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Minutes for February 12, 1965
T
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 Att.
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.
Chm. Martin
Gov. Mills,
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. Mitchell
Gov. Daane
17
Minutes of the Board of Governors of the Federal Reserve
System on Friday, February 12, 1965.
The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Balderston, Vice Chairman
Mills 1/
Shepardson
Mitchell
Daane
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
1
Sherman, Secretary
Kenyon, Assistant Secretary
Broida, Assistant Secretary
Young, Adviser to the Board and Director,
Division of International Finance
Noyes, Adviser to the Board
Molony, Assistant to the Board
Cardon, Legislative Counsel
Fauver, Assistant to the Board
Brill, Director, Division of Research and
Statistics
Solomon, Director, Division of Examinations
Holland, Associate Director, Division of
Research and Statistics
Koch, Associate Director, Division of
Research and Statistics
Partee, Adviser, Division of Research and
Statistics
Solomon, Adviser, Division of Research and
Statistics
Katz, Adviser, Division of International
Finance
Sammons, Adviser, Division of International
Finance
Axilrod, Chief, Government Finance Section,
Division of Research and Statistics
Eckert, Chief, Banking Section, Division of
Research and Statistics
Keir, Chief, Capital Markets Section, Division
of Research and Statistics
Baker, Economist, Division of International
Finance
Furth, Consultant
Withdrew from meeting at point indicated in minutes.
2/12/65
-2Money market review.
Mr. Axilrod commented on developments
in the Government securities market, with emphasis on recent and
Prospective short- and long-term interest rate movements, after which
Mr. Baker reviewed foreign exchange market developments and related
matters.
Tables were distributed affording perspective on the money
market and on bank reserve utilization.
After discussion based on the foregoing comments, Governor
Mills and all members of the staff who had been present except
Messrs. Sherman, Kenyon, Noyes, Molony, Cardon, and Solomon (Examinations)
vithdrew and the following entered the room:
Hackley, General Counsel
Farrell, Director, Division of Bank Operations
Shay, Assistant General Counsel
Daniels, Assistant Director, Division of Bank Operations
Young, Senior Attorney, Legal Division
Egertson, Supervisory Review Examiner, Division of
Examinations
Mr. Ring, Technical Assistant, Division of Bank Operations
Mr. Shuter, Attorney, Legal Division
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Discount rates.
The establishment without change by the
following Federal Reserve Banks on February 11, 1965, of the rates
On discounts and advances in their existing schedules was approved
unanimously, with the understanding that appropriate advice would be
sent to those Banks:
Cleveland, Richmond, Atlanta, Chicago, St. Louis,
Minneapolis, Kansas City, and Dallas.
Distributed items.
After discussion the following items,
copies of which are attached to these minutes under the respective
Item numbers indicated, were approved unanimously:
Item No.
Letter to Trade Bank and Trust Company, New York, New
York, approving the establishment of a branch at
515 Seventh Avenue, Borough of Manhattan, in connection
"with the removal of the bank's main office to another
location.
1
Letter to the Bureau of the Budget regarding a draft
bill proposed by the Department of Justice to amend the
Expediting Act.
2
Report on competitive factors (Rumford-Rangeley, Maine).
Unanimous approval was given to the transmittal to the Federal Deposit
Insurance Corporation of a report on the competitive factors involved
in the proposed purchase of assets and assumption of liabilities of
Rangeley Trust Company, Rangeley, Maine, by Rumford Bank and Trust
C°mPany„ Rumford, Maine.
The conclusion stated that the proposed
transaction would not have adverse competitive effects.
Application of United California Bank (Items
3 and 4). After
discussion during which a minor change was agreed upon in the draft
statement that had been distributed, the Board authorized the issuance
°f an order and statement reflecting its decision on. February 3, 1965,
to approve the application of United California Bank, Los Angeles,
California, for permission to merge with Bank of Mt. Shasta, Mount
Shasta, California.
Copies of the order and statement, as issued,
4re attached as Items 3 and
4.
Report on coin situation (Item No.
5). There had been distributed
4 draft of letter to Chairman Fascell on the Legal and Monetary Affairs
2/12/65
-4-
Subcommittee of the House Committee on Government Operations in
response to his letter of January 22, 1965, requesting views and
comments on various matters relating to the coin shortage.
The only part of the draft to be questioned was the proposed
answer to the inquiry whether any official consideration had been
given to requiring member banks to report to the System the amounts
and denominations of coin held by them and counted as part of their
reserves.
One view expressed was that it would be preferable simply
to let the answer reflect the unanimous opinion of the Reserve Bank
Presidents that the requiring of such reports would be undesirable,
without detailed explanation of the reasons for this opinion.
Another
view leaned toward including an explanation of the reasoning that led
the Presidents to take a negative position, and the Board to concur in
the opinion of the Presidents; while the draft answer had attempted
to
clo this, it was felt that the reasons had not been developed too effectively.
A requirement for reports, it was pointed out, might have the
feet of causing member banks to reduce their return shipments to the
Reserve Banks, out of apprehension that the call for reports presaged
flArther rationing by the Reserve Banks.
At the conclusion of the
discussion, general agreement was reached on an approach that took into
4ecount elements of the various views that had been expressed.
Accord-
approval was given to the sending of a letter to Chairman Fascell
in the form attached as Item No.
5.
2/12/65
-5The meeting then adjourned.
Secretary's Note: Governor Shepardson today
approved on behalf of the Board the following
items:
Memorandum from the Division of Research and Statistics dated
February 5, 1965, recommending the appointment of George R. Hall,
Logistics Department, The Rand Corporation, Santa Monica, California,
as Consultant in that Division on a temporary contractual basis
effective to December 31, 1965, with compensation at the rate of
$60 per day aud necessary travel to be handled in accordance with
the Board's travel regulations.
Memorandum from the Division of Research and Statistics dated
February 5, 1965, recommending the reappointment of Charles F. Phillips,
Jr.) Associate Professor of Economics, Washington and Lee University,
Lexington,Virginia, as Consultant in that Division on a temporary
contractual basis effective to December 31, 1965, with compensation
at the rate of $60 per day and necessary travel to be handled in
accordance with the Board's travel regulations.
Memoranda recommending the following actions relating to the
Board's staff:
Salary increases
J. William Via, Jr., Senior Attorney, Legal Division, from $10,250
to $11,315 per annum, effective February 14, 1965.
Charles W. Bryson, Economist, Division of Research and Statistics,
fr°m $7,955 to $8,650 per annum, effective February 14, 1965.
„11:Tission to engage in outside activity
M. H. Schwartz, Director, Division of Data Processing, to conduct
an orientation class for the staff of Resources for the Future.
tance of resignation
Ann C. Tompros, Secretary, Division of Examinations, effective
at the close of business March
3, 1965.
Secretary
BOARD OF GOVERNORS
Item No. 1
2/12/65
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 12, 1965.
Board of Directors,
Trade Bank and Trust Company,
New York, New York.
Gentlemen:
The Board of Governors of the Federal
Reserve System approves the establishment of an
in-town branch by Trade Bank and Trust Company at
515 Seventh Avenue, Borough of Manhattan, in connection with the removal of its head office from that
address to 594 Fifth Avenue, Borough of Manhattan,
New York. This approval expires six months from
the date of this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension of
the period allowed to establish the branch; and
that if an extension should be requested, the
procedure prescribed in the Board's letter of
November 9, 1962 (S-1846), should be followed.)
1730t
Item No. 2
BOARD OF GOVERNORS
OF THE
2/12/65
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 12, 1965.
Mr. Phillip S. Hughes,
Assistant Director for
Legislative Reference,
Bureau of the Budget,
Washington, D. C. 20503
Dear Mr. Hughes:
This is in response to your legislative referral
memorandum of January 12, 1965, requesting the views of the Board
on a draft bill proposed by the Department of Justice
"To amend
section 2 of the Act of February 11, 1903 (32 Stat. 1823, as amended,
15 U.S.C. 29, 49 U.S.C. 45), commonly known as the Expediting
Act."
It is understood that the Expediting Act was originally enacted
to
reduce the time consumed in the Federal courts in consideratio
n of
antitrust and interstate commerc
e cases and to encourage development
ot uniform interpretation of cases in these
areas by exclusive appeal
to the Supreme Court.
Apparently, in recent years the procedure for uniform
construction of these antitrust and interstate
commerce statutes has
greatly increased the burden on the Supreme Court, although the necessity for exclusive appeal in every case has declined. The proposed
i raendment seeks to relieve the Court of a portion
of its present
'?urderi by restricting the right of exclusive appeal to those cases
Involving matters of national importance. The Board
favors this
Objective if it can be achieved withou
t impairing the fundamental
rights of litigants. However, the instant proposal involve
s technical
Procedural matters in the adminis
tration of justice that appear to
e beyond the sphere of the Board's primary responsibilities and
ex pertise, and the Board has
no comments to offer on its specific
Provisions.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
504
Item No.
UNITED STATES OF AMERICA
3
2/12/65
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
in the Matter of the Application of
UllITED CALIFORNIA BANK
for approval of merger with
Bank of Mt. Shasta
•••
ORDER APPROVING MERGER OF BANKS
There has come before the Board of Governors, pursuant to the
Batik Merger Act of 1960 (12 U.S.C. 1828(c)), an application by United
California Bank, Los Angeles, California, a State member bank of the
Paderal Reserve System, for the Board's prior approval of the merger of
that bank and Bank of Mt. Shasta, Mount Shasta, California, under the
eharter and title of United California Bank.
As an incident to the
rnerger, the only office of Bank of Mt. Shasta would become a branch of
he resulting bank. Notice of the proposed merger, in form approved by
the Board, has been published pursuant to said Act.
Upon consideration of all relevant material in the light of
the factors set forth in said Act, including reports furnished by the
Cftlotroller of the Currency, the Federal Deposit Insurance Corporation,
-2and the Department of Justice on the competitive factors involved in
the proposed merger,
IT IS HEREBY ORDERED, for the reasons set forth in the Board's
Statement of this date, that said application be and hereby is approved,
Provided that said merger shall not be consummated (a) within seven
calendar days after the date of this Order or (b) later than three months
after said date.
Dated at Washington, D. C., this 12th day of February, 1965.
By order of the Board of Governors.
Voting for this action: Chairman Martin, and
Governors Mills, Robertson, Mitchell, and Daane.
Absent and not voting:
and Shepardson.
Governors Balderston
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
Item No.
4
2/12/65
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION OF UNITED CALIFORNIA BANK
FOR APPROVAL OF MERGER WITH
BANK OF MT. SHASTA
STATEMENT
United California Bank, Los Angeles, California ("United
California"), with total deposits of about $2.6 billion, has applied,
PlItsuant to the Bank Merger Act of 1960 (12 U.S.C. 1828(c)), for the
Ik)ardls prior approval of the merger of that bank and Bank of Mt. Shasta,
113411t Shasta, California ("Mt. Shasta Bank"), with total deposits of
44ut $4 million.
United
The banks would merge under the charter and name of
California, a State member bank of the Federal Reserve System.
As an . .
incident to the merger, United California would establish a branch
at ch...
present location of Mt. Shasta Bank, increasing to 175 the number
Offices operated by United California.
Under the Act, the Board is required to consider, as to each
the banks involved, (1) its financial history and condition, (2) the
,
adequ,
-eY of its capital structure, (3) its future earnings prospects,
(4) the
general character of its management, (5) whether its corporate
11(4/ets are consistent with the purposes of 12 U.S.C., Ch. 16 (the Federal
eposit f gures are as of June 30, 1964.
-2-
Deposit Insurance Act), (6) the convenience and needs of the community
to be served, and (7) the effect of the transaction on competition
(including any tendency toward monopoly).
The Board may not approve
the transaction unless, after considering all these factors, it finds
the transaction to be in the public interest.
Banking factors. - United California (a subsidiary of Western
Bancorporation, Los Angeles, California, a registered bank holding
company) and Mt. Shasta Bank have satisfactory financial histories.
The
asset condition of United California is satisfactory, its capital structure is reasonably adequate, and its future earnings prospects are
44tisfactory.
These attributes would be true also of the resulting
bank, which would be under the competent management of United California.
Mt. Shasta Bank's asset condition and capital structure are
satisfactory, and its future earnings prospects are favorable.
The bank,
hellever, has had serious difficulty in retaining persons qualified to
til/ervise its operations.
This difficulty is not likely to diminish.
The, bank follows the ultraconservative policies of its president, a man
Pest normal retirement age.
the
Because he is the majority stockholder,
President dominates the bank, but he is frequently opposed by a
director who is the second largest stockholder.
The bank's restrictive
-4.ng policies have created widespread resentment and dissatisfaction
Ott
the part of the local business community. The fact of control, the
tvy,
'"e of control, and the lack of harmony indicate that mt. Shasta Bank
-3_
wftid have considerable difficulty in recruiting and retaining capable
officers.
Effectuation of the proposed transaction would solve these
Problems at lift. Shasta Bank.
There is no indication that the corporate powers of the banks
involved are, or would be, inconsistent with 12 U.S.C„ Ch. 16.
Convenience and needs of the communities. - United California,
the fifth largest bank in California in terms of deposits, has offices
ill 34
counties.
Consummation of the merger would have no appreciable
effect on the convenience and needs of the communities now served by
United California.
The town of Mount Shasta is located in Siskiyou County, about
300 miles north of San Francisco.
The population of the county is esti-
mated to be somewhat over 34,000.
Mount Shasta has a population of
about 2,500, with an additional 1,500 persons in the immediate surroundings.
The
economy of the area is based primarily on lumbering, although there
4 a
limited amount of dairying and livestock raising.
The town also
at
tracts a large segment of the year-round tourist trade, which has
Increased in recent years and is expected to continue.
Mt. Shasta Bank, as indicated above, has followed restrictive
PtIlicies.
Ninety per cent of its investment account consists of United
States Government obligations, which comprise 47 per cent of the bank's
tcltel assets.
About 35 per cent of the bank's total assets are in loans,
4" 85 per cent of these are conventional real estate loans.
Commercial
509
-4-
and industrial loans make up only three per cent of the total.
The bank
makes no FHA or VA loans, nor does it engage in floor-plan lending for
automobile or consumer-goods dealers, or in construction financing for
industrial and residential developers.
In the last four years, total
1°arks at Mt. Shasta Bank have increased by less than one per cent, while
the other three banking offices in the area have shown growth in total
loans of 48 per cent, 62 per cent, and 77 per cent.
In addition to Mt. Shasta Bank, the area is served by two
branches of Bank of America National Trust & Savings Association, one
located at Dunsmuir, 9 miles south of Mount Shasta, and the other at
cel°ud, 12 miles southeast of Mount Shasta, and by a branch of United
California located at Weed, 10 miles north of Mount Shasta.
While a full
l'ange of banking services is available at these locations, consummation
Of the proposal would provide such services in the town of Mount Shasta.
2/
of Mt. Shasta Bank and that
Competition. - The service area
Of the
Weed office of United California overlap to a small degree, and
such competition as exists between them would be eliminated by the proposed
Trl.rger. At
the same time, Bank of America, the only other bank that
14°u1d be
affected, for the first time would have a strong competitor at
l'IcItint
Shasta, which is showing steady growth and is becoming the center
Of trade
for surrounding communities.
/ The.
area from which a bank derives 75 per cent or more of its deposits
Of
lnd
lviduals, partnerships, and corporations.
-5-
If effected, the proposal would result in an increase in the
concentration of California's banking resources in a few large banks.
United California's position, however, would remain relatively
unchanged, since Mt. Shasta Bank's deposits represent only a minimal
amount of the total deposits in the State.
Summary and conclusion. - The merger of United California and
Mt. Shasta Bank would result in the elimination of some present and
Potential competition between the two banks, and would increase banking
Concentration in the State, although minutely. However, there would be
substituted in Mount Shasta a bank offering full banking services for
the ultraconservative Mt. Shasta Bank, which has not served the
needs of the Mount Shasta community in accordance with the bank's
eePebility.
Consummation of the proposal also would solve the serious
difficulty of Mt. Shasta Bank in retaining qualified officers.
These
Pcsittve benefits to the public in the growing Mount Shasta area would
more
than offset any adverse effects of the transaction.
Accordingly, the Board finds the proposed merger to be in
the public interest.
Pebruary 12, 1965.
•......
.0',00fC0ti•.
•
BOARD OF GOVERNORS
Item No.
OF THE
FEDERAL RESERVE SYSTEM
to.
h.
h'
5
2/12/65
WAS
OFFICE OF THE CHAIRMAN
•°AL RE.St.
.••
•••..••
February 12, 1965.
The Honorable Dante B. Fascell, Chairman,
legal and Monetary Affairs Subcommittee
,of the Committee on Government Operations,
House of Representatives,
Washington, D. C. 20515.
Dear Mr. Chairman:
This refers to your letter of January 22, 1965, requesting
views and comments on various matters relating to the coin
Shortage.
A copy of your letter was sent to the President of each
Pederal Reserve Bank and copies of their individual replies are
furnished herewith. The following summary comments regarding the
specific matters mentioned in your letter are based largely on the
information submitted by the Reserve Banks.
1. The present coin-availability situation, the
indications of future availability as reflected
by "flowbacks" or other criteria, and the effect
on coin supply the Treasury's crash program has
had, or can be expected to have, as indicated by
the Federal Reserve System's operations.
The Treasury's massive production program not only prevent
ed the coin shortage from getting much worse but appears, in
the
4
light of recent evidence, to be making some progress in improvig the flowback of coins from circulation. For instance, most of
fiel Reserve Banks reported that recently they have been able to
the' orders for cents as requested, and in some cases have eased
lr rationing of other denominations.
iT
The Kennedy Halves are an exception to the improving
Pleture.
Although more than 200 million of these coins have been
Prod'iced,
is still no significant use of Chem as a circulatmed ium and
almost none are being returned to the Reserve Banks.
While coin receipts from circulation, particularly cents,
are
fr _Quowing some signs of improvement, the flowback is still far
what it should be at this time of the year to permit the
Se
Banks to build up adequate inventories to meet seasonal
tier
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
The Honorable Dante B. Fascell
-2-
needs later on. For example, as may be noted from the following
table, the return flow in January 1965 was little more than half
that of January 1964, which was even then far below normal, and
only about one-third as much as in January
1963.
Coins Received From Circulation
By All Federal Reserve Banks and Branches
(Millions of Pieces)
Jan.
1965
All denominations 345.3
Cents
Nickels
Dimes
,,
,
warters
Halves
Receipts
Jan.
1964
Jan.
1963
January 1965 as a
per cent of-Jan.1964 Jan.1963
658.5
1,013.1
52
34
131.7.
102.2
231.8
129
57
46.0
100.0
222.8
46
21
133.2
290.7
341.1
46
39
33.3
142.2
190.0
23
18
1.1
23.4
27.4
5
4
2. The steps taken by the Federal Reserve
Board and the Federal Reserve Banks since the
Subcommittee's hearings in July, 1964, to
assist in alleviating the coin shortage.
As a deterrent to hoarding for speculative purposes, the
Board
urged legislation, subsequently enacted as Public Law 88-580,
.t_o. authorize
the Mint 4to continue the 1964 date on all coins until
4ciequate supplies are available.
The Reserve Banks have amended their operating procedures
sO that
they now stand willing to pay transportation costs on shipt8 of coin
from nonmember banks and to accept deposits of wrapped
r_41. There are no indications, however, that these changes have
nited in any significant increase in receipts from circulatio
n.
In addition, as a step toward minimizing the opportunity
for HI
nt-sealed bags of new coin to come into the hands of hoarders
and s
peculators, the Reserve Banks have uniformly adopted the
vr ctice of
rebagging all coin received from the Mint and, where
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Ihe Honorable Dante B. Fascell
-3-
Practicable, mixing some circulated coin with new coin and putting
the coin into bags containing smaller amounts than the uniform
Mint bags.
As indicated by the accompanying comments from the individual Banks, various other steps have been taken including
letters, published articles, meetings, and personal contacts with
bankers and others calling attention to the shortage and urging
cooperation in seeing that coin is paid out only for use as a
medium of exchange and that excess coin is returned to normal
channels of circulation.
3. The extent to which Federal Reserve Banks
are rationing coin, and the bases on which
rationed.
And
4. What, if anything, the Federal Reserve
System does to determine the actual coin needs
of members, and to assure the fair and equitable distribution of available coin.
Possibly because of the seasonal flowback, several of
the Reserve Banks have found it possible in recent weeks
to discontinue rationin of
g
pennies and to pay in full the amounts requested.
With few other minor exceptio
,
ns; the rationing procedures remain as
':_tlined in the information previously sent to your Committee with
clle Board's letter of July
30, 1964.
The Reserve Banks continue to believe that the judgment
of their coin officers provide the best basis for
dueltermining the actual coin needs of member banks and for assuring
to fair and equitable distribution of available coin. In addition
cords extending back over several years, these officers have
the
cit:
t e benefit of frequent telephone conversations
with member banks
faring which current inventories, seasonal needs, and other such
etc:Ts are discussed and evaluated.
and
5. What records are maintained by the Federal
Reserve System with reference to coin distribution.
The Federal Reserve Banks keep copies of invoices or
oth er
al, records showing the dates and amounts (by denomina
tion) of
'
coin receipts and payments
.
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
The H
onorable Dante B. Fascell
country
Reserve
January
January
-4-
In order to keep abreast of the coin situation in the
as a whole, the Board's staff has maintained a. chart of
Bank coin receipts, payments, and inventory since
1963. A copy of the chart, showing monthly data through
1965, is attached.
6. Whether any official consideration has
been given to requiring members to report to
the System the amounts and denominations of
coin they hold and count as part of their
reserves under the Vault Cash Act.
The System officials most directly involved have con(lnded that such reports would serve no useful purpose; in fact,
;,request for reports of this nature would almost alrely worsen
ne situation. The Board concurs in this view.
Oneof the main objections to this procedure is the
difficulty of evaluating such information. Before inventory
!
igures could be meaningful, it would be necessary to develop
standards to judge such other factors as justifiable holdings,
Payment demands, seasonal variations, etc. In other words,
mequired reports of this nature would have to be supplemented by
of the same kind of information that is now being obtained,
Wheree
the situation seems to warrant it, on a cooperative basis.
The Board feels that this cooperation might not be so
rea-1L forthcoming in the light of the "policing" atmosphere
that;C
would inevitably accompany a requirement for inventory reports.
request for such reports would quite likely be interpreted by
the
d banks and the public as a step toward tighter rationing prow° ures and, hence, as a sign that shortages were about to become
esrse rather than better. This consideration would seem to be
prPecially important now in view of the Treasury's current massive
thoduction program. That program is based on the premise that
co? most effective way to cure the coin shortage is to produce
beln enough to meet all demands, with the hope that hoarding will
minimized if everyone knows he can get all the coin he wants
from
met his bank, and banks in turn know they can have their demands
In_ by the Reserve Banks. Thus, substantial inventories at
lber
banks are an inherent part of the program. Accordingly, the
at rt,c1, believes that any suggestion of policing these inventories
this time
would do more harm than good.
C
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
The Honorable Dante B. Fascell
-5-
7. The extent to which the silver futures
market may be affecting coin and silver
supplies.
Generally speaking, neither the Board nor the Federal
Reserve Banks are familiar enough with the silver futures market
to arrive at firm conclusions with regard to how this market
may be affecting coin and silver supplies; however, some of the
Reserve Banks have included in their replies comments on this
matter that may be helpful.
Some of the coin shortage undoubtedly stems from purchases of silver coins for speculation in an effort to profit
from a hoped -for substan
tial rise in the market price of silver.
'Ete extent of this
kind of hoarding cannot be measured, and it
ls one of the principal factors that make
it impossible now to
d
etermine coin needs for the near future.
8. Other matters which were raised in the
Subcommittee's hearings, including efforts made
towards obtaining better measurements of future
coin needs, the extent and effect of coin hoarding and speculation and changes in distribution
patterns which delay or prevent coin from returning to banks for normal recirculation.
The numerous advertisements in numismatic publications
and Other
evidence indicates that there is widespread coin hoardtrtg and
speculation, but there is not enough information to judge
the
extent
and precise effect. of these practices on the coin shortage.
The experience of the Reserve Banks indicates that there
have b
een substantial changes in the distribution patterns, and
it_hat some of these changes
delay or prevent coin from returning to
for normal recirculation. On the other hand, there
is evidence
at some of the new patterns, such as banks
exchang
ing
coin
among
themselves
and paying a premium for coin, have been effective in
bueventing
the coin shortage from having a more serious effect on
thsinese transactions. In our free economy, we can expect
that
bue need to satisfy custome
r demand will lead banks and other
co
!
inese enterprises to find new methods of stretching availab
le
ber suPplies, even though these methods are costly.
However,
theause of the higher costs involved, it is
more than likely that
c_, d istortion in distribution
pattern
s
will
disappear when the
"4-11 shortag
e is cured.
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Honorable
Dante B. Fascell
-6-
These many imponderables, complicated further by uncertai .
nties as to what will be done about the use of silver in future
le,°ins, lead to the view shared by all Reserve Bank Presidents that
uetter measurements of future coin needs are presently impossible,
!nd that for the time being the only solution to the problem lies
,11 the continued production of coin by the Mints at full capacity.
Ivertheless, it
is recognized that there will be a need to determine in advance when this production may be tapered off, and
1
11,reliminary discussions have been had with representatives of the
ereasurY with the thought of developing a better procedure for
r8timating future requirements once the existing uncertai
nties are
"loved to an extent that will make meaningful estimate
s possible.
Sincerely yours,
(Signed) Wt. McC. Martin, Jr.
WW1. McC. Martin, Jr.
811C1°Stlres.
liptitAL RESERVE BANK COIN RECEIPTS, PAYMENTS, AND INVENTORY
JANuAty 1, 1963 _ JANUARY 31, 1965
11Ailii•ns el P.111c•s
•
- ••
PAYMENTS
•
1200
I.
RECEIPTS FROM CIRCULATION
000
•
••
.....,.
\
/
I ,...,,,
,,• I‘•
• i
/ ‘,,, •
.• •i
•
.1 r-.../
•
•
I
1
I
INVENTORY
400
•••• 01. AMOY Mil
•
RECEIPTS FROM MINT
MAR
_1_
JUNE
1963
SEPT '
1_
1
DEC
0
1
MAR.
JUNE
1044
SEPT.
DEC.
@FedFRASER