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609
Minutes for
To:
Members of the Board
From:
Office of the Secretary
August 16, 1966
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.
Chm. Martin
Gov. Robertson
Gov. Shepardson
Gov. Mitchell
Gov. Daane
Gov. Maisel
Gov. Brimmer
Minutes of the Board of Governors of the Federal Reserve
System on Tuesday, August 16, 1966.
The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Robertson, Vice Chairman
Shepardson
Mitchell
Brimmer
Sherman, Secretary
Kenyon, Assistant Secretary
Bakke, Assistant Secretary
Holland, Adviser to the Board
Molony, Assistant to the Board
Cardon, Legislative Counsel
Fauver, Assistant to the Board
Hackley, General Counsel
Brill, Director, Division of Research and
Statistics
Mr. O'Connell, Assistant General Counsel
Mr. Shay, Assistant General Counsel
Mr. Hooff, Assistant General Counsel
Mr. Goodman, Assistant Director, Division of
Examinations
Mr. Leavitt, Assistant Director, Division of
Examinations
Miss Wolcott, Technical Assistant, Office of
the Secretary
Messrs. Forrestal, Kay, and Pustilnik, and Miss
Hart of the Legal Division
Mr. Dahl, Chief, Special Studies and Operations
Section, Division of International Finance
Messrs. Egertson and Goodfellow of the Division
of Examinations
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Approved items.
after
The following items were approved unanimously
consideration of background information that had been made avail-
able to the Board.
indicated.
Copies are attached under the respective numbers
Aj
04.4
8/16/66
(;
-2Item No.
Letter to Fidelity-Philadelphia Trust Company,
Philadelphia, Pennsylvania, approving the
establishment of a branch in Springfield TownshiP and an investment in bank premises.
1
Letter to First State Bank of Greenville,
Greenville, Michigan, approving the establishment of a branch at South Franklin and West
Cass Streets.
2
Letter to Commerce Trust Company, Kansas City,
Illssouri, approving the declaration of a dividend, consisting of certain assets equal to
sPProximately $18.6 million, to be paid in
1966 or 1967.
3
Letter to Continental International Finance
Corporation, Chicago, Illinois, granting consent to an additional investment by Continental
and Overseas Investments N.V., Amsterdam, The
!
l e therlands, a 50 per cent owned subsidiary,
ln Banque Europeenne d'Outre-Mer, Brussels,
Belgium.
4
Letter to the Federal Reserve Bank of New York
:
1 11terposing no objection to certain revisions
ln its foreign travel program for 1966.
5
Letter to the Bureau of the Budget advising
that the Board had no recommendations at this
time for action under the Reorganization Act
°f 1949, as amended.
6
'et-tr to the Comptroller of the Currency inviting comment on the Board's request that steps be
taken to terminate certain interlocking director8111Ps in the Detroit-Livonia, Michigan, area
Prohibited under section 8 of the Clayton Act.
7
L
tett_
ur to the Department of Justice advising
at the Board had no suggestions as to the form
and substance of regulations to be formulated
covering the settlement of claims against the
4°vernment arising under the Federal Tort Claims
let. (With the understanding that copies of the
etter would be sent to all Reserve Banks.)
8
2997
8/16/66
-3In connection with Item No. 3, it was noted that Commerce
Trust Company had been subject to continuing criticism by Federal
Reserve examiners for ownership of extensive real estate interests
through subsidiaries.
The bank now proposed to form a holding company
to which
would be transferred 80 per cent or more of the bank's outstanding common stock.
After transfer of all nonbank real estate
interests to one of its subsidiaries in exchange for additional stock
of that subsidiary, the bank would declare and pay a dividend
consisting of all stock of the subsidiary companies.
While the declaration of
the dividend was approved, members of the Board noted reservations as
to
the
use of subsidiaries or one-bank holding companies to combine
banking and nonbanking businesses, even though there was no statutory
pro
hibition.
With respect to Item No. 4, question was raised why the letter
f consent did not contain the usual caveat with respect to observance
f the
voluntary foreign credit restraint effort guidelines.
Governor
Robertson noted that where an Edge corporation itself proposed to make
an investment abroad, such comment was appropriate since the transacti°n involved a capital outflow from the U.S.
4
In this case, however,
f°reign subsidiary of the applicant proposed to make the investment
and to use
funds already abroad.
In connection with Item No. 5, Governor Brimmer inquired
Whether
it was considered appropriate for a foreign central bank to pay
8/16/66
-4-
the expenses of a System representative traveling on official business.
lie referred to a proposed trip by Mr. Lang of the New York Reserve Bank
to Venezuela in connection with the dedication of new quarters of the
Venezuelan central bank.
In discussion, it was pointed out that the
circumstances of the particular trip to which Governor Brimmer referred
were different from those involved in the usual visitation, and that
no System policies regarding foreign travel would appear to be contravened by accepting the Venezuelan central bank's offer to underwrite
Mr. Lang's expenses.
In this connection, it was recalled that the same
tender had been made in 1965 by the Ethiopian central bank when
Mt. Rozell of the New York Reserve Bank, who at one time had served as
g"ernor of the Ethiopian central bank, was invited to attend dedication ceremonies.
sion.
No objection was interposed by the Board on that occa-
Governor Mitchell commented in further explanation of the
Venezuelan ceremonies, to which many central banks were sending represent tives, and it was the consensus that the circumstances warranted
accepting the central bank's offer.
With respect to Item No. 6, Governor Mitchell commented that
not
the Board's reluctance in the past to suggest use of
the
Reorganization Act to obtain authorization for delegation of certail.). Board responsibilities, if present efforts to secure such authority
by
the
.
-egislation were not productive he would favor reconsideration of
P°ssibility of pursuing the reorganization plan route.
8/16/66
-5Request for FOMC records (Item No. 9).
s tanding
Pursuant to an under-
reached at yesterday's meeting, there had been distributed a
draft of reply to a letter of August 12, 1966, from Chairman Patman of
the House Banking and Currency Committee requesting that minutes and
Other records of the Federal Open Market Committee be made available
to members of the House Banking and Currency Committee and its staff.
Following discussion, during which certain editorial changes
were suggested, unanimous approval was given to a reply in the form
attached
as Item No. 9.
The meeting adjourned after the Vice Chairman, in a session
with limited staff attendance, reported to the other Board members
certain developments relating to proposed legislation to provide broader
au thority for interest rate limitations on savings-type deposits.
Secretary's Note: Governor Shepardson
today approved on behalf of the Board
memoranda recommending the following
actions relating to the Board's staff:
AP.z.11,11.taltal
Ellen R. Lewis as Statistical Clerk, Division of Research and
tistics, with basic annual salary at the rate of $4,776, effective the date of entrance upon duty.
Sta
Tra
0, Diane Dzik, from the position of Stenographer in the Division
pf Personnel Administration to the position of Stenographer in the
,Pilsion of Examinations, with no change in basic annual salary at
'le rate of $4,269, effective upon assuming her new duties.
3() )
8/16/66
-6-
AS,'..9..tptance of resinations
David H. Mudarri, Economist, Division of Research and Statistics,
effective the close of business August 26, 1966.
Robert P. Lacey, Statistical Clerk, Division of Research and
S tatistics, effective the close of business September 9, 1966.
,
4104,
1/111
Secretaiy
Item No. 1
BOARD OF GOVERNORS
8/16/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADORCIIIII
orriciAL
CORRESPONDeNCE
TO THE 110ARO
August 16, 1966
Board of Directors,
Fidelity-Philadelphia Trust Company,
Philadelphia, Pennsylvania.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by Fidelity-Philadelphia
Trust Company, Philadelphia, Pennsylvania, of a branch
in the vicinity of the intersection of Baltimore Pike and
Sproul Road, Springfield Township, Delaware County,
Pennsylvania, provided the branch is established within
one year from the date of this letter.
The Board of Governors also approves under the
provisions of Section 24A of the Federal Reserve Act, an
additional investment of $75,000 in bank promises incident
to the establishment of the branch.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)
3002
Item No. 2
8/16/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON. O. C. 20551
ADDRESS
orrscam. comoturtatioctica
TO THE BOARD
August 16, 1966
Board of Directors,
First State Bank of Greenville,
Greenville, Michigan.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by First State Bank of
Greenville, Greenville, Michigan, of a branch at the
southwest corner of South Franklin and West Cass Streets,
Greenville, Michigan, provided the branch is established
within six months from the date of this letter.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)
Item No. 3
8/16/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS orrictAL CORRESPONDENCE
TO THE BOARD
August 16, 1966
Board of Directors,
Commerce Trust Company,
Kansas City, Missouri.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves, under the provisions of paragraph 6 of
Section 9 of the Federal Reserve Act and Section 5199(b)
of United States Revised Statutes, the declaration of a
dividend consisting of assets equal to approximately
$18.6 million by Commerce Trust Company, Kansas City,
Missouri, to be paid in 1966 or 1967. It is understood
that this dividend will include Commerce Trust Company's
investment in the Commerce Tower Building, the Commerce
Garage Building, the Civic Center Property, and its
investment in its subsidiaries, ComTrusCo Investment
Company, Commerce Tower Company, and Kansas City MiaRoyalty Company.
This letter does not authorize any future
declaration of dividends that would require the Board's
approval under the foregoing statutes.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
;i1)04
Item No. 4
8/16/66
BOARD OF GOVERNORS
OF THE
.00C G01.4
:•
.
R4:
0..
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS orrictAL CORRESPONDENCE
TO THE BOARD
August 16, 1966.
Continental International
Finance Corporation,
231 South LaSalle Street,
Chicago, Illinois. 60690
Gentlemen:
In response to your letter of July 29, 1966,
written on behalf of Continental and Overseas Investments
N.V. ("COIN"), Amsterdam, The Netherlands, the Board of
Governors grants consent for COIN to make an additional investment in Banque Europeenne d'Outre-Mer, Brussels, Belgium,
of 100 million Belgian Francs, equivalent to US$2,000,000.
It is noted that COIN currently has sufficient
funds for the proposed investment and hence no additional
outlay is required of Continental International Finance
Corporation.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
05
Item No. 5
8/16/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
Arsamene orrtciAL
CORRESPONOILAIOC
TO THE BOARD
August 16, 1966
Mr. Richard A. Debs, Secretary,
Federal Reserve Bank of New York,
New York, New York. 10045
Dear Mr. Debs:
This will acknowledge receipt of your letter of
August 9, 1966, advising the Board of changes in your Bank's
1966 foreign travel program to include visits by Messrs. Clarke
and Lang, respectively, to Mexico and Venezuela.
The Board has noted without objection these revisions
in your foreign travel program.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 6
8/16/66
WASHINGTON
OFFICE OF THE VICE CHAIRMAN
August 16, 1966
Mr, Charles L. Schultze, Director,
Bureau of the Budget,
Executive Office of the President,
Washington, D. C. 20503
Dear Mr. Schultze:
This is in response to your letter of August 3, 1966,
in which you invite the Board to recommend to the Bureau any
Presidential reorganization plan action that the Board may
consider desirable in connection with the Bureau's review of
Proposals concerning the organization and management of agencies
and functions for possible presentation during the next session
of Congress under the Reorganization Act of 1949, as amended.
The Board has no such recommendations to make at this
time.
Sincerely,
(Signed) J. L. Robertson
J. L. Robertson.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 7
8/16/66
WASHINGTON
OFFICE OF THE VICE CHAIRMAN
August 17, 1966
The Honorable James J. Saxon,
eftptroller
of the Currency,
laasury Department,
14a8hington,
D. C. 20220
Dear
Mr. Comptroller:
Under date of July 7, 1966, you were supplied with a copy
of the u
Board's letter of that date to the Federal Reserve Bank of
Chic go in
cilV
which the Board concluded that Mr. Stanford C. Stoddard
Act *. Frank R. Welsher were prohibited by section 8 of the Clayton
Of 1,S15 U.S.C. 19) from continuing to serve as officers and directors
Nat,chigan Bank, National Association, and directors of Livonia
on rnal Bank, Livonia, Michigan. The Board's conclusion is based
plea
:8 View that Livonia and Detroit are "adjacent" within the
:ng of paragraph (5) of section 8 of the Clayton Act and
Elec
212.2(d)(5) of the Board's Regulation L, and that the
sZarlocking services are not permitted by any other provision of
ti
"8 or the Regulation.
The Board had taken the position in 1953 that Livonia and
Ntroi
mnio, t were adjacent. However, in your letter of March 3, 1966 (in
tnro." You referred to the Board's 1953 letter), you advised Michigan
of t3 National Association, that because of paragraph (5) of section 8
vel he Clayton Act the interlocking services of Messrs. Stoddard and
4aher were not forbidden by the statute.
As pointed out in the Board's letter of July 7, 1966,
11 of the Clayton Act (15 U.S.C. 21) places authority in the
to;"I to enforce section 8, where applicable to banks, and directs the
viold, whenever it shall have reason to believe that any person is
admining or has violated any provisions of that section, to institute
u4atrative proceedings for that purpose.
4ctio
The Honorable James J. Saxon
-2-
It is understood that Messrs. Stoddard and Welsher are
continuing
to serve in the aforementioned capacities with Michigan Bank,
1.1ational Association, and Livonia National Bank, although the Board in
12,4 letter of July 7 requested that steps be taken promptly to terminate
c_.ne interlocking services. In the circumstances, the Board proposes to
..?mmunicate further with the banks involved and advise them that, unless
he interlocking relationships in question are terminated forthwith, it
111 be necessary for the Board to initiate steps to carry out its respon:
;bility under section 11 of the Act. However, before so communicating
wi
...42th the banks, the Board asked that the matter be brought to your
:_tention again, as it would be glad to receive any comments that you
1 41' Wish to offer. Inasmuch as more than a month has expired since the
.:
letter of July 7, the Board believes that it would not be desirable
delay the matter unnecessarily and, therefore, would hope that it might
have
"ye a reply from you by the middle of September.
Sincerely,
(Signed) J. L. Robertson
J. L. Robertson.
BOARD OF GOVERNORS
Item No. 8
8/16/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE UOARD
August 16, 1966
The Honorable John W. Douglas,
Assistant Attorney General,
Civil Division,
Department of Justice,
Washington, D. C. 20530
Dear Mr. Douglas:
This is in response to your letter of August 4, 1966,
referring to Public Law 89-506, pursuant to which the Federal Tort
Claims Act has been amended to authorize increased agency consideration of tort claims against the Government. You refer to Section 1
of P.L. 89-506, which provides that the head of each Federal agency
maY consider and settle claims "in accordance with regulations prescribed by the Attorney General", and state that your office is now
considering
the form and substance of proposed regulations. You request submission to you of any suggestions in this regard that the
Board may wish to make.
As you are aware, on those occasions when interests of the
Board of Governors in pending litigation have been represented by
the Department of Justice, such representation has been undertaken
With respect to the status of the Board as an independent establishment of the United States. Thus positioned, the Board meets the
definition of "Federal agency" contained in the Tort Claims Act prior
and subsequent to amendment. However, we are not aware of any instance when the Board was named defendant in an action brought under
the Tort Claims Act, or where the Department of Justice represented
the Board with respect td a claim filed under that Act. For this
reason, the Board believes that the Department's purpose in requesting submission of suggestions as to the form and substance of the
regu
lations proposed would not be furthered by the Board's submission of such suggestions. An additional reason for this decision is
the fact that with respect to any award, compromise, or settlement,
fts authorized by P.L. 89-506, provision is made that the same "shall
I3e Paid by the head of the Federal agency concerned out of appropriations available to that agency". The Board does not operate with
funds appropriated by Congress. Its operating funds are obtained
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
The Honorable John W. Douglas
-2-
through semiannual levy upon the Federal Reserve Banks of an
assessment sufficient to pay the Board's estimated expenses and.
the salaries of its members and employees for the half-year succeeding the levying of each such assessment (12 U.S.C. 243). Any claim
for damages that might be asserted against the Board premised upon
alleged tortious conduct of an employee would either be paid by the
Board's insurance carrier pursuant to contractual obligation or, if
not so paid, and if such claim were successfully pursued to judgment
or settlement, would be paid from the Board's "non-appropriated"
funds. In either event, such payment would not be subject to the
conditions and requirements set forth in P.L. 89-506.
For the foregoing reasons, the Board has no suggestions to
make as to the form and substance of the regulations proposed. If,
as your work on this matter progresses, you believe that members of
the Board's staff can be of some assistance, we will be glad to reaPond to a request for such assistance.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
OF THE
Item No. 9
8/16/66
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE OF THE VICE CHAIRMAN
August 16, 1966
The Honorable Wright Patman,
Chairman,
Committee on Banking and Currency,
House of Representatives,
Washington, D. C. 20515
Dear Mx. Chairman:
In the absence of Chairman Martin, I am acknowledging
Your letter of August 12, 1966, referring to the recent passage
Of P. L. 89-487 and expressing again your desire for immediate
availability of minutes and other records of the Federal Open
Market Committee.
As you know, the effect of actual trading operations
undertaken at the instruction of the Federal Open Market
Committee is publicly reported each Thursday in the Federal
Reserve condition statement. Also, a complete record of the
actions of the Open Market Committee is published in the
Board's Annual Report, including all votes cast by each member
in connection with the determination of open market policies,
Plus statements of the reasons underlying the actions of the
Committee and those underlying dissents, when there are dissents.
In addition, the complete minutes of the Open Market Committee,
Which relate the discussions preceding the actions that are
reported as above, have been made available through the end of
1960 for public inspection at the National Archives, at the
Board's offices here, and at all Federal Reserve Banks and
branches over the country.
As you also know, we do have concern, from the standpoint of the public interest and that of the Treasury, over
Premature disclosure of records that could permit speculators
and others to realize unfair profits or advantages through
Speculative trading in securities or foreign exchange, and
could be disruptive to the Government securities market and
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
-2-
The Honorable Wright Patman
adverse to the Board's ability to carry out its monetary
responsibilities. Similarly, since confidential financial
information of foreign governments and their respective central
banks is among matters covered in these records, premature
disclosure could also jeopardize relations between the United
States and these friendly governments.
We are now studying the provisions of P. L. 89-487
that Congress enacted to become effective July 4, 1967, with
every desire to see that the public's access to information is
fully assured, and we will conclude that study within the time
Prescribed by the Congress.
Sincerely yours,
(Signed) J. L. Robertson
J. L. Robertson
@FedFRASER