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Minutes for August 12, 1958 To: 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 vith 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, if you "ere present at the meeting, please initial in col.. Umn A below to indicate that you approve the minutes. you were not present, please initial in column B "low to indicate that you have seen the minutes. A Chm. Martin Gov. Szymczak Gov. Vardaman Gov. Mills Gov, Robertson Gov. Balderston Gov. Shepardson 2:1 At A Minutes of the Board of Governors of the Federal Reserve System on Tuesday, August 12, 1958. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Vardaman Shepardson Mr. Kenyon, Assistant Secretary Mr. Fauver, Assistant Secretary Mr. Leonard, Director, Division of Bank Operations Mr. Shay, Legislative Counsel Mr. Solomon, Assistant General Counsel an Matter relating to condition of membership of The Michig: _ Governor Vardaman reported that he had Miiian. . 13a Ikz...Pei:121A ---L— l'eceived a telephone call yesterday afternoon from Mr. James B. Alley, c°unsel for The Michigan Bank, who stated that The Michigan Bank had submitted correspondence to the Board in connection with the third condition of membership laid down by the Board upon admission of The Michigan Bank on April 26, 1956. This condition related to the investInent of certain funds of a proposed employees' profit-sharing retirement trUst in shares of stock of the subject bank. Counsel for The Michigan rtl.. BA-.."A had requested that before a decision was made by the Board with x'egard to the correspondence an opportunity be afforded for representatives of the bank to appear. At Governor Vardaman's suggestion, Mr. Solomon was authorized to ca„ -1-1. Mr. Alley and tell him that the letter had been received and that he would be notified when the Board was ready to discuss the matter. 2312 -2. 8/12/58 Discount rates. Unanimous approval was given to a telegram to the Federal Reserve Bank of Boston approving the establishment without Change by that Bank on August 11, 1958, of the rates on discounts and advances in its existing schedule. Item circulated to the Board (Item No. 1). There had been ciroUlated to the members of the Board a letter to the Federal Reserve Bank of St. Louis concurring in the view that section 32 of the Banking Act of 1933 was applicable to the concurrent service of Mr. Elmer J. Gisselman as a director of Normandy State Bank, Normandy, Missouri, and as a salesman for the firm of Yates, Heitner and Woods, St. Louis, Missouri. Unanimous approval was given to the letter, a copy of which is attached to these minutes as Item No. 1. Proposal for a Thirteenth Federal Reserve District (Item No. 2). Prior to the meeting there had been distributed to the Board a proposed ply to a joint letter dated August 7, 1958, from Senators Magnuson re arld Jackson of the State of Washington, relating to the possible creation of a new Thirteenth Federal Reserve District to serve the Pacific Northwest and Alaska. The proposed reply followed the general hature of the recent response to Senator Neuberger of Oregon on the same allbiect. Minor editorial changes were decided upon and it was then illisnimously agreed to send a letter to Senator Magnuson in the form at tached to these minutes as Item No. 2, with a similar letter to Senator Jackson. It was also understood that a similar reply would be 2313 8/12/58 -3- made to Governor Rosellini of Washington, and to others writing to the Board on this same subject whenever such a reply would be appropriate. Loss-Sharing Agreement of the Federal Reserve Banks (Item No. Prior to the meeting there had been distributed a memorandum dated August 6, 1958, from Mr. Leonard relating to correspondence from Mr. 1\11ton, Chairman of the Committee on Miscellaneous Operations of the Conference of Presidents, requesting the Board's approval of certain 1111‘0Posed amendments to the Loss-Sharing Agreement of the Federal Reserve 44ke. of the These amendments had been approved at a special meeting Pesidents Conference on July 29. The proposed amendments were designed to put into effect the Emergency Operations r°11°wing recommendation of the Special Committee on 14 itS the Conference report of April 25, 1958, which was approved by Of"lb- an (1) That the System adopt the policy of assuming, during nt Agreeme g -Sharin Loss System emergency, under the between Federal (a) war risks on currency shipments and on such banks -Agent non Reserve Banks and non-Agent banks, and banks Agent shipments between banks, including nonmember involving non(b) other risks on currency shipments are already risks such extent member banks to the and banks, member ng involvi assumed on shipments ons provisi ty indemni from (c) liabilities resulting Banks and of agreements between Federal Reserve Agent banks. Mr. and (b) above were Leonard pointed out that proposals (a) '"Igned to facilitate the supply and distribution of currency in case 231 8/12/58 -4- of a national emergency. The proposed amendments to the Loss-Sharing Agreement would provide war risk coverage on currency shipments between Federal Reserve Banks and other banks, including nonmember banks. Also) losses of a Federal Reserve Bank resulting from indemnity provisions in contracts with Cash Agent banks would be covered under the Proposed amendments. Following Mr. Leonard's explanation of the amendments to the " 1 3-Sharing Agreement, it was unanimously agreed to approve the proposed aniendments and to send the letter attached to these minutes as Item No. 3 to Mr. Fulton, chairman of the Committee on Miscellaneous Operations of the Conference of Presidents. Proposed mereL of First Western Bank & Trust Co. of California California Bank, Los Angeles. Governor Balderston reported that 41*ing the 11 o'clock market call on Monday, Mr. Mangels had mentioned incidentally that the San Francisco Federal Reserve Bank expected to ' leceive soon papers from the Firstamerica Corporation outlining plans tOr its acquisition of a major share of the outstanding stock of the California Bank. Once such stock had been obtained, it was planned to Itlei‘ge or consolidate this institution with another banking subsidiary Of Firstamerical the First Western Bank & Trust Co. Supplementing this information, Mr. Solomon mentioned that he had received a visit from Mr. Gerhard Gesell, who was acting as counsel 2315 8A2/58 for the Firstamerica Corporation in this transaction, and who had substantiated the intentions of Firstamerica Corporation as outlined by Governor Balderston. It was pointed out that the California Bank Operated 63 branch offices in southern California and First Western maintained 99 offices, most of which were in the central and northern portions of California. Thereupon the meeting adjourned. Secretary's Note: Governor Shepardson today approved on behalf of the Board the following items: . Memorandum dated August 7, 1958, from Mr. Leonard, Director, ',I-vision of Bank Operations, recommending that Barbara J. Wrenn, otatistical Clerk in that Division, be allowed to work an additional !LID/1th before she begins her maternity leave, and that, when she begins ',ler maternity leave on September 8, she be granted the annual and sick --eave remaining to her credit at that time and, if necessary, the em:aining part of her maternity leave, not exceeding six full pay PerIods after the date of confinement, be charged to leave without pay. .Letter to the Federal Reserve Bank of New York approving the "ploointment of John C. Parker as examiner and Donald M. Burd and Noel Stafford, Jr., as assistant examiners. A copy of the letter is attached as Item No. 4. 1 4:?: Assistant Secretary 231_6 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM .,•14 WASHINGTON 25. D. C. 0 04 Item No. 1 8/12/58 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD August 12, 1958 Mr. Geo. E. Kroner, Vice President, Federal Reserve Bank of St. Louis, St. Louis 2, Missouri. Dear Mr. Kroner: Reference is made to your letter of June 23, 1958, regarda 11g 1_, possible violation of section 32 of the Banking Act of 1933 1_ the concurrent service of Mr. Elmer J. Gieselman as a director 7 5 Normandy State Bank, Normandy, Missouri, and as a salesman for the firm of Yates, Heitner and Woods, St. Louis, Missouri. WO questions are presented: (1) whether the firm is 11,,, evImarily engaged" in the types of business described in section 32, and (2) whether Mr. Gieselman is an "employee" of the firm. With respect to the first question, you have ascertained bY means of several conferences and letters that about 13 per cent )f the annual dollar volume of the business of the firm consists of 3 of the kinds described in section 32, the remainder being brokerage 1 okerage business. Furthermore, you point out that in the Directory : , , 1,t Security Dealers of North America, the firm describes itself as ' underwriters, distributors, brokers and dealers in corporate and riicipal securities, institutional issues; stock and commodity srukers On the basis of this information, it is your view that "e firm comes within the statute. i In cases of this kind, it is preferable to obtain, if in the Board's Possib l Ie4,_ e, additional data of the kinds outlined with a view rewritten being is of January 271 3.948 (which lnsertinp- it in the Federal Reserve Loose-Leaf Service), va1itiou1ar4; information as to the percentage of the firm's total Federal aeserve Bank of St. Louis -2- t7oss income derived from section 32 business, and to obtain the figures for several years. However, on the basis of such informaGion as you have been able to obtain, there would seem to be no reason to differ from your view that the firm comes within the statute. The question whether Mr. Gieselman is an "employee" of the firm within the meaning of the statute appears to be a very close one. He is registered as a salesman of the company under the Miscouri Securities Law and with the National Association of Securities Dealers, and although some of the facts listed in the enclosures with your letter point to his being an independent contractor and some point to his being an employee, the Board ,grees with the view of your counsel that Mr. Gieselman appears co be an "employee" and that, therefore, the statute is applicable to his current service as a director of Normandy State Bank. 'very truly yours, (Signed) Kenneth A. Kezvon Kenneth A. Kenyon, Assistant Secretary. 231 0,0f1P0,,,,,., ,4p:',$9-0,!, BOARD OF GOVERNORS OF THE , Item No, 2 8/12/58 FEDERAL RESERVE SYSTEM 1.4 WASHINGTON '4 OFFICE OF THE CHAIRMAN August 121 1958 The Honorable Warren G. Magnuson, United States Senate, Washington 25, D. C. pear Senator Magnuson: I am pleased to acknowledge the letter of August 7, 1958, gned jointly by you and Senator Jackson, and also your letter of be st 8, in which reasons are given for your view that Seattle would an appropriate location for a new Federal Reserve Bank in the ;vent that a thirteenth Federal Reserve district should be created to erye the Pacific Northwest and Alaska. 3i The question you present is under study in accordance with Statehood bill which provides that "when the State of all_ ka is hereafter admitted to the Union the Federal Reserve districts be readjusted by the Board of Governors of the Federal Reserve Jstem in such manner as to include such State." the Al Ala Alaskan In this connection, the Federal Reserve Act states that Federa t,_•L• aeserve Reserve districts "may be readjusted and new districts may from 4:uls to time be created by the Board of Governors of the Federal 5 be erve System, not to exceed twelve in all." Accordingly, it would 4 4.1eeesSary to obtain the approval of the Congress in order to create wlirteenth Federal Reserve district. The Board will be glad to give consideration to the views ujA-essed in your letters. It is probable, however, that the Board defer any recommendation to the Congress until it becomes clearer 1,114t action the Congress decides to take in regard to the pending Lie,1„„ 4an Statehood measure. I am sending a similar reply to Senator Jackson. Sincerely yours, (Signed) 'in. NcC. Martin, Jr. Wm. McC. Martin, Jr. 2319 F3DARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 3 8/12/58 WASHINGTON 25, D. C ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD August 12, 1958 W. D. Fulton, Chairman, `101nMittee on Miscellaneous Operations, Conference of Presidents of the iFedera1 Reserve Banks, 2/0 Federal Reserve Bank of Cleveland, ' levaland 1, Ohio. Dear Mi.. Fulton: This refers to your letter of July 30, 1958, requesting approval of the proposed amendments to the Loss-Sharing oment of the Federal Reserve Banks, which were approved by the " n3idents at the special meeting of the Conference on July 29. the The Board has approved the proposed amendments to the LOOS13 -7.4 ing Agreement, as stated in Exhibit "A" of the report of the anoa Committee of the Federal Reserve Banks dated June 26$ 1958. It is understood that the Chairman of the Insurance Committee furni sh two copies of the revised Agreement to each of the Fedaral to,0. 4 Reserve Banks for execution and that each Reserve Bank will then to5'42Lrd a day executed counterpart original of the revised Agreement /,e4 7 . 3 Board. Men executed counterparts have been received from all 141 Reserve Banks, the Board will notify the Banks by wire, and, as ' vr° ided in Section 18 of the agreement, the revised agreement will be2 "Ina effective as of the date of such notice. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS 4 OF THE 1 0 a '4, FEDERAL RESERVE SYSTEM 4: A* Item No. 4 8/12/58 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD tt 4.**t 44444* August 12, 1958 22HEIEEETALIEL Mr, H. H. Kimball, Vice President, Federal Reserve Bank of New York, New York 45, New York. Dear Mr. Kimball: In accordance with the request contained in your letter of August 8, 1958, the Board approves the appointment Of John C. Parker as an examiner and Donald M. Burd and Noel D. Stafford, Jr. as assistant examiners for the Federal Reserve Bank of New York. Please advise as to the dates Upon which the appointments are made effective. It is noted that Mr. Parker is indebted to The Newton Trust Company, Newton, New Jersey, a nonmember bank, in the amount of $3,259.03 for a mortgage on his home. Accordingly, the Board's approval is given with the understanding that Mr. Parker will not participate in any examinations of that bank until his indebtedness has been liquidated. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary.
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