The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Minutes for
To:
February 16, 1961
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. Szymczak
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
(
k%)
Minutes of the Board of Governors of the Federal Reserve
System on Thursday, February 16, 1961.
Room
The Board met in the Board
at 2:15
P.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Szymczak
Mills
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. Solomon, Director, Division of Examinations
Mr. Hexter, Assistant General Counsel
Mr. Hooff, Assistant General Counsel
Mr. Robinson, Adviser, Division of Research and
Statistics
Mr. Furth, Adviser, Division of International
Finance
Mr. Sammons, Adviser, Division of International
Finance
Mr. Nelson, Assistant Director, Division of
Examinations
Mr. Goodman, Assistant Director, Division of
Examinations
Mr. Leavitt, Supervisory Review Examiner,
Division of Examinations
Mr. Potter, Legal Assistant
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Items circulated to the Board.
The following items, which had
been c
irculated to the members of the Board and copies of which are
attached to these minutes under the respective item numbers indicated,
tel'e a roved unanimously:
Item No.
Letter
to Chemical Bank New York Trust Company, New
1
;
r
6ilt City, approving the establishment of a branch at
6"
68 Ralph Avenue, Borough of Brooklyn.
1
G116
2/16/61
Item No.
Letter to Manufacturers Trust Company, New York City,
aPProving the establishment of a branch at 717 Allerton
Avenue, Borough of the Bronx.
2
Letter to The First National City Bank of New York,
New York City, approving an extension of time to establish
a branch in the City of Colon, Republic of Panama.
3
Letter to White Haven Savings Bank, White Haven, Fennsylvania,
gr
.anting its request for permission to exercise certain
fiduciary powers.
4
Letter to the Comptroller of the Currency recommending
unfavorably with respect to an application to organize a
national bank at Minneapolis, Minnesota.
5
Letter to the Comptroller of the Currency recommending
favorably with respect to an application to organize a
national bank at San Francisco, California, provided
',1"rangements are made for management satisfactory to the
kdomptroller.
6
Application of Bank of America (Item No. 7).
Bank of America,
New York, New York, an Edge corporation, awned shares of Banque
Afrioaine Internationale, Brussels, Belgium, Societe Congolaise de
Banque, Leopoldville, Republic of the Congo, and Banque du Ruanda-Urundi,
Ueumbura, Ruanda-Urundi.
Due to political developments in the Congo,
it had been felt necessary to form a banking corporation in Switzerland
Ilhich would own the shares of the three banks.
Accordingly, legal
l'equirements were being completed for the establishment of such a
'Poration, to be known as United Overseas Bank, with headquarters in
Geneva.
It was the intention to invite the shareholders of the three
batiks to exchange their holdings for shares of United Overseas Bank,
an'cl sank of America proposed in that manner to acquire 20 per cent of
2/16/61
—3...
the shares
of United Overseas Bank.
In addition, it was contemplated
that shares of United Overseas Bank would be held by banks in Belgium,
France, Germany, and Italy, with the Italian shareholdings owned by
anca d t America e d'Italia, Milan, an organization substantial3y owned
by Bank of America.
Bank of America had applied to the Board for
Perinission to accomplish the steps necessary to effectuate its part
in the plan, including the acquisition of shares by the Italian subIn a memorandum which had been distributed to the Board,
the Division of Examinations recommended favorable action, provided
the Board had no objection to part of the investment in United Overseas
Bank being held directly by Bank of America and part being held
indirectly through the Italian subsidiary°
Governor Mills stated that he would concur in the recommendation of the Division of Examinations.
He went on to say, however, that
thie case illustrated the concern he had expressed on previous occasions
with regard to an Edge corporation associating itself in an overseas
lienture with foreign institutions.
In such cases, he noted, there is
a definite exposure to political unsettlement, with the possibility of
ec3neequence5
adverse to the Edge corporation.
In this particular
instance, the purpose of the proposed arrangements was to hide the
crio-;
4-knal identification with Belgian ownership, and beyond that the
tl'aneaction seemed proper and correct from a technical standpoint.
wee
vex', he pointed out, Bank of America, New York, is wholly owned by
446.
of America National Trust and Savings Association, San Francisco,
2/16/61
and Banca dtAmerica e dtItalia is substantially owned by Bank of
America,
New York. Under the current proposal, the Italian banking
subsidiary would hold shares in still another banking corporation.
This suggested how a subsidiary banking corporation of an Edge corporation coaul,,
through investments on its own part, inject the parent
corporation into a variety of activities, with resulting problems of
su
pervision due to the complex financial relationships.
Mr. Goodman commented that the remarks of Governor Mills
l'erlected the reasons underlying the qualified recommendation of the
IDivision of Examinations.
He added that it would have been his prefer-
ellee that the entire investment in United Overseas Bank be made directly
by B
of America. However, when this question was raised with a
l'sPresentative of the
Bank of America organization, the reply was made
that the plan contemplated a multi-national foreign banking investment
4.4d that the
inclusion of some Italian bank was considered advisable.
In the circumstances, the Bank of America interests had been successful
n.
niaking a place for the Italian subsidiary- bank.
In further discussion, reference was made to the question,
l'aissd at times in the past, as to whether foreign banking activities
or the Bank of America organization should not be centered in the Edge
c°11Poration rather than divided between it and the parent national bank
ill San
Francisco.
It was pointed out, however, that in this particular
Itistance, where an investment in shares rather than a branch operation
2/16/61
-5-
was concerned, the investment would of necessity have to be made by
the Edge corporation.
Governor Mills explained that although he recognized the question
raised by a division of foreign banking activities between the Edge
corporation and its parent bank, the concern that he had expressed went
more to the fragmenting of investments by the Edge corporation; that is,
indirect investments of the Edge corporation through intermediate foreign
ins
titutions.
Governor Balderston indicated that he shared the concern expressed
bY Governor Mills regarding the development of the practice of indirect
investments.
Using the present application as an illustration, he
called attention to the supervisory problems that might be involved in
the complex of financial relationships evolving from such investments.
Due to the circumstances of the case now under consideration, he would
favor Board approval of the proposed investments in this instance, but
he felt that the concern of the Board regarding the general problem
sh°111d be expressed to Edge corporations for their guidance in the future.
Mr. Furth reviewed circumstances of the case under consideration
that
At
in his opinion suggested approval of the proposed transactions.
the same time, however, he indicated that he concurred in the views
Pressed by Governors Mills and Balderston regarding the general princiPle of fragmenting of investments.
Governor Mills then suggested that Governor Szymczak be requested
to ,
-.3cloress informally to representatives of the Bank of America organiza-
tio,
L' on some appropriate occasion the concern of the Board in this regard,
610
2/16/61
in order that Bank of America might have this in mind in considering
future proposals.
It having been agreed that the matter would be handled in the
illariner suggested by Governor Mills, unanimous approval was given to the
letter to Bank of America, New York, of which a copy is attached as
Item No. 7.
Messrs. Hexter, Furth, Sammons, Goodman, and Potter then withdrew from the meeting.
Report on H. R. 1770, H. R. 1851, and H. R. 2471 (Item No. 8).
There had been distributed to the Board copies of a draft of letter to
Chairman Dawson of the House Committee on Government Operations, prepared
ill response to requests for comment on bills H. R. 1770, H. R. 1851, and
R. 2471, each of which would provide for retirement of the public debt
by setting aside percentages of budget receipts for that purpose.
The
tirst two bills were virtually identical with H. R. 5203, introduced in
the second session of the 86th Congress, which was reviewed in the Board's
letter of June 8, 1960.
A copy of that letter would be enclosed with the
Current reply.
After certain suggestions had been made with respect to the tone
Qf the proposed letter, unanimous approval was given to a letter in the
form attached as Item No. 8.
Messrs. Noyes and Robinson then withdrew from the meeting.
1...sport on competitive aspects (Canton-Madrid, New York).
There
had been distributed to the Board a draft of report to the Comptroller
6
—7
2/16/61
Of the
Currency on the competitive factors involved in the proposed
illerger of the Madrid Bank, Madrid, New York, with and into The St.
Lawrence County National Bank of Canton, Canton, New York, under the
Charter and title of the latter.
The conclusion read as follows:
The proposed merger would eliminate only a snail
amount of competition between the institutions. While
the merger would enhance the charter bank's area of
competition, it does not appear that banking competition
would be materially affected.
There being no objection, the report was approved unanimously
for transmittal to the Comptroller of the Currency.
The meeting then adjourned.
Secretary's Note: Pursuant to the recommendation contained in a memorandum from the Division
of Research and Statistics, Governor Balderston,
acting in the absence of Governor Shepardson,
today approved on behalf of the Board the appointment of Phyllis J. Featherstone as Statistical
Clerk in that Division, with basic annual salary
at the rate of $3,865, effective the date of
entrance upon duty.
Secretary
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
Item No. 1
2/16/61
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 16, 1961
Board of Directors,
Chemical Bank New York Trust Company,
New York, New York.
Gentlemen:
Pursuant to your request submitted through
the Federal Reserve Bank of New York the Board of
Governors of the Federal Reserve System approves the
estdblishment of a branch by Chemical Bank New York
Trust Company, New York, New York, at 1966-68 Ralph
Avenue, Borough of Brooklyn, New York, New York,
Provided the branch is established within six months
i'rom the date of this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
440Wtotafr!,,;
OF THE
4zti
1!
FEDERAL RESERVE SYSTEM
6;\
5
WASHINGTON 25. D. C.
4
Item No. 2
2/16/61
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
%tLifittroti
****
February 16) 1961
Board of Directors,
Manufacturers Trust Company,
New York, New York.
Gentlemen:
Pursuant to your request submitted through
the Federal Reserve Bank of New York) the Board of
Governors of the Federal Reserve System approves the
establishment of a branch at 717 Allerton Avenue)
12erouth of the Bronx) New York, New York, by lianufac-curers Trust Company, New York, New York, with the
understanding that the operations of the branch will
be limited to the functions of your Personal Loan
Department. This approval is given provided the branch
is established within six months from the date of this
letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael)
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
Item No.
FEDERAL RESERVE SYSTEM
3
2/16/61
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARO
February 161 1961
The First National City Dank cf New York,
55 Wall Street,
New York l5, kew York.
G
entlemen:
In view of the request contained in your letter of
J an
,.;--tlarY 20, 1961, transmitted through the Federal Reserve Bank
New York, and on the basis of the information furnished, the
t'°ard of Governors extends to September 1, 19610 the time withWhich your Bank may establish a branch in the City of Colon,
l eipublic of Panama, at the corner of Front and Ninth Streets,
and close the branch of your Bank located at 1103
osevolt Avenue, Cristobal, Canal Zone, as approved by the
°ard on iarch 17, 1960.
r
The location of the proposed Colon branch may not be
2hanged, after establishment, without the prior approval of
'he Board of Governors.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
613
BOARD OF GOVERNORS
OF THE
Item No. 4
FEDERAL RESERVE SYSTEM
2/16/61
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 16, 1961
Board of Directors,
te Haven Savings Bank,
'White Haven, Pennsylvania.
Gentlemen
:
This refers to your request for permission, under
applicable provisions of your condition of membership numbered
1, to
act in certain fiduciary capacities.
Following consideration of the information submitted,
the Board of Governors of the Federal Reserve System grants
P
aermiesion to the White Haven Savings Bank to act as trustee of
.112d registrar of bond issues of municipal corporations, municvel authorities, and other authorities organized under the
g alls of the Commonwealth of Pennsylvania, with the understand;11g that your bank will not accept fiduciary appointments of
'her kinds without first obtaining the permission of the Board.
i
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
OW
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item NO. 5
2/16/61
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 16, 1961
exptroller of
2Illreasury
the Currency,
Department,
”asilington
25, D. C.
Attention Mr. C. C. Fleming,
Deputy Comptroller of the Currency.
Dear
. Comptroller:
Reference is made to a letter from your office dated
Sept
4
mber 13, 1960, enclosing copies of an application to organize
rearla
c tional bank at Minneapolis, Minnesota, and requesting a
nin1enclation as to whether or not the application should be
evroveci.
the
Information contained in a report of investigation of
(PPlication made by a representative of the Federal Reserve
't
°f the Minneapolis discloses that the proposed capital structure
obtai hank would be adequate and that modest earnings might be
fled after two years of operation. However, the proposed
ip,ement of the bank does not appear satisfactory and it is
a;:lcated that the existing facilities provide adequate banking
40t%
lees for the area. Accordingly the Board of Governors does
thc,'eel Justified in recommending favorable consideration of
aPplication.
BI4W
The Board's Division of Examinations will be glad to
yetir"ee any aspects of the application with representatives of
office if you so desire.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 6
2/16/61
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE E3OARD
February 16, 1961
Dqtroller
of the Currency,
jeasury Department,
qs
hington 25, D. C.
Attention Mr. H. S. Haggard,
" Deputy Comptroller of the Currency.
1)eea' Mr. Comptroller:
Reference is made to a letter from your office dated
Octote
4 _
r 18, 1960, enclosing copies of an application to organize
rencational bank at San Francisco, California, and requesting a
111Plendati0n as to whether or not the application should be
"
r°1red.
A report of investigation of the application made by
B. re,44,Fresentative of the Federal Reserve Bank of San Francisco
be 'ciltes that the proposed capital structure of the bank would
Elttladequate and that modest profitable operations could be
14tled in a reasonable time. While the need for the proposed
Na,18 .somewhat borderline and the added convenience to the
Prc
,e InaY be limited, it appears that the institution would
cer
:
t'de some measure of competition for the existing banks for
arid ain types of business. However, the bank would need competent
Elt tnperienced management to assure successful operation and
e time of investigation satisfactory arrangements for such
% ria'gement had not been made. In the circumstances, the Board of
1411°rs recommends favorable consideration of the application
yol2ded the arrangements are made for management satisfactory to
°ffice.
The Board's Division of Examinations will be glad to
off,'s any aspects of this case with representatives of your
-e) if you so desire.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
G 'LS
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No. 7
2/16/61
ADDRESS OFFICIAL CORRESPONDENCE
TO TI-4E BOARD
February 16, 1961
Mr, Tom B. Coughran,
Executive Vice President,
Bank of America,
41 Broad Street,
New York 15, New York.
Dear Mr. Coughran:
the
In accordance with the requests and on the basis of
and
1960,
27,
r
information furnished in your letters of Decembe
e Bank of
:!allnary 11, 1961, transmitted through the Federal Reserv
to:
New York, the Board of Governors grants its consent
(1) Bank of America to contribute one-third of
organizational capital expense of United Overseas Bank (1tUOW), Geneva, Switzerland, and to
receive capital shares of corresponding value,
amounting to Swiss Francs 166,666 (approximately
US$38,750 equivalent);
(2) Banca d'America e d'Italia ("BAI"), Milan, Italy,
to purchase 10 per cent of outstanding shares
each of -Banque Africaine Internationale, Brussels,
Belgium;
Societe Congolaise de Banque, Leopoldville,
Republic of the Congo; and
Banque du Ruanda4Jrundi, Usumbura, RuandaUrundi
for approximately US$135,000; and
(3)
Bank of America and BAI to exchange shares of
stock of the three banks for shares of UOB
shares.
after its organization, and to hold such
on that Bank of
The Board's consent is granted upon conditi
of UOB, as
stock
of
s
holding
their
of
America and BAI shall dispose
any time
at
should
UOB
that
event
the
in
Promptly as practicable,
61
(
Mr. Tom B. Coughran
-2-
.
.1 1.) engage in issuing, underwriting, selling or distributing securibies in the United States; (2) engage in the general business of
huYing or selling goods, wares, merchandise, or commodities in the
united States or transact any business in the United States except
,uch as is incidental to its international or foreign business; or
.9) conduct its operations in a manner which, in the Judgment of the
board of Governors of the Federal Reserve System, is inconsistent
with Section 25(a) of the Federal Reserve Act or regulations
th
ereunder.
Upon completion of the organization of U0B, it will be
aPPreciated if you will furnish the Board of Governors, (1) copies
Icf the articles of association and by-laws, (2) balance sheet,
!
fld (3) a list of officers and directors. Please advise the Board
11/4j4. Governors, through the Federal Reserve Bank of New York, when
°B is established and opened for business.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
f.
BOARD OF GOVERNORS
OF THE
Item No.
FEDERAL RESERVE SYSTEM
2/16/61
WAS
OFFICE OF THE CHAIRMAN
February 170 1961
The Honorable William L. Dawson,
Chairman,
Committee on Government Operations,
House of Representatives,
Washington 25, D. C.
Dear Mr. Chairman:
This is in response to your letter of January 16,
1961, requesting a review of bills H.R. 1770 and H.R. 1851,
bills that would amend the Budget and Accounting Act, 1921, to
Provide for the retirement of the public debt by setting aside
Specified percentages of budget receipts for that purpose.
These bills are identical in content except for the percentage
rates of debt retirement specified. This is also in response
to your letter of January 19, requesting a review of H.R. 2471.
This bill, though not identical in language with the other two,
Is similar in economic and budgetary logic and the comments below apply to all three bills.
The first two bills are virtually identical with H.R.
5203 which was introduced into the 2nd Session of the 86th
Congress, and which was reviewed in my letter of June 8, 1960.
The comments in that letter, a copy of which is enclosed, would
Seem to be applicable to each of the three proposals regarding
retirement of the public debt on which you have now asked for a
report. The Board has found no reason to change the views that
it expressed at that time, and, accordingly, it still doubts
that the effects of such measures would be sufficiently beneficial to justify their enactment.
Sincerely yours,
(Signed) Wm. MoC. Martin, Jr.
McC. Martin, Jr.
Enclosure.
8
@FedFRASER