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?Z0.9 Minutes for To: Members of the Board From: Office of the Secretary FObruary 23, 1965. 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 tilth 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 Gov. Mitchell Gay. Daane Minutes of the Board of Governors of the Federal Reserve System on Tuesday, February 23, 1965. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Mills Robertson Shepardson Mitchell Daane Sherman, Secretary Kenyon, Assistant Secretary Noyes, Adviser to the Board Molony, Assistant to the Board Fauver, Assistant to the Board Hackley, General Counsel Brill, Director, Division of Research and Statistics Mr. Farrell, Director, Division of Bank Operations Mr. Solomon, Director, Division of Examinations Mr. Kakalec, Controller Mr. Hexter, Assistant General Counsel Mr. O'Connell, Assistant General Counsel Mr. Shay, Assistant General Counsel Mr. Hooff, Assistant General Counsel Mr. Leavitt, Assistant Director, Division of Examinations Mr. Bass, Assistant Controller Mr. Spencer, General Assistant, Office of the Secretary Mr. Shuter, Attorney, Legal Division Messrs. Egertson and McClintock, Supervisory Review Examiners, Division of Examinations Mr. Poundstone, Review Examiner, Division of Examinations Mr. Waller, Supervisory Accountant, Office of the Controller Mr. Mr. Mr. Mr. Mr. Mr. Mr. Circulated or distributed items. Or The following items, copies Which are attached to these minutes under the respective item ritntibers indicated, were approved unanimously: 2/23/65 -2Item No. Letter to Bankers Trust Company, New York, New York, aPproving the establishment of a branch in Jericho, Town of Oyster Bay. 1 Letter to Manufacturers and Traders Trust Company, Buffalo, New York, approving the establishment of a branch in North Tonawanda. 2 Letter to Girard Trust Bank, Philadelphia, Pennsylvania, aPProving the establishment of a branch at 5522-24 North 5th Street. 3 Ipter to The Elyria Savings & Trust Company, Elyria, , approving the establishment of a branch in Avon ,hic) 4 Letter to Wells Fargo Bank, San Francisco, California, 4Pproving an extension of time to establish a branch at Fresno and Van Ness Streets, Fresno, provided branch 5 take. cTerations conducted at 1440 Fulton Street are discontlnUed simultaneously with the opening of this branch. tter to the Federal Reserve Bank of Chicago regarding e status of The Greater Iowa Corporation, Des Moines, , (va, as a holding company affiliate of First National aak, Cedar Falls, Iowa. 6 p Mernorandum of February 18, 1965, from the Legal Division ' Iecommending that Federal Reserve Banks be requested to ! 1 °tifIr member banks concerned of certain procedures to followed under Regulation F, Securities of Member itate Banks, in connection with stockholders' meetings; -stter to the Federal Reserve Bank of Boston reflecting chis recommendation. (The letter as approved incorporated er'tairt changes agreed upon during a discussion of the ( "raft.) (It was understood that similar letters would be sent to the other Federal Reserve Banks, except Minne: 01.P°11s. A copy of the letter sent to the Minneapolis 'eserve Bank is attached as Item No. 9.) Technical advisory committee. 7-9 Governor Robertson reported - connection with the program for voluntary restraint on foreign that in .I21 2/23/65 -3- lending by American banks, a technical advisory committee was being established to assist the Board's staff in formulating suitable guidelines for the conduct of the program. The committee would be made UP of approximately five people from the banking community familiar with many of the problems that might arise. It was contemplated that a meeting of the committee would be held in Washington beginIling Monday, March 1, 1965, which might last two to five days. Governor Robertson recommended that the Board authorize defraying the actual expenses of the members of the committee and Paying each member a fee in accordance with the Board's normal fee schedule for consultants. Governor Robertson's recommendation was approved unanimously. Request for certain documents relating to San Francisco 4etional Bank. Mr. Solomon stated that a telegram had been received trom the Federal Reserve Bank of San Francisco requesting the Board's vielf as to the procedure it should follow with respect to a request from a staff member of the Permanent Subcommittee on Investigations °f the Senate Committee on Government Operations for a copy of a r Port submitted by the Reserve Bank to the Board in 1961 in connectl04 with the application to organize San Francisco National Bank, SEtn• Francisco, California. The document in question was actually one of several on the saMe subject, Mr. Solomon said. Included in the material he referred 2/23/65 _L1._ to was the report of the Reserve Bank examiner who made an investigation in connection with the charter application, a letter of September 14, 1961, from the Reserve Bank submitting the examiner's report to the Board, and a memorandum that had been prepared on the basis of the foregoing material by the Board's Division of Examinations and addressed to the Board. Finally, there was the advisory letter that the Board had sent to the Comptroller of the Currency with regard to the charter application, in accordance with interagency procedures existing at the time. Mr. Solomon noted that the request of the Subcommittee staff involved the principle of releasing internal documents of a confidential character. In his opinion, the release of such material /10111d establish an unfortunate precedent. If the Board declined to Make the requested document available, the Subcommittee might subPosaa it. However, the Board's letter to the Comptroller of the Currency might serve the Subcommittee's purpose. Accordingly, he sUggested that the Board might offer to make a copy of that letter 4‘milable to the Subcommittee staff. At the conclusion of a discussion of possible alternative Procedures, it was understood that Mr. Solomon would advise the Pecleral Reserve Bank of San Francisco that, since the document rewas of an internnJ nature, the Board was unwilling to authorize its release, but that the Board would be willing to make _ 5_ 2/23/65 available a copy of the letter that had been sent to the Comptroller Of the Currency. Messrs. Noyes, Hexter, Shay, Hooff, Leavitt, Shuter, Egertson, McClintock, and Poundstone then withdrew from the meeting. Budget performance report for 1964. There had been dis- tributed to the members of the Board a report dated February 5, 1965, fmm the Office of the Controller reviewing the performance under the Board's budget for the calendar year 1964. The 1964 budget was $8,448,000; expenses totaled $8,747,000, resulting in an overexpenditure of $299,000. The principal factors contributing to the overexpenditure were the purchase of an IBM 1410 e°mPuter and the cost of a Consumer Finances Balance Sheet Survey Undertaken at the request of the Council of Economic Advisers, While 4ear1Y all account overexpenditures had been approved before year end) certain accounts totaling $13,069 were not submitted for approval or to December 31, 1964. In the opinion of the Controller these e.xPenditures were reasonably unavoidable, and it was recommended that a`eceptance of the budget performance report be considered as approval er the remaining overexpenditures. At the request of the Board, Mr. Kakalec commented on the budget performance report and summarized significant reasons for the totpo --L overexpenditure, following which he responded to several ques- -"s by members of the Board. It was understood, in line with a 2/23/65 -6- request by Governor Mitchell, that a memorandum would be prepared indicating the cost of various projects run in 1964 on the IBM 1410 computer. At the conclusion of the discussion, the budget performance report was accepted and the overexpenditures in certain account classifications totaling $13,069 that had not been submitted to the 80ard prior to December 31, 1964, were approved. Report of audit (Items 10 and 11). There had been distributed coPies of a report by Haskins & Sells dated February 4, 1965, covering its examination of the financial statements of the Board of Governors ror the year ended December 31, 1964, together with a report by that firm on the scope of its examination. There also had been distributed a Memorandum from the Office of the Controller dated February 15, 1965, relating to the audit report. The audit report was accepted, it being understood that copies 10111d be transmitted to the Chairmen of the Senate and House Banking 411c1 Currency Committees. Copies of the transmittal letters are at- tached as Items 10 and 11. Letter to Budget Bureau regarding H. R. 3818 (Item No. 12). 114441mous approval was given to a letter to the Bureau of the Budget l'ec(Mmiending approval of enrolled bill H. R. 3818, "To eliminate the reqUirement that Federal Reserve banks maintain certain reserves in 1(31-d certificates against deposit liabilities." 48 No. 12. A copy is attached 2/23/65 -7Report by Governor Daane. Governor Daane presented a brief report on the meeting he had attended last week in Paris, France, Of the Economic Policy Committee of the Organization for Economic Cooperation and Development. He noted that Mr. Young had reported earlier on the meeting of Working Party 3. At this point all of the members of the staff except Mr. Sherman withdrew from the meeting. Division of Examinations staff. Governor Shepardson stated that he had been reviewing with Mr. Solomon, Director of the Division c)r Examinations, plans for staff succession during the next year or 80 when at least one and perhaps two retirements of officers in the 1/1vision would occur. He stated that he would like to have the Board's reaction as to whether it would be desirable to strengthen the officer Staff by bringing in a mature, experienced person from one of the Reserve Banks, if such a person could be obtained, or whether in the alternative it would be preferable to rely upon promotions of younger en now in the Division. He went on to say that some of the younger " 43 in the Division seemed to be developing but that in his opinion the more immediate needs might be met most effectively by the addition from outside of an older, more seasoned person, with the expectation, of course, that the younger men now in the Division would be Pl'omoted as their development warranted. During a general discussion of the questions raised by vzrnor Shepardson it became evident that the Board felt strongly 2/23/65 -8- that steps should be taken promptly for strengthening supervision in the Division, that there was almost unanimous feeling that this should include the addition of at least one seasoned person with examination experience from outside, and that more aggressive attention should be given to developing persons within the present staff. At the conclusion of the discussion Governor Shepardson was requested to discuss the matter further with Mr. Solomon with a view to pursuing 4 Program along the lines indicated. The meeting then adjourned. Secretary's Notes: On February 18, 1965, Governor Shepardson approved on behalf of the Board a memorandum dated February 16, 1965, from Mr. Schwartz, Director, Division of Data Processing, recommending that a new position of statistician at the junior or intermediate level be established in that Division, it being understood that the position would be regarded as established when the statistician was hired. Governor Shepardson today approved on behalf of the Board memoranda recommending the following actions relating to the Board's staff: tary leave e . Kenneth L. Johnson, Draftsman-Trainee, Division of Data ProcbaSing, for the period necessary to fulfill his military obligation, e ing February 24, 1965. Pernr: -8iori to engage in outside activity .Ella M. Dear, Teletype Operator, Division of Administrative ,rvloes, to work as a flexowriter operator for the American Chemical `43ciety. Item No. 1 2/23/65 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE •OARD February 23, 1965 Board of Directors, Bankers Trust Company, New York, New York. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment by Bankers Trust Company, New York, New York, of a branch at 333 North Broadway in the unincorporated area of Jericho, Town of Oyster Bay, Nassau County, New York, provided the branch is established within six months from the date of this letter. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, 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. 2 2/23/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 23, 1965 Board of Directors, Manufacturers and Traders Trust Company, Buffalo, New York. Gentlemen: The Board of Governors of the Federal approves the establishment by System Reserve Traders Trust Company, Buffalo, and Manufacturers at 525 Division Street, branch a New York, of County, New York, proNiagara North Tonawanda, within one year established is vided the branch this of letter. from the date 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.) SOARED OF GOVERNORS Item No. 3 2/23/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 23, 1965 Board of Directors, Girard Trust Bank, Philadelphia, Pennsylvania. Gentlemen: The Board of Governors of the Federal Reserve !Ystem approves the establishment by Girard Trust Bank, 4111adelphia, Pennsylvania, of a branch at 5522-24 llorth 5th Street, Philadelphia, Pennsylvania, 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, (The letter to the Reserve Bank stated that the .1105.rd also had approved a six-month extension °I- the period allowed to establish the branch; !nd that if an extension should be requested, 'he procedure prescribed in the Board's letter °f November 9, 1962 (S-1846), should be followed.) BOARD OF GOVERNORS Item No. 2/23/65 OF THE FEDERAL RESERVE SYSTEM 4 WASHINGTON 25, D. C. ADDRESS orricsAL CORRESPONDENCE TO THE BOARD February 23, 1965 Board of Directors The Elyria Savings & Trust Company, Elyria, Ohio. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment by The Elyria Savings & Trust Company, Elyria, Ohio, of a branch at the intersection of Walker Road and Ohio Route 76, Avon Lake, Ohio, 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. OF THE 5 2/23/65 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. AOORCBR arracom. CORRICIIPONDENCL TO THE •OARD February 231 1965 Board of Directors, Wells Fargo Bank, San Francisco, California. Gentlemen: The Board of Governors of the Federal Reserve System extends to March 14, 1966, the time within which Wells Fargo Bank, San Francisco, California, may establish a branch at the northeast corner of the intersection of Fresno and Van Ness Streets, Fresno, California, provided that operations at the bank's existing office located at 1440 Fulton Street are discontinued simultaneously with the opening of the new office. Very truly yours, (Signed) Karl E. Bakke - Karl E. Bakke, Assistant Secretary. BOARD OF GOVERNORS Item No. 6 2/23/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 23, 1965 Mr. Leland Ross Vice President, Federal Reserve Bank of Chicago, Chicago, Illinois. 60690 ll'ear Mr. Ross: This refers to your letter of February 3, 1965, with respect to the Board's determination of January 4, 1965, as to the status of The Greater Iowa Corporation as a holding company affiliate of First National Bank, Cedar Falls, Iowa. Your letter states that in reviewing a report of examination of Midway Bank ' 6 Trust, Cedar Falls, Iowa, it was disclosed that the Corporation was the owner of record of one share of that bank's stock, although the information submitted by the Corporation, when requesting the determination, included a statement that it neither owned nor controlled stock in any bank other than First National Bank. Please advise the Corporation that the Board does not "nsider this a material variance from the statement contained in he application, and the ownership of this one share of stock will ! gc't affect the Board's determination of January 4, 1965. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Item No. 7 2/23/65 G33 February 18, 1965 Annual meeting dates of banks hard of Governors Subject: 4841 Division (Bruce D. Shuter) that must comply with Regulation F. As the Board is aware, about one hundred member State banks Vl11 register securities with the Board by April 30, 1965, and the Per will increase two years later. After registration, these banks "comply with section 206.5 of Regulation F, which requires them to PrePnre, file, and distribute an annual report and a so-called NY statement" prior to each annual meeting. Some of the affected customarily hold their annual meetings early in the year, but Ufl ;70r the new rules they may find it convenient, or even necessary, re change this practice to allow sufficient time to comply with the (Wired procedures. Z7 O Accordingly, there is attached for consideration a draft jetter to be sent to each Reserve Bank requesting them to notify the banks concerned of the existence of this time problem, so that rthey — take appropriate and timely action. may In some States the problem may be complicated because the date f dr.. or annual meetings is governed by statute or regulation. The letter suggests that the Reserve Banks determine whether such 141ultms exist and to aid affected banks in seeking corrective legL°11 or regulatory action, where necessary. In the case of States which the Legal Division is aware of a "troublesome" statutory th;vision regarding the annual meeting date, a specific reference to will be included in the letter to the Reserve Bank concerned. kttikehment Item No. BOARD OF GOVERNORS 8 2/23/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 24, 1965. Mr. George H. Ellis, President, Federal Reserve Bank of Boston, 02106 Boston, Massachusetts. Dear Mr. Ellis: As you know, under the Securities Exchange Act of 1934 and Federal Reserve Regulation F, "Securities of Member State Banks", each member State bank with assets of $1 million and 750 or more "holders of record" of any class of equity security must register that security With the Board by April 30, 1965. After such registration has become effective, the bank must furnish to its shareholders a written proxy statement a few weeks prior to each shareholders' meeting at which Shares are entitled to be voted (Reg. F, § 206.5). Proposed soliciting Material must be filed with the Board at least 10 days prior to the c,!ate the definitive Statement is supplied to shareholders and, if 11!-tectors are to be elected, an annual report must precede or accompany re Statement. In some cases, these requirements may compel a change 4. annual meeting dates of affected banks, in order to allow sufficient tn ime for preparing, filing, and distributing these reports and Statements. It appears that some member State banks in your District at are (or will be) subject to the above -mentioned registration ,.,!cluirements customarily hold their annual meetings early in the year. 'le Board believes it would be advisable for your Bank to bring this atter to the attention of those banks with 500 or more "holders of ! ecord" (which will be the controlling figure after December 1966), 0 that they may consider amendment of the bank's bylaws, or comparable ' action. In some States, however, the solution to this problem may be more because the time for annual meetings is prescribed b v Statedifficult, law or regulation. If this is found to be the case in any ate in your District, it is hoped that the Reserve Bank will be able s; Hr. George H. Ellis -2- to bring the matter to the attention of the banks concerned and to Offer assistance, so as to provide the maximum opportunity for prompt action. In that event, it may be advisable also to seek the cooperation of the State bank supervisor. The Board will appreciate being informed of developments. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. * )0K) Item No. BOARD OF GOVERNORS 9 2/23/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 26, 1965. Mr. M. H. Strothman, Jr., First Vice President, Federal Reserve Bank of Minneapolis, Minneapolis, Minnesota 55440. Dear Mr. Strothman: For your information and records, enclosed are copies of self-explanatory letters from the Board to the Federal Reserve Bank Of Boston and the Federal Reserve Bank of San Francisco. Similar letters, varying only in detail, have been sent to the other nine Reserve Banks. No similar letter is being sent to your Bank in view of your report that no member State banks in your District have 500 or more shareholders. However, the problem described and the sug&estions in these letters are called to your attention because similar situations may arise in your District hereafter. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Enclosures. 537 Item No. 10 2/23/65 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE CHAIRMAN February 23, 1965 The Honorable A. Willis Robertson, Chairman, Committee on Banking and Currency, United States Senate, Washington 25, D. C. Dear Mr. Chairman: In accordance with the practice followed for the past several years, there are enclosed copies of the reports made by the firm of public accountants that audited the accounts of the Board of Governors of the Federal Reserve System for the year ended December 31, 1964. These include (1) Financial Statements and Accountants' Opinion and (2) Report on Scope of Examination of Financial Statements. Sincerely yours, (Signed) Wm. McC. Martin, Jr. Wm. McC. Martin, Jr. Enclosures 2 Item No. 11 2/23/65 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE CHAIRMAN February 23, 1965 The Honorable Wrtght Patman, Chairman, Committee on Banking and Currency, House of Representatives, Washington 25, D. C. Dear Mr. Chairman: In accordance with the practice followed for the past several years, there are enclosed copies of the reports made by the firm of public accountants that audited the accounts of the Board of Governors of the Federal Reserve System for the year ended December 31, 1964. These include and (1) Financial Statements and Accountants' Opinion ts. Statemen l (2) Report on Scope of Examination of Financia Sincerely yours, (Signed) Wm. MtC. Martin, Jr. Wm. McC. Martin, Jr. Enclosures 2 BOARD OF GOVERNORS Item No. 12 2/23/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON acme OF THE CHAIRMAN February 23, 1965 Mr. Phillip S. Hughes, Assistant Director for Legislative Reference, Bureau of the Budget, Washington, D. C. 20503 Dear Mr. Hughes: This is to advise, in response to your communication 2f February 19, 1965, that the Board recommends approval by the rresident of the enrolled bill, H. R. 3818, "To eliminate the l‘equirement that Federal Reserve banks maintain certain reserves ill gold certificates against deposit liabilities." Sincerely yours, (Signed) Wm. McC. Martin, Jr. Wm. McC, Martin, Jr.