Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, February 20, 1963, Volume 50, Part 2

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Minutes for February 20, 1963

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. King
Gov. Mitchell

Minutes of the Board of Governors of the Federal Reserve
System on Wednesday, February 20, 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
Cardon, Legislative Counsel
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. Sammons, Adviser, Division of International
Finance
Mr. Conkling, Assistant Director, Division
of Bank Operations
Mr. Daniels, Assistant Director, Division
of Bank Operations
Mr. Kiley, Assistant Director, Division
of Bank Operations
Mr. Leavitt, Assistant Director, Division
of Examinations
Mrs. Semia, Technical Assistant, Office of
the Secretary
Mr. Young, Senior Attorney, Legal Division
Mr. Fawley, Economist, Division of Research
and Statistics

Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Discount rates.

The establishment without change by the

Federal Reserve Banks of Boston and Atlanta on February 18, 1963, of

the rates on discounts and advances in their existing schedules was
aPproved unanimously, with the understanding that appropriate advice
vould be sent to those Banks.

-2-

2/2063

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 New York
aPproving attendance by Martin Barrett at the
Eleventh Technical Training Program of the
Center for Latin American Monetary Studies.

1

Letter to the Federal Reserve Bank of Richmond
waiving the assessment of penalties incurred by
Wachovia Bank and Trust Company, Winston-Salem,
North Carolina, for deficiencies in required
reserves.

2

Telegram to the Federal Reserve Bank of Atlanta
interposing no objection to rental, with purchase
Option, of an IBM 1420 bank transit system.

3

Letter to The Sumitomo Bank of California, San
Francisco, California, approving the establishment
Of a branch in Gardena.

14.

Letter to Wells Fargo Bank, San Francisco,
California, approving the establishment of a
branch in Quincy.

5

Letter to Wells Fargo Bank, San Francisco,
California, approving the establishment of a
branch in Sunnyvale.

6

Letter to the Chairman of the Senate Banking and
Currency Committee reporting on S. 750, a bill
To assist in the promotion of economic stabilization by requiring the disclosure of finance
of credit."
charges in connection with extensions

7

and Pawley then
Messrs. Sammons, Conkling, Kiley, Young,
Withdrew.
Report on competitive factors (Charlotte-Greensboro,
North Carolina.

There had been distributed a draft of report to

r4
-3-

2/20/63

the Comptroller of the Currency on the competitive factors involved
in the proposed merger of Bank of Greensboro, Greensboro, North
a, Charlotte,
Carolina, into First Union National Bank of North Carolin
North Carolina.

The conclusion of the draft report was in adverse

could
terms, and included a sentence observing that First Union
shment of a
alternatively enter the Greensboro area through establi
de novo branch.
Governor Shepardson questioned whether the Board should
Include the aforementioned sentence.

It was his personal feeling,

In retrospect, that it would have been preferable not to cite the
the basis for the
alternative possibility of de novo branching as part of
Chemical
Board's decisions on the Chase Manhattan-Hempstead Bank and
Board
Bank-Long Island Trust Company mergers (denied by orders of the
dated April 30, 1962).

Subsequently, there had been a great many de

larly national
novo branches established by New York City banks, particu
led to controversy and
banks, in the surrounding counties; this had
was excessive.
Charges that the number of banking offices
Governor Robertson expressed a preference for retaining the
ing that he had no strong feeling.
sentence in question, although indicat
In his view, the fact that de novo branching may have been abused in
ing de novo branches
some instances did not make the policy of advocat
generally inappropriate.

In the case under discussion, the establishment

te bank to come into Greensboro
of a de novo branch would allow the Charlot
independent bank.
'without eliminating an established

2/20/63
After discussion in the light of the foregoing comments, several
changes in the wording of the conclusion of the report were agreed upon,
following which the report was approved unanimously for transmission to
the Comptroller of the Currency.

The conclusion of the report, as

approved, read as follows:
A merger of First Union National Bank of North
Carolina, Charlotte, North Carolina, and Bank of
Greensboro, Greensboro, North Carolina, would not
significantly alter First Union's relative position
in the State nor would it adversely affect the other
three banks then operating in Greensboro, as they
are the first, second, and fourth largest banks in
the State. It would, however, eliminate the only
remaining independent bank in Greensboro, and would
further concentration of banking resources in North
Carolina.
Expenses of Federal Reserve Issue and Redemption Division
(Item No.

8). There had been distributed a memorandum dated

ns attaching a reply
February 15, 1963, from the Division of Bank Operatio
from the Administrative Assistant to the Comptroller of the Currency
ion about
to the Board's letter of January 14, 1963, requesting informat
a new item for "Management and Administrative Services" that had been
Issue and
included in the estimated expenses of the Federal Reserve
Redemption Division for 1963.

Also attached to the memorandum were

of which would note the reasons
alternative drafts of response, the first
enclose a check in payment.
that had been given for the charge and

The

question as to the appropriateness
Other draft was in terms of raising a
Of the basis on which the charge had been made and requesting that the
a further review of the
Office of the Comptroller of the Currency make
matter.

-5-

2/20/63

In commenting on the alternative drafts of letter, Mr.
Farrell reviewed circumstances that led the Division of Bank Operations
to feel that the Board might have some reason to question the manner
in which the charge had been calculated.

However, he doubted that the

Board could successfully contest the item of expense.

Paragraph 11 of

section 16 of the Federal Reserve Act, which provided for payment by
the Federal Reserve Banks of all expenses incident to the issue and
retirement of Federal Reserve notes, was in such broad terms that it
seemed unlikely that the Board's view could prevail over that of the
Comptroller of the Currency as to the method of computation of overhead
incurred by his Office in connection with the operations of the Federal
Reserve Issue and Redemption Division.
After discussion, during which Mr. Hackley agreed with the
view Mr. Farrell had expressed, the briefer form of response to the
Office of the Comptroller of the Currency (which would raise no further
question about the expense item) was approved unanimously.

A copy of

the letter is attached as Item No. 8.
Proposed proclamation.

There had been distributed copies of

a letter from the Bureau of the Budget dated February 18, 1963, referring
to the Bureau's letter of February 11 and the Board's reply of February 13
regarding a proposed executive proclamation entitled "Centennial of
the Dual Banking System."

The Bureau of the Budget indicated that,

although its first letter had stated that the draft of proclamation had
been prepared in the Treasury Department, it had been learned that such

SI
2/20/63

-6-

was not the case.

The second letter from the Bureau enclosed a copy

Of a revised draft of proclamation prepared from a draft subsequently
submitted by the Treasury Department.

The Bureau asked that it be

informed by telephone not later than February 20 as to whether the Board
saw any objection to the second draft of proclamation.
During discussion it was Observed that the second draft of
Proclamation eliminated fairly well most of the questions that had
been raised in regard to the first one.

However, Mr. Noyes stated that

he had had a telephone call from the Council of Economic Advisers
indicating that there continued to be some concern over the reference
to the "dual banking system' in the proclamation.
At the conclusion of the discussion Mr. Hackley was authorized
to inform the Bureau of the Budget that the Board had no objection to
the proposed proclamation, although there might be some question about
the reference to the "centennial of the dual banking system" rather than
to the "centennial of the national banking system."
All members of the staff then withdrew and the Board went into
executive session, following which the meeting adjourned.

(Reference

iS made in the minutes of February 18, 1963, to advice received by the
Secretary from the Chairman concerning an action taken by the Board
during the executive session.)
Secretary's Notes: On February 19, 1963,
Governor Shepardson approved on behalf
of the Board the following items:

2/20/63

-7-

Memorandum from the Division of Examinations dated February 19,
1963, recommending that Dr. Felix Kaufman, Partner, Lybrand, Ross Bros.
& Montgomery of New York City, be invited to discuss the use of
electronic data processing in banks at the Conference of Representatives
Of Bank Examination Departments of Federal Reserve Banks to be held
in Washington on March 11 and 12, 1963, with the understanding that his
transportation to and from New York, hotel, meals, and other incidental
expenses would be paid by the Board and that he would be invited to
attend the dinner to be given by the Board on the evening of March 11.
Memoranda from appropriate individuals concerned recommending
the following actions relating to the Board's staff:
Appointment
Phyllis B. Mulcahy as Assistant Legal File Clerk, Legal Division,
With basic annual salary at the rate of $4,110, effective the date
Of entrance upon duty.
Salary increase
Ted Edward Garner, Assistant Federal Reserve Examiner, Division
Of Examinations, from $5,205 to $5,725 per annum, effective March 3, 1963.
Acceptance of resignation
Alfred J. Holston, Jr., Clerk, Division of Administrative Services,
effective at the close of business February 25, 1963.
Outside activity
Robert L. Sammons, Adviser, Division of International Finance,
to do certain bibliography work for the Pan Amarican Union without
compensation.
Governor Shepardson today approved
on behalf of the Board the following
items:
Memorandum from the Division of Bank Operations recommending
acceptance of the resignation of Thomas G. Young, Analyst in that
Division, effective at the close of business March 1, 1963.

2/20/63

-8-

Letter to the Federal Reserve Bank of Atlanta (attached Item No. 9)
approving the designation of Harry C. Schiering as special assistant
examiner.

BOARD OF GOVERNORS

Item No. 1
2/20/63

OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESVONDENCE
TO THE BOARD

February 20, 1963

Mr. William F. Treiber,
First Vice President,
Federal Reserve Bank of New York,
New York 45, New York.
Dear Mr. Treiber:
of December 28,
This-is in reply to your letter
pate in the
to
partici
Barrett
Martin
1962, nominating Mr.
for Latin
the
Center
of
m
Progra
g
Trainin
Eleventh Technical
from
City
in
Mexico
held
be
to
s,
American Monetary Studie
1963.
April 26 to August 16,
pation
The Board has approved Mr. Barrett's partici
tion
for
Mr.
formal
applica
the
of
copy
in this Program. A
it
ted,
been
has
comple
it
after
and
Barrett is enclosed,
your Bank to the Center.
should be forwarded directly by
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Enclosure.

BOARD OF GOVERNORS

Item No. 2
2/20/63

OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

February 20, 1963

Mr. Aubrey N. Heflin,
First Vice President,
Federal Reserve Bank of Richmond,
Richmond 13, Virginia.
Dear Mr. Heflin:
This refers to your letter of February 1 regarding the
Penalties of $109.25 and $193.46 incurred by Wachovia Bank and
Trust Company, Winston-Salem, North Carolina, on deficiencies in
its required reserves for the computation periods ended November 28
and December 12, 1962.
It is noted that the deficiencies resulted from a simple
clerical error in the posting of the books by a new clerk at the
bank's Raleigh office, which was discovered too late for the bank
to take corrective action to avoid the deficiencies, and that the
bank has a good record in maintaining its required reserves.
In the circumstances, the Board authorizes your Bank to
*waive the assessments of the penalties for the periods ended
November 28 and December 121 1962.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.

Item No. 3

TELEGRAM
LEASED WIRE SERVICE

2/20/64

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON

February 20, 1963

- Atlanta

Your February 1, 1963 letter indicates intention to
Itract

or rental of IBM 1420 Bank Transit 5yst.em to be delivered

during last quarter of this year unless Board has objections. In
light of information submitted with urlet and subsequent telegram
Patterson, Board sees no reason to object to this proposal.
notes that proposal will be submitted to Executive Committee
a final commitment is made.
(Signed)
ShERMAN

ritt Sherman

Item No.

BOARD OF GOVERNORS

4

2/20/63

OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

February 20, 1963

Board of Directors,
The Sumitomo Bank of California,
'an Francisco', California.
Gentlemen:
The Board of Governors of the Federal Reserve System
Bank of
approves the establishment of a branch by The Sumitomo
California at 1271 West Redondo Beach Boulevard, Gardena,
California, provided the branch is established within one year
fl'om the date of this letter.
during the
The substantial deposit growth of your bank
e in
increas
ionate
proport
a
by
nied
Past year has not been accompa
capital
total
that
anding,
underst
Board's
capital funds. It is the
000 by June 30, 1963;
Alnds will be increased by not less than $1,500,
are such that serious
however, the capital needs of this bank
new
consideration should be given to a considerably larger sale of
nia
of
Califor
o Bank
stock in order that future growth of The Sumitom
14111 be on a sound basis.
Very truly yours,
(Signed) Elizabeth L. Carmichael

Elizabeth L. Carmichael,
Assistant Secretary.
(the letter to the Reserve Bank stated that the Board also had
"Proved a six-month extension of the period allowed to establish
the branch; and that if an extension should be requested, the
1)l'ocedure prescribed in the Board's letter of November 9, 1962
;
‘2-1846), should be followed.)

F

Item No.

BOARD OF GOVERNORS

5

2/20/63

OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

February 20, 1963

Board of Directors,
Wells Fargo Bank,
San Francisco, California.
Gentlemen:
The Board of Governors of the Federal
Reserve System approves the establishment of a
branch by Wells Fargo Bank in the downtown business
district of Quincy, California, provided the branch
is established within one year 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.)

BOARD OF GOVERNORS

Item No.

6

2/20/63

OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

February 20, 1963

Board of Directors,
Wells Fargo Bank,
San Francisco, California.
Gentlemen:
The Board of Governors of the Federal
lishment of a
Reserve System approves the estab
Westmoor
branch by Wells Fargo Bank in the
the interShopping Center in the vicinity of
Sunnyvale,
es,
section of Fremont and Mary Avenu
ished
establ
is
California, provided the branch
r.
lette
this
within one year from the date of
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.)

1 ;;
BOARD OF GOVERNORS
OF THE

A

Fig
4

FEDERAL RESERVE SYSTEM

Item No. 7

2/20/63

WASHINGTON

0
,t0

OFFICE OF THE CHAIRMAN

February 20, 1963

N Honorable A. Willis Robertson,
Chairman
18p4ate Banking and Currency Committee,
"48hingt0n 25, D. C.

— Mr. Chairman:
a
This is in reply to your request of February 8, 1963, for
stabili
c
of
economi
on
promoti
ePort
"To assist in the
Zati on S. 750, a bill
with
ion
in
connect
charges
finance
(1,, on by requiring the disclosure of
4""erlsions of credit."
of
The bill would require any person engaged in the extension
the
d,
to
prior
extende
is
credit
cr6dit
to furnish to each person to whom
,
cw
to
forth,
setting
nt
stateme
.t1 1.1/1mation of the transaction, a written
nr,, extent applicable and in accordance with rules and regulations to be
u
Board of Governors of the Federal Reserve System, among
ot eeribed by the
her items, (1) the finance charge in dollars and cents, and (2) the
d
Pereentage
that the finance charge bears to the total amount to be finance
balance
unpaid
?'ressed as a simple annual rate on the average outstanding
-L the obligation.
requiring crediThe Board is in full accord with the purpose of
that the more
doubt
no
zo disclose their finance charges. There is
prices they are
the
about
have
mation borrowers and credit purchasers
the alternaamong
choose
can
they
ntly
ti?,/142-1g for credit, the more efficie
its earlier
in
view
same
the
d
expresse
Board
r:ee available to them. The
and 1961,
1960
in
ed
introduc
bills
similar
lyorts on S. 2755 and S. 1740,
."e
pectively•
tor..

believes that
As also stated in its earlier reports, the Board
appropriate
an
te
constitu
not
would
tion
legisla
istration of such
trade disof
for the Federal Reserve System. The regulation
bilities
responsi
14'sure practices would be foreign to the Board's present
credit
through
and
are principally in the field of regulating money
° banking system to meet the varying needs of the economy.
of the bill, the
In connection with the trade practices aspect
1'01 -1
protectim message
consumer
in
nt
his
to -wing statement made by the Preside
'
as the sdecific
ch
"Inasmu
be
noted:
may
the Congress of March 15, 1962,

AL RESERVE SYSTEM
BOARD OF GOVERNORS OF THE FEDER

114 Honorable A. Willis Robertson
gned to correct are
Wit practices which such a bill would be desi
types of misleading
r
othe
with
t„°!elY related to and often combined
is already regulating,
on
issi
Comm
fage practices which the Federal Trade
assigned to the
be
y
orit
auth
l ec°Millend that enforcement of the new
n'
ft
'
dasion."
ier reports, the Board
Accordingly, as stated in its earl
erid
s to disclose their finance
itor
cred
cha7ses the objective of requiring
inappropriate for the Board to
ges, but believes that it would be
-44ualister such a bill.

T

Sincerely yours,
(Signed) WM. MCC. Martin, Jr.
WM. McC. Martin, Jr.

BOARD OF GOVERNORS

Item No.

OF THE

8

2/20/63

FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE

TO THE BOARD

February 20, 1963.

A. J. Faulstich,
Ad minstraved
Assistant to the
Comptroller of the Currency,
Department of the Treasury,
Washington 25, D. C.
Dear Mr. Faulstich:
Thank you for your letter of January 31, 1963, explaining the charge for "Management and Administrative Services" in
the estimated expenses of the Federal Reserve Issue and Redemption
Dtvision.
It is noted that the charge was computed by applying
Re12-1/2 per cent to the total of other expenses of the Federal
is
percentage
this
that
and
Division
serve Issue and Redemption
approximately the same percentage as is used by the Office of
the Treasurer of the United States in computing its cost of
administration applicable to expenses incurred in the redemption
Of Federal Reserve notes by the Currency Redemption Division.
Enclosed is a check for the "Management and Administra
excluded
was
amount
ive Services" expense item of $16,495, which
of the
om the Board's advance payment for estimated expenses
half
first
the
for
Division
rederal Reserve Issue and Redemption
Of 1963.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.

Enclosure

11,

Item Ho.

BOARD OF GOVERNORS

9

2/20/63

OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

February 21, 1963

AIR MAIL.
Mr. J. E. Denmark, Vice President,
Federal Reserve Bank of Atlanta,
Atlanta 3, Georgia.
Dear Mr. Denmark:
In accordance with the request contained in Mr.
Sheffer's letter of February 13, 1963, the Board approves
the designation of Harry C. Schiering as a special assistant
examiner for the Federal Reserve Bank of Atlanta for the
Purpose of participating in examinations of State member banks.
Very truly yours,
(Signed) Elizabeth L. Carmichael

Elizabeth L. Carmichael,
Assistant Secretary.