Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, January 16, 1957, Volume 44, Part 1

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Minutes for January 161

To:

Members of the Board

From:

Office of the Secretary

1957.

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.

ahm. Martin
Gov. Szymczak
1/ Gov.

Vardaman

Gov. Mills
Gov. Robertson
Gov.

Balderston

x

G°11. Shepardson
'.;'ecoPI,Acitached set of minutes was sent to Governor Vardaman's office in
tr
uove_i_ance with the
procedure approved at the meeting of the Board on
vithilth
Eir 29, 1955. The set was returned by Governor Vardaman's of rice
that 1, e statement
(see Mr. Kenyon's memorandum of February 12, 1957)
3 "ereafter
Governor Vardaman would not initial any minutes of meet.
,,I1ella.1°Z the Board
at which he was not present. Therefore, with Governor
varda;4
1 °
,nt s aUrova). these minutes are being filed without Governor
-8 ini
al. -


Minutes of actions taken by the Board of Governors of the Federal

Reserve System on Wednesday, January 16)
1957. The Board met in

the Board
Room at 10:30 a.m.
PRESENT:

Mr.
Mr.
Mr.
Mr.

Martin, Chairman
Balderston, Vice Chairman
Szymczak
Mills
Mr.
Mr.
Mr.
Mr,
Mr.
Mr.
Mr.
Mr.

Carpenter, Secretary
Kenyon, Assistant Secretary
Vest, General Counsel
Sloan, Director, Division of
Examinations
Hackley, Associate General Counsel
Solomon, Assistant General Counsel
Hostrup, Assistant Director, Division of Examinations
Thompson, Supervisory Review Examiner) Division of Examinations

The followin
g matters, which had been circulated to the members

°T the Board,
were presented for consideration and the action taken in
each

instance was as
stated:

17e1,7, Letter to Mt. Phelan, Vice President, Federal Reserve Bank
of
Iork) reading as follows:
This refers to
your letter of January 9, 1957, and
:!
1 .enclosures, concerning the proposed
issue by the Inter1''1°
Bank!
for Reconstruction and Development of its
Imenty-Year Bonds of 1957 dated January 1, 1957, due
January
1977. In that letter you state that it is
Proposed to amend Schedule
A of the Fiscal Agency Agreeat dated
as of February 6, 1950, between the International
43-4k and Your
Bank to include the bonds in question.

r

as ,.The Board of Governors approves of your Bank acting
1,
!
4 Iscal Agent in respect of the proposed issue of the
,tiernational Bank of Twenty-Year Bonds of 1957, dated
s'
,
,
44nuary 1, 1957,
due January 1) 1977, and approves the
1O and delivery
by your Bank of an Agreement with
the In
ternatio
nal
Bank in the form or sUbstantially in
the
m4,11°M of Supplement No. 9 to the Fiscal Agency Agreeof February 6, 1950, between your Bank and the
Inter-4.cional Bank,
enclosed with your letter.




Approved unanimously.

105
1/16/57

-2ea. Letter to Mr. Powell, President, Federal Reserve Bank of
lin Polls, reading
as follows:
Reference is made to your letter of January 3,
1957, advising of the approval by the Board of Directors of the
adoption of a new hospitalization plan
ncxw available
from the Minnesota Hospital Service
Association.
The Board of Governors interposes no objection
o the
?-fl the assumption of the increased expense involved
adoption of the new hospital plan as described
Your letter, with the understanding that payments
0Y the Federal
Reserve Bank of Minneapolis will not
exceed two
thirds of the cost of the hospitalization
and surgical benefits under your group hospitalization
program.
Approved unanimously.
Letter to the Board of Directors, Worcester County Trust
4TanY, W
orcester, Massachusetts, reading as follows:
Pursuant to your request submitted through the
Fed.
Reserve Bank of Boston, the Board of Governors
13
11f the
Federal Reserve System approves the establishOf branches by
of
Worcester County Trust Company at
the Junction of
Southbridge and Auburn
Streets, Auburn, Massachusetts,
the intersection
of Main Street and Boyden
Road, Holden, Massachusetts, and
the intersection of Route 9 and Maple Avenue,
Shrewsbury,
Massachusetts,

r

wided the branches
are established within one year
j
torn the date
of this letter and the approval of the
.ffect as of the dates the
iZde
chr=i=b1s
br:
le




Approved unanimously, for
transmittal through the Federal
Reserve Bank of Boston.

106
1/16/57

-3-

Letters to Mr. Wiltse, Vice President, Federal Reserve Bank
°f New York, reading
as follows:
Reference is made to your letter of January 3, 1957,
transmitting
the request of the Clinton Trust Company,
New York, New
York, for an extension of time within which
to establish
a branch in the Port Authority Bus Terminal
Building at 625 Eighth Avenue, New York City.
After considering the information which you have submitted, the Board concurs in your recommendation and extends to April 1, 1957, the time within which the Clinton
Trust Company may establish the above described branch,
provided the approval of State authorities is effective
as of the date the branch is established.

,, Reference is made to your letters of December 21 and
°) 1956, submitting with favorable recommendations requests of Federal Trust Company, Newark, New Jersey, for
permission
to invest under section 24A of the Federal Reserve Act
*35,000 and a7,5001 respectively, for the purPOse of remodeling its Hayes Circle Branch and acquiring
additional parking space at the rear of that branch.
The
You have Board has given consideration to the information
sUbmitted and approves the proposed additional
investments with the understanding that the35,000 cost
Of r
emodeling the Hayes Circle Branch will be charged off
Pon
trustcompletion of the work involved. Please advise the
accordingly.
Approved unanimously.
tillact,

Letter to Mr. Hill, Vice President, Federal Reserve Bank of
"lPhia, reading as follows:

In view of the information submitted in your letter
Of
rer!anuary 2, 1957, and the Reserve Bank's favorable
- nmendation, the Board of Governors extends until
0 .c)r
L',
6
,17
I r 1, 1957, the time within which Fidelity-Philadelphia
Trust Company, Philadelphia, Pennsylvania, may
7tablish a branch in the Oak Park Shopping Center,
,
between Oak Road and Bishop Road, West BaltiUpper Darby Township, Pennsylvania, under the
uth
orization contained in its letter of July 12, 1956.

L




Approved unanimously.

*107
1/16/57

-4-

Letter to Mr. Patterson, Vice President and Gener
al Counsel,
Federal Reserve
Bank of Atlanta, reading as follows:
This refers to your letter of December 21, 1956,
transmitting the request of Citiz
ens and Southern Holding
Company, Atlanta, Georgia, for an opini
on as to whether
that Company,
which is a bank holding company, may, in
the light of
the provisions of section 4(a)(2) of the
Bank Holding Company Act of 1956, conti
nue (1) to acquire,
Own, operate, and lease real
estate to be used as bank
Premises by its subsidiary banks, and
(2) to acquire for
liquidation
purposes loans secured by collateral charged
°ff by sUbsidiary banks and property acquired on foreclosure by such banks.
Section 4(c)(1) of the Bank Holding Company Act
spe
cifically excepts from the divestment requirements
of that
section shares owned by a bank holding cornAY in any compa
ny engaged solely in holding or operating properties
used wholly or substantially by the
?!..n
kholding company's subsidiary banks or engaged in
liquidating assets acquired from subsidiary banks
. No
s?-milar exception
specifically provided in connection
is
'with the
prohibition in section 4(a)(2) of the Act against
t,_
.ab_an
k holding
company engaging in any business other than
rit7
Itiiii
o
sffi .rbr
king or of managing or controlling banks or of
services to or of performing services for its
1.ibsidiary banks. However, it would seem unrea
sonable to
interpret the
statute as permitting a bank holding company
t
c).engage indirectly through a subsidiary compa
ny in activiles of the
kind here in question and at the same time as
Prohibiting the bank holding company from directly engag
ing
in such
activities.
or
On the basis of the facts prese
nted and in the light
4, the spirit and intent of the statute and its legislat'I'v! history,
it is the opinion of the Board that the
cetivities engaged in by Citizens and Southern Holdi
ng
,?ml?allY as described above may properly be regarded as
:Lcidental
to the bank holding company's management of
.j17-Is subsidiary
banks or as being in the nature of seri ces Performed by it for such banks and that, conse
quent:Y=, the
statute will not make it unlawful for the Company
'°1 continue
such activities.




108
1/16/57

-5It will be appreciated if your will advise Citizens
and Southern
Holding Company of the Board's views as
stated above. It should be mentioned,
of course, that,
although administration of the Act is vested in the Board
,
1
.tsenfo
rcement as a criminal statute falls within the
Jurisdiction of the Department of Justice, and conceivably
the Board's interpretati
on of the statute might not be
followed by that Department if it should have occasi
on
to
consider the matter.
Approved unanimously.
St.

.Letter to Mr. Kroner, Vice President, Federal Reserve Bank
of
'°111s, reading as
follows:
This will acknowledge the receipt of your letter
Of
December 31, 1956, and various attachments respecting
vlolations of
Section 22(g) of the Federal Reserve Act
and Regulation
0 by Mr. T. H. Van Sant, Vice President
Trust Officer of The Callaway Bank, Fulton, Missouri.
15 is the third series of violations occurring since
the
warning under Section 30 of the Banking Act of 1933
was sent to
Mr. Van Sant.
The Board has reviewed
the facts disclosed by your
letter and its
attachments and has considered your recommendation. In
view of your statement that a very consid!!rable and consta
nt improvement has been shown by Mr. Van
'2°111; and that items of excessive indebtedness seem to be
inadvertent than deliberate, the Board concurs in
Your re
commendation that no action be taken in the matter
the
present time.
Approved unanimously.

of mi,_ Letter
to Mr. McConnell, Vice President, Federal Reserve Bank
"geaPolis, reading as follow
s:
This refers to
your letter dated December 28, 1956,
ty`.1.transraitting the
application of Northwest Bancorporation,
1,11111,M°1is, Minnesota, for an extension of time to March
1.14-if, in which it may register with the Board as a bank
Roi ng comp
any, pursuant to section 5(a) of the Bank
The.-3 11g C°mPany Act of 1956 and section 3 of Regulation Y.
- hoard has
granted the requested extension of time.




Approved unanimously.

109
1116/57

-6-

Letter to the Comptroller of the Currency, Treasury Department,
Waal,
,Aington, D. C., reading as follows:
It is respectfully requested that you place an order
With the Bureau of Engraving and Printing, supplementing
the order of June 27, 1956, for printing Federal Reserve
notes of the Federal Reserve Bank of Kansas City in the
amount and denomination stated below:
Denomination

Number of
notes

$loo

144low

Amount

$141 400,000

Approved unanimously.
Letter for the signature of the Chairman to Dr. Javier Marquez,
tlec!orij:%nter
for Latin American Monetary Studies, Mexico, D. F.,
u/ reading as follows:
The Board of Governors will be glad to collaborate
thi-s
year, as in previous years, in the annual training
program at MCA.
I note that your current requirements call for a
earson to
lecture on the Federal Reserve System during
, e meek of July 22. For this purpose, the Board deslz_Vaates Mr. Robert L. Sammons, Chief of the Latin
rican Section in
the Board's Division of International

t

Approved unanimously, together with the recommendation
contained in a memorandum dated
January 8, 1957) from Mr. Marget,
Director, Division of International
Finance, that the rate of per diem
in lieu of subsistence in connection
With this travel be the same as would
be applicable for travel within the
United States.
Under date of
November 19, 1956, the House Committee on Governket A_
uperations sent to the Board, along with other agencies, a Questiohy-44‘ttire on Administrative Organization, Procedure and Practice. The




.110
1/16/57
-7reply to Section I of the Questionnaire, relating to rulemaking,
this

was sent to the Committee on Decemb
er 17, 1956.

Prior to

meeting, there had been sent to the members of the Board copies

Of a memora
ndum from Mr. Solomon dated January 11, 1957, submitting
clraft of
replies to the questions in Section II, relating to adJud
ication.

4

During the discussion of the proposed replies, agreement was
N°ressed with
an editorial change in the answer to question 15 which
1448 suggested
by Governor Balderston.
that

Mr. Carpenter
reported having been advised by Governor Robertson
he

had no changes to suggest in the draft replies.
There being no other suggestions for changes in the proposed replies, unanimous approval
was given to a letter for the
Chairman's signature to The Honorable
William L. Dawson, Chairman, Committee
on Government Operations, House of
Representatives, reading as follows:

As requested in
your letter of November 19, 1956, which
used a Questionnair
e on Administrative Organization,
.,ure and Practice, there are attached 12 copies
of the
„Zard's reply to Section II of the Questionnair
section
the
e,
wuich relate
s to adjudication.

W

Con
sideration then was given to a memorandum from the Division

or E
•
reQeiv

nations dated January
11, 1957, relating to certain requests

ed from Morgan & Cie. Incorporated New York, New
York, a foreign
,

11111king
t
°the

corporation operating under agreement with the Board pursua
nt
1)r°visions of Section 25 of the Federal Reserve Act.




By reason

1/16/57

-8-

of section
11 of the provisions of the revised Regulation K (adopted
effective January 15, 1957, under the title Corporations Doing Foreign
Banking or Other Foreign Financing under the Federal Reserve Act)
1
M°1'ga & Cie. Incorporated would become subject to the regulation on
that date.
The memorandum from the Division of Examinations recomInetided. approval of the requests, as did the Federal Reserve Bank of
New York,
Governor Szymczak reviewed the situation and said that he conellrred in the favorable reco endation of the Division of Examinations.
In res
ponse to a
question, he stated that if the requests were granted,
111°rganri
Incorporated would not occupy a position different from
that
'Lich it held under the terms of its agreement with the Board of
Gc3
'
iernors.
Thereupon, unanimous approval
was given to a letter to Mr. Julian
Allen, President, Morgan & Cie. Incorporated, New York, New York, reading
as follows, for transmittal through
the Federal Reserve Bank of New York:
mit,This refers to your letter of December 31, 1956, transthrough the Federal Reserve Bank of New York, regarding
the
tl., revisi0n of Regulation K, effective January 15, 1957, and
;7 agreement
which Morgan & Cie. Incorporated executed with
the B
,oard
of
Governors pursuant to Section 25 of the Federal
Ileserve
Act under date of Janunry 26, 1945.
As

requested in your letter, the Board of Governors hereby
Morgan & Cie. Incorporated of all obligation to comply
of j e future with the regulations contained in your agreement
as onarY 26, 1945 mentioned above, this action to be effective
01
:v..-nuary 15, 1957 and to remain in effect so long as Morgan
-* Jalcorporated remains subject to Regulation K.
mor,‘4ith reference to the further request in your letter that
'
6an & Cie. Incorporated be permitted to exceed the limits set




112
1/16/57
-9forth in Section 10(b) of the revised Regulation K regarding
the aggregate
liabilities of your Corporation, the Board of
Governors
hereby grants permission to Morgan & Cie. Incorporated to exceed the limits of Section 10(b), such permission
o be subject
to the same conditions that applied to the simliar permission
which the Board granted under your agreement
of January
261 1945, namely, (a) that Morgan & Cie. Incorporated shall
maintain a condition of liquidity consonant with
the nature
of its liabilities, and (b) that the Corporation
shall
restrict its operations and conduct its business in
such manner and under such other or further limitations and
res
trictions as the Board may hereafter from time to time
prescribe for the place or places wherein such business is
to be
conducted.
There had been sent to the members of the Board copies of a mem°randum

from the Division of Examinations dated January 10, 1957, dis-

cussing certain
questions that had been raised by Marine Midland Corporation, B
uffalo, New York, regarding requirements for the establishment
and
maintenance by holding company affiliates of reserves of readily
marketable assets
pursuant to the provisions of section 5144 of the
lievised S
tatutes of the United States. The memorandum stated that the
Division
agreed with Marine Midland's understanding as to the meaning
Of the
re
quirements and recommended that a letter reading as follows
be sent to mr.
Crosse, Assistant Vice President of the Federal Reserve

/3allk of New
York:
dre

This refers
to the letter, dated January h, 1957, ad..lan.(sIsr. to Your Bank by Mr. Maull, President of Marine MidrPoration, Buffalo, New York, which was transmitted
with Your
letter dated January 7, 1957.
,,,,-10.1.1eleInteielss.t letter, Mr. Maull stated that as a result of
during the past year between representatives
enethe Federal
Reserve Bank and the corporation with refer514 to the readily marketable asset provisions of
section
'Revised Statutes, it is their understanding that




'113
1/16/57

-10-

(1) the required
reserve need not be accumulated only
out of earnings in excess
of 6 per cent of the book
value of the stock; (2) any assets which the corporation has, irrespective of how obtained, which
qualify not
for the reserve, can be so counted; (3) it is
necessary that the reserve be earmarked and held as
a separate account; and (4) if such reserve is in
existence
all corporate earnings are available for
proper
corporate purposes, including the payment of
dividends.
The Board is in agreement with the understandings
stated
above. It should be noted with respect to item
numbered (2) that the assets required to be held, in
niltion to being readily marketable, shall be held
free and
clear of any lien, pledge, or hypothecation
\a4Y nature. Also, with respect to item numbered
‘4
'), if the required reserve is in existence, corParate earnings would be available for the payment
of dividends, provided dividends are declared in
:mounts which do not violate the provisions of subectl04 (e)(4) of section 5144, Revised Statutes.

g

Please advise Marine Midland Corporation accord-

Following a brief discussion, the letter was approved unanimously.
The next

item to be considered was a memorandum from the Divi-

81*(34 of Ex
aminations dated January 15, 1957, copies of which had been
sent to the
members of the Board, regarding certain requests for extell510
11 of time within
which to register as a bank holding company
Pursuamt to
the Bank Holding Company Act of 1956.
cioled that
each of the requests be granted.

The memorandum rec-

lir. Thompson said that two of the five cases apparently reflected
ltiQk of a
wareness of
holding company status under the new statute and that




1/16/57

-11-

in two other cases
there was apparently a misunderstanding regarding
the
registration requirements.
With respect to the fifth case, involving The Fort Worth
National B
ank) Fort Worth, Texas, Mr. Hackley explained that the
"estion of the bank's
status as a bank holding company under the
law remained to
be resolved. He said the Board's staff had the matter under c
onsideration and would make a recommendation to the Board
as
soon as
possible. He went on to say that it was hoped to have the
ree0
11unandation ready for presentation to the Board before the expiration of
the proposed
extension of time for registration, namely March

15
'1957i

If not, the time could of course be further extended.
Thereupon, unanimous approval
was given to telegrams reading as
follows:

T Mr
ondrom

Vice President

Federal Reserve Bank of Dallas

ard, has not
had an opportunity to determine whether
The
ba Port Worth
National Bank, Fort Worth, Texas, is a
clun?*°1ding company. However, in order to avoid any
in-Vilon as to violation of registration requirements
untIlle event registation is necessary, Board extends
b
March 15, 1957, the time for registration by that
ank Pursuant
to the Bank Holding Company Act of 1956.
Also ,
withinard has extended to March 15, 1957, the time.
1,1
which Farmers and Mechanics Trust Company, Childpltr
's_s_. y Texas
,may register as a bank holding company,
Act6uant to the provisions of the Bank Holding Company

°r 1956.
Also ,
with -uoard has

extended to February 15, 1957, the time
1,,-112,Thich
The
Equitable Company of Texas and Mercantile
Nati
bea ho Bank at Dallas, Dallas, Texas, may register as
1d
ta
1ding
companies pursuant to the provisions of the
Holding Company Act of 1956.




115
1/16/57

-12-

To mr
---__!_912,tzelberger

Vice President Federal Reserve Bank of Cleveland

Board has extended to March 15, 1957, the time within
which The Buckeye Union Casualty Company, Columbus,
Ohio, may
register as a bank holding company, pursuant
to56the
provisions of the Bank Holding Company Act of

19.

The meeting then adjourned.




Secretary's Note: Governor Balderston
today approved on behalf of the Board
the recommendation contained in a memorandum dated January 9, 1957, from Mr.
Young, Director, Division of Research
and Statistics, that the resignation
of Mary Ann Nichols, Clerk-Typist in
that Division, be accepted effective
February 15, 1957.