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Minutes for August 6 To: Members of the Board From: Office of the Secretary 1965 Attached is a copy of the minutes of the Governors of the Federal Reserve System on of Board 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. Balderston Gov. Shepardson Gov. Mitchell Gov. Daane Gov. Maisel Minutes of the Board of Governors of the Federal Reserve System on Friday, August 6, 1965. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Balderston, Vice Chairman Robertson Shepardson Mitchell Maisel Sherman, Secretary Kenyon, Assistant Secretary Broida, Assistant Secretary Young, Adviser to the Board and Director, Division of International Finance Mr. Molony, Assistant to the Board Mr. Cardon, Legislative Counsel Mr. Furth, Consultant Mr. Morgan, Staff Assistant, Board Members' Offices Miss Eaton, General Assistant, Office of the Secretary Mr. Mr. Mr. Mr. Messrs. Brill, Holland, Partee, Bernard, Ettin, and Gramley, and Mrs. Peskin of the Division of Research and Statistics Messrs. Hersey, Sammons, Reynolds, Baker, Gekker, and Gemmill of the Division of International Finance Money market review. Reports on the Government securities Inarket, bank credit developments, and foreign exchange matters were given by Messrs. Bernard, Gramley, and Baker, and tables were distributed affording perspective on the money market and bank reserve utilization. After a general discussion in the light of these reports, all m embers of the staff who had been present except Messrs. Sherman, Kenyon, Young, Molony, Sammons, and Furth withdrew and the following persons entered the room: 8/6/65 -2Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Hackley, General Counsel Farrell, Director, Division of Bank Operations Solomon, Director, Division of Examinations Hexter, Assistant General Counsel Daniels, Assistant Director, Division of Bank Operations Leavitt, Assistant Director, Division of Examinations Via, Senior Attorney, Legal Division Forrestal, Attorney, Legal Division Discount rates. The establishment without change by the following Federal Reserve Banks on August 5, 1965, of the rates on discounts and advances in their existing schedules was approved unanimously, with the understanding that appropriate advice would be sent to the respective Banks: New York, Philadelphia, Cleveland, Richmond, St. Louis, Dallas, and San Francisco. Reports on competitive factors. Unanimous approval was given to the transmittal to the Comptroller of the Currency of a report on the competitive factors involved in the proposed merger of The Loudoun National Bank of Leesburg, Leesburg, Virginia, into First and Merchants National Bank, Richmond, Virginia. The conclusion read as follows: There is little or no competition existing between The Loudoun National Bank of Leesburg and First and Merchants National Bank, Richmond, and effectuation of the instant proposal would not significantly alter First's competitive capacity in the areas where it currently operates, nor alter its position in relation to other large banking organizations in the State. Consummation of the transaction would expand First's geographic coverage and, in this connection, would again alter the banking structure in Loudoun County, which, since May 1960, has witnessed the loss of three independent institutions through acquisitions by holding companies. After consideration of various factors bearing upon the present and prospective competitive situation in the area concerned, and comments 8/6/65 -3- by members of the Board reflecting their analysis of such factors, unanimous approval was given to the transmittal to the Federal Deposit Insurance Corporation of a report, containing a conclusion in the following form, on the competitive factors involved in the proposed consolidation of Brownstown Loan and Trust Co. and The First National Bank of Brownstown, both of Brownstown, Indiana: The proposed consolidation of Brownstown Loan and Trust Co. and The First National Bank of Brownstown would eliminate direct competition between the two institutions. While the effect of the proposal on competition would be adverse in this instance, the public interest might be better served by creation of a larger bank since there would still be two banks in Brownstown and the continuing bank would be the third largest in the county. Marine Corporation (Item No. 1). As recommended in a memo- randum from the Division of Examinations dated August 4, 1965, unanimous ..RalLayal was given to a letter to the Federal Reserve Bank of Chicago acceding to a request of The Marine Corporation, Milwaukee, Wisconsin, for copies of reports of examination of two subsidiary State member banks on a continuing basis. A copy of the letter is attached as Item No Examiners' meeting. Unanimous approval was given to the proposal a memorandum from the Division of Examinations dated August 4, 1965, that a meeting with officers of the bank examination departments of the Federal Reserve Banks be held in Detroit, Michigan, on October 1, 1965, connection with the annual convention of the National Association of S upervisors of State Banks. Attendance of Mr. Solomon and two other 8/6/65 -4- officers of the Division of Examinations was approved, along with Payment of the convention registration fee of $40 for each Board representative. Gold arrangement (Item No. 2). A memorandum from Mr. Hackley dated August 5, 1965, advised that for several months representatives of the U. S. Treasury, the International Monetary Fund, and the Federal Reserve Bank of New York had been working on an arrangement under which the Fund would make a deposit of gold with the New York Reserve Bank (as depository of the Fund under the Bretton Woods Agreements Act) and at the same time the Treasury would instruct the Reserve Bank to hold such gold as fiscal agent of the United States. The general purpose of the arrangement was to avoid the decline in the U. S. gold stock that Otherwise would result from purchases of gold from this country by certain foreign countries in order to enable them to meet increases in Monetary Fund quotas. The arrangement had now been substantially com- Pleted, as evidenced by a letter agreement between the Monetary Fund and the New York Reserve Bank dated August 3, 1965, and a pending letter from the Treasury to the Reserve Bank. The action required to be taken by the Board was to advise the New York Reserve Bank of its approval of the Bank's acting as depository, this being necessary because of the requirement in section 6 of the Bretton Woods Agreements Act that the Board "supervise and direct" the carrying out of functions of the Reserve Banks as depositories or fiscal agents of 8/6/65 -5- the Monetary Fund. A draft of letter from the Board to the New York Reserve Bank was submitted with Mr. Hackley's memorandum. Following comments by members of the staff reflecting their understanding of the purpose and mechanics of the contemplated gold arrangement, it was noted that the arrangement reflected a decision reached at policy level between the U. S. Treasury and the International Monetary Fund and that the arrangement reportedly had been taken up with the National Advisory Council on International Monetary and Financial Problems. Accordingly, although some reservations were expressed by members of the Board regarding the arrangement, it appeared that the action authorizing the New York Reserve Bank to act as depository of the Monetary Fund constituted merely approval of the performance by the Reserve Bank of a service function implementing the policy decision and did not go to the merits of the decision itself. On this basis the letter to the New York Bank, a copy of which is attached as Item No. 2, was Ilartsay_2.st unanimously. The meeting then adjourned. Secretary's Notes: A letter was sent today to First National City Bank, New York, New York, acknowledging receipt of notice of its intent to establish an additional branch in Panama, to be located in the Betania section of Panama City. The letter contained the following paragraph: "With respect to foreign branches, funds provided by home office (whether in the form of allocated capital, advances, or otherwise) should be regarded as foreign assets for purposes of the voluntary foreign credit restraint effort." 8/6/65 -6A letter was sent today to Bank of America National Trust and Savings Association, San Francisco, California, acknowledging receipt of notice of its intent to establish an additional branch in Belgium, to be located in Brussels. The letter contained the following paragraph: "With respect to the establishment of foreign branches, funds provided by home office (whether in the form of allocated capital, advances, or otherwise) should be regarded as foreign assets for purposes of the voluntary foreign credit restraint effort. However, your letter of July 23, 1965, stated that presently no additional capital is required and it is understood that premises will be leased and that furniture and fixtures and other expenditures will be provided for out of locally generated funds." Governor Shepardson today approved on behalf of the Board the following items: Memorandum dated August 6, 1965, from Mr. Bakke, Assistant Secretary, regarding plans for the program to be given September 13-17, 1965, for trainees from the Center for Latin American Monetary Studies and requesting authorization to proceed with the necessary arrangements Within the scope of the provision made in the 1965 budget of the Office of the Secretary. Memoranda recommending the following actions relating to the Board's staff: AzzaiaLmfaL Robert T. Parry as Economist, Division of Research and Statistics, with basic annual salary at the rate of $11,315, effective the date of entrance upon duty. ASS_eptance of resignations William E. Pegram, Messenger, Division of Administrative Services, effective at the close of business August 6, 1965. John S. Hollis, Jr., Messenger (Driver), Division of Administrative Services, effective at the close of business August 17, 1965. Secretary BOARD OF GOVERNORS Item No. I 8/6/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20851 ADDRESS orrimAL OORRESPONDIENCIE TO THE SOAR° August 6, 1965. Mr. Leland M. Ross, Vice President, Federal Reserve Bank of Chicago, Chicago, Illinois. 60690 Dear Mr. Ross: This refers to your telegram of August 3, 1965, in.which you state that The Marine Corporation, Milwaukee, Wisconsin, a registered bank holding company, desires to be furnished copies of reports of examination of Cudahy Marine Bank, Cudahy, Wisconsin, and Wisconsin Marine Bank, Milwaukee, Wisconsin. The Board of Governors of the Federal Reserve System approves making available to the holding company such reports of examination provided the board of directors of each bank, by resolution duly adopted, requests and authorizes such action. Furnishing copies of reports of examination of each of these banks to The Marine Corporation is approved pursuant to paragraph 8, section 9, of the Federal Reserve Act, and applicable provisions of the Board's Rules of Organization. The Marine Corporation should be informed that information obtained from examination reports of each of the two aforementioned banks is subject to the same restrictions and conditions as to recall, use, disclosure, or publication as those which govern the copies of reports furnished to State member banks pursuant to form FR 410-45Receipt. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. BOARD OF GOVERNORS ..... • ,c)of Got,t • R • '0 • •ri Item No. 2 8/6/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD ,-.‘`v • •• 1.Z.41. RES.•'.• August 6, 1965. Mr. Alfred Hayes, President, Federal Reserve Bank of New York, New York, New York. 10045 Dear Mr. Hayes: Reference is made to Section 6 of the Bretton Woods Agreements Act (59 Stat. 514, 22 U.S.C. § 286(d)) which provides, among other things, that any Federal Reserve Bank which is requested to do so by the International Monetary Fund shall act as its depository and which further provides that the Board of Governors of the Federal Reserve System shall supervise and direct the carrying out by the Federal Reserve Bank of its functions as depository. The Board understands that arrangements have been proposed Whereby the Fund would make a general deposit of gold with you acting as its depository and whereby you would receive such gold as fiscal agent of the United States under authorization from the Secretary of the Treasury, all as contemplated by a proposed letter from the Secretary of the Treasury to you and a letter-agreement dated August 3, 1965, between you and the Fund, each in the form enclosed. This is to advise you that you are hereby authorized and directed, upon receiving from the Secretary of the Treasury, or his duly authorized delegate, a letter substantially in the form enclosed herewith, to act as depository of the Fund with respect to the abovementioned deposit of gold in accordance with an agreement with the Fund in the form of the enclosed letter-agreement. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Enclosures
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