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Minutes for February 20, 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
fili5
Minutes of the Board of Governors of the Federal Reserve
SYstem on Thursday, February 20, 1964.
The Board met in the Board
4orrt at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Mills
Robertson
Shepardson
Daane
Sherman, Secretary
Kenyon, Assistant Secretary
Broida, Assistant Secretary
Young, Adviser to the Board and Director,
Division of International Finance
Mr. Noyes, Adviser to the Board
Mr. Fauver, Assistant Co the Board
Mr. Brill, Director, Division of Research and
Statistics
Mr. Holland, Associate Director, Division of
Research and Statistics
Mr. Koch, Associate Director, Division of Research
and Statistics
Mr. Partee, Adviser, Division of Research and
Statistics
Mr. Furth, Adviser, Division of International
Finance
Mr. Hersey, Adviser, Division of International
Finance
Mr. Katz, Associate Adviser, Division of
International Finance
Mr. Mattras, General Assistant, Office of the
Secretary
Mr. Eckert, Chief, Banking Section, Division of
Research and Statistics
Mr. Bernard, Economist, Division of Research and
Statistics
Mr. Gemmill, Economist, Division of International
Mr.
Mr.
Mr.
Mr.
Finance
Mr. Baker, Economist, Division of International
Finance
1211U
1.
market review.
Mr. Bernard reported on developments in
the,
`'°vernment securities market, after which Mr. Holland discussed
606
-2-
2/20/64
bank reserves and the money supply and reviewed recent System open
market operations.
Mr. Gemmill then reported on developments in the
fc)reign exchange market.
All members of the staff then withdrew except Messrs. Sherman,
KellYon, Broida, Young, Noyes, Brill, Furth, and Mattras, and the
f°11awing members of the staff entered the room:
Mr.
Mr.
Mr.
Mr„
Mr.
Mr.
Mr.
Molony, Assistant to the Board
Solomon, Director, Division of Examinations
Johnson, Director, Division of Personnel Administration
Hexter, Assistant General Counsel
Shay, Assistant General Counsel
Goodman, Assistant Director, Division of Examinations
McClintock, Supervisory Review Examiner, Division of
Examinations
Circulated or distributed items.
The following items, copies
Ofwhich are attached to these minutes under the respective item
4411thers indicated, were approved unanimously:
Item No.
LQtter to Security Bank, Lincoln Park, Michigan,
aP
establish a
provin
branch g an extension of time to
in the vicinity of Dix Road and Old
Godd ard
Road.
Letter
to the Federal Reserve Bank of Philadelphia
app
2
the payment of salary to Dudley G. Luckett
an
officer
of the Bank with the title of Economist
at a
specified rate.
A
re
lication by International Banking Corporation (Item No. 3).
had been distributed a memorandum from the Division of Examinations
dat
ed F
ebruary 18, 1964, regarding an application by International
tays,
g Corporation, New York, New York, an agreement corporation, for
607
-3-
2/20/64
Permission to purchase approximately 10 per cent of the shares of
tame° de Financiacion Industrial, Madrid, Spain.
A draft of letter
granting the Board's consent was attached.
Governor Mills expressed the view that the application seemed
to merit approval on the basis that such action would be consistent
with the steps taken recently by the Board.
He noted, however, that
Ilanco stock would be held by a group of Western European banks and
that there had been similar situations of this kind in other cases
coming before the Board.
This could develop at some point into
mnancial cartelization of a kind that would be suspect and subject
to investigation by the Department of Justice if it occurred in the
ted States.
Further, it was questionable whether the shareholders
/17c/uld be able to place national interest above the profit objective.
C°17ernor Mills therefore felt that the Board should be alert to the
4'etivities of the foreign financial institutions in which Edge Act
441 agreement corporations had invested along with foreign banks,
ttL a
view to trying to reach a judgment as to whether such particiPltions were in the public interest so far as the United States was
e°11Leerned.
Mr. Goodman commented that since the revised Regulation K
-uittted a range of investments to be made without prior Board
a4to 1
-va.t, this imposed a particular responsibility from the examining
atbd
su pervisory standpoint. The Division of Examinations recognized
this
responsibility and would be endeavoring to meet it.
608
2/20/64
-4The Board then approved unanimously the proposed letter to
A copy is attached to these
International Banking Corporation.
minutes as Item No. 3.
Messrs. Solomon, Shay, Goodman, and McClintock then withdrew
Irom the meeting.
Special Manager's report.
There had been distributed a report
°4 foreign currency operations in 1963 by the Special Manager of the
81/18tem Open Market Account, proposed for inclusion in the Board's
441141 Report for 1963.
During discussion a number of editorial changes were suggested.
Was also suggested that a check be made with the Special Manager to
Inake sure that adequate clearance had been, or would be, obtained from
the
foreign
Department of the Treasury since the report covered joint
Currency operations of the System and the Treasury.
In this connection,
14estion was raised whether the report needed to deal as extensively
48 it did with Treasury operations.
It was pointed out the report
411°41d not obscure the fact that the operations of the System and the
leasurY in the foreign currency area were closely interwoven; however,
there were some expressions to the effect that consideration might be
i'vem to the rephrasing of certain passages and that in any event
.14.11 Treasury clearance should be obtained.
It was then agreed that the report would be edited along the
suggested and that any further comments of members of the Board
2/20/64
-5-
would be transmitted to Mr. Molony for consideration in preparing the
I'ePort in final form for inclusion in the Annual Report.
Messrs. Young, Noyes, and Furth then withdrew from the meeting.
Review of Federal Reserve policy.
At the meeting on February 12,
1614, Governors Mitchell and Daane were asked, in regard to the possibility
of including in the Board's 50th Annual Report a summary of System policy
fc'r the period 1949 to 1963, to review a revised draft of manuscript.
Governor Daane reported that he and Governor Mitchell had
r
Vie ed the revised draft and, while the editing had improved the
P%entation, they questioned whether the article would be appropriate
fctl. inclusion in the Annual Report.
Wa
It was felt that the Annual Report
lready rather long; beyond that, Governor Mitchell had observed
thaLt any two people could review the 15-year period in question and
e different interpretations of what the System had done, and why.
The
Presentation of a monolithic view could be subject to criticism
8laic
e System policy was reached by the process of compromise.
Governor Daane then stated that he had reached the same conl an as Governor Mitchell regarding the use of the article in the
'
141
Report, but for somewhat different reasons.
He felt that an
arti
cle Of this scope deserved review by a lot of people in the
Sy
stem
si.nce it was to interpret System policy for the period involved.
It
Isi°uld therefore seem inadvisable to attempt to include it in the
41%1 Report.
The material might preferably be used in a Bulletin
4qiele or be issued as a separate publication.
2/20/64
-6Mr. Molony commented that the essential question appeared to
be Whether the Federal Reserve System could in fact tell its own story
°fIghat it did and the reasons for its decisions.
A 15-year review
'af Postwar activity appeared to him appropriate in principle for
illelusion in the 50th Annual Report.
The System had not published
such a review, but other parties had given their own versions.
It
l'as thought that Mr. Hersey had approached the task in a judicious
444 competent manner.
However, there remained the issue as to
*lether any single interpretation of the rationale for the System's
MicY actions would be generally acceptable.
Chairman Martin stated that in his view there was need for
"fective exposition of the System's operations.
As a practical
matter, it was difficult to obtain agreement within the System as
to „
'"e reasons for past policies, but some exposition was desirable.
110/,k_
"el', in view of the problems that had been mentioned, including
the Problem of timing, he would not press to include the 15-year
elliew in the Annual Report for 1963.
In further discussion, there were expressions by Board
ti1ber
that it should be possible to prepare a review of System
P°14eY1 as decided upon, irrespective of the difficulties involved
14 the variety of views entering into the decision-making process.
It ,
1
however, that the 15-year review should be omitted
-48
frotl
the 50th Annual Report and that the manuscript should be sent
ap.:224.,
(;21
2/20/64
-7-
to the Board members for review with the thought of its possible
adaptation for use in the Federal Reserve Bulletin or for other
PurPoses.
The general problem of how to present the story of System
P°11-cY to the public should also be studied further.
The meeting then adjourned.
Secretary's Notes: A letter was sent today
to International Banking Corporation, New
York, New York, acknowledging receipt of
advice that The Bank of Monrovia, Monrovia,
Liberia, intended to establish a branch in
Harbel, Liberia, such branch to replace its
Harbel agency.
Governor Shepardson today approved on behalf
of the Board the following items:
Letter to the Federal Reserve Bank of New York (attached Item
L..2) approving the appointment of Gerald M. Malovany as assistant
•,aminer.
Memorandum from the Division of Examinations recommending
that
be the position of Assistant Director formerly held by Henry Benner
abolished, and stating that the position of Secretary to Mr. Benner
p;18:1 therefore also abolished, effective as of the close of business
Nary 15, 1964.
Governor Shepardson today noted on behalf
of the Board a memorandum from the Division
of Examinations advising that Esther Severud,
Secretary (to Mr. Benner) in that Division,
had made application for discontinued service
retirement, effective as of the close of
business February 15, 1964.
Secretary
61°4
Item No. 1
2/2064
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 20, 1964
Board of Directors,
Security Bank,
Lincoln Park, Michigan.
Gentlemen:
The Board of Governors of the Federal Reserve System
extends to June I, 1964, the time within which Security Bank
may establish an in-town branch in the vicinity of the intersection of Dix Road and Old Goddard Road.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
61
Item No. 2
BOARD OF GOVERNORS
.
.....
,11
2/20/64
OF THE
OVG0p.
•.
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 20, 1964.
gATREEELLL(E1)
Mr. Karl R. Bopp, President,
Federal Reserve Bank of Philadelphia,
Philadelphia, Pennsylvania. 19101.
Dear Mr. Bopp:
The Board of Governors approves the payment of
salary to Mr. Dudley G. Luckett as an officer of the Federal
Reserve Bank of Philadelphia with the title of Economist, at
the rate of $15,500 per annum from the time of entrance on
duty through December 31, 1964, if so fixed by your Board
of Directors.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Gj
Item No.
BOARD OF GOVERNORS
3
2/20/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
•
TO THE BOARD
February 20, 1964.
llternational Banking Corporation,
399 Park Avenue,
New York 22, New York.
Gentlemen:
In accordance with your request and on the basis
°t the information furnished in your letters of January 24
rIcl February 11, 1964, transmitted through the Federal
'eserve Bank of New York, the Board of Governors grants
e°48ent for International Banking Corporation ("IBC") to
Purchase and hold 120,001 shares, par value Pesetas 500 each,
t Banco de Financiacion Industrial (INDUBAN), Madrid, Spain,
:
t a cost not to exceed approximately US$1,010,000, provided
tStIch shares are acquired within one year from the date of
,
ruts letter. The Board's consent is given pursuant to the
lielquirement therefor in the outstanding agreement between
C and the Board of Governors under the provisions of
"ection 25 of the Federal Reserve Act.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
615
Item No.
BOARD OF GOVERNORS
4
2/2064
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
February 201 1964
Howard D. Crosse, Vice President,
Pederal Reserve Bank of New York,
Ilew York, New York 10045.
Ilsear Mr. Crosse:
st contained in Mr. Bilby's
In accordance with the reque
approves the appointment of
letter of February 17, 1964, the Board
for the Federal Reserve
?erald M. Malovany as an assistant examiner
date of the appointment.
tive
effec
J3ank of New York. Please advise the
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
@FedFRASER