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Minutes for Jarmarv 17, 1957 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 ,inutes 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 Chm. Martin Gov. Szymczak Vardaman Gov. Mills Gov. Robertson Gov. Balderston x Gov. Shepa80 X6i441 1/1 Trie accont:ached set of minutes was sent to Governor Vardaman's office in lioli nce With the procedure approved at the meeting of the Board on with! tle 29,1955. The set was returned by Governor Vardaman's office u statement "hat Le (see Mr. Kenyon's memorandum of February 12, 1957) n ereafter Governor Vardaman would not initial any minutes of meet— the Board at which he was not present. Therefore, with Governor .19val, these minutes are being filed without Governor rZnt7,11p17 Ta is valtI Minutes of actions taken by the Board of Governors of the Pederal Reserve System on Thursday, January 17, 1957. ii the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. The Board met Martin, Chairman Balderston, Vice Chairman Szymczak Mills Shepardson Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Kenyon, Assistant Secretary Vest, General Counsel Sloan, Director, Division of Examinations Solomon, Assistant General Counsel Goodman, Assistant Director, Division of Examinations The following matters , which had been circulated to the members or the Board., were presented for consideration and the action taken in e"11 instan„ was as stated. Of Nev ,Letter lark, to Mr. Treiber First Vice President, Federal Reserve Bank reading as follows: to „The Board of Governors approves the payment of salary Carl H. Madden as a Manager assigne d to the Public th-Lrormation Department for the period January 3, 1957, °4gh December 31, 1957, at the rate of $10,500 per annum porc th is the rate fixed by the Board of Directors as reed in your letter of January 3, 1957. Approved unanimously. eielrelanLette_ 1- to the Board of Directors, The Cleveland Trust Company, d ' o, reading as follows : Rese Pn! ant to your request submitted through the Federal Feder "nk of Cleveland, the Board of Governors of the in a al ReservP System approves the establishment of a branch 8 1,11°PP1ng center to be constructed at the southwest car°' Pleasant Valley and Broadview Roads, Parma, Ohio, by 117 1/17/57 -2- The Cleveland Trust Company, Cleveland, Ohio, provided the branch is established within one year from the date Of this letter and the approval of the State authorities is in effect as of the date the branch is established. Approved unanimously, for transmittal through the Federal Reserve Bank of Cleveland. Bank Telegrams to Mr. Mitchell, Federal Reserve Agent, Federal Reserve authorizing the issuance of limited voting permits, under stairvisions of section 5144 of the Revised Statutes of the United The ci) to Citizens and Southern Holding Company, Savannah, Georgia, and ormnitizens and Southern National Bank, also of Savannah, entitling each on to vote ti the stock which it owns or controls of Augusta Naanraj : al anky Augusta, Georgia, at any time prior to April 1, 1957, at the eeting of shareholders of such bank, or any adjournments thereof, (1) are c;:deleet directors and act upon such matters of a routine nature as to vo#_itarily acted upon at the annual meetings of such bank, and (2) ,7 on the adoption of the Pension and Profit Sharing Plans of The 4"ns and Southern National Bank. the Of Atlanta, Approved unanimously. reaA u- Letter to the Board d of f Directors, City Bank, Detroit, Michigan, ELS fOUOWS: er , Pursuant to your request submitted through the Fedi) a-L Reserve Bank of Chicago, the Board of Governors ap144:°ves the establishment of a branch by City Bank in the De. ! ct Ill'tY of the corner of Mack Avenue and Cadieux Road in vity Michigan, provided the branch is established pr "in nine months from the date of this letter, and apdaral (:)f the State authoritie s is effective as of the t.e the branch is established. Approved unanimously, for transmittal through the Federal Reserve Bank of Chicago. Pr, Letter s-ePOrt y to the Board of Directors, First National Bank of Freeport, lin°18, reading as follows: has .T!Ipe B°ard of Governors of the Federal Reserve System consideration to your application for fiduciary 1117/57 -3- Powers and grants you authority to act, when not in contravention of State or local law, as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies or other corporations which come into competition with national banks /lre permitted to act under the laws of the State of llinois, the exercise of all such rights to be sub,11 .. 7ct to the provisions of the Federal Reserve Act and le regulations of the Board of Governors of the Federal Reserve System, A formal certificate indicating the fiduciary Powers which the First National Bank of Freeport is now duthorized to exercise will be forwarded to you in due course. Approved unanimously, for transmittal through the Federal Reserve Bank of Chicago. san Letter to Mr. Millard, Vice President, Federal Reserve Bank of yrancisco, reading as follows: and Reference is made to your letter of January 2, 1957, enclosure concerning a proposal by Wells Fargo San Francisco, California, to open a branch in temtidiriarY quarters at 1124 "B" Street, Hayward, California. +1, 8 less than two blocks from "A" Street between p 8 men; ' - 11 Boulevard and Second Street where the establish1.9 g °f a branch was approved by the Board on October 18, Inasmuch as it Is the temporary locais at be abandoned as soon as quarters can be erected ue Permanent location, the Board will interpose no objeci on to the proposal. it8 Approved unanimously. There had been circulated to the members of the Board a memor"clurtl from the Division of Examinations dated January 8, 1957, regarding a r from The Chase Bank, New York, New York, that the Board ap11). "It further investment in Arcturus Investment & Development, Ltd. in 119 1/17/57 r°rm to be decided upon by The Chase Bank, up to an amount which, with the existing investment, would not exceed $7,500,000. The memorandum ec3rmnented en the approvals previously given by the Board to The Chase tank to Purchase otock in Arcturus, a company organized under the Com- Panlea Act of Canada, up to an amount not exceeding $1,300,000; the total investment of The Chase Bank in Arcturus as of December 10, 1956 ($1291,650.73); the balance sheet of Arcturus as of November 30, 1956, e'lld the investments reflected therein; a change in the original plan of The Chase Bank so that it would continue as the sole stockholder of Al'eturua rather than bringing in other organizations or individuals; the Invest nt ale-- aims and purposes of Arcturus, as stated by the management Of The Chase Bank during a recent examination of that organization; and the itnancial condition of The Chase Bank, as disclosed by examination as Or December 10, 1956. The e1 memorandum also commented on the recommendation of the Fed- Reserve Bank of New York that the use of funds from the requested Increased investment in Arcturus be made subject to the same limitations cn loans and investments as apply to The Chase Bank itself. It was rePorted to be the feeling of the Division of Examinations, however, that it 11.11Y limitations were to be prescribed they might more appropriately be related to the capital and surplus of Arcturus than The Chase Bank. Aecr4inglY, the Division recommended that the requested authority be granted without indicating specific limitations but with the understanding The Chase Bank would be expected to dispose of the stock of Arcturus that ProMptly as practicable in the event that it should appear at any 120 1/17A7 -5- tin* that Arcturus was engaging in loan, investment, or other activities al4cl eperation8 which could be regarded as being inconsistent with the 1)1‘°11-sions of section 25(a) of the Federal Reserve Act or regulations thereunder. Following a review by Mr. Goodman of the facts developed in the rileni°ralaclum, during which he explained the reasons for the position taken hY the Division of Exeminations Governor Mills made a statement in which he said that when the proposal of The Chase Bank to invest in Arcturus Presented to the Board originally it was his impression that Arcturus /las to engage in the field of distributing securities. From a study of the clIrrent proposal, he said, it appeared that the intent as to the activities of Arcturus was far beyond that of investment distribution 44d that the company intended to engage in equity ownership in manufactIlrizig or other types of enterprise. While it had been his opinion that the tial proposal was consistent with the provisions of Regulation K 64 it then existed, this did not hold with respect to the current pro- 14)41. Raving been among the minority of the Board that voted against ado Pti°11 of the revised Regulation K, he would wish to abstain from voting %the current application. It response to a question by Governor Balderston, Governor Mills 414111,1c zlo O4 that he had looked with disfavor on the recent request of Overseas Finance Corporation for permission to invest in a cor- rati°11 organized to handle chrome ore deliveries to ports. He said that 121 1/17/57 -6- he regarded the current proposal as even more questionable because he understood the status of The Chase Bank to be that of a "banking c°1'Poration" rather than a "financing corporation". If this was not the ease) he suggested that it would be in order for The Chase Bank to request a change in title which would eliminate the word "bank". In view of Governor Mills' comments, Mr. Goodman discussed the activities of The Chase Bank. He also stated that there had been some indication that the corporation was considering making a request of the Board for permission to be a financing corporation under Regulation IC and for Permission to change its name. Governor Szymczak then inquired of Mr. Goodman whether in his clItai°11 aPproval of the increased investment by The Chase Bank would be ccileistent with the provisions of the revised Regulation K, as adopted bY .11,— "u Board effective January 15, 1957. Mr. Goodman responded that he thought the answer would depend stymelit at on the meer in which one interpreted the changes made in the draft Of the regulation in the light of the suggestions made by Governor 11Q h bert8°-. It was a matter of judgment, he said, whether favorable etttioll 'with the language proposed to be included in the letter to The ehttae t te ank, 'would conform broadly to the pertinent provisions of the illiati°11 in the form in which it was adopted by the Board. tIlat he lajAy. In fUrther discussion of the matter, Governor Balderston said Shared. to some extent Governor Mills' concern about the possi- of a4 Edge corporation being enabled to take a permanent equity 1/17/57 -7rather than making temporary investments for the purpose of engaging in the distribution of securities. He suggested that equity investments might develop in such a way as to result in injury to the Parent banking institutions. Chairman Martin said that he would be inclined to agree so far a6 Permanent holdings were concerned, but that on the other hand he did 11°t think that Edge corporations could engage in foreign financing business without having "some room in which to turn around". He felt that there would be no real point in going into activities such as c°flteMPlated by Arcturus if the investments yere going to be regarded 48 Permanent. He went on to express views similar to those he had stated Previ°118 occasions concerning the difficulty in operating in the field f°reign financing under banking regulations, particularly if such regl.laations were given a narrow interpretati on. Governor Szymczak then suggested that the current request be held °ver for thi8 further consideration in the light of the questions raised at rrteetjng and Chaee that Mr. Goodman be requested to ascertain whether The Bank vas rtaala considering a request to the Board for permission to be a eing corporation under Regulation K and for permission to change it tame. There was unanimous agreement with these suggestions. Chairman Martin said that it had been ascertained that it would agrf, -eable to the Reserve Bank Presidents if the meeting of the Federal 123 1/17/57 -8- °Pen Market Committee now scheduled for the morning of Tuesday, Jan29, were held on Monday morning, January 28, with necessary adjustThellts in the schedule for the meeting of the Presidents' Conference and tIle Joint meeting of the Presidents and the Board. No objection was interposed to the proposed changes. Governor Shepardson referred to recent interagency meetings in vhich he had participated having to do with relief for drought-stricken areas and said that several of the recommendations were in the field of ereclits catiot He vent on to say that while it was possible to obtain modifiof some of the proposals, others still appeared to contemplate l'elexat o i-n of credit standards to take care of situations that might 144.1 aPPropriately be dealt with through other forms of assistance. The dreft -ecommendations of the conference having been referred to the PEttticiPants for further suggestions prior to final review by the DepartOf A_ start ''grioulture, he inquired whether the Board would wish to have its 8° over them to ascertain whether any comments should be submitted to the r. -ePartment. Chat Martin replied to Governor Shepardson that he should reel ee to have the staff review the draft recommendations and to sub- 1111t to that the D epartment of Agriculture any comments that he saw fit, and if 0 overnor tatter Shepardson so desired the Board would be glad to consider before any such comments were transmitted. 1117/57 The meeting then adjourned. Secretary's Note: Pursuant to recommendations contained in memoranda from appropriate individuals, Governor Shepardson today approved on behalf of the Board the following matters relating to the Board's staff: ointment Gertrude tra44 urne ervices,H. Price, as Cafeteria Helper in the Division of Adminiseffect4 with basic salary at the rate of $21600 per annum, .ore the date she assumes her duties. Salarv -4 increase and transfer Positio Florence A. Norman, from the position of Assistant Baker to the ttn°' 11 Relief Cook in the Division of Administrative Services, with the in her basic annual salary from $3,000 to $3,125, effective %Late she assumes her new duties. Aeee tatee f real ation SAy.. siot of Examiza D. Everett, Assistant Federal 8 Reserve Examiner in the Divi tions, effective January 2 1 1957.
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