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Minutes for February 11, 1965 To: Members of the Board From: Office of the Secretary Attached is a copy of the minutes of the Board of Governors of the Federal Reserve System on the above date. It is not proposed to include a statement with respect to any of the entries in this set of minutes in the record of policy actions required to be maintained pursuant to section 10 of the Federal Reserve Act. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, please initial below. If you were present at the meeting, your initials will indicate approval of the minutes. If you were not present, your initials will indicate only that you have seen the minutes. Chin. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. Mitchell Gov. Daane Minutes of the Board of Governors of the Federal Reserve System on Thursday, February 11, 1965. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Balderston, Vice Chairman Mills Robertson Shepardson Daane Sherman, Secretary Kenyon, Assistant Secretary Noyes, Adviser to the Board Farrell, Director, Division of Bank Operations Mr. Solomon, Director, Division of Examinations Mr. Johnson, Director, Division of Personnel Administration Mr. Hexter, Assistant General Counsel Mr. Sammons, Adviser, Division of International Finance Mr. Kiley, Assistant Director, Division of Bank Operations Mr. Smith, Assistant Director, Division of Examinations Miss Hart, Senior Attorney, Legal Division Mr. McClintock, Supervisory Review Examiner, Division of Examinations Mr. Mr. Mr. Mr. Circulated or distributed items. The following items, Copies of which are attached to these minutes under the respective Item numbers indicated, were approved unanimously: Item No. Letter to the Federal Reserve Bank of San Francisco I'egarding the question whether the prohibitions of section 32 of the Banking Act of 1933, as amended, : xtend to a director who is a shareholder of 7 corporationbank that is or will be primarily engaged tn section 32 business, but who is not a director, urflcer, or employee of such corporation. 1 2/11/65 Item No. Letter to the Comptroller of the Currency regarding the obtaining of copies of reports of changes in control of management of banks furnished to his Office under the provisions of Public Law 88-593. 2 from Mr. Young dated January 28, 1965, regarding the furnishing of assistance to the Central Bank of the Philippines for a study of both systems and procedures and manpower requirements and utilization. 3 *MOrandum Messrs. Noyes, Sammons, and McClintock, and Miss Hart withdrew from the meeting at this point. Examination of Richmond Bank. There had been circulated to the Board the report of examination of the Federal Reserve Bank of Richmond made by the Board's field examining staff as of November 2, 1964, together with related supplemental memoranda. Mr. Smith reviewed the examination findings, and there developed to be no matters concerning which action by the Board at this time was deemed necessary. Among other things Mr. Smith commented on indebtedness to two brokerage firms reported by LloYd B. Gee, an employee of the Money Department, and on recent verbal advice from the Reserve Bank's General Auditor indicating that the situation was currently being given renewed attention by the Bank's management with a view to receiving assurance that the ernPloyee's financial program was on a sound investment basis. The meeting then. adjourned. 2/11/65 -3Secretary's Note: Governor Shepardson today approved on behalf of the Board the following items: Letter to the Federal Reserve Bank of Philadelphia (attached Item No. 4) approving the designation of Joseph R. Joyce as special assistant examiner. Letter to the Federal Reserve Bank of Cleveland (attached Item No. 5) approving the designation of William F. Krech, Dennis E. Murray, and Richard Nicoloff as special assistant examiners. Letter to the Federal Reserve Bank of San Francisco (attached Item No. 6) approving the appointment of Richard Ray as assistant examiner. Memoranda recommending the following actions relating to the Board's staff: APP2intment . Judith S. Scully as Secretary, Division of Personnel Administratlon, with basic annual salary at the rate of $5,1651 effective the date of entrance upon duty. increase Sandra H. Cook, Statistical Clerk, Division of Bank Operations, fllom $3,680 to $4,005 per annum, effective February 14, 1965. Secre BOARD OF GOVERNORS Item No. 1 2/11/65 ..... OF THE ,DO?Goti.. FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 11, 1965 M. H. E. Hemmings, First Vice President, Federal Reserve Bank of San Francisco, San Francisco, California. 94120 Dear Mr. Hemmings: Your letter of February 1, 1965, and its enclosures, Presented the question whether the continued service of Mr. W. P. Fuller Brawner as a director of The Bank of California, N. A., San Francisco, California, may be contrary to the prohibition in section 32 of the Banking Act of 1933, as amended, because of his clornership of shares in Tappan-Smith .& Co., Inc., and his membership in a group of five individuals who vote the stock of that company. From the information presented, it seems clear that Tappan_ Smith & Co., Inc., is to be regarded as primarily engaged in business of the kinds described in section 32. However, it is stated that Hr. Brawner is not an officer, director, or employee of that company and that he does not take any active part in its management. APParently, his only relationship with the company arises from his ownership of one-half.of its outstanding preferred stock and approximately 15 per cent of its Class B (nonvoting) common stock, and from the fact that he is one of a group of five persons holding an irrevocable proxy under which they will jointly vote all the Class A (voting) stock of the company for a period of seven years. It does not seem from your letter and its enclosures that the group of five persons just mentioned is a partnership; if it were, the principles enunciated in 1964 Federal Reserve Bulletin 563 might PlY, so that the interlocking service of a member of the group as a ' 4rector of a member bank might be prohibited. 2 However, as the Board has indicated on previous occasions when the question has arisen, mere ownership of stock in a corporation Pjimarily engaged in section 32 business does not preclude the person wning the stock from serving as a director, officer, or employee of a member bank. On the basis of the information submitted, outlined above, BOARD OF GOVERNORS CIF THE FEDERAL RL3ERVE SYSTEM Mx. H. E. Hemmings -2- it would not appear that Mr. Brawner, either because of any activity by him in his individual capacity or because of any relationship he has with Tappan-Smith & Co., Inc., would be precluded by section 32 from continuing as a director of The Bank of California, N. A. This seems to be the view of your Bank. However, if there should be further facts having a material bearing on the matter, or if there should be any substantial change in the situation as presented, further consideration of the matter might be required. In the circumstances, it would seem desirable for Your Bank to review the matter from time to time. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. BOARD OF GOVERNORS Item No. 2 OF THE 2/11/65 FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS orricoim CONIIILIPPONOCNCII TO THE SOARD February 11, 1965. The Honorable James J. Saxon, Comptroller of the Currency, Treasury Department, Washington, D. C. 20220 Dear Mr. Saxon: In the Board's letter of October 21, 1964, addressed to you in answer to Mr. Bloom's letter of October 1, 1964, the • Board stated that it would appreciate obtaining copies of rePorts regarding changes in control of management of banks 8ubmitted to you in accordance with the provisions of Public Law 88-593, Mr. Bloom's letter stated that the Office of the Comptroller would be glad to make copies of these reports available to the Federal Reserve Board in Washington as they are received. Our records reveal no instances where your office has furnished the Board with copies of reports received directly by u. The Board assumes your office continues to be agreeable r making such reports available, and it would like to reaffirm "a desire to receive copies of reports as they are submitted to You. n Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. BOARD OF GOVERNORS Item No. 3 2/11/65 OF THE FEDERAL RESERVE SYSTEM ° t filee 40 Correspondence Board of Governors Nt__!alph A. Young Date January 28, 1965 Subject: Assistance to the Central Bank of the Philippines Governor Castillo, of the Central Bank of the Philippines, has !aked the Federal Reserve System to furnish assistance to the Central Bank. or a study of both systems and procedures and manpower requirements and ?tilization. A copy of Governor Castillo's letter is attached. Vice I:resident Sanford, of the Federal Reserve Bank of New York, contacted the oard with regard to an earlier verbal request by Governor Castillo and !uggested that the Board consider arranging for this study to be made by tWO officials of the System. This was discussed informally with Governor Robertson, who suggested that one of the officials selected be from the Board of Governors 4_lud recommended the Director of the Division of Personnel Administration :t the Board, E. J. Johnson. It is recommended that Mr. Johnson be ssigned to this study for the time necessary for completion . With the thought that the other member on this assignment should Preferably have Reserve Bank Planning Department experience, Jarvis M. Tha eidYer, Jr., Cashier at the Federal Reserve Bank of Boston, is under conha 1"ation to accompany Mr. Johnson on this assignment. A review of his wiIcKground is attached. Informal inquiry has been made of President Ellis, has he has agreed to Mr. Thayer being selected for this assignment; however, Bo w°uld prefer delaying formal agreement until he has the approval of the itard of Directors of that Bank. They will meet next Monday, February 1. a,„ is recommended that the Board approve the selection of Mr. Thayer, if eProved by the Board of Directors of the Boston Reserve Bank. In addition, Everett B. Post, Manager of the Planning Department l if at;_he Federal Reserve Bank of New York, has been asked by the Central the of the Philippines to participate for a few weeks at the beginning of to ,studY. Mr. Post has recently completed a five-month assignment there -institute a position classification plan. It is expected, based upon Mr. Post's estimates and a broad anal . a ysY6ls of Governor Castillo's request, that this study will approximate Period of three months' duration. First discussion covered a possible s Period of from three to six months; however, Mr. Post has indicated that, bo-"' his knowledge of the background of the request, three months would closer to the required time, barring unforeseen problems. The expected nning date would be about April 1. , As to the financial arrangements, the Central Bank of the reas _FPlnes would expect to provide the cost of transportation, plus the 'flable living expenses while in the Philippines. This is similar to exPense arrangements made with Mr. Post, and is recommended. With regard to salary, the Central Bank of the Philippines would be to reimburse the Board and the Federal Reserve Bank concerned for the salaries of the study team. This was the arrangement with New York in connection with Mr. Post. However, Mr. Ellis mentioned that his Bank would prefer that the salary of Mr. Thayer be absorbed by the Reserve Bank, as in the loan of Mr. Latham to the State Bank of Ethiopia. Keeping in mind that this would be considered as assistance to another central bank) it is possible that the Board also might wish to absorb the salary °f its representative, as is being done in Mr. Sammons' participation in a current mission to Honduras. It appears to me that it would be preferable to request reimbursement of out-of-pocket expense only, and this is , recommended. In either case, it is assumed, of course, that all existing 'rings benefits of the participants would be continued, with the present contributions by the participants toward the costs of these fringe beneftts also to continue. Attachme S4 Item No. 4 BOARD OF GOVERNORS 2/11/65 OF THE FEDERAL RESERVE SYSTEM • WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE OOARD February 12, 1965 Joseph R. Campbell, Vice President, Federal Reserve Bank of Philadelphia, Philadelphia, Pennsylvania. 19101 Mr. Dear Mr. Campbells In accordance with the request contained in your letter of February 9, 1965, the Board approves the designation of Joseph R. Joyce as a special assistant examiner for the Federal Reserve Bank of Philadelphia for the purpose of participating in examinations of State member banks. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 40-5 BOARD OF GOVERNORS Item No. OF THE 5 2/11/65 FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE SOAR° February 111 1965 Mr. Harry W. Huning, Vice President, Federal Reserve Bank of Cleveland, Cleveland, Ohio. 44101 Dear Mr. Huning: In accordance with the request contained in your letter of February 8, 1965, the Board approves the designation of William F. Krech and Dennis E. Murray as special assistant examiners for the Federal Reserve Bank of Cleveland for the purPose of participating in examinations of State member banks. The Board also approves the designation of Richard • Nicoloff as a special assistant examiner for your bank for the Purpose of participating in examinations of State member banks except The Cleveland Trust Company, Cleveland, Ohio. The authorization heretofore given your bank to designate Mr. Nicoloff on an unrestricted basis is hereby cancelea. The name of Frank Carrell has been deleted from our list of special assistant examiners. Very truly yours, (signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 1146 Item No. 6 BOARD OF GOVERNORS 2/11/65 OF" THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 4 ADDRESS OFFICIAL CORRESPONDENCE \j'•;;Wf•P TO THE BOARD P. February 12, 1965 CONFIDENTIAL, (FR) Mr. E. H. Galvin, Vice President, Federal Reserve Bank of San Francisco, San Francisco, California. 94120 Dear Mr. Galvin: In accordance with the request contained in Mr. Cavan's letter of February 8, 1965, the Board approves the appointment of Richard Ray as an assistant examiner for the Federal Reserve Bank of San Francisco, effective today. It is noted that Mr. Ray is indebted to Bank Of America National Trust and Savings Association, San Francisco, California, and that his sister is employed by that bank. Accordingly, the Board's approval of the aPPointment of Mr. Ray is given with the understanding that he will not participate in any examination of that bank so long as his indebtedness remains unliquidated and his sister is employed by that institution. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary.
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