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Minutes for To: Members of the Board From: Office Of the Secretary August 23, 1963 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 vith 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. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Gov. Mitchell C.15:1,6 2904 Minutes of the Board of Governors of the Federal Reserve SMem on Friday, August 23, 1963. The Board met in the Board 110(xm at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Mills Robertson Shepardson Mr. Kenyon, Assistant Secretary Mr. Cardon, Legislative Counsel Mr. Brill, Adviser, Division of Research and Statistics Mr. Furth, Adviser, Division of International Finance Mr. Yager, Chief, Government Finance Section, Division of Research and Statistics Mr. Axilrod, Senior Economist, Division of Research and Statistics Miss Dingle, Senior Economist, Division of Research and Statistics Mr. Keir, Senior Economist, Division of Research and Statistics Mr. Gemmill, Economist, Division of International Finance Money market review. Mr. Keir reported on developments in the G°1iernment securities market, including prospective Treasury financing ()) Ations, Miss Dingle commented on bank reserves and bank credit, and Gemmill reviewed foreign exchange market developments. Distributed Ine.terials included a table showing recent changes in yields on U. S. Gov, -A-nment securities, a table on member bank reserve positions, and 811mmary of monetary developments in the four-week period ended 4141-118't 21, 1963. All of the members of the staff except Messrs. Kenyon, Cardon, 111 then withdrew and the following entered the room: ' 111. 81 Mr. Hackley, General Counsel Mr. Johnson, Director, Division of Personnel Administration 290 8/23/63 -2Mr. Leavitt, Assistant Director, Division of Examinations Nx. Thompson, Assistant Director, Division of Examinations Mr. Bakke, Senior Attorney, Legal Division Proposed legislation (Item No. 1). On August 21, 1963, Chairman Martin and Vice Chairman Balderston, accompanied by Messrs. Cardon and. Haekiey, had visited Senator Robertson and Congressman Patman, Chairmen of the Senate and House Banking and Currency Committees, l'esPectively, to present letters recommending the introduction and enactment of legislation that would, in effect, substitute for the Preaent requirements of the Federal Reserve Act relating to the eligibility of paper for discount or as security for advances by l'ed'eral Reserve Banks, a new provision authorizing the Reserve Banks to make advances to member banks on any security satisfactory to the Re erve Banks, subject to limitations, restrictions, and regulations Pres cribed by the Board of Governors. (The letters, dated August 21, 1963, were in form approved by the Board on August 8, 1963.) At the Chairman's request, Mr. Cardon reported briefly on the._ visits and on a subsequent indication by a member of the staff of the u 440use Banking and Currency Committee that there were certain aspects c't the had proposed legislation concerning which Chairman Patman reportedly •ueservations. It was understood that the Board's staff would give --"41er study to the phases of the proposal as to which such reservations reportedly had been expressed. ;‘, 2906 8/23/63 -3It was noted that, as previously agreed upon by the Board, copies of the letters and enclosures delivered to Messrs. Robertson and. Patman had been sent (under date of August 22) to the Reserve Rank Presidents, and that copies also were being sent to the CoMPtroller of the Currency, the Federal Deposit Insurance Corporation, 4nd the Budget Bureau, along with the American Bankers Association 4nd the Association of Reserve City Bankers. The letter to the Reserve Bank Presidents had also requested comments on an enclosed Cil'aft of a revision of Regulation A, Advances and Discounts by Federal Reserve Banks, that might be considered for adoption if the proposed legislation should be enacted. It was suggested by Governor Mills that information concerning the proposed legislation also be sent to the Independent Bankers Association, the National Association of Mutual Savings Banks, and the U. S. Chamber of Commerce. Chairman Martin suggested that the legislative proposal be tilade „ he 24 subject of a press release, to be issued today, and it was 21. that this would be done. A copy of the press release is attached as Item No. 1. Mr. Cardon reported, in this connection, that there was some indeation that the proposed bill would be introduced in the Senate two,. hY Senator Robertson. Discount rates. The establishment without change by the ?Le1111 Reserve Banks of New York, Philadelphia, Cleveland, Richmond, St. U18, Minneapolis, Kansas City, and Dallas on August 22, 1963, 2907 8/23/63 -4- or the rates on discounts and advances in their existing schedules unanimously, with the understanding that appropriate advice would be sent to those Banks. Distributed items. The following items, copies of which are attached to these minutes under the respective item numbers indicated, 14ere approved unanimously: Item No. l(tter to United California Bank, Los eles, California, approving the j ','"ablishment of a branch in Calexico in ,,elilloorary quarters pending the completion "rpermanent quarters. !l legram to the Federal Reserve Agent at Federal Reserve Bank of Kansas City uorizing the issuance of a general Ing permit to First Oklahoma Bancorporation, Oklahoma City, Oklahoma, covering T's stock in The First National Bank and t ,t ,s_t Company of Oklahoma City, but indicating to-'' a general voting permit with reference 0];l atock of The Idabel National Bank, Idabel, : a110ma, would be withheld pending improveraZ in the condition of that bank, and that 1; he meantime the Board would consider the iPlance of limited voting permits when needed, requested. 2 3 Messrs. Cardon, Thompson, and Bakke then withdrew from the r4eeting and Mr. Sprecher, Assistant Director, Division of Personnel nistration, entered the room. Employment of consultants by Reserve Banks. Clated August In a letter 9, 1963, President Bryan of the Federal Reserve Bank of Ilta advised the Board of Governors that in the absence of objection 2908 8/23/63 -5- he proposed to recommend to the Bank's Board of Directors the appointitent of DT. David McCord Wright, Professor of Economics at the University of Georgia, as economic adviser to the Reserve Bank in a Part-time, consultant capacity, with compensation at the rate of $75 Per day for time actually spent in the service of the Bank, plus actual travel and other out-of-pocket expenses. It would not be the intent to use Dr. Wright on Federal Open Market Committee matters or to release Open Market Committee materials to him. It was estimated that 30-60 days of service per year might be involved, and the elliangement would be terminable at any time. ' In a letter dated August 14, 1963, President Deming of the ?ecleral Reserve Bank of Minneapolis advised that the Bank's Board of -eLiors had authorized him to enter into an arrangement under which V'essor John H. Kareken of the University of Minnesota would be erigaged as an economic consultant to the Bank, effective October 1, 963, at an annual fee of $7,000 payable for the nine months of the 4eadeclie year at $500 per month, with the balance payable in three 1118talments during the summer months. No fringe benefits would be 1/11r61 --ved and no deductions for Federal or State taxes would be made. It exPected that Professor Kareken would devote to this assignment 841 a.verage of approximately 1-1/2 days per week during the academic Year ) and approximately seven weeks full time equivalent during the 11T4131ers The arrangement would continue as long as it was mutually 2909 8/23/63 -6- agreeable. It was anticipated that Professor Kareken would devote the major share of his time to analysis of monetary, fiscal, and banking Problems, that he would have access to Federal Open Market Committee minutes and other confidential material, that he would visit the Ped eral Reserve Bank of New York on occasion to observe open market oPerations, and that he would attend Open Market Committee meetings rrom time to time. Copies of these letters had been distributed to the members 01' the Board along with a memorandum dated August 21 1963, from the ruvislon of Personnel Administration in which it was stated that there PPeared to be no instructions outstanding requiring approval by the ta ru of the employment of consultants by Reserve Banks. The Division leaned toward not requiring such approval, though recognizing that eeltain procedures such as security clearance should be observed when ellsultant was to have access to confidential System material or e rte. in Open Market Committee activities. It was felt however, that it rr,4 —4-ght be desirable for the Board's views on the subject to be e°Mmunicated to the Reserve Banks, by letter or otherwise. In discussion, a general view became apparent that it would esirable for the Board to be adequately informed by the Reserve - concerning the retention of consultants, even though specific kta, a aPProval was not to be required, perhaps through initial advice 1z13.0 entering into such an arrangement followed by periodic reports. 2910 8/2 6 -7Governor Mills suggested that there was a budget aspect involved, and that some control should be maintained. He added that the research area was one in which presumably the Reserve Banks might be considered to be self-sufficient. The Presidents of the Reserve Banks were for the most part economists, and they had research staffs. This raised a question as to the necessity to go outside the System for part-time assistance on a consultant basis. This was also a matter that needed to be watched from the expense angle. The arrangements e°111d grow out of bounds in various ways, such as the farming out of llork periodically, and he was of the opinion that adequate information 14-eul4 not be provided under the current Reserve Bank budget procedures. Mr. Brill discussed difficulties sometimes encountered in ttl*aoting top-flight economic talent on a full-time basis, following C Chairman Martin expressed the view that it was desirable to encourage the engagement of outstanding persons by the Federal Reserve 'ever possible and Governor Balderston outlined circumstances at the Federal Reserve Bank of Minneapolis that had presented a need for the services of a person with Professor Kareken's qualifications. The question of sending a letter to all Federal Reserve Banks Cove 4-Ing some of the points that had been made at this meeting was then _. 04.8e There was substantial agreement that it would be desirable usseq to l, Ilve such a letter drafted for the Board's consideration, with the " ocia on keeping the Board adequately informed. In this connection, 'man Martin commented that, as he understood it, the main point ; 2911 8/23/63 -8- decided upon today was that it was not considered necessary for a Reserve Bank to obtain advance approval from the Board before going ahead with such an arrangement. The discussion concluded with an understanding that a general letter to the Reserve Banks along the lines suggested would be prepared for the Board's consideration, that there would be no objection to the Federal Reserve Banks of Atlanta and Minneapolis entering into the proposed arrangements with Professors Wright and Kareken, respectively, and that Presidents Bryan and Deming would be advised to such effect. Messrs. Johnson and Sprecher then withdrew from the meeting. Letters from Banking and Currency Committee. Reference was 4acie to letters that had been received by the members of the Board from Chairman Patman of the House Banking and Currency Committee presenting aerne 24 questions dealing with the general area of monetary policy and related matters. There was agreement that it would be appropriate to request the staff to undertake the drafting of material responsive to the gtlestions, with the understanding that upon consideration of the draft niaterial members of the Board could decide whether to join in the tl'841smittal of a single reply. It was also suggested that Chairman Chairman of Mal*.till might want to discuss the subject with Mr. Irons, the residents' Conference, since it was understood that similar lett ers had been sent to the Presidents of the respective Federal Reserve knits. 2912 8/23/63 -9-The meeting then adjourned. Secretary's Note: Governor Shepardson today approved on behalf of the Board the following items: Letter to the Federal Reserve Bank of San Francisco (attached Item No. 4) aloproving the appointment of Harold D. Palmer as assistant examiner. . Memorandum from the Division of Personnel Administration and the 13'ff],ce of the Controller (attached Item No. 5) recommending formal 1 c)ard. approval of existing practices in respect to overtime of -0ard employees. ssistant Secre a 291 Item No. 1 8/23/63 Pot' immediate release • August 23, 1963. men of the Banking and Currency In identical letters to the Chair d legislaCommittees of the Congress the Board of Governors has recommende on which credit can tic)n to broaden substantially the kinds of security be advanced by the Federal Reserve Banks. two-year review within the This action follows an extensive practices governing Pederal Reserve System of the law, regulation, and The new legislaraember bank borrowing from the Federal Reserve Banks. technical requirements regarding tion s if enacted, would do away with "eli wings that have become outmoded gibility" of collateral for such borro aince the enactment of the Federal Reserve Act in 1913. Subject to would be authorized teguletion by the Board of Governors, the Reserve Banks paper to make loans to member banks primarily based on the soundness of the off which credit ered as security and the appropriateness of the purpose for 18 Bought. Chairman of each Banking and A copy of the Board's letter to the Cur ability of this new legislation, rencY Committee, explaining the desir ie attached. Attachment 2914 Item No. 2 8/23/63 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TCI THE BOARD August 23) 1963 Board of Directors, United California Bank, Los Angeles, California. Ge ntlemen: The Board of Governors of the Federal Reserve Sys tem will interpose no objection to United California Bank's e catablishing in temporary quarters a branch at the southwest Aorner of Second Street and Heber Avenue, Calexico, California. :t such time as the permanent quarters are occupied at the interion of Fourth Street and Heffernan Avenue, Calexico, California °Perations at the temporary site should be discontinued. Very truly yours, (signed) Elizaoeta L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. Item g911.5 8/23/63 TELEGRAM LEASED WIRE SERVICE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON August 23, 1963 SCOTT -- KANSAS CITY KEBJE A. First Oklahoma Bancorporation, Inc., Oklahoma City, Oklahoma. B. The First National Bank and Trust Company of Oklahoma City, Oklahoma City, Oklahoma. C. Prior to issuance of permit authorized herein, Applicant shall execute and deliver to you, in duplicate, an agreement in form accompanying Boards letter 5-964 (F.R.L.S. #7190). STOP Please advise Applicant that with reference to The Idabel National Bank, a general voting permit is being withheld until subsequent reports of examination indicate a marked improvement in the condition of that bank. In the meantime, the Board will consider the issuance of limited voting permits, When needed, if First Oklahoma Bancorporation requests such Permits pursuant to section 216.6(d) of Regulation P. (Signed) Elizabeth L. Carmichael CARMICHAEL DefiIjjtion of KEBJE The Board authorizes the issuance of a general voting permit, under the provisions of section 5144 of the Revised Statutes of the United States, to the holding company affiliate named below after the letter "A", entitling such organization to vote the Eltoek which it owns or controls of the bank(e) named below after the letter "B" at all meetings of shareholders of such bank(s), subject to the condition(s) stated below after the letter "C". The period within which a permit may be issued Pursuant to this authorization is limited to thirty days from the date of this telegram unless an extension of time is granted 14 the Board. Please proceed in accordance with the instructions contained in the Board's letter of March 10, 1947, (5-964). ?RIB Item No. Ar 8/23/63 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD .:Lugust 23 1963 Mr. E. H. Galvin, Vice President, Federal Reserve Bank of San Francisco, San Francisco 20, Califor nia. Dear Mr. Galvin: In accordance with the request contained in *. Cavan's letter of August 9, 1963, the Board approves the "Pointment of Harold D. Palmer as an assistant examiner for the Federal Reserve Bank of San Francisco. Please advise the 'qffective date of the appointment. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 2917 Item No. 5 BOARD OF GOVERNORS 8/23/63 Of THE FEDERAL RESERVE SYSTEM ,„ffice co Correspondence $ -....„1!ynor Shepardson Division of Personnel Administration and Office of the Controller Date August 22, 1963 Subject: Board Approval for Existing Practices in Overtime Pay The Division of Personnel Administration and the Office of the arIntroller believe the current overtime policy, as described below, should i. () wive formal Board approval, and it will, therefore, be appreciated if you 1 1 gtve consideration to approving it on behalf of the Board. ' Erni .44.2.Xte_s on the Regular Salary Schedule ' Employees in Grades FR-1 through FR-9 are eligible for overtime pay °r c0,111pensatory leave for all hours worked in excess of 40 hours in a basic 0111K week. Employees in grades above FR-9 are entitled to compensatory leave Y. No employees above Grade FR-15 shall be eligible for compensatory leave. The overtime hourly rate of compensation shall be an amount equal too— one "e and one-half times the hourly rate of basic compensation not to exceed lea and one-half times the minimum hourly rate for Grade FR-9. Compensatory Ve is granted for a period equal to the overtime worked. Overtime may be paid only to the extent that the aggregate compensacorn" ln any biweekly pay period shall not exceed the maximum rate of basic toaPensation provided for Grade FR-15. (This was previously approved by the rd On July 2, 1962, but is included here for completeness.) 4112742a.on Wage Board Salary Schedules ' All employees are eligible for overtime pay for hours worked in excess groat of 8 hours per day or in excess of 40 hours per week, whichever is the shadi-er number of overtime hours. The overtime hourly rate of compensation ar, be time and one-half, without restriction. All employees in these salJ schedules are entitled to compensatory leave in lieu of overtime pay. P:444a1 Overtime pay or compensatory leave of supervisors, regardless of ? schedule, should be requested by a designated superior of the supervisoz shoupand approved by an official or his designated representative. Divisions or " carefully scrutinize situations where supervisors are paid overtime pay anted compensatory leave for overtime that they decide is required. sala_ For reasons of health and efficiency, an employee who performs substallt4 al (aver 4 hours) overtime work on a Saturday or Sunday is required to ' take 4 lunch period of at least one-half hour.
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