Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, February 11, 1960, Volume 47, Part 2

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609
'
'
7 10/59

Minutes for

To:

FebruAr

1

1 q6o

Members of the Board

From: Office of the Secretary

Attached is a copy of the minutes of the
Board of Governors of the Federal Reserve System on
the above date.
It is not proposed to include a statement
Ii respect to any of the entries in this set of
!Iinutes in the record of policy actions required to
pe 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

!he Secretary's Office. Otherwise, please initial below.
tr You were present at the meeting, your initials will
indicate approval of the minutes. If you were not present,
the
'' Iflitials will indicate only that you have seen




Chin. Martin
Gov. Szymczak
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King

541
Minutes of the Board of Governors of the Federal Reserve System on
T
hursda—,
J February 11, 1960.
PRESENT:

Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

The Board met in the Board Room at 10:00 a.m.

Martin, Chairman
Balderston, Vice Chairman
Szymczak
Mills
Robertson
Shepardson
King
Mr. Sherman, Secretary
Miss Carmichael, Assistant Secretary
Mr. Hackley, General Counsel
Mr. Farrell, Director, Division of Bank Operations
Mr. Solomon, Director, Division of Examinations
Mr. Hexter, Assistant General Counsel
Mr. Nelson, Assistant Director, Division of
Examinations
Mr. Hooff, Assistant Counsel
Mr. Collier, Chief, Current Series Section,
Division of Bank Operations

Items circulated to the Board.

been

The following items, which had

circulated to the Board and copies of which are attached to these

ItlilatItes under the respective item numbers indicated, were approved
Unanimously:
Item No.
tetter
Ohio -to The Rittman Savings Bank, Rittman,
'a)Proving an investment in bank premises.

1

tette
vith r to the Federal Reserve Bank of Minneapolis,
tsrik:°Pies to the Presidents of all Federal Reserve
red ing allowable grace periods for payment
06 on savings deposits under section 3(d)
Ileglaation Q.

2

Letter to Federal Reserve Bank of Chicago concerning insurance
eavings accounts (Item No. 3). There had been circulated to the
tolar.,
`i a letter dated January 22, 1960, from the Federal Reserve Bank




2/11/60

-2-

of Chicago concerning an inquiry from City- Bank and Trust Company,
;Michigan, as to whether a member bank, paying the maximum
jacks()
airl°11rit of interest permitted on savings deposits, might purchase
insUrance for its depositors from a private insurance company to cover
all

savings deposits in amounts in excess of10,000 and up to 4a00,000.

Also circulated was a draft of reply that would indicate that the
payment
1)11-tichase of such insurance by a bank would constitute an indirect
of interest on savings deposits within the meaning of section

3(a) of

Regulation n, Payment of Interest on Deposits.
reasoning
Governor Shepardson said that he did not follow the
i4 the Proposed reply.

of
He suggested that any expense for insurance

1)111c. accounts could be considered in the same category as an expense
incid
eat to handling an account. A depositor in effect makes a loan
tcs the bank, and the bank offers various types of services.

Also, he

11°.tecl that mention had been made in the proposed letter that the Board
114(1 in the past taken the position that the cost to a member bank of
4h°113ina* the insurance premiums on the lives of its depositors in
elli°11nts corresponding to the amount of the savings depositor's account
14(3111a. constitute an indirect payment of interest on savings deposits
lithin the meaning of section 3(a) of the Regulation Q.

He was of the

()13illion that the present proposal was quite different since here the
d.
(1e13°8itor was being protected only to get back the amount he had deposite
Uticier life insurance contracts, the depositor's estate might gain
a441-tionaa money.




-3arguable and
Mr. Hackley said that the question was clearly
insurance
that there was much to be said for the view that the additional
on the deposit was an incident to the relationship whereby the bank
aesUred the depositor his funds would be returned.

In preparing the

previous
13/‘°Pc'sed letter, the Legal Division had been influenced by
insurance
1'111i-rigs in which the Board had taken the position that where the
it would
emilzil paid by a bank was not passed back to the depositor,
1)1
'
be regarded as an indirect payment of interest.

Insuring deposits

something
°ver *10,000 was a competitive device enabling a bank to give
to a depositor in addition to a stated rate of interest, and that appeared
t° be quite different from the Federal Deposit Insurance Corporation
ssessment to cover a31 deposits up to *10,000.

The question was

apply the same
clebe:table) Mr. Hackley said, but on balance he would
rule to the insurance for more than *10 000 as that applied to life
Inslarance.
proposed by City
Governor Shepardson reiterated that the plan
the
44k and Trust Company would not return any additional dollars to
clePcsitor; it merely assured him that he would get back what he had
deDcsited.

provided when
He then commented on the additional service

service
In windows were established, noting that this type of
til e it possible for a person to deposit funds without getting out of
hi8 a
utomobile and thus was a competitive device.
out of an insurance
Governor Balderston suggested that the taking
give the impression
covering deposits in excess of *10,000 would




54
2/11/60
that a
a. bank was exceptionally safe, and Governor Shepardson agreed
that this too would be a competitive consideration.
used
There ensued a general discussion of competitive devices
bY hanks in an effort to attract deposits and of Board rulings on
expenses
Whether
various premiums constituted only nominal advertising
or' whether they should be considered as indirect payments of interest.
the reasoning
Governor Mills said that he was much impressed with
r the Legal Division in this case. This proposal was a competitive
device
to attract deposits. It did not differ essentially from any
131'emium given on savings deposits, such as fountain pens, etc.

He

ri°ted the Board had ruled that giving gifts was equivalent to payment
or interest if
advertising
those gifts represented more than nominal
e%PenRp. to
--s
attract general business to the bank.
nonrecurring
Mr. Hackley said that gifts representing nominal and
eXpe,„1.
'Luatures could be regarded as legitimate advertising.
B0A'r4
had

Also, the

not a
taken the position that general overhead expenses are

1)4Ylilent of interest.

was
For example, the cost of printing checks

e°4sidered as a part of general overhead expense, but absorption of
eXehange charges was not a nominal overhead expense but a direct out-offor
Pocket expense and under Regulation Q was considered a compensation

the

118e

of funds.

Division
In the case before the Board, the Legal

that payment of the additional insurance premium would be compenEttlon for the use of the funds.




2/11/60

-5drive-in
Governor Shepardson noted that the expenditure for

which, until
wincl(pws and the operation of them was an added expense
rece

_
Ynti ,

was not usual in a bank's business.

He raised a question

Ithether it could be said that banks were not justified in providing
as overhead expense this competitive attraction for deposits.
considering cases
Chairman Martin indicated that the Board, in
arisirig under Regulation Q, had never decided what would be a nominal
advertising expense.
that
Mr. Hackley said that this was true, and Mr. Hooff noted
n°rLiirlaa gifts such as fountain pens were given only once, whereas in
the ease being
recurring.
considered the payment of premiums would be
Mr. Hexter referred to Governor Shepardson's feeling that
itistirance on deposits over 40,000 was merely to assure return of the
thus inking
'" and would not add anything to his income or estate,
it

a4..
-

Liferent from payment of a life insurance premium.

It was Mr. Hexter's

tho
'
46at that the real point was that the insurance was an economic
benefit to the depositor.
Governor Robertson Observed that City Bank and Trust Company
1)1‘43P°sed to pay the insurance premium which an individual would pay
11* self
if he wanted to provide this protection. He noted that in the
ease ui
extra,
exchange charges, the individual did not get anything
Yt the
Board, ruled that if banks absorbed these charges they were
kYlllents of
interest.




2/11/60

-6After Governor Balderston suggested that the ultimate solution

to
kb
'

problem was to get legislation repealing the provision on which

this part
of Regulation Q was based, Chairman Martin noted that there
w48 a fine point of distinction as to what was considered payment of
interest and what was thought to be nominal advertising expense.

He

418° said that he felt a discussion such as this was helpful in pointing
Up one
of the supervisory problems.
Mr. Hooff commented that representatives of the Federal Deposit
illaurance Corporation were surprised that it was possible to obtain
Insurance covering savings accounts over $10,000, and Mr. Hackley said
that if the Board should decide to take a different position from that
Pr°P°88d in the letter to the Federal Reserve Bank of Chicago, it would
Bee: advisable
to consult with the Federal Deposit Insurance Corporation
before doinn.45. so.
Governor King said it was interesting to ponder what might
develoP if banks were to start insuring deposits in excess of $10,000.
lie
questioned whether this was the sort of thing that represented an
illsUrable risk for private companies to undertake.

He doubted whether

ltw°uld be wise to issue a ruling that would encourage insurance of
tIli8

kind.
After a further discussion of the question, including consider-

several suggestions for possible change in the draft of letter,
Govern
°r Shepardson indicated that it might be best to stand by the




2/11/60

_7_

13°Bition taken by the Board in the past.

He felt, however, that there

Ilere inconsistencies in what was being done in treating some things
as indirect
payments of interest and ruling that other devices were
not,

.5.221:92.L.1

Bank
was then given the letter to the Federal Reserve

purchase of
of Chicago, indicating it was the Board's opinion that the
insur
ance by the bank covering a deposit in excess of $10,000 would
constitute an indirect payment of interest within the meaning of
RegUlation

Q.

A copy of the letter is attached as Item No.

3.

Legislative
Messrs. Molony, Assistant to the Board, and Shay,
entered the room during the foregoing discussion.
Bank,
Request for reduction in reserve requirements by Security
Washin

(Item No.

4).

There had been circulated to the

i.
13Qexc

a memorandum dated February 9, 1960, from the Division of Bank
OPeratin
-ns presenting a recommendation from the Federal Reserve Bank
Of Ri
'
4 ehmond that Security Bank, Washington, D. C., be permitted to
niEtint--n
the same reserves against deposits as are required to be
sailed by banks located outside of central reserve and reserve
cities
) instead of the reserves required of reserve city banks. The
Richm
(11141 Reserve Bank had indicated that Security Bank ItTEts the only
ln W

downtown retail
ashington, D. C. with its head office in the

(listri"
-- east of 10th Street, about eight blocks from what is considered
the
tinim
to
-"cial center of the city; its total deposits amounted




548
2/11/60

-8-

1;38 --llion (75
per cent demand); its nearest competitor was the
MeLachlen Banking Corporation with demand deposits of

J.r.
( million;

arid its interbank deposits were insignificant as compared with the
three largest banks in the city.

It was the feeling of the Richmond

Bank that,
under any criteria likely to be established, the Board mould
seem Justified in granting the requested permission to carry reserves
°11

4

"country bank" basis.

The Richmond Bank letter included pertinent

-.at.,3.0n on Washington banking as a whole which was summarized in
the

ulemorandum.

bank,, .

It was noted that there were at present nine member

the City of Washington, D. C.--seven reserve city banks and

two c
cUntry banks. The Reserve Bank suggested that the seven member
barikn
1°W maintaining reserves required of reserve city banks could be
el4sified in two groups: the three banks with demand deposits of over
$195
MJ.11.ion in the category of "probable remaining reserve city banks"
atitl the four with demand deposits of less than .S.50 million in the
eetego,„..
'J of "probable country banks." Only one of the four "probable
,
,..,
"0
Q().411tr\TI
'
" -4S"

held any interbank deposits, and their ratios of excess

res..
-rve

uo required reserves during the first six months of 1959 were
consia
erablY higher than the "probable remaining reserve city banks."

The Ilatinni., Savings and Trust, which was the largest bank in the
Drobw„
"4-e country banks" group, was the only frequent buyer or seller
Of ped

the

eral funds.

difference in
There appeared to be no significant

ID.osit activity between the two groups of banks.




If all four

549
-9were to be
of reserves
reclassified as country banks, the net release
this
11°111d- be approximately 4;6 million; if only the smaller three,
figure would be reduced to 4;4 million.
Operations
Attached to the memorandum from the Division of Bank
Were tables showing deposits and activity of member banks in Washington,
D. 0.
and selected asset and deposit data of member and nonmember banks
14 the metropolitan area of Washington, D. C.
In the memorandum the Division of Bank Operations recommended
(1) that
--

same
Security Bank be granted permission to maintain the

reserves as banks outside central reserve and reserve cities, instead
Or the reserves required of reserve city banks, and (2) that the Reserve
33arlk•
be Informed that the Board will consider applications for country
be.
"probable
status from the other three banks included in the list of
CC)1111triV
" -

reserves
AS," but that action on an application for reduced

millionfl‘c411 N4tional Savings and Trust Company (which falls in the 4;4o
iOn

such time
demand deposit category) would be deferred until

as information was available from all districts on which to base
distinctions as to the appropriate reserve classification for the
b°1'cleriline banks.

this effect
A draft of letter to the Richmond Bank to

w4s at
tached to the memorandum.
follow the
Governor Robertson said he thought the Board had to
DroceA
`&tlre recommended by the Division of Bank Operations in view of
e.Qtionn
''aken before. He observed that the Board was getting into a




2/11/60

-10-

13°8ition of setting up a magic figure of
Of ec)untry member banks.

million for classification

This standard was being established without

thiaking the whole thing through, and the Board was releasing reserves
each time it approved one of these requests.
Mr. Farrell said he did not think the Board could get into much
t11°Ithle with a

VA' million

standard.

He felt the question was whether

that standard
was high enough.
Governor Mills suggested that if the Board could agree to exclude
10eitY in determining classification of banks or cities for reserve
1)11r13°8es) it could move to a set of standards promptly.
th°11ght

He said he

it was a mistake to consider velocity for this purpose.
Governor Balderston wondered whether the answer to Governor

R°bert
8°11t a problem would not be to follow the type of analysis the staff
hEta
Us
ed in this case, try to draft some standards that could be agreed
on, ala
d then continue the process now being carried on. He said if the
Board.
WaS Willing

to forego the one standard of velocity, perhaps

adequa
ta information to set up standards would be readily available. If
the B
°IstI'd waited for that final bit of information, he visualized months
8..11.111°11th8 Passing, whereas if the Board should take the information
which .
:Lt
might
now had and attempt to agree on standards, the solution

be rs
ached within weeks.
Governor Shepardson recalled the Board's recent request that

the st
e
'
ff prepare a memorandum presenting various points of view as




,
2/11/60
to

haw

-11-

Martin
classification criteria might be developed, and Chairman

asked- Mr. Farrell how soon such a memorandum might be available.
Parrell

Mr.

working on
indicated that Messrs. Thomas and Dembitz were now

such a
memorandum.
Division
Messrs. Noyes, Director, and Denibitz, Associate Adviser,
of Research and Statistics, entered the room at this point.
A general discussion of factors entering into the determination
of

--v-utlards for classification of banks and cities for reserve purposes

f.°11°/4ed, during which Governor Robertson reiterated his opinion that
a nienl°1"Etadum on the subject should be gotten before the Board promptly.
-LIg the discussion, Mr. Dembitz reported that he and Mr. Thomas were
vorkirig
on a memorandum which he hoped would provide the information
Governor Robertson suggested be furnished the Board.
Security
Chairman Martin then returned to the proposal that the
aak „.0
"4 Washington, D. C., be granted permission to maintain the same
reserv
by banks outes against deposits as are required to be maintained
there were
central reserve and reserve cities, indicating that if
no b.
Operations would
jeetion, the recommendation of the Division of Bank
/3e at
-Proved. There was unanimous agreement with this suggestion, and a
QOpy or
is attached
the letter to the Federal Reserve Bank of Richmond
as Item

m

Governor Shepardson
Chairman Martin also suggested that

aise_
uss with
the
Mr. Thomas the preparation of a statement showing
V4/1.0.8

'
1 factors entering into standards for classification of banks for




5

2/11/6,0
rye

-12purposes, such a statement to be presented to the Board before

filrtiler Staff studies were mane of the individual items.
Messrs. Noyes, Dembitz, and Collier then withdrew from the
Meeting.

..§.Iement in Bulletin regarding notice to Justice Department of
11(3341113c.omparly ap lications (Item No. 51
:
_ There had been circulated
t° the Board with a covering memorandum from Mr. Hackley dated February
10, 1960) a proposed statement for publication in the Federal Reserve
nulletin

regarding Board action on January 28, 1960, by which the Board

lall
'
eeti to inform the Justice Department of the receipt of bank holding
e°41PanY applications.

The memorandum pointed out that the statement was

be.secl on a letter sent to the Federal Reserve Banks and registered bank
holding
14

companies on January 29, 1960, but it had been modified slightly

order to clarify the Board's position.

Pro:pr.

It seemed desirable that

notice of this procedure be included in the Bulletin, and it

1/48
40Ped that publication of the Board's statement would correct or
'
enY misunderstanding that might have resulted from a recent
411;lele in the press that gave the impression that the Justice Department
be Participating in the Board's decisions on holding company
Matt rs.

1'4)1114

After incorporating several suggested changes in wording, the

state
merit was approved for publication in the Bulletin and is attached
e4 Item No. 5.




2/11/60

-13Mr. Hooff then withdrew from the meeting.
Testimony before House Banking and Currency Committee on S. 1062.

There had been distributed to the Board a memorandum dated February 10,
1960) from Mr. Rexter, and a draft of statement to be made by Chairman
Martin on February 16 before the House Banking and Currency Committee
z%egEtraing S. 1062, an Act to amend the Federal Deposit Insurance Act to
13r(Ivide safeguards against mergers and consolidations of banks which
kight lessen
competition unduly or tend unduly to create a monopoly in
the field of
banking. When S. 1062 was passed by the Senate in 1959,
the B^__,
'Java and other Federal bank supervisory agencies indicated they
toored the
bill.
The memorandum pointed out that the proposed statement was much
Short
er than the one on S. 1062 pixie by Governor Robertson before the
Sete
Xlkiflg and Currency Committee on March 18, 1959. It omitted
celtata "orienting" information that seemed unnecessary at this time,
Eta

as any discussion contrasting S. 1062 with bills that would

11144 bank mergers within the coverage of section 7 of the Clayton
411titrUst Act.

Also, the statement did not go into the question of the

I'el4tive merits of the terms "unduly" and "substantially" in the proposed
4,

St
e

nor the compromise solution of this controversy informally

sted bY Mr. Cardon, the Clerk of the House Banking and Currency
tee,and, discussed by the Board on January 26, 1960. It was noted
the memorandum that brief discussions of these questions were being




54
2/11/6o
1/rePared for use in the event they were taken up with Chairman Martin
cluring his testimony.

with S. 1062
The proposed statement would deal

as amended by the Senate and would support its aims and general approach
introduced and as
without drawing
any distinction between the bill as
amended in the Senate.

the Senate
In this connection, it vas noted that

lealldment, which made it mandatory for the Federal banking agencies to
Obtain a report from the Attorney General on bank mergers and required
reports to Congress regarding
the banking agencies to submit semiannual
bank mergers, did not materially undermine the desirable main features
of the
bill.
been
Mr. Hackley indicated that the proposed statement had
Insurance
discussed informally with representatives of the Federal Deposit
Corp
said that it would
ora:tion and the Comptroller of the Currency and
.
be
-unsistent with their views. Mr. Hexter noted that the Comptroller
of the

as amended
Currency preferred S. 1062 as introduced rather than

bY the

probably precede
Senate, that the Comptroller's statement would

hairman

should feel that
Martin's testimony, and that, if the Board

the Senate amendment was not of major significance, the draft statement
ght be

the Senate.
changed to deal only with S. 1062 as amended by

the Chairman
Senate amendment should be brought up, he assumed
without the amendagree with Mr. Gidney's preference of the bill
tient.




2/11/60

-15Chairman Martin indicated that there would be no objection to

seadi
ng his proposed statement to Mr. Gidney for comment, and Governor
Mills suggested that it be shown to the Federal Deposit Insurance Corpoation also.

Governor Robertson suggested several changes that he felt

woUld clarify
the statement.
Governor Shepardson suggested that it was the intent of those

advocating this legislation to restrain mergers unless there was a
Icisittvle need for them.
Mr. Hackley responded that this involved a question of fundamental
'
l c'sch to this subject. It was the feeling of the Legal Division and
(I '
the
‘'umPtroller of the Currency that it was not the intent of this bill

that,

wank supervisory agencies should be required to justify mergers by

sho
'
ng that they would be in the public interest. Mr. Hexter added
that

/ at the present time, many mergers could take place without super)11

and the purpose of the bill was to put all bank mergers under

84

Si0. so that undesirable ones could be stopped.
Governor Shepardson said it seemed to him that a large part of
the
'
scussion that had been taking place over the merger bill pointed
4t1P Ole
Sri?! the reaction to the position the Board had taken as to the
1)11.rpos
e of the Bank Holding Company Act, a position that was also implied
14 the
proposed statement. He felt it important to determine the real
Of those advocating such legislation.

All antitrust legislation,

his
°Pinion, was aimed in the direction of restraint on concentration




556
-16°f economic power except where it could be shown there was a positive
illstification for letting a consolidation go ahead.

In matters arising

under the Bank Holding Company Act, the Board had put itself in the
P°sition of granting approval if there were no serious adverse reasons
against doing so.

He felt the Board had drawn a pretty thin line in

strengthening the hand
s°rne h°1ding Company cases and believed it was
Of the Justice Department by failing to recognize the firm purpose of

the people who pushed this legislation.

Governor Shepardson suggested

that the Board would be in a stronger position if it recognized that
Point of
view.
1148

He agreed that the intent of the Holding Company Act

not to create a freeze but to keep holding companies from going

theell

unless there was some reason why they should not.
Governors Szymczak and King indicated agreement with Governor

Sh
evarda
°11 s general approach, Governor King adding, however, that there
Itve

°"*-4-es of minimum markets where it was extremely difficult to draw

Et
Governor Mills stated that he would have to object to such an
,
appr
-ach and that he would tie himself closely to the position stated
by
'
lassrs. Hackley and Hexter. We are living in a laissez faire
IllittY and we are strong advocates of free markets and the premise
tor t
1181ness or banking or other types of organizations to choose their
ol‘r4 tea
from
fellows unless positive reasons are found to prohibit them
14g
So,
Governor Mills said. For the Board to set itself up as an




V'.
;,.-3

2/11/60

-17-

arbiter to decide whether business organizations could choose their
°Igli line of development was, in his judgment, contrary to the very spirit
of the
Federal Reserve System itself.
During further discussion of the proposed statement, Governor
Balderston said he shared some of the concern Governor Mills had expressed.

The Board's Primary purpose should be to prevent such lessening of competition as would
be incompatible with the public interest.

Noting that

the statement implied that the Board was concerned over the number of
bAnl„
--'nlergers in recent years, he said that the Board should not be naive
e4c)ugh to think that the wave of mechanization in the banking industry
or should be stopped.
'
°tile

Nothing that the Board could do would keep

14 existence all
the present unit banks. Governor Balderston went on
to s„,_
that he did not regret the differences that had appeared in the
Board
011 some of the bank holding company decisions. However, until the
Illestion could be answered more clearly, he believed the Board might
some wisdom take the position that unless a holding company applieetio
4 Was clearly incompatible with the public interest because it
wota.r,
lessen competition unduly, it could be approved. He observed
that
It Was one thing to say that the Board saw no lessening of competitio,
sUfficient to require an adverse decision; it was quite another
to require clear and substantial reasons that would warrant the

toaZzi. s

approval of a merger or a holding company acquisition.




55
2/11/60

-18Governor
Governor Shepardson stated he did not disagree with

had
Balderston's philosophy, and he referred to an earlier comment he
etcle regarding the enlargement of the size of farms which he felt was
ills-Li-fled affirmatively because of mechanization.

He added that in

that case, larger farms did not mean they were no longer family farms.
Mr. Hackley sai0 that there was a fundamental question of
Phil°8°PhY involved.

one
The present bill was a direct descendant of

request.
drafted- by the Board some years ago at Congressman Celler's
Ever since 1950, there had been a feeling on the part of the three
merger legisl'ecleral bank supervisory agencies that the purpose of bank
lati°n was not to bring banks under the antitrust laws, on the theory
that in the banking field this would not be in the public interest.
There might
bad as
well be cases where too much competition was just as
too ,
The position suggested by Governor Shepardson would be
l'egsrded as a complete reversal of the position taken traditionally by
the three
Federal bank supervisory agencies.

The intent of this merger

legislation was (1) to bring all bank mergers under supervision and
(2) to
make it clear in the statute that the bank supervisory agencies
l'1(31-11d take
but
into account not only the usual banking considerations
also the
competition
effect of mergers on competition, but without giving
''011in

importance.

7
If bank mergers were made subject to section

ing, and the bank
()I' the ClaYton Act, competition would be controll
1-113e
rv--°rY agencies had consistently opposed such action.




2/11/60

-19Governor Shepardson said he did not see where the views he

had expressed were inconsistent.

There was, he thought, a strong general

PhilosoPhY reflected in various legislative acts against the significant
lessening of competition and the concentration of economic power.

The

banking agencies, foreseeing this pressure to put banks under strictly
antitrust legislation, took the position of trying to get a law that
would let them
take a look at the mergers, recognizing the competitive
'°131em but also being in a position to examine other factors peculiar
131
t° hanks and to use these other factors where justified.

This was in

lieu Of having the administration of such legislation in an agency that
134/4 little or no attention to banking.

The legislation, however, was

Part

and parcel of controlling the concentration of economic power. He
belie
ved that the Board's position had not been to get away from the
e°MPetitive factor but to have the legislation administered by an agency
lizant of banking's peculiar problems.

Governor Shepardson said he

1.414 °f the opinion that, in light of the position the Board had taken
heretofore,

it needed to re-examine this point carefully.

He felt the

'enera-1- Picture of competitive legislation did not follow the philosophy
Of
Petting

mergers whenever they did not lessen competition unduly.

()tigress could determine the intent of legislation, and he recalled
that
ln considering some of the amendments to the Bank Holding Company

Act

44 attempt had been made to clarify this point. If there was as
1111,1c1, ,
- °'oubt as there seemed to be as to the intent of Congress, then in




5F0
2/11/60

-20-

testim0ny or otherwise he believed the point should be raised; perhaps
the Board
should raise with the Congress the question as to which of

the two
philosophies that had been discussed this morning was intended
bY the
legislation.

Governor Shepardson concluded with a statement

that he was groping with an idea that bothered him. In some of the
bank holding
company cases he had taken a position in line with what
he thought was consistent with the rationale developed for the Board,
altlicpugh in some specific cases it was contrary to his own feeling.

He

thought he was in an inconsistent position, and that bothered him.
After some further discussion of the proposed statement, it was
1114erstood that Mr. Hexter would incorporate several suggested changes,
e°1)ies would be submitted to the Comptroller of the Currency and the
Pederal
Deposit Insurance Corporation, and, when in a form satisfactory
to ch.„2_
°"rman Martin, the statement would be agreeable to the Board.
Permission to make information available to District Chief
Examiner

(Item No.

6).

There had been distributed a

naenie'reliclum dated February 10, 1960, from the Division of Examinations
corice
rfling a request from the Federal Reserve Bank of Richmond for
Dermis
si011 to advise the District Chief National Bank Examiner of an
411)Perent..

LLL-ulng operation disclosed by the Bank's examination of a

State
member bank and involving a national bank.

Attached to the memo-

was a proposed wire to the Richmond Reserve Bank granting the

r'(1.11.ested

permissi0n.




The memorandum also suggested that since questions

2/11/60

-21-

'°8e from time to time concerning the treatment of information regarding
kiting operations, it might be desirable to send a general authorization
to all Reserve Banks to exchange information of this nature with other
bank supervisory authorities, district attorneys, the Federal Bureau of
14vestigati0
Department (because of the possibility
n, the Post Office
1'14111 fraud in such cases), and other law enforcement agencies.
The Board approved the proposed telegram, which is attached as
of
It was maerstood that, in line with the recommendation

he Division of Examinations, a letter would be sent to all Reserve
444 granting general authorization to exchange information of this
nature.

The meeting then adjourned.




562
BOARD OF GOVERNORS
OF THE

Item No. 1
2/11/60

FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.

ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

February 11, 1960.

Board of Directors,
The Rittman Savings Bank,
Rittman, Ohio.
Gentlemen:
Pursuant to your request submitted through
the Federal Reserve Bank of Cleveland, the Board of
Governors of the Federal Reserve System approves,
under the provisions of Section 24A of the Federal
Reserve Act, an investment of $225,000 in bank premises exclusive of a charge off of 00,000 in 1959
for the purpose of a remodeling program by The
Eittman Savings Bank, Tittman, Ohio.




Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.

BOARD OF GOVERNORS
OF THE

FEDERAL RESERVE SYSTEM

Item No. 2
2/11/60

WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPCINDENCE
TO THE BOARD

February 11, 1960.

Frederick L.
Deming, President,
%Vera]. Reserve Bank of Minneapolis,
'11113apolis 21 Minnesota.
Mr• Deming:
llestThis refers to Yr. Olin's letter of January 15, 1960
'
req
11'g an expression of the Board's views as to the application
or the,
Nm. i±G.calendar-day grace period, permitted by section 3(d) of
Q, to seven situations arising when the 10th calendar day
-11
a
holiday. The specific question and situations are as
rOl],ows:
Sohould the tenth of the month fall on Saturday, Sundays
al
'a legal holiday, would savings deposits received under
i rT of the following conditions be eligible to receive
'rlerest from the first of the month
1. Mail deposits received postmarked the 8th,
9th, or 10th
2. Deposits received in the "drop box" located
in the bank lobby and opened the morning of the 11th
3. Deposits received in the night depository
and opened the morning of the 11th )4. Collections outstanding received on or before
the 8th and outstanding until the 11th or a
subsequent date 5. Auto bank deposits not received in the
savings department until the morning of the 11th -




564
lir. Frederick L. Deming

-2-

6. Transfers from branches on the 8th and received
at the I-ain Office on the 11th -

7. Inter-department credits held over until the
11th due to late hour business.
As to the first situation, it is the Board,s opinion that
the
.Postmark does not determine when the deposit is delivered to the
'
an that is, received by it. The customer adopts the post office
de2_11-! agent and, therefore, must rely upon such agent making the
.sit within the first 10 calendar days. The provision for grace
per
ello ls is a liberal one, and the Board does not believe that it
"L' be further extended.
box
In the second and third situations, deposit in the drop
receipt
to
amounts
ht
days
calendar
10
during the first
4114r* bank and the day the bank opens the drop box or night depository
is not change this. The extreme situation would be then the 10th day
rday and the drop box or night depository is not opened until
the 12th. Although a deposit may possibly have been made on
1:41,.'th, the bank might reasonably assume that the deposit was made
"In the 10 calendar days.
As to the fourth situation, items received for collection
on or t
&e t efore the 10th calendar day may be included although final credit
ot given
until after the 10th day.
delivered
In situations five, six, and seven, if the deposit is
th
day,
calendar
•4terLzank, branch, or any office thereof by the 10th
4.
of when
InV be credited from the 1st day of the month regardless
the
t!flis processed and credit is given.




Very truly yours,
(SigLeU) rxrritt blierwoJ.

Merritt Sherman,
Secretary.

BOARD OF GOVERNORS

to.ivi0 1'4 4,4
4

ealio,
;t

OF THE

:%
5

FEDERAL RESERVE SYSTEM

X*

WASHINGTON 25. D. C.

Y4k rAVIt'tP

Item No. 3

2/11/60

ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

040**

February 11, 1960.

• Paul C. Hodge, Vice President,
leral Reserve Bank of Chicago,
'"leago 90, Illinois.

Z

Dear Mr.
Hodqe:
This refers to your letter of January 22, 1960, to
MA,• y
ainoflackiey inquiring whether a member bank, paying the maximum
Of interest permitted on savings deposits, may purchase
rance for its depositors from a private insurance company
.ovr all savins deposits in amounts in excess of ,10,000 and
1.) to
a00,000.

4._l

It is the Board's opinion that the purchase of such
payment of interest
lirith.'"ce by the bank would constitute an indirect
lettln the meaning of Regulation Q. This is in line with the Board's
6393) which took the
plov n' of April 19, 1956 (S-l590; F.R.L.S.
the insurance
absorbing
,J.on that the cost to a member bank of
pr4:
to
corresponding
amounts
the lums on the lives of its depositors in
indirect
an
constitute
would
account
Nrmanlount of the savings depositor's
3(a)
section
of
meaning
the
within
or trt of interest on savings deposits
e Regulation.
analogous. Such
Payments of F.D.I.C. assessments are not
expense similar to
Yment
Pother
oe are required by law and are a necessary
etc.,
1Thich overhead", such as fidelity insurance, taxes, utilities,
operations.
the bank must assume in the normal course of its




Very truly yours,
(Signed) Merritt Sherman
lierritt Sherman,
Secretary.

566

BOARD OF GOVERNORS
OF THE

FEDERAL RESERVE SYSTEM

Item No. 4
2/11/60

WASHINGTON 25. D. C
CORRESPONDENCE
TO THE BOARD

AOORESS OFFICIAL

February 11, 1960.

*. 4
p
olgh

Leach, President,
n
edleral aeserve
Bank of Richmond,
te11111°Ild 13, Virginia.

Nar Mr.
Leach:
Reference is made to your letter of December 31, 1959, recom.4 g that the Security Bank, Washington, D. C., be permitted to main:
bn;lie same reserves against deposits as are required to be maintained
has
located outside of central reserve and reserve cities. The Board
is° considered the suggested classifications of all member banks in
liashrl'
gt°1.13 D. C., which were included in your letter.
t

Govern
After consideration of the information submitted, the Board of
.rs concurs in your recommendation, and pursuant to the provisions
of se .°
Seclon 19 of the Federal Reserve Act, grants permission to the
cleposi:Y Bank of Washington, D. C., to maintain the same reserves against
Nerc's as are required to be maintained by banks outside of central
%trIpute and reserve cities, effective with the first biweekly reserve
liard tni°11 period beginning after the date of this letter. Please for"e enclosed letter addressed to the subject bank. A copy is
sed for your file.
The Board is prepared to consider applications for country bank
tatus
Ntl,,from the other three banks included in your list of "probable
from the
44tionajtanks," but it is probable that action on an application
is
information
Savings and Trust Company will be deferred until
approthe
to
as
s
fr°m all districts on which to base distinction
eserve
'
1/11ilear
'
classification for banks in the borderline size category.
d
eferments have been made with respect to banks in another district.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
410
'OSIxree




56 0,
Item No.
2/11/60

Advice to Justice Department of
Bank Holding Company Applications
of the
Under Section 8(c) of the Rules of Organization
Board of Governors, applications for Board approval pursuant to
tute
Section 3(a) of the Bank Holding Company Act of 1956 consti
UtPUblished information which ordinarily is not disclosed.

Section

Board may make
7(b) of the Rules of Organization provides that the
sUCh information available to agencies of the United States for use
14here necessary in the performance of their official duties.
is, of
Aaministration of the Bank Holding Company Act
course, vested in the Board of Governors.

However, the Department

°I* Justice has certain statutory responsibilities under the anti
laws with respect to banks.

Accordingly, pursuant to a

purpose
lequest from the Department of Justice, and solely for the
'
the antiOf facilitating performance of its responsibilities under
the
tIllat laws, the Board had agreed to inform it of the receipt by
Bank Holding Company
Bclall of applications under Section 3(a) of the
Act.




TELEGRAM
LEASED WIRE SERVICE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON

February 11, 1960.

Minlistead -Richmond
IN RESPONSE TO YOUR WIRE OF FEBRUARY 9, 1960, YOU ARE
AITTRORIZED TO ADVISE THE DISTRICT CHIEF NATIONAL BANK EXAMINER
0?411 krTARENT KITING OPERATION DISCLOSED BY YOUR EXAMINATION
()P A STATE MISER BANK AND INVOLVING A NATIONAL BANK.




(Signed) Merritt Sherman
SHERMAN