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Minutes for To: Members of the Board From: Office of the Secretary January 15, 1959 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, if you were present at the meeting, please initial in column A below to indicate that you approve the minutes. If you were not present, please initial in column B below to indicate that you have seen the minutes. A Chin. Martin Gov. Szymczak Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Minutes of the Board of Governors of the Federal Reserve System on Thursday, January 15, 1959. PRESENT: Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Martin, Chairman Balderston, Vice Chairman Mills Robertson Shepardson Mr. Sherman, Secretary Mr. Kenyon, Assistant Secretary Mr. Marget, Director, Division of International Finance Mr. Hackley, General Counsel Mr. Masters, Director, Division of Examinations Mr. Connell, Controller Mr. Furth, Associate Adviser, Division of International Finance Mr. Chase, Assistant General Counsel Mr. Benner, Assistant Director, Division of Examinations Mr. Hill, Assistant to the Secretary Mr. Kakalec, Budget and Planning Assistant, Office of the Controller Discount rates. Unanimous approval was given to a telegram to the Pecleral Reserve Bank of San Francisco approving the establishment without hange by that Bank on January 14, 1959, of the rates on discounts and advances in its existing schedule. Items circulated to the Board. The following items, which had been eil'eulated to the members of the Board and copies of which are attached to these minutes under the respective item numbers indicated, were approved 4hanimously: Item No. Lette,s 'to the Chemical Corn Exchange Bank, New York, New York, Park. aPProving the establishment of a branch in Rego (For transmittal Lhrough the Federal Reserve Bank Of N ew York) 1 1/15/59 -2-Item No. Letter , 60 the Columbus Bank and Trust Company, Columbus, : t rgia, approving the establishment of a branch in -11113°rarY quarters near the intersection of Benning Drive :nd Victory Highway. (For transmittal through the Fedral Reserve Bank of Atlanta) 2 ReuestofKirkman. On the basis of incomplete information, C°1111sel for the Federal Reserve Bank of Philadelphia rendered the opinion in 1953 that service by Mr. Elwood F. Kirkman as an officer and director f both The Boardwalk National Bank, Atlantic City, New Jersey, and The Natio----, nAl Dank of Ocean City, Ocean City, New Jersey, was permissible under secti°n 8 of the Clayton Act. However, a more recent review by the Phil A a"elphia Reserve Bank indicated that such service would not be Perthissible because The Boardwalk National Bank maintained a branch in SOiner Point and the corporate limits of that city and Ocean City were found to coincide for a distance of approximately 4,800 feet. A memorandum fr°M Mr. Chase dated January 13, 1959, which had been distributed to the 4"pers of the Board along with a draft of letter to the Philadelphia aee.'ve Bank, indicated that the advice recently given by the Bank to *. Kirkman was clearly correct. The proposed letter therefore raised the 44esti (3/1 whether any useful purpose would be served by acceding to Mr. ICirkmani s request for a meeting with representatives of the Board. Governor Robertson reported that President Bopp of the Federal Resery -e Bank of Philadelphia called on the telephone yesterday to say that the s. ituation was embarrassing to him not only because of the erroneous 252 1/15/59 -3- °Pinion originally given by Counsel for the Reserve Bank but also because ** Kirkman had been told by Vice President Campbell that a hearing would be granted to him in Washington before a decision was made. This indication had been given by Mr. Campbell due to a misunderstanding following discussion of the matter with a member of the Board's staff. Governor Robertson said that in the circumstances he felt the Board was obliged to afford Mr. Kirkman an opportunity to appear, and the qtlesti°n was whether the Board wished to designate one of its members to 'fleet with him. Governor Balderston commented that the reversal of the 1953 opinion had o ccasioned some feeling on the part of Mr. Kirkman. Since the more recent opinion had been given just prior to the retirement of Vice President Hill, he felt that the circumstances might lend themselves to err°neous interpretation and that it would be desirable for the Board to "cede to the request for a meeting. Accordingly, in consideration of the history of the matter, it was uI12.2.1 to invite Mr. Kirkman to present his views to available members of the Board on a mutually convenient date. Secretary's Note: Pursuant to this understanding, arrangements were made for Mr. Kirkman to meet with members of the Board at 3:00 p.m. on Thursday, January 22, 1959. 112t4Lag. with Mr. Sottile. With further reference to his comment e meeting on Tuesday, January 13, that Mr. James Sottile, Jr., 1/15/59 —4— President of the Pan American Bank of Miami, Miami, Florida, had been en deavoring to reach him on the telephone, Governor Robertson said it had now developed that Mr. Sottile would like to come to Washington, aceomPanied by Mr. Louis Sedlacek and General Sterling Wood, to discuss 4 Program intended to improve the bank's capital position. After 3Paaking to the Chairman, Governor Robertson said, he suggested to 14r. Sottile a meeting with members of the Board on Monday, January 19, t 31(13° P.m. Subsequently, Mr. Sedlacek called on the telephone to larify the terms of reference of the meeting, and he (Governor Robertson) expressed the view, with which Mr. Sedlacek agreed, that discussion should be 1 -4imited to the plan for augmenting capital. was indicated to proceeding on the basis stated by -1 11° 01 Governor Robertson. Mr. Chase then withdrew from the meeting. 1401get overexpenditures. There had been circulated to the members °is the Board under date of December 30, 1958, a memorandum from the Board's Controller transmitting requests from the respective Divisions for approval ore in various account classifications in excess of the 1958 bUdget. These requests had been submitted pursuant to the Statement of 1111(10.4 'arY Principles and Procedures, as revised July 28, 1958, and it was ' the r eoommendation of the Controller that they be approved. Governor Shepardson stated that he had gone over the memorandum and attached requests and that the overexpenditures of an unusual nature 254. 1/15/59 -54PPeared to have resulted from approvals given during the course of the Year by the Board or by him on behalf of the Board. He said that he concurred in the Controller's recommendation. Mr. Connell commented that expenditures during 1958 amounted to about $5.9 million, compared with a budget of $6.3 million, the under- expenditure having been attributable principally to the decision to rent rather than to buy an electronic computer. The requests from 'he several Divisions were occasioned by account overexpenditures totaling aPProximately $420,000, of which about $278,000 was accounted for by 8411`117 adjustments resulting from the general pay increase which became rfeotive on a retroactive basis to January 12, 1958. Of the remainder, e lartoapart was attributable to special projects such as the section 9 Proceeding involving a State member bank in Salt Lake City, Utah, the 'nail business financing study, and the renovation of the Board Room. Mr. Connell stated that his office was in the process of closing the 4 books for 1958 and within the near future would submit to the Board memorandum containing a full statement of expenditures for the year in relation to the 1958 budget. Thereupon, the recommendation contained in the Controller's mem°randum was approved unanimously. liessrs. Connell and Kakalec then withdrew from the meeting. old loan to Bolivia (Item No. that t , J. Mr. Marget reported he Few York Reserve Bank anticipated receiving from the Central Bank 1/15/59 -6- Of Bolivia a request for a one-month renewal of the gold loan of $600,000 which was approved by the Board on September 22, 1958. Unless the Board °f Governors should express a negative view, he said, the officers of the Batik • intended to recommend to the Board of Directors at its meeting today that the anticipated request be granted. It was understood that the Central Bank of Bolivia was negotiating for a loan from a United States commercial bank, the proceeds of which would be used in part to repay the Federal Reserve loan on gold, but it would not be possible to complete the negotiations prior to the maturity date of the gold loan. In commenting on the matter, Er. Marget reviewed financial develoPments in Bolivia, including.,the progress made by that country on 4 StabiliZatiOn program undertaken in cooperation with the International Moneta -17 Fund. It was his recommendation that the Board of Governors authorize renewal of the gold loan, assming that such a request was received and favorable action was taken by the Board of Directors of the Reserve Bank In response to a question by the Chairman, Governor Mills, who had e xpressed certain reservations about the making of the gold loan oria na14, stated that in view of the negotiations in process which Provide for repayment, he felt that renewal of the loan would be in order. Thereupon, Mr. Margetis recommendation was approved unanimously. 1/15/59 —7— Secretaryts Note: Later in the day a telegram was received from the New York Reserve Bank indicating that its Board of Directors had authorized a one—month renewal of the gold loan if an extension should be requested from the Central Bank of Bolivia. Accordingly, the tele— gram of which a copy is attached as Item No. 3 was sent to the Federal Re— serve Bank of New York. Messrs. Marget, Furth, and Hill then withdrew from the meeting. Problem banks. Tuesday, Pursuant to the understanding at the meeting on January 13, there was a further discussion of the memorandum from the Division of Examinations dated November 24, 1958, with respect to State member banks on the problem list as of October 31, 1958. Mr. Benner reviewed the 13 banks that had been in the problem category for more than a Year but less than five years, and also the 17 banks that were added to the . list during the twelve—month period prior to October 31, 1958. In alutma ' r zing, he and Mr. Masters commented that most of the banks were sh°14ing improvement under supervisory pressure, one or two of them had aireadY been removed from the problem list, and others probably would be removed within the next few months. There followed discussion with respect to the recent issuance of Preferred stock by a State member bank in Chicago, as mentioned at the january 13 meeting, in relation to the issues involved in the suit filed again-8,, the Board on that date by The Michigan Bank, Detroit, Idchigan. 1/15/59 -8Center for Latin American Monetary Studies (Item No. 4). As re commended in a memorandum from Mr. Marget dated January 12, 1959, the Board P4PRIZITI.1 a letter to the Center for Latin American Monetary Studies, of which a copy is attached as Item No. 4, designating Mr. Yves Maroni to give lectures on the Federal Reserve System at the sessions of the Center to be held in Mexico City this summer. The request from the Center contemplated lectures extending over a period of approximately one waoke The meeting then adjourned. Secretary's Note: Pursuant to the recommendations contained in memoranda from appropriate individuals concerned, Governor Shepardson today approved on behalf of the Board the following items affecting the Board's staff: karY B. McKee, Of from the position of Clerk-Stenographer in the Division ?e ti_rsonnel Administration to the position of Clerk-Stenographer in the eion of Research and Statistics, with no change in her basic annual -4.grY at the rate of 0,755, effective January 15, 1959. Acce tance of resi ation Catherine Anne Wright, Statistical Assistant, Division of Research tatistics, effective January 23, 1959. EIDARO OF GOVERNO13 0E404* 4110 tr0.4*4 4 r 7 1. t OF THE 4'* vits,„ FEDERAL RESERVE SYSTEM 4 Item No. 1 1/15/59 WASHiNGTON 25, D. C. 4 A41161: ' ACTUFFE8Ei OFFICIAL COFFREEPONOENCE TO THE HOARD 4oe January 15, 1959 1, 1 4rd of k4lemleal Directors, Corn Exchange Bank, Wew York, New York. Qentlemen: Pursuant to your request submitted through the Federal Dank of New York, the Board of Governors approves the : eet 48hm ent Abl4. of a branch on the southeast corner of Junction Boul. Exch-vard and 62nd Drive, Rego Park, New York, by Chemical Corn 14,42nge Bank, New York, New York. This approval is given pro— tilianch is established within one year from the date of and that formal approval of the State authorities is "'feet at the time the branch is established. ' , /arIrt% n Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 2 1/15/59 ADDRESS OFFICIAL CORRESPONDENCE TO THE SOARD January 15, 1959 Board of Directors, Columbus Bank and Trust Company, Columbus Georgia. G entlemen: Pursuant to your request submitted through the rsderal Reserve Bank of Atlanta, the Board of Governors aPProves the establishment of a branch in temporary coluarters on Benning Drive, one and one-half blocks north _f the intersection of Benning Drive and Victory Highway, 3 Georgia, by Columbus Bank and Trust Company. -sibus understood that operations at this location will be la.71-scontinued simultaneously with the opening of the branch the northeast intersection of Benning Drive and Victory Y, aS approved by the Board of Governors on December 19, Tr Mr Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. 260 TELEGRAM LEASED WIRE SERVICE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON Item No. 3 1/15/59 January 160 1959. EXTER Your N YORK wire January 15. Provided the Banco Central de Bolivia requests an extenaion, the Board approves the renewal of a loan on gold by your Bank to the Banco Central de Bolivia of terms and conditions: 00,000 on the following (A) T0 be collateraled by the pledge of gold under earmark in a form a cceptable to the officers of your Bank and having a value of an -Proximately $692,000. T ) -0 mature in one month with option to repay before maturitY; (C) To bear interest at the discount rate of your Bank in effect on the date on which such loan is renewed. It i. -u nderstood that the usual participation will be offered to the other Federal Reserve Banks. (Signed) Merritt Sherman SHERMAN 26 BOARD OF GOVERNORS OF THE Item No. 4 1/15/59 FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE CHAIRMAN January 16, 1959 AIR MAIL Mr. Javier Marquez, Director, Center for Latin American Monetary Studies, San an de Letran No. 2- Piso 32, Mexico 1, D. F. Dear Javier: Further reference is made to your letter of November 28, • 1958, in which you requested that we provide someone again this ear to give lectures on the Federal Reserve System. I am glad to „inform you that Mr. Yves Maroni has been designated for this task. Maroni is the senior economist in the Latin American Section it the Division of International Finance, has a good command of sh,tNdlzd. B had teaching experience in addition to his work here T Consideration is also being given to the possibility of ha thltng System personnel attend the Center as participants again „ year, and we expect to be able to give you definite informa,,,Lon on this matter some time in February. Sincerely yours, (Signed) Wm. McC. Martin, 31. Wm. McC. Martin, Jr.
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