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Minutes for To: Members of the Board From: Office of the Secretary December 26, 1963 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 , it will be appreciated if you will advise minutes the 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. Chin. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. Mitcholl Gov. Daane 4550 Minutes of a meeting of the available members of the Board of Governors of the Federal Reserve System on Thursday, December 26, 1963. The meeting was held in the Board Roam at 2:00 p.m. PRESENT: Mr. Robertson, Acting Chairman Mr. Mitchell Mr. Daane Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Sherman, Secretary Kenyon, Assistant Secretary Molony, Assistant to the Board Cardon, Legislative Counsel Fauver, Assistant to the Board Hackley, General Counsel Noyes, Director, Division of Research and Statistics Farrell, Director, Division of Bank Operations Solomon, Director, Division of Examinations Hexter, Assistant General Counsel Hooff, Assistant General Counsel This meeting was held for the purpose of considering the issuance of a statement regarding an interpretation by the Comptroller of the Currency under date of December 19, 1963, to the effect that a national bank could accept savings accounts without regard to whether the funds deposited were to the credit of one or more individuals or of a corporation, association, or other organization, whether operated for profit or otherwise. The interpretation was published in the Federal Register on December 24, 1963, and advice from the Comptroller's Office concerning it was received at the Board this morning. 4551 12/26/63 -2- After discussion, unanimous approval was given to the issuance of a press statement in the form attached as Item No. 1, with the understanding that copies would be sent by wire to the Federal Reserve Banks for their information and that other appropriate distribution would be made. This action was taken subject to ratification at the next meeting of the Board at which a quorum was present. Reference also was made to certain other rulings that had been issued recently by the Comptroller, relating to loans to executive officers, capital debentures, and appraisals, and it was understood that such consideration as might seem necessary and appropriate would be given to those rulings at a subsequent Board meeting. The meeting then adjourned. Secretary's Notes: Pursuant to recommendations contained in memoranda dated December 18, 1963, from the Division of Research and Statistics, Governor Robertson, acting in the absence of Governor Shepardson, today approved on behalf of the Board the reappointment of the following persons as Consultants in that Division on a temporary contractual basis, effective as of January 1, 1964, and until December 31, 1964, with compensation for each at the rate indicated below for each day worked for the Board either in Washington or outside the city, and with the understanding that, in accordance with the Board's travel regulations, each would receive a per diem in lieu of subsistence in the amount of $16 when in travel status in connection with official assignments, and transportation: A 1- t-.1) 12/26/63 -3Susan S. Burr Almarin Phillips Gertrude Weiss $50 per day $75 per day $65 per day Governor Robertson noted today on behalf of the Board a memorandum from the Office of the Secretary advising that Lillie B. Brow, Assistant Supervisor, Subject Files, Records Section, had filed application for retirement, effective at the close of business December 30, 1963. Pursuant to the procedure approved by the Board on October 12, 1960, relating to examinations of Edge Act and agreement corporations by examiners for the Federal Reserve Banks of New York and Philadelphia, acting as examiners for the Board of Governors, a letter was sent today to the Federal Reserve Bank of Cleveland authorizing a similar arrangement in that District for examination of Mellon International Finance Corporation, Pittsburgh, Pennsylvania. The requirements contemplated by the Board's action on December 4, 1963, in approving the issuance of a preliminary permit to the International Bank of Detroit, Detroit, Michigan, having been completed, a letter was sent to that corporation on December 26, 1963, transmitting a final permit to commence business. 1- LA Secretar7 Ay1/tArk Item No. 1 12/26/63 Pot immediate release 4553 December 26, 1963. an interThe Board of Governors has received inquiries regarding Currency under date of December 19, Pretation issued by the Comptroller of the . . accept savings accounts 1963, to the effect that "a national bank may. are to the credit of one or Without regard to whether the funds deposited more individuals or of a corporation, association, or other organization, Whether operated for profit or otherwise." System, national banks are subject As members of the Federal Reserve to the provisions of section 19 of the Federal Reserve Act which prohibit member banks from paying interest, directly or indirectly, on any demand deposit and which require the Board of Governors to limit the rate of interest that may be paid by such banks on time and savings deposits. To this "demand deposits" and "savings end, it is necessary to define the terms to define deposits"; and the law expressly authorizes the Board of Governors of the auch terms and to prescribe regulations to effectuate the purposes statute and prevent evasions. "savings deposit" in a manner The Board's Regulation Q defines a that permits such deposits to be made only by individuals or by corporations, associations, and other organizations which are not operated for profit but for religious, philanthropic, charitable, educational, fraternal, or similar Purpose _. This definition has been in effect since 1936. 5 not n Accordingly, a deposit by a corporatio operated for profit may be classified by any member bank, including a national bank, as a savings 4554 -2Unless such a deposit comes within the definition of a "time dePosit. deposit" it would constitute a demand deposit under Regulation Q and payment °f interest on such deposit by a national bank would violate the prohibition of the law against payment of interest on demand deposits. provisions of the Federal Failure of a national bank to comply with Reserve Act constitutes grounds for instituting legal proceedings to close the bank. director of a national batik particThe law also provides that any iPating in or assenting to a violation shall be personally liable fpr any damage: that may be sustained by the bank, its shareholders, or any other persons - n f:°°sequence of the violation. Regulation D, relating to reserves In addition, Federal Reserve equired to be maintained by member banks in the Federal Reserve System, contains a definition of savings deposits identical to that of Regulation Q. 11° deposit of a business corporation in a member bank may be classified as 4 savings deposit for reserve purposes and, unless it falls within the definition of a time deposit, a national bank must maintain against such d ePosit the reserves applicable to demand deposits (16-1/2 per cent for resets e v city banks and 12 per cent for other member banks), rather than 4 th0 (4 per cent for all member 8e applicable to time and savings deposits banks). Classification of such a deposit as a savings deposit would violate 4gulati0n D and subject the member bank to a penalty for any resulting serve deficiency.
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