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Minutes for January 13, 1964
To:
Members of the Board
From:
Office of the Secretary
Attached is a copy of the minutes of the
Board of Governors of the Federal Reserve System on
the above date.
It is not proposed to include a statement
with respect to any of the entries in this set of
minutes in the record of policy actions required to
be maintained pursuant to section 10 of the Federal
Reserve Act.
Should you have any question with regard to
the minutes, it will be appreciated if you will advise
the Secretary's Office. Otherwise, please initial
below. If you were present at the meeting, your
initials will indicate approval of the minutes. If
you were not present, your initials will indicate
only that you have seen the minutes.
Chin. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. Mitchell
Gov. Daane
ilia
if,
90
Minutes of the Board of Governors of the Federal Reserve
System on Monday, January 13, 1964.
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
Mr. Sherman, Secretary
Mr. Kenyon, Assistant Secretary
Mr. Young, Adviser to the Board and Director,
Division of International Finance
Mr. Noyes, Adviser to the Board
Mr. Molony, Assistant to the Board
Mr. Fauver, Assistant to the Board
Mr. Farrell, Director, Division of
Bank Operations
Mr. Solomon, Director, Division of
Examinations
Mr. Hexter, Assistant General Counsel
Mr. O'Connell, Assistant General Counsel
Mr. Sammons, Adviser, Division of
International Finance
Mr. Daniels, Assistant Director, Division
of Bank Operations
Mr. Leavitt, Assistant Director, Division
of Examinations
Mr. Thompson, Assistant Director, Division
of Examinations
Mr. Spencer, General Assistant, Office of
the Secretary
Mr. RuMbarger, Review Examiner, Division of
Examinations
Report on competitive factors (Harrisburg-New Bloomfield,
Pennsylvania).
There had been distributed a draft of report to the
Comptroller of the Currency on the competitive factors involved in the
Proposed merger of The First National Bank of New Bloomfield, New
91
1/13/64
-2-
Bloomfield, Pennsylvania, into The Harrisburg National Bank and Trust
Company, Harrisburg, Pennsylvania.
The conclusion in the report read
as follows:
The proposed merger of The First National Bank of New
Bloomfield into The Harrisburg National Bank and Trust
Company would eliminate the small amount of competition
existing between the two banks. While this proposal would
not alter the competitive picture in Dauphin and Cumberland
Counties, it might have adverse competitive effects on the
five small banks situated within a 10-mile radius of New
Bloomfield (in Perry County).
the
The report was approved unanimously for transmittal to
Comptroller.
Inland Investment Company (Item No. 1).
There had been
distributed a memorandum from the Division of Examinations dated
January 10, 1964, with respect to a request by Flour Mills of America,
it from all
Inc., Kansas City, Missouri, for a determination exempting
d in
h°1ding company affiliate requirements except those containe
section 23A of the Federal Reserve Act.
e
The memorandum stated that Associated Employers Insuranc
subside°mPanY, Fort Worth, Texas, directly and indirectly through
ing shares
iaries, controlled approximately 67 per cent of the outstand
Flour Mills of America.
Flour Mills in turn owned, directly and
indirectly, about 82 per cent of the outstanding shares of The Poudre
.
ValleY National Bank of Fort Collins, Fort Collins, Colorado
The
memorandum went on to note that Associated Employers Insurance Company
had not yet filed a request for a determination and that the Kansas
92
1/13/64
-3-
City Reserve Bank was in the process of obtaining such a request from
that company.
It was recommended by the Division of Examinations that
a determination be granted only if the Reserve Bank had in its possession a request for a determination from Associated and such request
Showed that Associated and its subsidiaries did not have a fairly
sizable interest in any other bank.
Attached to the memorandum of January 10 was a draft of letter
addressed to Associated Employers Insurance Company that would state
that on the basis of the facts presented, a determination had been
granted exempting it and Flour Mills.
As discussion opened, Mr. Thompson reported that a telephone
Call had been received from the Federal Reserve Bank of Kansas City
advising that Associated Employers Insurance Company was no longer
the top holding company affiliate in this case. Inland Investment
Company, Fort Worth, Texas, and its subsidiaries now awned or controlled,
directly or indirectly, approximately 67 per cent of the outstanding
v°ting shares of Flour Mills of America, which in turn owned approximately
82 per cent of the voting shares of The Poudre Valley National Bank
°II Port Collins.
Associated Employers Insurance Company was a subsi-
diary of Inland Investment Company.
It was understood that the Reserve
13ank was momentarily expecting to receive a written request for a
section 301 determination from Inland Investment Company.
Mr. Thompson went on to say that the Division of Examinations
suggested that the requests of Flour Mills and Inland Investment Company
1/13/64
be approved by the Board, provided the written request of Inland
Investment Company was in the hands of the Kansas City Reserve Bank
and provided the facts relating to the case were similar to those
described in the request received from Flour Mills.
Following Mr. Thompson's comments, Mr. Hexter expressed the
view that it might be preferable for the Board to await further written
information from the Kansas City Reserve Bank before acting upon the
requests.
If the Board should act now, it could be construed as a
delegation to the Reserve Bank of Board responsibility in this field,
and this seemed to him a questionable procedure.
In discussion, it was pointed out that if the Board now apProved the requests of Flour Mills and Inland Investment Company, it
would do so subject to there being no basic change in the information
already available.
Further, if the facts received by the Reserve Bank
and the Division of Examinations on this case so warranted, it was
lAnderstood the matter would be brought back to the Board for reconsideration.
Governor Mills commented that while he was not enthusiastic
about delegating authority in such matters, this was a case where he
aid not believe it would be imprudent for the Board to delegate.
The requests of Flour Mills of America, Inc., and Inland
Investment Company were then approved unanimously, subject to the
Understandings mentioned during the foregoing discussion.
1/13/64
-5Secretary's Note: Subsequent to this
meeting, a letter was received from the
Federal Reserve Bank of Kansas City dated
January 13, 1964, enclosing a written
request for a section 301 determination
from Inland Investment Company, Fort
Worth, Texas, dated January 11, 1964.
There was no basic change in the information presented from that previously
available. Accordingly, pursuant to the
understanding at this meeting, the
determination was granted. A copy of
the letter sent to Inland Investment
Company on January 15, 1964, is attached
as Item No. 1.
Mr. Rumbarger then withdrew from the meeting.
Letter to Treasury on coin shortage (Item No. 2).
There had
been distributed a draft of letter to the Treasury Department prepared
by the Division of Bank Operations under date of January 10, 1964, with
regard to the acute shortage of coin.
The draft letter pointed out that the subject of the coin shortwas discussed at the December 1963 meeting of the Presidents of the
Pederal
Reserve Banks and the Board of Governors, at which time it was
sUggested that current reports from each of the Reserve Banks be Obtained
80 that the Treasury could be apprised more precisely of the coin
situation.
The draft letter noted that the reports had now been re-
eeivei and that pertinent excerpts from the reports were attached.
The
last paragraph of the draft letter suggested that the Mint consider the
Use
arld
f outside production facilities in order to mitigate the continuing
reasing coin shortages.
1/13/64
-6During discussion, Governor Mitchell suggested certain wording
for inclusion in the last paragraph of the letter that would emphasize
the harmful effects of the coin shortage and urge that steps be taken
to augment Mint output.
Governor Daane noted that existing Mint
facilities had been utilized to capacity for some time.
There was then a general discussion relating to the minting
Of a new half dollar on the face of which would be pictured President
It was pointed out that a shortage could develop as a result
Kennedy.
Of people wishing to hold this particular coin.
Question was then
raised whether to suggest to the Treasury the possibility of striking
a commemorative medallion.
However, it was pointed out that this might
Place an additional burden on Mint facilities.
At the conclusion of discussion, the draft of letter to the
Treasury Department was approved unanimously, with the understanding
that the last paragraph would include the wording suggested by Governor
Mitchell.
A copy of the letter, in the form transmitted to the Treasury,
is attached as Item No. 2.
Messrs. Farrell, Solomon, Hexter, O'Connell, and Daniels then
withdrew from the meeting.
Inter-Agency Committee on Automation.
There had been distributed
a memorandum from Governor Robertson dated January
7, 1964, with regard
t° a final report of the Inter-Agency Committee on Automation dated
December 18, 1963, a copy of which was attached.
It was noted that
the Inter-Agency Committee on Automation was set up following a top-level
9i
1/13/64
-7-
inter-agency conference of examination officers in February 1961 for
the purpose of ascertaining the most effective means of training examiners in electronic data processing applications in banks.
The
conference was arranged at Governor Robertson's suggestion in cooperation with the Chairman of the Federal Deposit Insurance Corporation
and the Comptroller of the Currency. (The latter had since withdrawn
from the program.)
Governor Robertson stated in the memorandum that it was his
°Pinion that the efforts of the Committee on a preliminary basis had
been successful and measures for the continuation and improvement of
such work warranted the Board's favorable consideration.
The Committee
had suggested that, as a minimum, the basic two-week regional training
Program be continued and conducted several times each year, and that
consideration be given to an advanced inter-agency training program
for examiners who attended the orientation program, related more
aPecifically to examination procedures.
The memorandum pointed out that the report of the Committee
indicated that a further regional training program was planned, and
that it would be held in Dallas, with the cooperation of the Federal
Reserve Bank of Dallas.
Mr. Goodman, Assistant Director of the Board's
Division of Examinations, had been asked to proceed with necessary
arrangements.
The memorandum went on to note that the Committee further
suggested that a permanent committee be established for the participating
-8-
1/13/64
agencies with responsibility for (1) the development and conduct of
future automation training programs for examination electronic specialists and for general EDP programs for all examiners; (2) the development
Of a standardized approach to the examination and inspection of automated installations in banks, as well as independent and joint data
Processing centers; and, (3) the development of uniform reports with
respect to such examinations and inspections.
Governor Robertson stated that he was inclined to believe a
committee to serve purposes like those suggested by the report could
be useful, assuming that it would receive suitable technical assistance
from the staffs of interested agencies and operate subject to the
gUidance and approval of such agencies.
However, in view of the present
ma impending vacancies on the Board of Directors of the Federal Deposit
Insurance Corporation, it was felt that no definitive action should be
taken to establish such a committee or appoint Board representatives
Until the membership of the Corporation's directorate had been completed.
Governor Robertson noted at this meeting that the memorandum
had been submitted for the information of the Board, and in the discUssion that followed no objection was expressed to the suggestions
contained in the memorandum with regard to the regional training
Program for examiners.
It was understood that no action would be taken
at this time with respect to the establishment of a permanent interagency committee.
1/13/64
-9Foreign travel by Mr. Reynolds (Item No. 3).
There had been
distributed a memorandum dated January 9, 1964, from Mr. Young, Adviser
to the Board and Director, Division of International Finance, recommending that John E. Reynolds, Chief, Special Studies and Operations
Section, Division of International Finance, be authorized to participate
in a meeting of balance of payments experts in Paris, France, on
February 10 and 11, 1964, and that the necessary expenses for the trip
be paid by the Board in accordance with the standardized Government
travel regulations.
The recommendations, as set forth in the memorandum,
a copy of which is attached as Item No.
3, were approved unanimously.
The meeting then adjourned.
Secretary's Note: Governor Shepardson
today approved on behalf of the Board
the following items:
Letter to the Federal Reserve Bank of Boston (attached Item No. 4)
IIPProving the appointment of Francis J. Suckfull and Maurice P. Shea,
3rd, as examiners.
Letter to the Federal Reserve Bank of Richmond (attached Item No. 5)
aPProving the designation of James R. T. Hodgson as special assistant
examiner.
Memorandum from the Board's General Counsel recommending acceptance
the resignation of Karl E. Bakke, Senior Attorney in the Legal
t'lvision, effective at the close of business January 18, 1964.
99
Item No. I
1/13/64
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
January 15, 1964.
Inland Investment Company,
P. 0. Box 1869,
Fort Worth, Texas.
Gentlemen:
This refers to the requests on behalf of Inland Investment
,?r1pany, Fort Worth, Texas ("Inland"), and Flour Mills of America,
tilos, Kansas City, Missouri ("Flour Mills"), submitted through the
Rederal Reserve Bank of Kansas City, for a determination by the Board
ot Governors of the Federal Reserve System as to the status of Inland
„
and
r Flour Mills as holding company affiliates of The Poudre Valley
'ational Bank of Fort Collins, Fort Collins, Colorado ("Bank").
2
From the information submitted, the Board understands that
Inland and its subsidiaries own or control, directly or indirectly,
m
aP,Proximately 67 per cent of the outstanding voting shares of Flour
,-.1-18; that Flour Mills in turn owns approximately 82 per cent of the
l ‘ing shares of Bank; that other subsidiaries of Inland are Basin
Alatoleum Company
(a Texas corporation engaged solely in drilling for
lailad Producing oil and gas), Associated Employers Insurance Company,
nston Fire and Casualty. Insurance Company, General Insurance Corpora41'
4 4 and Insurors Indemnity & Insurance Company, which are engaged in
•e
fire and/or casualty insurance business, and Metropolitan Securities
the only asset of which is a minority interest in stock of
Pio
m, lar1Mills; that Inland is primarily a holding company
but also has
scellaneous investment assets; that Flour Mills
is actively and pritlY engaged in the manufacture and sale of flour, commercial feeds
'
•
174 corn meal and in commodity trading and grain storage, and that
in has under consideration from time to time the acquisition of stock
other enterprises in connection with its program of diversification;
04:at Flour Mills! purchase of stock of Bank was for the purpose of
liersification; and that Inland and its subsidiaries do not control
Y,-, tank other than The Poudre Valley National Bank of Fort Collins,
'
ee in addition in the aggregate only own or control less than 1 per
Of the shares of each of the following banks: Continental National
s Fort Worth, Texas; First National Bank, Fort Worth, Texas; Fort
ejth National Bank, Fort Worth, Texas; First National Bank and Trust
• ) Tulsa, Oklahoma; Republic National Bank, Dallas,
Texas; and
qational
Bank of Tulsa, Tulsa, Oklahoma.
j
Z
Z
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
—2-,
Inland Investment Company
In view of these facts, the Board on January 13, 1964,
cietermined that Inland and Flour Mills are not engaged, directly or
.
Indirectly, as a business in holding the stock of, or managing or
controlling, banks, banking associations, savings banks, or trust
companies within the meaning of section 2(c) of the Banking Act of
1933 (12 U.S.C. 221a); and, accordingly, they are not deemed to be
holding company affiliates except for the purposes of section 23A
of the Federal Reserve Act and will not need voting permits from the
Board of Governors to vote the stock of Bank which they may own or
control.
If, however, the facts should at any time indicate that
Inland or Flour Mills might be deemed to be so engaged, this matter
Should again be submitted to the Board. The Board reserves the right
to rescind this determination and make a further determination of this
Matter at any time on the basis of the then existing facts, including
additional acquisitions of bank stocks even though not constituting
Control.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
.....
GOv4,0;;
Item No. 2
1/13/64
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WAS
OFFICE OF THE CHAIRMAN
• ALRES.
January 13, 1964.
The Honorable C. Douglas Dillon,
Secretary of the Treasury,
Washington, D. C. 20220.
Dear Doug:
You will recall my letter of November 16, 1962, referring to
the acute shortage of coin at that time and expressing the hope that
some emergency measures might be possible to ease the shortage and
avoid a recurrence in the future.
The subject of coin was again mentioned at the December meetng of the Presidents of the Federal Reserve Banks and the Board of
!
Governors. Comments made by the Presidents indicated that the situation
With respect to the coin supply had worsened as compared with last
Year, and it was suggested that we obtain current reports from each of
the Reserve Banks so that the Treasury could be apprised more precisely
of the situation.
All Reserve Banks have now furnished current information and,
B oept for Minneapolis, report that the coin shortage is far more
!erious than it was a year ago, despite increased amounts supplied by
e Mint over shipments last year. Widespread and severe rationing
s been necessary, mainly because of a substantial reduction in
of coin from the commercial banks coupled with a larger demand.
Lost Reserve Banks indicated that they expect the situation to become
cast
Vorse until new Mint facilities are available or until other measures
!te taken to help relieve the shortage. Pertinent excerpts from the
tePorts received from the Reserve Banks are attached. The reports in
'
heir entirety are available for the use of your staff, if desired.
V
Under the circumstances, and with mint production at capacity,
of the Reserve Banks have suggested that the Mint use outside
c1.°duction facilities in order to mitigate the continuing and increasing
P
in shortages. In our view, the coin shortage is now harmful to the
'(, )Itcluot of the nation's business and is getting worse. Drastic measures
deal with the situation are warranted. During the next several weeks
need for coin will seasonally abate and in that period we urge you
e
t
take steps to augment mint output so that when seasonal needs next
Be we will be able to operate with ample supplies.
Be
4
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
Wm. McC. Martin, Jr.
Item No.
3
1/13/64
January 9, 1964.
To: Board of Governors
From: Ralph A. Young
Subject: Foreign travel: Hr. John Reynolds
There will be a meeting of balance-of-payments experts
of the OECD countries in Paris on February 10 and U. The purpose
la to advise the Secretariat as to the conceptual adoquacy and
Practicability of a draft balance-of-payments questionnaire,
Which has been prepared jointly by the staffs of the OECD Secretariat
and the IMF. The adoption of a common questionnaire by the two agencies
Will greatly reduce the burden on the balance-of-payments compilers
In the various countries, as well as ensure that all international
agencies are working with similar data.
The head of the U.S. delegation to this meeting will be
Mlle Walther Lederer, Chief of the Balance of Payments Division of the
Department of Commerce. However, the State Department has indicated
that it would welcome the participation of technicians of other
iaterested agencies.
This meeting may be ,regarded as a•continuation of the
meetings of balance-of-payments experts convoked by the International
Planetary Fund; the Federal Reserve has been represented at those
meetings by Mr. Arthur Hersey, who however, will not be available
or the forthcoming meeting in Paris.
In view of Mr. John Reynold& position as Staff Director
of the Bernstein Committee, as well as his permanent association
vith the Division of International Finance, it is recommended
that he be authorized to participate in this meeting as a representative
?f.the Federal Reserve System, and that the necessary expenses for the
;p;10 be paid by the Board on the basis of Standardized Government
'ravel Regulations
1.03
Item No.
BOARD OF GOVERNORS
Os.
4
1/13/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
January 141 1964
AIR MAIL
CONFIDENTIAL (FR)
Mr. Luther M. Hoyle, Jr., Vice President,
Federal Reserve Bank of Boston,
Boston, Massachusetts. 02106.
Dear Mr. Hoyle:
In accordance with the requests contained in your
letters of January 8, 1964, the Board approves the appointment
of Francis J. Suckfull and Maurice P. Shea, 3rd, at present
assistant examiners, as examiners for the Federal Reserve Bank
of Boston. Please advise the salary rates and effective dates
of the appointments. •
It is noted that Mr. Shea is indebted to Arlington
Lawrence, Massachusetts, and Mr. Suckfull is
Company,
Trust
Cooperative Bank, Boston, Massachusetts,
Workingman's
to
indebted
the Board's approval of the
Accordingly,
banks.
both nonmember
that neither
understanding
the
with
given
is
appointments
any examination
in
participate
will
Suckfull
Mr.
Mr. Shea nor
of the bank to which he is indebted until such indebtedness has
been liquidated.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
Item No.
1/13/64
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
January 14, 1964
lir. John L. Nosker, Vice President,
Pederal Reserve Bank of Richmond,
Richmond 13, Virginia.
Dear Mr. Nosker:
In accordance with the request contained in your letter
of January 7, 1964, the Board approves the designation of James R. T.
Hodgson as a special assistant examiner for the Federal Reserve Bank
of Richmond for the purpose of participating in examinations of State
member banks except The Bank of Virginia, Richmond, Virginia, and
6tate-Planters Bank of Commerce and Trusts, Richmond, Virginia.
The authorization heretofore given your Bank to designate
r. Hodgson as a special assistant examiner is hereby canceled.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
@FedFRASER