. This, he believed, 14ould be a legitimate use by the chief law enforcement agency of Government documents such as the reports in question. Mr. Governor Shepardson indicated that he would not press for liackley's attendance at the proposed meeting if it appeared that that /.43111d only complicate matters. He added that he still agreed with the l'c'sition of the majority of the Board, pursuant to the Board's Rules of (*ganization, that the request of Justice for an opportunity to inspect 1224 4/6/61 -5- the examination reports in question should be granted. However, if Messrs. Coburn and Englert should be successful in persuading the Justice Department to withdraw the current request, that might be of considerable advantage in the present circumstances. Governor King stated that he wished to be recorded as abstaining from participation in the decision on the question of Mr. Hackley's attendance at the proposed meeting. Governor King then inquired whether it was the intent that the examination reports would be made available to Justice Department representatives only at the Board's offices, and after discussion it was agreed to amend the proposed letter to the Department to specify that this would be the case. Following further discussion it was agreed, Governors Mills and 1(1ng abstaining, that Mr. Hackley would not accompany Messrs. Englert and Coburn on their proposed visit to the Justice Department. It was Understood that word from Mr. Coburn on the results of the proposed visit would be awaited, and that the letter to the Justice Department e€reeing to comply with its request for access to the reports of "amination of the two State member banks in Lexington, Kentucky, would riot be sent until advice had been received from Mr. Coburn. Travel by Mr. Wood. The Board authorized Ralph C. Wood, Chief °f the European Section in the Division of International Finance, to ace°111PanY Chairman Martin and Mr. Young, Adviser to the Board and Director 4/6/61 -6- of the Division of International Finance, on their forthcoming trip to Europe which would include attendance at the meeting of the Economic Pc)licY Committee of the Organization for Economic Cooperation and Development, to be held in Paris in mid-April, and visits to certain European central banks, with the understanding that Mr. Wood would be reimibursed on the basis of actual expenses. The meeting then adjourned. Secretary's Note: Pursuant to the recommendations contained in memoranda from appropriate individuals concerned, Governor Shepardson today approved on behalf of the Board increases in the basic annual salaries of the following persons on the Board's staff effective April 16, 1961: Name and title Division Basic annual salary To From _ Office of the Secretary Zoe Gratsias, Secretary Shirley R. Sherman, Secretary $5,655 $5,820 4,84o 5,005 6,435 6,600 4,675 4,840 5,355 5,520 Research and Statistics David Ryerson 1101 1 Jr., Economist Bank Operations DaisY Polk, Secretary Examinations Thnm. G. Yong, Assistant Federal Reserve Examiner Ave#4.4 4/6/61 -7- jr increases 11921a_p„nd title effective April 16t 1961 (continued) Division Basic annual salary To From _ 11..00 Administrative Services Ruth Anna Brown, Telegraph Operator Lola A. Buckley, Telephone Operator James T. Fegan, Supply Clerk MYrtle I. Ellicott, Clerk-Typist ,r5,005 4,075 3,500 3,865 $5,170 4,180 3,605 7,095 7,260 3,970 Office of the Controller lia-rrY G. Felix, Budget and. Planning Assistant Governor Shepardson today noted on behalf of the Board that application for retirement had been filed by John J. Hurley, Analyst, Division of Bank Operations, effective May 10 1961. Secr&tarY BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 1 4/6/61 WASHINGTON 25. D. C. ADDRESS April arricIAL CORRESPONDENCE TO THE BOARD 6, 1961 lir. D. C. Niles, Manager, Accounting Department, Federal Reserve Bank of New York, New York 45, New York . Dear Mr. Niles: This is in reply to your letter of Marc h 24, regarding a penalty of $793.15 incurred by the First-City Nati onal Bank of 1.1- hamton, N. Y., on an average daily deficiency of $386,000 , or 7*b per cent, in its required reserves for the biweekly computation period ended Marc h 8, 1961. It is noted that this deficiency resulted from the failure °I. a clerk, in the abse nce of the officer who normally is in charge its reserve account, to make three transfers of $1,000,0 00, each, z"ilr°m the bank's acco unt with its correspondent to its reserve acco unt, lth°ugh these transfers had been ordered by the officer in charge eind entered on its books; the fact that the transfer s were not made ,8 not discovered until March 9, when $3,000,0 00 was immediately ,a 'ansferred to its reserve account; and that the subj ect bank has only Deen assessed one penalty since September 30, 1955. In the circumstances and in view of your recommendation, the Board your Bank to waive the assessment of the pena lty of Y''3.15 for the period ended March 8, 1961. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. BOARD OF GOVERNORS oiottoratt4 %,09 OF THE \ FEDERAL RESERVE SYSTEM A* WASHINGTON 25. D. C. Item No. 2 4/6/61 ADDRESS orricim. CORRESPONDENCE V,N mizecAti TO THE BOARD 64***** April 6, 1961 Board of Directors, Citizens National Bank of San Antonio, San Antonio, Texas. G entlemen: Pursuant to your request submitted through the Federal Reserve Bank of Dallas, the Board of Governors, acting under the Provisions of Section 19 of the Federal Reserve Act, grants per581n to the Citizens National Bank of San Antonio to maintain l'pe same reserves against deposits as are required to be maintained Y banks located outside of central reserve and reserve cities, effective as of the date it opens for business. is Your attention is called to the fact that such permission subject to revocation by the Board of Governors. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary.
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