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Minutes for February 13, 1964 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 eit;7 Minutes of the Board of Governors of the Federal Reserve System on Thursday, February 13, 1964. The Board met in the Board Roo— .1 at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Martin, Chairman Robertson Mitchell Daane Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Circulated item. Sherman, Secretary Kenyon, Assistant Secretary Cardon, Legislative Counsel Fauver, Assistant to the Board Brill, Director, Division of Research and Statistics Solomon, Director, Division of Examinations Hexter, Assistant General Counsel O'Connell, Assistant General Counsel Thompson, Assistant Director, Division of Examinations Mattras, General Assistant, Office of the Secretary Young, Senior Attorney, Legal Division Egertson, Supervisory Review Examiner, Division of Examinations The following item, a copy of which is attached to t, "ese minutes as Item No. 1, was approved unanimously: int r to the Federal Reserve Bank of New York tr n°sing no objection to the proposed foreign 4.el. Program of the Bank for the current year. Itat22..ELof Pacific State Bank. There had been distributed a rciemor andum from the Division of Examinations dated February 5, 1964, -ng a request by Pacific State Bank, Hawthorne, California, for flj8810n, under the provisions of section 24A of the Federal Reserve invest in bank premises an additional amount in excess of the stock of the bank. According to the memorandum, the bank's ge.rterai condition was unsatisfactory, and there had recently been large 468 2/13/64 -2- loan charge-offs. Management was regarded as poor, and the bank's caPital structure was inadequate. On December 30, 1963, representatives Of the Federal Reserve Bank of San Francisco, the California State Banking Department, and the Federal Deposit Insurance Corporation met with the management of the bank. It was reported that the bank was att empting to employ new executive officers and was considering the Sale and leaseback of certain bank premises. off The bank had now charged all losses and one-half of doubtful classifications estimated in the December 1963 examination report and was considering the possibility Of a merger. In addition, the sale of $1 million of capital debentures Was under consideration. On February 12,.1962, the Board had approved an additional investment in bank premises of $562,100 and on June 26, 1963, the Board app roved a further investment of $25,000. As of November 29, 1963, ever, the investment in bank premises totaled approximately $14,500 More than approved by the Board. The subject bank now wished to obtain "°val of the amount spent in excess of previous Board approval and 411 ad ditional amount of $21,000 to purchase a parking lot adjoining the batik, S main office. There was some indication that one of the bank's ectors might purchase the lot and lease it to the bank if approval Of the proposed investment by the bank was not obtained. The Division of Examinations noted that the Board could refuse to a PProve the proposed expenditure on the ground that no additional 4" 2/13/64 -3- investment of this kind was justified in view of the bank's generally unsatisfactory condition. However, the Division recommended, on balance, that no objection be taken to the unauthorized investment of approxinlatelY $14,500, and that approval be given to the investment of an additional $21,000 for the purchase of the parking lot on the ground that the amount involved was not substantial and that there was aPParently a real parking need as far as customer convenience was Concerned. bank, s Acquisition of the lot might also enhance the value of the present property, which it was contemplated would soon be sold by the bank under a leaseback arrangement. Governor Robertson stated that this was a case where the aPP1icant bank was in unsatisfactory condition, with inadequate capital, asset Problems, and other difficulties. It had already made an invest- ment in premises exceeding that approved by the Board and was seeking aPPro val of an additional investment. The various circumstances 411431ved suggested that the bank's directors were not properly carrying Nt their L responsibilities. Moreover, approval of the proposed a4diti°nal investment in a parking lot was not crucial since there was an indication that one of the bank's directors was prepared, if tieessarY, to purchase the lot and lease it to the bank, As a result, G°Vernor Robertson said, he would not approve the current request or tat e action to sanction the excess expenditure already made. This 2113/64 -4- do no harm to the bank but would indicate that the Board was not to go along with the current situation at the bank. After discussion of various aspects of the matter it was agreed, at the suggestion of Chairman Martin, that the Federal Reserve Bank of San Francisco would be advised informally that the Board was disposed to taking a dim view of the request and, in considering the matter flIrther, would appreciate any additional comments from the Reserve Bank in suPPort of its favorable recommendation. Mr. Egertson then withdrew from the meeting. Application of Baystate Corporation. illetil°randUM There had been distributed from the Legal Division and the Division of Examinations dated February 10, 1964, regarding the timing of Board action on an aPplication of Baystate Corporation, Boston, Massachusetts, under the 1144kRolding Company Act. On November 7, 1963, the corporation filed atl a PPlication for Board approval of the acquisition of voting shares Of Me tmack Valley National Bank, Haverhill, Haverhill, Massachusetts. 48 required by Massachusetts law, it had also requested approval of the 4411i8 ition from the Massachusetts Board of Bank Incorporation, and a hearing had been set for February 13, 1964, before the Massachusetts 1/e'ard • The Division of Examinations' memorandum and recommendation on the , PPlication, accompanied by the memorandum from the Federal Reserve ' Of Boston, would be ready for distribution to the Board shortly. 11.0%qev er, the Board might wish to defer action until after the decision r" , 2/13/64 _5.. Of the Massachusetts Board was announced, thus taking advantage of 44 additional information that might be brought out at the State hearing and avoiding the possibility of a prior, but unpublished, approval of the Board of Governors followed by denial by the Massachusetts Board, so that the Board of Governors' decision would be of no practical effect. The gal, and Examinations Divisions recommended that Board consideration Of the application be suspended until after the final decision of the /slassachusetts Board. After discussion, the Board agreed to delay consideration of the application, with the understanding that Baystate Corporation would be 'advised informally that this was the Board's intent. S. 750. t There had been distributed a draft of letter addressed airman Robertson of the Senate Committee on Banking and Currency 14 resPonse to a request for a report on 83 questions regarding S. 750, to assist in the promotion of economic stabilization by requiring 4 bill the disclosure of finance charges in connection with extensions of credit. The draft reply would advise that the Board's staff had discussed the 1.411e4t with the staff of the Federal Trade Commission, which had also beerl r equested to submit answers to the same questions and was preparing respon g and that it might therefore be more appropriate for the tear ' ( h°t to provide separate answers to the questions. Mr. Cardon informed the Board that he had just received advice that Chairman Robertson would like to have answers from the Board with 2113/64 -6- gard to the 83 questions. Accordingly, it was understood that the staff would draft answers to the questions for the Board's consideration. Visit of State Bank Supervisors. The Board authorized extending to the officers of the National Association of Supervisors of State 11411k8 an invitation to visit the Board on April 1, 1964, for luncheon 111/c1 4 conference with available members of the Board. The meeting then adjourned. Secretary's Note: Pursuant to the recommendation contained in a memorandum from the Division of Research and Statistics, Governor Robertson, acting in the absence of Governor Shepardson, today approved on behalf of the Board the appointment of David Michael Duren as Statistical Clerk in that Division, with basic annual salary at the rate of $4,090, effective the date of entrance upon duty. A.. Q., Secretary, Cki 1, 1/Ne- BOARD OF GOVERNORS Item No. 1 2/13/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 13, 1964. Mr. Alfred Hayes, President, Federal Reserve Bank of New York, New York, New York. 10045. Dear Mr. Hayes: The memorandum dated January 16, 1964 outlining the foreign travel program of the Federal Reserve Bank of New York for the current year, which YOU forwarded with your letter of January 17, has been brought to the attention of the Board of Governors. The Board has no objection to the program as outlined in the memorandum and understands that the Proposed trips are subject to change as to country and timing if circumstances make such changes desirable. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary.
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