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Minutes for December 7, 1965
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 proposed to place in the record of policy actions
required to be kept under the provisions of section 10 of the
Federal Reserve Act an entry covering the item in this set of
minutes commencing on the page and dealing with the subject
referred to
below:
Page 6
Approval of a discount rate of 4-1/2 per cent
for the Federal Reserve Banks of Boston and
Atlanta, and also for other Reserve Banks if
their directors acted to establish such a rate.
Should you have any question with regard to the minutes,
•
lt
will be appreciated if you will advise the Secretary's Office.
(t)ri.herwise, please initial below. If you were present at the
eeting, your initials will indicate approval of the minutes. If
Y°t1 were not present, your initi
I indicate only that you
have
seen tne minutes.
Chm. Martin
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. Mitchell
Gov. Daane
Gov. Maisel
Minutes of the Board of Governors of the Federal Reserve System
on Tuesday, December 7, 1965.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
The Board met in the Board Room at 10:00 a.m.
Martin, Chairman
Balderston, Vice Chairman
Robertson
Shepardson
Mitchell
Maisel
Sherman, Secretary
Kenyon, Assistant Secretary
Broida, Assistant Secretary
Young, Senior Adviser to the Board and Director,
Division of International Finance
Mr. Holland, Adviser to the Board
Mr. Solomon, Adviser to the Board
Mr. Hackley, General Counsel
Mr. Brill, Director, Division of Research and
Statistics
Mr. Hooff, Assistant General Counsel
Mr. Partee, Associate Director, Division of Research
and Statistics
Mr. Dembitz, Associate Adviser, Division of Research
and Statistics
Mr. Sammons, Associate Director, Division of International Finance
Mr. Irvine, Adviser, Division of International
Finance
Messrs. Goodman, Leavitt, and Thompson, Assistant
Directors, Division of Examinations
Mrs. Semia, Technical Assistant, Office of the
Secretary
Mr. Morgan, Staff Assistant, Board Members' Offices
Mr. Forrestal, Senior Attorney, Legal Division
Mr. Veenstra, Chief, Financial Statistics Section,
Division of Data Processing
Mr. Staiger, Senior Economist, Division of Data
Processing
Mr.
Mr.
Mr.
Mr.
Distributed items.
The following items, copies of which are
attached to these minutes under the respective item numbers indicated,
ere a2P.ovd unanimously:
12/7/65
-2Item No.
Letter to the Ambassador from Venezuela stating
that, in response to a request for the temporary
services of a bank examiner, Robert Hochstatter
would be assigned to assist in the investigation
and audit of a Venezuelan development bank.
1
Telegram to the Federal Reserve Agent at Chicago
authorizing the issuance to K-J Investment Company,
Moline, Illinois, of a limited permit to vote its
stock of The Farmers National Bank of Knoxville,
Knoxville, Illinois.
2
Letter to the Federal Reserve Bank of Boston
regarding certain questions arising in connection
with the proposal by a national bank to acquire
the assets and assume the liabilities of a savings
and loan association. (With a copy to the Comproller of the Currency.)
Request by Central Bank of Trinidad and Tobago.
There had been
dis tributed a memorandum dated December 3, 1965, from Mr. Young stating
that the International Monetary Fund wished to submit to the Government
of Trinidad and Tobago names of possible candidates for the governorship
of the Central Bank.
The Fund had selected several names, as listed in
the memorandum, from a roster of Federal Reserve System personnel who
might be available for foreign assignments.
It was not known whether
any of the individuals mentioned would be interested in the assignment,
but the
Fund would like to know whether they might be available and
whether the Board would have any objection to the submission of their
names to the Government of Trinidad and Tobago for its consideration.
Iwo other possible candidates were mentioned in Mr. Young's memorandum,
and it was suggested that the Board might wish to propose additional
names.
AI ell-.
tt
12/7/65
-3After a discussion of the qualifications and possible avail-
ability of the various persons named, Governor Robertson asked that
the matter be deferred in order that he might make a further suggestion
in executive session.
Secretary's Note: In executive session,
Governor Robertson suggested the name of a
member of the Board's staff. However, it
subsequently developed that he was not
interested in being considered for the
post. The Monetary Fund later indicated
that the Government of Trinidad and Tobago
probably would fill the position from a
non-U.S. source.
Form of condition report (Items 4 and 5).
On September 27,
1965, the Board approved the adoption of a revised condition report
form for use by State member banks.
The form reflected the outcome
of Prolonged negotiation among the Federal bank supervisory authorities.
It was based principally on a draft report form proposed by the Comptroller of the Currency, in effect as a response to the Board's
Proposal for a compromise format that was transmitted to the other
gencies in December 1964 and modified in early 1965.
The Board's
Se ptember 1965 approval contemplated that the staff would negotiate
further on the reporting of real estate loans and other minor points.
There had now been distributed a memorandum dated December 1,
1965, from Messrs. Partee and Veenstra submitting a draft letter to
he Bureau of the Budget that would request clearance for the report
12/7/65
-4-
form proposed for use by State member banks.
The memorandum, however,
pointed out that there had been one major change requiring reappraisal
of plans.
The Comptroller of the Currency had now decided to revert
to the old maturity
schedule for reporting U.S. Government securities,
rather than to use an issue reporting schedule.
After commenting on the apparent reasons for the change in the
Comptroller's position, (the principal one being that the Comptroller
aPParently had understood, incorrectly, that the Treasury Ownership
Survey would be dropped for the months of December and June if he
collected the data by issues from national banks), the memorandum
stated that the staff felt the reasons favoring use of the issue schedule
in June and December condition reports, even aside from possible Treasury
uses of the data, were persuasive.
It was understood that the staff of
the Federal Deposit Insurance Corporation shared this view.
Briefly,
issue reporting would permit easier reporting, greater accuracy, and
greater usefulness and flexibility both for current and longer range
applications.
Banks that reported in the Treasury Ownership Survey
would be able to use the same data with only minor variations for the
call report, while banks not now reporting to the Treasury should be
able to
report holdings by issue with considerably more ease and
accuracy than on the old maturity schedule.
The Federal Deposit
Insurance Corporation was now printing its year-end call forms, using
the new issue format.
12/7/65
-5Given the Comptroller's position, the fact that he was not
at present available for further discussion of the subject, and the
Treasury's reluctance to furnish the full issue schedule for reporting
national banks, the alternatives seemed to be as follows:
(1) use a slip sheet to obtain the issue listing for
Government and agency securities from all national banks;
(2) use a slip sheet to obtain the issue listing from
national banks not included in the Treasury sample;
(3) make no collection from national banks; for compilation purposes, the maturity distribution furnished by the
Treasury could be used for banks reporting in the Ownership
Survey, and the data collected by the Comptroller could be
used for the other national banks.
Comments in the memorandum on these alternatives indicated the
staff's Preference for the first, although it would, of course, run
the greatest risk of objection from the Comptroller's Office and, because
it involved some question of duplication of reporting with the Treasury
Survey, there might be difficulty in getting Budget Bureau approval of
the slip sheet.
The tenor of discussion was that the first alternative appeared
Preferable,
and there was unanimous agreement that an attempt should be
-made to obtain Budget Bureau clearance on that basis before considering
the other alternatives.
The letter to the Bureau of the Budget requesting clearance of
the
revised format of the report of condition was then approved unanimously
re form attached as Item No. 4.
A copy of the letter subsequently
4i
12/7/65
-6-
sent to the Bureau of the Budget requesting clearance on the proposed
Slip sheet for national banks is attached as Item No. 5.
Messrs. Sammons, Hooff, Irvine, Goodman, Thompson, Forrestal,
Veenstra, and Staiger, and Mrs. Semia then withdrew from the meeting
and Mr. Solomon, Director, Division of Examinations, entered the room.
Chairman Martin, who had visited yesterday with the President
in Texas, in company with certain Administration officials, commented
informally on some of the matters that had been discussed with the
President and on the press conference that was held incident to the
Meeting.
Discount rates.
The Boards of Directors of the Federal Reserve
Banks of Boston and Atlanta had established, subject to the approval
of the
Board of Governors, a rate of 4-1/2 per cent on discounts for
and advances
to member banks under sections 13 and 13a of the Federal
Reserve Act and a rate of 5 per cent on advances under section 10(b).
In a ddition, the Boston Bank had established a rate of 5-1/2 per cent
On advances under the last paragraph of section 13, while the Atlanta
Bank had
established a rate of 6-1/2 per cent on such advances.
The establishment of such rates by those Banks was approved
effective
December 8, 1965, with the understanding that a press release
14°uld be issued this afternoon, that appropriate advice would be sent
by
wire to the two Banks and also to the other Federal Reserve Banks,
and that a notice
would be published in the Federal Register.
12/7/65
-7In addition, upon receipt of advice that other Reserve Banks
had acted to establish a rate of 4-1/2 per cent on discounts and advances
under sections 13 and 13a, along with appropriate subsidiary rates, the
Secretary was authorized to advise such Banks of approval of such rates
bY the Board of Governors, with the understanding that the usual press
statement would be issued and that appropriate notification and publication procedures would be followed.
Secretary's Note: Acting under this authorization, the
Secretary subsequently advised the Federal Reserve
Banks shown below of approval of the establishment by
them of a rate of 4-1/2 per cent on discounts and
advances under sections 13 and 13a and of indicated
rates on other advances, effective the dates indicated:
Philadelphia
Cleveland
Richmond
St. Louis
Minneapolis
Dallas
San Francisco
Kansas City
December
December
December
December
December
December
December
December
10,
10,
10,
10,
10,
10,
10,
13,
1965
1965
1965
1965
1965
1965
1965
1965
The rate established and approved for each of the Banks
on advances under section 10(b) was 5 per cent. The
rates established and approved on advances under the
last paragraph of section 13 were as follows: Philadelphia,
Richmond, St. Louis, Minneapolis, Kansas City, Dallas, and
San Francisco - 5-1/2 per cent; Cleveland - 6 per cent.
Reserve requirements.
Pursuant to the understanding at yester-
%'s meeting, there had been distributed copies of a memorandum from
ilessrs. Young, Brill, Holland, and Solomon (Adviser) dated December 6,
19", stating that they had reexamined two reserve requirement reduction
12/7/65
-8-
Plans previously presented to the Board and that they had also devised
a third variant combining the features of the other plans that seemed
to have elicited favorable response at the Board meeting yesterday.
All of the plans introduced the graduated reserve principle, two in
entirety and the other one partially.
All would result in a net release
of reserves, in amounts ranging from $300 million to $550 million.
All
would release reserves for the smallest banks, but the first and third
Plans would raise reserve requirements for larger banks.
The second
and third plans would reduce the requirement on the first $2 million of
net demand deposits to the statutory minimum of 7 per cent.
The first
Plan would reduce the requirement on the first $5 million of deposits
to 8 per cent.
The second plan would affect no bank adversely.
The
third plan would affect adversely only country banks with net demand
de posits of above $52 million and reserve city banks above $520 million,
/Mile the first plan would affect adversely country banks with deposits
413°ve $45 million and reserve city banks with deposits above $497 million.
The memorandum pointed out that there appeared to be no need to
inject reserves for seasonal purposes until early February.
A substantial
ection now would probably require some offsetting open market sales,
sPread over time as the released reserves drifted in to the money markets.
Moreover, any action that increased reserve pressures on money market
banks during the period of tax and dividend date flows would compound
12/7/65
-9-
money market pressures.
Accordingly, the most relevant effective date
for a reserve reduction of the types that the first and third plans
would afford would likely be the reserve week beginning December 23,
Which would also be the beginning of a country bank reserve computation
period.
The second plan could be introduced as early as the reserve
period beginning December 9.
The problem of selecting an appropriate
effective date, however, did not prejudice the choice of an announcement
date, so long as the interval was not too long.
Chairman Martin said he had not yet had an opportunity to study
the memorandum or the proposals discussed therein.
In general, while
he would have no objection to discussing the subject, he felt that it
Would be premature for the Board to take any additional policy action
at
this particular juncture.
The discussion of the alternative proposals then proceeded, and
during this discussion Governor Maisel noted that a first decision was
Whether
the Board wanted to move on a proposal that would become effec-
tive for
the reserve computation period beginning December 9.
there
Was
He thought
would be decided advantages in moving about that time if the Board
going to move, and he felt that a decision to delay should be a
conscious decision.
Chairman Martin said it was his feeling that a move on reserve
requirements would only complicate the present situation.
He believed
s
,1 cg
4,4
12/7/65
-10-
that the announcement of any such action might be blown out of proportions.
However, he would not be averse to taking some action of this kind at an
appropriate time.
Governor Mitchell questioned whether a reserve requirement action
would necessarily have the effect Chairman Martin had indicated, and the
latter commented that this was a matter of judgment.
Various interpreta-
tions, he
believed, might be placed on such an action if taken at this
Particular time.
Governor Shepardson observed that the Board, in previous discussions of reserve requirements, had talked in terms of reducing the disParity between requirements of reserve city and country banks.
As he
read the figures related to the current proposals, this disparity would
be
increased, at least on the
two
ends.
Governor Mitchell commented that the very small member banks do
not compete importantly with the large banks.
e nmPete among themselves.
However, they do have to
The third of the three plans now before the
board would go as far as possible toward minimizing the costs of the
small banks.
Governor Shepardson noted that under this plan a substantial
number of banks would have their requirements increased, and Governor
Mitchell observed that these were mostly the large country banks, which
had
been occupying a preferred position.
12/7/65
-11There ensued further references to the question of timing, with
mention being made that there would appear to be no need for injection
of reserves for seasonal purposes until early February.
Governor Robertson commented that the Board was going to be
criticized in some quarters whenever it took action of this kind.
How-
ever, the actions taken on December 3 would be the focus of attention
for the next couple of months.
Hence, if reserve requirements were
adjusted now, the move might not be subject to so much criticism as
Otherwise.
In taking its actions on December 3 the Board had made it
P°ssible for the large banks to draw funds away from the small banks,
and this
would suggest that the Board was in a good position now to move
°a reserve requirements in a way that would benefit the small banks.
He
favored a graduated system of reserve requirements, and he felt that the
board might now be in the best possible position to move in that direction.
Governor Mitchell commented that there would be criticism from
he large banks if action along the lines suggested was taken at any time.
However,
he recognized the possibility that action at this particular
"-me might be subjected to interpretations of the kind to which the ChairMan had alluded earlier.
There followed additional discussion of various elements of the
staff proposals and of a memorandum from Mr. Hackley, distributed under
Yesterda _y t s
date, submitting a draft of a possible revision of the Supple-
iriellt to Regulation D, Reserves of Member Banks, that would establish
4
r
12/7/65
-12-
graduated reserve requirements (of undetermined amounts) against net
demand deposits for all member banks.
Mr. Hackley had also submitted
a draft of proposed amendments to Regulations D and Q, Payment of
Interest on Deposits, that would in effect define deposits, both for
reserve purposes and for purposes of payment of interest on deposits,
as including promissory notes of member banks, with specified exceptions.
On the promissory notes, Governor Mitchell said that his previous
ob jections to amendments along the lines submitted by Mr. Hackley had
been removed by virtue of the action taken to raise the maximum rate
Permitted to be paid by member banks on time deposits.
Chairman Martin observed that it would seem appropriate for him
to meet with the Comptroller of the Currency before proposed amendments
Ott
promissory notes were published for comment, and question was raised
w hether
the Chairman would want to be authorized to say to the Comptroller
that the Board was prepared to take such action.
However, the Chairman
indicated that he did not believe matters had yet developed to the point
that this would be necessary.
Chairman Martin also noted that Chairman Patman of the Joint
Ec°110mic Committee was preparing to call hearings next week on the
11°ard's discount rate and Regulation Q actions.
All members of the staff except Messrs. Sherman, Kenyon, Hackley,
arid Morgan then withdrew from the meeting.
12/7/65
-13Director appointments.
Chairman Martin reported that he had
d iscussed with
Raymond Rebsamen, Chairman of the Federal Reserve Bank
of St. Louis, certain problems that had arisen in connection with Mr.
Rebsamen's continuing as Chairman and as a Class C director of the Bank.
On the basis of this clarifying conversation, Chairman Martin recommended
that Mr. Rebsamen be reappointed as a Class C director for the three-year
term beginning January 1, 1966, and designated as Chairman and Federal
Reserve Agent for the calendar year 1966, and these actions were agreed
Upon.
The Board also appointed Smith D. Broadbent, Jr., as Deputy
Chairman of the St. Louis Bank for the year 1966.
It was agreed to request the Chairman of the Federal Reserve
Bank of Richmond to ascertain whether Wilbur G. Smith, General Manager,
Sparrows
Point Works of Bethlehem Steel Corporation, Baltimore, Maryland,
would accept appointment, if tendered, as a director of the Baltimore
Branch for the unexpired portion of the term ending December 31, 1966,
to replace Harry B. Cummings,who had resigned, with the understanding
that if Mr. Smith would accept, the appointment would be made.
should
If it
be found that he was not available, it was understood that similar
inquiry would be made with respect to Lewis M. Smith, Vice President,
Chesapeake and Potomac Telephone Company, Baltimore, Maryland.
It was agreed to ascertain through the Chairman of the Federal
Reserve
Bank of Richmond whether John L. Fraley, Executive Vice President
12/7/65
-14-
of Carolina Freight Carriers, Inc., Cherryville, North Carolina, would
accept appointment, if tendered, as a director of the Charlotte Branch
for the three-year term beginning January 1, 1966, with the understanding
that if it were found that he would accept, the appointment would be made.
Secretary's Note: It having been ascertained
that Mr. Fraley would accept the appointment
if tendered, an appointment wire was sent to
him on December 8, 1965.
Governor Mitchell reported that he had discussed with Chairman
Lunding of the Federal Reserve Bank of Chicago the appointment of a
Class C director of the Bank for the three-year term beginning January 1,
1966.
On the basis of Governor Mitchell's report, it was agreed to
ascertain
through Chairman Lunding whether Elvis J. Stahr, Jr., President
f Indiana University, Bloomington, Indiana, would accept the appointment,
if tendered, with the understanding that if it were found that he would
accePt, the appointment would be made.
Secretary's Note: It having been ascertained
that Mr. Stahr would accept the appointment if
tendered, an appointment wire was sent to him
on December 14, 1965.
The meeting then adjourned.
Secretary's Note: Governor Shepardson today
approved on behalf of the Board the following
items:
ap
Letter to the Federal Reserve Bank of New York (attached Item No. 6)
Pr°ving the appointment of William L. Mayer as assistant examiner.
407(
1217/65
-15-
Memorandum from the Division of Administrative Services recommending acceptance of the resignation of Verna Ruth Hornbeck, Cafeteria
Helper in that Division, effective at the close of business November 29,
1965.
Memorandum dated December 1, 1965, from Mr. Young, Senior Adviser
to the Board and Director, Division of International Finance, requesting
at four specified staff members of the Division of International
"mance be authorized to attend at Board expense the annual meetings
?f the Allied Social Science Associations to be held in New York City,
December
28-30, 1965.
t
BOARD OF GOVERNORS
Item No. 1
12/7/65
OP THE
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE OF THE CHAIRMAN
December 7, 1965.
His Excellency
Dr. Enrique Tejera-Paris,
of Venezuela,
Washington
"
ashington, D. C. 20008.
De`lt Mr. Ambassador:
In your letter of November 24, 1965, you relayed a
request
from Banco Industrial of Venezuela for the temporary
services of a bank examiner. The bank examiner would go to
Caracas for a period of about one week to help in the investiati°n and audit of a local development bank which may have
been
involved in some irregularities.
It is a pleasure to inform you that the System can
zak
e available to you the services of Mr. Robert Hochstatter,
Zienior Examiner for the Federal Reserve Bank of Chicago.
,
Hochstatter is a competent and highly regarded examiner, who
has been
employed by the Federal Reserve Bank of Chicago for 24
ears. He also has a fairly good knowledge of Spanish which we
eliave would be helpful.
t
We note that Banco Industrial of Venezuela will
reimburse
riburse the Federal Reserve for Mr. Hochstatter's expenses.
There will be no fee charged for his services.
Let me assure you that the Federal Reserve System is
Pleased to be able to make available the services of one of our
examiners.
Sincerely yours,
McC. Martin, Jr.
TELEGRAM
• r
LCASIED Wine SIERVICK
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON
Item No. 2
12/7/65
December 7, 1965
LUNDING -- CHICAGO
KECEA.
A. K-J Investment Company, Moline, Illinois.
B. The Farmers National Bank of Knoxville, Knoxville, Illinois.
C.
None.
D.
At any time prior to December 31, 1965, at a special
meeting of shareholders of such bank, or any adjournments thereof, to amend the Articles of Association of
such bank' as follows: (1) to declare a $60,000 stock
dividend; (2) to change the par value of.the outstanding stock from $100 to $10 per share; and (3) to permit
the appointment during any one year of two additional
all
directors between annual meetings, provided that
satisaction taken shall be in accordance with plans
factory to the Comptroller of the Currency.
(Signed) Karl E. Bakke
BA1UCE
Definition of K*
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 "Alts entitling such organization to
vote the stock which it owns or controls of the bank(s) named
below after the letter RBI', subject to the condition(s) stated
below after the letter *CI'. The permit authorized hereunder
is limited to the period of time and the purposes stated after
the letter no. Please proceed in accordance with the instructions contained in the Board's letter of March 10, 1947 (S-964)
BOARD OF GOVERNORS
Item No. 3
12/7/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORREIBPONDICNOC
TO THE BOARD
December 7, 1965.
Luther M. Hoyle, Jr.,
Vice President,
Federal Reserve Bank of Boston,
Boston, Massachusetts. 02106
Dear Mr. Hoyle:
This refers to your letter of November 22, 1965,
transmitting a request for answers to certain questions arising
in connection with the proposal by a national bank to acquire the
assets and assume the liabilities of a savings and loan association.
It is stated that the association has been paying a
quarterly dividend of 4.25 per cent per annum which, in effect, is
similar to a 90-day withdrawal privilege, although no written contract provides for this. However, it is probable that the practice
of the association is to permit a customer to withdraw his funds at
any time upon demand, the only penalty being loss of some interest.
The questions are whether the national bank may continue
to Pay this 4.25 per cent rate without requiring a written contract
or certificate of deposit and, if this cannot be done, whether the
bank may continue paying interest at this rate for a period of
18 months to allow for orderly integration of these accounts with
its present savings deposits.
The answer to both questions is in the negative. Regulaexceeding
tionQ provides that a member bank may not pay interest
some of
Furthermore,
deposit.
savings
per
4
cent per annum on a
the accounts in the association probably would not qualify for
deposit in a savings account. Also the bank would not have reserved
the right to require at least 30 days' written ,notice before with4.25 per cent
drawal. In order for the bank to pay interest at the
rate there must exist an agreement or contract providing that the
at
funds represented thereby may not be withdrawn for a period of
least 30 days. Therefore, the accounts acquired from the savings
BOARD OF GOVERNORS OF THE FEDE ALRESERVE SYSTEM
Hi. Luther M. Hoyle
- 407
Jr.
and loan association would not qualify as either savings or time
deposits of the member bank and would be demand deposits upon which
no interest may be paid.
However, if these accounts are acquired by the bank
during the running of a quarterly period, the Board will not object
to the bank's paying interest at the 4.25 per cent rate until the
end of the first complete quarterly period when valid time deposit
contracts must be executed in order for the bank thereafter to pay
interest in excess of 4 per cent.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
4
BOARD OF GOVERNORS
Item No. 4
12/7/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, CI.,C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December
9, 1965.
Mr- Edward T. Crowder,
Clearance Officer,
Office of Statistical Standards,
Bureau of the Budget,
Executive Office of the President,
Washington, D. C. 20503
tear Mr. Crowder:
This is to request clearance by your Agency of a revised
1bePort of condition to be collected from State bank members of the
:
"deral Reserve System. Two copies of your form 83, the proposed
condition report form, and the required supporting statement, are
?Ilelosed. This request recognizes use of this report for the col4-ecti0n of statistical information as well as for the regulatory
44d supervisory purposes for which it is also used.
Balance sheet information for the 1430 State member banks,
Whe
,
compiled with data for the 4800 national and 7300 nonmember banks,
the primary source of balance sheet statistics for the commcrcial
ellking system. Summary data for mid-year and year-end call dates
Ze used extensively by economists, financial analysts and others in
7Ternment and elsewhere and are required by the Board in the conduct
its responsibilities for monetary policy. These data are also
e
c
.
!
t
I
; 4 used as benchmark universe data and form the foundation on
-ch Many other important statistical series with smaller reporting
vases are built.
For your information, it is understood that the Federal
be
4 Posit Insurance Corporation will use the same form, including the
2sue schedule of U. S. Government direct obligations and obligations
Federal agencies not guaranteed by the Government, to collect data
10,a insured nonmember commercial banks. It is also understood that
;
,Z1
e Comptroller of the Currency will use a form similar to the enclosed
.%cept that it will not include the schedule of Government and agency
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Mr. Edward T. Crowder
-2-
4
4 f
securities by issue. Our information is that national banks will
report Government direct obligations in the same maturity schedule
as was used in the previous report and Agency securities in a single
item with no breakdown.
The enclosed form follows closely proposals made by the
Comptroller of the Currency through an inter-agency committee of the
heads of the Federal bank supervisory agencies, in response to an
earlier proposal made by the Board. The Comptroller's proposal
Climaxed approximately two years of negotiations during which time
the reports collected from State and national banks have differed
substantively. Nearly all of the Comptroller's proposals were
adopted by the other Federal bank supervisory agencies, and approved
by the National Association of Supervisors of State Banks, in the
interests of uniformity. Reconciliation of the most important
differences previously existing has been achieved by means of
memoranda reporting of the amount of securities purchased and sold
under repurchase transactions, recognizing differences in regulatory
Policy concerning these transactions. Board representatives are
continuing to discuss methods of achieving uniformity of reporting
Government and Agency securities or of deriving uniform data in this
area for all classes of banks. We will keep your Office advised as
these discussions progress.
The enclosed form will be used at mid-year and year-end
call dates. It is planned to use a shorter form for surprise spring
and fall call dates, to include only the items on the face of the
report and the few items on the reverse that are required for deposit
insurance assessment purposes.
No request for clearance is being made for four report forms
that have been submitted for clearance in earlier years. Form 105e
is the publisher's copy supplement used for joint publication of
condition data under applicable State and Federal statutes, and form
105e is used for the same purpose by banks publishing only under
Section 9 of the Federal Reserve Act. The purpose is strictly
supervisory and the reported data are not used for statistical
Purposes. Form 220 and form 220a, the Report of an Affiliate or a
R°1ding Company Affiliate and the related publisher's copy, are
also strictly supervisory forms required under existing legislation
with no statistical uses. All of these forms are retained at the
Reserve Banks and no copies or summaries are forwarded to the Board.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
41closures.
4.017
BOARD OF GOVERNORS
......
.• 400f GOvei•
OF THE
FEDERAL RESERVE SYSTEM
fT
,4!11f
•*
Z:
L., ••
Item No. 5
12/7/65
WASHINGTON 25. D. C.
REst
it41•.
-.....
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 16, 1965.
Mr. Edward T. Crowder,
Clearance Officer,
Office of Statistical Standards,
Bureau of the Budget,
Executive Office of the President,
Washington, D. C. 20503
Dear Mr. Crowder:
There are enclosed two copies of your form 83 and a
Proposed schedule to be used to collect issue data on holdings of
U. S. Government direct and guaranteed obligations and of Federal
agency obligations by national member banks. When used with
corresponding information to be collected from State member banks
17 the Federal Reserve System and from insured nonmember banks by
the Federal Deposit Insurance Corporation, these data will provide
consistent and uniform data for 01 member and all insured commercial
banks.
stateAs discussed at length in the letter and supporting
:?rit of December 9 which transmitted the request for clearance of
141
("ae corresponding State member bank condition report form, issue
rePorting is considered to be a substantial improvement over the
iaturity schedule previously used because it is considerably less
uurdensome to respondents and provides more accurate information of
greater analytic usefulness. Consistent information coming from
v
irtua14 all banks in the country will be helpful to the Treasury
in
Survey.
estimating the coverage of its monthly sample Ownership
new
for
market
potential
the
!
r i will also be helpful in gauging
f
and
certificates
participation
._eesury debt issues, including
°O-igations of Federal agencies. As discussed in detail in the
suPPorting statement, these data are required to support a wide
!lage of vital research work in which the Federal Reserve System
"
48 already invested heavily.
t
f
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Mr. Crowder
-2-
This schedule was drawn in the same form as is used for
the Treasury Ownership Survey collected monthly from about 6000
commercial and mutual savings banks. The banking agency form has
been revised slightly to include a few securities held by only a
few banks which are considered guaranteed or agency issues by the
banking agencies but not by the Treasury, and to include memoranda
Items for total book value of Government and agency obligations to
tie into corresponding items on the face of the report of condition.
As you know, this form for collecting information on
U. S. Government and Federal agency securities was adopted unanimously
after extensive negotiations among representatives of the Federal and
State bank supervisory authorities. Since that time the Comptroller
Of the Currency has decided to revert to the old maturity schedule
for national banks. Unless some additional information is obtained
from national banks, the data collected from national and State banks
11111 be inconsistent and incompatible. National bank data will be
based on book values in the old 10-way issue and maturity breakdown,'
and summary data for RII member and insured banks can not be compiled
except for some rough estimates of totals on a national basis. No
data would be available in the more detailed geographical breakdowns
for publication in the numerous releases of the Board and the FDIC,
and the data could not be used for research purposes requiring
regional, size, or other breakdowns, or requiring comparable data
for individual banks. No breakdown of agency issues would be
available.
Since Treasury representatives are concerned over the
Possibility of any discontinuities in their series, the semi-annual
report collected by the banking agencies would not replace the
Treasury reports. Treasury representatives have also declined to
Inake available Survey data for individual banks since this would
1r/validate a written understanding with their respondents that
such data would not be used outside Treasury Offices.
The burden on respondents of essentially duplicating
information on the two forms is more apparent than real. The
data are readily available from bank records and no separate or
8Pecial preparation is necessary. For most of the large national
12allks participating in the Treasury Survey, completion of the additional call report schedule would involve no more than submitting
a duplicate copy of their December and June Ownership schedules
uith a notation of the book value items added. Treasury representhave emphasized that issue reporting is not burdensome due
to its simplicity. They could recall no single complaint that the
schedule was complex and difficult throughout the 24-year period
the Survey has been in effect.
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Mr. Crowder
Treasury representatives have expressed a strong interest
in obtaining universe data from which monthly totals can be blown
1110 to universe totals. Because of serious inaccuracies in reporting
the maturity schedule previously used, this has been impossible.
Misclassifications according to maturity, and often arbitrary and
inconsistent llocations of valuation reserves by maturity class in
adinsting from par to book value, have reduced the usefulness of
call report data for this and other eqpally important purposes.
Total bank holdings estimates made by the Treasury have been imperfect,
end revisions based on new call report data have required extensive
comPutations in order to isolate the shifting book value factors, as
/Tell as arbitrary judgments as to the extent of misclassifications.
The proposed format would eliminate these problems while providing
the regulatory agencies with far more accurate data on commercial
bank holdings of Government securities.
banks
The investment requirements of small commercial
differ from those of the larger institutions, but without adequate
data to indicate small bank interest, or potential participation,
USWIlly
ilsw U. S. Government and Federal agency security issues
ons.
instituti
toust be designed primarily to meet the needs of larger
e
preferenc
the
Por example, although the Treasury has been aware of
On the part of smaller banks for "rights" refunding of maturing
securities, rarely is it able to determine the relative importance
°f this consideration due to the lack of data concerning small bank
holdings of specific upcoming maturities.
may
It is hoped that the Comptroller of the Currency
June
the
for
l'acognize these values and adopt issue reporting
and
!all- Because the national bank form has been printed
December
the
for
distributed, the possibility of making any change
end by
this
achieve
call seems to be ruled out. Negotiations to
ly.
intensive
the June call will be pursued
Because of the obvious time limitations for the December
at
cell, we would appreciate your consideration of these proposals
Your earliest convenience.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Enclosures
BOARD OF GOVERNORS
Item No. 6
12/7/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 7, 1965
Mr. Fred W. Piderit, Jr., Vice President,
Federal Reserve Bank of New York,
10045
New York, New York.
Dear Mr. Piderit:
In accordance with the request contained in your
letter of December 2, 1965, the Board approves the appointment of William L. Mayer as an assistant examiner for the
Federal Reserve Bank of New York. Please advise the effective date of the appointment.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
@FedFRASER