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!609 9161 Minutes for To: Members of the Board From: Office Of the Secretary February 13, 1963 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. King Gov. Mitchell r-f,prz # Minutes of the Board of Governors of the Federal Reserve System on Wednesday, February 13, 1963. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Robertson Shepardson Mitchell Sherman, Secretary Kenyon, Assistant Secretary Molony, Assistant to the Board Fauver, Assistant to the Board Hackley, General Counsel Noyes, Director, Division of Research and Statistics Mr. Farrell, Director, Division of Bank Operations Mr. Solomon, Director, Division of Examinations Mr. Connell, Controller Mr. Hexter, Assistant General Counsel Mr. Shay, Assistant General Counsel Mr. Holland, Adviser, Division of Research and Statistics Mr. Conkling, Assistant Director, Division of Bank Operations Mr. Leavitt, Assistant Director, Division of Examinations Mr. Bass, Assistant Controller Mr. Langham, Assistant Director, Division of Data Processing Mrs. Semia, Technical Assistant, Office of the Secretary Miss Hart, Senior Attorney, Legal Division Mr. Mr. Mr. Mr. Mr. Mr. Branch application of United California Bank (Item No. 1). There had been distributed a memorandum dated February 11, 1963, from the Division of Examinations in connection with the application of United California Bank, Los Angeles, California, for permission to "tablish a branch in Huntington Beach, California. Although the 2/13/63 -2- Division recommended approval, it reviewed in the memorandum the apparent deterioration in the applicant's capital position and concurred in the suggestion of the Federal Reserve Bank of San Prancisco that, if the establishment of the branch was approved by the Board, the letter conveying this decision include a comment regarding the bank's capital. In the discussion at this meeting it was brought out that, after a special staff study based upon the bank's September 28, 1962, report of condition, the Federal Reserve Bank of San Francisco had l'illitten to the bank on December 21, 1962, commenting on its Unfavorable capital position and asking for comments as to steps to be taken for improvement. On December 26, 1962, the Superintendent °I Banks of California had written to United California stating that he lias not in agreement with the Federal Reserve Bank's conclusions and expressing the view that an analysis of the February 13, 1962, examination report of United California indicated that capital funds at that date were in satisfactory relationship to total assets. Staff e°13ments noted that information reflecting conditions subsequent to the Pebruary 1962 examination report suggested a further weakening of 'Pita' position. " The view was expressed that, while the establishment of the Particular branch in question would in itself have no significant effect en United California's capital position, it would be undesirable to give the impression that if the Board approved the establishment of satisfactory the branch it must have considered the bank's capital position 2/13/63 -3- at the time of the approval. In this connection, it was understood that three more branch applications by United California had been filed With the Reserve Bank. It was observed that in a letter to the San Francisco Reserve Bank dated January 22, 1963, United California had stated that Western Bancorporation, the major stockholder of United California, had just closed the sale of its majority interest in First Western Bank and Trust Company, and that completion of the transaction lould place Western Bancorporation in a better position "to assist in a determination of the form and source most advantageous to the Bank arid its shareholders of any capital increase that may be found desirable" as part of United California's long-range plans. It was suggested that 4 letter informing the bank of the Board's approval of the branch aPPlication might use the January 22 letter as a reference point and exPress the Board's view that a program for substantial capital iMProvement should be undertaken. The application of United California Bank was thereupon 4PProved unanimously, subject to the understanding that the letter itlforming the bank of such action would contain language along the lines suggested. A copy of the letter sent to the bank pursuant to this action is attached as Item No. 1. Request for reconsideration of Hackensack Trust Company Merger (Item No. 2). There had been distributed a draft of letter clenYing a request by Mr. Charles Ford, Montclair, New Jersey, that the 538 2/13/63 Board reconsider its order and statement dated January 30, 1963, aPProving the merger of Bank of Bogota, Bogota, New Jersey, into The Hackensack Trust Company, Hackensack, New Jersey. After discussion, the letter was approved unanimously. A COPY is attached as Item No. 2. Mr. Leavitt and Miss Hart then withdrew. Report of audit (Items 3 and 4). There had been distributed Copies of the report by Haskins & Sells dated January 23, 1963, covering its examination of the financial statements of the Board of Governors for the year ended December 31, 1962, together with a report by that firm on the scope of its examination. There also had been distributed a nieniorandum from the Office of the Controller dated January 30, 1963, relating to the audit report. There was a discussion of the assignment that might be given Ileakins & Sells for reviewing during 1963 the work of the Board's field examining staff, in the light of the steps being taken with a viev to consideration of the proposals made by Governor Robertson in his memorandum of December 4, 1962, for reorganization of the Board's lic)rk relating to supervision and examination of the Federal Reserve 131/4ks. It was noted that three accounting firms - Price Waterhouse & Co-, Haskins & Sells, and Arthur Andersen & Co. - had been asked to review and comment on those proposals, and it was anticipated that their replies would be available in the near future. (Several staff memoranda N419 2/13/63 on -5- the subject already had been distributed.) The expectation was that all of these comments were available for the Board's study, the Board would give further consideration to Governor Robertson's proposals and would decide whether to invite representatives of the respective Public accounting firms to meet with the Board. Thereafter, a decision could be reached on what assignment it might be appropriate to give to Haskins & Sells with respect to a review during 1963 of the procedures r°110wed in the examination of Federal Reserve Banks. The audit report was thereupon accepted, it being understood that copies would be transmitted to Senator Robertson and Congressman Patrnan, Chairmen of the Senate and House Banking and Currency Committees, respectively. 3 and Copies of the transmittal letters are attached as Items 4. Messrs. Connell and Bass then withdrew. Record of Board policy actions. A memorandum dated February 11, 1963) from the Office of the Secretary had been distributed submitting rcIr the Board's consideration drafts of entries for the record of Board P°11cY actions to be published in the Annual Report for 1962. After discussion, the 1962 policy record entries of the Board, 14 the form distributed but subject to such minor editorial or technical changes as might be found appropriate by the Secretary, were approved Unanimously for inclusion in the Board's Annual Report. Proposed proclamation (Item No. 5). There had been distributed eoPies of a letter dated February 11, 1963, from the Bureau of the Budget, 2/13/63 -6- r equesting the Board's comments on a proposed Executive proclamation entitled "Centennial of the Dual Banking System," which, the letter stated, had been prepared in the Treasury Department. The draft Proclamation spoke of the approval of the National Currency Act on February 25, 1863, which led to the establishment of a system of n ational banks, as being "the beginning of the 'Dual Banking System' //bich for a century has been an important factor in the economic growth and productivity of the United States." The terms of the document provided that President Kennedy would proclaim the period from February 25, 1963, to December 31, 1963, as the Centennial of the /)441 Banking System of the United States. Mr. Hexter commented on the language of the proposed proclamation, 134)ting that the passage of the National Currency Act (National Bank Act) Ilad been intended to facilitate the establishment of a national banking BY8tem in place of a system of State banks. The coexistence of the rilttional and the State banking systems was therefore not a development e°4templated by the Act, and in the circumstances the proposed proclamat104 might be regarded as somewhat misleading. He understood that the thinking hPd been to celebrate the centennial of the national 1344king system but, as indicated by the language of the proposed procla4ti°u, certain developments apparently had occurred that shifted the eqhasis to the existence of the dual banking system. He had received eertain information, incidentally, that tended to raise some question r1i 2/13/63 -7- as to whether the proposed proclamation forwarded by the Budget Bureau had actually originated in the Treasury Department. Governor Robertson expressed the opinion, for reasons stated by him, that it would be prudent for the Board not to become involved in the matter. He suggested that in replying to the Budget Bureau's request the Board state that it had no comment. The tenor of the ensuing discussion was to the effect that, it would seem well for the Board to avoid taking an official Position, it would also seem unfortunate if the Bureau of the Budget was not given the benefit of the information outlined by Mr. Hexter concerning the National Bank Act. At the conclusion of the discussion it was agreed that a rePlY would be sent to the Bureau of the Budget stating that the 13c)ard had no comment. attached as Item No. A copy of the letter sent to the Bureau is 5. It was understood, however, that Mr. Hackley ' l/°111d communicate informally with the General Counsel of the Bureau to eall his attention to the information Mr. Hexter had presented. Call report forms. Mr. Noyes stated that he had been informed ilac)fricially by Mr. Daane, Deputy Under Secretary of the Treasury for Mc)netarY Affairs, that the Comptroller of the Currency had raised with the Secretary of the Treasury the question of proceeding with the plan the Comptroller had wanted to put into operation in the spring of 1962 t0 eliminate, on all but year-end call reports, most of the detailed 2/13/63 -8- information now required on the back of the national bank call report f°1111. It was Mr. Noyes' understanding that both Mr. Daane and Mr. Roosa, Under Secretary of the Treasury for Monetary Affairs, had taken the Position that the availability of such information was important to both monetary and debt management policy. This raised the question whether the Board should reaffirm the Position taken in its letter of May 2, 1962, to Mr. Saxon, a copy of which had been sent to the Secretary of the Treasury. The letter had -,414sested that if the report form for national banks were so condensed as to eliminate the vital information now obtained, the Board might have no alternative but to ask the national banks, pursuant to the Pr°visions of section 11(a) of the Federal Reserve Act, to submit separate reports of condition on the same form as used by State member banks. It was suggested that Chairman Martin might want to discuss the matter informally with the Secretary of the Treasury. Chairman Martin inquired whether any member of the Board disagreed with the position expressed previously, and Governor Mitchell responded that he believed, for reasons that he outlined, that the data °btained from the reverse side of the call report form could be better Obtained by other means. At his request Messrs. Noyes and Holland described steps that were under consideration looking toward a revamping c't the collection of banking statistics. A sampling technique was lavolved, in which was inherent the problem of persuading a relatively 2/13/63 -9- small number of banks to take on a greater reporting burden than other banks in the interest of lessening the reporting burden on the banking sYstem as a whole. Another problem was the existence of divergent view's within the System, which made it difficult to push concertedly for early effectuation of a revised reporting system. Therefore, if the Comptroller of the Currency should persist in his plan, there might he a break in the continuity of banking statistics that were now clerived from the call reports. In further discussion, Governor Robertson asked if information 14as needed that was not now being obtained from the call reports. Mr* Noyes having indicated that the coverage of the call report was reasonably satisfactory, Governor Robertson questioned the advisability of giving up the information now being obtained until a different l'ePorting system could be put into effect. Governor Mitchell suggested that if the Comptroller could be Prevailed upon to defer putting his plan into effect, that would be helpful in holding the place until the Federal Reserve could work out and announce a revised reporting program, the effect of which would be to ease the total reporting burden on the banking system. Chairman Martin commented to the effect that he thought the Boa-A, s basic position was clear on the record. The Board felt that the Information obtained from the call reports should continue to be "ailable, either through that procedure or in some other way. The 2/13/63 -10- effect of the report at this meeting had been to alert the Board to 4 Possible development that might or might not occur. It suggested, however, that the problem should be borne in mind and work should be Continued on the formulation of an alternative reporting program along the lines described by Messrs. Noyes and Holland. The meeting then adjourned. Secretary's Note: On February 12, 1963, Governor Shepardson approved on behalf of the Board the following items: Letter to Mr. George L. Stevens confirming arrangements for him conduct a 24-hour course in reading improvement for members of the °111'd'5 staff as an activity of the Employee Training and Development ! V:ogram, with the understanding that the Board would pay him a fee of T'f0 for each participant at the completion of the course. to , Memorandum from Mr. Landry, Assistant to the Secretary, recommending calat a luncheon be included in the program to be arranged for a group ' 4°11sisting of approximately 20 insurance investment officers that was 'c) visit the Board on April 18, 1963. Secretary ) 545 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 1 2/13/63 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 13, 1963. 80ard of Directors, United California Bank, 48 Angeles; California. Gentl emen: The Board of Governors of the Federal Reserve System approve s the establishment of a branch in the vicinity of Huntington Bea on Beach, Boulevard between Edinger and Warner Avenues, Huntingt is branch the provided Bank, es,'fornia, by United California Lab'.ished within one year from the date of this letter. been In recent years and particularly during 1962 there has perwith n, positio capital c°nsid bank's cellt erable deterioration in the age increases in deposits and loans having far exceeded comparable feels that capital srrreases in capital funds. The Board of Governors lower than ably consider now is Bank ia ,1cture of United Californ (601 — trable. L. King, The letter of January 22, 1963 from Mr. Frank Chair the Federal of t Res man of your Board, to Mr. Galvin, Vice Presiden being made was thaerve Bank of San Francisco, indicated that a study of United ents requirem 14ould take into consideration the capital Calif urges s Governor of th,!!°tIlia Bank over the long range. The Board possible as promptly ancl i. the study now being made be completed as ' of the bank's capital poe4 that plans for substantial strengthening tion be expedited. ' Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. (The , Board also had approved 4 -Letter to the Reserve Bank stated that the sh the branch; month extension of the period allowed to establi Etla e prescribed procedur the ed, request 14 ,that if an extension should be ''he Board's letter of November 9, 1962 (S-1846), should be followed.) Item No. 2 2/13/63 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 13, 1963 Charles Ford, 45 North Fullerton Avenue, Mo ntclair, New Jersey. Dear Mr. Ford: This refers to your telegram of February 9, 1963, in which r.°11 requested the Board to reconsider its Order and Statement approving 1 e Merger of Bank of Bogota, Bogota, New Jersey, into The Hackensack 2 ; 'rust Company, Hackensack, New Jersey, dated January 30, 1963. i As you were advised in the Board's letter of October 16, 1962, Ponding to your letter of October 13 and its enclosure opposing the rrger and requesting to be informed when the Board scheduled a public thin the discretion of the ii aring on the merger application, it is within ! eiusard whether a public hearing or other form of presentation of views ,r11 be held in connection with an application for the Board's approval the Bank Merger Act of 1960 (U.S.C., Title 12, Sec. 1828(c)). The 'Eetute itself makes no provision for hearings. res your The Board's reply to you of October 16 also advised that in Board the by n attentio ate appropri 111 :1 ,sion would be given ,1_Isidering the application and in determining whether to conduct a connection with the application. Thelic hearing or oral presentation in your letter and its enclosure to ation consider Board gave careful 'ore determining not to conduct a public hearing or oral presentation d in deciding whether to approve or disapprove the application. 4 W X some of the In requesting reconsideration, you referred to understood be should It „ers mentioned in the Board's Statement. that which Congress factors all the the statute requires the Board to weigh a judgment, reach to and forth as properly bearing upon a decision, merger the not or whether to er balancing all of these factors, as in the public interest. P7-17 Mr. Charles Ford -2- Under section 262.2(f)(6) of the Board's Rules of Procedure: "After action by the Board on an application, the Board will not grant any request for reconsideration of its action, unless the request presents relevant facts that, for good cause shown, were not previously presented to the Board, or unless it otherwise appears to the Board that reconsideration would be appropriate." (12 CFR 262.2(f)(6)) Upon consideration of your telegram, the Board has concluded thai-- the matters cited therein do not constitute "good cause shown" for !ranting reconsideration, nor does it otherwise appear to the Board PPropriate to re-open the decision in this matter. Accordingly, the °ard denies, your request for reconsideration. ' Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Item No.3 2/13/63 BOARO OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE CHAIRMAN February 13, 1963 The Honorable A. Willis Robertson, Chairman, Committee on Banking and Currency, United States Senate, Washington 25, D. C. Dear Mr. Chairman: In accordance with the practice followed for the past several years, there are enclosed copies of thri reports made by the firm of public accountants that audited the accounts of the Board of Governors of the Federal Reserve System for the year ended December 31, 1962. These include (1) Financial Statements and Accountants' Opinion and (2) Report on Scope of Examination of Financial Statements. Sinceraly yours, (Signed) Wm. MtC. Martin, Jr. McC. Martin, Jr. -nclosures r-49 Item No. 4 2/13/63 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE CHAIRMAN February 13, 1963 The Hondrable Wright Patman, Chairman, Committee on Banking and Currency, House of Representatives, Washington 25, D. C. Dear Mr, Chairman: In accordance with the practice followed for the past several years, there are enclosed copies of the reports made by tho firm of public accountants that audited the accounts of the Board of Governors of the Federal Reserve System for the year ended December 31, 1962. These include (1) Financial Statements and Accountants' Opinion and (2) Report on Scope of Examination of Financial Statements. Sincerely yours, (Signed) Wm. McC. Martin, Jr. Wm. McC. Martin, Jr. Enclosures Item No. 5 2/13/63 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 13, 1963 4r. Arthur B. Focke, General Counsel, I,14reau of the Budget, '4ee'lltive Office of the President, W4s1iingt0n 25, D. C. 1--)ear Mr. Focke: This is in response to your letter of February 11, 1963, . which was attached a copy of a proposed Executive proclamation atitled "CenteDnial of the Equal Banking System", which was prepared 0 ;the Treasury Department and referred to the Director of the Bureau 1, the Budget in accordance with the provisions of Executive Order "°. 11030 of June 19, 1962. to Z this The Board of Governors has no cormnente to offer regarding atter. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary.
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