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Minutes for December
To:
Members of the Board
From:
Office of the Secretary
8, 1958
Attached is a copy of the minutes of the
Board of Governors of the Federal Reserve System on
the above date.
It is not proposed to include a statement
with respect to any of the entries in this set of
minutes in the record of policy actions required to
be maintained pursuant to section 10 of the Federal
Reserve Act.
Should you have any question with regard
to the minutes, it will be appreciated if you will
advise the Secretary's Office. Otherwise, if you
were present at the meeting, please initial in column A below to indicate that you approve the minutes.
If you were not present, please initial in column B
below to indicate that you have seen the minutes.
A
Chin. Martin
Gov. Szymczak
Gov. Mills
Gov. Robertson
x
Gov. Balderston
Gov. Shepardson
x6w
353tr
Minutes of the Board of Governors of the Federal Reserve
System on Monday, December 8, 1958.
The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Szymczak
Mills
Robertson
Shepardson
Sherman, Secretary
Kenyon, Assistant Secretary
Riefler, Assistant to the Chairman
Thomas, Economic Adviser to the Board
Leonard, Director, Division of Bank
Operations
Mr. Hackley, General Counsel
Mr. Masters, Director, Division of
Examinations
Mr. Shay, Legislative Counsel
Mr. Farrell, Associate Director, Division
of Bank Operations
Mr. Noyes, Adviser, Division of Research
and Statistics
Mr. Solomon, Assistant General Counsel
Mr. Hexter, Assistant General Counsel
Mr. Nelson, Assistant Director, Division
of Examinations
Mr. Kiley, Chief, Reserve Bank Operations
Section, Division of Bank Operations
Mr. Young, Assistant Counsel
Mr. Holahan, Supervisory Review Examiner,
Division of Examinations
Mr.
Mr.
Mr.
Mr.
Mr.
Discount rates.
Unanimous approval was given to telegrams
to the Federal Reserve Banks of New York, Philadelphia, and St. Louis
aPProving the establishment without change by those Banks on December
4, 1958, of the rates on discounts and advances in their existing
schedules.
353S
12/8/58
-2Items circulated or distributed to the Board. The following
items, which had been circulated or distributed to the members of the
Board and copies of which are attached to these minutes under the respective item numbers indicated, were approved unanimously:
Item No.
Letter to Federation Bank and Trust Company, New York
City, granting an extension of time within which to
establish a branch in Jamaica, New York. (For transmittal through the Federal Reserve Bank of New York)
1
Letter to the Union Trust Company of the District of
Columbia, Washington, D. C., advising that Board approval
Would not be required for the proposed purchase of banking assets and assumption of certain liabilities of The
Munsey Trust Company. (With a copy to the Federal Reserve Bank of Richmond)
2
Letter to the Farmers and Merchants Bank of Summersville,
Summersville, West Virginia, approving an investment in
bank premises. (For transmittal through the Federal
Reserve Bank of Richmond)
3
Letter to the Security Trust Company, Wheeling, West
Virginia, approving an investment in bank premises. (For
transmittal through the Federal Reserve Bank of Cleveland)
4
Letter to The First National Bank of Jasper, Jasper,
Alabama, approving its application for fiduciary powers.
(For transmittal through the Federal Reserve Bank of
Atlanta)
5
letter to the American Trust Company, San Francisco,
ualifornia, granting an extension of time within which to
?stablish a branch at Sansome and Market Streets. (For
x'rsnsmittal through the Federal Reserve Bank of San
ancisco)
6
Letter to the Presidents of all Federal Reserve Banks re7
garding the status of certain Federal funds transactions under the Bank Holding Company Act.
35,
12/8/58
Item No.
Letter to the Federal Reserve Bank of Atlanta approving
the appointment of Raymond L. Foushee as Alternate Federal Reserve Agent's Representative.
8
Letter to the House Committee on Government Operations
reporting on H. R. 13782, a bill "To amend the Employment Act of 1946 to make relative stability of prices
an explicit aim of Federal economic policy." (With a
copy to the Bureau of the Budget)
Letter to the Budget Bureau regarding a draft bill sub'flitted by the Treasury Department "To provide for payment by the Federal Reserve Banks of the cost of constructing a depository for the storage of Federal Reserve
notes."
10
Letter to the First National Bank in Yonkers, Yonkers,
New York, regarding the applicability of the provisions
of section 22(g) of the Federal Reserve Act and Regulation 0 to loans made to directors of member banks who
are acting as members of the Discount Committee.
(With a copy to the Federal Reserve Bank of New York)
11
The foregoing Item No.
9 was approved following dis-
cussion in the light of questions raised by Governor Mills, who
Observed that H.R. 13782 would not only amend the Employment Act
of
1946 so to add to the declaration of policy language emphasizing
and making explicit the importance of stabilizing the level of
Prices but also would require the Economic Report of the President
to deal with "current and foreseeable trends in price levels prevailing in the economy and the steps, if any, which have been taken
to counter inflationary or deflationary pressures arising within
the economy." Further, the bill would add language to the provisions
°f section 4 of the Act relating to the qualifications and duties of
the Council of Economic Advisers. In raising the question whether
the inclusion of these other provisions in the bill would cause the
354it
12/8/58
-4-
Board to want to qualify its report, Governor Mills referred to a
bill introduced earlier by Congressman Reuss which would have rerequired the President to include in his Economic Report recommendations on monetary and credit policy.
The Board had expressed
doubt as to the wisdom of such provisions.
It was noted that the last paragraph of the proposed letter
was phrased in terms of endorsing a carefully worded amendment to the
directive contained in the Employment Act of 1946, which suggested
that the Board would be left free to deal in testimony, if called
Upon, with amendments to other sections of the Act.
This appearing
to be the more feasible course, it was decided to send the letter
in the form in which it had been drafted for the Board's consideration.
In connection with Item No. 10, Governor Robertson commented that, although it miEht be considered safer to have legislation authorizing the construction of a depository on the Fort Riley
Military Reservation with Federal Reserve funds, the project probably
could have been accomplished without legislation and considerable
delay had already been involved.
Chairman Martin concurred in the
views expressed by Governor Robertson.
Messrs. Shay and Young then withdrew.
Application of The Michigan Bank.
On August 20, 1958, the
Board approved the establishment of two branches applied for by The
141chigan Bank, Detroit, Michigan, provided the capital structure
3541
12/8/58
of the applicant bank was increased not less than $1,000,000 by the
sale of additional common stock.
The bank had proposed to obtain
that amount of capital through the sale of preferred stock, and its
representatives appeared before the Board on two occasions, most
recently on November 24, to present their views. Prior to the
November 24 meeting, memoranda relating to the use of preferred
stock as a means of providing capital for commercial banks had been
prepared for the Board's use by the Division of Examinations, the
Legal Division, and the Division of Research and Statistics.
Copies
of these memoranda, dated November 18, November 19, and November 21,
respectively, have been placed in the Board's files.
Under date of
December 2, 199, there were distributed to the Board copies of a
memorandum from Mr. Masters reviewing the branch applications of
The Michigan Bank and recommending that the Board's original action
On the matter be reaffirmed.
Mr. Masters indicated that he was per-
suaded by the arguments in the aforementioned memoranda from the
Examination and Research Divisions which pointed up several relatively undesirable features associated with the preferred stock
issue proposed by The Michigan Bank and which emphasized the substantial proportion of the bank's capital structure that would be
r
epresented by preferred stock.
He indicated that he was also
influenced strongly by important precedential effects of this case
if the Board condoned the use of preferred stock in the form and
amount proposed.
12/8/58
-6At the request of the Board, Mr. Masters reviewed the
original recommendation of the Division of Examinations concerning
the applications, the reasons therefor, subsequent consideration
of the matter by the Board, and the reasons which had now led him
to concur in the view of others within the Division that the Board's
decision in the matter should be reaffirmed.
He went on to refer
to some possible inconsistency in the decision, in that within the
rather recent past the Board had approved branches for several banks
that had outstanding either preferred stock or debentures or a combination of both.
On the other hand, the decision would be consistent
with the Board's long-standing general policy against condoning the
use of preferred stock by State member banks except in an emergency.
Governor Mills stated that the position taken by the Board
in The Michigan Bank case was one to which he had been opposed
because he was not able to discover statutory authority extensive
enough to prohibit the inclusion of preferred stock in a bank's
capital structure. To him, this was a problem that should be brought
tO the
attention of the Congress with a view to obtaining remedial
legislation.
He was completely in sympathy with the view that pre-
ferred stock is an undesirable component of a member bank's capital
structure except under emergency conditions, but he was in no wise
Persuaded that the position taken by the Board in this case might
not be regarded, under present statutory authority, as arbitrary and
capricious.
354:3
12/8/58
-7Asked for comments on the legal aspects of the case, Mr.
Hackley referred to the Legal Division's memorandum of November 191
1958, in which reference was made to the arguments of Counsel for
The Michigan Bank, as set forth in correspondence, and the grounds
were stated on which the Legal Division felt that the Board's authority could be legally sustained.
However, he said, the legal authority
was certainly subject to question and one could not be sure that the
action would be sustained.
The principal ground would be that the
Board, in approving branches, had authority to consider both the
public interest and the financial condition of the applying bank.
The nature of the bank's capital structure, as well as the amount,
would appear to have a bearing on its financial condition.
Chairman Martin inquired as to the staff's views about the
validity of points made by the representatives of The Michigan Bank
on November 24 concerning the unusual situation of that bank arising
from the rapid growth of its savings deposits.
Mr. Masters replied
that he thought there was some validity to those arguments, but they
were not sufficient to change the staff recommendation.
There followed discussion of cases where the Board had
approved branches for banks having outstanding preferred stock or
debentures, from which it developed that in each case the composition
of the bank's capital structure was an outgrowth of the sale of preferred stock to the Reconstruction Finance Corporation.
12/8/58
-8Chairman Martin then made a statement in which he expressed
views regarding the careful consideration that should be given by the
Board to cases in the bank supervisory field in order to be sure that
its decisions were sound from the standpoint of the public interest
and free from the appearance of undue harassment.
He urged the im-
portance of thinking in terms of objectives and referred to the problem
involved in deciding whether to proceed through the courts or through
requests for remedial legislation in areas where the Board's statutory
authority was not entirely clear.
Governor Robertson stated that he regarded this case as
important enough to justify litigation, if litigation should result
from the Board's decision, because favorable action would constitute a
Precedent that would lead to the use of preferred stock on a wide-scale
basis.
In order to determine the views of the other supervisory
agencies regarding this problem, he had gotten in touch with the
Comptroller of the Currency and the Federal Deposit Insurance Corporation.
The Comptroller, he found, continued to take the position that preferred
stock should be used by banks only in an emergency where it was
necessary to augment capital. Since the situation of The Michigan Bank
did not
appear to involve an emergency, the Comptroller agreed with the
Position the Board had taken.
The Federal Deposit Insurance Corporation
advised that it had before it a similar case, also in the State of
Michigan, and that, like the Board, it was taking the position that it
3545
12/8/58
-9-
would approve the branches applied for only if the applicant bank
augmented its capital by the sale of common stock.
Governor Robertson continued by saying that he concurred in
the final recommendation of the Division of Examinations, as stated in
Mr. Masters' memorandum of December 2, 1958.
He felt that the bank
Probably needed, in fact, more than 40_ million additional capital
because of the continued growth of its deposits since the branch
applications were first considered by the Board.
However, he would be
satisfied simply to reaffirm the original decision.
As to the legal aspects, Governor Robertson said that the
position taken by the Board was one taken by all of the Federal
supervisory agencies over a long period and that this administrative
Practice no doubt would be taken into account by the courts.
At the
Proper time, he felt that the preferred stock problem should come up
in the form of requested legislation, but until that time arrived he
would adhere to the same position as in the past.
Governor Mills stated that where the Federal Reserve admonished
a bank not to increase its capital through the issuance of preferred
stock and the bank failed to heed that admonition, he felt that the
bank was making a very serious mistake.
However, he did not think that
decision by the bank to go ahead in the face of the admonition would
warrant straining the statute in an attempt to prevent the bank from
doing so.
In such event, there would be reason to go to the Congress,
•
12/8/58
Cite the specific case, explain the reasons for opposing preferred
capital except in an emergency, and point out that the Board lacked
the authority to enforce an entirely reasonable and appropriate
supervisory position.
In response to a question by Chairman Martin, Governor Mills
affirmed that in terms of general principle he was opposed to the use
Of preferred stock by banks except in an emergency.
The Chairman then stated that he had reached the conclusion
that this case was one where the Board would be warranted in adhering
to its position at the risk of the time and effort involved in possible
litigation because the problem was one that appeared to strike at the
heart of banking. The embarrassment that might be caused by taking a
position different from that of the Comptroller of the Currency and
the Federal Deposit Insurance Corporation also weighed in his thinking.
Whereas in certain other cases he felt that the Board might have taken
a position without being entirely clear as to the cause for which it
was fighting, in this case the point seemed more clear.
Perhaps, he
said, the Board should reaffirm its position and also go to the Congress
for clarification of statutory authority.
Governor Shepardson indicated that his feelings were much
along the lines of those stated by the Chairman. While in one or two
eases he had thought that the Board might be straining at a situation
4n1ulY, in this case a policy of long standing was involved.
In view
4
=
12/8/58
-11-
of the interest of the other supervisory agencies in the problem
and the fact that a similar case was currently before one of them,
he felt that it would be unwise to depart from the position of long
standing at this time.
Therefore, although he agreed with the
Chairman's comments about the undesirability of getting into
unnecessary litigation, he would be inclined to reaffirm the decision
in this case.
Governor Szymczak expressed agreement.
Thereupon, it was agreed to reaffirm the decision made on
August 20, 1958, with respect to the branch applications of The
Michigan Bank, with the understanding that Governor Mills continued
to Oppose the Board's original decision for the reasons he had stated
at this meeting
and on earlier occasions.
Problem banks.
Governor Robertson referred to recent
developments with respect to the Pan American Bank, Miami, Florida,
and the Bank of Belmont Shore, Long Beach, California, and suggested
that it would be desirable for the Board to have a report on these
developments.
After Governor Robertson had summarized briefly the
Problems
of the Bank of Belmont Shore, it was understood that
Mr. Masters would make a more extensive report to the Board concerning
this bank at tomorrow's meeting, at which time he would also report on
the
an American Bank.
Messrs. Thomas, Hexter, and Nelson then withdrew from the
'fleeting.
C
12/8/58
-12Safekeeping facilities (Item No. 12). In view of questions
raised by individual Federal Reserve Banks, the Board requested the
Conference of Presidents in a letter dated September 19, 1957, to
review the entire subject of safekeeping facilities of the Reserve
Banks.
Subsequently, a report was presented to the Presidents'
Conference by the Subcommittee on Cash, Leased Wire, and Sundry
Operations.
This report was accepted by the Conference and at the
joint meeting of the Board and the Presidents on February 11, 1958, it
Was indicated that the Board would give the matter further consideration
and advise the Presidents of its views.
A memorandum from the Division of Bank Operations dated
November 28, 1958, which had been distributed to the Board, reviewed
Board letters setting forth policies with respect to various types of
safekeeping, discussions at meetings of the Presidents' Conference in
September 1957, and February 1958, and various points covered in the
report of the Subcommittee on Cash, Leased Wire, and Sundry Operations.
The memorandum noted that, with certain minor exceptions, the
acceptance by the Presidents' Conference of the Subcommittee report
suggested basically a reaffirmation of decisions reached upon earlier
Occasions by the Conference and the Board.
It was proposed that it
woUld be desirable to formulate a current statement of policy with
respect to safekeeping and related activities that could be agreed
upon by the Board and the Presidents, and that the Subcommittee report
1.2/8/58
-13-
provided a basis therefor.
Submitted with the memorandum was a
draft of letter to the Chairman of the Presidents' Conference setting forth a proposed statement of policy and requesting the comments of the Presidents.
Following explanatory comments by Mr. Farrell, agreement
was expressed with a suggestion that there be omitted from the
letter a paragraph which would have stated that securities owned
by suspended member banks might be accepted for safekeeping until
the receiver had an opportunity to make other arrangements.
The
basis for the deletion was that this paragraph would have very
limited applicability.
With regard to the two questions that had been received
from individual Reserve Banks, Mr. Farrell commented that the proPosed statement of general policy would answer in the negative the
question raised by President Allen of the Federal Reserve Bank of
Chicago concerning the propriety of holding bonds of the International
Bank for Reconstruction and Development owned by the State of
W
isconsin.
The other question had been raised by President Johns of
the Federal Reserve Bank of St. Louis, who expressed doubt concerning the propriety of accepting for safekeeping securities in
which third parties have an interest; for example, securities
Pledged by member banks as collateral for deposits of public funds.
3550
12/8/58
-14-
The proposed statement of policy would provide that securities in
which third parties have an interest should not be accepted from
member banks for safekeeping except (1) securities pledged as
collateral to secure deposits of public funds, and (2) securities
deposited with a public official to qualify member banks to
exercise trust powers.
Provision also would be made for the
handling of exceptional cases at the discretion of the individual
Reserve Banks.
There followed discussion of portions of the memorandum
dealing with the question raised by Mr. Johns during which Mr.
Hackley referred to occasions in the past when the Board had been
advised by its legal staff that there was no specific statutory
authority for the practice of holding for member banks securities
in which third parties have an interest.
He brought out, however,
that the practice had been followed for many years and that it
seemed doubtful whether anyone would challenge the authority of the
Federal Reserve Banks in this respect.
Mr. Hackley added that the
statutes
Banks
contain no specific provisions authorizing the Reserve
t° Provide safekeeping facilities for any party.
Where securities
owned by member banks are held for them, he felt that there
would be a line of reasoning to justify providing the service.
There might be more of a question in cases where securities in
which third parties have an interest are held for member banks.
12/8/58
-15Mr. Farrell observed that Mr. Johns was contending in
effect that the decision should depend on legal authority rather
than whether a service was being performed.
By accepting the Sub-
committee report, the other Presidents had in effect voted against
the contention of Mr. Johns, and the proposed letter would confirm
the position taken by the other Presidents.
Thereupon, unanimous approval was given to a letter to the
Chairman of the Presidents' Conference in the form attached as Item
No. 12.
During the foregoing discussion Mr. Fauver, Assistant
Secretary, entered the room, and at its conclusion Messrs. Leonard,
Noyes, Farrell, and Kiley withdrew.
Availability of information from examination reports
(Item No. 13).
Reference was made to a telegram received this morn-
ing from the President of the Federal Reserve Bank of San Francisco
which stated that the Internal Revenue Service had requested that
there be made available to its representatives reports of examination
Of the Continental Bank and Trust Company, Salt Lake City, Utah, for
the years
1955, 1956,
and 1957, in connection with an audit of the
hank's affairs being made by that agency. The request was occasioned
bY the refusal of the bank's president to make the reports available
on the basis that they were the property of the Board of Governors
and contents thereof were not to be disclosed by the bank, as
12/8/9
-16-
indicated by the language printed on the cover of Form F.R. 410.
Ni. Mangels recommended that the request be granted.
A proposed
reply distributed prior to this meeting would authorize the Reserve
Bank to make the reports available to the Internal Revenue Service
to the extent necessary to provide representatives of that agency
with information required in the performance of their functions,
subject to certain specified restrictions on the use of the information.
Mr. Hackley reported telephone conversations with General
Counsel for the San Francisco Reserve Bank last Friday in which the
latter indicated that he thought it would be desirable for the
Board to authorize Continental Bank and Trust Company to make the
reports
available. Mr. Hackley then cited provisions of the law
and the Board's Rules of Organization which left no question from
a legal standpoint as to the Board's right to authorize making the
repo-,_
1- us available to representatives of the Internal Revenue
Service.
From the standpoint of policy/ he referred to similar
questions that had arisen in the past, including one instance in
1947 in connection with an investigation by the Treasury of the
arrairs of a customer of a member bank.
The policy adopted by the
Board at that
time was that certain information from the reports of
examination would be made available if the request was in writing,
With the
understanding that the request should contain an indication
f
reasons and that the information furnished would be used only to
355
12/8/58
develop leads, no reference would be made to the source, and the
information would not be used in court or similar proceedings.
In further comments, Mr. Hackley referred to occasions
where the Board had authorized the furnishing of information from
examination reports through the Federal Reserve Bank concerned.
In those instances, there had been an indication that the Board
considered such a procedure desirable because the reports would
remain under the control of the Reserve Banks.
Mr. Masters commented that member banks no doubt frequently make information from examination reports available to
the Internal Revenue Service in connection with audits.
Under nor-
mal circumstances, therefore, he felt that it would be preferable
to advise a member bank raising any such question that it had
authority
to make the information available.
Mr. Hackley commented
that the Internal Reserve Service, by following certain legal procedures, could compel the furnishing of the examination reports.
There followed further discussion as to whether the
authorization
to make the reports available should go to the member
bank or to the Reserve Bank.
Arguments were presented on both
Sides, and
Governor Robertson suggested a possible procedure under
/4111oh the Reserve Bank would be authorized to make the reports
available if the member bank did not choose to furnish the inforMation.
35.
12/8/58
-18Governor Mills expressed doubt whether the Federal Reserve
System should provide investigatory information to other Federal
agencies except if that information were subpoenaed.
For a long
time, he said,
he had been seriously concerned about the practice
of making information available to the Justice Department without
a court order,
and he would be distressed about an extension of
that procedure to cases of the kind now before the Board, particularly in a case where the furnishing of information to the Internal
Revenue Service without the knowledge and consent of the member bank
resulted
in a proceeding against the bank.
It occurred to him that
it would
be preferable to advise Continental that it had authority
and permission to place the reports in question at the disposal of
the Internal Revenue Service.
He further commented that he could
see a distinction between furnishing information relating to an
investigation of the member bank's affairs and furnishing information relating to the affairs of a member bank's customer.
If, in
this case, Continental refused a request from Internal Revenue
Service and that agency should apply direct to the Board, he felt
that
Continental should be apprised of the circumstances and told
that the
Board had no choice but to authorize release of the inforillati°n to the Internal Revenue Service as a Federal agency entitled
to
The Chairman then stated that the end result was clear.
All of the Board members were in agreement that if the member bank
wotild not
supply the information, the Federal Reserve Bank would
3555
12/8/58
-19-
have to supply it.
The problem, therefore, was one of procedure.
Certain difficulties were suggested in sending a wire direct
to Continental, including the need for specific language in order to
avoid any misunderstanding.
Accordingly, it was suggested that it
might be possible to acommodate the various views expressed at this
meeting if a telegram were sent to the San Francisco Reserve Bank
stating that both that Bank and Continental were authorized to make
available to the Internal Revenue Service information contained in
the examination reports to the extent necessary for the performance of
the agency's functions, and with certain understandings concerning the
use of the information.
This suggestion contemplated that the Reserve
Bank would be asked to advise Continental accordingly.
At the conclusion of the discussion, agreement was expressed
'ith the suggested procedure.
A copy of the telegram sent to the
Sala Francisco Reserve Bank pursuant to this action is attached as
Item No. 13.
The meeting then adjourned.
Secretary's Notes:
Pursuant to the recommendations contained in
memoranda from appropriate individuals concerned,
Governor Shepardson approved on behalf of the
Board on December 5, 1958, the following items
affecting the Board's staff:
12/8/58
-20-
Tra1tsfer and salarL increase
. Robert L. Hill, from the position of Technical Assistant in the
Division of Bank Operations to the position of Assistant to the
Secretary in the Office of the Secretary, with an increase in his
basic annual salary from $7,030 to $7,7501 effective the date he
assumes his new duties.
Transfer
E. Ralph Massey, from the position of Technical Assistant to the
position of Chief, Reserve Bank Operations Section, in the Division
of Bank Operations, with no change in his basic annual salary at the
rate of $9,890, effective January 1, 1959.
Pursuant to the recommendation contained in a
memorandum from Mr. Connell, Controller, dated
December 1, 1958, Governor Shepardson also
a roved on behalf of the Board on December 5,
1958, payment of a bill in the amount of $5,o86.8o
submitted by the Federal Reserve Bank of New York
to cover the cost of a special printing of the
bank examination report form. On March 17, 1958,
the Board had approved reimbursement to the New
York Bank for this work, but in the amount of
$4,330.
Governor Shepardson today approved on behalf of the
Board the following items:
pi
Memoranda dated November 7, 1958, from Mr. Kelleher, Director,
t visi°n of Administrative Services, recommending the following
ransfers within that Division:
James R. Carnahan, from the position of Guard to the
Position of Supply Clerk, with no change in his basic annual
salary at the rate of $3,51O, effective the date he assumes
his new duties.
Bishop Hart, from the position of Supply Clerk to the
losition of Operator, Duplicating Devices, with no change in
is basic annual salary at the rate of $4,065, effective the
date he assumes his new duties.
f
3557
12/8/58
-21-
Letter to the Federal Reserve Bank of St. Louis (attached
Item Nb. 14) approving the appointment of Edward J. Burda and Bobbie
roy McDonald as examiners.
u
Letter to the Federal Reserve Bank of Dallas (attached Item
aat_12 approving the appointment of James F. Coughlin as assistant
examiner.
3558
BOARD OF GOVERNORS
OF THE
Wk•
FEDERAL RESERVE SYSTEM
Item No. 1
12/8/58
WASHINGTON 25. D. C.
ADDRESS
orrociAL
CORRESPONDENCE
TO THE BOARD
December 80 1958
Board of Directors,
Federation Bank and Trust Company,
New York 19, New York.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of New York, the Board of Governors
extends until October 22, 1959, the time within which
Federation Bank and Trust Company may establish a branch
at 168-48 Hillside Avenue, Jamaica, Borough of Queens,
New York, New York, under authority contained in the
Board's letter of January 22, 1958.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon
Assistant Secretary.
3559
BOARD OF GOVERNORS
OF THE
Item No. 2
12/8/58
FEDERAL RESERVE SYSTEM
WASHINGTON 25. O. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 8, 1958
Mr. J. D.
Executive Bowersock,
Vice-President,
Union Trust Company of the
District of Columbia,
Washington 5, D. C.
Dear Mr.
Bowersock:
This refers to your letter of November 20, 1958 in which
.
3:0u state that pursuant
to section 18(c) of the Federal Deposit
,,,nsurance Act, approval has been granted by the Comptroller of the
rrrency 1,0
the proposed purchase of banking assets and the assumption
ij certain
liabilities by your bank of The Munsey Trust Company,
shIngton, D. C. In connection with the proposed transaction you
aask us to
confirm your understanding that approval of the Board is
not
necessary under the Bank Holding Company Act of 1956.
It is the Board's understanding that over 66 per cent of
caPital stock of Union Trust Company is owned by Capitol Securities
CiorPoration (Washington, D. C.); that Capitol Securities Corporation
turn is wholly owned by The Morris Plan Corporation (New York,
NOW
Which is a wholly-owned subsidiary of Financial General
:S
C YINtitcic (New York, New York); that over 67 per cent of the capital
raZek of Financial General Corporation is owned by The Equity Corpon (New York, New York); that The Equity Corporation, Financial
Ge
ho'17ral Corporation, and The Morris Plan Corporation are not bank
by virtue of section 2(a)(B) of the Bank Holding
Company
Act relating to companies, and their affiliated companies,
urt-ch
-Lu
com
re registered (prior to May 15,
were
1955) under the Investment
25 PanY Act of 1940; that since Capitol Securities Corporation owns
ZtholdiZ more of the shares of only one bank, it also is not
a bPaZ
company under the Act.
the
On the basis of the foregoing it is the Board's opinion
that
:
8
the
approval
vlalof the proposed transaction is not required under
Company Act.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
356i_
BOARD OF GOVERNORS
t
,
1,0tit.* ft LI,
".40000op:,r,
*,?
/
OF THE
Item No. 3
FEDERAL RESERVE SYSTEM
12/8/58
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 81 1958
Board of Directors,
Farmers and Merchants Bank of Summersville,
Summersville, West Virginia.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of Richmond, the Board of Governors
Of the Federal Reserve System approves, under the provisions of Section 24A of the Federal Reserve Act, the additional investment in bank premises by Farmers and Merchants
Bank of Summersville, Summersville, West Virginia of not to
exceed $115,000, for the purpose of remodeling present banking quarters.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
3561
BOARD OF GOVERNORS
0
,014it*
OF THE
-;,
FEDERAL RESERVE SYSTEM
Item NO.
4
12/8/58
WASHINGTON 25, D. C.
ADORESS OFFICIAL CORRESPONOENCE
TO THE BOARD
December
81 1958
Board of Directors,
Security Trust Company,
wheeling, West Virginia.
Gentlemen:
Pursuant to your request submitted through the Federal
Reserve Bank of Cleveland, the Board of Governors approves, under
he provisions of Section 24A of the Federal Reserve
Act, an
investment of 850,000 in bank premises by Security Trust Company
for the purpose of constructing a new building. It is understood
that an affiliate is to be organized for the purpose of holding
and operating the bank premises and the bank will own all of its
capital stock. It is further understood that the affiliate plans
to borrow ,350,000 to help finance construction of the building.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
OF THE
,racki): eol;
f
tr'•••"79.1,
Item No.
FEDERAL RESERVE SYSTEM
0),
1 %
WASHINGTON 25. D. C.
tl•
4
ADDRESS
orriciAL
CORRESPONDENCE
TO THE BOARD
% 41.(mat
444***
December
8, 1958
Board of Directors,
The First National Bank of Jasper,
Jasper, Alabama.
Gentlemen:
The Board of Governors of the Federal Reserve
System has given consideration to your application for
fiduciary powers and grants you authority to act, when
not in contravention of State or local law, as trustee,
executor, administrator, registrar of stocks and bonds,
guardian of estates, assignee, receiver, committee of
estates of lunatics, or in any other fiduciary capacity
in which State banks, trust companies, or other corporations which come into competition with national banks
are permitted to act under the laws of the State of
Alabama, the exercise of all such rights to be subject
to the provisions of Section 11(k) of the Federal Reserve
Act and Regulation F of the Board of Governors of the
Federal Reserve System.
A formal certificate indicating the fiduciary
Powers which The First National Bank of Jasper is now
authorized to exercise will be forwarded to you in due
course.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
5
12/8/58
3
BOARD OF GOVERNORS
OF THE
°
1011g1g4:.s..*44,
*".
4
0
44
1%41
•
FEDERAL RESERVE SYSTEM
44
Item No.
6
12/8/58
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONOENCE
TO THE BOARD
December
8, 1958
Board of Directors,
American Trust Company,
San Francisco 20, California.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of San Francisco, the Board of
Governors extends until December 14, 1959, the time within
which American Trust Company may establish a branch at the
intersection of Sansome and Market Streets, San Francisco,
California, under authority contained in the Board's letter
of December 14, 1956.
Very truly yours,
(signed) Merritt Sherman
Merritt Sherman,
Secretary.
I
.
35
BOARD OF GOVERNORS
S-1682
OF THE
FEDERAL RESERVE SYSTEM
Item NO. 7
1218158
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December 8, 1958.
Dear Sir:
A Federal Reserve Bank recently asked the Board whether
9
sales,
' of Federal funds, at current rates of interest, between
1/911k subsidiaries of a holding company would constitute loans or
extensions of credit within the ourview of section 6(a)(4) of the
Bank Holding Company Act, which forbids a bank
"to make any loan, discount or extension of credit to
a bank holding company of which it is a subsidiary or
to any other subsidiary of such bank holding company."
For many years the Federal Reserve System and other bank
supervisory authorities have regarded such inter-bank transfers of
Reserve credit as loans (see 1930 Fed. Res. Bulletin 81;
Federa1
!.R.L.S.
k36141), and the Board found no reason to infer that these
6ransactions have a different status under the Holding Company Act.
l'ecordingly, the inquiring Reserve Bank was informed that, in the
d's opinion, a sale of Federal funds would constitute a prohicated "loan" or "extension of credit" under section 6(a)(4).
The Board also expressed the view that sales of Federal
!unds are not exempted from the prohibitions of section 6(a) by
'
he following -)rovision of the last paragraph of that subsection:
"Ncninterest-bearing deposits to the credit of a
bank shall not be deemed to be a loan or advance
to the bank of deposit. . . ."
ue 1930 ruling, cited above, clearly indicates that funds so transferred are not deposits in the "purchasing" bank. Accordingly, the
Toted exception would not exempt Federal-funds transactions even
I/ such transactions were on a noninterest-bearing basis.
Very truly ,yours,
k
'
an,
Merritt sh
Secrettary
400**,1,4
l:
41i
BOARD OF GOVERNORS
OF THE
pce
"t
FEDERAL RESERVE SYSTEM
4*
K*
8
WASHINGTON 25, D. C.
'14
0
etA
Item No.
12/8
/5
8
"{4
4
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
4*444140V
December 8, 1958
Mr. Walter M. -Mitchell,
Federal Reserve Agent,
Federal Reserve Bank of Atlanta/
Atlanta 31 Georgia.
Dear Mr. Mitchell:
In accordance with the request contained in your letter of
November 241 1958, the Board of Governors approves the appointment of
MI'. Raymond L. Foushee as Alternate Federal Reserve Agent's Representative
at the
Birmingham Branch to succeed Mr. Hugh Moreland, Jr.
This approval is given with the understanding that Mr. Foushee
11 be solely responsible to the Federal Reserve Agent and the
Board of
?overnors for the proper performance of his duties, except that, during
the absence or disability of the Federal
Reserve A„Lent or a vacancy in
that office,
his responsibility will be to the Assistant Federal Reserve
Agent and the Board of Governors.
When not engaged in the performance of his duties as Alternate
Federal Reserve Agent's Representative
Mr. Foushee may, with the approval
°f the Federal Reserve
Agent and the President, perform such work for the
:,
16ank as will not be inconsistent with his duties
as Alternate Federal
Iteserve Agent's Representative.
It will be appreciated if Mr. Foushee is fully informed of the
!;111Portance of his responsibilities as a member
of the staff of .the Federal
erve Agent and the need for maintenance of independence from the operJ(3113
of the Bank in the discharge of these responsibilities.
X
Mr. Foushee should execute the usual Oath of Office which is
to be
forwarded to the Board of Governors. Your advice with respect to
the effective date
of Hr. Foushee's appointment also will be apprecia
ted.
very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
:154
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No.
WASHINC3TON
9
12/8/58
OFFICE OF THE CHAIRMAN
December
8, 1958
The Honorable William L. Dawson,
Chairman, Committee on Government Operations,
House of Representatives,
1501 House Office
Building,
Washington, D. C.
MY dear Mr. Chairman:
This refers to your request for a report on H. R. 13782, a bill
amend the Employment Act of 1946 to make relative stability of prices
an explicit aim of Federal economic policy."
The bill would amend the Employment Act of 1946 by adding lennage thereto which would emphasize and make explicit the importance of
eabilizing the level of prices. Specifically, additional language would
s
ot
coeur in the declaration of policy in section 2 of the Act, in section 3(o)
ea,!rerning the items to be covered in the Economic Report of the President,
1Z1110-rilil isei?n 4 concerning the qualifications and duties of the Council of
c Advisers.
The bill H.
13782 is similar to the bill H. R. 13154 which was
the
8. ,Ject of the Board's report to you of July 10, 1958, and the bill
4 to which reference was made in the Board's report to you of June 27,
1)0, on H. R.
12785.
As pointed out in our report to you of July 10, 1958, when I
apo„..
„ar-,
zu before the Committee on Finance of the United States Senate on
A"
gust 13, 1957, I stated in part:
"If the will is there, and it is demonstrated convincingly to the American people, the cost of living can be
stabilized,
interest rates will relax, and a sufficient volume
°f savings will be encouraged to provide for the economic
growth needed in this generation and the next.
"This Committee and the Congress can contribute
U°"tly to that end by declaring resolutely--so that all
i ne world will know--that stabilization of the cost of liv-ng 13 a primary aim of Federal economic policy.
-2"The goal of price stability, now implicit in the
Employment Act, can be made explicit by a straightforward
declaration and directive to all agencies of the Government
that anti-inflationary actions are to be taken promptly whenever the cost of living begins to rise."
The Board's view continues to be that while careful consideration
should be given to the wording of the directive suggested in the statement
cillloted above, the Board would favor an amendment to the law which would make
explicit that national economic policy is also concerned with preserving
'ne Purchasing power of the dollar.
Sincerely yours,
(Signed) Wm. MCC. Martin, Jr.
Wm. McC. Martin, Jr.
356R
BOARD OF GOVERNORS
OF THE
N4*
Item No. 10
12/8/58
FEDERAL RESERVE SYSTEM
•
WASHINGTON 25. O. C.
ADDRESS OrriciAL CuHuLsHoNDENCE
To THE BOARD
°4k.?LAtV'
'
December
8, 1958
Mr. Phillip S. Hughes,
Assistant
Director for
Legislative Reference,
Bureau of the Budget,
'Washington
251 D. C.
Dear Mr. Hughes:
This is in response to your Legislative Referral Memorandum
of
November 20, 19581 requesting the Board's views with respect to a
uraft bill, submitted by the Treasury Department, "To provide for
p,aYment by the Federal Reserve Banks of the cost of constructing a
uePository for the storage of Federal Reserve Notes."
The Board of Governors participated in the study that led
to the submission of this proposal by the Treasury Department and,
i
a,
11
, the opinion of the Board, the proposal presents a practical
:rangement for providing the necessary and well—located additional
;acilities for storage of emergency supplies of currency. The
e°4rd also considers appropriate the provision of the bill that the
"t of construction shall be paid by the Federal Reserve Banks.
The Board of Governors urges enactment of the proposed
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
356.
RD OF GOVERNORS
OF THE
1
FEDERAL RESERVE SYSTEM
Item No. 11
12/8/58
W ASHINGTON 25. O. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE 00ARD
December
8, 1958
Mr. Joseph P. Finnegan,
Chairman of the Board,
First National Bank in Yonkers,
Yonkers, New York.
Dear Mr.
Finnegan:
This refers to correspondence had with your Bank late in
1957 and early
in 1958 regarding the applicability of the provisions
5 section 22(g) of the Federal Reserve Act and negulatio
n 0 of the
board of Governors
to loans made to directors of member banks who
are acting at the time as members of the Discount Committee
.
In the Board's letter of January 10, 1958 it was stated
that the
term "executive officer" does not include a director who
rY be a
member of the Executive or Discount Committee unless, of
eourse, he is also an officer of the bank. At the same time the
Board stated
that these directors might be considered as executive
ttsficers because of certain other services and duties performed by
otm which might involve participation in the operating managemen
t
the bank otherwise than in the capacity of directors.
the 13_
This is to advise that, on the basis of information which
by,uctra has received regarding the services presently performed
mr."Te G. A. Brenner, as "Chairman of Examining Committee",
and Henry Herz, as "Director in Charge
of Safe Deposit Department",
th Mr. William J. Sherry, as "Director in Charge of Real Estate",
bee Board
would not consider any of them to be executive officers
c use of such services.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
70
BOARD OF GOVERNORS
OF THE
Item No. 12
FEDERAL RESERVE SYSTEM
12/8/58
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
December
8, 1958
Mrs J. A. Erickson, Chairman,
Conference of Presidents,
cifo Federal Reserve Bank of Boston,
Boston 6, Massachusetts.
near Mr. Erickson:
In a letter dated September 19, 1957, the Board requested
the
1,
of Presidents to review the entire subject of the safezeePinr facilities of the Federal Reserve Banks. This request grew
or two questions previously received from individual Banks: one
asking whether
it was appropriate for the Reserve Bank to hold
tn safekeeping for a State instrumentality bonds of the International
fank for Reconstruction and Develonment; and the other concerning
ecurities pledged by member banks as collateral for deposits of
12u?lic
funds, and asking whether it might be desirable, as a general
rlicY, to refuse to accept any securities in which third parties
'Lave an interest.
Subsequently, the Subcommittee on Cash, Leased Wire and
Sundry
tuldrY
compiled current information on the safekeeping
,
ervless rendered by each Federal Reserve Rank and branch, and in a
?port dated January 23, 1958 presented this information to the
'
a°nference of Presidents. The report was accepted by the Conference,
,ncl was discussed with the Board at the joint meeting of the Board
vInd the
Presidents on February 11, 1958.
The Board notes that the views expressed in the SubcomIllitte
e, Le report represent basically a reaffirmation of decisions
1:ti;acued upon earlier occasions by the Presidents' Conference and
the
Board, and that the Presidents' Conference accepted the report
wouIhe Subcommittee with the understandinz that each Reserve Hank
4-res r"iew its safekeeping practices in the light of the material
ented in the report.
To: Mr. Erickson
-2-
Accordingly, it would seem that a current statement of
general policy with regard to safekeeping and related practices
mlOit be agreed upon along the following lines.
Holdings for Member Banks
1.
Securities owned by country member banks may be
accepted for safekeeping without restriction.
2.
Securities awned by member banks in Reserve Bank
cities may be accepted for safekeeping) if such
member banks do not have adequate vault protection.
3.
Government securities owned by member banks in
Reserve Bank cities which do have adequate vault
facilities may be accepted—ror safekeeping or held
in "collateral account" (even if not actually
pledged as security for borrowings or deposits)
provided the safekeeoing service is for limited
periods and contributes to the efficient and
economical operations of the Reserve Banks.
4.
The amount of securities held as collateral for
Treasury Tax and Loan Accounts should have some
reasonable relationship to the actual depositary
balances over a period of time.
5.
The amount o securities held for member banks in
Reserve Bank cities in anticipation of use as collateral against future borrowing should have some
reasonable limit determined in the light of current
experience with borrowings by such banks.
6.
Securities in which third -arties have an interest
should not be accepted from member banks for safekeeping except (1) securities pledged as collateral
by member banks to secure deposits ef public funds,
and (2) securities deposited with a public official
Co qualify member banks to exercise trust powcrs, but
with the understanding th,...t this policy be interpreted to provide recognition of the fact that there
may be exceptional cases in addition to those specifically mentioned which should be handled at the discretion of the individual Reserve Bank.
357e)
To: Mr. Erickson
States and Political Subdivisions
Government securities which are the property of
States or political subdivisions thereof may be
accepted for safekeeping where such service
appears desirable, but, in order not to overload
the vault facilities of the Reserve Banks, there
should be no general invitation to States and
political subdivisions to deposit their securities
for safekeeping.
The Board would a.Treciate having the comments of the
Conference of Presidents with regard to the foregoing suggested
PjlicY statement in the light of the review of safekeeping pracices which was agreed upon by the Conference last February;
Very truly yours,
(Signed) Kenneth A. Kenyon
Yenneth A. Kenyon,
Assistant Secretary.
TELEGRAM
LEASED WIRE SERVICE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON
Item No. 13
12/8/58
December
8,
1958.
Mangels - San Francisco
Reurtel December 5, 1958, your Bank and Continental
Bank and Trust Company, Salt Lake City, Utah, are authorized,
Pursuant to section 7(h) of Board's Rules of Organization, to
Make available to representatives of Bureau of Internal Revenue
information contained in examination reports of Continental
Bank and Trust Company, Salt Lake City, Utah, for years 1955,
1956, and 1957, to extent necessary to provide such representatives
with information necessary in performance of their functions in
connection with audit of affairs of such bank, but with underStanding (1) that such representatives shall not make such information available to public, (2) that it will be used only in developing leads, (3) that no reference will be made to source, and (4)
that information will not be used in court or similar proceedings.
Please so inform Continental Bank and Trust Company.
(signed) Merritt Sherman
Sherman.
9;r7"-iBOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. 0, C.
Item No. 14
12/8/58
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARO
December 8, 1958
Mr. Geo. E. Kroner, Vice President,
Federal Reserve Bank of St. Louis,
St. Louis 66, Missouri.
Dear Mr. Kroner:
In accordance with the request contained
in your letter of December 2, 1958, the Board
approves the appointments or Edward J. Burda and
Bobbie Leroy McDonald as examiners for the Federal
Reserve Bank of St. Louis.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
too***
40401091
.. 401.
77os..
0117.0
VIVr/
s*
i
BOARD OF GOVERNORS
OF THE
Item No. 15
12/8/58
FEDERAL RESERVE SYSTEM
WASHINGTON 25. O. C.
44
*64
•
4
Aooactis OFFICIAL
CONRCEIPONOCHCE
TO THE •OAR0
0,••**
December 8, 1958
It. L. G. Pondrom, Vice President,
Federal Reserve Bank of Dallas,
Dallaa 2, Texas.
Dear Mr. Pondroms
In accordance with the request contained in your
letter of December 4, 1958, the Board approves the appointof Mr. James F. Caughlin as an assistant examiner for
the Federal Reserve Bank of Dallas, effective today.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assiatant Secretary.
@FedFRASER