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Minutes for August 14, 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 proposed to place in the record of policy actions required 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 15. Increase in discount rate at Federal Reserve Bank of San Francisco. 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 were present at the meeting, please initial in column A below to indicate that you approve the minutes. If you vere not present, please initial in column B below to indicate that You have seen the minutes. A Chm. Martin Gov. Szymczak Gov. Vardaman Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson 2321 Minutes of the Board of Governors of the Federal Reserve System on T hursday, August 14, 1958. PRESENT: Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Martin, Chairman Balderston, Vice Chairman Vardaman Shepardson Kenyon, Assistant Secretary Fauver, Assistant Secretary Thurston, Assistant to the Board Riefler, Assistant to the Chairman Leonard, Director, Division of Bank Operations Young, Director, Division of Research and Statistics Mr. Hackley, General Counsel Mr. Masters, Director, Division of Examinations Mr. Shay, Legislative Counsel Mr. Robinson, Adviser, Division of Research and Statistics Mr. Solomon, Assistant General Counsel Mr. Hexter, Assistant General Counsel Er. Hostrup, Assistant Director, Division of Examinations Mr. Nelson, Assistant Director, Division of Examinations Mr. Smith, Assistant Director, Division of Examinations Mr. Mr. Mr. Mr. Mr. Mr. Items circulated to the Board. The following items, which had been circulated to the members of the Board and copies of which are attached to these minutes under the respective item numbers indicated, /lere a roved unanimously: Item No. Letter to the Peoples Bank of Cuba, Cuba, Missouri, ttal °ving an investment in bank premises. (For transmi ' ::1 rough the Federal Reserve Bank of St. Louis.) . Lett 'r to the Citizens Bank of Stuart, Stuart, Florida, submitted aii'f7)ving the application for fiduciary powers () „ uehalf of the First National Bank of Stuart, into the State bank is to be converted. (For transmittal ""ich thr °ugh the Federal Reserve Bank of Atlanta) 1 4 2 2322 8/14/58 -2Item No. Letter to the Zeeland State Bank, Zeeland, Michigan, aPProving an extension of time in which to establish a branch in Hamilton, Michigan. (For transmittal through the Federal Reserve Bank of Chicago) 3 Letter to the Comptroller of the Currency recommending aPproval of an application to organize a national bank Pocatello, Idaho. (With a copy to the Federal Reserve Bank of San Francisco) 4 ,l_lemorandum from Mr. Hexter recommending that no action taken regarding a question which was raised concerning he status of the South St. Louis Investment Company as a bank holding company. 5 on (Item No. 6). Prior tax certification -- General Contract Corporati Prior to the meeting there had been distributed memoranda dated August 11, 1958, from the Division of Examinations and from Mr. Hexter relating to 4 request from the General Contract Corporation of St. Louis, Missouri, Ora prior tax certification in connection with its proposed transfer corporation, the stock of Of certain nonbanking subsidiaries to a new which would be distributed to General Contract stockholders. The transfer a holding is necessitated by the fact that General Contract is from its banking ColliPanY with nonbanking interests that must be divorced interests by May 9, 1959. General Contract stockholders will then have the same interests that they now possess, but such interests will be ren — 1-`sented by shares in two corporations instead of one. In order to relieve its stockholders of additional income taxes that of Otherwise might accrue on account of their receiving the stock -3- 8/14/58 the new corporation, General Contract proposes to carry out the distribution in accordance with Section 1101(a)(2)(A)(i) of the Internal Revenue Code. That tax relief provision, however, would not be applicable without certification by the Board that such distribution of shares of the new corporation was required under Section 4 ().f the Bank Holding Company Act. Mr. Hexter's memorandum pointed out that this was the first case ih which the Board had been asked for a certification regarding a aPin-off of nonbanking interests. In prior cases the holding company had effected the required divorcement by divesting itself of bank shares, thereby ceasing to be a bank holding company. The memorandum of the Bivision of Examinations expressed the opinion that although General Contract's plan of divestment would reduce its financial strength to some extent, the result would not jeopardize the continued soundness n Of the holding company system or its subsidiary- banks. The Divisio therefore issued. recommended that the required certification be Copies of both memoranda have been placed in the Board's files. unanimously Following a discussion of the matter, the Board 4ezttsi to the issuance of a prior tax certification for the General ing Contract Corporation in connection with the divestment of its nonbank interests No. 6 with the in the form attached to these minutes as Item Understanding that a duplicate original would be sent to the Commissioner °I' Internal Revenue. 8/14/58 -4Effects of Alaska Statehood Act (Item No. 7). Prior to the 'fleeting there had been distributed to the Board a memorandum from 14r. Solomon dated August 12, 1958, to which was attached a proposed letter to the Bureau of the Budget in reply to its request of August 4, 1958, on the subject of "Effects of Alaska Statehood." The request„ which was in the form of a bulletin for general distribution Nithin the Government, directed that certain studies be made regarding the effects of Alaska statehood on the functions of each agency and 4180 directed that certain reports be made to the Budget Bureau, including a report by August 15, 1958, identifying the officer superIri8ing the review directed by the bulletin. Mr. Solomon's memorandum pointed out that while there was some klUbt that the Budget Bureau's request applied to the Board, the Board °°141d take the steps mentioned in the bulletin to the extent it deemed l eaeonable as a matter of cooperation without specifically referring ' to the applicability of the request to the Board. the The proposed reply suggested designating Mr. Hackley as °tficer responsible for supervising the review of the effects of Statehood Alaska statehood and pointed out that Section 19 of the Alaska itet Provides for membership of national banks in Alaska in the Federal a 4e8erve System. The reply would state that the Board had initiated nts, if any, would 8tlickY of its regulations to determine what amendme be desirable in view of Alaska's new status. It also indicated that 8/14/58 consideration was being given to the relative advantages and disadvantages Of creating an additional Federal Reserve district, which would require new legislation, but added that inasmuch as that matter was also related to the status of Hawaii, the Board would probably defer any definite e°nclusion on the subject until it became more clear what action Congress would take with regard to Hawaii. There was a brief discussion during which Governor Balderston euggested some improvements in the phrasing of the third paragraph of the letter which were accepted. Thereupon it was unanimously agreed to send the letter attached to these minutes as Item No. 7 to the Director of the Bureau of the Budget. Incident at Jacksonville Branch. At the Chairman's request, 141r. Leonard reported to the Board about an incident involving the hanciling of currency at the Jacksonville Branch which had been called to the attention of the Board initially by an apparently anonymous telegram addressed to Governor Robertson. The telegram alleged that there had been an abuse of privileges by an employee of the Jacksonville "en who had access to vault currency. Upon receipt of the telegram, 141% Leonard had contacted President Bryan of the Federal Reserve Bank et Atl -anta who was already in Jacksonville investigating the matter. Altho ugh a complete report of the incident had not been received, 141% Leonard said it appeared that the following had happened: ehipment A new of currency had been received by the Branch and in checking 232( -6-- 8/14/58 the numbers of the "bricks" an employee had discovered that one of the bricks contained a new bill with a serial number for which a substantial Prize was being offered on a local television program. When this brick 'was transferred to a tellerTs cash supply, the employee arranged to 81118.13 his own one dollar bill for the new bill with the desired serial number. The bill was then turned over to his wife who entered it in the contest and ultimately won the prize. There followed a discussion of various aspects of the matter, after which it was agreed to await receipt of further information about the incident from the Federal Reserve Bank of Atlanta. At this point Messrs. Allen, President of the Federal Reserve Bahl, Allison, of Chicago, Molony, Special Assistant to the Board, and Mr. Hostrup SPeeial Consultant to the Board, joined the meeting and Kthd rew from the meeting. Leport on Operation Alert 1251. the Mr. Leonard had distributed to • evaluation members of the Board prior to the meeting a draft of Office of t'elle'rt for Operation Alert 1958 in the form requested by the Def— organizational ' use and Civilian Mobilization. The report covered readiness, rrangements and operational assignments, operational security, rces„ financial and economic stabilization, domestic infor documents issued for the Illation, training, and a review of all readiness plans and e'el'eise, as well as recommendations for improving r(lIr future Alerts. 232' -7- 8/14/58 Mr. Leonard reviewed the report in detail for the Board, Pointing out that basically the position taken was similar to that in reports made by the Board in evaluating prior Alerts. He explained that the full report, along with those of other agencies, would be reviewed and evaluated by a number of study teams pointing toward Phase III of the Alert scheduled for mid-September. This was the evaluation phase in which heads of agencies would participate. The report concluded with the following specific recommendations: 1. Development of agreed upon policies to serve as a common basis for economic planning. 2. al Development of the specific preattack Feder tive effec make Government measures required to ncy the assurances as to underwriting the solve and ary monet and liquidity of the Nation's for credit system contained in the Standards Operation Alert 1958. necessary 3. Development of a program for providing orders and s ation postattack flexibility in regul issued preattack. dissemina4. Development of a program for preattack guide lines tion of information, instructions, and to reach to all banks, accompanied by publicity s. nment Gover other agencies, State, and local c 5. Development of a program for preattack publi and plans announcement of Federal Government of massive ts effec the with measures for dealing instituattack damage on banks, other financial system. tions, and the Nation's monetary 6. Intensified program for Federal, State, and and precooperation in emergency planning local paredness measures. 2328 8/14/58 -8- 7. Development of a program for greater participation of nongovernmental groups in emergency planning and preparedness measures. In the discussion that followed, Governor Balderston commented that a great deal of time had passed since the Board presented its recommendations a year ago but that not very much progress seemed to have been made toward the adoption of those recommendations. There Still was a conflict between the Treasury and the Federal Reserve over basic legal authority for the emergency documents; the recommendation that an additional supply of one dollar bills be printed had not been getting Plemented; and little or no progress had been made in ellrrency to places where it would be accessible in a time of emergency. The latter objective might be easier of attainment, he felt, if legislation had been obtained to permit including vault cash as a part of required l eserves. ' cash item had been Governor Vardaman commented that the vault 8111v1tted to the Congress as part of a larger program for the revision reserve requirements. the vault He thought that if the System felt essh Proposal was essential from the standpoint of meeting defense needs, it would be program with the worth while to pursue it as an emergency highest priority. e with the Mr. Leonard observed that while he agreed in principl comm that some definite signs ente of Governor Balderston, he also felt or Progress were at hand. There was now a change in the Treasury's ,2(11 r-,tc-2 -,, „.1 8/14/58 -9- since the advent of the attitude toward emergency planning, especially new Secretary, and he felt the new, changed attitude was seeping down that the combination through the staff to some extent. He also felt Of the Federal Civil Defense Administration and the Office of Defense Mobilization into a single agency, with a vigorous administrator, . would lead to a resolution of previous conflicts in responsibilities ct in the relatively In other words, he said, there were reasons to expe work that had gone on to near future some flowering of a great deal of date. The evaluation session in mid-September would afford an to oPPortunity for the heads of agencies and Government departments face up to some of the major issues. unanimously to send the report to Thereupon the Board agreed tion in the form presented the Office of Defense and Civilian Mobiliza the staff was authorized 137 Mr. Leonard, with the understanding that to make of the report, as transmitted, minor editorial changes. A copy has reference. been placed in the Board's files for withdrew from the meeting. Messrs. Allison and Robinson then In accordance with s 8 and Letter to Congressman Multer Item the ,4 August 7, 1958, to request •Aecision of the Board at its meeting on Richmond to terminate their the Federal Reserve Banks of New York and New York State Bankers all'angements for the occupancy of space by the Association, respectively, there 4880oiation and the Maryland Bankers had suggested reply been circulated prior to this meeting drafts of a ‘. 2330 8/14/58 -10- to Congressman Multer's letter of June 30 and a letter to the Reserve Bank Presidents which would advise them of the Board's position in this matter. Governor Balderston commented that the draft of letter to Congressman Multer seemed to express clearly the Board's position, and agreement was expressed with that comment. There was brief discussion about alternate wording in the letter to the Reserve Bank Presidents which would have pointed out that while the Board recognized that some ' l easons could be offered in support of such arrangements with bankers' °rganizations, the Board was convinced that those reasons were outweighed by the importance of avoiding any actual or apparent undesirable relationships between supervised institutions and supervising authorities. This suggestion was not accepted, however, on the gr°11nds that the letter to Congressman Multer spoke for itself and that Providing the Bank Presidents with copies of the exchange of correspondence with the Congressman would afford them sufficient explanation of the 8°ardl s views. In response to Chairman Martin's invitation, President Allen e°rnmented that he agreed with the Board's view in this matter. He that the Illinois Bankers Association had inquired recently whether would be possible to lease space in the enlarged premises of the Chi oago Bank when those areas were completed, and that he had turned them down without any knowledge of the current discussions with the New York and Richmond Banks. 2331 8/14/58 -11Thereupon it was unanimously agreed to send the letter attached to these minutes as Item No. 8 to Congressman Multer and to advise the Presidents of the Federal Reserve Banks by means of a letter in the form attached to these minutes as Item No. 9. At this point Messrs. Riefler, Leonard, Young, Molony, and Shay withdrew from the meeting. The Michigan Bank, membership condition. Governor Vardaman re ported to the Board that again on Tuesday afternoon, August 12, James B. Alley, counsel for The Michigan Bank, had called his °ffice, presumably to discuss the third condition applied to this bank at the time of its admission to membership. He said that Mr. Alley had been unsuccessful in reaching him, but that it appeared the bank had decided to hold the matter in abeyance for the time being. The Michi an Bank SO royal of branches. At its meeting on August 11, 1958, the Board had reached an understanding concerning certain would have branch applications of The Michigan Bank which esulted in referral of the applications back to the Federal Reserve Bank of Chicago for further consideration. Prior to this meeting there been distributed to the Board copies of a proposed letter to the Rese rve Bank which would h3ve effected this referral. The draft pointed out that it was a generally accepted policy that sale of banks should be capitalized with common stock and that the PI'eferred stock should be resorted to only in emergency situations. 2332 8/14/58 -12- The letter also stated that it was believed there were sound reasons suPPorting the continuation of this policy. It suggested that if the Federal Reserve Bank of Chicago deemed it advisable or necessary, further discussion of the problem might be arranged with the management of the applicant bank and/or the Commissioner of Banking for Michigan. eased on the results of such a reconsideration, it requested submission r an unqualified recommendation on the point. ' Bank in Washington The presence of President Allen of the Chicago f°r other purposes also afforded an opportunity for a discussion of this dent Allen the Board's Problem. Governor Vardaman reviewed for Presi mendation of evious discussion of the matter in the light of the recom ' Pl the Chicago Bank, and at Governor Balderston's request Mr. Solomon reviewed the Board with regard to the question of the legal authority of the . issuance of preferred stock. er the The specific question was wheth it could not add hoard had authority to tell a State member bank that on said that the Pl'eferred stock to its capital structure. Mr. Solom ansller to this question was probably a negative one. He added, however, go into this matter under that he thought the Board did have authority to its adequacy of capital. general supervisory powers to determine the Ther structure -- that is, e was little doubt that the nature of a capital its -- had a bearing on the ision between preferred and capital stock ade m could take into account quacY of capital and in that way the Syste the Propriety of the issuance of preferred stock. A,v -13- 8/14/58 Governor Balderston said that his concern was with how the courts would view an effort by the Board to use its authority with respect to branches to accomplish some other end. This was the question, he said, in the Old Kent case where the Board was using its authority r'egarding branches to express objection to a proposed merger. In The kehigan Bank matter, the Board would be doing substantially the same thing and he wondered how far it would be advisable to go in risking j4dicial disapproval of this approach. Governor Vardaman said his approach was somewhat different. He would favor approving the branches but only on the condition that the bank have adequate capital. Then, when a plan for increasing capital waS developed, he would specify that it must be on a sound basis. He of judicial l'ec°gnized that the latter process might involve the risk y t'elliew and if it developed that the courts denied the Board's authorit 14 this regard, then the System would be in a position to carry the Matter to Congress. broad principle His concern, he said, was for the (4 maintaining a wide distribution of common voting shares and encouraging al banks. t°eIcholder interest in the management of individual commerci The as to encourage his Position of a preferred stockholder was not such foli . that he would prefer "ang management developments closely. He stated 40t, to applications on the basis of predicate the turndown of the branch the insufficient capital. Preferred stock as such but on the grounds of 2334 8/14/58 At the Chairman's invitation, President Allen commented that he sympathized with the Board's point of view although he was highly skeptical of the Reserve Bank's ability to convince the management of The Michigan Bank that it ought to change the proposed method of financing. He said Mr. Stoddard is undoubtedly convinced that he is 111°ving forward with this plan on a legally sound basis. He reiterated however that the Chicago Bank would be pleased to do whatever it could the member through discussion of the matter with representatives of barlk and with the Michigan Commissioner of Banks, but he felt he could, not promise much support from the latter source. ative approach At this point Mr. Masters suggested that an altern taight be to approve the applications for the new branches with the less than 8Pecif1c provision that the bank increase its capital not n stock. 41,000,000 through the issuance of additional commo y agreed not to send the After further discussion, it was unanimousl Proposed letter to the Federal Reserve Bank of Chicago and instead to ask the ion a new letter to the staff to prepare for the Board's considerat toar, l through the Federal of Directors of The Michigan Bank for transmitta ' Res srve Bank of Chicago on the basis of Mr. Masters' suggestion. would not be desirable, as Governor Shepardson asked whether it a firt step, to ask the Chicago Bank to reconsider its recommendation. Pres. and that 'dent Allen said he would be glad to have his Bank do so, his on the °wn view would be to recommend approving the branches cond. . 0,000 of itlon that The Michigan Bank would sell at least $1,00 -15- 8/14/58 additional common stock prior to the establishment of the branches. All of the members of the staff except Mr. Kenyon then Withdrew and the Board went into executive session. Change in discount rate at San Francisco. At the request of the Chairman, Mr. Kenyon read a telegram received at 5:11 p.m. Yesterday from the Federal Reserve Bank of San Francisco which stated that the directors of the Bank had established, subject to the approval °f the Board of Governors, a rate of 2 per cent (rather than 1-3/4 per cent) on discounts for and advances to member banks under sections 13 and 1311 of the Federal Reserve Act, a rate of 2-1/2 per cent (rather under section 10(b), than 24/4 per cent) on advances to member banks and a rate of 3-3/4 per cent (rather than 3-1/2 per cent) on advances to individuals, partnerships, and corporations other than member banks 4nder the last paragraph of section 13. Other rates in the Bank's "isting schedule were established by the directors without change. "In view of 48 reasons for the action taken, the telegram stated: price increases, evidence of business recovery, of recent Pecially in industrial commodities, and of the strengthening of " Treat.. this action was 1117" bill rates and other short-term money rates, ' y conditions t4kan to contribute to the continuance of sound monetar eatiential to a sustainable recovery." inclined to approve Chairman Martin stated that he would be the .._, this 41.e increase at the first reasonable opportunity. In ' to -"ection, he inquired whether it would be the desire of the Board 2336 -16- 8/14/58 defer any action until after the meeting of the Federal Open Market Committee next Tuesday, August 19. Such a deferral, he noted, would be without prejudice to the position of any member of the Board. The Chairman observed that the Treasury bill rate had now risen to a level around 1-1/2 per cent. He then referred also to the fact that the index of industrial production rose in July to 133 per cent of the 1947-49 average. This figure, scheduled for release tomorrow, would represent a gain of two points from June, on a seasonally adjusted basis, and a gain of seven points from the low of 126 established in April. The Chairman noted that private housing starts rose again in July to a seasonally adjusted annual rate of nearly 1.2 Million units, 14 per cent above a year earlier. On the other hand, he said, it must be recognized that announcement of a discount rate increase would put additional pressure on the Government bond market. The discussion that ensued indicated a disposition on the part f the other members of the Board to question the necessity or desirability f deferring action on the San Francisco rate. Points which might be niede in favor of awaiting the discussion at the Open Market meeting were weighed against the advantages of more prompt action, and it was then agreed that the Board would meet again at 4:00 p.m. this afternoon. The meeting then recessed and reconvened at 4:00 p.m. with Chat_ Shepardson "nan Martin and Governors Balderston, Vardaman, and Pl'esent. Messrs. Kenyon and Molony also were present. 8/14/58 -17Chairman Martin stated that informal discussion of the matter since the morning session had disclosed that the Treasury would be agreeable to a decision, if that should be the Board's conclusion, to approve and announce today the higher discount rate at the San Francisco Bank. He also commented that during the regular morning Open market telephone call at 11:00 a.m. today, it was reported that ramors were circulating of a possible discount rate change. He said President Mangels had advised him that knowledge of the action taken bY the San Francisco directors was restricted very closely within the Reserve Bank. There followed a further discussion of various aspects of the Proposed rate change, after which it was voted unanimously to advise the San Francisco Bank that the Board approved the rates established bY the directors, effective August 15, 1958. This contemplated that s press release would be issued today in the usual format 4:30 p.m. EDS; that advice of the action would be sent by telegram to all Federal Reserve Banks and branches, and that a notice would be sent to the Federal Register for publication. Unanimous approval also was given to telegrams to the following Federal Reserve Banks approving the establishment without change by those Banks today of the rates on discounts and advances in their existihg schedules: 233L 8/14/58 -18New York Cleveland Richmond St. Louis Minneapolis Kansas City Dallas The meeting then adjourned. Secretary's Notes: Pursuant to the recommendation contained in a memorandum dated August 7, 1958, from Mr. Noyes, Adviser, Division of Research and Statistics, Governor Shepardson yesterday approved on behalf of the Board acceptance of the resignation of Florence G. Moffett, Statistical Clerk in that Division, effective August 27, 1958. Governor Shepardson today approved on behalf of the Board the following items: Memorandum dated August 12, 1958, from Mr. Kern, Chief, Office ; )ervices, Division of Administrative Services, recommending an increase lt.1 the basic annual salary of William E. Becker from $3,920 to $4,0401 wIth a change in title from Guard to Sergeant, Guard Force, effective August 24, 1958. D. . Memorandum dated August 11, 1958, from Mr. Masters, Director, ,lvision of Examinations, recommending that John Lovejoy, Assistant rederal Reserve Examiner in that Division, be granted leave without 118,Y for the period August 20 to September 18, 1958, in order to take refresher course in accounting and auditing preparatory to taking Ole CPA examination. Assistant Secretary 2339 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 1 8A4/58 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE HOARD August 14, 1958 Board of Directors, Peoples Bank of Cuba, Cuba, Missouri. Gentlemen: Pursuant to your request submitted through the Reserve Bank of St. Louis, the Board of Governors of the Reserve System approves, under the provisions of Section the Federal Reserve Act, an additional investment by the Bank of Cuba of :50,500 in bank premises. Federal Federal 24A of Peoples it is understood that proceeds from sale of existing bank prewises will be applied against book value of bank premises, and that depreciation will be taken in accord with Federal Income Pax allowables. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE Vr7".• , - ,,Ns- v.1 .4, r*,k)„, FEDERAL RESERVE SYSTEM Item No. 2 8/1)4/58 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD August 14, 1958 Board of Directors, Citizens Bank of Stuart, Stuart, Florida. Jen tleMen: The Board of Governors of the Federal Reserve System has ren consideration to the application for permission to exercise 'lduciary powers made by you on behalf of the First National Bank . i) cif Stuart, Stuart, Florida, the national bank into which the Citizens Qank of Stuart, Stuart, Florida, is to be converted, and grants such I tional bank authority, effective if and when it is authorized by rine Comptroller of the Currency to commence business, to act, when ,?t,in contravention of State or local law, as trustee, executor, ad— ; lnistrator, registrar of stocks and bonds, guardian of estates, o lgnee, receiver, committee of estates of lunatics, or in any ,'ner fiduciary capacity in which State banks, trust companies, other corporations which come into competition with national 1,1. 1ks are permitted to act under the laws of the State of Florida. exercise of all such rights shall be subject to the provisions G the Federal Reserve Act and the regulations of the Board of overnors of the Federal Reserve System. V After the conversion of the Citizens Bank of Stuart tnto 1,4 41-rst National Bank of Stuart becomes effective and the Comptroller y; the Currency authorizes the national bank to commence business, ball are requested to have the board of directors of the national torik adopt a resolution ratifying your application for permission ti exercise fiduciary powers, and a certified copy of the resolu— or'? so adopted should be forwarded to the Federal Reserve Bank At for transmittal to the Board for its records. When a of such resolution has been received by the Board, a formal tficate covering the national bank's authority to exercise 't powers will be forwarded. the of Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. '341 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 3 8/14/58 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD August 14, 1958 Board of Directors, Zeeland State Bank, Zeeland, Michigan. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of Chicago, the Board of Governors extends until January 2, 1959, the time within which the Zeeland State Bank may establish a branch on West Washington Street, Hamilton, Michigan, under authority contained in the Board's letter of March 21, 1958. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 4 8/14/58 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCIE TO THE BOARD August 14, 1958 C°}1Iptroller of the Currency, : wrrl e, 4811rY Department, n ellington 25, D. C. ' Attention W. L. A. Jennings, Deputy Comptroller of the Currency. Mr. Comptroller: Reference is made to a letter from your office dated May 5, 1958, e 01 ltcliosing copies of an application to organize a national bank at Pocatello, sh h°, and requesting a recommendation as to whether or not the application °lad be approved. A report of investigation of the application made by an examiner Ic)r the Federal Reserve Bank of San Francisco discloses that the organizers he pr agreed to provide a minimum capital structure of $400,000 for the bank, tZlided the investment in fixed assets does not exceed $100,000 and that caPital funds would be increased on a graduated scale to $500,000 in the ra;t the fixed asset investment amounted to more than $200,000. This arprogement for capital would appear to be adequate. The future earnings be 4ect8 of the bank and the general character of the management appear to tioeatisfactory. While it is reported that there is no acute need for addiOr: r 41 banking services in Pocatello, it is probable that the establishment Ilsc,r1lother banking office would stimulate competition and therefore serve a pec1.4.11 purpose. On the basis of the generally favorable findings with reOf to the foregoing factors, the Board of Governors recommends approval e application. The Board's Division of Examinations will be glad to discuss any e of this case with representatives of your office if you so desire. 4aPeet, Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. •72.. BOARD OF GOVERNORS Item No. 5 8/14/58 Of THE FEDERAL RESERVE SYSTEM ce Correspondence ---21.9.2.1:4_af212yEpors Hr. Hexter Date August 6, 1958 Subject: Ownership of bank stock of South St. Louis Investment Co. Attached are memoranda dated July 28 and July 29, relating to the question whether the above-named Company had become a bank holding company in violation of the Holding Company Act. Also attached is a letter of August 1 from the St. Louis Reserve Bank, enclosing a letter from Counsel for the Company and stating that the Reserve Bank is not disposed to do anything further in this connection. The information presented indicates that the Company probably 1?as not been a "bank holding company" at any time and that it certainly ls not a bank holding company at present. Although it is remotely Possible that the Company was a bank holding company for a short time, the Company has demonstrated its good faith by its voluntary disclosure °f the matter and by taking action to eliminate any possibilit y of holding company status. In the circumstances I agree with the Reserve Bank's position, , nd no further action will be taken unless the Board gives other Instructions. c.) 234-1 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 6 WASHINGTON 8/14/58 CEATIFICATION 1. The Board of Governors of the Federal Reserve System has been informed by General Contract Corporation, St. Louis, Iiissouri (hereinafter referred to as "the bank holding company"), that it proposes to take the following actions prior to May 9, (a) to change its name from "General Contract Corporation" to "General Bancshares Corporation"; (b) to exchange the shares of stock enumerated hereinafter for all of the stock of a new corporation organized for the purpose of receiving such property; the shares of stock referred to are as follows: Name of Company Securities Investment Company of St. Louis Shares outstandine Shares to be transferred* 297,840 297,213 15,000 15,000 200,000 100,000 1,000 1,000 Industrial Finance Company of Wellston 250 250 Baden Loan Company 150 150 General Contract Loan Company (Mo.) 250 250 Washington Fire & Marine Insurance Company Midwestern Fire and Marine Insurance Co. Industrial Loan Company * Common stock unless otherwise stated. 1959: 2345 2Shares outstanding* Name of Company Shares to be transferred* General Contract Loan Company, Inc. (La.) 3,125 3,125 Quincy Union Finance Company 3,375 3,375 Springfield Union Finance co. 3,375 3,375 S.I.C. Loan Company 300 300 General Contract Loan Prokers, Inc. 101 101 Apex Insurance Agency, Inc. 10 10 St. Louis-Washington Insurance Agency, Inc. 10 10 Springfield Insurance A7ency, Inc. 10 10 Quincy Insurance Agency, Inc. 20 20 Pulaski County Insurance Agency, Inc. 20 20 Texarkana Insurance Agency, Inc. 20 20 Northwestern Insurance Agency, Inc. 10 10 Reid-Kruse, Inc. 10 10 Sterick Insurance Ar7,ency, Inc. 20 20 Jefferson-Gravois Insurance Agency, Inc. 10 10 Washington Fire & Marine Insurance Company achington Fire et Marine Insurance Company 5,000 5,000 (Class A preferred stock) 2,000 2,000 (Class B preferred stock); (c) immediately after the exchange describe d in (b), to distribute (in accordance with section 1101(a)(2)(A)(i) of the Internal Revenue Code of 1954) all ommon stock unless otherwise stated. of the stock of the new 2346 _3_ corporation bo the stoqkholders of the bank holding cmmany without the surrender by such stockholders of any stock of the bank holding company. The bank holding company has also informed the Board of Governors (d) that, as a result of said exchange and distribution, the new corporation will also acquire indirect control of additional shares of stock; (e) that neither the property to be changed for the stock of the new corporation nor thE, shares of stock referred to in (d) will include any property described in section 1101(b)(1)(B)(i) of the Internal ltevenue Code of 1954. 2. Pursuant to the provisions of section 1101(c)(2) and section 1103(b) of the Internal Revenue Code of 1954, the Board of Governors of the Federal Reserve System hereby certifies that: (a) The bank holdirw eonpany satisfies the requirements of subsection (b) nf see Lion1103 of the Internal Revenue Code of 1954 and therefore is a "qualified bank holding corporation" as defined in that, subsection. (b) The shares of stock enumerated in 1(b) above include property which, under section 1101(a)(1) of the Internal aevenue Code of 1954, the bank holiiing company could distribute directly to its shareholders without the recognition of Pain to such shareholders. 2347 -4) The proposed eIrchange and distribution (referred to in 1 above) are appropriate to effectuate section 4 of the Bank Ho1dint7 Company Act of 1956. • Executed in Washington, D. C., pursuant to direction of the Board of Governors of the Federal Reserve System. (SEAL) nate: August 114, 1958 (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. , >(4•34.k Item No. 7 8/14/58 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE CHAIRMAN August 140 1958 The Honorable Maurice H. Stans, Director, Bureau of the Budget, Washington 25, D. C. Dear Mr. Stans: To the limited extent that the Board's functions would be affected by the admission of Alaska to statehood, the Board has instituted a review of the kind described in paragraph 2 of Your Bulletin No. 59-1 of August 4, 1958, regarding "Effects of Alaska statehood". The Board's General Counsel, Mr. Howard H. Hackley, is supervising this review. Section 19 of the Alaska statehood Act provides for Membership of national banks in Alaska in the Federal Reserve SYstem and thus covers the aspect of the matter which would be Of principal interest to this Board. The Board has initiated a !tudy of its regulations to determine what amendments, if any, to hose regulations would be desirable in view of Alaska statehood. It is believed that the functions of the Board in connection with !Ilch statehood would not require any additional legislation, execuqve orders or proclamations. Consideration is being given to the relative advantages d disadvantages either of creating an additional Federal Reserve 3tr1ct, which would require new legislation, or of including I14aska in an existing Federal Reserve district, which is authorized der the Alaska statehood Act. However, the Board probably will ! t rer any definite conclusion until it becomes clearer what action "e Congress decides to take regarding the pending Hawaii statehood Pleasure. r The Board does not expect to have any further information c/Ifthe kinds contemplated by the September 15, 1958 and November 150 'xi' reports mentioned in your Bulletin. Sincerely yours, (Signed) Urn. McC. Martin, Jr. Wm. McC. Martin, Jr. f-N*-1/1 truee)ef BOARD OF GOVERNORS of OF THE Item No. 8 8/i4/58 FEDERAL RESERVE SYSTEM ee. koc., WASHINGTON 4 s.oi OFFICE OF THE CHAIRMAN --e-ed.,;We, • August 14, 1958 The Honorable Abraham J. Nulter, House of Representatives, Washington 25, D. C. Dear Mr. Multer: This is in further reference to your letter of June 30 of apace in bbdeeal Reserve Bank buildings to rental regarding bankers associations. As :ou were advised in my letter of July 8, the Board's views would be communicated to you as soon as a review Of the matter had been completed. The facts are these. The New York State Bankers Association has been a tenant of the Federal Reserve Bank of New York since 1930. The Association was accepted as a tenant because the Reseeve Bank felt that discussion of matters of mutual interest to the Reserve Bank and commercial banks would be facilitated by such an arrangement. The Board recognizes the reasons which prompted the Federal Reserve Bank to enter into the arrangement, but after review has come to the conclusion that it should be discontinued. The situation at the Baltimore Branch is quite different. The use of space there arises solely from the fact that the present executive manager of the Baltimore Clearing House also serves as secretary of the Maryland Bankers Association and is permitted by he Clearing House to perform his Bankers Association duties in the 2uarter8 which the Clearing House rents from the Baltimore Branch. Ihe Branch has no lease or other direct arrangement with the Bankers Association. In this case also, the Board has come to the conclusion that the arrangement whereby the Bankers Association occupies space in the Federal Reserve Branch building should be discontinued. the Accordingly, the Board has initiated steps to terminate arrangements as soon as that can reasonably be done. Sincerely yours, (Signed) Wm. McC. Martin, Jr. Wm. McC. Martin, Jr. 2350 BOARD OF GOVERNORS OF THE Item No. 9 FEDERAL RESERVE SYSTEM 8134/58 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD August 14, 1958. Sir: Enclosed is a copy of a letter dated June 30 from Congressman t;u14. -,,or regarding rental of space in Federal Reserve Bank buildings to oankers associations and a copy of the Board's reply. The request that the arrangements under which the Bankers ..3seciations occupy space in the rederal Reserve Bank of Hew York and ie Baltimore Branch of the Federal leserve Bank of Richmond be terminated has a2ready been made to the Presidents of those Banks, and a er''Rr of the Board's letter to Congressman Multer is forwarded to you °r Your information and guidance. According to the Board's records, the only space in a Federal ,4.'erve Bank or Branch building rented to a bankers association is that We'd York. It will be appreciated if you will advise the Board ;ljther bankers associations occupy space in any of your buildings, 'her under lease or under any other arrangement. Very truly yours, f!'":'57/ Kenneth A. Kenyon, Assistant Secretary. Encl. SUres °Mt PRESIDENTS OF ALL FriDERAL RESERVE BANKS
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