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Minutes for necember 22, 1964 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. Mitchell Gov. Daane * Minutes of the Board of Governors of the Federal Reserve System on Tuesday, December 22, 1964. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. BalderstQn, Vice Chairman Mills Robertson Mitchell Daane Sherman, Secretary Molony, Assistant to the Board Fauver, Assistant to the Board Hackley, General Counsel Farrell, Director, Division of Bank Operations Mr. Solomon, Director, Division of Examinations Mr. Johnson, Director, Division of Personnel Administration Mr. Schwartz, Director, Division of Data Processing Mr. Hooff, Assistaut General Counsel Mr. Partee, Adviser, Division of Research and Statistics Mr. Daniels, Assistant Director, Division of Bank Operations Mr. Leavitt, Assistant Director, Division of Examinations Mr. Langham, Assistant Director, Division of Data Processing Mrs. Semia, Technical Assistant, Office of the Secretary Mr. Donovan, Review Examiner, Division of Examinations Mr. Guth, Review Examiner, Division of Examinations Mr. Veenstra, Chief, Financial Statistics Section, Division of Data Processing Mr. Mr. Mr. Mr. Mr. Discount rates. The establishment without change by the Peelial Reserve Bank of Boston on December 21, 1964, of the rates °4 discounts and advances in its existing schedule was approved 12/22/64 -2- unanimously, with the understanding that appropriate advice would be sent to that Bank. Circulated or distributed items. The following items, conies of which are attached to these minutes under the respective Item numbers indicated, were approved, the action being unanimous in each case except that Governor Robertson abstained from voting (41 Items 4 and 5: Item No. Letter to the Presidents of all Federal Reserve Banks ' ransmitting forms to be used by State member banks 4nd their affiliates in submitting reports as of the ilext call date. 1 Telegram to the Federal Reserve Agent at Minneapolis horizing the issuance to Bancorporation of Montana, eat Palls, Montana, of a limited voting permit vering its stock of Liberty County Bank, Chester, entana, Citizens Bank of Montana, Havre, Montana, and -ntral Bank of Montana, Great Falls, Montana. 2 tter to Hollywood National Bank, Los Angeles (HollyCalifornia, granting its request for permission ° maintain reduced reserves. 3 Lett-r e to Royal Properties, Inc., Phoenix, Arizona, 4 r riting a determinaticn exempting it from all holding 021/1"PanY affiliate requirements except those in section 23A .L the Federal Reserve Act. Letter to Guaranty Development Company, Livingston, Mortann., granting a determination exempting it from al, ti14- holding company affiliate requirements except °se in section 23A of the Federal Reserve Act. 5 Messrs. Schwartz, Hooff, Partee, Langham, Donovan, Guth, and Veenstra then withdrew from the meeting. 12/22/64 -3- Retirement System matter (Item No. 6). There had been distributed a memorandum dated December 21, 1964, from the Division of Personnel Administration regarding implementation of the postretirement death benefit of $1,000, to be provided through an insurance company, that the Board had approved on October 23, 1964, for certain retirees of the Federal Reserve Banks. Arrangements for the benefit had been made with Connecticut General Life Insurance e°141PanY, which handled the group insurance policy of the Federal Reserve System. In order to make the arrangements effective, it was Ilecessary that the Board and each Federal Reserve Bank authorize the l'ederal Reserve Bank of Chicago to execute an amendment to the group insurance policy. The Division recommended that the Board so authorize the Bank, and a draft of letter in those terms was attached. The Division memorandum, supplemented by an attached memorandum from Mr. SP1'echer, Assistant Director of the Division, called attention to the fact that under insurance industry practice an employee who is covered by a group insurance contract may not, on retirement, convert his insurance to an amount greater than he had as an active Meniber of the group; therefore the amount of insurance available to ' ellYs Particular employee for conversion was reduced by the amount of 4PPlicable death benefit, since the benefit would otherwise represent 44 addition to the individual's total insurance. Explorations of this 12/22/64 Point disclosed that, although it would have been possible to retain the entire amount of group insurance upon conversion if a policy for the death benefit had been written separately by another company, such an arrangement would be impractical because of the cost of the separate policy as coupared with the cost of adding the death benefit to the existing policy. In the course of discussion Governor Mitchell remarked that 48 he learned more about the basis on which the post-retirement death benefit was to be provided he had an increasing impression that it wc)uld be cheaper in the long run for the Federal Reserve System to Pay for the benefit directly rather than to provide it through an 1118urance company. It seemed to him perfectly feasible to handle It as an expense as payments were made, without funding. Governor Mills stated that that point was debatable, particUlarlY if all costs were considered. He noted that previous inves- tigations had indicated that an initial lump-sum payment of $4.l r4illion would have been required of the Reserve Banks to cover accrued liability if this had been funded through the Retirement System, hereas no such payment was called for under the insurance plan. Governor Daane said that the arrangement through an insure company seemed to him to be the more orderly procedure. At the conclusion of the discussion the letter to the Federal Ileselive Bank of Chicago was approved, Governor Mitchell abstaining. A c°13Y of the letter is attached as Item No. 6. 12/22/64. Federal Reserve Bank earnings. 4 There had been distributed revised draft of statement for the press to be released on or about January 5, 1965, regarding Federal Reserve Bank earnings during 1964. The statement would include information regarding Payments to be made to the Treasury reflecting the action taken by the Board on December 16, 1964, calling for maintenance of the 8urP1us accounts of Federal Reserve Banks at an amount equal to their paid-in capital. During a discussion of the draft statement, there was agreement that its general form was satisfactory, but it was underthat it would be brought to the Board's attention again when 4CCUrate year-end figures became available. Secretary's Note: Later in the day the statement as revised at this meeting was sent by telegram to the Reserve Bank Presidents for their information, with the comment that no distribution should be given to the tentative draft and that no announcement regarding the subject was contemplated or desired prior to official release on or about January 5. The meeting then adjourned. Secretary's Notes: A letter was sent today to First National City Bank, New York, New York, acknowledging receipt of notice of its intent to establish an additional branch in Malaysia, to be located in Georgetown, Penang. Acting in the absence of Governor Shepardson, Governor Robertson today approved, on behalf of the Board the following items: 12/22/64 -6- Letter to the Federal Reserve Bank of Cleveland (attached ILem No. 7) approving the designation of John W. Mitchell, Jr., as special assistant examiner. Letter to the Federal Reserve Bank of Chicago (attached approving the designation of Jess Dennis as special 4ssistant examiner. gaillj..a§) Letter to the Federal Reserve Bank of San Francisco (attachedItem No. 9) approving the appointment of Alvin M. Cibula, . .1 as assistant examiner. Memorandum from the Office of the Secretary recommending transfer of Gail Roberts frcm the position of Secretary in the Division of Research and Statistics to the position of SecetarY in the Office of the Secretary, with an increase in basic : ' 41Inual salary from $6,615 to $7,050, effective January 3, 1965. the Secretary Item No. 1 12/22/64 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD December 23, 1964. Dear Sir: The indicated number of copies of the following forms are being forwarded to your Bank under separate cover for use of State member banks and their affiliates in submitting reports as of the next call date. A copy of each form is attached. Number of Form FR 105 (Call No. 174), Report of Condition of State member banks. Form FR 105e (Revised February 1961), Publisher's copy of report of condition of State member banks. Form FR 105e-1 (Revised February 1961), Publisher's copy of report of condition of State member banks. Form FR220 (Revised March 1952), Report of affiliate or holding company affiliate. Form FR 220a (Revised March 1952), Publisher's copy of report of affiliate or holding company affiliate. The forms are identical to those used for the June 30, 1964, report. Form FR 105 includes the schedules on the reverse, ich had been eliminated for the fall call. The same form has 7,een printed by the Federal Deposit Insurance Corporation for oistribution to insured nonmember State banks. n -2- It is understood the face of the form to be distributed to national banks by the Comptroller of the Currency will be the same as that used by that Agency for the October 1, 1964, call date and thus will differ in several respects from the form being used by State banks. However, it is also understood that except for the exclusion of Federal funds and resale transactions from loans, the reverse of the form to be used by national banks will be the same as for State member banks. If these circumstances prevail, it will again be necessary to collect additional information directly from national banks in order that important statistical information may be compiled for all member and all insured banks for the year-end call date. For this purpose, three copies of a supplementary reconciliation statement for each national bank similar to the one used at the June 30 call date will be forwarded as soon as firm information on the national bank form to be used is available. The memorandum on operating Procedures for editing and tabulating national bank reports and the reconciliation statements forwarded to the Reserve Banks by the Division of Data Processing for the June call Should be followed for handling this call. Procedures to be used for editing and tabulating State member reports will also be the same as those in effect for the June call. You will be advised promptly as we become aware of any need to change these plans. Very truly yours, Merritt Sherman, Secretary. Enclosures. TO THE PRESIDENTS AT ALL FEDERAL RESERVE BANKS. 4606 Item No. 2 12/22/64 AM TELEGR LEASED WIRE SERVICE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON December 221 1964 BEAN -- MINNEAPOLIS KECEA A. Bancorporation of Montana, Great Falls, Montana B. Liberty County Bank, Chester, Montana Citizens Bank of Montana, Havre, Montana Central Bank of Montana, Great Falls, Montana C. None D. At any time prior to May 1, 1965, at the annual meetings of shareholders of such banks, or any adjournments thereof, to elect directors, and to act thereat upon such matters of a routine nature as are ordinarily acted upon at the annual meetings of such banks. (Signed) Karl E. Bakke BAKKE Definition of KECCA: The Board authorizes the issuance of a limited voting permit, under the provisions of section 5144 of the Revised Statutes of the United States, to the holding company affiliate named below after the letter "AP, entitling such organization to vote the stock which it owns or controls of the bank(s) named below after the letter "B", subject to the condition e stated below after the letter "C". The permit authorized hereunder is limited to the period of time and the purponeo stated after the letter "D". Please proceed in accordance with the instruc* tione contained in the Board's letter of March 10, 1947, (S-964). 4.5"7 BOARD OF Item No. GOVERNORS 3 12/22/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD December 22, 1964 Board of Directors, Hollywood National Bank, Los Angeles (Hollywood), California. Gentlemen: With reference to your request submitted through the Federal Reserve Bank of San Francisco, the Board of 19 of the Governors, acting under the provisions of Section d Hollywoo the to on Federal Reserve Act, grants permissi deposits against reserves National Bank to maintain the same as are required to be maintained by nonreserve city banks, . effective as of the date it opened for business such Your attention is called to the fact that of Board Permission is subject to revocation by the Governors. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. 1 01.411.. IF a'. BOARD OF GOVERNORS Item No. OF THE 12/22/64 4 FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE • TO THE BOARD December 22, 1964 Mr. T. E. Nelson, Jr., President, Royal Properties, Inc., 4800 N. Central Avenue, Phoenix, Arizona. 85012 Dear Mr. Nelson: This refers to the request contained in your letter of October 12, 1964, submitted through the Federal Reserve Bank of San Francisco, for a determination by the Board of Governors of the Federal Reserve System as to the status of Royal Properties, Inc., Phoenix, Arizona (a Nevada corporation), as a holding comPany affiliate. From the information presented, the Board understands that Royal Properties, Inc., owns 99 per cent of the stock of a savings and loan association, owns or controls three real estate development companies, two welding supply distributing companies, an engineering and construction company, an interior decorating company, and all of the stock of three inactive corporations, and °Ilna less than control of a sign company and a company engaged in the operation of a motel; that it is a holding company affiliate bY reason of the fact that it owns 6,990 of the 7,500 outstanding Shares of stock of The American National Bank of Cheyenne, Cheyenne, WYcming; and that it does not, directly or indirectly, own or conany stock of, or manage or control, any other banking institution. In view of these facts, the Board has determined that RoYal Properties, Inc., is not engaged, directly or indirectly, a business in holding the stock of, or managing or controlling banks, banking associations, savings banks, or trust companies within the meaning of section 2(c) of the Banking Act of 1933 U.S.C. 221a); and, accordingly, it is not deemed to be a "°1ding company affiliate except for the purposes of section 23A ?! the Federal Reserve Act and does not need a voting permit from cne Board of Governors in order to vote the bank stock which it °Tans. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 45t . T. E. Nelson If, however, the facts should at any time indicate that Royal Properties, Inc., might be so engaged, this matter should be again submitted to the Board. The Board reserves the right to rescind this determination and make further determination of this matter at any time on the basis of the then existing facts, including additional acquisitions of bank stocks even though not constituting control. Very truly yours, (Signed) Karl E. Bakke Ka 1 E. Bakke, Assis ant Secretary. Item No. BOARD OF GOVERNORS 5 12/22/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD December 221 1964 Mr. Claude R. Erickson, President, Guaranty Development Company, Box 666, Livingston, Montana. Dear Mr. Erickson: This refers to the request contained in your letter of December 1, 1964, submitted through the Federal Reserve Bank of Mlnneapolis, for a determination by the Board of Governors of the Federal Reserve System as to the status of Guaranty Development C°mPany as a holding company affiliate. From the information presented, the Board understands 1.1(at Guaranty Development Company was formed for various purposes Including selling of insurance, owning and rental of real and Personal property, engaging in various businesses, and owning stocks and securities; that it is a holding company affiliate by reason of the fact that it owns 643.25 (64.3%) of the 1,000 outs tanding shares of stock of Livingston State Bank, Livingston, Montana; and that it does not, directly or indirectly, own or !ontrol any stock of, or manage or control, any other banking Ins titution. In view of these facts, the Board has determined that Guaranty Development Company is not engaged, directly or ind irectly, as a business in holding the stock of, or managing or controlling banks, banking associations, savings banks, or trust c°mPanies within the meaning of section 2(c) of the Banking Act to 1) 1933 (12 U.S.C. 221a); and, accordingly, it is not deemed ( ! e a holding company affiliate except for the purposes of : ection 23A of the Federal Reserve Act and does not need a voting mit from the Board of Governors in order to vote the bank stock wnich it owns. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Mr. Claude R. Erickson -2- If, however, the facts should at any time indicate that Guaranty Development Company might be deemed to be so engaged, this matter should again be submitted to the Board. The Board reserves the right to rescind this determination and make further determination of this matter at any time on the basis of the then existing facts, including additional acquisltions of bank stocks even though not constituting control. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. BOARD OF GOVERNORS Item No. OF THE 12/22/64 6 FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD December 22, 1964 Mr. Charles J. Scanlon, President, Federal Reserve Bank of Chicago, Chicago, Illinois 60690. Dear Mr. Scanlon: The Board of Governors has authorized the Federal Reserve Bank of Chicago to execute on behalf of the Board an amendment to the Group Life Insurance Policy No. 22271-01 With Connecticut General Group Life Insurance Company, in the fcmm enclosed with Mr. Hilkert's letter of December 11, 1964. The amendment provides a post-retirement death benefit of $1,000 for certain retirees of the Federal Reserve Banks. Employees of the Board of Governors are specifically e xcluded from the post-retirement benefit by terms of the amendment. It would be appreciated if, after the rider reflecting the changes provided by the amendment has been executed a representative of the Federal Reserve Bank of Chicago, the signed original is sent to the Board of Governors in order that it may be placed with the master policy. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Eric10 sure 15-13 10 the Federal Reserve Bank of Chicago: The Federal Reserve Bank of Chicago is authorized on behalf of the Board of Governors of the Federal Reserve System to accept and sign 44 amendment in the form of the rider enclosed with the letter dated 451414er 11, 1964, from Mr. Robert N. Hilkert, Chairman, Subcommittee "Personnel. which rider is to be attached to and form a part of policy Wa. 22271..01 issued by the Connecticut General Life Insurance Company. Board of Governors of the Federal Reserve System (SEAL) ceimber 22, 196k Date By (Signed) Merritt Sherman Merritt Sherman, Secretary. 1131,-A BOARD OF GOVERNORS Item No. OF THE 12/22/64 7 FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADOItESS FICIAL CLINFIESPONDENCE TO THE HUARD December 22 1964 Mr. Harry W. Huning, Vice President, Federal Reserve Bank of Cleveland, 44101 Cleveland, Ohio. Dear Mr. Huning: In accordance with the request contained in your letter of December 17, 1964, the Board approves the designation of John W. Mitchell, Jr., as a special assistant the examiner for the Federal Reserve Bank of Cleveland for member State of ns examinatio in ing participat purpose of banks except The Provident Bank, Cincinnati, Ohio. The authorization heretofore given your Bank to designate Mr. Mitchell as a special assistant examiner is hereby canceled. Appropriate notations have been made on our records of the names to be deleted from the list of special assistant examiners. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. Item No. 8 BOARD OF GOVERNORS OF THE o'. 12/22/61 FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 . ADDRESS OFFICIAL CORRESPON DENCE TO THE BOARD ;IL RESt56(c .• December 22, 1964 Mr. Leland M. Ross, Vice President, Federal Reserve Bank of Chicago, Chicago, Illinois. 60690 Dear Mr. Ross: In accordance with the request contained in your letter of December 15, 1964, the Board approves the designation of Jess Dennis as a special assistant examiner for the Federal Reserve Bank of Chicago to participate in examinations of State member banks. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS Item No. OF THE 12/22/64 9 FEDERAL RESERVE SYSTEM WASHING 1 ON, 0. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD December 22, 1964- C°11FIDEL (Fit) ,r. 1 E. H. Galvin, Vice President, Federal Reserve Bank of San Francisco, San Francisco, California. 94120 Dear Mr. Galvin: In accordance with the request contained in your letter December 16, 1964, the Board approves the appointment of lvin M. Cibula, Jr. as an assistant examiner for the Federal ! ' eaerve Bank of San Francisco, effective January 1, 1965. It is noted that /Ir. Cibula is indebted to 'Golden Gate National Bank, San Francisco, California. Accordingly, the Btardis approval of the appointment of Mr. Cibula is given with e understanding that he will not participate in any examination Of that bank until his indebtedness has been liquidated. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary.
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