Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, August 30, 1965, Volume 52, Part 8

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

$1 1

Minutes for August 302_ 1965

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 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
e
the minutes, it will be appreciated if you will advis
al
initi
e
pleas
wise,
the Secretary's Office. Other
below. If you were present at the meeting, your
If
initials will indicate approval of the minutes.
ate
indic
will
als
you were not present, your initi
only that you have seen the minutes.

Chm. Martin
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. Mitchell
Gov. Daane
Gov. Maisel

----

iii

Minutes of the Board of Governors of the Federal Reserve
System on Monday, August 30, 1965.

The Board met in the Board Room

at 10:00 a.m.
PRESENT:

Mr.
Mr.
Mr.
Mr.
Mr.

Balderston, Vice Chairman
Shepardson
Mitchell
Daane
Maisel 1/
Mr. Kenyon, Assistant Secretary
Mr. Broida, Assistant Secretary
Mr. Goodman, Assistant Director, Division
of Examinations
Miss Eaton, General Assistant, Office of the
Secretary
Mr. Furth, Consultant
Mr. Grimwood, Chief, Liaison Office, Office of
Defense Planning
Messrs. Holland, Garfield, Solomon, Williams,
Dembitz, Axilrod, Eckert, Ettin, Fisher,
Gehman, Keir, Peret, Thompson, and Wernick
of the Division of Research and Statistics
Messrs. Katz, Sammons, Irvine, Reynolds, Gekker,
Hart, Mills, Nettles, and Ruckdeschel of the
Division of International Finance

Economic review.

A review of international financial develop-

ments and domestic business and financial developments was presented
by the Divisions of International Finance and Research and Statistics.
All members of the staff who had been present except Mr. Kenyon
then withdrew and the following entered the room:

Messrs. Johnson,

Director, Division of Personnel Administration; Hexter, Assistant General
Counsel; Daniels, Assistant Director, Division of Bank Operations; Leavitt,
Assistant Director, Division of Examinations; Plotkin, Senior Attorney,
Legal Division; and Heyde, Attorney, Legal Division.

I/ Withdrew from meeting during course of economic review.

-2-

8/30/65
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 Birmingham-Bloomfield Bank, Birmingham,
Michigan, waiving the requirement of six months'
notice of withdrawal from membership in the Federal
Reserve System.

1

Letter to the Federal Reserve Bank of St. Louis
concerning the classification of member banks in
the Eighth District for the purpose of electing
Class A and Class B directors.

2

Letter to the Federal Reserve Bank of Kansas City
approving the appointment of Joseph William Davis
as Federal Reserve Agent's Representative at the
Oklahoma City Branch.

3

Registration statement of Cleveland Trust Company (Item No. 4).
There had been distributed a draft of reply to a letter dated August 6,
1965, in which Chairman Patman of the House Banking and Currency Committee
raised certain questions with regard to the accuracy and sufficiency of
the registration statement filed by The Cleveland Trust Company, Cleveland, Ohio, pursuant to section 12(g) of the Securities Exchange Act of
1934 and Regulation F, Securities of Member State Banks.
In a discussion of the matter, during which Mr. Plotkin reviewed
the nature of the questions that had been raised by Chairman Patman--in
the August 6 letter and in previous correspondence--concerning the trust
company's practices and registration statement, along with similar questions that had been raised by Mr. Cyrus Eaton of Cleveland, a number of

-3-

8/30/65

suggestions were made for changes in the proposed reply, principally
for the purpose of deleting material regarded as extraneous.

Unanimous

approval then was given to a letter in the form attached as Item No. 4.
Dinner in connection with Fund-Bank meetings.

Governor Shepardson

referred to a suggestion by Governor Daane, following informal discussion
with Treasury officials, that the Federal Reserve join the Treasury in
tendering a dinner at the State Department on September 24, 1965, for
representatives of the Group of Ten and Working Party 3 attending the
annual meetings of the International Monetary Fund and the International
Bank for Reconstruction and Development.

This would be in line with

past practice in host countries, and it was anticipated that approximately
75 persons might attend.
This suggestion was approved unanimously, and the payment of the
cost incurred by the Board as co-host with the Treasury was authorized.
The meeting then adjourned.
Secretary's Notes: The requirements contemplated by the Board's action on August 3, 1965,
in approving the issuance of a preliminary
permit to Citizens and Southern International
Corporation, Atlanta, Georgia, having been
completed, a letter was sent today to that
corporation transmitting a final permit to
commence business.
Governor Shepardson today approved on behalf
of the Board the following items:
Letter to the Federal Reserve Bank of St. Louis (attached Item
approving the appointment of Jerome Robert Rogers as assistant
examiner.

8/30/65

-4-

memoranda recommending the following actions relating to the
Board's staff:
Transfer
Bernice T. Mann, from the position of Secretary in the Division of
Research and Statistics to the position of Secretary in the Office of
the Secretary, with no change in basic annual salary at the rate of
$6,800, effective upon assuming her new duties.
Acceptance of resignation
Wallace H. Wilson, Summer Research Assistant, Division of Research
and Statistics, effective at the close of business August 31, 1965.

Assistant Secretary

Item No. 1
8/30/65

BOARD OF GOVERNORS
OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADONIC11111

orreatAL 0011111111.0NOICNIM
TO The ODIUM

August 30, 1965.

Board of Directors,
Birmingham-Bloomfield Bank,
Birmingham, Michigan.
Gentlemen:
The Federal Reserve Bank of Chicago has forwarded to the
Board of Governors President Wagner's letter dated June 17, 1965,
together with the accompanying resolution dated July 19, 1965,
signifying your intention to withdraw from membership in the Federal
Reserve System and requesting waiver of the six months' notice of
such withdrawal.
The Board of Governors waives the requirement of six months'
notice of withdrawal. Under the provisions of Section 208.10(c) of
the Board's Regulation H, your institution may accomplish termination
of its membership at any time within eight months from the date that
notice of intention of withdraw from membership was given. Upon
surrender to the Federal Reserve Bank of Chicago of the Federal
Reserve stock issued to your institution, such stock will be cancelled and appropriate refund will be' made thereon.
It is requested that the certificate of membership be
returned to the Federal Reserve Bank of Chicago.
.Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.

BOARD OF GOVERNORS

Item No.
8/30/65

CIF THE

FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS

OFFICIAL

CORRESPONDENCE

TO THE BOARD

August 30, 1965

Mr. Harry A. Shuford, President,
Federal Reserve Bank of St. Louis,
63166
St. Louis, Missouri.
Dear Mr. Shuford:
This refers to your letter of August 12, 1965, concerning
reclassification of member banks in the Eighth District for the
purpose of electing Class A and Class B directors.
It is noted that after reviewing the classification, which
has been in effect since September 10, 1962, your Bank believes that
the grouping is still close enough to the prescribed formula to make
unnecessary a classification change this year. The Board concurs in
this opinion and will make no change in the existing classification
at this time.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.

BOARD OF GOVERNORS
OF THE

Item No. 3
8/30/65

FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551

ADDRESS OFFICIAL CORRIEMPONOCIVCIC
TO THE BOARD

August 30, 1965.

Mr. Homer A. Scott,
Federal Reserve Agent,
Federal Reserve Bank of Kansas City,
Kansas City, Missouri. 64106
Dear Mr. Scott:
As requested in your letter of August 12, 1965, the Board
of Governors approves the appointment of Mr. Joseph William Davis
Branch
as Federal Reserve Agent's Representative at the Oklahoma City
p.
to succeed Mr. Jay C. Waldrou
This approval is given with the understanding that Mr. Davis
will be solely responsible to the Federal Reserve Agent and the Board
of Governors for the proper performance of his duties, except that,
a
during the absence or disability of the Federal Reserve Agent or
nt
Assista
the
to
be
will
bility
responsi
vacancy in that office, his
rs.
Governo
of
Board
the
Federal Reserve Agent and
When not engaged in the performance of his duties as Federal
l of
Reserve Agent's Representative, Mr. Davis may, with the approva
the
the Federal Reserve Agent and the Vice President in charge of
will not be
Oklahoma City Branch, perform such work for the Branch as
Representative.
inconsistent with the duties as Federal Reserve Agent's
of the
It will be appreciated if Mr. Davis is fully informed
the
of
importance of his responsibilities as a member of the staff
ence from
independ
of
nce
maintena
for
need
the
and
Agent
Federal Reserve
.
bilities
the operations of the Bank in the discharge of these responsi
which
Please have Mr. Davis execute the usual Oath of Office
anotific
with
should then be forwarded to the Board of Governors along
tion of the effective date of his appointment.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.

BOARD OF GOVERNORS
OF THF:

FEDERAL RESERVE' SYSTEM

Item No. 4
8/30/65

WASH,A3TON

Orrice

OF THE VICE OHAIRMAN

August 31, 1965.
The Honorable Wright Patman, Chairman,
Committee on Banking and Currency,
House of Representatives,
Washington, D. C. 20515
Dear Mr. Chairman:
,This is in response to your letter of August 6, 1965,
concerning the registration statement filed by The Cleveland Trust
Act
Company, pursuant to section 12(g) of the Securities Exchange
of 1934 and Federal Reserve Regulation F.
Your letter states that the bank's July 1, 1965, amendment
to its registration statement is deficient in at least two respects.
You list the following as the first deficiency:
"In Item 11(a) the bank repreents that
A. A. Welsh & Co, votes the shares held by it 'only
as it is directed so to do'. This statement implies
that there is active discretion by the beneficial
owners in each case with respect to matters to be
acted upon at meetings of stockholders. This is not
the fact. The very least that the bank should do in
order to avoid misrepresentation is to add the words
'or authorized so to do by the underlying trust
instruments'."
The addition you suggest might prevent a misunderstanding.
regisHowever, the primary responsibility for the preparation of a
18
section
under
and
bank,
registrant
the
on
tration statement rests
damages
for
liable
be
would
management
its
of the Act, the bank and
part of
resulting from false or misleading statements therein. As
compliance
l
substantia
is
there
that
its review functions, to assure
with Regulation F and the Act, our staff examines each registration
are
statement in an effort to assure that no statements are made that
are
that
false or misleading and that no material facts are omitted
necessary to make the information presented not false or misleading.
In other words, if it appears that (1) an investor will not be misled
after reading the entire contents of the registration statement, or

The Honorable Wright Patman

- 2.

(2) a presentation that may be less than adequate (in
our opinion)
relates to a relatively insignificant point, amendment ordinar
ily is
not required. The exercise of judgment in this connection,
and the
consequent possibility of divergent opinions, are obviously unavoid
able.
The second criticism presented by your letter is also a
matter of judgment. The bank states that its method of registering
the stock in question is expressly authorized by statute. Your letter
suggests that the bank should be required to state that such statute
does not expressly' authorize the voting of such stock. In our judgment, it is unlikely that a reader of the registration statement would
infer from the bank's assertion concerning the registering of the
stock that the bank also had express statutory authorization for the
voting of the stock.
A related comment in your letter is that the bank should be
required to mention section 1701.47(c) of the Ohio Revised Code, which
you believe "presents a very substantial question as to the legalit
y"
of voting by a bank of its awn shares. Without exploring the questio
n
whether this statutory provision is applicable to Ohio banks (as to
which there appears to be substantial controversy), it is our belief
that in our review functions, we must ordinarily assume that a bank
is acting in accord with applicable State law unless a patent violation is evident.
In addition, the reader of a registration statement may be
informed of possible illegal practices even before there has been
an
adjudication or administrative determination of the matter, as Item 6
of the registration statement requires the bank to disclose
any material
legal proceedings pending against it. Also, the Board's Form F-3,
the current report required to be filed upon the occurrence of
specified classes of events, requires the bank to reveal any materia
l legal
proceedings to which it becomes a party after the filing of its
registration statement.
Your letter further suggests an investigation by the Board
(1) "of all aspects of the bank's practice of voting
as much as
35 per cent of its stock, and the absolute
and tremendous economic
power that this practice places in the hands of an
insider, or a few
insiders, in the very top management of the bank", and (2) "of the
extent to which the top management of the bank, through
its absolute
domination over the Trust Department, provides legal business to some
of the lawyers who are directo
rs of the bank and to the law firms which
they represent".
I can readily understand your concern with the consequences
Which may result from the voting by a bank of its own shares.
It has

The Honorable Wright Fatman

-3-

been the policy of the Federal Reserve System to encourage State
member banks to dispose of shares of their own stock acquired in a
fiduciary capacity.
Under our dual banking system, the powers of State banks
(including those that are members of the Federal Reserve System)
are derived from State laws and such banks are regulated principally
by the respective States. As you may know, the Ohio legislature
recently authorized an investigation into the practices of Ohio
banks that vote their own stock held in a fiduciary capacity.
Sincerely yours,
(Signed) C. C. Balderston

C. Canby Balderston,
Vice Chairman.

HOARD OF GOVERNORS

Item No. 5
8/30/65

OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS

orriciAL

CORRESPONDENCE

TO THE SWARD

August 31, 1965.

Mr. O. 0. Wyrick, Vice President,
Federal Reserve Bank of St. Louis,
63166
St. Louis, Missouri.
Dear Mr. Wyrick:
In accordance with the request contained in your
letter of August 25, 1965, the Board approves the appointment of Jerome Robert Rogers as an assistant examiner for
the Federal Reserve Bank of St. Louis, effective October 1,
1965.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.