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v608 : 10/59 Minutes for To: Members of the Board From: Office of the Secretary °f Augpst 121 1960 Attached is a copy of the minutes of the Board of Governors the Federal Reserve System on the above date. It is proposed to place in the record of policy actions mquired to be kept under the provisions of Section 10 of the Federal Reserve Act an entry covering the item in this set of minutes commencing on the page and dealing with the subject referred to below: Page 6 Approval of a discount rate of 3 per cent for the Federal Reserve Bank of Minneapolis. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. °therwise, 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 ”4:2; Minutes of the Board of Governors of the Federal Reserve System on Friday, August 12, 1960. PRESENT: Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Balderston, Vice Chairman Szymczak Mills Shepardson Kenyon, Assistant Secretary Fauver, Assistant to the Board Solomon, Director, Division of Examinations Johnson, Director, Division of Personnel Administration Mr. Hexter, Assistant General Counsel Mr. Nelson, Assistant Director, Division of Examinations Mrs. Semia, Technical Assistant, Office of the Secretary Mr. Hooff, Assistant Counsel Mr. Mr. Mr. Mr. 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 unanimously: Item No. elegram to the Federal Reserve Agent at Txl,ichmond authorizing the issuance of a general 1 v2ting permit to The First Virginia Corporation, lington, Virginia, covering its stock in The rurcellville National Bank, Purcellville, Virginia. Letter to Wells Fargo Bank American Trust Company, San Francisco, California, approving the establishMent of a branch in Palo Alto. 2 Letter to the Federal Reserve Bank of Atlanta aPProving the appointment of W. H. Hutchison, Jr., as Federal Reserve Agent's Representative at the 4ashville Branch. 3 Letter to the Federal Reserve Bank of San Francisco al) Proving certain adjustments in the rates and coverage of the Blue Cross plan applicable to retired employees of the Portland Branch. -2- 8/12/60 Proposed national banks at Universal City, Texas, and Randolph Air Force Base, Texas (Items 5 and 6). There had been circulated to the Board files on two applications to organize national banks--one at Universal City, Texas, and the other at Randolph Air Force Base, Texas. The Federal Reserve Bank of Dallas and the Division of Examinations had suggested an unfavorable recommendation in each case, and letters to the Comptroller of the Currency reflecting such recommendations had been submitted for consideration. The Randolph Air Force Base application contemplated the establishment of a bank to replace a military facility operated on the Base by Broadway National Bank of Alamo Heights. The Attorney General Of the State of Texas had ruled that military facilities were branches and illegal under State law, and the Broadway National Bank, as well as Other banks operating such facilities, had been joined in a suit to Close them. The proposed new bank would be an affiliate of Broadway Ilational and would occupy quarters now furnished the present facility of the national bank at the Base. Since the principal purpose of the aPPlication apparently was to guard against loss of business in case the facility had to be closed, Mr. Pondrom, Vice President of the Federal Reserve Bank of Dallas, felt that the application was premature until such time as the legality of the operation of the facility was resolved. The Universal City application also had been filed in contemIllation that the facility at the Air Force Base would be closed. Universal 8/12/60 -3- City, a town with 1,200 to 1,500 population located adjacent to Randolph Air Force Base, was reported to be comprised principally of businesses offering services. In addition to the military facility of the Broadway National Bank located at the Air Force Base, a small State bank was located one mile east and a private bank five miles east. In commenting on these applications, Mr. Nelson stated that according to a press article a lower court had now ruled that facilities such as the one operated at Randolph Air Force Base were legal and could continue to operate. course. The case might be carried to a higher court, of Although there had been some indication in the application that Broalway National wanted to discontinue the facility, regardless of the outcome of the current litigation, and replace it with an affiliated Unit bank, Mr. Nelson expressed doubt that a unit bank could operate Profitably, particularly in view of the relatively small volume of deposits that had been built up by the existing facility. After further discussion of the question of developing a Profitable banking operation in the vicinity of Randolph Air Force Base, the two letters to the Comptroller of the Currency recommending disapproval the respective applications were approved unanimously. letters are attached as Items Discount rate. Copies of the 5 and 6. At Governor Balderston's request, Mr. Fauver commented briefly on press coverage of the announcement yesterday of a decrease in discount rates at the Federal Reserve Banks of New York, 8/12/60 His impression was that thus Cleveland, Richmond, and Kansas City. far, at least, the rate reduction had been regarded generally as a technical adjustment to market rates. Absorption of exchange charges. At its meeting on August 11, 1960, the Board considered a draft of reply to Mr. W. D. Malone, Chairman Of the Board of The First National Bank of Dothan, Dothan, Alabama, in regard to the application of the Board's recent ruling on absorption Of exchange charges as an indirect payment of interest on deposits. The Board had agreed to consider the matter further after a meeting to be held that afternoon with representatives of the American Bankers Association in regard to the Board's ruling. There was a discussion of the draft of reply in the light of the comments made by the representatives of the American Bankers Association, especially the suggestion that the Board publish in the Federal Reserve Bulletin or elsewhere a statement explaining the circumstances that caused the Board to issue the August 4 ruling. During the discussion Governor Mills expressed the view that the Board should go slowly in publishing any kind of a statement, esPecially since there were no effective sanctions to enforce compliance with the recent ruling. Some banks, he noted, had stretched the previous interpretations of the Board out of context and had not been checked by the supervisory authorities. Whereas the Board had, by interpretation, Permitted the absorption of exchange charges in nominal amounts, some ( 10 8/12/6o -5- banks had followed the practice of absorbing exchange on all nonpar checks up to some predetermined amount, thus absorbing for some individual accounts much more per month than permitted by the $2 rule. Also, since banks determined their awn costs, they were in a position to absorb exchange charges quite liberally and claim to be proceeding on the basis that the amounts absorbed were less than the cost of charging back, as permitted under another Board interpretation. Now the Board had issued an interpretation prohibiting the absorption of exchange charges in any amount, and there was a serious question as to how the interpretation should be handled. Perhaps the best course would be to vait and let the American Bankers Association come back with some formula, acceptable to the Board, that might encourage compliance with the ruling. Governor Balderston then suggested that the letter from Mr. Malone be held and discussed with President Bryan of the Atlanta Reserve Bank when the latter was in Washington next Tuesday for a meeting of the Federal Open Market Committee. He also suggested that the staff might be able to present an alternative draft of reply to Mr. Malone, that the Board. could consider the alternative replies on Monday, and that the Matter could then be discussed with Mr. Bryan. There was agreement with the procedure suggested by Governor talderston. The meeting then adjourned. 3099 8/12/6o -6Secretary's Notes: During the day advice was received from the Federal Reserve Bank of Minneapolis that the directors of that Bank had established, subject to the approval of the Board of Governors, a rate of 3 per cent (rather than 3-1/2 per cent) on discounts for and advances to member banks under sections 13 and 13a of the Federal Reserve Act, a rate of 3-1/2 per cent on advances to member banks under section 10(b), and a rate of 4 per cent on advances to individuals, partnerships, and corporations other than member banks under the last paragraph of section 13. Pursuant to the authorization given to the Secretary's Office by the Board on August 11, 1960, the Minneapolis Reserve Bank was advised of the approval of such rates, effective August 15, 1960. All Federal Reserve Banks and branches were notified by telegram, a press statement in the usual form was issued at 4:00 p.m. EDT, and arrangements were made for publication of a notice in the Federal Register. Governor Shepardson today approved on behalf of the Board the following items: Memorandum dated August 101 1960, from Mr. Johnson, Director, Division of Personnel Administration, recommending the appointment of Elizabeth Ann Poole as a Clerk-Stenographer in that Division, with basic annual salary at the rate of $3,970, effective the date of entrance upon duty. Letter to the Federal Reserve Bank of Richmond (attached Item No. 7) " PProving the designation of Robert L. Thurman as special assistant a examiner. Assistant cretary Item NO. 1 TELEGRAM 8/12/60 LEASED WIRE SERVICE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON August 12, 1960 DECKER - RICHMOND KEBJE A. The First Virginia Corporation, Arlington, Virginia. B. The Purcellville National Bank, Purcellyille, Virginia. C. Prior to the issuance of permit authorized herein, applicant shall execute and deliver to you in duplicate an agreement in form accompanying Board's letter 5-964 (F.R.L.S. #7190). (Signed) Kenneth A. Kenyon KENYON Definition of KEBJE The Board authorizes the issuance of a general voting permit, under the provisions of section 5144 of the Revised Statutes of the United States, to the holding company affiliate named below after the letter “All, entitling such organization to vote the stock which it owns or controls of the bank(s) named below after the letter "Bu at all meetings of shareholders of such bank(s), subject to the condition(s) stated below after the letter (IC". The period within which a permit may be issued pursuant to this authorization is limited to thirty days from the date of this telegram unless an extension of time is granted by the Board. Please proceed in accordance with the instructions contained in the Board's letter of March 10, 1947, (S-964). 3100 BOARD OF GOVERNORS OF THE Item No. 2 8/12/60 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADORES. OFFICIAL CORRESPONOCNCC TO THE BOARD August 121 1960 Board of Directors, Wells Fargo Bank American Trust Company, San Francisco, California. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of San Francisco, the Board of Governors of the Federal Reserve System approves the establishment of a branch in the vicinity of Willow and Arboretum Roads, Palo Alto, California, by Wells Fargo Bank American Trust Company, provided the branch is estab— lished within one year from the date of this letter. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE Item No. FEDERAL RESERVE SYSTEM 3 8/12/60 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD August 12, 1960 Mr, Walter M. Mitchell, Chairman of the Board and Federal Reserve Agent, Pederal Reserve Bank of Atlanta, Atlanta 3, Georgia. Dear Mr. Mitchell: In accordance with the request contained in your letter of 12725, 1960, the Board of Governors approves the appointment of a+ ," H. Hutchison, Jr., as a Federal Reserve Agent's Representative "Ole Nashville Branch to succeed Mr. Evin Davis, effective upterliber 1, 1960. mr. This approval is given with the understanding that t.iutchison will be solely responsible to the Federal Reserve Agent ex,. the Board of Governors for the proper performance of his duties, Age 'ellt that, during the absence or disability of the Federal Reserve ,lt or a vacancy in that office, his responsibility will be to the Assr istant Federal Reserve Agent and the Board of Governors. Mien not engaged in the performance of his duties as Federal Rese— :114 1 ..441;Int's Representative, Mr. Hutchison may, with the approval of Reserve Agent and the Vice President in charge of the sistville Branch, perform such work for the Branch as will not be incon— ent with his duties as Federal Reserve Agent's Representative. It will be appreciated if Mr. Hutchison is fully informed of the 4,?ede;40rtance of his responsibilities as a member of the staff of the thC al Reserve Agent and the need for maintenance of independence from °Aerations of the Bank in the discharge of these responsibilities° It is assumed that Mr. Hutchison will execute the usual Oath le°, which will be forwarded to the Board of Governors. Of off. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS ottlii*or,4 1 o:007001 OF THE Item No. 4 8/12/60 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD August 12, 1960 LI'. Ralph H. Morrill, Vice President, Federal Reserve Bank of San Francisco, San Francisco 20) California. Dear Mr. Morrill: Reference is made to your letter of July 15, 1960, inf ,_--orming the Board that, effective September 1, there will oe adjustments in the rates and coverage of the Blue Cross Plan applicable to retired employees of the Portland Branch. in The Board approves the additional expense involved providing increased benefits under the new contract. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 5 8/12/60 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD August 121 1960 Comptroller of the Currency, Treasury Department, Washington 25, D. C. Attention Mr. G. W. Garwood, Deputy Comptroller of the Currency. Dear Mr. Comptroller: Reference is made to a letter from your office dated APril 61 1960, enclosing copies of an application to organize a national bank at Universal City, Texas, and requesting a recommendation as to whether or not the application should be approved. A report of investigation of the application made by an examiner for the Federal Reserve Bank of Dallas indicates that the r..°Posed capital structure of the bank would be adequate and that 2a Proposed management would be fairly satisfactory. However, in view of the existing banking facilities now being operated in the area, it is not believed there is a sufficient need for the bank nd its profitable operations are open to question. According ly, the Board of Governors does not feel justified in recommending favorable consideration of the application. t The Board's Division of Examinations will be glad to diem, -as any aspects of this case with representatives of your '"ee if you so desire. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS 4420***0 OF THE FEDERAL RESERVE SYSTEM Item No. WASHINGTON 25. D. C. 41a 0 ADDRESS orriciAL CORRESPONDENCE TO THE BOARD 41. °Ct: 000 August 12) 1960 Comptroller of the Currency, Treasury Departments Washington 25, D. C. Attention Kr. G. W. Garwood, Deputy Comptroller of the Currency. Dear Mr. Comptroller: Reference is made to a letter from your office dated APril 20, 1960, enclosing copies of an application to organize a national bank at Randolph Air Force Base, Bexar County, Texas, and requesting a recommendation as to whether or not the application should be approved. A report of investigation of the application made by an examiner for the Federal Reserve Bank of Dallas indicates that e proposed capital structure and management of the bank would ".5e satisfactory. However, it is reported that the legality of ;he operation of a facility now located at Randolph Air Force traee ie in litigation and as long as this matter is pending there :VA appear to be no need for the proposed bank, and its profit7'1,-‘a operations would be questionable. In the circumstances, : ndco. lszt feel justified in recommending favorable conapplication at this time. ;line= The Board's Division of Examinations will be glad to diaftn. .8 1. 4 any aspects of this case with representatives of your "-Lee if you so desire. 6 8/12/60 Very tray yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. Item No. 7 8/12/60 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD August 12, 1960 Mk'. N. L. Armistead, Vice President, Federal Reserve Bank of Richmond, Richmond 13, Virginia. Dear flr. Armistead: In accordance vith the request contained in your letter of August 9, 1960, the Board approves the designation of Robert L. Thurman as a special assistant examiner for the Federal Reserve Bank of Richmond for the purpose of participating in examinations of State member banks only, except The Bank of Virginia, Richmond, Virginia. Very truly yours, (Signed) Kenneth A. Knyon Kenneth A. Kenyon, Assistant Secretary.
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