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V61 Minutes for To: Members of the Board From: Office of the Secretary August 17, 1962 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 mlautes 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 °Illy that you have seen the minutes. Chm. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Gov. Mitchell Minutes of the Board of Governors of the Federal Reserve System on Friday, August 17, 1962. at 1 0:00 The Board met in the Board Room a.m. PRESENT: Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Mills Shepardson Mr. Kenyon, Assistant Secretary Mr. Young, Adviser to the Board and Director, Division of International Finance Mr. Molony, Assistant to the Board Mr. Cardon, Legislative Counsel Mr. Noyes, Director, Division of Research and Statistics Mr, Holland, Adviser, Division of Research and Statistics Mr. Furth, Adviser, Division of International Finance Mr. Keir, Senior Economist, Division of Research and Statistics Mr. Axilrod, Economist, Division of Research and Statistics Mr. Mattras, General Assistant, Office of the Secretary Money market review. (1) Mr. Keir distributed tables relating to cent yields on United States government securities and (2) prospecTreasury refunding, and he then discussed the Government securities 414rizet• including developments with respect to Treasury operations. .(lAilrod discussed recent developments in bank reserves, bank credit, 441 related matters. Messrs. Young, Furth, Keir, and Axilrod then withdrew and the Ol uving entered the room: Mr. Hackley, General Counsel Mr. Farrell, Director, Division of Bank Operations 8/17/62 -2Mr. Solomon, Director, Division of Examinations Mr. Johnson, Director, Division of Personnel Administration Mr. Shay, Assistant General Counsel Mr. Hoof1, Assistant General Counsel Mr. Benner, Assistant Director, Division of Examinations Mr. Sprecher, Assistant Director, Division of Personnel Administration Mr. Young, Senior Attorney, Legal Division Mr. McClintock, Supervisory Review Examiner, Division of Examinations Discount rates. The establishment without change by the ecieral Reserve Banks of New York, Philadelphia, Chicago, Minneapolis, 4111i Sala Francisco on August 16, 1962, of the rates on discounts and 84valaces in their existing schedules was approved unanimously, with the 444erstanding that appropriate advice would be sent to those Banks. Circulated or distributed items. The following items, which 441 been circulated or distributed to the Board and copies of which are att"hed to these minutes under the respective item numbers indicated, Ver. aPproved unanimously: Item No. Lett vir er to The Bank of Virginia, Richmond, €Ullia, approving the establishment of Etb, arIch in Henrico County. ' tett yorker to the Federal Reserve Bank of New thai reaffirming the Board's earlier decision the Army and Air Force Exchange Service 4c not be eligible to maintain a savings (311.11t with a member bank. 1 2 _3_ 8/17/62 Item No. Letter to the Federal Reserve Bank of Chicago 84313rwing the payment of salary to the Bank's Marble maintenance man at a specified rate for ttnle spent performing marble setter duties. 3 -rietter to Southern Arizona Bank and Trust Company, , u2s0m, Arizona, approving the establishment of oranch in the Thomas Mali Shopping Center, Phoenix. 1 , 1etter to The Denton County National Bank of Denton, e4t°11, Texas, approving its application for fiduciary , 141vers. Letter to Chairman Robertson of the Senate Banking Currency Committee reporting on S. 10050 a bill 1171° amend section 10 and section 3 of the Federal eserve Act, and for other purposes." Letter to Chairman Robertson of the Senate Banking i Currency Committee reporting on H. R. 8874, a "To authorize certain banks to invest in ;orations whose purpose is to provide clerical el'vices for them, and for other purposes." n 6 7 With reference to Item No. 7 Mr. Hackley reported that the 1314get Bureau hAd requested staff comments on a letter that the Treasury 1418 Proposing to write to the Senate Banking and Currency Committee e°4taining certain criticisms of H. R. 8874. The Budget Bureau sought .()113/11ellts only at the staff level, and comments therefore were furnished 14tormally on that basis. Report on competitive factors (Orangeburg-Salley-Swansea, s 0. There had been distributed a draft of report to the L2a.I1211/2. 'ral Deposit Insurance Corporation on the competitive factors involved 14 the proposed merger of The Bank of Salley, Salley, South Carolina, and 3113 8/17/62 -4- Slialuea Depository, Swansea, South Carolina, into Bank of Orangeburg, OrEllaWA1/ South Carolina° The report was approved unanimously for transmission to the Corporation. The conclusion of the report read as follows: Little, if any, competition exists between the merging banks. The proposal would have no adverse effect on competition. Application of Connecticut Bank and Trust Company (Items 8 and 9). 311ant to the decision reached by the Board at the meeting on August ' 1)111 8, 1962, there had been distributed a proposed order and statement reflecting al/Proval of the application of The Connecticut Bank and Trust Company, II4.rtf0rd, Connecticut, to merge with The Wallingford Bank and Trust cc4nPanY, Wallingford, Connecticut. The issuance of the order and statement was authorized. 4re attached as Items Copies 8 and 9. ck Messrs. Farrell, Shay, Hooff, Benner, Young, and McClinto thea withdrew. Conflict of interest reports. There had been circulated a rilein(Irandum from the Division of Personnel Administration dated August 1 1962, recommending the following procedure for handling conflict of ' illterst reports submitted by consultants to the Board pursuant to the 151\)6ranl approved by the Board on June 25, 1962: 1. That the Division of Personnel Administration obtain completed statements from each consultant. 8/17/62 -5- . That the Board's Legal Division then review these 2 statements and advise the Division of Personnel Administration of possible conflict of interest. 3. That the procedure then be as follows: (a) If the report is that no conflict of interest is indicated, the statement of the consultant will be retained in the confidential files of the Division of Personnel Administration, and no further action will be taken. (b) If, in the opinion of the Legal Division, there is a conflict of interest indicated, the statement of the consultant and the comments of the Legal Division will be referred to the Board for determination. As a possible alternative to the procedure stated in 3(b), the Personnel Division suggested that the Board might prefer that the 14erliber having responsibility for managerial affairs review the conflict °f interest statements and the Legal Division's comments on behalf of the . Board During a short discussion, the feeling was expressed that cases 111110Iv1ng possible conflict of interest would occur only infrequently 4451 that review of such cases by the Board would involve little burden. Accordingly, the Board approved the recommended procedure, eelliding the alternate suggestion. The meeting then adjourned. Secretary's Notes: On August 16, 1962, Governor Shepardson approved on behalf of the Board the following items: ndMemorandum from the Division of International Finance recomme that in ry , Secreta McVeigh biWeceptance of the resignation of Mary Anne eion, effective at the close of business August 24, 1962. 8/17/62 -6- Letter to the Federal Reserve Bank of Nev York (attached Item N approving the appointment of Anthony R, Almassy, Roger 4, Loll', William S. Spaulding, Jr., and John J. Sweeney as assistant ex amimers. Letter to the Presidents of all Federal Reserve Banks trans"in for the use of State member banks and their affiliates forms s reports as of the next call date. (With the understanding ubmitting that the letter would be sent when the forms were printed.) Pursuant to recommendations contained in memoranda from appropriate individuals concerned, Governor Shepardson today approved on behalf of the Board increases in the basic annual salaries of the following persons on the Board's staff, effective August 19, 1962: Mary T. Gregory, Statistical Clerk, Division of Research and Statistics, from $4,670 to $40840 per annum. Doris V. Bubb, Statistical Assistant, Division of Bank Operations, from $5,335 to $5,655 per annum. (Change in title from Statistical Clerk.) ssistant Secretary, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 1 8/17/62 WASHINGTON 25, 0. C. AODRES8 OFFICiAt. CORRESPONOENCE TO THE BOARD August 17, 1962 !?ard of Directors, .. 1 ne Bank of Virginia, " ichmond, Virginia. Gentlemen: sy 4. The Board of Governors of the Federal Reserve skicm approves the establishment of a branch by The -ank of Virginia at the intersection of Brook Road, IAIzalea Avenue and Norwood Avenue in Henrico County, irginia, provided the branch is established within one rear from the date of this letter. Very truly yours, (Signed) Elizabeth Le Cauuichael Elizabeth L. Carmichael, Assistant Secretary. 31.37 BOARD OF GOVERNORS ,,,40totot,0. t• OF THE Item No. 2 8/17/62 FEDERAL RESERVE SYSTEM ' 11 * WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD August 20, 1962 Howard D. Crosse, Vice President, ecteral Reserve Bank of New York, York 45, New York, near Mr. Crosse: This refers to your letters of March 22 and June 26, 1962, further reference to the eligibility of the Army and Air Force TIVIlge Service to maintain a savings account with a member bank. A. was enclosed a letter dated March 20, 1962, from Colonel Charles stle f°3s, General Counsel, Army and Air Force Exchange Service, re, s''ing reconsideration of the Board's position that such accounts tria J not be classified as savings deposits. th The principal argument advanced by Colonel Gross is that e Prim --rY purpose of the Exchange Service is to promote the morale and Prit de corps of the members of the Army and the Air Force, contribute to the proper and efficient operation of those ble"Ices. However, in order for an organization to qualify as eligirelit° maintain a savings account, it must be operated primarily for philanthropic, charitable, educational, fraternal or other Purposes. An organization operated primarily for morale !ee s does not meet these qualifications. The fact that illj i trEtqentally some of its activities are of a religious, educational, eli .7rnal or similar nature would not be sufficient to make it dec le. Accordingly, the Board has reconsidered its earlier .;xchs"r1 and reaffirms its position that the Army and Air Force a 111.Z e Service is not eligible to maintain a savings deposit with -"er bank. th Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. * BOARD OF GOVERNORS Item No. 3 8/17/62 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADORESS OfFICIAL CORRESPONDENCE TO THE BOARD • August 17, 1962. C(31VIDENTIAL FR J. Newman, Vice President, 6-1'.1eral Reserwe Bank of Chicago, lcago 90, Illinois. 4r lir. Newman: In accordance with the request contained in your letter Pig le ,af August 9 1962, the Board of Governors approves the theill of salary by the Federal Reserve Bank of Chicago to rate4.rioumbent of the position Marble Maintenance Man at the '$4.45 per hour for tire- spent performing Marble Setter dtiti °I es, effective June 1, 1962. Very truly yours, (Signed) Kenneth AA Kenyon Kenneth A. Kenyon, Assistant Secretary. '7(t BOARD OF GOVERNORS 4I1S44,44 1owtok. , Item No. OF THE FEDERAL RESERVE SYSTEM .1* 4 8/17/62 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD tkin '400 August 17, 1962 actQard of Directors, Qouthern Arizona Bank and Trust Company, Tucson, Arizona. Ge ntlemen: The Board of Governors of the federal Reserve Svp4 „!-uem approves the establishment by Southern Arizona Ik and Trust Company, Tucson, Arizona, of a branch in 'ne Mall Shopping Center at the intersection of Thoma p,„ 8 Road and 44th Street, Phoenix, Muricopa County, -41z0rat provided the branch is established by September 1, 1963. 4,V Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 1 BOARD OF GOVERNORS Item NO. OF THE 5 8/17/62 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. AODRESS OFFICIAL CORRESPONDENCE TO TME BOARD August 170 1962 B 0 of Directors, ,D Denton County National Bank of Denton, °titan, Texas. 11:d 4ritlemen: The Board of Governors of the Federal Reserve System has consideration to your application for fiduciary powers and s The Denton County National Bank of Denton authority to act, When! 1 °t in contravention of State or local law, as trustee, executor, 4,1111strator, registrar of stocks and bonds, guardian of estates, tidil eel receiver, committee of estates of lunatics, or in any other ' Et 09' cortc capacity in which State banks, trust companies, or other ons which come into competition with national hanks are Pe otalltted to act under the laws of the State of Texas. The exercise rights shall be subject to the provisions of Section 11(1) tkiOf Of Regulation F of the Board of Governors the Federal Reserve Act and " Federal Reserve System. giVen A formal certificate indicating the fiduciary powers that YQUr ba ce4rseink is now authorized to exercise will be forwarded in due Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS Item No. 6 OF THE 8/17/62 FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE CHAIRMAN August 17, 1962 The Honorable A. Willis Robertson, Chair „ —.0..ttee on Banking and Currency, 11ted States Senate, ashington 25, D. C. 1: 13earl Mr• Chairman: It is understood from the Chief of Staff of your Committee that s. InYou would like to have a report from the Board an the bill Act : (35, "To amend section 10 and section 3 of the Federal Reserve 04 and for other purposes," which passed the House of Representatives August 14 with an amendment. As passed by the Senate, section 1 of S. 1005 would have 1,411;-led the 9th paragraph of section 10 of the Federal Reserve Act, 4 contains a provision limiting the aggregate cost that may be proZed bY all Federal Reserve Banks for branch bank buildings apsilb, after July 30, 1947, to $30 million. The House amendment u4._ proQ for section 1 of the bill, as passed by the Senate, a $60' ' 0n increasing the aggregate cost figure of $30 million to Million. The Board would prefer the bill as passed by the Senate. Whicher, in view of the urgent need for additional branch buildings iloaLrd 2annot be provided under the limitation in the present law, the the „" ) Pes that your Committee will give favorable consideration to ' ."-1 as amended by the House. Sincerely yours, (Signed) Wk. McC, Martin, Jr. WM. McC. Martin, Jr. ; BOARD OF GOVERNORS Item No. 7 8/17/62 OF THE 33:3 FEDERAL RESERVE SYSTEM 3Lti ). ,t r es WASHINGTON OFFICE OF THE CHAIRMAN L43, \ O P August 170 1962 34,elionorable A. Willis Robertson, i.;1<rman, ';'3rn-attee on. Banking and Currency, .11114d States Senate, as4fice,.:ton 251 D. C. 41'4. Chairman: Co/14111 It is understood from the Chief of Staff of your e that you would like to have a report from the Board On it ocT, bill H.R. 8874, "To authorize certain banks to invcit, for : i :Porations whose purpose is to provide clerical services Au, lerrly and for other purposes," which passed the Rouse on -ust 14. The Board recommends enactwent, of the bill. Sincerely yourLis (signed) Wm. McC. Martino Jr. WM. McC. Martins Jr. 3 3 3 Item No. 8 8/17/62 UNITED STATES OF AMERICA BE'20RE THE 30AaD OF GOVERNORS OF TIM FEDERAL RESERVE SYSTEM WASHINGTON, D. C. *ft 14 the Matter of the application of CONNECTICUT BANK AND TRUST C01 113:1171t tor , proval of merger with N ...1o1-) LI11. -Jangford Bank and Trust Company' ORDER APPROVING MERGER OF BANKS There has come before the Board of Governors, pursuant to he Bank Merger Act of 1960 (12 U.S.C. 1828(c)), an application by The a, Hartford, Connecticut, a member .nnecticut Bank and Trust Company, approval of of the Federal Reserve System, for the Boardts prior the r Trust Company, el'ger of that bank and The Wallingford Bank and Vkll. charter and title of the former 121gford, Connecticut, under the as an incident to the merger, a branch would be operated at the 14eai- Company. 1°11 of The lallingford Bank and Trust ' Notice of the been published P17°Pc'sed merger, in form approved by the Board, has kra, "nt to said Act. material in the light of Upon consideration of all relevant the f by the etors set forth in said Act, including reports furnished Insurance Corporation, of the Currency, the Federal Deposit the epartment of Justice on the competitive factors involved in the -, Drt)pcl, merger, ec'MPt -2IT IS HEREBY ORDERED, for the reasons set forth in the Boardts Statement of this date, that said application be and hereby is approved, Pr°Irided that said merger sh,7111 not be consummated (a) within seven caaendar days after the data of this Order or (b) later than three Months after said date. Dated at lashington„ D. C,„ this 17th day of August, 1962. By order of the Board of Governors. Voting for this action: Chairman Martin, and Governors Balderston, Mills, Robertson, Shepardson„ and King. Absent and not voting: Governor Mitchell. (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. Item No. 9 8/17/62 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM POR APPLICATIOTI BY THE CONNECTICUT BANK AND TRUST COMPANY APPROVAL OF MERGER WITH THE WALLINGFORD BANK AND TRUST COMPANY STATEMENT The Connecticut Bank and Trust Company, Hartford, Connecticut 0100„ ,, '41eoticut B-mk"), with deposits of approximately $441 million, a - member bank, has applied, pursuant to the Bank Merger Act (12 U.S.C. 1828( \\ \e)), for the Board's prior approval of the merger of that bank and The /ri allingford Bank and Trust Company, Wallingford, Connecticut Nall4 4-Lngford Bank"), with deposits of approximately $8.6 million. Under the QPPlieation and Plan of Merger the two banks would merge under the 'harter and title of Connecticut Bank, and as an incident to the merger, 0011ne etlout Bank would operate a branch at the location of Wallingford This would increase from 30 to 31 the approved branches of ecirltecticut 13ank. Under the Act, the Board is required to consider (1) the 'clal history and condition of each of the banks involved, (2) the 149,11. cy of its capital structure, (3)its future earnings prospects, (4) th e general character of its management, (5) whether its corporate Do/ler 8 re consistent with the purposes of 12 U.S.C., Ch. 16 (the Pecie 111 Deposit Insurance Act), (6) the convenience and needs of the torani 11111tY to be served, .and (7) the effect of the transaction on cornincluding any tendency toward monopolY). The Board may not ( -2all these factors, 4)Pr77e the transaction unless, after considering public interest. tt finds the transction to be in the condition and capital Banking factors. - The financial W;r1,4.uure satisfactory, as would be true of each of the banks are °e the prospects of the resulting bank resulting bank. The earnings l'e f4vor3ble and its management would be competent. 12 U.S.C., Ch. 16, No inconsistency with the purposes of ie inCaer!)ted. communities. - The main office Convenience and needs of the has one additional (Ite°11113cticut Bonk, which operates 29 branches and is 1)1 ftlm, is located in Hartford which —"approved but not yet operating, the, (population about 162,000). ' -QPit:11 and largest city in Connecticut The estimated population of ..ervice area of Connecticut Bonk has an supported primarily by 7(3°,000 The economy of the service area is , 4ve a significant economic ' 41-tied manufacturing. Farming is also 4' Nt home offices of about 50 °r• There are located in Hartford the 1214xn, "ce companies. 30,000), in Few Haven County, Wallingford (population about 613111 .1. some 23 miles south of Hartford. a-ion about 660,000) is located establishments The t, having 62 manufacturing is largely industrialized, eIrrAcAr • ving about 5,600 persons. the establishment by a Since Connecticut law prohibits %1Talle another city in which an rela bank of a de novo branch in office, Wallingford Bank ±s the 'fldent commercial bank has its head establish branches in the city. c°1111/lorcial bank which may legally -3.. proposed merger would permit the further expansion of banking 40i1 -L4• .-Lulec which should increase cometition and contribute materially to the growth. of the comyrunity. The Inajoriy of Uallingferd Bank's loans are in mortgages and, 44 a rosult of heavy requests for such credit, it originates, sells and ervices mortgages. The proposed merger would help meet the demand for 11101't gage and other types of credit as well, and would provide an element Ot un eillence not only in this respect but in other banking services, the services of a. much larger trust department which would -Lc‘*•e the relatively inactive trust department of liallingford Bank. .2o!. =tition, - Connecticut Dank is the second largest 'cinsl. institution in the State. Ninety per cent of its total deposit s originatoin the three counties of Hartford, Tolland end 144,01.. ha which are located in the approximate northeastern quarter of the h4 e 'ate and constitute its primary service area. Connecticut Bank branch offices in any major Connecticut city except Hartford. kith°uEll it has a branch or branches in seven of the State's eight it does not appear to be a major factor competitively in e°1Jalties other than trio three just mentioned. Wallingrord Bank is located in New Haven County, 23 miles n south of ,, onnecticut Bank's main office in Hartford and 7 miles f th t °- -ank's nearest branches in Ebriden„ which has a population of 7)roxi -.1riately 52,000 and which is also located in How Haven County. Th r e are no banking facilities between Wallingford and Nbriden. Ilgford Bank's orimr,r service area is almost encircled by other c°1.1%Mities within a 5 to 7 mile range and each of these communities haa . vlfices or branches of banks many times the size of Wallingford &411t. The proposed merger should have no significant effect on Othe banks in the primary service area of Connecticut Bank. In the "ngeord area some increase in competition should result, since Coriri ectleut Bank would become a competitor with the Wallingford branch of un. 1°n and New Haven Trust Company (local deposits of approximately klmi„ —"-Lion) and with Dime Savings Bank in Wallingford (deposits of 1)1)1,0 ximately $16 million). As previously indicated, the proposed I/lerPre, would permit the further expansion of banking facilities in ' 4-ligrord, thus providing additional competition for the banks which Plentl3r have offices in the area. Only slight competition between e°1111ecti0ut Bank and Wallingford Bank would be eliminated. Summary and conclusion. — The proposed merger would provide oader and more convenient banking services and facilities needed in the p "allingford area to meet the demands generated by substantial growth both 1. no — Population and industry. The transaction would eliminate Bank °11113etit. -lon except the small amount now existing between Connecticut increase "vallingford Bank, but at the same time should result in an the overf..:an competition among the banking offices now operating in the 1,/a llingford area. to be in Accordingly, the Board finds the proposed merger the Public interest. 17 1962 BOARD OF GOVERNORS Item No. 10 8/17/62 , OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO ?NE BOARD August 17, 1962 29222Pl ara12.111 5 1 Harold A. Bilby, Vice President, rederal Reserve Bank of New York, 4aw York 45, New York. tear Mr. Bilby: In accordance with the request contained in your letter of glISt 10, 1962, the Board approves the appointment of Anthony R. Alma saY, Roger A. Loff, William S. Spaulding, Jr., and John J. Sweeney, /i assistant examiners for the Federal Reserve Bank of New York. ease advise the effective dates of the appointments. It is noted that Messrs. Loll', Spaulding, and Sweeney are --t,ed to banks as follows: Roger A. Loff - The Howard Savings Institution, Newark, New Jersey (Nonmember) William S. Spaulding, Jr. - The Merchants National Bank & Trust Company of Syracuse, Syracuse, New York First Trust and Deposit Company, Syracuse, New York John J. Sweeney - The Chase Manhattan Bank, New York, New York. -Ordiv. 11gly, given . the Board's approval of each of these appointments is to wIth the understanding that the individual will not be permitted 111.1t rpate in any examination of a bank to which he is indebted such indebtedness has been liquidated. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary.
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