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Minutes for To: Members of the Board From: Office of the Secretary August 16, 1965 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. Robertson Gov. Balderston Gov. Shepardson Gov. Mitchell Gov. Daane Gov. Maisel () Minutes of the Board of Governors of the Federal Reserve System on Monday, August 16, 1965. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Martin, Chairman Balderston, Vice Robertson Shepardson Mitchell Daane Maisel Chairman Kenyon, Assistant Secretary Noyes, Adviser to the Board Fauver, Assistant to the Board Brill, Director, Division of Research and Statistics Mr. Farrell, Director, Division of Bank Operations Mr. Solomon, Director, Division of Examinations Mr. Johnson, Director, Division of Personnel Administration Mr. O'Connell, Assistant General Counsel Mr. Holland, Associate Director, Division of Research and Statistics Mr. Leavitt, Assistant Director, Division of Examinations Mrs. Semia, Technical Assistant, Office of the Secretary Mr. McClintock, Supervisory Review Examiner, Division of Examinations Mr. Mr. Mr. Mr. Circulated items. The following items, copies of which are attached to these minutes under the respective item numbers indicated, Were approved unanimously: Item No. Letter to Wells Fargo Bank, San Francisco, California, approving an extension of time to establish a branch in the blocks bounded by Battery, Clay, Davis, and Washington Streets. 1 Letter to the Federal Reserve Bank of Chicago waiving the assessment of a penalty incurred by The Iowa State Bank, Algona, Iowa, because of a deficiency in its required reserves. 2 8/16/65 -2Item No. 3 Letter to the Federal Reserve Bank of Kansas City approving the appointment of James J. Lease as Federal Reserve Agent's Representative at the Denver Branch. Report on competitive factors (Erie, Pennsylvania). A revision of the proposed conclusion having been agreed upon, unanimous approval was given to the transmittal to the Federal Deposit Insurance Corporation of a report on the competitive factors involved in the proposed merger of The Bank of Erie into Union Bank & Trust Co., Erie, both of Erie, Pennsylvania. In the form in which approved, the conclusion read as follows: While the proposed merger between the Union Bank & Trust Co., Erie, Erie, Pennsylvania, and The Bank of Erie, Erie, Pennsylvania, might enable the resulting bank to become more competitive for loan business in the $250,000 to $425,000 category, it would eliminate existing and potential competition between the participants and would also reduce the number of available banking sources for small and medium size borrowers from 5 to 4. The overall effect of the proposed merger on competition would be adverse. Coin distribution procedures (Items 4 and 5). There had been dis- tributed a memorandum dated August 12, 1965, from Mr. Farrell recommending, for reasons stated, (1) that the Reserve Banks be permitted to discontinue reb agging of nickels, of which there was now an adequate supply, and (2) that the views of the Conference of Presidents be requested regarding variation among the Federal Reserve Banks with respect to accepting coin orders -3- 8/16/65 from nonmember banks. Attached to the memorandum were drafts of letters to the Federal Reserve Bank Presidents and to the Chairman of the Conference of Presidents reflecting these recommendations. The memorandum also reported for the Board's information that the joint Treasury-Federal Reserve Ad Hoc Coin Committee, which was studying possible improvements in coin estimating and distribution procedures, had noted considerable variation among the Reserve Banks as to the methods used in rationing coin to commercial banks. In the light of various considerations set out in the memorandum, the Committee had suggested that a committee of the Presidents' Conference be appointed to develop a rationing procedure that would yield comparable results among the Reserve Banks. Such procedure would be presented to the meeting of the Conference of Presidents in September for consideration looking toward adoption by all Reserve Banks. A committee had now been appointed and would report to the forthcoming meeting of the Conference. After comments by Mr. Farrell, there was a discussion of the procurrent and prospective situation in regard to coin supplies, the respective cedures being followed in redeeming silver certificates, and the roles of the Reserve Banks and the Mint in regard to the supply and distribution of coins. Reference was made to previous occasions on which shortage Assistant Secretary of the Treasury Wallace had discussed coin Problems with Board members and the Presidents of the Federal Reserve Banks, and it was suggested that another meeting might be helpful in 8/16/65 -4- view of the situation that appeared likely to develop over the next several months. At the conclusion of the discussion the letters to the Reserve Bank Presidents and to the Chairman of the Conference of Presidents were ...U2E2y29.1.. unanimously. Copies are attached as Items 4 and 5. It was understood that the suggestion for a meeting with Assistant Secretary Wallace would be followed up. Secretary's Note: At the Board meeting on August 18 an alternative suggestion was made that Mr. Wallace be invited to meet with the Board members and perhaps selected Reserve Bank representatives on a mutually convenient date, it having been ascertained that difficulties would be involved in scheduling a meeting on dates in the near future when all the Reserve Bank Presidents would be in Washington. Exchange of information regarding national banks (Item No. 6). There had been distributed a draft of reply to a letter of July 28, 1965, from the Comptroller of the Currency regarding exchange of information concerning national banks between the Federal Reserve Banks and the Regional Comptrollers of the Currency. (The present correspondence grew out of the reply made by the Board on July 12, 1965, to a letter of June 1 in which the Comptroller requested information regarding borrowings by national banks from Federal Reserve Banks.) After a discussion during which various suggestions were agreed Upon regarding approach and emphasis, the letter was approved unanimously in the form attached as Item No. 6. 8/16/65 -5All members of the staff except Mr. Kenyon then withdrew. Minneapolis directorship. Governor Balderston related for the benefit of Chairman Martin the substance of a discussion of the Board in executive session on August 12, 1965, concerning a question that had been raised by Chairman Bean of the Federal Reserve Bank of Minneapolis regarding the procedures that might appropriately be followed in locating persons for consideration by the Board of Governors in selecting a member of the Bank's Board of Directors to succeed Mr. Bean, whose term would expire at the end of 1965. Chairman Martin then clarified the background against which the question had been raised, indicating that President Galusha had inquired of him about the steps usually followed in such circumstances and that, at his suggestion, Mr. Galusha had then discussed the matter with Chairman Bean. Chairman Martin expressed the view that it would seem in order to indicate to Chairman Bean that, other things being equal, it could probably be assumed that Deputy Chairman Bemis, whose term did not expire until the end of 1966, would be named Chairman of the Bank to succeed Mr. Bean. Chairman Martin thought that such an informal indication might be helpful to Chairman Bean in working With Mr. Bemis in developing names of possible appointees to the Class C director vacancy that would develop at the end of this year, and there was general agreement that this would be appropriate. The meeting then adjourned. -6- 8/16/65 Secretary's Note: Governor Shepardson today approved on behalf of the Board the following items: Letter to the Federal Reserve Bank of Kansas City (attached Item No. 7) approving the designation of 52 employees as special assistant examiners. Memoranda recommending the following actions relating to the Board's staff: Entrance salary adjustment Benson H. Hart, Economist, Division of International Finance, at the rate of $9,240 per annum, effective August 16, 1965, rather than at the rate of $10,250 approved by the Board on June 21, 1965. Transfers Jo Ann H. Cannada, from the position of Secretary in the Office of the Controller to the position of Secretary in the Division of Research and Statistics, with an adjustment in basic annual salary from $5,505 to $5,165, effective August 19, 1965. Brenda Irene Dobson, from the position of Stenographer in the Division of Personnel Administration to the position of Stenographer in the Division of Examinations, with no change in basic annual salary at the rate of $4,005, effective August 29, 1965. Peggy Jo H. of the Secretary Controller, with effective August Powles, from the position of Secretary in the Office to the position of Secretary in the Office of the no change in basic annual salary at the rate of $5,330, 23, 1965. .6.Essstance of resignation Wilbert J. Hart, Supply Clerk, Division of Administrative Services, effective at the close of business August 18, 1965. Assistant Secretary Item No. 1 8/16/65 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS orrocIAL CORRESPONDENCE TO THE BOARD August 16, 1965. Board of Directors, Wells Fargo Bank, San Francisco, California. Gentlemen: The Board of Governors has approved an extension until February 25, 1966, of the time within which Wells Fargo Bank may establish a branch in the blocks bounded by Battery, Clay, Davis and Washington Streets, San Francisco, California. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. Item No. 2 8/16/65 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADORCIIIII OFFICIAL CORREISPONOIENCt TO THE BOARD August 16, 1965 M. L. H. Jones, Vice President and Cashier, Federal Reserve Bank of Chicago, P. 0. Box 834, Chicago, Illinois. 60690 Dear Mr. Jones: This refers to your letter of August 3, 1965, regarding the on Penalty of $89.75 incurred by The Iowa State Bank, Algona, Iowa, the for reserves required its in $39,000 of an average deficiency reserve computation period ended July 21, 1965. from an It is noted that (1) this deficiency resulted both error in the bank's computation of average reserves required and from a delay byits correspondent bank in making a transfer; (2) if the have transfer had been completed as planned, the bank still would been deficient in its reserves, but in an amount that could and would have been waived by your Bank under Paragraph E of the Board's instrucrecord tions (F.R.L.S. #6120); and (3) the bank has had an excellent in maintaining its required reserves. Bank to In the circumstances, the Board authorizes your ended period waive the assessment of the penalty of $89.75 for the July 21, 1965. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS Item No. 3 8/16/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD August 16, 1965. 11r. Homer A. Scott, Federal Reserve Agent, Federal Reserve Bank of Kansas City, Kansas City, Missouri. 64106 Dear Mr. Scott: As requested in Mr. Mathews' letter of July 28, 1965, the Board of Governors approves the appointment of Mr. James J. Lease as Federal Reserve Agent's Representative at the Denver Branch to succeed Mr. Clare T. Roeder. This approval is given with the understanding that Mr. Lease Will be solely responsible to the Federal Reserve Agent and the Board Of Governors for the proper performance of his duties, except that, during the absence or disability of the Federal Reserve Agent or a vacancy in that office, his responsibility will be to the Assistant Pederal Reserve Agent and the Board of Governors. When not engaged in the performance of his duties as Federal Reserve Agent's Representative, Mr. Lease may, with the approval of the Federal Reserve Agent and the Vice President in charge of the Denver Branch, perform such work for the Branch as will not be inconsistent with the duties as Federal Reserve Agent's Representative. It will be appreciated if Mr. Lease is fully informed of the imPortance of his responsibilities as a member of the staff of the Pederal Reserve Agent and the need for maintenance of independence from the operations of the Bank in the discharge of these responsibilities. Please have Mr. Lease execute the usual Oath of Office, which should then be forwarded to the Board of Governors along with "tification of the effective date of his appointment. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. f BOARD OF GOVERNORS Item No. 4 8/16/65 S-1966 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS arriciAL CORRESPONDENCE TO THE BOARD August 16, 1965. Dear Sir: coin shortage, As part of the program adopted to combat the Banks to ve Reser the asked the Board's letter of August 13, 1964, with coin lated circu mix to and rebag coin received from the Mint n of nitio recog in ly, quent Subse new coin to the extent possible. of letter 's Board the es, the improvement in the supply of penni reging rebag the from on inati March 15, 1965, exempted this denom in t vemen impro great a been quirement. More recently, there has r whethe to as asked been have the supply of nickels, and questions their rebagging now serves any useful purpose. Treasury-Federal The Board has been informed that the joint its meeting on at ng feeli a Reserve Ad Hoc Coin Committee indicated mixing of Mint and ging rebag y July 21, 1965, that as a general polic all Reserve by nued conti be coin of a specific denomination should is rationing such coin. Banks and Branches as long as any one of them Board's Division of the by 6 t Replies to the inquiry made on Augus Bank Operations show that there is-.•••••••• •=•••*.... ve Bank or Branch (1) No rationing of nickels by any Reser at the present time. s during the next (2) No foreseeable need to ration nickel several months. among the Reserve Banks as to the (3) Uniform agreement of nickels. desirability of discontinuing the rebagging the Board agrees that In the light of these circumstances, from the rebagging ed exempt nickels, as well as pennies, should be was raised about ion quest that a requirement. The Board understands S-1966 -2- the continuing need for further rebagging of any denomination of COLA, but it feels that discontinuance at this time of the practice of rebagging silver coin might be premature in the light of the of such uncertainties that now exist with respect to the supply Coin. Very truly yours, 41 c6: ;;: ' 25 Kenneth A. Kenyon, Assistant Secretary. TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS. Item No. 5 8/16/65 BOARD OF GOVERNORS ••• ,D OV OF THE FEDERAL RESERVE SYSTEM • /'mk 00 1, WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD ".tAi• .••c''."•• •..REs August 16, 1965. Karl R. Bopp, Chairman, Conference of Presidents, Pederal Reserve Bank of Philadelphia, hiladelphia, Pennsylvania. 19101 °ear Mr. Bopp: Federal Reserve The Board has been informed that the Treasury among the variation Ad u the about concern ,17.- 4,0o Coin Committee expressed some banks, nonmember from orders coin ederal Reserve Banks with respect to ; the to matter this bring to want and suggested that the Board might ttention of the Presidents' Conference. the various The Committee noted from the operating circulars of from direct orders coin receive erve Banks that some of them will through submitted be to orders 11°4member banks while others require such ember banks. The Committee felt that the latter practice is questionable Red111 the light of the Sub-Treasury responsibilities transferred to the Committee, eral Reserve Banks by the Secretary of the Treasury. The desirability the consider to s ;erefore, suggested that the Board might want of circulars cash the in adopt, asking the Presidents' Conference to nonmember from orders coin covering ne Reserve Banks, uniform paragraphs auanks, with a view toward eliminating any provisions that discriminate ainst such banks. It is understood that the Committee did not have in 411d any change with respect to absorption of shipping charges. Res j about The Board shares the concern of the Ad Hoc Committee Conference Presidents' the of views the have matter, and would like to ka regard to it. this Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. ee l Mr. Lawrence C. Murdoch, Jr., Secretary, Conference of Presidents. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 6 8/16/65 WAS OFFICE OF THE CHAIRMAN August 18, 1965. The Honorable James J. Saxon, Comptroller of the Currency, Treasury Department, Washington, D. C. Dear Jim: This refers to your letter of July 28, 1965, in response to my letter of July 12, 1965. I have noted your statement that "It is my understanding that for many years, antedating my term as Comptroller of the Currency, there has not been the flow of information from the Federal Reserve Banks which would have been desired." My own understanding is exactly the reverse. I can assure you that the practice at Reserve Banks has 12, been and continues to be as I described it in my letter of July 1965: when a national bank borrows from the Reserve lties Bank in circumstances reflecting possible difficu ng— borrowi such of ood likelih a es indicat r of the bank--o and fully informs ...the Federal Reserve Bank promptly y; it counsels Currenc the of ller Comptro l the Regiona him with him regarding the situation; and it keeps not include fully apprised of developments. This would but Bank, only changes in borrowings from the Reserve also any other pertinent information coming to the ncies in knowledge of the Reserve Bank, such as deficie Bank. Reserve the at the national bank's reserve account s receive Bank Reserve a In fact, any information that a of ss soundne or safety significantly relating to the l Regiona the to cated national bank is promptly communi or whether of ess regardl Comptroller of the Currency likelihood not the national bank is borrowing or shows Banks Reserve The Bank, of borrowing from the Reserve and day day-tol informa close, endeavor to do this on a highly be to believe we which even hour-to -hour basis, desirable." -2- The Honorable James J. Saxon You indicate that Regional Comptrollers were mistaken if they felt, as the Reserve Banks found they apparently did, that they were under recent constraints from Washington as to information they could communicate to the Reserve Banks. I am sure it will greatly facilitate communication of information to Reserve Banks if the Regional Comptrollers clearly understand from you that they are to communicate with the Reserve Banks as fully as I have indicated in the above quotation from my July 12, 1965, letter that the Reserve Banks communicate with them. Since it is clear from your letter and from mine that it ' is the intention on both our parts to provide a simple, efficient mechanism for the free and full interchange of information of mutual interest, I suggest that we leave it to the Regional Comptrollers and the Reserve Banks to work out these arrangements in the light of this understanding. If any specific difficulties are encountered we can both move quickly to emphasize further our joint position that there should be no impediment whatsoever to free interchange. I am glad to clarify the reference in my letter of July 12, 1965, regarding the furnishing to a Reserve Bank of copies it may request of reports of examination of national banks given a composite rating of 3 or 4--sometimes called "problem" banks. Reserve Banks now purchase from you a copy of the report of the first examination made of each national bank each calendar year. Since a bank's "problem" status may first appear in an examination subsequent to the first one of the year, it could be helpful if a Reserve Bank could be supplied promptly With a copy of each report of examination of a bank in such condition. been However, Reserve Bank requests to purchase these reports have reluctance declined by Regional Comptrollers, apparently because of a to identify to the Reserve Bank national banks the Regional Comptrollers if you will considered to be in that condition. We will appreciate it requests. authorize Regional Comptrollers to comply with such While I hold the view that repurchase agreements and Federal funds purchased should be treated as borrowing in Reports of Condition, my letter of July 12, 1965, did not suggest how they be treated, but only that information regarding them be included in the Report of learned from Condition and also communicated to the Reserve Banks if funds Federal Other sources. As you know, information regarding national of Condition Purchased is already included in the Report of I would borrowing. as banks, even though not specifically designated repurchase regarding urge that suitable information also be included agreements. Sincerely yours, (Signed) Bill Wm. McC, Martin, Jr. Ti BOARD OF GOVERNORS Item No. 7 8/16/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 AOOPC•11 OFFICIAL COARICSPONOCNCC TO TUC BOARD August 16, 1965. Mr. George D. Royer, Jr., Vice President, Federal Reserve Bank of Kansas City, 64106 Kansas City, Missouri. Dear Mr. Royer: In accordance with the request contained in your letter of August 11, 1965, the Board approves the designation of the following employees as special assistant examiners for the Federal Reserve Bank of Kansas City for the purpose of participating in the 1965 examination of Commerce Trust Company, Kansas City, Missouri: Brown, Robert A. Cable, Willard Cahill, Robert Carr, Gordon Cockrell, Paul E. Culbertson, W. E. Curtis, E. J. Czerwinski, H. R. Dewey, Keith Elliott, Jerry Foley, Cecil Fowks, William Hain, W. M. Hall, Tony Hamilton, Dave Hopper, Grady Hughes, Wm. H. Kelly, Michael Kurek, Richard M. LaRose, Sylvester Miller, Larry McCoy, Ronald McKee, Hugh Neville, William Novak, Frank J. Park, Dennis Pope, Joseph M. Rogers, Guy Searle, Joseph Shewmaker, Harold Shreeves, Jerry Shull, Keith Slover, Don Spurlock, John B. Stanley, Billy R. Swanson, Estus A. Tindall, Keith Trimble, Harry B. Tuggle, Jesse E. Walker, Lawrence Wangler, Arthur Werner, Darrell Wilson, James N. Wisniewski, Chester Wray, Jack Burns, Dorothy Hirsch, Catherine Hisey, Betty L. Johnson, Aileen Lynn, Mary Norris, Dorothy M. Smart, Dorothy J. It is noted that these designations will be terminated immediately upon completion of the examination. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary.
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