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9161 Minutes for February 231 1962 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. Chm. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Coy. King Gov. Mitchell Minutes of the Board of Governors of the Federal Reserve System on Room at 10:00 a.m. Friday, February 23, 1962. The Board met in the Board PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Mills Robertson Shepardson King Sherman, Secretary Kenyon, Assistant Secretary Molony, Assistant to the Board Hackley, General Counsel Solomon, Director, Division of Examinations Sammons, Adviser, Division of International Finance Mr. Goodman, Assistant Director, Division of Examinations Mr. Leavitt, Assistant Director, Division of Examinations Mrs. Semial Technical Assistant, Office of the Secretary Mr. Mr. Mr. Mr. Mr. Mr. Gold loan to Colombia. Mr. Sammons reported that the Federal from Banco de la Reserve Bank of New York had received a request for a term of Republica de Colombia for a gold loan of $15 million six months. Also, while a formal request had not been received, there had been indications that Colombia would request a three-month renewal Of its present $15 million gold loan, payment of which was due March 27, 1962. on gold In this connection, Mr. Sammons referred to the policy loans loans that the Board had adopted on December 6, 1955, under which °a gold would not be made for more than three months unless exceptional circumstances justified a longer maturity. The directors of the New York Reserve Bank had not yet acted on the Colombian request, but -2- 2/23/62 Mr. Sammons had been asked to determine whether or not, if and when the application was presented for approval, the Board would be inclined to consider that exceptional circumstances were present that would Justify granting a loan for six months. Mr. Sammons then reviewed various factors affecting the Colombian economy, among the more important of which were the coming elections, 'which were to take place in May 1962, and various monetary reforms that "ere expected to be made thereafter. He also described measures that were being taken by the International Monetary Fund, Export-Import Bank Of Washington, and New York City banks through which the current financial Position of Colombia would be assisted. Governor Mills commented that if the Board approved the prothe financial sPective gold loan it should do so in awareness that that the management Position of Colombia left much to be desired and Of the country's financial affairs had not been up to the International Monetary Fund's standards or generally accepted central bank practices. In his view, the arguments for approving the loan involved principally Political expediency. As he saw it, the Board was drifting away from that they the policy that had been set for granting gold loans, namely, Should exchange needs ordinarily be for the purpose of meeting seasonal ties requiring short-term financing, or to alleviate exchange difficul nature, the correction of which caused by factors of a clearly temporary could be expected within a short time. With such correction, the loan ) 2/23/62 -3- could be repaid from export earnings or other current proceeds and there would be no necessity for the borrower to sell gold in order to make payment. In reply to a question about the attitude of the New York Bank toward the Colombian loan application, Mr. Sammons indicated that the Bank would have preferred that the request be for a three-month loan. However, it was fairly clear that Colombia would not be able to repay the loan at that time. Thus, the alternatives were to deny the appli- cation, to grant a three-month loan in the knowledge that it would almost certainly have to be renewed, or to grant a six-month loan at the present time. Further discussion related to recent monetary developments in Colombia. Although there had been a substantial relaxation in monetary and fiscal policies beginning about March 1961, somewhat more conservative steps had been resumed in recent months, including increases in reserve requirements. It was brought out that the State Department had indicated 14formal1y that it would not object to the granting of the proposed gold loan. At the same time, it did not wish to be in the position of asking that the loan be granted. Governor Shepardson asked whether, since it was considered that Colombia would not be able to repay the loan in three months, there was 4nY assurance that it could pay in six months, in response to which Mr. Sammons outlined various anticipated developments, following the elections, that might enable Colombia to meet the six-month payment date. 2/23/62 After further discussion of the matter, Chairman Martin stated that although the theory underlying the policy on gold loans adopted in 1955 was sound, in his view there was probably sufficient justification in this instance for making an exception to the usual three-month limitation. He suggested that, unless there were strong objections, Mr. Sammons be authorized to advise the New York Reserve Bank informally that if the Bank's Board of Directors should approve the six-month loan application, the Board of Governors would be prepared to approve also 'When the matter was presented to it formally. However, Mr. Sammons should inform the Reserve Bank of the reservations that had been expressed, sO that it would be clear that the Board had not lightly made an exception to the general gold loan policy. No objection being expressed to the suggested procedure, it was understood that Mr. Sammons would advise the New York Bank along the lines indicated. Discount rates. The establishment without change by the Federal Reserve Banks of Cleveland, Richmond, and Kansas City on February 211 19621 and by the Federal Reserve Banks of Minneapolis and Dallas on Pebruary 221 19621 of the rates on discounts and advances in their eXisting schedules was approved unanimously, with the understanding that appropriate advice would be sent to those Banks. Items circulated or distributed to the Board. The following items, which had been circulated or distributed to the Board and copies 2/23/62 of which are attached to these minutes under the respective item numbers indicated, were approved unanimously: Item No. Letter to Manufacturers Hanover Trust Company, New York, New York, approving an extension of time to establish a branch in Riverdale, Borough Of the Bronx, New York. 1 Letter to Bank of America, New York, New York, granting consent for Banca d'America e d'Italia, Milan, Italy, to increase its investment in Banca per Finanziamenti a Medio Termine, Milan, Italy. 2 Report on competitive factors (Valley Stream-Kings Park, New York. Under date of February 15, 1962, there had been distributed a draft of report to the Comptroller of the Currency on the competitive factors involved in the proposed merger of The National Bank of Kings Park, Kings Park, New York, into Valley National Bank of Long Island, valley Stream, New York. After a brief discussion, the report was approved unanimously for transmission to the Comptroller of the Currency. The conclusion of the report read as follows: Because of the considerable distances between the offices of Valley National and Kings Park Bank, there does not appear to be any competition between them. Valley National's competitive position would not be changed in Nassau County and only slightly in Suffolk County. The entry of a larger bank into the immediate area of Kings Park may intensify local are competition somewhat, but no adverse competitive effects noted. The meeting then adjourned. rm'y 1 '1, 4Th 2/23/62 -6Secretary's Note: Governor Shepardson today approved on behalf of the Board a letter to the Federal Reserve Bank of New York (attached Item No. 3) regarding the current indebtedness of Victor Chang whose appointment as assistant examiner for that Bank was recently approved by the Board. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. Item No. 1 2/23/62 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 23, 1962 Board of Directors, Manufacturers Hanover Trust Company, New York, New York. Gentlemen: The Board of Governors of the Federal Reserve System has approved an extension until February 20, 1963, of the time within which Manufacturers Hanover Trust Company may establish a branch at 5664 Riverdale Avenue, Riverdale, Borough of the Bronx, New York, New York. The establishment of this branch was authorized in a letter dated February 20, 1961. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 2 2/23/62 ADDRESS OFFICIAL CORRICIPONCIBNCC TO THE BOARD February 23, 1962 Bank of America, 41 Broad Street, New York 15, New York. Gentlemen: In accordance with the request and on the basis of the information furnished in your letter of February 5, 1962, transmitted through the Federal Reserve Bank of New York, the Board of Governors grants consent for Banca diAmerica e di Italia, Milan, Italy, to increase its investment in the capital stock of Banca per Finanziamenti a Medic) Termine, Milan, Italy, from Lire 500,000,000 (approximately US$800,000) to Lire 1,000,000,000 (approximately US$1,600,000), represented by an aggregate holding of 20,000 shares, par value Lire 50,000 each. Very truly yours, (Signed) Elizabeth L. Carmichael Blizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. WASHINGTON 25. D. C. 2/23/62 3 ADDRESS OFFICIAL CORRESPONDENCE TO THE GUARD February 23, 1962 CONFIDENTIAL (Fal Mr. John F. Pierce, Chief Examiner, Federal Reserve Bank of New York, New York 45, New York. Dear Mr. Pierce: This will acknowledge your letter of February 160 1962, advising as to the current indebtedness of Victor Chang, whose appointment as an assistant examiner for your Bank was approved by the Board on February 9. It is noted that Mr. Changls indebtedness, previously indicated as $3,307 to Columbia University, actually consists of two loans totaling $2,110 from Columbia University, and a third loan in the amount of $1,700 which, although arranged by the University on Mr. Chang's behalf, is, in fact, a loan from Bankers Trust Company, New York, New York, a State member bank. It is understood, of course, that Mr. Chang will not be permitted to participate in any examination of Bankers Trust Company Until his indebtedness to that bank has been liquidated. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary.
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