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eNo Minutes of actions taken by the Board of Governors of the Federal Reserve System on Wednesday, April 7, 1954. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Szymczak, Acting Chairman Evans Vardaman Robertson Mr. Sherman, Assistant Secretary Mr. Kenyon, Assistant Secretary Mr. Thurston, Assistant to the Board the Governor Evans reported, as a matter of information, that Federal Reserve Bank of St. Louis had now completed the purchase of Property located at 5th and Liberty Streets in Louisville, Kentucky, as a site for a new Louisville Branch building. Authority for the Re- serve Bank to acquire this property was contained in the Board's letter which was approved at the meeting on March 5, 1954. took place at Governor Robertson referred to discussions which the meetings on December lb, 16, and 21, 1953, concerning the request regarding made by Congressman Patman of Texas for certain information salaries of officers of commercial banks. He said that pursuant to the Understanding at that time the Board's staff, in cooperation with the Federal Reserve Banks, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation, had compiled data on commercial bank salary trends which he believed to be sufficient to satisfy Congressman Patman's request, although the study probably was not comprehensive enough to warrant publication of an article based on it in the Federal Re8er1e Bulletin or otherwise. 558 h/7/54 -2Governor Robertson said that since the original request from Congressman Patman for such information had been directed to the Federal Deposit Insurance Corporation, it would be his suggestion that the letter transmitting the data be sent over the signature of Mr. Cook, Chairman of that Corporation. He went on to say that a letterl in a form which he considered acceptable, had been drafted for Mr. Cook's signature and that it would be submitted to the members of the Board ler of the for consideration after having been approved by the Comptrol Currency and the Federal Deposit Insurance Corporation. The letter, he said, would make it clear that the data transmitted had been compiled sory through a joint effort on the part of the three Federal bank supervi agencies. The meeting then adjourned. During the day the following addi- tional actions were taken by the Board with all of the members except Chairman Martin and Governor Mills present: the Federal Minutes of actions taken by the Board of Governors of Reserve System on April 6, 1954, were approved unanimously. r, DiMemorandum dated April 2, 1954, from Mr. Sloan, Directo Sion of Examinations, recommending that the resignation of Evelyn C. Golibart, Stenographer in that Division, be accepted effective April 23, 1991. Approved unanimously. 559 4/7/54 —3— l e Letter to Mr. Stetzelberger, Vice President, Federa Reserv Bank of Cleveland, reading as follows: In accordance with the request contained in your apletter of March 31, 1954, the Board approves the er examin ant assist an pointment of Leo G. Hafford as and. of Clevel for the Federal Reserve Bank apPlease advise as to the date upon which the pointment is made effective. to It is noted that Mr. Hafford's indebtedness and, Clevel and, Clevel of the Central National Bank mortOhio, in the amount of $800, secured by a first will gage on his home, is being amortized monthly and of d, assume be paid in full by September 1955. It is ipate partic course, that he will not be authorized to his loan in any examinations of the national bank until has been liquidated. Approved unanimously. Reserve Bank of Letter to Mr. Denmark, Vice President, Federal Atlanta, reading as follows: In accordance with the request contained in your desigletter of April 1, 1954, the Board approves the ant assist l nation of Charles M. Fife, Jr., as a specia for a, Atlant examiner for the Federal Reserve Bank of exthe specific purpose of rendering assistance in the aminations of State member banks only. Approved unanimously. Bank of Miami, Letter to the Board of Directors, Metropolitan membership 41-a-Ini, Florida, stating that subject to conditions of 1111mbered 1 and 2 contained in the Board's Regulation HI the Board apFederal Reserve PI'oves the bank's application for membership in the SYstem and for the appropriate amount of stock in the Federal Reserve Bank of Atlanta. graph: The letter also contained the following special para- 560 4/7/54 -4- At the time of the examination as of February 23, 1954, the investment account of the bank included shares of three local savings and loan associations. Upon be, the bank coming a member of the Federal Reserve System shares such in ments invest make will not be permitted to e l Reserv Federa the of 9 n of Sectio under the provisions Act and, therefore, the Board requests that the shares now owned be disposed of within a reasonable time if such action has not already been taken. Approved unanimously, for transmittal through the Federal Reserve Bank of Atlanta. Reserve Bank of Letter to Mr. Wiltse, Vice President, Federal New York, reading as follows: and This refers to your letter of March 19, 19514, y of abilit applic its enclosures, concerning the possible to d, amende section 32 of the Banking Act of 1933, as or trust interlocking relationships between member banks which y" compan companies and a "mutual trust investment g pendin bill would be authorized to be incorporated by a the by red sponso in the New York State Legislature and New York State Bankers Association. conFrom the above correspondence it appears to be (an y" compan ment templated that the "mutual trust invest behalf on or by Open-end company) would be incorporated powers of trust companies and national banks with trust funds ary fiduci of ment invest as a medium for the common proposed held by such institutions. The shares of the limited to the investment company would be held by and fiduciary participating fiduciary institutions in their capacity only. the formaAmong other things, it appears also that company" tion of the proposed "mutual trust investment Banking would require the approval of the New York State t conduc the Board which would be authorized to regulate be would and management of the company; that the company as are authorized to invest only in such investments legal investments for fiduciaries under New York State the comlaw; that the investment of fiduciary funds in pany's shares would be permissible except where prohibited 561 4/7/54 -5- by the terms of a particular trust or where the amount of investment per trust would exceed $100,000; and that the New York statute similar to section 32 of the Banking Act of 1933 would be amended so as to exempt interlocking relationships between State chartered institutions and the proposed investment company. The Board has heretofore taken the position that openend investment companies are primarily engaged in the business described in section 32 of the Banking Act of 1933 and the question, therefore, is whether there are peculiar facts in this case which might exclude it from the scope of the prohibition in section 32. The fact that the investment company may be a nonposprofit organization would not seem to eliminate the sibility of the exercise of undesirable influence with which the law is concerned. The question must be cons sidered in the light of the fact that officers or employee rs, of the nonprofit organization, as well as its directo might conceivably wish to be or become directors of member law banks. Even though such influence may be unlikely, the would is aimed at the possibility of such influence. It seem that trust beneficiaries should have the protection of the law to the same extent as other customers of a trust benemember bank; indeed the need for protection for s are decision ent investm ficiaries may be greater, since made by the bank's officers. In this respect particularly this case is believed to be different from that referred to in the Board's letter of October 9, 1952, with respect to an open-end trust established under New York law as an investment medium exclusively for mutual savings banks. at hand, Accordingly, on the basis of the information ships relation the Board is of the view that interlocking investtrust mutual between member banks and the proposed ns ment company would not be permissible under the provisio of section 32 of the Banking Act of 1933. Approved unanimously. le Homer Letter for the signature of the Chairman to The Honorab E 'Cape, Chairman, Committee on Banking and Currency, United States 562 4/7/54 -6- Senate, Washington, D. C., reading as follows: This is in response to your Committee's request, dated March 29, for the opinion of the Board of Governors as to the merits of S. 3158, a bill "To eliminate cumulative voting of shares of stock in the election of directors of national banking associations." Cumulative voting for directors of corporations, which is provided for in the Constitutions of a number of States and by statute in other States, is based on the principle that minority represontation, or proportional representation, on boards of directors is desirable. Through cumulative voting, minority shareholders may be enabled to elect one or more directors, whereas in the absence of cumulative ors, voting the majority shareholders could elect all the direct agreeso that a substantial minority which might not be in ty ment with the policies and point of view of the majori se otherwi could be prevented from presenting its views and s. affair Participating in the direction of the corporation's olders shareh The provision regarding cumulative voting by of national banks has been a part of the Federal statutes for direct over twenty years, and while the Board has not had the Comphas supervision of the operation of the statute, as the that troller of the Currency, it is the Board's opinion ing permitt principle underlying cumulative voting - namely, reprebe substantial minority groups of shareholders to Accordsented on the board of directors - is a sound one. amended be not should ingly, the Board feels that the statute shed establi is it in the manner proposed by S. 3158 unless s that Congres the and to the satisfaction of your Committee that able unfavor so results in actual operation have been repeal of the provision is clearly advisable. Approved unanimously, with the understanding that before the letter was transmitted, a copy would be sent to the Bureau of the Budget, in accordance with the usual procedure, with a request that the Board be advised as to the relationship of the proposed legislation to the program of the President. 563 4/7/54 -7Letter to Mr. Roger W. Jones, Assistant Director, Legislative Reference, Bureau of the Budget, Washington, D. C., reading as follows: This refers to your letter of March 29, 1954 requesting an expression of views on a draft bill (submitted by the Farm Credit Administration) "To authorize production credit associations to pay dividends on class A stock without paying dividends on class B stock, to pledge securities representing investments of their guaranty funds, and to pay dividends on class A or class C stock without regard to the provisions of Section 22 of the Farm Credit Act of 1933) and to authorize production credit corporations to invest in class C stock of production credit asassociations without affecting the tax status of such sociations, and for other purposes." The proposed bill would change the law chiefly in the the respects indicated above in its title. It appears that ns operatio the bill deals mainly with technical aspects of it general, in of production credit associations, and that, . bilities responsi would not directly affect the Board's major offer to d attempte In the circumstances, the Board has not extensive comments on the bill or to make a thorough appraisal of its advantages or disadvantages. Approved unanimously. Assistant'Secr ary
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