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i58 Minutes of actions taken by the Board of Governors of the Fed— eral Reserve System on Friday, February 4, 1955. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Szymczak Vardaman Robertson Balderston Carpenter, Secretary Sherman, Assistant Secretary Kenyon, Assistant Secretary Thurston, Assistant to the Board Riefler, Assistant to the Chairman Thomas, Economic Adviser to the Board Vest, General Counsel Young, Director, Division of Research and Statistics Mr. Sloan, Director, Division of Examinations Mr. Hackley, Assistant General Counsel Mr. Thompson, Federal Reserve Examiner, Division of Examinations Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. The following matters, which had been circulated among the mom— of the Board, were presented for consideration and the action taken in each instance was as indicated: 3 . Letter to the Honorable Philip Young, Chairman, United States Civil "vice Commission, Washington, D. Cop reading as follows: In accordance with the regulations established by the Civil Service Commission in connection with the administra— tion of the Federal Employees Group Life Insurance Act of 1954, Mr. H. Franklin Sprecher, Jr., Assistant Director of the Division of Personnel Administration, has been desig— nated as the Insurance Officer for the Board of Governors of the Federal Reserve System. Approved unanimously. Letter to Mr. Willis, Secretary, Federal Reserve Bank of New York, readingn as follows: Reference is made to your letter of January 25, 1955, advising that, in response to a request received from Mr. c tr• —2— R. E. Peterson, Director of Office of Personnel, Foreign Operations Administration, Washington, D. C., the services of Mr. Frank W. Schiff, Economist in the Domestic Research Division, and Mr. Alan R. Holmes, Economist in the Foreign Research Division, Research Department, are being made available to enable them to act as consultants to the Foreign Operations Administration mission to Indochina. It is noted that Messrs. Schiff and Holmes have been granted leaves of absence without pay for a period of approx— imately six months, plus travel time, commencing with and contingent upon the securing of necessary clearance pertaining to their employment with the Foreign Operations Administration. It is noted further that Mr. Holmes will, in effect, assist Mr. Schiff in carrying forward the work performed by Mr. Bloom— field, who is now returning from Indochina. The Peard of Governors will interpose no objection to the arrangements made with respect to Messrs. Schiff and Holmes as described in your letter. Approved unanimously. Letter to the Board of Directors, Bank of Commerce, Lexington, Kentucky, reading as follows: 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 1974 Harrodsburg Road, Fayette County, Kentucky, by Bank of Commerce, Lexington, Kentucky, provided the branch is established within six months of the date of this letter. Approved unanimously, for transmittal through the Federal Reserve Bank of Cleveland. There were presented telegrams to the Federal Reserve Banks of Boston, New York, Philadelphia, St. Louis, and San Francisco approving the establishment without change by the Federal Reserve Banks of Boston and St. Louis on January 31, by the Federal Reserve Bank of San Francisco °11 February 21 and by the Federal Reserve Banks of New York and Philadelphia °n February 3, 1955, of the rates of discount and purchase in their existing sc hedules. Approved unanimously. 160 At its meeting on November h, 1951, the Board adopted a general Policy of making favorable determinations under section 301 of the Bank— ing Act of 1935 as a normal matter in all so—called "one—bank" cases, with the understanding that such a determination might be declined in any extraordinary case in which such action seemed necessary. In connection with the adoption of this policy, the Board requested that a review be made of 22 cases in which favorable determinations had been made and were out— standing, but which appeared to present some questionable aspects. At its meeting on December 2, 1954, the Board also requested that a review be made of four one—bank cases in which section 301 determinations were declined during 1954. Accordingly, the following memoranda had been prepared and circulated to the members of the Board prior to this meeting: 1. Memorandum dated December 17, 1954, from the Division of Examinations reviewing the 22 out— standing cases that had been referred to as questionable. The memorandum recommended that no action be taken to rescind any of the deter— minations. 2. Memorandum from the Division of Examinations dated December 200 1954, reviewing the four ap— plications for section 301 determinations which were denied in 1954. In two of these cases, it was found that the holding company affiliate relationship no longer existed. In the other two cases (Main Line, Inc., of Wilmington, Dela— ware, and Friendly Finance Company, of St. Louis, Missouri), it was recommended, from a supervisory and practical viewpoint, that the decisions of the Board in declining favorable determinations be continued. 3. Memorandum from Mr. Hackley dated January 13, 1955, discussing the reviews made by the Division of Examinations and concurring in the recommenda— tions of that Division. •• 2/4/55 ' -4At the request of the Board, Mr. Hackley commented on the reviews Which had been made and summarized the reasons, for the recommendations contained therein. as stated in the memoranda, Messrs. Vest, Sloan, and Thompson indicated that they concurred in the views expressed by Mr. Haekley. During a discussion of the matter, question was raised as to what information was available to the Division of Examinations in reviewing cases involving favorable section 301 determinations to determine whether there had been any material change in the factual situation which would appear to warrant rescission of such determinations. Following a statement by Mr. Thompson regarding the data obtainable from reports of examination, Governor Robertson reiterated the view (Which he expressed at the meeting on January 19) 1955, in connection with a discussion of certain material regarding holding companies owning only one member bank that had been requested by Congressman Spence, Chairman of the House Banking and Currency Committee) that steps should be taken through the Federal Reserve Banks to make sure that the Board had in its possession adequate current information regarding such holding companies for the purpose of reviewing each situation. He also suggested that a review of all outstanding cases should be made by the Board °nee each year. The other members of the Board expressed general agreement with Governor Robertson's position, and the discussion which followed con— cerned the extent to which the accumulation of such information would be feasible and the methods by which this might be accomplished. Following a statement by Chairman Martin that this was not an occasion which appeared to call for a letter from the Board requesting information regarding the 2/4/55 holding companies, it was suggested that the Division of Examinations be asked to contact the bank examination departments of the Federal Reserve Banks by letter or otherwise on the basis that the Division had reviewed outstanding section 301 determinations at the request of the Board and that the Division would like to have, in addition to such information as Was already available to it, information from the Federal Reserve Banks as to whether there had been any substantial change in the factual situ— ation in any outstanding case that might call for reconsideration of the holding company affiliate status. Under the procedure suggested, it would be left to the judgment of the Federal Reserve Banks as to how any informa— tion deemed necessary in a given case should be obtained. At the conclusion of the dis— cussion, the matter was referred to the Division of Examinations with the request that additional information relative to the outstanding determina— tions be obtained in the manner sug— gested. Messrs. Sloan, Hackley„ and Thompson then withdrew from the meeting. In accordance with the understanding at the meeting yesterday, there were distributed for the further consideration of the Board three alterna— tive drafts covering the statement in the policy record section for the Board's 1954 Annual Report of the votes on the amendments to Regulations J, Check Clearing and Collection, and G, Collection of Noncash Items, approved on July 2, 1954. Following a discussion of the alternative drafts, agree— was reached on an entry suggested by Governor Robertson, as follows: ) k.)0 2/4/55 -6- Votes for this action: Messrs. Mills and Robertson. Messrs. Martin, Szymczak„ and Vardaman who were absent had previously indicated their approval. Votes against this action: None. This action was taken on this date because in the circumstances it was desirable to have the new pro— cedures become effective as soon as possible with reason— able notice thereof. The action was ratified by unanimous vote at the next meeting on July 7, 1954, at which Messrs. Martin, Vardaman, Mills, and Robertson were present, and be— came effective on July 15, 1954. Reference also was made to the entry for February 4, 1954, re— lating to approval of a reduction in the rates on discounts for and ad— vances to member banks by Federal Reserve Banks, and it was suggested by Governor Robertson that the draft of entry be modified by inserting a para— graph as follows: In accordance with the provisions of the Federal Re— serve Act, the Federal Reserve Banks establish, subject to review and determination of the Board of Governors, rates on discounts and advances to member banks at least every 14 days and submit such rates to the Board for consideration. No changes involving new policy had been made in these rates since those referred to on pages 82 and 85 of the Board's Annual Report for 1953. There being agreement with this suggestion, unanimous ap— proval was given to the record of Board policy actions for inclusion in the appendix to the 1954 Annual Report, with the understanding that the draft originally submitted to the Board would be changed to in— corporate the changes agreed upon at this meeting. On January 21, 1955, Mr. Riefler, as Secretary of the Federal Open Market Committee, sent to the members of the Committee and to the Federal Reserve Bank Presidents not now serving on the Committee copies of a A 2/4/55 _7 draft of record of policy actions of the Committee during the year 1954. Prior to this meeting, he had sent to the members of the Board copies of a memorandum dated February 3, 1955, discussing the comments and suggestions received from the Federal Reserve Bank Presidents, showing haw the draft of policy record would appear if certain of these suggestions were accepted, and raising questions with respect to the incorporation of other suggestions. Following a discussion, during which agreement was expressed with several suggested changes, unanimous approval was given to the record of policy actions for inclusion in the appendix to the Boardts Annual Report for 1954, with the understanding that copies of the policy record, as revised to take into account the changes agreed upon at this meeting would be resubmit— ted to the Federal Reserve Bank Presi— dents and that, if any further requests for changes were received, the matter would be considered by the Board again. Governor Balderston suggested the desirability of including in the Boardts Annual Report for 1954 as a matter of current interest, a reference tO the action on December 27, 1954, approving an investment by The Chase Bank, New York, New York, in the stock of a Canadian investment corporation. Chairman Martin suggested that the Report likewise make reference to the study by the Special Committee on Foreign Operations of American Banks (the Neal Committee). It was agreed that references to these matters should be included in the text of the Annual Report. Minutes of actions taken by the Board of Governors of the Federal
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