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'9/61 Minutes for December 20, 1961 To: Members of the Board From: Office of the Secretary Attached is a copy of the minutes of the Board of Governors of the Federal Reserve System on the above date. It is not proposed to include a statement With respect to any of the entries in this set of minutes in the record of policy actions required to be maintained pursuant to section 10 of the Federal Reserve Act. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, please initial below. If you were present at the meeting, your initials will indicate approval of the minutes. If You were not present, your initials will indicate only that you have seen the minutes. Chm. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Gov. Mitchell /•"" (1)411"713 Minutes of the Board of Governors of the Federal Reserve System on Wednesday, December 20, 1961. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Martin, Chairman Balderston, Vice Chairman Mills Robertson King Mitchell Mr. Sherman, Secretary Mr. Kenyon, Assistant Secretary Mr. Young, Adviser to the Board and Director, Division of International Finance Mr. Molony, Assistant to the Board Mr. Fauver, Assistant to the Board Mr. Hackley, General Counsel Mr. Solomon, Director, Division of Examinations Mr. Johnson, Director, Division of Personnel Administration Controller Connell, Mr. General Counsel Assistant Chase, Mr. Mr. Hooff, Assistant General Counsel Mr. Sammons, Adviser, Division of International Finance Mr. Leavitt, Assistant Director, Division of Examinations Mr. Sprecher, Assistant Director, Division of Personnel Administration Mr. Bass, Assistant Controller Mr. Landry, Assistant to the Secretary Discount rates. The establishment without change by the Federal Reserve Bank of Atlanta on December 18, 1961, of the rates on discounts ei4.4 advances in its existing schedule was approved unanimously, with the llticierstanding that appropriate advice would be sent to that Bank. Items distributed to the Board. The following items, which had bes4 distributed to the Board and copies of which are attached to these "es under the respective item numbers indicated, were approved 11114111Mous1y: rlECN 12/20/61 -2Item No. Letter to The Chase Manhattan Bank, New York, 4e1/ York, authorizing the establishment of a ! °ranch in Port-of-Spain, Trinidad, The West Iadies, 1 Illelegram to the Federal Reserve Bank of New °rk approving a gold loan to Colombia. 2 utter to the President of Liberty National and Trust Company of Louisville, Louise, Kentucky, replying to his letter of 0ecember 81 1961, regarding payment of interest all savings deposits. (With copies to the Presi-ents of all Federal Reserve Banks.) 3 Messrs. Young and Sammons then withdrew from the meeting. Report on competitive factors (McKeesport-Pittsburgh, PennsylA draft of report to the Comptroller of the Currency on the e°raPetitive factors involved in the proposed consolidation of Western PerIllsYlvania National Bank, McKeesport, Pennsylvania, and West End Bank, ?1ttsburgh, Pennsylvania, had been distributed under date of December 15, 1961. In discussion, Governor Robertson suggested a revision in the ectlelusion of the report, following which the report was approved unani41°1184 for transmittal to the Comptroller. The conclusion of the report, aPProved, read as follows: Our investigation discloses very little, if any, competition between Western Pennsylvania National Bank and West End Bank. While approval of the proposed consolidation Might intensify competition for the remaining small bank in the area, it does not appear that that bank would be adversely affected thereby. 11 12/2o/61 -3- Assessment on Federal Reserve Banks for first half of 1962. Copies of a memorandum from Mr. Bass dated December 19, 1961, had been distributed recommending that an assessment of .00248 of the total I/aid-in capital and surplus of the Federal Reserve Banks as of December 31) 1961, be levied upon the Banks to help defray the expenses of the 13°41'd for the first half of 1962. Based on estimated capital and surplus Of $1,319,000,0041 the rate indicated would produce $3,271,124. There being no objection, the proposed assessment was approved 144 anianously. Messrs. Connell, Hooff, and Bass withdrew from the meeting at this point. Use of facilities at Atlanta Bank. A letter dated December 61 1961) had been received from Counsel, Washington Bureau, National 4880ciation for the Advancement of Colored People, enclosing a copy of all office memorandum sent to employees of the Federal Reserve Bank of Atlanta by President Bryan under date of November 9, 1961) regarding the 118e or the facilities in the Bank's new building. Copies had been distributed of a draft of reply over Chairman Martin's signature that 110111d point out that under the provisions of section 4 of the Federal Ileaerve Act each of the twelve Federal Reserve Banks "shall be conducted Utider the supervision and control of a Board of Directors." The letter 14341d also state that it was not known what consideration had been by the directors of the Bank to the question of making available ( 12/20/61 -4- seParate rest room and shover facilities for members of the staff according to race, that President Bryan's memorandum had not been seen Pl'eviously by the Board, but that a copy of the incoming letter was being sent to President Bryan for his information, and with the request t414 the letter be brought to the attention of the directors of the Bank. After discussion, it was agreed that Chairman Martin would cl18eues the matter with President Bryan to obtain additional information 431d that the proposed reply would then be considered further by the Board. Messrs. Johnson and Sprecher then withdrew from the meeting. Question under section 8 of Clayton Act (Item No. 4). There had been distributed under date of December 19, 1961, a memorandum from ttle Legal Division regarding whether service by Mr. Alvin M. Parker as director of both the Riggs National Bank, Washington, D. C., and the 444endria National Bank, Alexandria, Virginia, would be prohibited by "ion 8 of the Clayton Act, On December 18, 1961, Mr. Robert V. Ilelaing, Chairman of the Board of Riggs National Bank, and Representative 11°14Lrd Smith of Virginia, Chairman of the Board of Alexandria National visited Chairman Martin,withVice Chairman Balderston and Mr. 44ek4.eY also present, to request that the Board reconsider the ruling Contained in its letter of June 15, 1961, to the office 4 of the Comptroller he Currency that Alexandria and Washington are "contiguous" within 12/2o/61 -5- the meaning of section 8 of the Clayton Act and that, therefore, a director of Riggs could not also serve as a director of Alexandria National Bank. Messrs. Fleming and Smith advised that Mr. Parker had been serving as a director of both banks since 1958 and that he succeeded *. Thomas A. Butt, who had been serving both banks since 1947. It was indicated that both Messrs. Parker and Butt had been elected as directors °f Riggs National Bank pursuant to the desire of a large depositor. Since Messrs. Parker and Butt had served for such a long period without c)hjection, Mr. Fleming and Mr. Smith urged that Mr. Parker be allowed to the continue to serve irrespective of the purely legal aspects of Matter. With reference to previous cases of this type that had come berore the Board, the memorandum noted that in every instance but two the Board had held that the statute prohibited the interlocking relationConcerned because the places were "contiguous". In the more recent Of the two exceptions, the Board on January 28, 1959, stated that it 141d "interpose no objection" to the continued service of Mr. Elwood Kirkman as director of a bank in Ocean City, New Jersey, and a bank haw __ 4-“g a branch in Somers Point, New Jersey, even though the corporate It's of these two places coincided under navigable waters separating them. The reason for the Board's position in that case was that Mr. --Luan had been told earlier by a representative of the Federal Reserve tWIL Of Philadelphia that the Clayton Act would not prohibit his serving 12/20/61 48 4 —6- director of the two banks. On the basis of this advice, the branch In Somers Point was established. As to whether Alexandria, Virginia, 44i Washington, D. C., were "adjacent" within the meaning of the statute, the Board had stated in its letter of June 15, 19610 referred to previously, that the fact the two communities in question were "contiguous" rendered 1134)0t the question whether they were "adjacent", although the two places Ir°1414 probably be considered "adjacent" as well. It was the conclusion of the Legal Division, as expressed in its 41ellumrdtml, that in view of the fact that the boundaries of Alexandria 4104 Washington touched and coincided, the two places were "contiguous" the meaning of the statute. It was noted, however, that the service of Mr. Parker and his predecessor had been allowed to continue tcli 4 long time without objection. In commenting on the matter, Mr. Hackley pointed out that not 14141 recently had the Office of the Comptroller of the Currency raised qUeStiOn regarding the service of Mt. Butts, and later of Mr. Parker. 4PeLrent1y a new national bank examiner had noted the interlocking lieletionship at the most recent examination, and the Comptroller's °trice then wrote to the Board. The Board's reply of June 15, 1961, was to the effect indicated in the Legal Division's memorandum. Since the Co 4 vorate boundaries of Washington and Alexandria coincide for a certain 4letance, the two places would appear to be "contiguous" within the 41118 of section ' ee 8 of the Clayton Act. In such circumstances, it had 12/20/61 -7- been the Board's general position that regardless of other considerations, sUch as whether the banks concerned actually were in competition, the cE vould not fall within any of the exceptions to the Clayton Act 844 service as a director of both banks therefore would be prohibited by statute. However, in one recent case (the Kirkman case) the Board had telt that the equities of the matter were such as to warrant taking a P°81tion that it would interpose no objection to the continued service c'r the bank director involved. Accordingly, the question was whether tile circumstances of the Parker case might be such as to warrant taking 81Milar position. There ensued a lengthy discussion during which reference was mad the alnong other things, to the provisions of the law, the history of Present case, and the arguments that might be cited for and against rPosing no objection to the continued service of Mr. Parker as a 411"setor of both banks. Governor Robertson took the position that the Board should reaffirm the ruling contained in its letter of June 15, 1961, to the Comptroller's 0 144". The fact of the matter, he brought out, was simply that the 44ti°11Eil bank examiners did not note the interlocking relationship until l'entlY. When the situation was finally noted, the matter was presented to the Board, and the Board replied. It would, he thought, place the °.81. in a bad light if it now changed the position that it had stated 14 Its letter. 12/20/61 -8- Governor Mitchell suggested advising the banks concerned that 'Parker's service as a director of one of the two institutions should Mr be terminated as soon as it was convenient and practicable to replace him) without specifying any particular time within which that step must be accomplished. The other members of the Board indicated that, in view of the circumstances of this particular case, including the continuity of l'elationships over a period of approximately 15 years, they would favor 4civising that although Washington and Alexandria would appear to be Q°11tigUous within the meaning of section 8 of the Clayton Act, the would interpose no objection to Mr. Parker's continuing as a cl*"tor of both banks, with the understanding, however, that no alleceeding interlocking director would be elected when Mr. Parker's l'171ce terminated. Accordingly, it was agreed, with Governors Robertson and Mitchell clisenting, to send to the Chairman of the Riggs National Bank a letter 14 the form attached as Item No. 4, with a copy to the Comptroller of the Currency. All of the members of the staff except Messrs. Sherman and Njr. y r then withdrew from the meeting. Appointment of director. The Board authorized the usual steps to be taken to ascertain through Chairman Mitchell of the Federal Reserve p °4- Atlanta whether Mr. Kenneth R. Giddens, President of WKRG-TV, Inc., 4 3 12/20/61 -9- Mobile, Alabama, would accept appointment as a director of the New 011earls Branch of that Bank for the three-year term beginning January 1, 1962) with the understanding that if he would accept such appointment it t endered, the appointment would be made. Secretary's Note: It having been ascertained that Mr. Giddens would accept the appointment if tendered, a telegram advising him of the appointment was sent on December 26, 1961. Loan of services of Mr. Wernick. 4 Governor Robertson presented Memorandum from Mr. Noyes dated December 19, 19610 regarding a request fl Dr. R. A. Gordon, Chairman of the President's Committee to 418e Employment and Unemployment Statistics, that Murray Wernick, ' 413131 8e4ior Economist in the Division of Research and Statistics, be made Nilable to serve as Staff Director for the Committee during the period *°14 January 1 through June 30, 1962, such duties to take approximately bAllt Of Mr. Wernick's time and the remainder to be spent on his usual cli4ies as a member of the Board's staff. After discussion, unanimous approval was given to Mr. Wernick's 411111g in the capacity indicated, with the understanding that the Board kola, Pay his full salary on a nonreimbursable basis during the period is service with the Committee and that other expenses such as travel kcl Per diem, related to the work of the Committee, would be paid from N14 a of the Committee. The meeting then adjourned. 43‘4, 12/20/61 -10Secretary's Notes: The work contemplated by the discussion at the Board meeting on September 28, 1961, having been accomplished, there was sent to Senator Douglas, Chairman of the Subcommittee on Production and Stabilization of the Senate Banking and Currency Committee, on December 19, 1961, a compilation of State laws relating to the extension of consumer credit. A copy of the letter transmitting this compilation is attached as Item No. 5. It having been ascertained, pursuant to Board action on December 1, 1961, that Dr. Willis J. Winn, Vice Provost of the University of Pennsylvania, Philadelphia, Pennsylvania, would accept appointment, if tendered, as a Class C director of the Federal Reserve Bank of Philadelphia for the three-year term beginning January 1, 1962, a telegram advising of the appointment was sent to Dr. Winn today. Governor Shepardson noted on behalf of the Board on December 19, 1961, a memorandum advising that the application for retirement filed by C. C. Hostrup, Assistant Director, Division of Examinations, had been approved, effective at the close of business December 31, 1961. On December 19, 1961, Governor Shepardson approved on behalf of the Board the following items: r Memoranda from appropriate individuals concerned recommending °110wing actions relating to the Board's staff: 41a-1'Y increase with change in title tita 2dwin G. White, from $7,260 to $7,560 per annum, with a change in Okren4fr0m Analyst to Technical Assistant in the Division of Bank -1(31.1s, effective December 24, 1961. -4411Lat1on of employment sva G. Kennedy, Statistical Assistant, Division of Research and NtiE tics, effective at the close of business December 3, 1961. 12/20/61 arrangements for him to e_ , Letter to Mr. George L. Stevens confirming onauct two 24-hour courses in Reading Improvement for members of e Board's staff as an activity of the Board's Employee Training and beveloPment Program, with the understanding that the first course would en on January 16, 1962, and the second course on March 27, 1962; Mr. Stevens would provide all the equipment, materials, and h„._'erences required for this program; and that the Board would pay 4-m at the completion of each course $40 for each participant in this 131 ' 0 8.m. r Memorandum dated December 19, 1961, from the Office of the Cortr oller recommending approval of certain anticipated overexpenditures 6he 1961 budgets of several divisions and offices of the Board. Pursuant to the recommendations contained in memoranda from appropriate individuals concerned, Governor Robertson, acting in the absence of Governor Shepardson, today approved on behalf of the Board the following items: Statistics, with Robert R. Wyand, II, as Economist, Division of Research and uasic annual salary at the rate of $6,435, effective January 2, 1962. Baxbara Lou Jones as Special Assistant Federal Reserve Examiner, elfIcT)n of Examinations, with basic annual salary at the rate of $4,040, LVe the date of entrance upon duty. kee of resignation qtbjerome W. Shay, Legislative Counsel, Board Members' Offices, effective 'close of business December 280 1961. Governor Robertson noted on behalf of the Board a memorandum advising that the application for retirement filed by Bricen Barnes, Bindery Helper and Operator, Mimeograph, Division of Administrative Services, had been approved, effective at the close of business December 31, 1961. Sec BOARD OF GOVERNORS OF THE Item No. 1 12/2o/61 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD December 201 1961 The Chase Manhattan Bank, ?Ile Chase Manhattan Plaza, New York 15, New York. Gentlemen: The Board of Governors of the Federal Reserve System authorizes The Chase Manhattan Bank, New York, New York, pur21_101t to the provisions of Sections 9 and 25 of the Federal rerve Act, to establish a branch in the City of Port-of2.1111, Trinidad, The West Indies, and to operate and maintain 'Ilch branch subject to the provisions of such Sections. Unless the branch is actually established and opened el' business on or before December 1, 1962, all rights granted shall be deemed to have been abandoned and the authority here rebY granted will automatically terminate on that date. P Please advise the Board of Governors in writing, through the p -ederal Reserve Bank of New York when the branch is opened information as to the exact location of the business, furnishing branch. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. Item No. 2 12/20/61 TELEGRAM LEASED WIRE SERVICE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON December 20, 1961 11°tISE - NEW YORK 1°141mire December 14. Board approves granting of loan on gold up to to+.., "*"7 of $15 million by your Bank to the Banco de la Republica on the r alowing terms and conditions: (a) To be made up to 98 per cent of the value of gold bars set aside in your vaults under pledge to you; (b) To mature in three months with option to repay at any time before maturity, both the loans and repayments to be in multiples of $1 million; (c) To bear interest at the discount rate of your Bank in effect on the date on which such loan or loans are made; and (d) To be requested and made on or before December 27. -understood that the usual participation will be offered to the Other Federal Reserve Banks. (Signed) Merritt Sherman SHERMAN (Tele ;r8121 refers to Banco de la Republica (Colombia)) ( BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON Item No. 3 12/20/61 OFFIOE OF THE CHAIRMAN December 21, 1961 Merle E. Robertson, President, -336,,rtY National Bank and Trust Company 1,111.1 Louisville, ille 1, Kentucky. bear Robertson: I have read with much interest your letter of December 8, regarding payment of interest on savings deposits and, because atte41,k It will also be of interest to them, I am bringing it to the i°n of the other members of the Board. 1961 As you say in your letter, savings deposits for all practical are payable on demand; yet, unlike demand checking accounts, are "s deposits are permitted to bear interest and, in addition, they Thiean.biect to lower reserve requirements than checking accounts. !Mewhat privileged status has, of course, been accorded to saythe n''€Torsits in order to encourage thrift by the public; and, with l'qte-anle Purpose in mind, the Board has always prescribed a maximum pe °f interest on savings deposits equal to the highest maximum rate tted with respect to any time deposits. PlIrpos es clopoa4 At the same time, we are aware of the possibility that savings ' te, because of their demand nature, may be improperly used for orciin tor TharY checking purposes. For this reason, the Board's regulations 41c1 -anY Years required savings deposits to be represented by passbooks to trrIllitted member banks to make payments from savings deposits only n depositor himself or to a third person holding and presenting the : qC, 180300k. Several years ago, in view of the development of the use aa- anical equipment by banks, the Board relaxed its regulations 114t () permit non-passbook savings accounts, but with a limitation 'lloth:lleh accounts may be paid only to the depositor himself. As Nzler means of preventing abuses of savings deposits, the Boardts Q t.t,aa".tions permit them to be maintained only by individuals or by In tYpes of nonprofit corporations. .q1 terii,, Recently, certain situations have come to the Boardts L°n that appear to be inconsistent with the proper use of savNounts and in order to prevent abuses, the Board has amended ()n Q in certain respects to become effective January 15. In cop,,•erit ° that you have not yet seen these amendments, I am enclosing 4 for your information. (:; Merle E. Robertson -2- The spread of the practice of computing interest on savings deposits on a daily basis, that is, from the date of deposit to the date of withdrawal, has been a source of some concern to the Board in recent months. As you know, the Boardls regulations permit a member bank to compute interest on any basis desired by the member bank provided the amount of interest paid does not exceed the amount that would be paid at the relevant maximum rate of interest prescribed by the Board when compounded quarterly. Consequently, subject to this limitation, there is nothing to prevent member banks from computing interest on a daily basis. In one respect, this practice may be regarded as desirable since it makes it unnecessary for a bona fide savings depositor to sacrifice interest if he is obliged to make a withdrawal between regular interest dates. However, the Board has recognized that the practice might lead to abuses if it should encourage individuals or eligible organizations to make savings deposits in large amounts for only a few days merely in order to obtain interest 011 temporarily idle funds. Obviously, this would not be consistent with the basic purposes of a savings deposit. For the reasons just indicated, the Board has asked the Pederal Reserve Banks to watch carefully the development of the c1113 -interest practice and to report to the Board any instances in which the practice may be leading to abuses. You may be sure that Ile will expect to give this matter our continuous attention. Sincerely yours, (Signed) Wm. Mc.C. Martin, Jr. "MIL McC. Martin, Jr. Zriclosure BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. Item No• 4 12/2061 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD Deember 22, 1961 b trz, m s 0 ert V. Fleming, man of the Board, iggs National Bank, —suington 13, D. C. Dear Fleming: This is in reference to your letter of December 19, 1961 ' a.a Chairman Martin regarding the service of Hr. Alvin M. Parker director of The aiggs National Bank and as a director of the ndria National Bank, Alexandria, Virginia. It appears that ele Parker was elected to succeed Mr. Thomas A. Butt who was erZted a director or The Riggs National Bank in January 1947 and 1143'r as a director or both banks until his death in 1958. There _'herefore been a continuity of service of anproximately dears. 4 It appears that the corporate boundaries of Alexandria • 1 411(1'da. for a certain distance and that D. C. coincide r 4.4.811neton, the ect?-Lore the two places are "contiguous" within the meaning of Ile ,l;°/1 8 of the Clayton Act. However, in view of the fact that elationship, as stated above, has had a continuity of a.l 011 mately 15 years, the Board interposes no objection based "e provisions or the Clayton Act to Mr. Parkerts continuing z(g,clirector to both banks with the understanding that when his 4-ce no succeeding interlocking director will be eted.terminates Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Federal Reserve Bank of Richmond 'onptroller of the Currency BOARD OF GOVERNORS ot') OF THE Item No. FEDERAL RESERVE SYSTEM 12/20/61 WASHINGTON OFFICE OF THE CHAIRMAN December 19, 1961 The Honorable Paul H. Douglas, Chairman, bubeommittee on Production and Stabilization, Committee on Banking and Currency, United States Senate, Washington 25, D. C. Dear Mr. Chairman: As requested in your letter of September 25, 1961, there is enclosed herewith a compilation of the State statutes Which relate to the provisions of section 4 of S. 1740, a bill 'To assist in the promotion of economic stabilization by requiring the disclosure of finance charges in connection with extensions of credit." This compilation has been prepared by the Legal Division of the Board of Governors of the Federal Reserve bystem on the basis of compilations of State statutes prepared by counsel for the Federal Reserve Banks by means of an examination of the laws of the various States. In order to avoid making the compilation even more voluminous than it is, it has been edited so as to include only those items which bear direct1Y on the subject and so as to omit a large volume of provisions Which are related only indirectly to it. We hope the compilation will be helpful in your further study of S. 1740. Sincerely yours, N.\ i 1:g i2- Wm. McC. hartin, Jr. Lnclosure 5
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