The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Minutes for December 17. 1998
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, if you
were present at the meeting, please initial in column A below to indicate that you approve the minutes.
If you were not present, please initial in column B
below to indicate that you have seen the minutes.
A
Chm. Martin
Gov. Szymczak
Gov. Mills
Gov. Robertson
X
y
Goy. Balderston
Goy. Shepardson
Minutes of the Board of Governors of the Federal Reserve System
011 Wednesday, December 17, 1958.
The Board met in the Board Room at
9:30 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman 1/
Szymczak
Mills
Robertson
Shepardson
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Discount rates.
Sherman, Secretary
Kenyon, Assistant Secretary
Hackley, General Counsel
Masters, Director, Division of Examinations
Connell, Controller
Furth, Associate Adviser, Division of
International Finance
Solomon, Assistant General Counsel
Hexter, Assistant General Counsel
Hostrup, Assistant Director, Division of
Examinations
Nelson, Assistant Director, Division of
Examinations
Bass, Assistant Controller
Poundstone, Federal Reserve Examiner, Division
of Examinations
Kakalec, Budget and Planning Assistant, Office
of the Controller
Unanimous approval was given to a telegram to
the Federal Reserve Bank of Boston approving the establishment without
ehahge by that Bank on December 15, 1958, of the rates on discounts and
84vances in its existing schedule.
Items circulated or distributed to the Board.
The following
ltelns, which had been circulated or distributed to the members of the
B°4rqi
and copies of which are attached to these minutes under the
l'e8Pective item numbers indicated, were approved unanimously:
zntered during afternoon session at point indicated in minutes.
372?
12/17/58
-2Item No.
Letter to the Bankers Trust Company, New York City,
Proving the establishment of a branch in the Kings
-ay
Shopping Center. (For transmittal through the
Federal Reserve Bank of New York)
1
Letter to The Oystermen's Bank and Trust Company,
SaYville, Long Island, New York, granting an extension
of time within which to establish a branch in Oakdale.
(For transmittal through the Federal Reserve Bank of
New York)
2
Letter to the Riverside Trust Company, Riverside, New
lerseY, approving the establishment of a branch in
ij
urlington County. (For transmittal through the
xederal Reserve Bank of Philadelphia)
3
P
Idetter to The First Pennsylvania Banking and Trust
°I1IPalaY, Philadelphia, Pennsylvania, approving the
!
stablishment of a branch at Huntingdon Valley incident
a merger with the Huntingdon Valley Trust Company.
,nr transmittal through the Federal Reserve Bank of
rh
iladelphia)
oner to the Society National Bank of Cleveland,
t
eveland Ohio, approving its application for
1 powers. (For transmittal through the
•
fidu-ciary
m_,cL
'eral Reserve Bank of Cleveland)
14.
5
t-ter to the Genesee Merchants Bank and Trust Company,
illty Michigan, consenting to the consolidation of that
'
bj
a4k, The First State and Savings Bank of Flushing, Peoples
otate Bank of Flushing, and the State Bank of Ortonville,
a approving the establishment of three branches by the
m°4-tinuing institution. (For transmittal through the
zederal Reserve Bank of Chicago)
6
.12.etter to the Federal Reserve Bank of Atlanta regarding
the decision of the Department of Justice not to prosecute
matter involving the Trust Company of Georgia and Trust
11°131PanY of Georgia Associates that may have involved
lolations of section 4(a) of the Bank Holding Company Act.
7
Letter to the Comptroller of the Currency recommending
"royal of an application to organize a national bank
13 Roseburg, Oregon. (With a copy to the Federal Reserve
'
allk of San Francisco)
8
r
12/17/58
-3Item No.
Letter to the Comptroller of the Currency recommending
aPProval of an application to organize a national bank
at Spokane, Washington. (With a copy to the Federal
Reserve Bank of San Francisco)
9
Letter to the Department of Justice regarding possible
coercive
insurance practices by the Pine Lawn Bank and
Trust Company, St. Louis, Missouri. (With a copy to the
Federal Reserve Bank of St. Louis)
10
.Notice of Tentative Decision and Tentative Statement in
matter of the application of Northwest Bancorporation
tc.)r prior approval of the acquisition of stock of The
rlrst National Bank at Eveleth, Eveleth, Minnesota.
ItJetter to the Federal Reserve Bank of New York regarding
he application of The Chase Manhattan Bank, New York, for
Lermission to invest in an "agreement corporation" to be
P
f0l411 as "Chase Manhattan Overseas Corporation", and for
1,11e agreement corporation to invest in stock of a commercial
"1411k to be organized unfler the Banking Act of the Union of
,
0outh Africa.
13
Z
In connection with the foregoing Item No. 51 Mr. Masters
1%ePorted, at the request of Governor Robertson, receipt of advice
tram the Federal Reserve Bank of Cleveland that the management of
the Society for Savings in the City of Cleveland was formulating
13144s in confidence whereby the Society would give up its status as
°Ile of the largest mutunl savings banks and consolidate with the
S°eletY National Bank of Cleveland, a bank which it organized in
1956 to develop a commercial banking business and of which it owned
9° Per cent of the shares of stock outstanding.
Incident to this
eellsolidation, pursuant to which the depositors of the Society for
vings would become shareholders in the Society National Bank, the
'
Se
14tter institution would require fiduciary powers to facilitate the
e°MPlicated transfer operation.
3729
-4-
12/17/58
With respect to the foregoing Item No. 6, Governor Mills said
that although he concurred in the recommendation for approval of the
lierger and operation of branches by the continuing institution (Genesee
Merchants Bank & Trust Co.) it should be noted that there was some
similarity between the situation in Flushing and the situation in
Attica, New York, where the Board some time ago denied the application
°f a. Marine Midland subsidiary bank, which already operated a branch
lathe town, to take over the independent bank and thus bring about
all elimination of banking competition in the community.
In the present
'se, the proposed transaction also would involve elimination of
es
e°111Petition in the community concerned, since the two branches in
Flushing would be under the same ownership.
In his thinking, however,
there was at least one strong difference, namely, that the Attica case
Illvolved an isolated community while Flushing was essentially a suburb
of the city of Flint.
The proposal now before the Board therefore
Zight be regarded in the light of the establishment by a bank in
lint of branches in the general community.
by
Mr. Masters commented that the distinction brought out
GOVom
`rn0r
Examinations
Mills had been a factor influencing the Division of
in its recommendation.
He went on to say that many of the people who
Iseside in Flushing commute to places of employment in Flint and that
y.
PlUshing would appear to be essentially a one-bank communit
3730
12/17/58
Question was raised in this connection whether it was not
likely that the other bank in Flint might apply to establish a branch
in Flushing, and the reply was in terms that it was not entirely clear
141
her the statutes of the State of Michigan would permit another
bank to enter the community.
It was noted, however, that the competing
?lint bank was operating a branch within eight miles of Flushing; also
that
persons from Flushing who work in Flint would have available a
choice of
banks in that city.
Governor Robertson said that he too had had difficulty with
this case, for the proposed transactions would result in the elimination
f competition in Flushing and the nearest competing banks were seven
to sixteen miles distant.
Consequently, he considered this a borderline
es8c) one where it would be possible to go one way or the other and not
be
sure of
the correctness of the decision except in hindsight. In
deciding to concur in the favorable recommendation of the Reserve Bank
alla the Board's staff, he was influenced by the fact that, as pointed
) most of the workers residing in Flushing commute to Flint, so that
PI-fishing is essentially a small residential community.
In these
ellscIlmstances, Flushing might be regarded as a one-bank rather than a
t14'
3-bank community.
With respect to Item No. 9, relating to an application to
°Isallize a national bank in Spokane, Washington, Governor Mills
(3b"rved that it seemed questionable whether the group applying
3731
12/17/58
to
-6-
organize the bank might be expected to retain control of it,
Particularly in view of the record of the proposed chief executive
°fficer, who had a history of moving from one place to another as
baras in which he was interested were bought and sold.
It was noted that the Federal Reserve Bank of San Francisco
had recommended approval of the application provided the Comptroller
°I the Currency was satisfied as to the intention of the organizers
to retain ownership of the proposed bank and that the Board's letter
to the Comptroller incorporated a reference to this reservation.
With regard to Item No. 11, Mr. Hackley commented that Northwest
Corporation
had expressed a desire to have a final decision made on
the matter before December 31, 1958, if possible, because its option
t° acquire shares of The First National Bank at Eveleth would expire on
that date.
The notice of tentative decision provided the usual 15 days
r°r interested parties to submit comments, which would mean that a final
decision could not be rendered before the end of the year.
However,
Hackiey considered it likely that Northwest Bancorporation would
be able to obtain an extension of its options, and he did not feel that
he circumstances warranted giving less than the normal 15-day notice.
In a discussion preceding approval of Item No. 13, Governor
Mills raised a question about the name "Chase Manhattan Overseas
C°rPoration" selected for the proposed "agreement" corporation which
1'1°1114 be awned by The Chase Manhattan Bank.
It was his thought that
47tr-,*9'4-70
k
12/17/58
-7-
the name might cause the public to assume a relationship with the
A4erican Overseas Finance Company, the predecessor corporation to
*itch was originated by Chase interests.
Governor Mills added,
hover, that the handling of the application had been carried to
4
stage where there seemed to be no need for expressing any dissenting
viev about the choice of name, even though he was somewhat concerned.
Mr. Poundstone commented that the applicants may have been
i"1"nced in their decision to include the word "overseas" in the
title bY the language of section 3(b) of Regulation K, which cites
tIlat word among others as being appropriate to indicate the nature
"business contemplated to be conducted by a proposed Edge Act or
4greement corporation.
Application of The Hanover Bank (Item No. 14).
There had
been circulated to the Board, with the favorable recommendation of
the nivision of Examinations, an application from The Hanover Bank,
isiev York, New York, to establish a branch at 350 Park Avenue in
lieu
Of the branch at 399 Park Avenue approved by the Board in 1957.
Although the branch now applied for was to be situated in a large
ce building not yet constructed, the letter suggested for transission to the applicant was phrased in terms of the branch being
Mac
ed in operation within one year from the date of the Board's
41)P1'°val.
This reflected the practice followed generally by the
'E°11rd- in placing time limits on the establishment of branches.
With
12/17/58
-8-
the file
there had been circulated a memorandum dated December 1, 1958,
fr°111 Mr. Hooff, Assistant Counsel, raising the question whether, in
circumstances where the proposed branch obviously could not be placed
oPeration within a year, the Board might not wish to follow a more
flexible procedure.
Governor Robertson observed that in this case it was very
clearly going to take a substantial length of time to erect the building
In which the branch quarters were to be located.
While he felt that
°1"°Iinarily a time limit not to exceed one year was appropriate, at the
Same time he felt that the Board ought to be realistic.
Therefore, in
ell'cumstances such as those involved in the application of The Hanover
13allk he would be inclined to modify the position that he, and the
13(3ard, had taken over the years.
Application of the modified procedure
would contemplate granting a period within which to establish the branch
(31% The Hanover Bank that would tie in with available information
e°4cerning the date on which it appeared probable that branch operations
could be begun.
After Mr. Masters stated that the Division of Examinations
v°red such an approach, Mr. Nelson said that completion of the
'
re
b4ilding in which the branch of The Hanover Bank would be housed was
N°ected in
the fp11 of 1960.
Accordingly, it was agreed unanimously
tO grant a period of two years from this date within which to establish
the branch.
3734
12/17/58
-9-
A copy of the letter transmitted to The Hanover Bank through
the Federal Reserve Bank of New York pursuant to this action is attached
as Item No. 14.
Procedure for making material available to Board members.
G°Irernor Shepardson commented that the files relating to several of
the items included on the agenda for this meeting had been reproduced
for
distribution to the members of the Board, there had been a heavy
14°rkload recently in the Board's duplicating office, and he would like
to inquire regarding the wishes of the Board.
There followed comments by members of the staff which indicated
that the pressure of applications for Board action had been severe
recently,
some of the applications required prompt action, and the
Process of duplication therefore had been followed in a number of cases
14 Preference to the ordinary process of circulation.
Also, it was
P°5-4ted out, a special effort haxi been made to place certain items
before the Board prior to the Christmas holiday
season.
Governor Mills recalled having advocated the duplicating process
Ighere complicated matters of importance were concerned and said that he
continued of the same opinion.
He noted that presumably the workload
14 the duplicating office would fluctuate somewhat and that the load
t the
present time might represent an extreme situation.
He went on
to say that he frequently found it difficult to absorb a voluminous
rile
on circulation, and to retain familiarity with intricate points
f several days elapsed from the time the material passed over his
cle8k until the item appeared on the Board meeting agenda.
f—
41 psy
fl)(t)t)
12/17/58
-10-
At the conclusion of the discussion, Governor Shepardson again
14dicated that he ball raised the question for the purpose of obtaining
reactions as
to the procedures considered most appropriate.
During the foregoing discussion Mr. O'Connell, Assistant General
Counsel, entered the room and at its conclusion Messrs. Furth and
Poundstone withdraw.
Request of Wachovia Bank and Trust Company (Item No. 15).
Salem,
Till'°ugh its counsel, Wachovia Bank and Trust Company of Winstoneration
14c)rth Carolina, had requested the Board to grant a further reconsid
in the matter of Wachovia's request for approval of its operating two
of
of
fioes in Wilmington, North Carolina, formerly operated as offices
The Wilmington Savings & Trust Co., and on the basis of such reconsideration to grant the application.
for
Should the Board deny the request
that a
reconsideration and favorable action, Wachovia then asked
fc'raal hearing be held at which evidence could be presented, witnesses
cr°ss-examined, and a record made which would provide Wachovia a basis
for obtaining judicial review.
Copies of the memorandum from counsel for Wachovia had been
distributed to the Board, along with a memorandum from Mr. Hackley
clated
denying both
December 16, 1958, which submitted a proposed reply
l'ecillests.
The denial would be essentially on the ground that Wachovia
he'd disqualified itself by establishing the branches in Wilmington in
therefor, and
disregard of the Board's disapproval of the application
61-18° in disregard of orderly processes.
The reply would further
indicate that the points urged by Wachovia were not believed to justify
f)
t
12/17/58
-11In
a change in the Board's position with respect to the application.
14r. Hackley's memorandum the view was expressed that the granting of
either of Wachovia's current requests would have the effect of largely
riullifYing the Board's contention in the case of the Old Kent Bank and
Trust Company (Grand Rapids, Michigan) to the effect that establishment
of the branches in question disqualified the applicant bank from
receiving further consideration of its application; and that such
raalification would affect not only the Wachovia case but probably
41so the Old Kent case.
Moreover, the points advanced by counsel for
Wachovia contained no additional facts such as to constitute a reason
t° grant another hearing on the application for branches.
In summarizing the matter, Mr. Hackley said that the memorandum
*°111 counsel for Wachovia was received following discussion with members
°f the Board's staff.
It appeared that after reading the Board's
lielnorandum of Points and Authorities filed in the Old Kent case,
e°114sel for Wachovia wished to be in the position of being able to
state that in this case all possible administrative remedies had been
e*tallsted before the matter was taken to the courts.
While counsel for
WIleh°via had indicated when visiting the Board's offices that the request
f°r rehearing would contain additional facts, the memorandum submitted
'
clic
not contain such facts and instead dealt with legal issues.
In the
Irellmstances, there appeared to be little reason to grant either the
renue
st for reconsideration or the request for a formal hearing.
Further-
'as pointed out in the memorandum distributed to the Board, Wachovia
q
L)e t.P /
12/17/58
-12-
aPPeared to have disqualified itself from further consideration of the
matter by establishing the branches in Wilmington in disregard of the
Board's disapproval of its application.
Governor Mills expressed the view that the position taken by
the Legal Division was entirely correct and that the proposed letter
constituted a capable presentation of that position.
As he read the
Illemorandum from counsel for Wachovia, it was essentially a challenging
Of the Board's legal authority to deny the branches for which Wachovia
had made application.
The Board, he noted, had taken the position
that it was vested with authority to deny branches where there was
al
essening of competition.
In such circumstances, it appeared that
the appropriate recourse for Wachovia was to go to the courts rather
than to seek a rehearing of the matter before the Board.
Mr. Hackley pointed out that Wachovia would in some measure
have accomplished its purpose of being able to state that it
had exhausted administrative remedies even if the current request
ri3r rehearing should be denied.
It was conceivable, he said in a
rtzrther comment, that if Wachovia had had an opportunity to read the
ar'd's brief in the Old Kent case it might not have opened the branches
13a'
14 Wilmington.
It was also possible that Wachovia might now close those
1)1'8-1ches and come back to the Board, but the Board's original reasons
denying the application for branches would still seem to hold true
14 the absence of additional facts.
12/17/58
-13-
Thereupon, unanimous approval was given to the letter to counsel
f°17
Wachovia Bank and Trust Company of which a copy is attached as Item
with the understanding that a copy would be sent to the Federal
Reserve Bank of Richmond.
Messrs.
O'Connell and Nelson then withdrew from the meeting.
Matter of First Bank Stock Corporation.
On August 5, 1958, the
B°erd denied the application of First Bank Stock Corporation, Minneapolis,
Minnesota, for permission to acquire shares of the First Eastern Heights
State
Bank, a proposed new bank in St. Paul, Minnesota.
On October 21
1958) First Bank Stock filed with the Eighth Circuit Court of Appeals
134 St. Louis a petition for judicial review of the Board's denial, and
the time for the Board to file the record with the court was extended
1:7 stipulation to January 10, 1959.
The proposed bank later was
cirgs41ized by the Minnesota Mining and Manufacturing Company, and First
11184k Stock had filed an application to acquire stock of the operating
bank.
The possibility of mootness of First Bank Stock's case before
the Circuit Court therefore was suggested in the Board's letter of
October 24, 1958, to the Department of Justice, and counsel for First
Bank Stock had conceded informally that this was probably true.
had it.
--L4dicated, however, the hope of having
Counsel
the Circuit Court use the
l'ecord on the appeal to throw light on an appeal from any denial by
the Board of the current application.
Since there would be no
cont
rovrsy in connection with the usual parts of the record, namely,
the aPPlication, the views of the State Bank Commissioner, and the
12/17/58
statement
13(3ard'e statement and order of denial, including the dissenting
Of three
was the purpose
members of the Board, it seemed likely that it
of First Bank Stock to get into the record documents such as staff and
Reserve Bank memoranda.
which had
A memorandum from Mr. Solomon dated December 161 19581
to resist
been distributed, suggested that the Board probably would wish
ure for
the inclusion of such documents, particularly since the proced
on in
Issuance of tentative decisions, adopted after the Board's decisi
inclusion.
the St. Paul case, was intended partly to prevent such
After
cliscussion with the Department of Justice, it therefore seemed desirable
(1) to advise counsel for First Bank Stock informally that the Board and
ation/ the
the Department considered the record to consist of the applic
order issued by
State Bank Commissioner's views, and the statements and
the Board; and (2) to suggest to counsel that if First Bank Stock were
to
agree to dismissal of the appeal the Board would agree that those
on the second appliIteills would be considered to be part of the record
eati°n.
; the next step
Should First Bank Stock reject the proposal
being
/g°1-11d be for the Board to certify the three items mentioned as
the record and at the same time to file a motion to dismiss because
Of
mootness.
on the matter in
At the Board's request, Mr. Solomon commented
a441G1ification of his memorandum and there ensued a brief discussion
table that the
d4ring which Governor Mills observed that it was regret
12/17/58
record in
this case was not as complete as would be the record in
eases decided subsequent to the institution of procedural changes
t
hereafter agreed upon by the Board with respect to the handling of
Inatters arising under the Bank Holding Company Act.
The Board then authorized by unanimous vote the taking of the
Steps suggested in Mr. Solomon's memorandum.
Messrs. Hexter and Hostrup then withdrew from the meeting and
Messrs. Johnson, Director, and Sprecher, Assistant Director, Division
of Personnel Administration, entered the room along with Messrs. Farrell,
Associate Director, and Daniels, Assistant Director, Division of Bank
Ope
rations.
Rebate of unearned interest (Item No. 16).
understanding at the Board meeting on December
Pursuant to the
3, 1958, there had been
distributed copies of a revised draft of letter to the Chairman of the
sidents' Conference requesting views on alternative possibilities
fOr computing the rebate of unearned interest on prepaid borrowings
a Reserve Bank following a discount rate change.
The revised letter, of which a copy is attached hereto as
was approved unanimously.
Messrs. Farrell and Daniels then withdrew from the meeting.
Restricted stock options (Item No. 17).
At the Board meeting
°4 November 14, 1958, reference was made to a memorandum from Mr.
—
So1°"lun dated November
5, 1958, discussing a proposal of Congressman
12/17/58
17.
/I
t.)
Lft
-16-
October 22, 1958) that
Ce11er of New York, received under date of
RegUlation U be amended to exempt the financing of purchases of
d stock options."
registered stock through the exercise of "restricte
ilWever, it was decided at that time to defer consideration of the
of Delaware
Pr()Posal because of an indication that Senator Williams
ht submit a brief indicating his position on the same matter.
last evening,
The Secretary stated that Chairman Martin, as of
141 not yet received any brief from Senator Williams and that in the
.
4
d not be delayed
Chairman's view a reply to Congressman Celler shoul
lcInger.
of reply had
Mr. Sherman also noted that although no draft
been submittPd with Mr. Solomon's memorandum, unless the Board
clecided upon a change from the position it had taken on numerous
proposals the reply
°ceasions in the past with respect to similar
Ipresumably would be quite similar to the Board's letter to Mr.
°eller dated August 26, 1957, concerning a suggestion made by the
C°11gressman at that time.
ibuted
A copy of that reply had been distr
vith 4r.
us other papers from
Solomon's memorandum along with vario
option
the Board's files relating to the subject of executives' stock
Plans.
that fairly
In commenting on the proposal, Mr. Solomon said
question.
Persuasive arguments could be made on both sides of the
He
to impose
noted that the current level of margin requirements would seem
4 greater hardship on those in a position to exercise stock options than
:
12/17/58
-17-
hen the
margin requirements were lower.
it
On the other hand, the economic
would appear to make an exemption less desirable at this
ti e.
Governor Szymczak commented that some persons desiring to
exercise stock options are able to do so by means of borrowing at a
bank on a personal note, while others do not have sufficient credit
"art'l
-ng
to proceed in that manner.
Governor Mills referred to the contention frequently advanced
that the stock option privilege is essentially a form of executive
compensation designed to attract talent into the employing company
and therefore would not really tie into the use of stock as collateral
r°r borrowing where investment was not truly a factor.
If that were
t114e) he said, one might create a distinction between a man who
borr°Nred to exercise a stock option and one who wished to employ his
credit to acquire stocks.
However, there had recently been comments
in the legal and financial journals to the effect that the stock
°Pti
c)/1 practice was suspect, that it had been drawn into the speculative
sl'ea, that employees enjoying the privilege of stock options under
c°11traet rights had not hesitated to take advantage of market opportixlii,.
'les afforded them within the past year, and that they had been
4 contributing element to the general flow of credit in the securities
111411cet.
Such a situation would of course be aggravated if they were
Perzitted an exemption from the margin requirements.
Beyond that,
12/17/58
-18-
he said, these same comments had brought out quite decisively that
the broader range of stockholders in corporations was beginning to
1
ec3r4P ain vociferously about the practice in that it afforded an
o
Pportunity to insiders to buy stock below the market price and thus
to deprive the stockholders in general of the just rewards of ownership.
1.\11thermore, such plans tended to dilute the ownership of the company
if unissued treasury shares were awarded thereunder.
Governor Robertson said that he continued to agree with the
15°81tion taken by the Board on previous occasions for the reasons stated
°4 those
occasions.
Thereupon, the staff was authorized to prepare for appropriate
i6/natUre a reply to Congressman Celler consistent with the position
Pr'eviously taken by the Board with respect to similar proposals.
A copy of the letter sent pursuant to this action is attached
48 Item N
7.
Withdrawal and substitution rules.
In reply to a question by
Gclveruor Szymczak, the Secretary stated that Chairman Martin had planned
leP°rt to the Board at this meeting on his conversation with the
t° '
Pl'esident of the New, York Stock Exchange concerning a study of the
1*(11/3-ems involved in a tightening of the withdrawal and substitution
1111e8 Under the Board's margin regulations. It had also been contemplated
thai.
" the Division of Research and Statistics would report briefly, if the
so desired, on developments with respect to stock market credit.
11°
"
3741
12/17/58
-19-
Mr. Solomon said that he understood Mr. Young, Director of the
13ivision of Research and Statistics, had been informed by Chairman Martin
l'egarcling the nature of his conversation with President Funston of the
New York Stock Exchange.
As the result of that conversation, an official
Of the Stock Exchange was to visit the Board's offices tomorrow for
discussion with appropriate members of the staff.
Governor Szymczak said he considered it desirable for the minutes
to reflect that the subject of a possible tightening of the withdrawal and
stlbstitution rules had been taken up by the Board on several occasions
l'ecelltlY, including today, because the question might later arise in the
e°11rse of Congressional hearings on financial matters.
Integration of Bank Plan and Social Security (Item No. 18).
ques
At the
Of Mr. Fulton, Chairman of the Board of Trustees of the Retirement
SYStexn of the
Federal Reserve Banks, the Retirement Committee had underta"ken• a study of the effect of the Social Security Amendments of 1958 on
the Bank Plan of the Retirement System.
In its report, submitted under
11/te of October 30, 1958, the Retirement Committee recommended that no
ellsllge be made in the Rules and Regulations of the Retirement System as
4 reslat of the Social Security Amendments.
The effect of this recom-
11"dation, if approved, would be that the Reserve Banks and their employees
14°111(1 each increase their Social Security tax payments from 2-1/4 to
'` Per cent of salary up to the new wage base for tax and benefit
131-1rPoses of $4,800 per annum,
commencing January 1, 1959, but that the
Point in the Bank Plan formula would remain at $4,200, the present
3,745
12/17/58
-20-
wage base for Social Security.
The formula for computing the pension
Porton of the retirement allowance (the portion afforded by the Reserve
Banks' contributions) would continue to be 3/4 of one per cent on the
first $4,200 of the final average salary and 1-1/2 per cent above $4,200,
and the formula for the annuity (the portion afforded by the employee's
contributions) would continue to require contributions by members at
4 Per cent of salaries in excess of $4,200.
Having received a copy of the report of the Retirement Committee,
the Division of Personnel Administration had prepared an analytical
Illem°randum on the subject under date of December 9, 1958, and copies
°f this memorandum and the Committee report had been distributed to the
11(3ard.
The Division memorandum recommended that, if the Presidents'
C°11ference should endorse the report of the Retirement Committee, the
13°ard consider interposing no objection.
At yesterday's joint meeting of the Board and the Presidents,
the Board was advised that the Presidents' Conference had accepted
the report of the Retirement Committee.
Governor Robertson stated that although the memorandum from
the Division of Personnel Administration was well prepared, he did not
ee with the position taken therein for it appeared to him that
'
4€Ct
c°11elArrence in the recommendation of the Retirement Committee and the
Pl'esidents' Conference would represent backsliding.
out at
As he had pointed
yesterday's joint meeting, the decision last year was to integrate
at the $4,200 level, supposedly to bring the Bank Plan up to date, and
3746
12/17/58
-21-
ng to the same
adoption of the current recommendation would mean reverti
situation as
base was raised from $3,600
existed when the Social Security
to $4,200.
that the
Governor Robertson went on to express the opinion
favorable aspects of the recommendation were set forth in terms that
woUld not stand up under scrutiny.
As an example, he turned to the
a-rglznent that diminution of total benefits would occur incident to
1'1-tither integration.
n
On the basis of a table set forth in the Divisio
Memorandum, showing retirement allowances of retirees with 30 years'
service at various salary levels under the current Bank Plan, the proposed
Bank Plan (no integration), and a fully integrated Bank Plan, Governor
Robertson observed that, as between the latter two plans, no differences
1/0111d appear below the
$4,800
annual salary level.
Each of them, he
noted, would afford larger total retirement allowances than the current
131an.
integrate
In substance, it seemed to him that if the conclusion to
at the $4,200 level was right last year, then a decision against further
14tegration at this time must be wrong.
In the
future
He inquired what would be done
when there were additional amendments to the Social
Security
Act.
any
In further comments, Governor Robertson suggested that
diMinution in benefits resulting from full integration would be more
than offset by lesser deductions from employees' salaries and that a
with the recomclecision against integration would not be in harmony
Mendations of Industrial Relations Counselors Service.
374'5
12/17/58
-22-
Governor Mills stated that it would be his judgment to approve
the recommendation of the Retirement Committee and the Presidents'
Conference.
As he saw it, what the Board essentially was deciding
whether the Bank Plan of the Federal Reserve Retirement System
should be regarded as additive or supplemental to Social Security
Protection.
If additive, then the move would be not to integrate
/bsn Social Security benefits were increased, but rather to add the
Retirement System benefits to those afforded by Social Security.
This
441 come to be increasingly general practice in the development of
PrIvate pension plans.
If the decision should be to integrate with
8°eial Security, then the thought of Social Security and the pension
131'ovided under the Bank Plan would come to be a single thought.
There
llould be the disadvantage, as brought out in the Division memorandum,
th4t
the spirit of the Retirement System would be violated, particularly
43:1 the lower ranges of the salary scale, because the principle of
Ireighting of benefits according to length of service would be infringed
121°04 and perhaps eventually eliminated.
Mr. Sprecher then developed some of the considerations that the
lel'sonael Division had had in mind in studying the problem.
One was that
tillither integration with Social Security eventurilly would result in a
sUbstantial reduction of the pension part of the retirement allowance
414 that, at least for employees with long service, Social Security
betlefits would not offset the reduction.
Another was that if the
12/17/58
-23-
Reserve Banks were going to follow community practices in the area
Of c
ompensation, it would seem fully as important to follow those
Practices in the area of fringe benefits.
In this connection, he said
hs had been in touch with certain New York firms and that, although
6°1s firms had in mind moving toward further integration with Social
Security, the intention was to augment existing benefits at that time.
Slleh a procedure, he noted, was in accord with the philosophy expressed
1*. Industrial Relations Counselors Service for, as he understood it,
the basic concept of that firm was that further integration should be
ccmpanied by augmentation of benefits in order that the total
"
Pension benefits would not diminish.
This was the procedure followed
ill 1957 when integration of the Bank Plan with Social Security at the
$4,211^
'iv level was accomplished.
In a further comment, Mr. Sprecher
154inted out that increases in the level below which no contributions
tol the
Retirement System would be made by the employee would result
14 a lover annuity with the passage of time.
After Governor Robertson had reviewed the conclusions stated
In
the memorandum from the Personnel Division and indicated why he
gliestioned the validity of some of them, Governors Szymczak and
Shepardson
indicated their concurrence in the recommendation of the
Retirement Committee and the Presidents' Conference.
Accordingly,
- the majority view seemed clear, Governor Robertson suggested
that it 'would be advisable to bring the matter to a prompt conclusion.
Chairman
Martin, he pointed out, could record his position when he
Joined the meeting later.
"i,A;
e
12/17/58
-24-
Governor Mills then made a further statement in which he
exPressed the view that the System should not flop back and forth on
the question of integration of the Bank Plan and Social Security. In
hie view, a bridge had been reached which must be crossed permanently.
It the present position against further integration were maintained in
the face of increases in Social Security benefits in the future,
1)1‘esumably it would be necessary to devise some means at the pension
8.11c1 annuity end of the retirement program to prevent the total retirement
11°Vance from rising above 50 per cent of the final five-year average
sale-17 or such other percentage as might be deemed most appropriate.
Whether that could be done without destroying the principle of rewarding
length of service, he did not know, but it was a matter that should
be given a great deal of study.
Governor Mills also commented that the philosophy in the operation
t retirement systems had thus far become progressively more liberal.
It that trend should continue and should be recognized by the Board and
the
Reserve Banks in their decisions concerning the Retirement System,
ill'eaUltably the additive portion of the retirement allowance above
soci ,
8.4., Security would be increased, and the Retirement System was a
ec
'et1Y thing even at the present time.
Governor Shepardson agreed that the System should not be in a
1114cillat1ng position.
On the other hand, he observed, it was not possible
)1t this stage to predict what the trend would be in the future, and he
th°
t the Personnel Division had properly suggested that the question
375()
12/17/58
-25-
°f further
integration as the Social Security tax and benefit base
increased should be the subject of continuing study, with the approPriateness of any action to be considered in the light of existing
circumstances at any time.
One could not tell, for example, what changes
ht be made in the Social Security program.
They might clearly make
it aPPropriate to follow the procedure recommended at this time, but
there could be changes in the whole pension philosophy such as to make
snother course of action advisable.
Accordingly, it would not seem
clesirable to be frozen into a pattern.
Thereupon, it was agreed, Governor Robertson dissenting, to
c°11eur in the recommendation of the Presidents' Conference that no
4ction be taken at this time to amend the Rules and Regulations of the
Retirement System of the Federal Reserve Banks to reflect the 1958
alllendinents to the Social Security Act.
This action was taken with
the Understanding that Chairman Martin would have an opportunity to
sent to the
t4te his position before advice of the Board's action was
l'residents.
Secretary's Note: Upon joining the meeting during
the afternoon session, Chairman Martin stated that
he favored concurrence in the recommendation of the
Presidents' Conference.
A copy of the letter sent pursuant to this action to the Chairman
Of the Presidents' Conference, with copies to the Chairman of the Board
Of Trustees
of the Retirement System of the Federal Reserve Banks and
to the Chairman of the Retirement Committee, is attached as Item No. 18.
Messrs. Johnson, Solomon, and Sprecher then withdraw from the
n'eeti4€.
(
-26-
12/17/58
Appointment of Consulting Architect.
During a meeting in
exectIttve session on October 310 1958, the Board authorized Governor
811ePardson to take steps to secure a replacement for Mr. C. David
?ersina, the Board's Consulting Architect, who died last spring.
In
4 memorandum dated December 11, 1958, which had been distributed prior
t° this meeting, Governor Shepardson recommended that Eugene E. Witherell,
Actt4g Director, Architectural and Structural Division of the Public
kildings Service, General Services Administration, be engaged as
C°48111ting Architect to the Board, with compensation at the rate of
$70 Per
day based upon the amount of his own time spent on matters
rel!ea.red to him by the Board, subject to receipt of advice from the
Buildings Service that such an arrangement would be satisfactory
to that organization.
In this connection, the memorandum noted
tefIffirmation by the Legal Division of the view that from a legal
titalldPoint there would be no objection to paying consultant fees to
e'Per8011
receiving salary at the same time from the Public Buildings
Service.
Following a brief discussion, the recommendation contained in
rnor Shepardson's memorandum was approved unanimously.
Proposed shelter (Item No. 19).
At the meeting of the Board
N"ember 17, 1958, it was decided to arrange with the architectural
Of Harbeson Hough Livingston & Larson, Philadelphia, Pennsylvanit,
to tal,
-e preliminary studies and sketches of a blast-proof, fallout-free
she1
ter which would serve as a sub-structure under any addition to the
12/17/58
-27-
13(pard's building which might be built on the north side of "C" Street.
A Memorandum from Governor Shepardson dated December 16, 1958, which
haa been distributed prior to this meeting, stated that a draft of
agreement, based on the contract entered into in 1940 covering plans
r°r an addition, had been submitted to the architectural firm for
coMment, this form having been used so that the contract would be
ecmPlete in the event the Board should decide to proceed beyond the
Preliminary studies and sketches.
The memorandum also spelled out
differences between the proposed agreement and the agreement entered
into in 1940.
Submitted with the memorandum were the draft of agreement
al4c1 a suggested letter to the architectural firm.
As to payments, the proposed agreement provided for a fee,
fer all services enumerated or described therein with certain exceptions,
the construction
equal to 5-3/4 per cent of the total cost to the Board of
g the
alid completion of the shelter, as determined by the Board, includin
cost of landscaping and work on the exterior grounds.
be
This fee was to
Paid in the following installments: (a) 20 per cent upon the
rUrnishing of the preliminary plans and estimates, (b) should the
13°ard decide to proceed beyond the preliminary plans and estimates, an
4ciciltional
6o per cent when contract drawings and specifications were
on of the
and (c) the remaining 20 per cent upon completi
shelter and its acceptance by the Board.
Until the actual cost of the
shelter was known, all payments to the architect not definitely fixed
aunt were to be computed on the basis of the estimated cost; and
-28-
12/17/58
the actlipl cost of the shelter became known, payments theretofore
made were to be adjusted in conformity therewith.
Estimates of cost
were to be made by the architect, but would be subject to the approval
of the Board.
Governor Shepardson stated, with regard to the payments, that
'
at
this point it was the architect's off-hand guess that the cost of
the Preliminary studies and sketches, computed according to the formula
Set
forth in the agreement, might be in the neighborhood of $20,000 to
He noted that no provision for this work had been made in the
13°4rd's budget for 1959 and suggested that a special project budget be
Set
uP for the purpose if the Board was disposed to enter into the
a.greement with the architectural firm.
In further remarks, Governor Shepardson said that a rough draft
Of
agreement
had been submitted to the architect, the architect had
Mad.e comments, and the Board's staff had reconciled points of difference.
Therefore, the draft of agreement in its present form was satisfactory
b°th to the Board's staff and the architect.
Following a brief discussion, during which Governor Robertson
14d1oated that he was prepared to approve the draft of agreement
IgIthout hesitation on the basis of Governor Shepardson's report, the
sending of the agreement to the architectural firm for execution was
2:1211-21 unanimously.
This action was taken with the understanding
that a special project budget covering the preliminary studies and
sketches would be set up in the budget of the Board for 1959.
A
12/17/58
-29-
eqVY of the letter sent to Harbeson Hough Livingston and Larson is
a
ttached to these minutes as Item No. 19.
Examination of the Federal Reserve Bank of Chicago.
The
l'ePort on the examination of the Federal Reserve Bank of Chicago made
by the Board's field expmining staff as of September 19, 1958, had
c°111131eted circulation to the members of the Board.
At the Board's request, Mr. Smith commented on various matters
covered in the report and accompanying memoranda, including personnel
chA,nt
--41ses under consideration in the light of the forthcoming retireme
Of the
Bank's
First Vice President and certain other members of the
°fricial staff.
In this connection, reference was made to the relation
of possible personnel realignment to the management of the Bank
F4candriation Department.
Mr. Smith noted that Governor Robertson had raised a question
'when the examination report was in circulation about service by Vice
Pl'esident Hugh Helmer as a member of the investment committee of the
Stock of the Month Club, Barrington, Illinois.
He said that President
Allen was to provide additional information on this outside activity
files, with
4411 that a memorandum would then be placed in the Board's
4 coPY to Governor Robertson.
from the
Messrs. Hackley, Masters, and Smith then withdrew
fleeting.
375.
12/17/58
-30-
Director appointments.
Subject to Chairman Martin's concurrence,
the following actions were agreed upon with respect to the appointment
Of directors at Federal Reserve Bank branches:
1. To request the Chairman of the Federal Reserve Bank of
New York to ascertain whether Mr. Whitworth Ferguson, President
of the Ferguson Electric Construction Company, Buffalo, New York,
would accept appointment, if tendered, as a director of the
Buffalo Branch for the three-year term beginning January 1,
1959, with the understanding that if he would accept, the
appointment would be made.
2. To request the Chairman of the Federal Reserve Bank of
Atlanta to ascertain whether Mr. John M. Fox, President of the
Minute Maid Corporation, Orlando, Florida, would accept appointment, if tendered, as a director of the Jacksonville Branch for
the three-year term beginning January 1, 1959, with the understanding that if he would accept, the appointment would be made.
3. Since Mr. Carl McFarland was not available for
reappointment as a director of the Helena Branch, to request
the Chairman of the Federal Reserve Bank of Minneapolis to
ascertain whether Mr. John D. Stephenson, senior partner in
the law firm of Jardine, Stephenson, Blewett, and Weaver, Great
!
ails, Montana, would accept appointment, if tendered, for the
'
470-year term beginning January 1, 1959, with the understanding
that if he would accept, the appointment would be made.
4.
If Mr. Stephenson were not available, to request the
'"airman of the Federal Reserve Bank of Minneapolis to ascertain
lihether Mr.
Norman J. Holter, Research Director of the Holter
Research
Foundation, Helena, Montana, would accept the appointment
if tendered and, in the event of an affirmative indication, to
make the appointment.
Secretary's Note: Upon joining the meeting
during the afternoon session, Chairman Martin
stated that he concurred in the aforementioned
actions. The appointments of Messrs. Ferguson,
Fox, and Stephenson were later made by the Board
following receipt of advice indicating their
willingness to serve as branch directors.
12/17/58
-31-
The meeting then recessed and reconvened at 2:25 p.m. with
Messrs. Szymczak, Mills, Robertson, and Shepardson present.
From the
staff Messrs. Sherman, Kenyon, Connell, Bass, and Kakalec were present
sicIng with the following:
Mr. Young, Director, Division of Research and Statistics
Mr. Marget, Director, Division of International Finance
Mr. Furth, Associate Adviser, Division of International
Finance
Mr. Sammons, Associate Adviser, Division of International
Finance
Partial renewal of gold loan to Haiti (Item No. 20).
On
SePtember 22, 1958, the Board approved a loan on gold by the Federal
Reserve Bank of New York to the National Bank of Haiti in the amount
°11 $700,000.
The National Bank of Haiti had now notified the New York
Ilank of its intention to repay a sum of $400,000 on the due date
(December 26, 1958), but requested a thirty-day renewal of the
realainder of the loan.
In a telegram dated today, the Reserve
1/4nk staff expressed the intention of recommending favorably to the
1144k's Board of Directors and requested approval by the Board of
Governors.
A memorandum from Mr. Marget under today's date, which had
been distributed, recommended favorable action on the part of the
toard.
Following comments by Mr. Marget, the requested renewal of the
g°1d loan was approved unanimously, effective upon authorization thereof
the Board of Directors of the Federal Reserve Bank of New York.
A
of the telegram sent to the Reserve Bank pursuant to this action
le a
ttached as Item No. 20.
341"'y
12/17/58
-32-
Messrs. Marget, Furth, and Sammons then withdrew from the
meeting.
, the meeting
Following informal discussion of certain matters
recessed briefly and then reconvened with Chairman Martin present.
Mr.
1°1111g was not in attendance when the meeting reconvened.
Board's budget for 1959 (Item No. 21).
There had been dis-
t
ributed to the members of the Board a summary of the proposed Board
budget for 1959, prepared by the Office of the Controller. The budget
ed expenses.
totaled $7,070,7821 or $1,099,425 more than 1958 estimat
Regtaar operations of the divisions were budgeted at $6,349,577, while
sPecial projects totaled $721,205.
At Governor Shepardson's request, Mr. Connell reviewed the
increase.
highlightS of the budget summary, including major items of
program-type
Re also commented on the use for the first time of a
tes following
blidget, as recommended by Lester B. Knight and Associa
their management and systems survey in 1957.
to the other
Governor Shepardson then noted that he had sent
Zembers of the Board a memorandum dated December 11, 1958, in which
he made certain observations regarding the proposed budget and the
tliend of Board expenses in recent years.
Commenting in amplification
°I' that memorandum, he celled attention to the increase of almost
50 per
the 1959 budget
cent for personal services when one compared
e in
Ilith 1954 expenses and, even more significantly, the increas
'ray
12/17/58
-33-
no
npersonal services from $940 thousand to $2.3 million.
These trends,
he aaid, should at least cause the Board to scrutinize with extreme
care expensive special projects proposed from time to time.
Governor Shepardson went on to say that, due to the pressure
of time, he had instructed the Controller to go ahead with the
sixamlarization for the Board on the basis of the budgets presented by
the
rsPective divisions.
However, as indicated in his December 11
Ille morandum, he (Governor Shepardson) would recommend deletion or
111(4ification of certain items as follows, which would effect reduction
°f budr,e4t,. provisions in the amounts indicated:
Minutes safe (deletion)
Outside work on preparation of
Chart Book (deletion)
Restyling Annual Report (deletion)
Appraisal of restyling of Federal Reserve
Bulletin (deletion)
Cost of printing Federal Reserve
Bulletin (reduction)
Replacement of automobile (deletion)
Reprinting Loose-Leaf Service (deletion)
Furniture replacement (reduction)
$
925
10,000
1,200
200
15,000
6,500
23,000
15,000
The memorandum also recommended approval of an additional position of
to
8e°11ftle Editor in the Division of Research and Statistics subject
the Understanding that the continuance of the additional position would
be rieviewed at the time of retirement of Miss Butler, Economist (Editorial),
41.4 elimination of a proposed third position of recruit Economist in the
seIlle Division.
Governor Shepardson's recommendations were approved unanimously.
12/17/58
Governor Shepardson then stated that the Controller had
re
commended that copies of the budget, less sheets showing individual
Salaries, be furnished to the head of each division to give a better
Picture of the Board's program and aid in planning, and there was
unanimous agreement with this recommendation.
With respect to the proposed budget as a whole, Governor
ShePardson commented that the Board had considered the various special
Projects as they came up and each one had seemed warranted.
However,
the sizeable growth was apparent when one looked at the budgets over
the past five or six years.
At this point discussion turned to the tentative budget
Pre'vision of $500,000 for the third part of the small business
financing study, namely, a survey of borrowers.
This was intended
to cover the cost of contracts with the Bureau of the Census or other
°rganizations for conducting surveys of manufacturing, retail, and
wholesale trade.
Due to the difficulty in determining a satisfactory
veY universe and other factors, the budgetary provision had been
'
8111
Set UP
arbitrarily to give the Board some idea of the size of the
Pl'oiect pending the availability of more specific cost data when
elqaoratory survey work by the Census Bureau was completed.
As stated
14 Governor Shepardson's memorandum of December II, such preliminary
tildies had not proceeded far enough to determine whether this would
he
4
$1,000,000 job or a much less costly one.
Nevertheless, it had
seelned desirable to include some figure in order to minimize the
7'60
12/17/58
-35-
Possibility of having to confront the Reserve Banks with a large
and unexpected assessment increase for the second half of the year.
Governor Shepardson stated that if it should be determined
atter preliminary testing that a part, at least, of the study could
be conducted by means of a mail survey, the cost of the project could
P°ssibly run as low as around $200,0001 while the cost could conceivably
rtla as high as $1,000,000 if it were determined that personal interviews
17ere required.
He indicated that the Division of Research and Statistics
110Ped to have a better basis for estimating within a period of about
c In this connection, he also observed that the provision of
6° l
4 figure in the budget did not mean necessarily that the amount budgeted
840Uld be spent.
After the matter was considered further in the light of the
13110spective value of the study and the commitments with regard thereto
11144e by the Board to the Congress, Chairman Martin stated, in pursuance
Ola a suggestion by Governor Mills, that if the Board so desired he would
be glad to discuss the subject with appropriate members of the Congress
14 order to obtain their reaction.
Before doing so, however, he felt
that it would be desirable to have a more firm estimate of the magnitude
Of the expenditure along with an outline of what the expenditure was
(014.1g to cover.
Governor Robertson commented that the matter might be discussed
14 terms of alternatives if the Division of Research and Statistics
12/17/58
-36-
shoUld determine that a type of survey involving lower cost would be
of some
value.
It was then agreed that the matter would be handled along the
lilies suggested, which meant that the provision of $500,000 would be
left in the 1959 budget but that the survey would not be actually
lastituted pending further consideration of the project in the light
Of discussion by Chairman Martin with appropriate members of the
COagress.
In connection with this and other items, Governor Robertson
8e1d it
should be understood that the amounts included in the budgets
Of the respective divisions were not necessarily the amounts that had
t° be spent.
He suggested a word of caution be sent to all of the
cilvisions in this regard, and there was concurrence in this suggestion.
All of the members of the staff except Mr. Sherman then withdrew
*am the meeting.
Governor Shepardson referred to a memorandum that he had dis**Muted to the members of the Board under date of December 11, 1958,
l'eal
'
aing staff salaries.
He commented that there had been an increase
14 staff salaries which, when reduced to percentage terms, showed a
Ilae of over
thari
that
6
per cent per year since 1955.
This seemed to him higher
necessary and, in analyzing the rise, he had come to the conclusion
the so-colled progress increase, which was originally designed to
'ate to the individual employee that he was making satisfactory
1314°€
'
1'ess on his job, had come to be a more or less automatic increase
12/17/58
-37-
given annuslly or at 18-month intervals to employees if they remained
on the payroll.
in 4
Governor Shepardson said that he questioned whether
staff the size of the Board's it was reasonable to think that
everybody in the organization was making satisfactory or adequate
Iprogress each year and thus entitled to what was termed a progress
increase.
He would hope, of course, that the great majority would
at least meet this standard, but the fact was that progress increases
//ere being given to virtually every person eligible for them, and it
ePPeared that they had become practically automatic almost regardless
c't vhether real progress was shown in the work.
Governor Shepardson
/lellt on to say that he would recommend that the Board agree upon a
st
atement as to the progress salary increase program that would call
f°11 greater discrimination on the part of supervisors and division
heads than hail been exercised in the past in recommending persons
tc)r Progress increases.
In other words, the program should be
8441il11stered so that an increase in salary would, in fact, denote a
Judgment that there had been progress in the employee's contribution
tO the Board's work.
In making this proposal, Governor Shepardson
said he realized such a program would differ from that rather generally
fol
-4-uwed in Govelnment departments as he understood it, but that did
4°.t bother him particularly because the Board had availed itself of
the freedom it had on the up side in so far as salary adjustments were
e°11cerned.
For example, compared with Civil Service the Board had a
e°4siderdbly higher number of employees in the so-called super-salary
3'763
-38-
12/17/58
grades than might be expected on the basis of total number of employees.
The Board also had exercised somewhat greater freedom in reclassifications
°f positions than he understood to be the case at Civil Service.
Governor Robertson inquired whether the recommendation contemPlated that the number of persons on the Board's staff receiving progress
salary increases annually would be reduced from say 98 per cent of the
staff to perhaps 50 per cent.
Governor Shepardson responded that he doubted the reduction
vould go nearly as far as 50 per cent.
He thought it likely that a
More discriminating approach might mean that instead of progress salary
Increases for perhaps
99 per cent of those whose ranges permitted such
increase, it might develop that something more like
75 or 80 per cent
Of the
staff would receive such recognition in the course of a year.
Rowever, he preferred not to have in mind any fixed figure.
His
emPhasis would be on the point that division heads should be discriminating in submitting recommendations for progress salary increases.
If this approach were approved, he would plan to discuss the program
e't a meeting of Division Heads, and he felt that an understanding of
the program he was proposing should be carried down to other supervisory
levels, since it was an important part of the training of the more
JUnior supervisors that they learn to exercise discrimination in matters
SUch as this.
Governor Shepardson again commented that if pursuit of
81-1°h a program were to result in progress salary increases for
75 or
8° Per cent of the eligible employees in the course of a year, this
12/17/58
-39-
would represent a distinct departure from the practice followed
throughout Government where he understood the progress salary increase
vas practicslly automatic for everyone eligible.
Governor Robertson said that he understood the gist of this
recommendation to be that an individual who had not made satisfactory
increase,
Progress over the year should not be blanketed in for a salary
aM Governor Shepardson responded that this was the substance of what
he Was recommending.
that the
Turning to merit increases, Governor Shepardson said
increases
Program adopted by the Board for granting meritorious salary
some years ago had been intended to recognize by additional salary
adjustments those individuals who for a considerable period of time
s
had given outstanding service, over and above the normal progres
sort
Or contribution that might be recognized by increases of the
that had just been under discussion. However, the meritorious salary
eliminating persons
increase program had developed in a way where, after
and
already at the top of the grade, members of the official staff,
a few others not eligible for this type of increase, about 30 to 32
Per cent of the eligible employees were receiving merit increases each
reclassification or
Y'ear. In addition, about 16 per cent had received
Promotion increases in the course of a year.
This did not mean that
some might have
48 per cent of the staff received such increases, since
_11.0
12/17/58
received both reclassification and merit increases.
Governor Shepardson
questioned whether the Board was justified in giving 30 per cent of the
staff meritorious increases each year, in addition to the progress
He would recommend that Directors of Divisions be requested
increases.
to limit their proposals for meritorious salary increases to approximately
20 Per cent, rather than 30 per cent, of the eligible staff in their
divisions in the course of a year, but he would caution against a fixed
Percentage figure; it would be preferable that the statement for Division
Heads include wording that they were requested to observe a higher degree
(If selectivity than heretofore had been exercised in submitting recommendations for meritorious salary increases.
With respect to reclassification and promotion increases,
Governor Shepardson said that these were given only when the increased
l equirements of a position in question called for a higher classification
'
or when a person was being promoted to a more responsible and demanding
Position.
He felt that an excellent job was being done by the Personnel
Classification Committee on positions in the lower two-thirds of the
8°.larY structure, in that careful appraisals both within the classification and in relation to positions outside the classification were
being made.
He was not sure that the reclassification surveys for
some of the higher positions had been as carefully reviewed as in the
those
1°14er grades, although an attempt had been made to safeguard
classification surveys and, in approving higher grades, to limit them
iii some cases to the individual who was contributing over and above the
°I'dinary demands of the job because of his particular incumbency.
;^-r
12/17/58
One other point he wished to mention, Governor Shepardson said,
as that occasionally a recommendation was made by a Division Head for
ft meritorious salary increase for someone who also within a matter of
a very short time either had been or would be considered for reclassification.
There had even been cases where within a matter of a few days
recommendation for a progress increase, a meritorious increase, and a
Promotion increase had been submitted.
He questioned whether this was
n
justified except in extremely rare cases, and he felt that Divisio
Heads should be asked to be careful not to compound merit increases
With reclassification adjustments at almost the same time.
Governor Shepardson said he recognized that the Board members
Might have comments on these proposals, and he would be glad to hear
ication
them, including comments on the total crawl upwards in classif
that had occurred in all parts of the salary range.
of
Governor Shepardson then took up the matter of salaries
memorandum
members of the officer staff, concerning which he had sent a
to the Board members on December 16, 1958.
He recalled that in January
promotions
1958, after very careful study, the Board made a number of
and increased salaries of several members of the officer staff in a
due and
Manner that it then thought would give recognition that seemed
'Which would take care of needs for some time to come.
In mid-year, at
increase, the
the time of the Government's 10 per cent general pay
80ard had considered and 'adopted the general pay increase and included
37
12/17/58
-42-
the officer staff, and this had resulted in bringing the salaries of
anticipated
members of that group beyond the level that the Board had
at the beginning of the year.
Governor Shepardson said he dolibted that
the Board could have done differently, but the fact remained that this
any blanket
created something of a problem, as always was the case with
salary increase.
ing
A few members of the officer staff were now receiv
higher salaries than seemed to him to be justified.
For the officer
further
staff as a group, he did not feel that this was the time for
s later.
salarY increases, except for one that he would discus
or Shepardson
In concluding his comments on these matters, Govern
convey both by
Said that, if the Board agreed, he would propose to
statements and in a meeting with Division Heads the views he had
meritorious
eXPressed here today concerning progress salary increases,
salary increases, and reclassifications and promotions.
expressed
Governor Mills stated that he agreed with the views
and with the proposal to take them up with Division Heads.
As it
on heads and
sP/ocared to him, the task was to cultivate in divisi
responsibility
section chiefs of the Board's staff the same sense of
Tor controlling expenditures that they felt for development of their
Professional or technical work.
As the years had gone on, there had
had become semibeen acceptance of the budgetary increases that
automatic.
would look at
The time had arrived where, if the staff
ll
the situation realistically, it must be sympathetic to the over-a
r`76.r1
12/17/58
-43-
problem that faced the Board as an agency within the Federal establishment.
Governor Robertson said that he agreed completely with the
views stated by Governor Shepardson and with his plan for making them
known to the staff, and Governor Szymczak indicated that he too concurred.
Chairman Martin stated that he also approved the program that
Governor Shepardson had outlined, adding that he thought this would
represent a step forward and that it was a problem on which the Board
should continue to work steadily.
All of the members of the Board who were present having indicated
general concurrence with the approaches recommended by Governor Shepardson
concerning progress and meritorious salary increases and reclassifications
positions that would result in salary adjustments, it was understood
that he would proceed with his plan to issue statements along the lines
of his comments at this meeting and that he would also discuss the
Program at a meeting of Division Heads.
Governor Shepardson then stated that he wished to take up some
specific salaries for members of the officer staff.
In line with what
he had just stated and with informal discussions that he had had with
8°me of the Board members, this seemed to him not to be the time to
consider further increases in officer salaries generally.
Two or three
cases had been brought to his attention, however, where Division Heads
felt quite strongly that adjustments should be made.
After outlining
12/17/53
these cases
Cases, Governor Shepardson stated that in only one case did he
'
wish to recommend to the Board an increase in salary of a member of
the officer staff, namely in the case of Mr. Kenyon, Assistant
Secretary, for vhom he would recommend a salary effective January 1,
1959,
of $13,500 per year.
There was unanimous approval of Governor Shepardsonts recom-
mendation.
transfer
Governor Shepardson commented that he had approved the
from the Division of Bank Operations to the Office of the Secretary of
Mr. Robert L. Hill in the position of Assistant to the Secretary, a non(nicer position, and that, with the Boardts approval, the Secretary
work
Planned to use Mr. Hill as quickly as he became familiar with the
°I' the Office in helping to prepare minutes, which vould mean that he
also would be attending Board meetings.
There was no indication of
that the
aissgreement with this procedure, and it was understood
investigation made
necessary steps would be taken to have a full field
for Mr. Hill.
Office
Governor Shepardson next referred to the 'workload of the
Of Defense Loans, noting that there had been a substantial reduction
in the volume of V-loans processed during the past fev, years and that
at the present time neither Mr. Boothe nor his secretary were fully
°coupled.
different assignment
He said that he had endeavored to find a
to *which Mr. Boothe might be transferred or other work that might be
transferred to his office but that he had not been successful in this
X
12/17/58
effort.
-45However, Mr. Boothe, because of his health, was working short
hours on advice of his doctor and was using some sick leave for that
Purpose.
Governor Shepardson noted that Mr. Boothe would become
eligible for retirement under the usual terms of the Retirement System
ou February 2, 1960, and that he had indicated he might wish to avail
himself of early retirement. In view of the amount of annual and sick
leave to Mr. Boothe's credit, it would be possible for him to be retired
Pkrsically several months ahead of that date, Governor Shepardson said,
and it was his suggestion that he be authorized to discuss with Mr.
Boothe plans for his retirement along the lines stated in the memorandum
that he (Governor Shepardson) had sent to the individual members of the
Board under date of December 161 1958.
/lith this suggestion.
There was unanimous agreement
It was also understood that Governor Shepardson
vould request Mr. Boothe during his remaining time on duty to prepare
4 comprehensive review of System experience in connection with the
defense loan program.
Governor Shepardson then stated that this completed his
liecommendations with respect to the proposed Board budget for 1959
4411 related salary matters.
Accordingly, the budget (attached Item
Itt_21) was approved unanimously subject to (1) the deletion or reduction
of
specific items recommended in Governor Shepardson's memorandum
December 11, 1958; (2) the establishment of a special project budget
'
for the cost of preliminary plans and sketches for a shelter to be
3771
12/17/58
Constructed across "C" Street; (3) deferral of expenditures in
connection with the third phase of the small business financing
study pending further consideration in the light of better cost
estimates and the discussions referred to earlier at this meeting;
and (4) the officer salary increase approved by the Board today.
Carry-over of unused annual leave.
Governor Shepardson
then brought to the Board's attention the fact that a few members of
the staff had, because of the Board's work, been unable to take all
of their annual leave during 1958 and that this would result in their
1°sing annual leave at the end of this year.
He recalled that two
Years ago the Board authorized a number of the members of the staff
to carry over annual leave under certain restricted conditions whereby
the leave ceiling would not be increased nna the leave carried forward
11°uld not be added to any other earned leave for purposes of increasing
the lump sum payment that might be made to an employee at the time of
termination of services.
Governor Shepardson reviewed this experience,
stating that it was not satisfactory to the divisions concerned and
that he would not recommend its repetition. However, it seemed to him
that it might be appropriate for the Board to consider a modification
Of its present rules regarding carry-over of unused annual leave beyond
December 31 each year so as to permit any employee who, because of the
130ard's work, had been unable to take his annual leave during the current
Year to carry it over with the understanding that it could be used at
44Y time during the first nine months of the succeeding year.
This
12/17/58
leave carried
would be with the understanding that in no case would this
employee under existing
forward raise the leave ceiling of the individual
leave be added
leave regulations, nor would the carrying forward of such
lump sum payment
to any other earned leave for purposes of increasing the
n of his
that would be made to the employee at the time of terminatio
services.
expressed the
With such a safeguard, Governor Shepardson
suggested
view that a modification of the leave rules to the extent he
the individual
'would be of administrative convenience to the Board and to
divisions, and he recommended its adoption.
helpful to have an
Governor Mills suggested that it would be
changing the
oPportunity to consider this suggestion thoroughly before
be prepared
leave rules, and it was understood that a memorandum would
meeting.
and distributed prior to consideration of the matter at a later
(Item No. 22).
Application of Worthen Bank & Trust Company
the appliThere had been circulated to the Board a file relating to
Arkansas, for
cation of Worthen Bank & Trust Company, Little Rock,
w branch in the neighborhood
Permission to establish a teller's windo
of Little
Of Markham and Hayes Streets just outside the city limits
Rock.
suggested that the
While the Federal Reserve Bank of St. Louis
d, it was the
aPPlication be held in abeyance for an unspecified perio
applirecommendation of the Board's Division of Examinations that the
cation be approved.
favorable action be taken
Governor Robertson suggested that
decision of the majority of the
°4 the application, if that were the
-48-
12/17/58
Board, but he added that he would like to be recorded as opposing the
granting of the application.
Following a brief discussion, approval was given to the letter
to the Worthen Bank & Trust Company of which a copy is attached as
Item No. 221 for transmittal through the Federal Reserve Bank of
3t. Louis, Governor Robertson voting "no".
The meeting then adjourned.
Secretary's Notes:
On December 161 19581 Governor Shepardson
approved on behalf of the Board the following
items:
Item No. 23)
Letter to the Federal Reserve Bank of New York (attached
.
4Proving the reappointment of John W. Shute as assistant examiner
ding that
Memoranda from appropriate individuals concerned recommen
erit salary increases be granted to the following employees on the
JJoard's staff in the amounts indicated, effective January 11, 1959:
T
Name and title
Division
Basic annual salary
To
From
Board Members' Offices
$ 5,770
Nancy B. Kelly, Secretary
$ 5,920
Office of the Secretary
Adeline R. Beeson, Records Analyst
Helen E. Cook, Supervisor, Bank and
Miscellaneous Records
!larY Jane Haymaker, Clerk
Elizabeth Jones, Supervisor, Minutes Unit
Katherine E. Olson, Records Clerk
5,240
5,090
5,390 1/
4,190
6,585
4,340
6,735
3,755
3,850
5,580
4,135
4,790
5,730
4,230
4,940
5,240
Legal
,',7,earl Crosby, Secretary
Paula G. Hauprich, Stenographer
Verna P. Ryon, Secretary
zr Salary following
28, 1958.
progress increase to be effective December
3'7'74
12/17/58
Name and title
-49-
Division
Basic annual salary
To
From
Research and Statistics
Alice E. Barnard, Library Assistant
Caroline H. Cagle, Economist
Dorothy G. Drake, Editorial Clerk
Theodore Flechsig, Economist
Virginia C. Gunter, Statistical Assistant
David R. Hull, Jr., Economist
Edward Kalachek, Economist
Esther P. Locke, Secretary
Milton Moss, Economist
Gail Roberts, Clerk-Stenographer
Mary Ann Shuler, Clerk-Stenographer
William J. Smith, Jr., Economist
Stephen P. Taylor, Economist
Charles A. Yager, Economist
$ 3,850
8,570
4,490
7,030
4,340
5,130
7,030
41490
11,355
3,945
3,945
7,030
9,890
9,890
$ 3,945
8,810
41640
7,270
4,490
5,280
7,270
41640
11,595
41040
41040
7,270
10,130
10,130
4,340
6,585
41490
6,735
7,270
4,190
13,070
7,510
4,340
13,370
8,330
5,090
9,050
41640
8,570
51240
9,290
41790
11,835
9,050
7,030
5,985
12,075
9,290
7,270
6,135
5,130
5,280
5,280
51430
International Finance
MarY V. F. Baker, Senior Clerk
Dorothy L. Helprin, Economist
Allan F. Rau, Jr., Economist
Anne T. Roberson, Secretary
Ralph C. Wood, Chief, European Section
Examinations
Robert F. Achor, Review Examiner
!nna S. Courtney, Secretary
'
II W. Huning, Review Examiner
James H. Joyce, Assistant Federal Reserve
Examiner
Brenton C. Leavitt, Supervisory Review Examiner
J6lin T. McClintock, Review Examiner
:Jerry B. Riley, Federal Reserve Examiner
william E. RuMbarger, Assistant Federal Reserve
Examiner
Linwood N. Tyndall, Assistant Federal Reserve
Examiner
R. N. Westmoreland, Jr., Assistant Federal
Reserve Examiner
/
12/17/58
Name and title
-50Division
Basic annual salary
To
From
Bank Operations
$4,64o
Doris V. Bubb, Statistical Clerk
9,890
Section
Series
Raymond J. Collier, Chief, Current
9,890
Lee W. Langham, Chief, Call Report Section
4,340
Mary Malinchock, Statistical Clerk
9,890
1/
Assistant
B. Ralph Massey, Technical
7,750
Paul D. Ring, Technical Assistant
$ 4,790
10,130
10,130
4,490
10,370
7,990
Personnel Administration
John J. Hart, Personnel Assistant
Robert B. Hamilton, Personnel Technician
9,050
5,130
9,290
5,280
5,240
3,150
5,580
3,635
3,730
2,960
3,150
4,190
31 540
3,340
3,055
5,390
3,245
5,730
3,730
3,825
3,055
3,245
4,34o
3,635
3,435
3,150
4,o4o
8,330
4,190
8,570
Administrative Services
Helen M. Capozio, Printing Clerk
James Jackson, Laborer
Sven E. Johnson, Inspector-Foreman, Labor Force
James R. Jordan, Mail Clerk
taMond C. Langley, Assistant Head Messenger
Nina L. Marcey, Cafeteria Helper
Richard J. Michel, Laborer
R. Jean Myers, Publications Clerk
Florence A. Norman, Relief Cook
Abraham Rose, Cafeteria Laborer
Eleanor W. Yates, Cafeteria Helper
Office of the Controller
:,48an O. Hoffman, Accounting Technician
8
u°11/1 Kakalec, Budget and Planning Assistant
Governor Shepardson today approved on
behalf of the Board the following items:
g the
Memoranda from appropriate individuals concerned recommendin
following actions affecting the Board's staff:
1/ Change in title to Chief, Reserve Bank Operations Section, effective
January 1, 1959.
3776
12/17/58
Aoikent
Phyllis H. Lockhart as Draftsman-Trainee in the Division of
Research and Statistics, with basic annual salary at the rate of
$3,590„ effective the date she assumes her duties.
Salary increases
effective December 28 1958
George L. Spencer, Jr., Secretary to Governor Szymczak„ from
A
156,505 to $72030 per annum.
Adaline Beeson, Records Analyst, Office of the Secretary, from
46,090 to $5,240 per annum.
Joan Hosley, Statistical Assistant, Division of Research and
Statistics, from $41o4o to $4,190 per annum.
Harold L. Emerson, Personnel Assistant, Division of Personnel
Administration, from $7A 270 to $7 510 per annum.
Manros A. Nickens, Mail Clerk, Division of Administrative Services,
fran $3,350 to $3,445 per annum.
Letter to the Federal Reserve Bank of Boston (attached
Item NO. 24) approving the appointment of Richard Charles Keith as
assistant examiner.
r
BOARD OF GOVERNORS
440,11.1g,4,
44_60011%,
,
,
,A
Or THE
,
'4 1',
:
;17
FEDERAL RESERVE SYSTEM
* AWIOV
4444***
WASHINGTON 25, D. C.
Item No 1
12/17/58
ADDRESS OFFICIAL CORRESPONDENCE
TO THE !SWARD
December 17, 1958
Board of Directors,
Bankers Trust Company,
New York
15/ New York.
Gentlemen:
Pursuant to your request submitted through the Federal
eserve Bank of New York, the Board of Governors of the Federal
tteserve System approves the establishment of a branch in the
.1,!111gs Bay Shopping Center on Nostrand Avenue between Avenues
4 and Zo Brooklyn, Kings County, New York, provided
the branch
18 established within one year from the date of this letter
and approval of the State authorities is in effect as of
the
date of the establishment of the branch.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
f1
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C,
Item No. 2
12/17/58
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 17, 1958
Board of Directors,
The Oystermen's Bank and Trust Company,
Sayville, Long Island, New York.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of New York, the Board of Govnrnors
Of the Federal Reserve System extends until March 2, 1959,
the time within which The Oystermen's Bank and Trust
Company may establish a branch on the north side of
Montauk Highway, approximately 800 feet west of Locust
Avenue in the unincorporated village of Oakdale, Suffolk
County, New York, under authority granted in the Board's
letter of July 21, 1958.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
ir-p
r4r.");,, ,e
., •
BOARD OF GOVERNORS
hoitti***4
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
Item No. 3
12/17/58
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 17, 1958
Board of Directors,
Riverside Trust Company,
Riverside, New Jersey.
Gentlemen;
Pursuant to your request submitted through the Federal
Reserve Bank of Philadelphia, the Board of Governors of the
Federal Reserve System approves the establishment of a branch
On Route 130, near the inters
ection of Charleston and Sunset
Roads, Willingboro Township, Burlington County, New Jersey, by
Riverside Trust Company, Riverside, New Jersey, provided the
branch is established within one year from the date of this
letter, capital is increased to not less than 050,000 to meet
Federal statutory requirements, and approval of the State
authorities is in effect as of the date of the establishment
Of the branch.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. L.
12/17/58
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 17, 1958
Board of Directors,
The First pennsylvania Banking and Trust Company,
Philadelphia 1, Pennsylvania.
Gentlemen:
Pursuant to your request submitted through the Federal
Reserve Bank of Philadelphia, the Board of Governors approves the
!
stablishment of a branch at 2560 Huntingdon Pike, Huntingdon
valley, Montgomery County, Pennsylvania, by The First Pennsylvania
zanking and Trust Company, provided:
1. the merger with Huntingdon Valley Trust
Company, Huntingdon Valley, Pennsylvania,
is effected substantially in accordance
with the Joint plan of Merger dated
October 27, 1958;
2* shares of stock acquired from dissenting
stockholders are disposed of within six
months from date of acquisition;
3. the branch is established within six months
from the date of this letter;
4. formal approval of the State authorities is
in effect as of the date of the establishment of the branch.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
Item No. 5
12/17/58
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 17, 1958
Board of Directors,
Society National Bank of Cleveland,
Cleveland, Ohio.
Gentlemen:
The Board of Governors of the Federal Reserve
System has given consideration to your application for
fiduciary powers and grants you authority to act, when
not in contravention of State or local law, as trustee,
executor, administrator, registrar of stocks and bonds,
guardian of estates, assignee, receiver, committee of
estates of lunatics, or in any other fiduciary capacity
in which State banks, trust companies or other corporations which come into competition with national banks
are permitted to act under the laws of the State of
Ohio, the exercise of such rights to be subject to
the provisions of section 11(k) of the Federal Reserve
Act and Regulation F of the Board of Governors of the
Federal Reserve System.
A formal certificate indicating the fiduciary
Powers which the Society National Bank of Cleveland is
now authorized to exercise will be forwarded to you in
due course.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
379‘
,
)
,
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No.
WASHINGTON 25. D. C.
12/17/58
6
AOORESB OFFICIAL CORRESPONDENCE
TO THE BOARD
December ,17, 1958
Board of Directors,
Genesee Merchants Bank &Trust Co.,
Flint, Michigan.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of Chicago, the Board of Governors of
the Federal Reserve System hereby gives its consent, under
the provisions of Section 18(c) of the Federal Deposit
Insurance Act, to the consolidation of Genesee Merchants
Bank &Trust Co., The First State and Savings Bank of
Flushing, Peoples State Bank of Flushing, and the State
Bank of Ortonville, under the charter of Genesee Merchants
Bank &Trust Co., and approves the establishment of branches
by the continuing bank as followst
130 East Main Street, Flushing, Michigan
122 East Main Street, Flushing, Michigan
4 South Street, Ortonville, Michigan
provided, (1) the consolidation is effected substantially in
accordance with the agreement between the parties dated
September 15, 1958, (2) shares of stock aceuired from dissenting stockholders of the constituent corporations are
disposed of within six months from the date of acquisition,
and (3) the pronosed consolidation and establishment of branches
are effected within six months from the date of this letter.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
3'78S
BOARD OF GOVERNORS
OF THE
;
)
444110
, ..---..tojot,
..04%
t
',1
41'
0 tt
1%
*
FEDERAL RESERVE SYSTEM
*
0
0
4:0
WASHINGTON 25. D. C.
4
4,
4413t,
Item No. 7
12/17/58
ADDRESS OFFICIAL CORRESPONDENCE
TO TUC BOARD
December 172 1958
Mr. Malcolm Bryan, President,
Federal Reserve Bank of Atlanta,
Atlanta 3, Georgia.
Dear Mr. Bryan:
As stated in the Board's letter to you dated June 3,
1958, on that date the Board reported to the Department of Justice
certain purchases of stock of Continental Gin Company on behalf
of Trust Company of Georgia and Trust Company of Georgia Associates
that may have involved violations of section 4(a) of the Bank
Holding Company Act. The Board has now received a letter on this
subject from the Department of Justice, dated December 4, stating
that the Department has concluded that prosecution is not warranted.
A copy of that letter is enclosed for your information and records.
It is presumed that the Department of Justice informed
the Board of its conclusion as a courtesy and also because of the
Board's administrative duties under the Act and the possible
relevancy of the Department's action in the event that the Board
has occasion hereafter to decide whether to report other apparent
7iolations. In the circumstances, and particularly because prosecution of violations of the Holding Company Act is not vested in
the Federal Reserve System, it would seem to be inappropriate for
the Board or your Bank to inform the holding companies concerned
of the position taken by the Department of Justice.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Enclosure
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No. 8
12/17/58
ADDRESS OFFICIAL
CORRESPONDENCE
TO THE BOARD
December 17, 1958
Comptroller of the Currency,
Treasury Department,
Washington 251 D. C.
Attention Mr. L. A. Jennings,
Deputy Comptroller of the Currency.
Dear Mr. Comptroller:
Reference is made to a letter from your offic
e dated
SePtember 3, 2_958, enclo
sing copies of an application to organize
!
..national bank at Roseburg,
Oregon, and requesting a recommenda'
10n as to whether or not the appli
cation should be approved.
A report of investigation of the application made by
an examiner for the Federal Reser
ve Bank of San Francisco discloses
generally satisfactory
findings with respect to the proposed
eaPital structure of the bank, its
future earnings prospects,
T,na
Cement, and convenience and needs of the community. Therefore,
'ne Board of Governors
recommends approval of the application.
The Board's Division of Examinations will be glad to
dis
4.„euss any aspects of this case with representa
tives of your
'lee if you so desire.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
3785
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
Item No. 9
12/17/58
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 17, 1958
Comptroller of the Currency,
Treasury Department,
Washington 25, D. C.
Attention Mr. Hollis S. Haggard,
Chief National Bank Examiner.
Dear Mr. Comptroller:
Reference is made to a letter from your office dated
JulY 28, 1958, enclosing copies of an application to organize a
national bank at Spokane, Washington, and requesting a recommendation as to whether or not the application should be approved.
A report of investigation of the application made by
an examiner for the Federal Reserve Bank of San Francisc
o indicates
that the proposed capital structure of the bank,
its future earnings
Prospects, and management would be reasonably satisfactory.
It is
reported that the need for additional banking facilities in Spokane
is not acute at the present time but that the public should
benefit
from the services offered by the proposed bank without creating an
Undue competitive situation. Accordingly, the Board of Governors
recommends approval of the
application.
The information submitted in the report discloses that
”me of the local people expressed the opinion that the organizaof the bank may be for the purpose of subsequent sale to some
°ttier banking group. The Board would not look with favor on the
°r anization of this bank for such purpose,
and it is assumed that
'Ills Matter will be resolved to your satisfaction.
The Board's Division of Examinations will be glad to
!:i&cuss any aspects of this case with representatives of your office
-44 you so desire.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
r)frayance
I' CU"
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No, 10
12/17/58
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 17, 1958
Mr. Victor R. Hansen,
Assistant Attorney General,
Antitrust Division,
Department of Justice,
Washington 25, D. C.
Dear Mr. Hansen:
This refers to your letter of July 9, 1958, with enclosures,
relating to complaints against the Pine Lawn Bank and Trust Company
of St. Louis, Missouri, regarding possible coercive insurance
Practices. You stated in your letter that, while the use of tie-in
a greements by the Bank may have been discontinued, the continuing
series of complaints indicate that perhaps other forms of coercion are
being used by Pine Lawn to restrict a borrower's reasonable choice of
insurance, and you requested that an examination be made of this matter
and that you be advised of the results.
Upon receipt of your letter we sent to the Federal Reserve
Bank of St. Louis all the pertinent documents and requested that an
investigation be made of the complaints. The Board is now in receipt
Of a report from Mr. Geo. E. Kroner, Vice President of the Federal
Aeserve Bank of St. Louis, the relevant portion of which is as follows:
"We have had several conferences with Mr. James T.
Dodds, Jr., Vice President and Secretary of the bank,
concerning this controversy. We did not attempt in these
meetings to resolve the above disputes, but rather to
obtain a clear statement from the bank concerning the
facts as an essential first step to an appraisal by
competent authority of the conformance of its conduct
With the provisions of the antitrust laws.
"As we understand it, the bank's position comes down
to this: it does not insist on controlling the insurance
on real property securing bank loans; however, it does
require (1) that such insurance be placed with a satisfactory
carrier, (2) that any renewal policy be in its hands thirty
Mr. Victor R. Hansen
-2-
days before expiration of current insurance, and (3) that
the bank be furnished evidence satisfactory to it, that
the premium on any renewal policy has been paid in full.
"To the extent the latter requirement involves
disbursement of the insurance escrow fund held by the bank
(and this seems to be one of the real bones of contention
in this controversy), four additional conditions are
involved:
"(a) The premium on the renewal policy must be
covered by the escrow fund; or
"(b) the mortgagee may add thereto a sufficient
amount to cover any increased premium; or
"(c) the mortgagee may pay the full renewal premium
and obtain refund of the escrow upon clear evidence of
such payment; or
"(d) the mortgagee may pay the additional portion of
the premium and obtain disbursement of the escrow to a
designated agent upon clear evidence of the initial
additional payment.
"It seems to us that in enforcing these conditions, the
bank may be less accommodating to its customers and their
insurance agents than other lenders in this area. This,
however, seems to be a consideration that is distinct from
the conditions themselves. Repeatedly Mr. Dodds has asked
me why the Department of Justice has not told him what it
is, in this connection, that he may not do, and I have always
told him that is a question I cannot answer. . . .0
With this report there were enclosed copies of correspondence
hearing on the insurance question, most of which we believe is in
Tour files, particularly a letter dated September 16 from Gerwitz &
?_eegers, Attorneys for the Bank, to Mr. Earl A. Jinkinson, Chief,
mldwest Office, Department of Justice in Chicago .and Mr. Jinkinsonts
l'ePly of September 18, 1958.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Item No0 11
12/17/58
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
NOTICE OF TENTATIVE DECISION ON APPLICATION FOR PRIOR
APPROVAL OF ACQUISITION BY A BANK HOLDING COMPANY
OF VOTING SHARES OF A BANK
Notice is hereby given that, pursuant to section 3(a)
of the Bank Holding Company Act of 1956 ("the Act"), Northwest
Bancorporation) Minneapolis, Minnesota ("Applicant"), has applied
for the Board's prior approval of action whereby- Applicant would
acquire 1,085 of the 1,200 outstanding voting shares of The First
National Bank at Eveleth, Eveleth, Minnesota.
Information con-
tained in the application and other information relied upon by the
Board in making its tentative decision are summarized in the Board's
Tentative Statement of this date, which is attached hereto and
made a part hereof, and is on file with the Federal Register
Division and available for inspection at the office of the Board's
Secretary and at the Federal Reserve Banks.
The record in this proceeding to date consists of the
application, the views and recommendations of the Comptroller of
the Currency, this Notice of Tentative Decision, and the facts set
forth in the Board's Tentative Statement.
-2-
For the reasons set forth in the Tentative Statement,
the Board proposes to grant the application.
Notice is further given that any interested person may,
not later than fifteen (15) days after the publication of this
notice in the Federal Register, file with the Board in writing any
comments on or objections to the Board's proposed action, stating
the nature of his interest, the reasons for such comments or objections, and the issues of fact or law, if any, presented by said
application which he desires to controvert. Such statement should
be addressed: Secretary, Board of Governors of the Federal Reserve
System, Washington 25, D. C.
Following expiration of the said 15-day period, the Board's
tentative decision will be made final by order to that effect,
unless for good cause shown other action is deemed appropriate by
the Board and is so ordered.
Dated at Washington, D. C. this 17th day of December, 1958.
By the Board of Governors.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Item Noo 12
12/17/58
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY NORTHWEST BANCORPORATION, MINNEAPOLIS, MINNESOTA,
FOR APPROVAL OF ACQUISITION OF VOTING SHARES OF
THE FIRST NATIONAL BANK, EVELETH, MINNESOTA
TENTATIVE STATEMENT
Northwest Bancorporation, a bank holding company, has
applied, pursuant to section 3(a)(2) of the Bank Holding Company
Act of 1956 ("the Act"), for this Board's prior approval of the
acquisition of 1,085 of the 1,200 outstanding voting shares of
The First National Bank at Eveleth, Eveleth, Minnesota.
Since The First National Bank at Eveleth is a national
bank under the supervision of the Comptroller of the Currency, the
Comptroller was asked, pursuant to section 3(h) of the Act, for
his views and recommendations.
The Comptroller recommended that
the Board approve the application.
Statutory factors. - Section 3(c) of the Act requires the
Board to take into consideration the following five factors:
(1) the financial history and condition of the holding company and
bank concerned; (2) their prospects; (3) the character of their
management; (4) the convenience, needs, and welfare of the communities and the area concerned; and (5) whether or not the effect of
the acquisition would be to expand the size or extent of the bank
holding company system involved beyond limits consistent with
adequate and sound banking, the public interest, and the preservation of competition in the field of banking.
Discussion. - The applicant, Northwest Bancorporation,
is a bank holding company- with its principal office in Minneapolis.
It owns a large majority of the stock of 46 banks in Minnesota
and 30 banks in Iowa, Montana, Nebraska, North Dakota, South Dakota,
and Wisconsin.
Northwest's 76 subsidiary banks have total deposits
of about $1.7 billion, of which about $1 billion is in its Minnesota
banks. Almost two-thirds of the deposits in its Minnesota banks
are in the principal bank of the holding company system (Northwestern
National Bank of Minneapolis) and the eleven other subsidiary banks
in Minneapolis and St. Paul.
The town of Eveleth, with an estimated population of
6,200, is located in the Mesabi Iron Range in the northern part of
the State, over 50 miles north of Duluth. Immediately adjacent to
Eveleth is Virginia, which, with a population of 12,486 (1950 census)/
is the largest community in the Mesabi area with the exception of
Hibbing (population 160276), 20 miles to the west.
Within a few
riles of Eveleth is the town of Gilbert (population 2,247).
Virginia, Eveleth, and Gilbert, the three towns in the
immediate area, are presently served by five banks.
The largest of
these are the State Bank of Virginia, owned by Northwest, and the
First National Bank of Virginia, owned by First Bank Stock Corporation, the other large bank holding company operating in Minnesota
and nearby States.
Each of these banks has deposits of approximately
$12 million. Eveleth has two banks, the First National Bank (the
subject of the pending application), with deposits of
and the Miners National Bank, with deposits of
4.9 million,
3.6 million.
The
First National Bank of Gilbert (deposits $2.6 million) is controlled
by the same interests that control the Miners National Bank of
Eveleth.
There are four relatively small banks in towns from 10 to
16 miles from Eveleth, and the Hibbing/Chisholm area, 20 miles to
the west, has four banks, of which the largest (deposits $12.8
million) is owned by First Bank Stock Corporation.
The financial history and condition of Northwest Bancorporation and The First National Bank at Eveleth are satisfactory.
The
Prospects of both the holding company and the bank also are favorable,
except to the extent that the prospects of the bank might be adversely
affected by problems of management succession, discussed hereinafter.
The management of Northwest is capable and experienced.
The present management of the bank also is competent, but the senior
Officers of the bank, who are in their middle 601 s, wish to retire
from active management as soon as replacement management is obtained.
Northwest and the Eveleth bank state that successor management is not
available within the bank's present staff and that it would be very
difficult to secure management from outside the bank, there having
been unsuccessful efforts to do so. It appears to the Board that if
Northwest acquires control of the bank, capable replacements would be
supplied when present active management retires.
The bank appears to have been serving the convenience,
needs, and welfare of its community and area in a satisfactory mariner.
-4Such satisfactory service can be expected to continue if control
is acquired by Northwest, and the change in ownership probably will
result in the bank's furnishing better and more complete banking
service to its customers. In this connection it may be expected
that) if owned by Northwest, the bank will be more aggressive in
seeking business.
In this case, as in many others under the Bank Holding
Company Act, the most difficult problems arise under the fifth factor
enumerated in section 3(c), which requires the Board to consider
whether the effect of the acquisition
"would be to expand the size or extent of the bank
holding company system involved beyond limits consistent with adequate and sound banking, the public
interest, and the preservation of competition in the
field of banking."
It is apparent that the proposed expansion of the Northwest
Bancorporation holding company system would not be inconsistent
With adequate and sound banking.
On the contrary, as previously
indicated, any changes that occurred in this respect probably would
be in the direction of increased banking service to the community and
area.
With respect to the preservation of competition, there are
conflicting elements.
At present the Virginia-Eveleth-Gilbert area
is served by five banks, controlled by four separate interests.
The
banking public in Eveleth can seek accommodation not only from the
two banks in that town but also from the two larger banks in Virginia,
five miles away, both of which are now unrelated to the Eveleth banks.
-5After the proposed acquisition, only one of the two banks in
Virginia would be under separate control from the banks in Eveleth.
In addition to the fact that the proposed acquisition
would result in a 25 per cent decrease in the number of competing
banking interests in the three-town area, the resulting increased
relative size of Northwest's interests in that area is an element
requiring careful consideration.
As a result of the acquisition,
Northwest's percentage of control of the banking offices in the threetown area would increase from 20 per cent to 40 per cent, and its
banks' aggregate holdings of the deposits of individuals, partnerships,
and corporations in the banks of the three towns would increase from
34 per cent to 48.8 per
cent.
These, of course, are adverse considerations.
On the
favorable side, however, must be weighed the fact that the acquisition would insure that the town of Eveleth will continue to be served
by two banks; whereas, if the acquisition is not permitted, there is
some possibility, in view of the age and the retirement plans of the
senior officers of the Eveleth bank and the difficulties encountered
in securing successor management, that the bank eventually would be
liquidated, thereby depriving Eveleth of one of its two in-town
bankin7, institutions.
In addition to the importance of this aspect
* This decrease in the number of separately-controlled
banking facilities in the area would also affect the banking public
of Virginia, but presumably to a lesser degree because Virginia is
the larger conuaunity and the two largest banks of the area are
situated there, so that the actual and potential flow of banking
business from Eveleth to Virginia probably is greater than the flow
in the opposite direction.
s
•"•-ye,
-6-
from the viewpoint of the convenience, needs, and welfare of the
community, it is significant from the viewpoint of maintenance of
banking competition in the town of Eveleth itself. In this connection, it is to be noted that the bulk of the deposits of the Eveleth
banks originate within the town.
Also favorable to the application is the previouslymentioned fact that acquisition of the bank by Northwest will tend
to assure competent and aggressive management succession, which would
contribute to the adequacy and soundness of banking in the area, and
thereby to the public interest. In addition, in view of the history
of Northwest and its subsidiary banks it appears unlikely that the
acquisition would lead to undue domination of banking in the area
by this holding company system.
Conclusion. - It is the judgment of the Board, in the light
of the factors enumerated in section 3(c) of the Act and the general
Purposes of the Act, that the relevant considerations in favor of the
Proposed acquisition outweigh the adverse circumstances and that,
accordingly, the application should be approved.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, O. C.
Item No. 13
12/17/58
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 17, 1958
Mr. R. B. Wiltse, Vice President,
Federal Reserve Bank of New York,
New York 45, New York.
Dear Mr. Wiltse:
This is in reference to the application dated
September 19, 1958, of The Chase Manhattan Bank, New York,
New York, for permission under the provisions of Section 25
of the Federal Reserve Act, to invest an amount not exceeding
41,000,000 in the stock of a corporation to be known as
"Chase Manhattan Overseas Corporation" (referred to as
Overseas Corporation) to be organized under the laws of the
State of New York to engage principally in international or
foreign banking through the agency, ownership or control of
local institutions in foreign countries.
The Board of Governors is prepared to grant the
requested permission upon condition that Overseas Corporation
shall deliver to you, within ninety days from the date of this
letter, two copies of the enclosed agreement duly executed by
the appropriate officers of Overseas Corporation. Upon
receipt of a duly executed copy of such agreement, the Board
will forward the requested permission directly to The Chase
Manhattan Bank with a copy to you for your information and
files.
The Board is further prepared to grant permission,
subject to certain conditions, to Overseas Corporation to invest
an amount up to its aggregate capital and surplus in the stock
of a foreign banking institution to be organized under the laws
of the Union of South Africa to be known as "The Chase Manhattan
Bank (South Africa) Ltd.," and with its head office located in
Johannesburg, South Africa. Permission for such investment will
be included in the letter to The Chase Manhattan Bank mentioned
above.
In connection with the request for confirmation of the
view that Section 25 would not preclude an investment by Overseas
Corporation in a minorit: interest in the shares of a foreign
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Er. R. B. Wiltse
-2-
banking organization and the request that the Board of Governors
grant prior approval to Overseas Corporation to make investments
in excess of 15 per cent of its capital and surplus, the Board
will consider future investments of Overseas Corporation upon
receipt of individual applications for permission to make such
investments.
executed
officers
Board of
retained
Please have two copies of the enclosed agreement
on behalf of Overseas Corporation by its appropriate
and forward the original executed copy thereof to the
Governors. The other copy of the agreement should be
for the records of the Reserve Bank.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
Enclosure
BOARD OF GOVERNORS
04*Ap,,
,
OF THE
;',Allt40
'
lor
FEDERAL RESERVE SYSTEM
it)%
Item No.
12/17/58
ko *
.1?1.
0
'0
0
0
0
IO
:1 4
I
D
At
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
triSt. 6
December 17, 1958
Board of Directors,
The Hanover Bank,
New York 15, New York.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of New York, the Board of Governors
of the Federal Reserve System approves the establishment
Of a branch at 350 park Avenue, New
New York, in
lieu of a branch at 399 park Avenue, New York, New York,
approved on may 22, 1957, by The Hanover Bank, New York,
New York, provided the branch is established within two
Years from the date of this letter and approval of the
State authorities is in effect as of the date of the establishment of the branch.
Very truly yours,
(Signed)
Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
olocia ft 44
te,•\h"-"11%
FEDERAL RESERVE SYSTEM
1.4
04#
ill
Item No. 15
12/17/58
OF THE
WASHINGTON 25, D. C.
*
ADDRESS OFFICIAL CORRESPONDENCE
j
TO THE BOARD
7
400}4tw
'
December 17, 1958
Womble, Carlyle, Sandridge & Rice,
Wachovia Bank Building,
Winston-Salem 1, North Carolina.
Gentlemen:
This is in response to your letter of December 10, 1958,
and accompanying memorandum to the Board in which, on behalf of
effect
Wachovia Bank and Trust Company ("Wachovia"), you request in
(1) That the Board reconsider for a second time
and grant the application by Wachovia, as contained
in its letter of November 17, 1958, for approval by
the Board of the establishment and operation by
Wachovia, as its branches, of the two banking offices
that had been operated by The Wilmington Savings and
Trust Company at the time of the merger of that banking
institution with Wachovia effective November 25,
1958; and
(2) That, if the above request is denied, Wachovia
be affordedfla full and formal hearing before the Board,
with an opportunity to offer evidence in support of
its application, with an opportunity to hear, consider
and rebut any evidence in opposition to its application
and to confront and cross-examine opposing witnesses,
and that a record be made of such hearing which shall
be made available to Wachovia as a basis for judicial
review...."
dum, it
Although not referred to in your letter or memoran
ng
operati
now
understood that Wachovia has established and is
ton
Wilming
The
of
°ranches at the locations of the two former offices
of
letters
Board's
,ravings and Trust Company, notwithstanding the
the estab','Wember 13, 1958, and November 25, 1958, disapproving
-Lishment of the branches.
the Board's
Because of this disregard by Wachovia of both
is of
Board
the
es,
process
iudication in this matter and orderly
matter
this
having
from
ified
_he opinion that Wachovia is disqual
onsidered further. Accordingly, both requests in your memorandum
are deni3d.
r
GOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Womble, Carlyle, Sandridge & Rice
-2-
The reasons for tha Board13 denial are set forth more
fully in the Memorandum of Points and Authorities, particularly
Pp. 11-21, filed on November 28, 1958, with the United States
District Court for the District of Columbia in connection with a
suit for declaratory judgment instituted by Old Kent Bank and Trust
Company, Grand Rapids, Michigan, in a matter involving certain issues
sialilar to those raised by your memorandum. It is understood that
You have a copy of the memorandum filed in the Old Kent Bank case,
but for your convenience an additional copy is enclosed herewith.
While your requests are denied for the reasons referred to
above, it may also be mentioned that Wachovia has already had ample
ePportunity to present its visits not only in connection with the
Board's original consideration of the application but also in connection with the reconsideration of the application, including the
meeting of the Board with representatives of Wachovia and The Wilmington
Savings and Trust Company on November 19, 1958. In connection with
both the Board's original adjudication in this matter and the Board's
reconsideration, Wachovia was given a statement of the grounds for
the Board's denial of Wachovia's application, in accordance with section 6(d) of the Administrative Procedure Act. Notwithstanding the
Board's statement of the grounds for denial, Wachovia has not submitted or proposed at this time any legal arguments that would warrant
rehearing or any facts or evidentiary data not previously presented
to the Board.
In reaching its conclusion upon the original adjudication
43 well as upon reconsideration, the Board considered, among other
things, the number of banking offices in Wilmington, North Carolina;
the volume of their deposits; the effect of the operation by Wachovia
°f the two branches in question upon competition in the local area;
,the financial condition and character of management; and the need for
oanking services by residents of the areas concerned. After weighing
411 material facts relevant to each of these considerations, it was
.!he Board's judgment that establishment and operation of the branches
ln question would have an adverse effect upon banking competition in
the area concerned that was not outweighed by any other relevant facts
and that, therefore, the application should be denied.
With respect to your request for a "full and formal hearing
before the Board", it should be noted that in cases of this kind there
no requirement for the holding of a formal hearing. Moreover, as
itndicated above, your memorandum contains no indication of any evidence
°earing upon this matt,,r that has not heretofore been presented to
and considered by the
ird.
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Womble, Carlyle, Sandridge & Rice
Accordingly, while both your requests are denied for the
reasons indicated at the outset of this letter, the Board is of the
opinion that such denial would also be appropriate for the further
reasons indicated.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
13hclesure
BOARD OF GOVERNORS
OF THE
Item No. 16
12/17/58
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 17, 1958.
,
11r. J. A. Erickson, Chairman,
Conference of Presidents of the
Federal Reserve Banks,
Federal Reserve Bank of Boston,
Boston 6, Massachusetts.
Dear Nr. Erickson:
At the February 1958 meeting of the Presidents' Conference
and the
joint meeting of the Presidents and the Board of Governors,
:he
t
subject "Rebate of unearned interest on prepaid borrowings from
4 Reserve Bank
after a rate change" was discussed.
The minutes of the joint meeting state that discussion at
meeting of the Conference found the Presidents divided in their
(3
0Pinion as to the preferable policy and it had been suggested that
rhalps this was a matter of discount window administration on which
"ere was no need for uniformity throughout the System.
the
j
The Board concurs in the opinion of the Presidents that the
Matter ls
•
not one of System credit policy but one of operating practice.
t;
,
- rr reviewing the subject, however, the Board is inclined to believe
bu''t a uniform policy would be desirable. Tentatively, the Board would
be Prepared either (1) to reaffirm as System policy the position taken
the Governors' Conference in 1923 and 1930 that the rebate of un„rned interest should be at the lesser of the rate at which the dis;'
01
)11?t was made or the current rate, or (2) to adopt as a new and uniform
redicY the position that the rebate of unearned interest after a
th2letion in the discount rate should be at the rate in effect when
a,' discount was made, provided that subsequent borrowings in equivctlent or lesser
amount prior to the original maturity of the prepaid
thecunt would be at the rate of the prepaid discount rather than at
b;: current rate. The second method would forestall prepayment of
rrowings merely to obtain advantage of a rate reduction.
4
The Board would like to have the views of the Presidents'
Cow.
lerence on the various possibilities.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
3S03
BOARD OF GOVERNORS
OF THE:
Item No. 17
12/17/58
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE OF THE CHAIRMAN
December 191
1958
The Honorable Emanuel Celler,
Chairman, Committee on the
Judiciary,
House of Representatives,
Washington 25, D. C.
MY dear Mr. Chairman:
This is with further reference to your letter of October 22,
1958, enclosing seven copies of a memorandum proposing an amendment
to the Board's Regulation U to exe14pt restricted stock options from the
Present margin requirements of the regulation.
As you indicate in your letter, this proposal has been submitted to the Board previously. In fact, such an amendment has been
slIggested on several occasions in the past from a number of different
ra,°4rees. Vice Chairman Balderston's letter to you of August 26, 1957,
the subject mentioned the case of Green v. Dietz, 247 F. 2d 689,
vhich questioned whether "possible inhibiting effects of tax proaiolls upon the security transactions of insiders" would justify a
gUlation exempting those transactions from section 16(b) of the
neeurities Exchange Act of 1934. The letter referred to the case as
"Perhaps not directly in point on the present subject", but stated that
MaY\be of interest". It is believed to be of interest not as holdthat the Board lacks authority to grant the proposed exemption, but
Illustrating the difficulties involved in using provisions of tax
eeelslation, enacted with one purpose in mind, as a basis for an exMPtion from other legislation enacted for different purposes.
n
r
While the present suggestion was carefully considered on
ear,
n -Lier occasionslit has been re-examined in the light of your letter
,1
- 6- memorandum, as well as the purposes of Regulation U and section 7
. the Securities Exchange Act. The proposal appears to relate
thinlarily to executive compensation rather than credit regulation, and
ale Board has again reached the conclusion that it would not be de131e at this time to adopt such an amendment to this credit regula$
,
3n.
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
Wm. McC. Martin, Jr.
k
BOARD OF GOVERNORS
oirat,o,),
OF THE
4777s--;'1,a
FEDERAL RESERVE SYSTEM
:1 3
Item No. 18
12/17/58
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
4:11.12t40:./
444***
December 17, 1958
Mr. J. A. Erickson,
Chairman, Conference of Presidents,
Federal Reserve Bank of Boston,
Boston 6, Massachusetts.
Dear Mr. Erickson:
The Board of Governors concurs in the recommenbe
dation of the Presidents! Conference that no action
of
ions
Regulat
and
taken at this time to amend the Rules
reto
Banks
Reserve
the Retirement System of the Federal
ty
Act.
Securi
flect the 1958 amendments to the Social
Very truly yours,
(Simed) Merritt Sherman
Nerritt Sherman,
Secretary.
3805
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 19
12/17/58
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 18, 1958
Mr. Wm. H. Livingston,
Harbeson Hough Livingston and Larson,
Architects Building,
Philadelphia 3, Pennsylvania.
Dear Mr. Livingston:
Thank you for your letter of November 25, 1958, with
further reference to the draft of an agreement between the Board
and your firm for architectural and engineering services for the
proposed blast-proof, fallout-free shelter which could serve as
the sub-structure under the future addition to the Board's building, if and when such an addition is built, on the north side of
"C" Street.
There is enclosed a form of agreement embodying all
the changes suggested in your letter and in addition, in accordance
'with the oral understanding reached in Governor Shepardson's office
On November 5, the Architect will be reimbursed for the costs of
anY special consultants whom the Board may direct you to use. This
Change was made in view of the specialized nature of the structure
which might make it necessary or desirable to consult specialists
tn shelter design and related matters.
With respect to the fee which would be payable in the
event the addition were built, the Board agrees with you that your
firm would be paid an additional 20 per cent of your fee based on
the original estimate of 1940 to bring the fee up to 80 per cent
°f that estimate, and then be paid the remaining 20 per cent of
In
the fee on the basis of the final actual cost of the work.
costa
for
addition to the fee, the Architect would be reimbursed
3806
Wm. 0. Livingston
and evenses as provided in the contract, including the cost of
arty necessary modifications to the plans and specifications to
embody. (a) new kinds of materials and equipment, and (b) alteratione in the design of the addition which might be needed in
order to fit it to the new design of the substructure.
If the enclosed form of agreement meets with your approval,
Please have it executed and returned to be executed on behalf of
the Board,
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman
Secretary.
B
TELEGI1A1A
Item No. 20
12/17/58
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
LEASED WIRE SERVICE
WASHINGTON
DECEMBER 17, 1958
4CTER - NEW YORK
YOUR WIRE DECEMBER 17. tkkECTIVE UPON AUTHORIZATION BY YOUR
BOARD OF DIRECTORS, BOARD APPROVES RENEWAL OF LOAN ON GOLD BY
YOUR BANK TO BANQUE NATIONALE DE LA REPUBLIQUE DIHAITI TO THE
EXTENT OF
$300,020 FOR ONE MONTH FROM ORIGINAL MATURITY OF
DECEMBER 26, 1958 ON TERMS AND CONDITIONS OF ORIGINAL LOAN.
IT IS UNDERSTOOD THAT THE USUAL PARTICIPATION WILL BE OFFERED
IT) THE OTHER FEDERAL RESERVE BANKS.
(Signed) Merritt Sherman
SHERMAN
3807
Item No. 21
12/17/58
1959 BUDGET
PERSONAL SERVICES
Salaries:
357,012
252,502
189,922
86,678
1,189,551
320,101
636,718
323,417
164,395
608,107
21,362
38,756
Offices of Members of the Board
Office of the Secretary
Legal Division
Office of the Controller
Division of Research and Statistics
Division of International Finance
Division of Examinations
Division of Bank Operations
,Division of Personnel Administration
I/Division of Administrative Services
Office of Defense Loans
Defense Planning
Total - Positions and Salaries
Retirement Contributions
Employee Insurance
$ 4,188,521
$
517,614
34,318
General Pay Increase
afficial Staff Increases
Total Personal Services
-.1./
Excluding Cafeteria Salaries
00401.4.10
$ 4,740,453
-2-
N ONPERSONAL SERVICES
Traveling Expenses
Postage and Expressage
Telephone and Telegraph
Printing and Binding
-Stationery and Supplies
PUrniture and Equipment
Rentals
!!°°1te and Subscriptions
neat, Light and Power
RePairs and Alterations (Building and Grounds)
21RePairs and Maintenance (Furniture and Equipment)
--/Medical Service and Supplies
Insurance
All Other
Auditing Books of Board
Review of Examination Procedures
Cafeteria (net)
Consumer Finances Surveys
Consumer Finances Survey - Field Studies
Consumer Buying Intentions Surveys
Small Business Financing Study
Business Loans Survey
Other Survey and Research Projects
Legal and Consultant Fees and Expenses
°I'ficial Dinners, Receptions, etc.
Meals for Official Guests
Security Clearance Investigations
Electronic Computer Installation and Contingencies
Miscellaneous
Total Nonpersonal Services
Total Personal Services
Grand Total
Account discontinued; amount provided elsewhere.
$
311,418
75,443
86,725
377,855
48,358
91,246
148,141
20,1400
48,850
104,550
12,983
6,325
998,035
4,000
10,000
55,060
151,500
110,000
500,000
95,800
4,070
3,325
20,100
44,180
$ 2,330,329
4,740,453
$ 7,070,782
810
BOARD OF GOVERNORS
,441***,144
OF THE
FEDERAL RESERVE SYSTEM
4
t
1
WASHINGTON 25, D. C.
Item No, 22
12/17/58
4,
ADDRESS OFFICIAL CORRESPONDENCE
TO THE HOARD
0
at4t AtSt
4414.**4
December 17, 1958
Board of Directors,
Worthen Bank & Trust Company,
Little Rock, Arkansas.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of St. Louis, the Board of Governors
of the Federal Reserve System approves the establishment
of a branch in the neighborhood of Markham and Hayes
Streets just outside the city limits of Little Rock,
Arkansas, provided the branch is established within six
months from the date of this letter.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
t
„pit*tttr,
OF THE
tie!C04::
0
Item No. 23
12/17/58
FEDERAL RESERVE SYSTEM
11)
WASHINGTON 25, D. C.
40,4M
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
;It=
04o**
December 16, 1958.
Mr. John F. Pierce, Chief Examiner,
Federal Reserve Bank of New York,
New York 45, New York.
Dear Mr. Pierce:
In accordance with the request contained in your
letter of December 10, 1958, the Board approves the reappointment of John W. Shute as an assistant examiner for the Federal
Reserve Bank of New York. Please advise as to the date upon
which the reappointment is made effective.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
44
;,4^4t11214'
,
OF THE
64' OW 4I044t..,
Item No. 24
12/17/58
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
41Lwast
December 17, 1958.
14r. Benjamin F. Groot, Vice President,
Federal Reserve Bank of Boston,
Boston 6, Massachusetts.
Dear Mr. Groot:
In accordance with the request contained in your
letter of December 11, 1958, the Board approves the appointment of Richard Charles Keith as an assistant examiner for
the Federal Reserve Bank of Boston. Please advise as to the
date upon which the appointment is made effective.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
@FedFRASER