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9
Minutes for December 16, 1966
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
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
3I
Minutes of the Board of Governors of the Federal Reserve
System on Friday, December 16, 1966.
The Board met in the Board Room
at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Robertson, Vice Chairman
Shepardson
Mitchell
Maisel
Brimmer
Sherman, Secretary
Kenyon, Assistant Secretary
Holland, Adviser to the Board
Molony, Assistant to the Board
Cardon, Legislative Counsel
Fauver, Assistant to the Board
Spencer, Staff Assistant, Office of
the Secretary
Mr. Morgan, Staff Assistant, Board Members'
Offices
Mr. Furth, Consultant
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Messrs. Brill, Koch, Partee, Williams, Axilrod,
Gramley, Bernard, Eckert, Ettin, Fry, Keir,
Kelty, and Rosenblatt of the Division of
Research and Statistics
Messrs. Sammons, Hersey, Gekker, Gemmill, and
Ruckdeschel of the Division of International
Finance
Money market review.
There had been distributed a table and
related charts affording perspective on bank reserve utilization and
tables providing data on the money and capital markets; copies have
bp
-en placed in the Board's files.
Mx. Axilrod reviewed developments relating to the Government
securities market and commented on the bank credit projections contained
in the
distributed material.
exchange market developments.
Mr. Ruckdeschel then discussed foreign
4
12/16/66
-2-
After a discussion based on the foregoing presentations that
included comment by Mr. Brill on estimates of fourth quarter gross
national product figures, all members of the staff except Messrs.
Sherman, Kenyon, Molony, Fauver, Sammons, and Spencer withdrew from
the meeting and the following entered the room:
Mr. Hackley, General Counsel
Mr. Daniels, Assistant Director, Division of
Bank Operations
Mr. Dahl, Assistant Director, Division of
Examinations
Mr. Forrestal, Senior Attorney, Legal Division
Mr. Egertson, Supervisory Review Examiner,
Division of Examinations
Mr. Poundstone, Review Examiner, Division of
Examinations
Discount rates.
The establishment without change by the Federal
Reserve Bank of Minneapolis on December 9 and by the Federal Reserve
Banks of New York, Philadelphia, Chicago, and San Francisco on December 15,
1966, of the rates on discounts and advances in their existing schedules
,...ERE5Easi
unanimously, with the understanding that appropriate advice
uld be sent to those Banks.
Approved items.
The following items, copies of which are
attached
to these minutes under the respective numbers indicated, were
Q.P...2,1 unanimously after consideration of background information that
had been made available to the Board:
Item No.
Letter to the Federal Deposit Insurance Corporalon regarding the application of Evanston Trust
j
a id Savings Bank, Evanston, Illinois, for continua1°n of deposit insurance after withdrawal from
Inembership in the Federal Reserve System.
1
12/16/66
-3Item No.
Letter to the Federal Reserve Bank of Kansas
City waiving the assessment of penalties
incurred by First National Bank in Gladstone,
Gladstone, Missouri, and First National Bank,
Kingman, Kansas, because of deficiencies in
their required reserves.
2
Letter to the Federal Deposit Insurance Corporation regarding the application of The Sumitomo
Bank of California, San Francisco, California,
for continuation of deposit insurance after
Withdrawal from membership in the Federal
Reserve System.
3
Letter to Morgan Guaranty International Banking
Corporation, New York, New York, granting consent to the purchase of shares of Banca Vonwiller,
S.p.A., Milan, Italy.
4
Letter to the Presidents of all Federal Reserve
Banks transmitting forms to be used by State
member banks and their affiliates in submitting
condition reports as of the next call date.
5
During a discussion of Item No. 4, the staff was requested to
Obtain information from Morgan Guaranty International Banking Corporation on whether its proposed investment in Banca Vonwiller, when combined
With other foreign loans and investments of the Corporation, Morgan
Guaranty Trust Company of New York, and Morgan Guaranty International
I'inance Corporation, would conform to the guidelines recently established
under the voluntary foreign credit restraint effort.
If it were ascer-
tained that the investment could be made within the guidelines and the
Pr iorities contained therein, it was understood that the letter would
be transmitted.
Subsequently Messrs. Sammons and Dahl talked with
12/16/66
-4-
representatives of Morgan and, after discussion with Governor Robertson,
the letter was sent.
Report on competitive factors.
A report to the Comptroller of
the Currency on the competitive factors involved in the proposed merger
of The Oxford National Bank, Oxford, North Carolina, into The Planters
National Bank and Trust Company, Rocky Mount, North Carolina, was
.,.lap.E1‘./asi for
senting.
transmittal to the Comptroller, Governor Robertson dis-
The conclusion read as follows:
The proposed merger of The Oxford National Bank, Oxford,
into The Planters National Bank and Trust Company, Rocky Mount,
would not have adverse competitive effects.
Governor Robertson had expressed the opinion that the conclusion
should include the statement that the proposed merger would place Union
National Bank of Oxford in direct competition with a branch of a bank
about ten times its size, resulting in a change in the competitive
situation to that extent.
Meetings with State bankers and related groups.
Governor
Shepard on called attention to a memorandum of December 15, 1966, from
the Office of the Secretary regarding the annual visits to Washington
by
various State bankers associations and related groups.
The Washington
°ffice of the American Bankers Association had been in touch with the
Secretary's Office about making arrangements for such groups to visit
the Board.
According to the pattern that had been established in recent
Years, a
member of the Board and two or more staff members would attend
)4
12/16/66
-5-
on a rotating basis the receptions and dinners given by the respective
groups.
Except where there might be scheduling conflicts, each group
would be invited to the Board's offices for luncheon, at which attendance would include two Board members and an appropriate number of
staff.
Following the luncheon, the two Board members would confer
With the visitors in the Board Room.
Governor Shepardson inquired whether the Board wished to continue
this practice, pointing out that if it wished to do so, the Office of
the Secretary would proceed with the necessary arrangements.
There followed an exchange of views on the value of receiving
such groups for luncheon and conference, and it was generally agreed
that the Board should continue the practice.
However, as a means of
lightening obligations of this nature, it was the consensus that it
would be appropriate if only one member of the Board were scheduled to
host each luncheon and confer with such groups.
It was recognized,
though, that it would be desirable to have additional Board members
join the conference with such groups whenever the schedules of the
individual members permitted such participation.
It was understood
that the Office of the Secretary would distribute to the members of the
Board a list of the proposed visits by the various State bankers asso'
lotions and that the Board members would indicate their order of
Preference for hosting the various luncheons.
There was also discussion of attendance by members of the Board
4t
receptions and dinners given by the State bankers associations for
12/16/66
their congressional
Congressional delegations, to which the members of the Board
customarily were invited.
It was understood that the Board members
would indicate their order of preference among such functions when the
list of contemplated Washington visits by the banker groups was distributed.
It was agreed that members of the Board should not feel
Obligated to attend these evening functions.
However, if no member
expressed a desire to attend a particular function, that fact was to
be made known to the Board with a view to ascertaining whether one of
its members would be available to represent the Board.
At the conclusion of the discussion, it was understood that the
°ffice of the Secretary would proceed with the necessary arrangements
relating to the visits by the State bankers associations and related
groups, with certain modifications in the practices followed in the
Past regarding participation in light of the views expressed at this
meeting.
Authorization was given for payment of the cost of the luncheons
for the visiting groups.
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 Philadelphia (copy attached
No. 6) approving the designation of nine employees as special
ssistant examiners.
"Item
Letter to the Federal Reserve Bank of Atlanta (copy attached as
Item
approving the appointment of W. James Montgomery and
" Howard Dillion as examiners.
12/16/66
Memorandum from the Division of Research and Statistics dated
December 14, 1966, recommending the establishment of an additional
economist position in the Banking Markets Section.
Memoranda recommending the following actions relating to the
Board's staff:
.t!'...P.2.521.4aLntaLL
Gerald Graham Bush as Messenger, Division of Administrative
Services, with basic annual salary at the rate of $3,609, effective
the date of entrance upon duty.
Overton William Freeland as Messenger, Division of Administrative
Services, with basic annual salary at the rate of $3,609, effective the
date of entrance upon duty.
.
Clifford V. Glover as Messenger, Division of Administrative Services, with basic annual salary at the rate of $3,609, effective the
date of entrance upon duty.
Gladys Y. Kirby as Cafeteria Helper, Division of Administrative
Services, with annual salary at the rate of $1,927 (4-hour day), effective the date of entrance upon duty.
Lawrence Leon Waytes as Messenger, Division of Administrative
Services, with basic annual salary at the rate of $3,609, effective
the date of entrance upon duty.
-§4...Iy_increases
effective December 18, 1966
Name and title
Division
Basic annual salary
To
From
Legal
David Robinson, II, Attorney
Bruce D. Shuter, Attorney
$ 9,221
9,221
$ 9,536
9,536
5,867
4,269
4,936
11,111
12,443
5,507
4,413
6,065
4,413
5,096
12,064
12,822
5,683
4,557
Research and Statistics
Carmen H. Feliciano, Secretary
adelene Gray, Statistical Clerk
:
"1 ercY M. Heath, Statistical Clerk
'csbert T. Parry, Economist
'
0
11110 O. Peterson, Economist
mist
Polievka, Secretary
'
argaret I. Ratcliffe, Clerk-Typist
t
12/16/66
C64
-8-
§.2.12..ry increases t_effective December 18
1966 (continued)
Division
1. 111e and title
Basic annual salary
To
From
Bank Operations
Perol A. Beach, Stenographer
$4,776
$4,936
3,731
5,990
3,853
6,282
Administrative Services
Walter W. Graves, Cafeteria Laborer
James R. Jordan, Operator (Offset Press and
Multilith)
§41-aly
increaseL, effective January 1, 1967
Name and title
Division
Basic annual salary
To
From
Examinations
J°hn N. Lyon, Supervisory Review Examiner
(change in title from Review Examiner)
John T. McClintock, Assistant to the Director
(change in title from Supervisory Review
Examiner)
$15,113
$16,152
17,198
18,764
asfers
Lovair Dingle, Messenger-Driver, Division of Administrative Seres, to another budget position, with no change in basic annual salary
t the rate of $4,058, effective upon assuming his new duties.
Johnny Samuel Fox, Jr., Messenger-Driver, Division of Administra
'
sive Services, to another budget position, with no change in basic annual
alary at the rate of $4,191, effective upon assuming his new duties.
•
0
Ernest R. Thomas, from the position of Messenger to the position
,f Messenger-Driver, Division of Administrative Services, with no change
441 basic annual salary at the rate of $3,609, effective upon assuming
his new duties.
A
Secretary,
BOARD OF GOVERNORS
Item No. 1
12/16/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 16, 1966
The Honorable K. A. Randall, Chairman,
Federal Deposit Insurance Corporation,
Washington, D. C. 20429
Dear Mr. Randall:
Reference is made to your letter of December 1, 1966,
concerning the application of Evanston Trust and Savings Bank,
Evanston, Illinois, for continuance of deposit insurance after
withdrawal from membership in the Federal Reserve System.
At the July 11, 1966, examination this bank was rated
a problem institution. Major reasons for this rating were the
sizable volume of criticized credits, only fair management, and
a capital position lower than satisfactory. Management was
requested to strengthen lending and collection policies in order
that the volume of criticized assets might be reduced and was
also urged to review very carefully the bank's capital adequacy.
There have been no other corrective programs urged upon
the bank, or agreed to by it, which have not been fully consummated, and there are no programs that the Board would advise be
incorporated as conditions of admitting the bank to membership in
the Corporation as a nonmember of the Federal Reserve System,
nevertheless, you may wish to consider the information in the
above paragraph in reviewing this application.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
168
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 2
12/16/66
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORREBPONOENCE
TO THE BOARD
December 16, 1966
Mr. John T. Boysen,
First Vice President,
Federal Reserve Bank of Kansas City,
Kansas City, Missouri.
64106
Dear Mr. Boysen:
This refers to your letter of November 30, 1966,
regarding deficient reserve penalties of $26.18 incurred by the
First National Bank in Gladstone, Missouri, and $8.19 incurred by
the First National Bank, Kingman, Kansas, both of which had been
waived inadvertently by your Bank.
It is noted that a recent audit at your Bank revealed
the penalties were improperly waived under Paragraph E of the
Board's letter of October 10, 1949 (Sr1123), that the two member
banks were advised prior to the audit of the waiver, that your
Bank is reluctant to go back to the banks at this late date and
collect the penalties, and that both banks have a good record
for maintaining required reserves.
In the circumstances, the Board ratifies the action
taken by
your Bank in waiving assessment of the penalty of $26.18
against the First National Bank in Gladstone, Missouri, for the
reserve computation period ended October 12, 1966, and the penalty
!
(3 $8.19 against the First National Bank, Kingman, Kansas, for
'he reserve computation period ended September 28, 1966.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
A
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 3
12/16/66
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 16, 1966
The Honorable K. A. Randall, Chairman,
Federal Deposit Insurance Corporation,
Washington, D. C. 20429
Dear Mr. Randall:
Reference is made to your letter of December 2, 1966,
concerning the application of The Sumitomo Bank of California,
San Francisco, California, for continuance of deposit insurance
after withdrawal from membership in the Federal Reserve System.
Subject bank was last examined by the Federal Reserve
sank of San Francisco as of the close of business August 15,
1966. At that time, the bank's capital position was less than
satisfactory, and the Reserve Bank urged that the directorate
give serious consideration to means to improve this condition.
There have been no other corrective programs urged
Upon the bank, or agreed to by it, which have not been fully
consummated, and there are no programs that the Board would
advise be incorporated as conditions of admitting the bank to
membership in the Corporation as a nonmember of the Federal
Reserve System. Nevertheless, you may wish to consider the
above information in your review of this application.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
Item No. 4
12/16/66
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 16, 1966.
lergan Guaranty International
Banking Corporation,
43 Wall Street,
New York, New York. 10015
Gentlemen
:
As requested in your letter of November 9, 1966, the Board of
Cove
r rnors grants consent for Morgan Guaranty International Banking
'
07Poration ("MGIBC') to purchase and hold approximately 510,000 shares
a, the capital stock of Banca Vonwiller, S.p.A. ("Banca"), Milan, Italy,
1.11;a cost of approximately US$7,307,300, provided such stock is acquired
tothin one year from the date of this letter. In this connection, the
Isa
"also approves the purchase and holding of such shares in excess of
Per cent of your Corporation's capital and surplus.
Olaxes
The Board's consent to the proposed purchase and holding of
of
f Banca by MGIBC is granted subject to the following conditions:
(1) That MGIBC shall not hold, directly or indirectly, any shares
of stock in Banca if Banca at any time fails to restrict its
activities to those permissible to a corporation in which a
corporation organized under Section 25(a) of the Federal
Reserve Act could, with the consent of the Board of Governors,
purchase and hold stock, or if Banca establishes any branch
or agency or takes any action or undertakes any operation in
Italy or elsewhere, in any manner, which at the time would
not be permissible to MGIBC;
(2) That, when required by the Board of Governors, MGIBC will
cause Banca (a) to permit examiners selected or auditors
approved by the Board of Governors to examine Banca and (b)
to furnish the Board of Governors with such reports as it
may require from time to time;
Morgan Guaranty International
Banking Corporation
-2-
on its books the shares
amount in excess of its
book capital accounts of
to the elimination of all
(3)
That MGIBC shall not carry
acquired of Banca at a net
proportionate share of the
Banca, after giving effect
known losses; and
(4)
That any share acquisitions or dispositions by Banca be
reported under Section 211.8(d) of Regulation K in the
same manner as if Banca were a corporation organized
under Section 25(a) of the Federal Reserve Act.
Subject to continuing observation and review, the Board suspends,
until further notice:
(a)
the provisions of subparagraph (1) of the second paragraph
of this letter so far as they relate to restrictions on
loans granted by Banca in Italy in the currency of that
country; and,
(b) the provisions of Section 211.9(b) of Regulation K, to the
extent that total liabilities of Banca to MGIBC will exceed
50 per cent of MGIBC's capital and surplus.
The foregoing consent is given with the understanding that the
IltZstme nt now being approved, combined with other fcreign loans and invest8 of your corporation, Morgan Guaranty Trust Company of New York, and
of gall Guaranty International Finance Corporation, will not cause the total
volauch loans and investments to excead the guidelines established under the.
erXtarY foreign credit restraint effort now in effect and that due consid"
-°n is being given to the priorities contained therein.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 5
12/16/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESRDNOENCE
To THE BOARD
December 19, 1966.
aar Sir'
The indicated number of copies of the following forms are being
fo
rwarded to your Bank under separate cover for use of State member banks
and their
affiliates in submitting reports as of the next call date.
4umber of
Form FR 105 (Call No. 182), Report of Condition
of State member banks including a separate
Schedule B for reporting U.S. Government and
Federal agency securities by issue.
Form FR 105e (Revised February 1966), Publisher's
copy of report of condition of State member banks.
Form FR 105e-1 (Revised February 1966), Publisher's
copy of report of condition of State member banks.
Form FR 105A-3 (Supplement), Credit Extended to Real
Estate Mortgage Lenders and to Other Financial
Institutions.
Form FR 105L (Supplement), Bank Liquidity Analysis.
Form FR 220 (Revised Septemly,r 1966), Report of
Affiliate or Holding Company Affiliate.
Form FR 220a (Revised September 1966), Publisher's
copy of Report of Affiliate or Holding Company
Affiliate.
aarne
The condition report forms to be used for this call are the
4s those used for the June 1966 report. Form FR 105 includes the
-2-
Schedules on the reverse which had been eliminated for the fall call and
a separate Schedule B for reporting the par value of U.S. Government
direct and guaranteed securities and Federal agency obligations, by issue.
11e same condition report and Schedule B forms are being used by the
Federal Deposit Insurance Corporation for distribution to insured nonmember State banks.
The Comptroller of the Currency will use a condition report
fbrm for national banks that differs somewhat from the State bank form
but is the same as that used for the June 1966 call. The Comptroller
also will require national banks to report on the issue Schedule B for
this call. Thus, it will not be necessary for the Reserve Banks to collect
,this Schedule from national banks. National banks will be required to
4
2rward a copy of this Schedule to the Reserve Banks for processing with
.17!leir condition reports. The same general procedures used in advising
5ne Comptroller's Office of edit changes in condition report forms should
be used for changes in Schedule B.
Reporting instructions for certificates of interest in Commodity
Credit Corporation pools of farm production loans require that these
1.ns t1
4
uments continue to be included in item 4, "Securities of Federal
aties and corporations not guaranteed by the United States" on the face
y _ the report, and in the appropriate item in Schedule B, with the new
e
tX participation certificates.
T
Schedule 105A-3 regarding credit extended to mortgage lenders
being collected at the request of Congressman Patman as Chairman of
tjie Joint Economic Committee. It is intended to provide important informa'
11 from all insured commercial banks not available elsewhere on the
:
cti.-!nt of direct and indirect lending by commercial banks to institutions
itrli the real estate credit market. The supplement has been drawn to tie
lat° official reports of condition and the weekly reports of condition of
r-ge_commercial banks.
The special supplement for the Analysis of Bank Liquidity (FR 105L)
h
-e collected from all insured commercial banks to provide information
for
i„ bank regulation, supervision, and for financial analysis. Comparable
zormation
for all insured banks as of a single date will permit regional
and
f, size of bank comparisons of bank liquidity and of the readily available
The Federal Deposit Insurance CorporatlentOrs affecting bank liquidity.
and the Comptroller of the Currency also will collect this supplement
°111 insured nonmember State banks and from national banks, respectively.
A preliminary edit at the Reserve Banks of these two new supplements
. ,lutted by State member banks should consist of verification of the items
ln
conth e reports that must agree with corresponding items in reports of
dition and a general review for reasonableness. Keypunching and tabulating
-3-
4692
of edited reports will be provided at the Board. The Board's copy of
these supplements should be forwarded to the Financial Statistics Section,
Division of Data Processing, on a weekly basis as soon as possible after
this review. Questions of priority should be resolved in favor of the
liquidity supplement.
Processing instructions and supplements used for the June call
and related Schedule B are applicable for the forthcoming December call.
Editing of national bank forms for keypunching in the same card format
as was
used for the June call will continue to be required.
Very truly yours,
Merritt Sherman,
Secretary.
E
nclosures
T° THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS.
41693
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 6
12/16/66
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 16, 1966
Mr, Joseph R. Campbell, Vice President,
Federal Reserve Bank of Philadelphia,
Philadelphia, Pennsylvania.
19101
Dear Mr. Campbell:
In accordance with the request contained in your letter
of December 7, 1966, the Board approves the designation of each
of the following employees as a special assistant examiner for the
Federal Reserve Bank of Philadelphia:
Melvin Cooper
Peter P. Giannone
William R. Kampf
John R. Perino
Francis T. Lewandowski
William C. Chandler
Harry H. Baeringer
Charles D. Soule
Nicholas J. Fulginiti
Appropriate notations have been made of the names to be
deleted from the list of special assistant examiners.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
16.44
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 7
12/16/66
WASHINGTON, O. C. 20551
ADORES, OfFICSIAL CORRESPONDENCE
TO THE •OARO
December 16, 1966
Mr. R. M. Stephenson, Vice President,
Federal Reserve Bank of Atlanta,
Atlanta, Georgia.
30303
Dear Mr. Stephenson:
In accordance with the requests contained in
your letters of December 12, 1966, the Board approves
the appointments of W. James Montgomery and L. Howard
Dillion, at present assistant examiners, as examiners
for the Federal Reserve Bank of Atlanta, effective
January 1, 1967.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
@FedFRASER