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Z,609 10/59 Minutes for February 24, 1961 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. It 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. Szymczak Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Minutes of the Board of Governors of the Federal Reserve System °II Friday, February 24, 1961. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Martin, Chairman Balderston, Vice Chairman Szymczak Mills Robertson Shepardson King Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Sherman, Secretary Kenyon, Assistant Secretary Thomas, Adviser to the Board Young, Adviser to the Board Molony, Assistant to the Board Fauver, Assistant to the Board Noyes, Director, Division of Research and Statistics Holland, Adviser, Division of Research and Statistics Dembitz, Associate Adviser, Division of Research and Statistics Furth, Adviser, Division of International Finance Petersen, Special Assistant, Office of the Secretary Yager, Economist, Division of Research and Statistics itport on money market developments. Mr. Yager reported on 4".1111tY in the Government securities market, with special reference to the , Initial implementation of the recent decision on the part of the Niel% al OPen Market Committee to authorize operations in longer-term u nit States Government securities. Mr. Thomas then presented an 411e4sis of the bank credit situation, and Mr. Furth reported on elcloments affecting the United States balance of payments. Messrs. Furth and Yager then withdrew from the meeting. 2/24/61 -2Discount rates. I The establishment without change by the Federal rve Banks of New York, Cleveland, Richmond, St. Louis, Kansas City, 414. Dallas on February 23, 1961, of the rates on discounts and advances 11/their existing schedules was approved unanimously, with the understanding that appropriate advice would be sent to those Banks. Items circulated to the Board. The following items, which had been circulated to the Board and copies of which are attached to these -1111,1tes under the respective item numbers indicated, were approved t111841mo12sly: Item No. 01V:'ter to The Union Commerce Bank, Cleveland, 14,2' aPproving (1) the establishment of a lieTV1 in the Southgate Shopping Center, Maple !) and a drive-in branch in the rear of and (?.) " Irom the principal branch in the Center, and arl investment in bank premises. tetter Comn - to The Savings Deposit Bank and Trust cr14 .41Y, Elyria, Ohio, approving an extension 44a 1-me to establish a branch at Lake Avenue Griswold Road in Elyria Township. l'etter L.o. The Union Savings & Trust Co., Warren Ohio EtPloroving the establishment of a branch at 132 ortland Road, Howland Township. tetter to Central Bank of Montana, Great Falls, Rolm granting an extension of time to accomplish -1.shin in the Federal Reserve System. „ letter , 11%,,-,2,0 First National Bank of Chadron, Chadron, Dw 4-a, approving its application for fiduciary 2 3 14. 5 2/24/61 _3_ Item No. Letter to the Office of the Statistical Standards, 0.. eau of the Budget, regarding a revised report 4 condition (Form F.R. 105) to be used by State 11leither banks. Statement for publication in the Federal Reserve et1n and the Federal Register with respect to ' 111gs deposits not evidenced by a pass book. 6 7 Messrs. Hackley, General Counsel; Farrell, Director, Conkling 4"aniels, Assistant Directors, and Collier, Chief, Current Series Secti°n, Division of Bank Operations; Solomon, Director, Division of `OLzrLinations; and Chase, Assistant General Counsel, entered the room et this point. Acceleration of procurement and construction (Item No. 8). A (3f letter to the Bureau of the Budget regarding possible acceleration or, r ocurement and construction projects, as referred to in the President's 111°1"anclum of Feburary 2, 1961, to the heads of executive departments and ageies, had been distributed to the Board. At the instance of Governor King, there was a discussion concern14g the necessity of specifying in two separate places in the letter that the arcl- and the Reserve Banks do not operate on appropriated funds, ()1_n which it was understood that the letter would be revised to l'etil°ve one of the references to that point. It was agreed unanimously that the letter would be sent after the Pr°Posed changes had been made. 4t-tae, i4ed. as Item No. 8. A copy of the letter, as sent, is if—lb ).)6 2/24/61 Mr. Daniels then withdrew from the meeting and Mr. Johnson, tirector, Division of Personnel Administration, entered the room. Classification of reserve cities (Item No. 9). A memorandum ted February 20, 1961, from Governor Balderston presenting an amended 111411 for the classification of reserve cities had been distributed, as haCi 4 memorandum from Mr. Hackley dated February 23, 1961, submitting 13r°110sed changes in Regulation D, Reserves of Member Banks, that would be necessary to implement Governor Balderston's proposal. The latter 111:l1ssion was in the form of a notice of proposed rule making which l'i°111c1 be published in the Federal Register. The notice would indicate the dollar figures represented by the percentages in the standards and 441(1 naMe the ' ' cities that would be continued, dropped, and added as l'eserye cities if the amendments were adopted. The principal features of the proposed amendments were as follows: 1. Reserve cities would include all cities in which: a. All member banks had an average daily total of demand deposits equal to 2/5 of one per cent of the United States total during 1960 (S)-i.87 million); or b. One member bank had an average daily total of demand deposits equal to 1/4 of one per cent of the United States total during 1960 ($304 million); or C. All member banks had an average daily total of interbank demand deposits equal to 2/5 of one per cent of the United States total during 1960 ($53 million). (These standards were the same as those suggested in Governor Balderston's memorandum of February 20, 1961). 2/24/61 -5- 2. The foregoing standards would be based upon deposits of member banks that had their head offices in particular cities as of January 1, 1961. 3. The proposed amendments would not exclude member banks With offices in Federal Reserve Bank or branch cities. This meant that Winston-Salem, North Carolina, and Savannah, Georgia, would be reserve cities, even though all member banks with head offices in those cities and no offices in a reserve city would probably be eligible for declassification. Every third year the Board would redesignate reserve cities in accordance with the foregoing standards, except that designations would be based upon deposits of member banks for the calendar year preceding each triennial review. 5. 6, 7. New reserve cities designated this year and in each third year thereafter would be allowed one year before the designation would become effective. The proposed amendments would provide for the automatic approval of applications for reduced reserves by member banks with total demand deposits of $50 million or less and for consideration of applications by banks with larger deposits on an ad hoc basis, but with an indication of the factors that would be considered by the Board. The proposed amendments would be published in the Federal Register with an invitation for the submission of comments by April 1, 1961, and would be finally adopted on or before MaY 1, 1961. Subsequent to May 15, the Board would designate reserve cities effective June 1, 1961, except that as to new reserve cities the effective date would be deferred until June 1, 1962. Governor Balderston stated that there were three parts to the 17)1'0131,— 111. confronting the Board at the present time. the AA First, there was 49Ption of new standards for the classification of reserve cities. ' - 2/24/61 -6- See°14, there was the implementation of these new standards by amending Regulation D. Third, there was the adoption, for the first time, of tanclards for declassifying those banks in reserve cities whose size 414 character of business warranted country bank reserve status. After the T... vebruary 13 meeting, he had distributed a memorandum under that date " 'lining a proposed set of standards for reclassifying reserve cities 1111141) in view of the Board's discussion, he felt that the Board members kigtt be willing to adopt. Like any compromise, the plan might not be ell*elY agreeable to everyone, but it might be acceptable enough to bt4in agreement. the The proposal's salient features were simplicity and 4*nclusion of a minimum number of new reserve cities, limited to le financial centers like Hartford and Newark. However, because the use of absolute dollar amounts of deposits would set up standards that I7ou1d not be self-adjusting as the economy and banking volume grew, he th en circulated the substitute proposal dated February 20. The veza 4rds suggested in this proposal would add four reserve cities, th f +, urther modification contained in Mr. Hackley's proposed zevi si°n of Regulation D, dated February 23, would add two more cities, and Winston-Salem. , , , , ,, The addition of these two southern cities nipt assign higher reserve requirements to any additional banks; the i 4ger banks with offices in these cities are already carrying 16-1/2 flt reserves and the smaller banks would be candidates for declassiti tio n. However, this modification did simplify the ampndments to 'LLLatiori D. Governor Balderston pointed out that if the proposed new standards Ilere adopted, Mineola, New York, a city he had expressed interest in Ilassifying as a reserve city at the February 13 meeting, would not now be 4-okssified as a reserve city. However, it could easily grow into the l'eserve city classification if its deposits were to expand percentagewise 4t • 4 faster rate than the national aggregate. In the case of Jackson, 1418sissiPpi, the interbank figure was only slightly under the standard. rrinAG 3 both Mineola and Jackson would come under the reserve city classiticati -°n if they grew faster than the country. Other cities that might be e• °nsidered borderline had interbank figures ranging from $69 million to• $100 million, well above the dividing line. Governor Balderston remarked that the final difficulty considered bY the staff was whether a bank could escape classification as a reserve eltIr bank by moving its head office to another city. This would be 130 41131e) he pointed out, only if the bank had daily average demand clePoa 2' s or less than $304 million during 1960. In Albany, New York, the 'argest bank had average demand deposits of $279 million. This zeenlea to be the only situation that could create a problem for the Board by re Iral of a head office, and the possibility seemed unlikely. Governor Balderston noted that a proposed time schedule for the ntation of these standards had been set forth in Mr. Hackley's ketaoran, Of February 23. The envisaged procedure would include 2/24/61 -8- 4111101Incement of the proposed new standards in the Federal Register and the Federal Reserve Bulletin, with a considerable delay before the new ata4clards would become effective and an additional year's delay before 1)4114 in the added cities would have to carry the higher reserves. Governor Balderston pointed out that the declassification of l'eseante city banks meriting country bank status was covered in the Q41qt --indments to Regulation D. He indicated that he would favor .1)elling out some of the meaning of the character of business, on which cieelTh "ssification would be based. However, it had also been suggested that nc provision for automatic declassification of banks with deposits or less than a specified figure should be included. Such inclusion, it te.s °Ixggested, would invite applications for declassification from at 4att a dozen banks whose deposits were below $50 million but whose te ank activity was considerable. After considering the matter, he -°111d be inclined, on balance, to omit the provision for automatic , s ification. In conclusion, Governor Balderston commented that the Board had uee, 116 with the problem of the classification of reserve _ for a number of years and particularly during the past several Mszlrithn Such discussion could continue indefinitely, but he felt that c relations called for the Board to "fish or cut bait." A number or t Mall banks had applications pending with the Board for reclassification. 2/24/61 -9- the circumstances, he favored doing something now that would stir up the le 4t commotion, but would at the same time accomplish a change in the *488ification standards that would achieve enough consistency to be fair. A's In ,ra..J. °. 14 ng examination papers, a line must be drawn somewhere between those who passed and those who did not. The ideal procedure would be to a dividing line where no bank would be close to the boundary, but thEt . involved difficulties. In the plan he had submitted, he felt there n sufficiently clear separation to avoid stirring up too much emotion. Mr. Hackley commented that the suggested procedural implementation of the proposal was in line with past and present practices of the Boar _ d the 1947 After referring to the steps that were taken prior to putting rule into effect, he reviewed the steps envisaged for implementlitiO" of the current proposal and expressed the view that advance notice illthe Federal Register, in order to provide an opportunity for the subon Of of Comments, would be desirable. If comments had to be received bY the first of April, he pointed out, no substantial delay would be in putting the plan into effect. He added that a one-year cl% in the effective date of the designation of new reserve cities 1'4424 be in line with the practice followed under the current rule. Chairman Martin inquired what advantages were seen in the proposed Dle.n compared with doing nothing, that is, retaining the 1947 classi- ,ion rule. 6:, 2/24/61 -10Governor Balderston replied that in view of the distinction in the 4-4w it was necessary to divide the total number of member banks in scinemanner into reserve city and country bank categories. Should the 131"esent rule be retained, that would leave in nonreserve city status a 1.-81.1ch as Newark, New Jersey, which is larger than several of the DI'esent reserve cities in terms of bank deposits. This was an element c4/111-ta1rness that perhaps the Board should not countenance; fairness V°111(1 seem to dictate the inclusion of cities like Newark and Hartford, e°411ecticut, and probably Phoenix, Arizona, and Albany, New York, as Veils Re recognized that the more cities added to the list at this title 41. `lilt more representations would be made that the Board was making ttd10. 44icult for the banks to "make a dollar". Nevertheless, even tholmh in a sense it would be easier for the Board to maintain the 4tEttil 8 QUO, he saw merit in adding the most likely and most plausible or the nonreserve cities to the reserve city list. He would be cont Hartford and Newark were not added. At the same time, he b e e -Wally concerned if any revised formula had the result of 64:114 a great many new cities to the list. With regard to including in the amendments to Regulation D a 4J-on that would result in automatic declassification of certain ' be.114 In reserve cities to country bank reserve status, Mr. Hackley 2/24/61 -11- 0°mnted that he saw merit in the argument for omitting such a provision. ()tithe other hand, inclusion thereof, if agreement could be reached, would ieve the Board of the necessity of considering a number of routine l case s - Further, it might help to temper the shock of the addition of new ere cities if the smaller banks therein were informed immediately that the could obtain declassification merely upon application to the Board. Governor Balderston said he had had in mind that in the cases of WinstcnSalem, North Carolina, and Savannah, Georgia, it might be advisable to ask the Presidents of the respective Federal Reserve Banks to call the taaller banks in those cities in advance of the publication of the Board's allricluncement in the Federal Register and explain the situation, since all °r the 1, -auks in those two cities not currently classified as reserve city , bn '44.1s would be obvious candidates for declassification to country bazit reserve status. In reply to a question by the Chairman, Mr. Thomas indicated that he reit the new proposal was about as near to the ideal scheme as one Co lik et- It embodied principles and standards that were defensible, r bezik r°m a practical standpoint it would bring into the reserve city classification only those large banks that merited such classific4tio n crl any equitable basis. If those banks were not brought in, then the Board should declassify a number of other banks. The plan 1101114 leave out of the reserve city classification those cases that 2/24/61 -12- clearly should be left out; on the borderline would be cases that could 13e argiled one way or the other. In those borderline cases, classification Illthe future would depend on the degree of deposit expansion in relation tO that of the banking system as a whole. From a public relations stand- the proposal seemed quite good, and the plan could be defended in 13"nciPle. In reply to the same question from the Chairman, Mr. Dembitz e°Dtaented that if the Board wanted to adopt a new standard the proposal °Iltlined by Governor Balderston seemed well-suited and appropriate. uanks would be raised to the status of reserve city banks, and if the 8°8 rd wanted to bring in about nine banks, these would be about the Ilight nine. However, it Should be borne in mind that reserve city bank .1;atIls was going to cost those banks a lot of money, and they might 1)1s()test vigorously. Therefore, if the Board should decide to adopt this ri6TrI11e) it should have in mind the likelihood of such a protest, and ac:bn idea of what it would do if protests were received. Mr. Dembitz thet, - Presented a rough estimate of the magnitude of the per annum cost t° the ts.“Dup of banks that would be elevated to reserve city status. Question was raised at this point regarding the relationship of the aPosal to monetary policy, and Mr. Thomas replied that there would be h -0 significant effect one way or the other as fax as monetary policy Irat concerned. Rather, it was a matter of equity. If the nine banks 2/24/61 -13- referred to by Mr. Dembitz were not brought in, many banks now classified es reserve city banks would be entitled to come in and complain on the gl'ound of inequity. Governor King pointed out that if the Board retained the present rIlle and reinstated the triennial review called for by that rule, certain cities apparently would be newly designated as reserve cities. In such elfellt, certain banks therein would lose earnings just like the nine batikS Mr. Dembitz had mentioned. Hence, those banks might be expected to Protest just as vigorously. After additional discussion during which Chairman Martin indicated that he was more and more convinced that the ultimate solution was in the ection of uniform reserve requirements, the Chairman called for the le s of the members of the Board. Governor Mills said he recognized that there were serious defects illthe 1947 rule. However, he would prefer to stay with that rule rather thll to adopt what seemed to him to be a kind of gerrymandering slideformula that could not be tied to complete logic. Until a formula Q°1441 be devised that was free from most complaints of illogicality, he "u maintain the status quo. Governor Robertson said he would approve the current proposal, hlch he regarded as much better than the existing rule. The new plan Illc)t perfect, but it was a significant step forward. 2/24/61 Governor Shepardson recalled that the last time this matter had e°11 uP for discussion, he was inclined toward the position that Governor 14111s had taken today. However, as pointed out at that time, there were 8°4* serious deficiencies in the present rule. The proposed rule seemed t° be a move in the direction of greater equity, if there could in fact be l*eal equity in a matter of this kind. Therefore, he would favor the Droposaa. Governor King indicated that he also would favor the plan. He 11:t that an improvement might be made by eliminating the portion of the r rrn.. Which related to interbank deposits, and possibly by classifying 8"eserve cities only those cities whose member banks had more than 1/2 clr°4e per cent (rather than 2/5 of one per cent) of total member bank (33sits. With reference to the inclusion of interbank deposits in the r°r.4411a, he selected Des Moines, Iowa, as an illustration and said he 1,14 11°t convinced that the rather large volume of interbank deposits of the eitY's member banks was a sufficient basis, when looked at together Other circumstances, to require them to carry the same reserve Isements as applicable to large money market institutions. He felt ther e Igno perfect way to draw the line between reserve city banks and other banks and that probably uniform reserve requirements presented the e \rentual solution. te/, . that direction. However, the current proposal appeared to be a Also, the 1959 legislation which terminated the ' 2/24/61 -15- Cal reserve city classification in mid-1962 was a step toward llrliform reserve requirements. He believed that a formula such as he he4 mentioned earlier would move in that direction a little faster, but" would be willing to go along with the current proposal. Governor Szymczak said he agreed with Governor Mills and Mr. betiktz, and that he would prefer to concentrate on working for uniform Iflerve requirements. However, he did not feel so strongly about the 'ter . that he would be unwilling to accept the current proposal. After Chairman Martin noted that on the basis of the views e4l'essed it appeared that the majority of the Board would support the Proposal, the discussion reverted to the question whether the pro1)(441 amendment of Regulation D should retain or drop the provision in the ciratt providing for automatic declassification to country bank re`'erve status of banks in reserve cities having demand deposits be1 °14. a certain level. Governor Balderston said he tended to favor dropping that Drovision. He had originally thought in terms that some figure like 4u-Llion of demand deposits would provide a fairly satisfactory atvia. -lng line, above which banks seeking declassification would be Qorizi aered on an ad hoc basis. However, members of the staff pointed t h4 `V- that most of the banks with deposits below that figure had made application to maintain reduced reserves, and therefore the kltprop 4.4 feature would not have much practical usefulness. Further, 2/24/61 -i6- Specific level of deposits that might be chosen probably would be illeapPropriate after a period of time. The staff had also pointed out that there were about 12 banks with demand deposits under $50 million that Probably would apply immediately for declassification. However, the nature of their business was such that the Board might have some Itlestion. If the automatic provision was omitted from the proposal, he had a feeling that most or arl of those banks would be content with their present reserve status and would not apply for declassification. Governor Mills expressed the view that the Board needed something that was more than just plausible and that there was a lack of 1314usibility in the whole scheme. Governor Robertson indicated that his earlier thinking had been °Ilthe side that the use of a fixed figure of deposits below which banks li°11-1c1 be automatically declassified would eliminate many complaints. ' 11°1'tever, he did not feel that that point weighed too heavily, and if the Board made the statement that an application from any bank would be c °Ilsidered on an ad hoc basis, that in itself would turn away some "e criticisms. The one major factor that had influenced his thinking er was that the lack of an automatic declassification procedure 1/01.11., mean more work for the Board, because otherwise all applications ra4zt be considered on the basis of the several factors that would be ated in Regulation D. He was willing to undertake that work, and (00 2/24/61 -17- th erefore he would be willing to accept the proposal minus the automatic cleelassification provision. The other members of the Board indicated concurrence in the view that the automatic declassification feature should be omitted. In further discussion, question was raised regarding the possibilitY of advising banks in new reserve cities that they might be ble to maintain reduced reserves upon application. Governor 8Q4erston commented that his earlier suggestion had been intended to °0111Y to the banks in Winston-Salem and Savannah that would appear ligible to maintain lower reserves, because of the unusual situation Igith respect to those cities. It was agreed that the announcement in the Federal Register would constitute sufficient notice in other cases, allot it was understood that the language of the introductory statement be supplemented in this regard for purpose of emphasis. Certain further suggestions then were made with respect to the oductory presentation in the Federal Register, following which Mr. ell commented that it might be desirable, prior to publication, to the Federal Reserve Banks to review the 1960 averages of daily f gross demand deposits and interbank demand deposits, as Q°1aPIAed from reports of deposits for reserve purposes, for banks in es in their respective districts that apparently would have their 4iLt s cuanged through adoption of the new formula, as well as banks 11- tasfIN 1.) 2/24/61 -18- illborderline cities, in order to verify the predicted results of 130-0Ption of the new standards. There was agreement that such a Procedure would be desirable. Accordingly, with Governor Mills dissenting for the reasons he had stated, the Board approved for publication in the Federal Register the proposed amendments to Regulation D set forth in Item No ---L2 attached to these minutes. This was with the understanding that 1°11131i-cation would not be made until after the respective Reserve Banks he4 suPplied the verification suggested by Mr. Farrell and that a press Isease would be issued when the notice of proposed rule making was sent to the Federal Register. Secretary's Note: Verifications having been received from the respective Reserve Banks, the notice was sent to the Federal Register on March 1, 1961, and a press statement was issued on that date. The notice sent to the Federal Register is attached as Item No. 9. Messrs. Thomas, Farrell, Chase, DeMbitz, Conkling, and Collier then withdrew. .g212.Ey of officer at Cleveland Bank (Item No. 10). There had etre ulated to the Board a draft of letter to the Federal Reserve Bank of Cleveland advising of approval of the payment of salary to Fred 0. Kiel, 4171ce President assigned to the Cincinnati Branch, for the period 1441'ell 1) 1961, through December 31, 1961, at the annual rate fixed by 2/24/61 -19- the Board of Directors, as reported in a letter from the Bank dated ?ebruarY 9, 1961. After a brief discussion the letter, a copy of which is attached 42 Item No. 10, was approved unanimously. Mr. Johnson then withdrew from the meeting. Directors' day proBxam. There had been distributed to the 1134rd copies of a memorandum from Mr. Fauver dated February 21, 1961, stlb /hitting an outline of a suggested program March 15-16, 1961, for heV directors of the Federal Reserve Banks and branches. After comments by Governor Shepardson and Mr. Fauver, and discussion based thereon, general agreement was expressed with the 1311°Posed program. It was understood that preparations would go forward °I1 that basis, subject to certain suggestions that had been made during the discussion. All of the members of the staff then withdrew and the Board Vert into executive session. Changes in Board's staff. The Secretary was informed later by gWeIllor Shepardson that during the executive session the Board took the t°110ving actions relating to its official staff: (1) Accepted the resignation of Arthur W. Marget, Director, Division of International Finance, effective at the close of business March 26, 1961; (2) Noted that application for retirement, effective at the close of business February 28, 1961, had been made by Fred A. Nelson, Assistant Director, Division of Examinations; 709 2/24/61 -20Appointed Brenton C. Leavitt, Supervisory Review Examiner, Division of Examinations, as Assistant Director of that Division, effective March 1, 1961, with annual salary at the rate of $14,500. (3) The meeting then adjourned. Secretaryts Note: Pursuant to recommendations contained in memoranda from appropriate individuals concerned, Governor Shepardson today approved on behalf of the Board the following items relating to the Board's staff: 9ment of consultant st ,..Mrs. Gertrude Weiss as Consultant in the Division of Research and ro4Q-stics, effective as of January 1, 1961, and until December 31, 1961, tels Continuance of her work in connection with consumer surveys, on a (3rary contractual basis with compensation at the rate of $50 per 0 %ha' for each day worked for the Board either in Washington or outside :City, and, in accordance with the Board's travel regulations, a De $12 for time spent in e. diem in lieu of subsistence in the amount of ravel status in connection with her assignments, and transportation. SQ. increases effective March 5, 1961 Nalze and title Division Basic annual salary To From International Finance ic lIc3bert F. Emery, Economist tr!;therine P. Hichborn, Secretary liZ,t S. Sharigan, Secretary 'tel.]. E. Thorne, Assistant to the Director $ 8,080 5,655 5,655 13,510 $ 8,955 5,820 5,820 13,770 6,765 6,930 Bank Operations ri'41clar Golodner, Analyst 2/24/61 Sai -21ncreases effective March 5, 1961 (continued) Division Basic annual salary To From Examinations Rpc)bert P. Achor, Review Examiner % 1\1. Westmoreland, Jr., Assistant w Review Exami ner cLiker White, Jr., Review Examiner $ 9,995 6,180 10,255 6,345 11,155 11,415 6,015 6,710 6,180 6,875 Office of the Controller n R: 41 S. Glascock, Secretary ---`41e T. Oros, Senior Accounting Technician Administrative Services 141°6- G. Luna, Guard Re nt following maternity leave 3,500 kb Susan Rowzie, Stenographer, Division of Examinations, effective ' IllarY 27, 1961. activity or R,stanley J. Sigel, Chief, Flow of Funds and Savings Section, Division Vaa;search and Statistics, to deliver a series of lectures for the IlriZerbilt University Graduate Program in Economic Development, with the alla tanding that he would receive an honorarium plus travel expenses 'hat his absence would be on annual leave. SecretarY BOARD OF GOVERNORS OF THE • FEDERAL RESERVE SYSTEM WASHINGTON 25. O. C. Item No. 1 2/24/61 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 24, 1961 Board of Directors, The Union Commerce Bank, Cleveland, Ohio. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of Cleveland, the Board of Governors approves the establishment of a branch in Southgate Shopping Center, at the intersection of Warrensville Center and Libby Roads, Maple Heights, Cuyahoga County, Ohio, and a drive-in branch in the rear of and apart from the principal branch in Southgate Shopping Center by The Union Commerce Bank, provided the branches are established within six months from the date of this letter. The Board of Governors also approves, under the Provisions of Section 24A of the Federal Reserve Act, an additional investment of $165,000 in leasehold improvements incident to establishment of the two branches. Very truly yours, (signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 712 BOARD OF GOVERNORS ootto ** V OW 40p OF THE FEDERAL RESERVE SYSTEM 11 * * N* 1 WASHINGTON 25, D. C. 0 Item No. 2 2/24/61 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD kW.OV '4440*-- February 24, 1961 Board of Directors, The Savings Deposit Bank and Trust Company, Elyria, Ohio. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of Cleveland, the Board of Governors of the Federal Reserve System has approved an extension of time until October 1, 1261, in which The Savings DePosit Dank and Trust Company may establish a branch at Lake Avenue and Griswold Road in Elyria Township, Ohio. The establishment of this branch was authorized in a letter dated February 25, 1260. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 7 BOARD OF GOVERNORS 40'4'4114.4 OF THE ICOQ(14,,,*4 44 • '7 , Are Vo 0,91 A* FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ; Item No. 3 2/24/61 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 24, 1961 Board of Directors, The Union Savings & Trust Co., Warren, Ohio. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of Cleveland, the Board of Governors of the Federal Reserve System approves the establishment Of a branch at 132 Niles-Cortland Road, Howland Township, Ohio, by The Union Savings & Trust Co., Warren, Ohio. 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 0Mo** 44'04IN 4ot/ OF THE 1!4-57. FEDERAL RESERVE SYSTEM st* 4* Item No. Ii- 2/24/61 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 24, 1961 Board of Directors, Central Bank of Montana, Great Falls, Montana. Gentlemen: In accordance with a request submitted through the Federal Reserve Bank of Minneapolis, the Board of Governors of the Federal Reserve System extends to September 6, 1961, the time within which Central Bank of Montana, Great Falls, Montana, may accomplish membership in the Federal Reserve SYstem, as outlined in the Board's letter of September 6, 1960, Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, O. C. Item No. 5 2/24/61 ADDRESS ornciikt- CORRESPONDENCE TO THE BOARD February 24, 1961 t,4_0(1 of Directors, "-rat National Bank of Chadron, Ohadrons Nebraska. Gert tlemen: The Board of Governors of the Federal Reserve System has Riven pir, consideration to your application for fiduciary powers and grants 1,141? National Bank of Chadron authority to act, 'when not in contraof.State or local law, as executor and administrator. The 11(k?.Lse of such rights shall be subject to the provisions of Section Govei of the Federal Reserve Act and Regulation F of the Board of IlIc)rs of the Federal Reserve System. b oottrA -e• A formal certificate indicatina, the fiducinry powers that is now authorized to exercise will be forwarded in due Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS 441itittetr, ;*, ec0001 OF THE i FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. 4 , k 4 ADDRESS %.4trast 444*** Item No. 6 2/24/61 * < orriciAL CORRESPONDENCE TO THE BOARD February 24, 1961 Mr. David Cohn, Clearance Officer, .Office of the Statistical Standards, Bureau of the Budget, Washington 25, D. C. Dear Mr. Cohn: Enclosed are two copies of Budget Bureau Form 83 submitting 4 revised report of condition (Form F.R. 105), and the related Plablisher's copies (Forms F.R. 105e and 105e-1), to be used by all State member banks of the Federal Reserve System in response to official calls for such reports. Also enclosed are two copies of the revised form as well as copies of the present form for convenient eference. It is understood that the revised form will also be used by the Comptroller of the Currency and the Federal Deposit Insurance Corporation at the forthcoming spring call date. Changes in the form are outlined in detail in an attachment. . The proposed changes are partly a result of the recent ch e.11Ce in the Federal Deposit Insurance Corporation Act which requires liae of reports of condition for computation of deposit insurance asand partly a result of the need for new data on deposits 1 foreign governments and official inslitutions, on deposits of lisultual savings banks, on the maturity distribution of U. S. Government cecurities, on bank holdings of securities of Federal agencies and t°1Torations not guaranteed by the U. S., and on savings and other 41s deposit& of individuals, partnerships and corporations. These proposed revisions are the result of extensive negoti4tions with representatives of the Federal Deposit Insurance Corporation, the flat %domptroller of the Currency, The Committee on Uniform Reports of the i°11a1 tvsociation of Supervisors of State Banks, and the Committee " Banking of the Advisory Council on Federal Reports. 0'1 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Dovid Cohn The changes, reflected in the form and in the attachment, ore 0imil_ar to those transmitted informally to lir. Crowder with a memorandum ated December 2, 1960, which was considered at a meetin„; of the Comttee on Bankirrj of the Advisory Council on Federal Reports held at Lhe Bureau of the Budget on January 12, 1961. As a result of these di ussiocis proposal to add a new item for deposits of other forein ri c)lders (other than banks, governments, and official insLitutions), was f0P1Ded. The bankers felt the inclusion of this item in the report of 'a°11clition would impose an undue reporting burden on the banks, but 11,,- l'eed that a one-time survey to determine the amount of such deposits by insured commercial banks would not be unreasonable. It was "-so understood that, if this survey indicated the volume of deposits t4 this category was larger than anticipated, the addition of the item ° theOfficial call report would be considered at a lauer date. i If this revised official report of condition is approved, chances will be proposed later for the report of condition (1. by weekly reporting member banks. eorIlse4 'z5pond1ng Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. :Eric.1 • urea Item No. 7 2/24/61 . SAVINGS DEPOSITS NOT EVIDENCED BY A PASS BOOR Regulation Q, Payment of Interest on Deposits, Permits a member bank to classify as "savings deposits" funds of individuals and certain types of corporations that are held by the bank, evidenced only by a written receipt or agreement, Provided "withdrawals are permitted only through payment to the depositor himself but not to any other person whether or not acting for the depositor". The purpose of this prohibition is to eliminate the so-called "agency privilege". The reason for this is that withdrawal by an agent of the depositor merely by presenting a "written receipt or agreement" for a specific amount deposited with the bank could result in the use of such deposits, in effect, as checking accounts. For example, in lieu of taking one "receipt" for his deposit of, say, $100„ the depositor could request 20 receipts for $5 each. Then, when he wished to pay a bill, he could '2arld his creditor sufficient receipts and the latter, as his "agent", could present them for payment. This procedure is Possible with a savings deposit evidenced by a pass book, but „t.he cumbersome procedure of turning the pass book over to a uhird party is a deterrent to the use of such savings accounts for checking purposes. At least not more than one so-called 21.1eck could be outstanding against the savings account at any b e; because the depositor would have to regain the pass book "fore turning it over to another person for a second withdrawal of funds. With respect to the use of deposits not evidenced by a Pass book as collateral to a loan either by the bank or by third person, the above quoted provision renders ineffective rls,ILI?h use, since only the depositor himself may receive payment. 'flle likewise prevents the use of such deposits, in effect, for checking purposes. BOARD OF GOVERNORS Item No. 8 2/24/61 OF THE FEDERAL RESERVE SYSTEM WASHINGTON : 4\;t443,t 610f,") OFFICE OF THE CHAIRMAN February 24, 1961 The Honorable David E. Bell, D irector, Bureau of the Budget, executive Office of the President, Washington 25, D. C. tear Mr. Bell: The President's memorandum of February 2, 1961, addressed t° of ExecLtive Departments and Agencies," requested that Procurement, and maintenance, repair, and construction projects, be accelerated and directed that a report on construction or other lpieets which could be initiated quickly, but for which additional unds might be required, be submitted no later than February 25. Although the expenditures of the Board of Governors and the , Federal Reserve Banks do not come from appropriated funds of the rvernment, the Board has suggested to the Reserve Banks that they .rcelerate procurement plans and maintenance and repair work for the ar 1961 insofar as practicable. Also, information was obtained °111 the Reserve Banks regarding expenditures for projects that could be moved forward from 1962 and subsequent years. g Since we do not have monthly figures, we cannot give the tigo, b„ requested by months. However, the Federal Reserve Banks have Zgeted for the year 1961 $3,100,000 for furniture and equipment 4 ;base s ; $7,200,000 for printing, stationery, and supplies; and 13 2°0,000 for repairs and maintenance. As indicated above, the ' ,43 will endeavor to accelerate these procurement expenditures. Estimated expenditures for construction projects planned tor , -062 or later that can be moved forward to 1961 total ',533,000. herirp. construction projects already planned for the calendar year 1961 110;olve estimated expenditures of 0,121,000, most of which applies to k already underway which is progressing as rapidly as possibl e. iicnorable David E. Bell There is a limitation in the law on the amount that may be „Pent for the erection of Federal Reserve Bank branch buildings, 61 the existing authorization has practically all been used. Zstruction programs that could be undertaken promptly, if the law total $9$643$000• The Board has submitted to the Banking '71nitAed$ kid PencY Committees of the Congress proposed legislation to "qt this construction. ?ed._ The foregoing information relates to expenditures by the Reserve Banks. As far as the Boards activities in the Washington area 4rt c t4)11 oncerned, its procurement expenditures for 1961 are estimated Drin2,81ightly over $400,000. These consist mainly of expenses for q t,' routine office supplies, and the replacement and maintenance Pres sniture and equipment. In keeping with the spirit of the to: sdent's letter, the Board has instructed its procurement people ' eelerate its purchases wherever possible. Sincerely yours, (Signed) Mt. McC. Martin, Jr. Wm. McC. Martin, Jr. c"f Item No. 9 2/24/61 FEDERAL RESERVE SYSTEM (12 CFR Part 204] (Reg. IA RESERVES OF MEMBER BANKS Notice of Proposed Rule Making The Board of Governors of the Federal Reser ve System is considering amending Part 204 [Regulation D) for the following purposes: (1) to provide a new basis for classifyin g reserve cities that would supersede the basis adopt ed by the Board in 1947) and (2) at the same time to set forth the facto rs that will be.coneidered by the Board in passing upon applicatio ns by individual member banks in reserve or central reserve citie s for permission to maintain reserves presc ribed for banks not located in reserve or central reserve cities. The proposed amendments are designed to implement the purposes of section 19 of the Federal Reser ve Act as amended by the Act of July 28, 1959 (73 Stat. 263). If the proposed amendments are adopted, the effec would be to t classify as reserve cities, in addit ion to cities in which there 4re Federal Reserve Banks or branches of Feder al Reserve Banks, every city in which, during 1960, (1) all member banks had aggregate average demand deposits equal to 2/5 of one per cent ($487 million) or more of the United States total of demand clePceits of all member banks of the Federal Reserve System, or -2(2) one member bank had average demand depos its equal to 1/4 of one per cent (304 million) or more of the United States total, or (3) all member banks had aggre gate average inter-bank demand deposits equal to 2/5 of one per cent ($53 million) or more of the United States total of such deposits. As a result, (1) the , following existing reserve cities, in addition toFederal Reserve Bank and Reserve Bank branch cities (exc ept New York and Chicago O. until July 28, 1962) would be continued as reserve cities: Columbus, Ohio; Des Manes, Iowa; Ft. Worth, Texas; Indianapolis, Indiana; Miami, Florida; Milwaukee, Wisconsin; National City (National Stock Yards), Illinois; St. Paul, Minnesota; Tuls a, Oklahoma; and . Washington, D. C.; (2)-the following existing reser ve cities would be discontinued as reserve cities effective June 1, 1961, unless requests for their continuance as such are grant ed by the Board as provided in the proposed amendments: Kansas City, Kansas; Pueblo, Colorado; Toledo, Ohio; Topeka, Kansas; and Wichita, Kansas; and (3) the following cities would be designated as additional reserve cities effective June 1, 1962: Albany, New York; Hartford, Connecticut; Newark, New Jersey; Phoenix, Arizona; Savan nah, Georgia; and Winston-Salem, North Carolina'. Individual member banks in newly designated reserve cities, as well as banks in existing reserve or central reserve cities not heretofore granted such permi ssion, Would be entitled to apply to the Board for permission to carry _3_ country-bank reserves, in which event such applications would be considered in the light of the factors stated in the proposed amendments. The proposed amendments would read as follows: 1. Subparagraph (2) of paragraph (a) of section 204.2 is amended to read as follows: (* Notwithstanding the provisions of subparagraph (1) of this paragraph, a member bank located in a central reserve city Or in a reserve city may hold and maintain the reserve balances . *which are in effect for member banks not located in reserve or central reserve cities if, upon application to the Board of Governors, the Board grants permibsion for the holding and maintainof such lower reserve balances after consideration of all factors relating to the character of such banks business, including, but not limited to, the amount of such member bankls total assets, the amount of its total deposits, the amount of its total cismand deposits, the amount of its demand deposits owing to banks, the nature of its depositors and borrowers, the rate of activity °f its demand deposits, the amount and frequency of its borrowings fl'om its Federal Reserve Bank or other lenders, its geographical location within the city, and its competitive position with relation to other banks in the city. Any such permission shall be subject to -4revocation by the Board at any time in the light of changed circumstances, and all such grants of permission may be subject to annual review by the Board. 2. Part 204 is amended by inserting after section 204.3 thereof anew section to read as follows: SECTION 204.4. CLASSIFICATION OF CITIES FOR RESERVE PURPOSES (a) Effective June 1, 1961, except as otherwise provided in Paragraph (c) hereof, the following cities shall be classified as reserve cities: (1) Every city (except New York and Chicago until July 28, 1962) in which there is situated a Federal Reserve Bank or a branch of a Federal Reserve Bank. (2) Every city in which the aggregate average daily amount of the ttal demand deposits (including such deposits held at both in-town and out-of-town offices) of all member banks of the Federal Reserve System which had their head offices in such city on January 1, 1961, was equal, during the calendar year 1960, to 2/5 of one per cent or more of the aggregate average daily amount °f demand deposits held by all member banks of the Federal Reserve aYsteme (3) Every city in which there was situated on January 1, 1961, the head office of a member bank which, during the calendar year 1960) had an aggregate average daily amount of total demand deposits (including such deposits held at both in-town and out-of-town offices) equal to 1/4 of one per cent or more of the aggregate average daily amount of demand deposits held by all member banks Of the Federal Reserve System. • of (0 Every city in which the aggregate average daily amount the demand deposits owing to banks (including such depsits held at both in-town and out-of-town offices) of all member banks of the Federal Reserve System which had their head offices in such city on January 1, 1961, was equal, during the calendar year 1960, to 2/5 of one per cent or more of the aggregate average daily amount of demand deposits owing to banks held by all member banks Of the Federal Reserve System. (5) Any city classified as a reserve city on January 1, 1961, but not falling within the scope of subparagraphs (2), (3), or (4) above, if a written request for the continuance of such city as a reserve city (together with a certified copy of a resolution of the board of directors of such member bank duly authorizing such Federal Reserve request) is received on or before May 15, 1961, by the at least one Ear* of thedistrict in which the city is located from if such Member bank which has its head office in such city, and Nquest is granted by the Board of Governors. June 1 of (b) Effective as of June 10 1964, and as of rs will each third year after June 1, 1964, the Board of Governo continue previously made reserve city classifications, designate additional cities as reserve cities, and terminate reserve city classifications of cities previously designated as such, in accordance with the standards set forth in paragraph (a) above; except that (1) such action will be based upon deposits of member banks which had their head offices in such cities on January 1, 1964, or on January 1 of each third year after 1964, (2) average daily deposit amounts will be computed for the calendar year preceding such action, and (3) requests for continuance of reserve . °1-tY designations as provided in subparagraph (5) of paragraph (a) vill be considered if received by the Federal Reserve Bank of the appropriate district not later than one month prior to the effective date of such action. (c) Notwithstanding other provisions of this section, the classification of any city as an additional reserve city pursuant to either paragraph (a) or paragraph (b) shall not become effective 114til one year after the date as of which its classification would Otherwise be effective under such paragraphs or until after such 1(Inger period as the Board may prescribe. (3) Effective June 1, 1961, subparagraph (b) of section 204.51 clt Part 2014, relating to classification of reserve cities, and ecotions 204.52 and 204.53 are revoked. 4. Effective July 28, 1962, subparagraph (a) of section 204.51, relating to classification of central reserve cities, is revoked. This notice is published pursuant to section 4 of the Administrative Procedure Act and section 2 of the rules of procedure of the Board of Governors of the Federal Reserve System (12 CFR 262.2). Authority to amend this Part is contained in sections 11(e), 11(i), and 19 of the Federal Reserve Act as amended (12 U.S.C. 248(e), (i), 461, 462, 462b). To aid in the consideration of the foregoing matter, the Board 16-11 consider any relevant data, views, or arguments that may be l'eceived in writing not later than April 1, 1961. Although such. Material may be sent directly to the Board, it is preferable that it be sent to the Federal Reserve Bank of the appropriate district for tr ansmittal to the Board. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (sEAL) (Signed) Merritt Sherman Merritt Sherman, Secretary. BOARD OF GOVERNORS 0,,d1,1*1•14.4 OF THE Item No. 10 2/24/61 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. 1..to ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD V1.1)\V 4**4 ' February 24, 1961 CONFIDENTIAL (FR) Mr. W. D. Milton, President, Federal Reserve Bank of Cleveland, Cleveland 1, Ohio. Dear Mr. Fulton: The Board of Governors approves the payment of salary to the following officer of the Federal Reserve Bank of Cleveland, for the period March 1 through December 31, 1961, at the rate indicated, which is the rate fixed by your Board of Directors as reported in your letter of February 9, 1961: Name Title Fred O. Kiel Vice President Annual Salau $17,000 It is noted that Mr. Kiel will be assigned to the Cincinnati Branch* It will be appreciated if you will advise the Board the date the transfer is made. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary.
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