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Minutes for
To:
Members of the Board
From:
Office Of the Secretary
February 27, 1963
Attached is a copy of the minutes of the
Board of Governors of the Federal Reserve System on
the above date.
It is not proposed to include a statement
with respect to any of the entries in this set of
minutes in the record of policy actions required to
be maintained pursuant to section 10 of the Federal
Reserve Act.
Should you have any question with regard to
the minutes, it will be appreciated if, you will advise
the Secretary's Office. Otherwise, please initial
below. If you were present at the meeting, your
initials will indicate approval of the minutes. If
you were not present, your initials will indicate
only that you have seen the minutes.
Chin. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell
197
Minutes of the Board of Governors of the Federal Reserve
System on Wednesday, February 27, 1963.
The Board met in the Board
Room at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Mills
Robertson
Shepardson
Mitchell
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Sherman, Secretary
Kenyon, Assistant Secretary
Molony, Assistant to the Board
Fauver, Assistant to the Board
Hackley, General Counsel
Noyes, Director, Division of Research
and Statistics
Farrell, Director, Division of Bank
Operations
Solomon, Director, Division of
Examinations
Johnson, Director, Division of
Personnel Administration
Connell, Controller
O'Connell, Assistant General Counsel
Shay, Assistant General Counsel
Sammons, Adviser, Division of
International Finance
Kiley, Assistant Director, Division
of Bank Operations
Smith, Assistant Director, Division
of Examinations
Leavitt, Assistant Director, Division of
Examinations
Thompson, Assistant Director, Division
of Examinations
Spencer, General Assistant, Office of
the Secretary
Hill, Attorney, Legal Division
Lyon, Review Examiner, Division
of Examinations
Noory, Assistant Review Examiner, Division
of Examinations
Brennan, Personnel Assistant, Division
of Personnel Administration
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2/27/63
Discount rates.
The establishment without change by the
Federal Reserve Bank of Atlanta on February 26, 1963, of the rates on
discounts and advances in its existing schedule was approved unanimously,
With the understanding that appropriate advice would be sent to that
Bank.
Distributed items.
The following items, copies of which are
attached to these minutes under the respective item numbers indicated,
were approved unanimously:
Item No.
Telegram to the Federal Reserve Bank of
Philadelphia interposing no objection to the
acquisition of additional electronic check
handling equipment.
1
Letter to the Bank of Brazil and the Superintendency of Money and Credit, Rio de Janeiro,
Brazil, regarding Federal Reserve System
Participation in the Seventh Meeting of
Technicians of the Central Banks of the American
Continent.
2
Application of Commercial and Savings Bank of St. Clair
(Items 3 and 4).
Pursuant to the decision reached at the meeting on
February 21, 1963, there had been distributed a proposed order and
statement reflecting Board approval of the application of The Commercial
and Savings Bank of St. Clair, St. Clair, Michigan, to consolidate with
The Citizens State Bank of Emmett, Emmett, Michigan.
There being no objection, the issuance of the order and
statement was authorized.
Copies of the order and statement, as issued,
are attached to these minutes as Items 3 and 4.
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2/27/63
-3Messrs. Shay and Hill then withdrew from the meeting.
Application of Brenton Companies, Inc.
There had been
distributed a memorandum from the Division of Examinations dated
February 20, 1963, and other pertinent papers regarding the application
of Brenton Companies, Inc., Des Moines, Iowa, to acquire
60 per cent
or more of the shares of First National Bank of Davenport, Davenport,
Iowa, a proposed new bank.
The recommendation of the Division was
favorable.
At the Board's request, Mr. Thompson made a statement regarding
the facts of the case and the reasons underlying the recommendation of
the Division of Examinations, his comments being based substantially on
the information in the February 20 memorandum.
In discussion, Governor Mitchell described the area in which
the proposed bank was to be located and expressed the opinion that in
view of the characteristics of the area First National would probably
develop into more than a neighborhood bank.
That factor seemed to make
a stronger case for approval.
Governor Mills indicated that he felt the application should
be approved, particularly because it would appear to introduce into the
area an additional strong and well-managed banking institution.
He had
wondered about the decision to establish a suburban bank, but he
gathered from Governor Mitchell's comments that the proposed location,
With its potential industrial possibilities, would result in First
National becoming more than a neighborhood type of bank.
m`i
..14 _
2/27/63
The application was then approved unanimously, with the
understanding that an order and statement reflecting this decision would
be prepared for the Board's consideration.
Messrs. Thompson, Lyon, and Noory then withdrew from the
meeting.
50th anniversary of the Federal Reserve System.
There had
been circulated a memorandum dated February 21, 1963, from Mr. Sherman
to which there were attached copies of letters dated January 30 and
February 11, 1963, from Mr. Harry A. Shuford, President of the Federal
Reserve Bank of St. Louis, in his capacity as Chairman of the Committee
on Bank and Public Relations of the Conference of Presidents.
The
letters related to the observance of the 50th anniversary of the Federal
Reserve System, in which connection certain recommendations had been
made to the Committee on Bank and Public Relations by the Subcommittee
on Bank and Public Relations and the System Committee on Education
and Publications.
These recommendations had been transmitted to the
a
Presidents of the respective Reserve Banks and had been approved by
majority of the Presidents.
The Board's views were now requested,
be requested
Particularly with respect to a proposal that the Post Office
to issue a commemorative stamp during 1964.
It was pointed out that a
request should be made promptly to the Postmaster General if such a
stamp was to be issued in 1964.
stated that while he had no
In discussion, Governor Robertson
ry of the System in
Objection to commemorating the 50th anniversa
1
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2/27/63
appropriate ways, he did question use of 1964 as the anniversary date.
It was his feeling, in which Governor Mills concurred, that it would be
more appropriate to observe, by means of a commemorative stamp and
otherwise, the fact that the Federal Reserve Act had been signed by
President Wilson on December 23, 1913.
There ensued a general discussion during which reference was
made, among other things, to the signing of the Act in December 1913)
the first meeting of the Federal Reserve Board on August 13, 1914, and the
Opening of the Federal Reserve Banks on November 16, 1914.
The thought
was expressed that observance of the 50th anniversary of the System
might appropriately begin with a date 50 years from the signing of the
Act, which would be December 23, 1963, with the Observance continuing
during the succeeding 12 months.
Attention was called to the difficulty
of having commemorative stamps issued, it being pointed out that the
Post Office received numerous requests and usually required submission
Of the design of a proposed stamp as much as 18 months before the date
Of issue.
The discussion also touched upon the kinds of activities that
y
would seem most suitable for commemoration of the 50th anniversar
of the System, and several comments by members of the Board reflected
that would tend to
a view that the emphasis should be on projects
Promote public understanding of the System's purposes and functions.
There was a suggestion that consideration might be given to making some
,,c)2
1 4,
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2/27/63
reference to the 50th anniversary in the holiday greeting card or
letter sent to the heads of other central banks this year.
After further discussion, it was agreed to endorse the idea
of a commemorative stamp, although without overemphasizing the importance
It was also agreed that further consideration would
of the project.
be given to other steps that might appropriately be taken in observance
of the 50th anniversary of the System.
Messrs. Noyes, O'Connell, and Sammons withdrew from the
meeting at this point.
Authorization for actuarial computations on the Retirement
System.
There had been distributed a memorandum dated February 15,
1963, from the Division of Personnel Administration recommending that
Mr. George B. Buck, Actuary of the Retirement System, be invited to
discuss with the Board the report submitted by Professor Dan M. McGill
of the Wharton School of Finance and Commerce, University of Pennsylvania,
under date of December
5, 1962, entitled "Mortality and Interest
Banks."
Assumptions for the Retirement System of the Federal Reserve
of a letter
Attached to the Personnel Division's memorandum was a copy
dated February
8, 1963, from Professor McGill advising of the fee that
making certain actuarial
Mr. Buck had indicated he would charge for
the maximum total cost
computations relating to the Retirement System;
would be $4,500.
It was pointed out that following his meeting with the
McGill had requested Mr. Buck to
Board on January 24, 1963, Professor
inform him of the charges that the latter's organization would make for
such computations.
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2/27/63
The computations suggested by Professor McGill included
(1) a measurement of the liabilities of the Retirement System if such
System were to be terminated; (2) the cost of providing a straight
life annuity of $12 a year for persons retiring at age 65 on the
basis of certain interest rate and mortality assumptions; and (3)
annual contribution rates for the Reserve Banks and the Board under
certain interest rate and mortality assumptions.
The question involved at this point was one of procedure.
It was the view of the Personnel Division that it would be desirable
as a next step to invite Mr. Buck to meet with the Board.
While
a discussion with Mr. Buck might result in some or all of the aforementioned computations being regarded as desirable, Mr. Buck might
suggest a need for other computations.
Such a meeting would also
give him an opportunity to explain his position on the recommendations
concerning mortality tables and interest rate assumptions that had
formed the basis for the Retirement Committee's earlier report and
recommendations to the Board of Trustees of the Retirement System.
It developed, however, from discussion at this meeting
that the consensus favored a procedure whereby the computations
suggested by Professor McGill would be made by Mr. Buck, so that such
information would be in hand and could be studied by the Board before
a meeting was held with Mr. Buck.
It was felt that the availability
Of these computations would be helpful in reviewing with Mr. Buck the
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2/27/63
recommendations made by Professor McGill in the latter's memorandum
of December
5, 1962.
Governor Mitchell dissented from this consensus, it being
his view that the Board was in a position to act on the recommendations
Of the Retirement Committee with respect to mortality tables and
interest rates, leaving for subsequent consideration the recommendations
of Professor McGill on other features of the Retirement System.
He
would be willing to meet with Mr. Buck, but he saw no need to defer
the meeting pending the availability of the computations suggested
by Professor McGill.
In line with the majority view on procedure, it was understood that arrangements would be made for Mr. Buck to undertake the
computations suggested by Professor McGill, after which the Board
could meet with Mr. Buck on a mutually convenient date.
This action
on the part of the Board served to authorize such overexpenditure in
the 1963 Board budget as might be occasioned by the cost (up to a
maximum of $4,500) of the computations to be made by Mr. Buck.
Services of Professor McGill.
In connection with the preceding
had approved on behalf
discussion, Governor Shepardson reported that he
of the Board the recommendation contained in a memorandum dated
y of the Board, that the
February 26, 1963, from Mr. Sherman, Secretar
be extended to cover the
contract for the services of Professor McGill
$200
Period January through June 1963, with compensation at the rate of
Per day for each day worked for the Board plus necessary expenses
incurred by him.
pmy
2/27/63
No objection was expressed by the Board regarding this
arrangement, and such budget overexpenditure as might be occasioned
thereby was authorized.
Messrs. Leavitt, Spencer, and Brennan then withdrew from
the meeting.
Report of examination of Atlanta Reserve Bank.
The report
on the examination of the Federal Reserve Bank of Atlanta made by
the Board's examining staff as of September 7, 1962, had been circulated
to the Board, along with the usual accompanying memoranda.
Mr. Smith commented on the information disclosed by the
examination, and there appeared to be no matters requiring specific
action on the part of the Board at this time.
However, there was a
brief discussion concerning the premises of the Jacksonville Branch
during which members of the Board expressed the view that the question
of the need for establishing a Federal Reserve branch office in Miami,
Florida, should be explored, at the Board's initiative.
It was brought
out that the manner in which this question was resolved would appear
to have a bearing on the need for expansion of the Jacksonville Branch
premises.
The meeting then adjourned.
Secretary's Notes: Pursuant to the
recommendation contained in a memorandum from the Division of Administrative
Services, Governor Shepardson today
approved on behalf of the Board an
advance of sick leave for William R.
McDonald, Building Maintenance Clerk
in that Division, for the period from
February 8 (half-hour) through February
21, 1963.
2/27/63
-10Governor Shepardson today noted on
behalf of the Board a memorandum
advising of the retirement of Ruth A.
Brown, Telegraph Operator, Division
of Administrative Services, effective
at the close of business on February 28,
1963.
Item No. 1
2/27/63
AM
TELEGR
WIRE SERVICE
LEASED
M
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTE
WASHINGTON
February 27, 1963
Hilkert - Philadelphia
of third comBoard interposes no objection to rental
ent proposed in urlet
Plement of high-speed check handling equipm
Bank has now decided to
February 8, 1963. Board understands your
with an IBM 1420
rent an IBM 1401-1419 system and replace it
ent.
system in 1964 under a purchase-option agreem
(Signed) Merritt Sherman
SIERPIAN
OS
Item No. 2
2/27/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINCITON
OFFICE OF THE CHAIRMAN
March 1, 1963.
AIR MAIL
Mr. Ney Neves Galva°, Presidents,
Banco do Brasil, S. A.,
and Mr. Julio de Souza Avellar, Director-Executivo,
Superintendencia da Moeda e do Credito,
Caixa Postal 495, zc, oo,
Rio de Janeiro (GB), Brasil.
Dear Messrs. Galvao and Avellar:
Thank you for your letter of January 10, 1963,
inviting the Federal Reserve System to participate in the
Seventh Meeting of Technicians of the Central Banks of the
American Continent, to be held in Rio de Janeiro beginning
October 14, 1963.
The Board of Governors is pleased to accept this
invitation on behalf of the Federal Reserve System. Mr. Robert
L. Sammons, Adviser in the Board's Division of International
Finance, has been designated to serve as technical secretary
of the System's delegation to the meeting and will transmit
to you in the near future suggestions regarding the proposed
agenda.
letter, the
In accordance with the request in your
being brought
is
October
meeting
the
System's participation in
While
Banks.
Reserve
Federal
twelve
to the attention of all
of the
behalf
on
nce
accepta
an
as
this letter may be considered
Reserve
Federal
the
from
hear
also
System, you will undoubtedly
and a separate invitation
Bank of New York, to which I underst
Federal Ressrve Banks.
other
was forwarded,and possibly from
you with the names of
furnish
At a later date, the Board will
s delegation.
System'
the
those persons who will compose
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
Wm. McC. Martin, Jr.
'4)9
Item No.
3
2/27/63
UNITLD STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.
In the Matter of the Application of
THE COMAERCIAL AND SAVINGS BANK OF ST. CLAW
for approval of consolidation with
The Citizens State Bank of Emmett
ORDER APPROVING CONSOLIDATION OF BANNS
There has come before the Board of Governors, pursuant to the
Bank Merger Act of 1960 (12 U.S.C. 1828(c)), an application by The
Commercial and Savings Bank of St. Clair, St. Clair, Michigan, a State
chartered member bank of the Federal Reserve System, for the Board's
Prior approval of the consolidation of that bank and The Citizens State
Bank of Emmett, Emmett, Michigan, under the charter of the former and
With the title of The Commercial and Savings Bank of St. Clair County.
As an incident to the consolidation, the sole office of The Citizens
State Bank of Emmett would be operated as a branch of The Commercial and
Savings Bank of St. Clair County.
Notice of the proposed consolidation,
in form approved by the Board:has been published pursuant to said Act.
Upon consideration of all relevant material in the light of
the factors set forth in said Act, including reports furnished by the
Comptroller of the Currency, the Federal Deposit Insurance Corporation,
and the Department of Justice on the competitive factors involved in the
proposed consolidation,
IT IS HEREBY ORDERED, for the reasons set forth in the Board's
Statement of this date, that said application be and hereby is approved,
Provided that said consolidation shall not be consummated (a) within
seven calendar days after the date of this Order or (b) later than three
months after said date.
Dated at Washington, D. C., this 27th day of February, 1963.
By order of the Board of Governors.
Voting for this action: Chairman Martin, and
Governors Balderston, Robertson, Shepardson, and Mitchell.
Absent and not voting: Governors Mills and King.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Item No. 4
2/27/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY THE COMMERCIAL AND SAVINGS BANK OF ST. CLAIR
FOR APPROVAL OF CONSOLIDATION WITH
THE CITIZENS STATE BANK OF EMMETT
STATEMENT
The Commercial and Savings Bank of St. Clair, St. Clair,
Michigan ("Commercial Bank"), a member State bank of the Federal Reserve
SYstem, with deposits of $12.5 million as of November 30, 1962, has
aPplied, pursuant to the Bank Merger Act of 1960 (12 U.S.C. 1828(c)),
Or the Board's prior approval of the consolidation of that bank and
The Citizens State Bank of Emmett, Emmett, Michigan ("Citizens Bank"),
with deposits of $2.4 million as of the same date.
The banks would
consolidate under the charter of Commercial Bank and under the title of
The Commercial and Savings Bank of St. Clair County.
As an incident to
the consolidation, the sole office of Citizens Bank would become a
branch of the resulting bank, increasing the number of offices of
CoMmercial Bank from one to two.
r, as to each
Under the Act, the Board is required to conside
cr the banks involved, (1) its financial history and condition, (2) the
adequacy of its capital structure, (3) its future earnings prospects,
(4) the general character of its management, (5) whether its corporate
Powers are consistent with the purposes of 12 U.S.C., Ch. 16 (the Federal
1'1
'12
-2-
Deposit Insurance Act), ( ) the convenience and needs of the community
to be served, and (7) the effect of the transaction on competition
(including any tendency toward monopoly), The Board may not approve
the transaction unless, after considering all these factors, it finds
the transaction to be in the public interest.
Banking factors. - The financial history and condition, and
the capital structure of each bank are satisfactory.
Prospects of Commercial Bank are favorable.
The earnings
Consummation of the trans-
action would provide a basis for improved earning power to what has been
the operation of Citizens Bank, the earnings prospects of which are only
fairs
Management of Commercial Bank is regarded as experienced and
well qualified.
Effectuation of the proposal would add management
strength to the banking operation in Emmett and would solve the management problem that recently arose with the death of the principal executive
officer of Citizens Bank.
The resulting bank, which would be under the management of
Commercial Bank, would have a sound financial condition, an adequate
capital structure, and favorable earnings prospects.
There is no indication that the corporate powers of the banks
are, or would be, inconsistent with 12 U.S.C., Ch. 16.
Convenience and needs of the communities. - The single office
Of Commercial Bank is the only bank in St. Clair (1960 city population
4,500; service area population 15,000). St. Clair, which is about fifty
miles from Detroit, is situated on the west bank of the St. Clair River,
part of the international boundary between Canada and the United States.
Port Huron (1960 population 36,100), the seat of St. Clair County, is
twelve miles north of St. Clair. The service area of Commercial Bank
encompasses a section west of the St. Clair River that lies in a semicircular area extending five to nine miles distance from St. Clair.
The sole office of Citizens Bank is the only bank in Emmett
(1960 village population 283; service area population 5,000).
Emmett,
which is also in St. Clair County, is twenty-one miles northwest of
St. Clair and nineteen miles west of Port Huron. The scrvice area of
Citizens Bank extends in a radius of six to nine miles from Emmett.
Consummation of the proposal would have no effect on the
convenience and needs of St. Clair.
While there does not appear to be
strong need for additional banking services in Emmett, the resulting
bank expects to meet such demand for additional services as there may
be in that area.
Competition. - The service areas of Commercial Bank and
Citizens Bank do not overlap, and there is little, if any, competition
between the two banks.
An independent bank in Port Huron and the Port Huron branches
of a large bank in Lansing, Michigan, dominate banking competition in
St. Clair County.
The proposed transaction would consolidate the small-
est with the third largest of nine banks within the combined service
areas of the two participating banks.
Commercial Bank*s proportionate
Share of bank loans and of deposits of individuals, partnerships, and
corporations in the combined service areas would increase by 1.5 per cent
and 2.0 per cent, respectively. The bank would continue to be third
largest in the area, holding about 12 per cent of deposits in the combined
service areas.
The proposed transaction would not have significant effect on
banking competition in any section of St. Clair County.
Summary and conclusion. - Consummation of the proposal would
(2)1ve the management and earnings problems existing at Citizens Bank.
there appears to be little need for increased banking services in
flrmett, any demand therefor would be met by the resulting bank. Consummati°n of the consolidation would have a negligible effect on competition in
the area.
Accordingly, the Board finds the proposed transaction to be in
the public interest.
P
ebruary 27, 1963.
@FedFRASER