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Minutes for
To:
Members of the Board
From:
Office of the Secretary
January 18, 1962
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. King
Gov. Mitchell
LG
Minutes of the Board of Governors of the Federal Reserve System on
Thursday, January 18, 1962.
PRESENT:
Mr.
Mr.
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
King
Mitchell
Sherman, Secretary
Kenyon, Assistant Secretary
Thomas, Adviser to the Board
Young, Adviser to the Board and Director,
Division of International Finance
Mr. Molony, Assistant to the Board
Mr. Cardon, Legislative Counsel
Mr. Hackley, General Counsel
Mr. Noyes, Director, Division of Research
and Statistics
Mr. Farrell, Director, Division of Bank Operations
Mr. Solomon, Director, Division of Examinations
Mr. O'Connell, Assistant General Counsel
Mr. Shay, Assistant General Counsel
Mr. Benner, Assistant Director, Division of
Examinations
Mr. Leavitt, Assistant Director, Division of
Examinations
Mr. Young, Senior Attorney
Mr. Veret, Attorney
Mr. Wood, Senior Economist, Division of
Research and Statistics
Mr. Troup, Supervisory Review Examiner,
Division of Examinations
Mr.
Mr.
Mr.
Mr.
Items circulated or distributed to the Board.
The following
itenls, which had been circulated or distributed to the members of the
18°4rd and copies of which are attached to these minutes under the
r'e sPective item numbers indicated, were approved unanimously:
Item No.
tter to Peoples and Union Bank, Lewisburg,
bennessee, approving the establishment of a
l'aneh at 422 East Commerce Street.
1
1/18/62
-2Item No.
Letter to the Federal Reserve Bank of Dallas
advising of a stay of the Board's order
directing the divestment of certain bank
Shares by C. B. Investment Corporation,
Houston, Texas.
2
Letter to all Federal Reserve Banks inviting
comments with respect to Regulation K.
3
Report on competitive factors (Pottsville-Orwigsburg, Pennsylvania).
There had been distributed to the Board a draft of report to the Comptroller of the Currency on the competitive factors involved in the
ProPosed merger of The Pennsylvania National Bank and Trust Company of
Pottsville, Pottsville, Pennsylvania, and The First National Bank and
TrUst Company of Orwigsburg, Orwigsburg, Pennsylvania.
The report, in which the conclusion read as follows, was approved
Unanimously for transmittal to the Comptroller:
Competition between The Pennsylvania National Bank and
Trust Company of Pottsville and The First National Bank and
Trust Company of Orwigsburg is minor. It does not appear
that the proposal will have adverse competitive effects on
Other banks in the area.
Examiners' Conference.
Pursuant to the recommendation contained
14 a memorandum from Mr. Benner dated January 15, 1962, which had been
e
distributed, unanimous approval was given to the holding of a Conferenc
°t RePresentatives of Bank Examination Departments of Federal Reserve
134111(8 at the Federal Reserve Building on March 26-27, 1962.
The
Illemorandum noted that it was planned to arrange a dinner at a local
1/18/62
-3-
hotel for Reserve Bank representatives and designated Board personnel
in connection with the conference.
Messrs. O'Connell and Benner then withdrew from the meeting.
Report on S. 2528 (Item No. 4).
There had been distributed a
memorandum from the Legal Division dated January 12, 1962, submitting a
da'aft of letter to the Senate Banking and Currency Committee with regard
t° S. 2528, a bill to authorize the establishment of Federal mutual
savings banks.
As noted in the memorandum, this bill was a revision of
bill S. 3796, on which the Board reported to the Senate Banking and
Currency Committee in its letter of December 9, 1960.
However, it was
telt that the points made by the Board in its report on S. 3796 continued
to be applicable.
4
Accordingly, the proposed letter would consist essentially
quotation from the Board's letter of December 9, 1960.
In that letter
the Board raised certain broad questions regarding the effects of such
legislation, along with questions on specific provisions of the bill.
In discussion, Mr. Cardon suggested that instead of including
the quoted material in the proposed letter, it might be preferable to
include the summary of points raised in the 1960 letter that appeared
lh the memorandum from the Legal Division.
eci2sressed with this suggestion.
General agreement was
However, Governor Mills raised the
qtlestion whether the Board would also want to comment in its report
°4 S. 2528 regarding the provision in that bill whereby Federally
chartered mutual savings banks would be insured banks under the
-4-
1/18/62
Federal Deposit Insurance Corporation, particularly in view of the
differences between the functions of such banks and those of insured
commercial banks.
A related point mentioned by Governor Mills was
that, despite the insurance arrangement, the mutual savings banks
l'icould fall under the supervision of the Federal Home Loan Bank Board.
After some discussion of those points, Mr. Cardon observed that there
were many questions involved in this proposed legislation into which
One might go as an academic matter.
However, there did not appear to
be enough support for the bill to indicate much possibility that it
lIould be passed.
In its 1960 letter on S.
3796, the Board had
refrained from taking a definite position, and in the present circumstances it was Mr. Cardon's thought that the Board might wish simply
to indicate, in effect, that the new bill did not resolve the questions
raised previously by the Board.
At the conclusion of the discussion, unanimous approval was
given to a letter to the Chairman of the Senate Banking and Currency
C°Inmittee in the form attached as Item No. 4.
Messrs. Cardon and Young (Senior Attorney) then withdrew from
the meeting.
Application of Columbus Junction State Bank.
There had been
distributed to the Board a memorandum from the Division of Examinations
4ted January
3, 1962, recommending favorably on an application by
consent
e°114mhus Junction State Bank, Columbus Junction, Iowa, for
1/18/62
-5-
to purchase the assets and assume the liabilities of The Louisa County
National Bank of Columbus Junction.
At the Board's request, Mr. Leavitt made a statement concerning
the facts of the case and the reasons underlying the recommendation of
the Division of Examinations, his comments being based substantially on
the information presented in the January 3 memorandum.
In the ensuing discussion, all of the members of the Board indicated that they would favor approval of the proposed transaction.
Ckwernor Robertson commented, in this connection, that the size of the
e°mmunity and of the smaller of the two banks concerned apparently was
not sufficient to enable that bank (Louisa County National Bank) to
obtain capable management.
In his judgment, this outweighed an adverse
factor, namely, that banking competition in the town would be eliminated
bY conslimmntion of the proposed transaction.
Accordingly, the application was approved unanimously, with the
luiderstanding that the Legal Division would prepare drafts of an order
414 sugporting statement for the Board's consideration.
Messrs. Leavitt, Troup, and Veret then withdrew from the meeting.
Collection of data on mortgage interest rates (Item No. 5).
a letter to Mr. Noyes dated January 10, 1962, the Chief of the
blvlsion of Research and Statistics of the Federal Deposit Insurance
C°rPoration submitted a draft of letter proposed to be sent to banks
ill connection with the Corporation's proposal to collect information
t
-6-
1/18/62
On conventional mortgage interest rates and related items.
These data,
When collected, would be combined with information to be collected by
the Federal Home Loan Bank Board from other lenders.
In its proposed
letter to reporting banks, the Corporation intended to state that the
"arrangement has the approval of the Office of the Comptroller of the
Currency and of the Board of Governors of the Federal Reserve System".
In the letter to Mr. Noyes, assurance was requested that the use of
84oh language was agreeable to the Board.
A memorandum from Mr. Noyes dated January 16, 1962, which had
been distributed, recommended that the Board agree to the inclusion of
the proposed language in the letter from the Federal Deposit Insurance
Corporation to reporting banks.
In view of the desirability of having
better information on mortgage interest rates, it was believed that the
effort was a desirable one and should have the Board's support.
Following comments by Mr. Noyes, unanimous agreement was
NIressed with the recommendation in his memorandum.
A copy of the
letter sent to the Federal Deposit Insurance Corporation regarding
this matter is attached as Item No.
5.
There followed informal comments by Mr. Young on his recent trip
t0 Paris to attend a meeting of a working party of the Organization for
e°n°11lie Cooperation and Development, after which the meeting adjourned.
‘11
1/18/62
-7Secretary's Note: Pursuant to the recommendation contained in a memorandum from
the Division of Research and Statistics,
Governor Shepardson today approved on
behalf of the Board an increase in the
basic annual salary of Polly Ann Mulville,
Statistical Clerk in that Division, from
$3,865 to $4,04o, effective January 21,
1962.
BOARD OF GOVERNORS
OF THE
Item No. 1
1/18/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25. O. C.
ADORERS
°meta*. OOPINEOPONOCNCE
TO THE illOARD
January 181 1962
Board of Directors,
Peoples and Union Bank,
Lewisburg, Tennessee.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of Atlanta, the Board of Governors
of the Federal Reserve System approves the establishment
of a branch at 422 East Commerce Street in Lewisburg,
Tennessee, by Peoples and Union Bank, provided the branch
is established within one year from the date of this
letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
Item No. 2
1/18/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONOENCE
TO THE BOARD
January 18, 1962
Mr, L.
G. Pondrom,
'gee President,
cleral Reserve Bank of Dallas,
D,,
248 2$ Texas.
Deex u_
Pondram:
1962, enclosing
This refers to your letter of January 12,
and
Reconsideration
coPies of a Petition For Stay of Directive,
41,
submitted
ent, together with related affidavits and brief,
15
Texas ("CB"), relating
t "B. Investment Corporation, Houston,
° the Board's actions of February 3 and September 19, 1961,
numbers of shares in
ing CB to divest itself of specified
ti/t
First National Bank
ot P--rSt National Bank of La Porte and the
rort Arthur.
Petition and the
The several matters contained in CB's
aoco„
,
Board
as iivanying affidavits and brief will be presented to the
Board's consideration of
0B18°°11 as practicable. Pending the
!Petition, and at GB's request, the date by which divestment
0:
namely,
J4441e shares in question was to have been accomplished,
date
such
until
1817 18, 1962, has been extended by the Board
aa 14.
'
41e Board may hereafter set.
tor
to counsel
Kindly transmit the substance of this letter
CB.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
,...
•1;
BOARD OF GOVERNORS
AO***
t47$444
OF THE
1040
Item No. 3
FEDERAL RESERVE SYSTEM
1/18/62
WASHINGTON 25. D. C.
ADDRESS OFFICiAL CORRESPONDENCE
TO THE BOARD
January 18, 1962,
Dear Sir:
The Board recently addressed a letter to foreign banking
and Pl
sections 25 and 25(,?,) of
the financing corporations operating under
Federal Reserve Act soliciting suggestions from the supervised
I-IL ns
titutions as to modifications of Regulation K that they believe
eclould enable them to carry out their functions more effectively. A
oPY of the letter used for this purpose is enclosed, from which
,
'will note that comments are to be forwarded to the Board through
till
'
e r espective Federal Reserve Banks by February 15, 1962,
The Board will, of course, also be glad to receive corn—
s that your Bank may wish to submit with respect to the
1 ?gulation. While it is not necessary to do so, there is no
0
'
bJection to your discussing the regulation with interested member
lo„nks or others in your district who might have views that should
considered in connection with a comprehensive review of its
°visions at this time.
4
Very truly yours,
'
Merritt
Sec
41elOsure
PRESIDENTS OF ALL FEDERAL RESERVE BANKS
BOARD OF GOVERNORS
OF THE
Item No.
FEDERAL RESERVE SYSTEM
1/18/62
WASHINGTON
OFFICE OF THE CHAIRMAN
January 19, 1962
Tho Honorable A. Willis Robertson,
Chairman,
Tommittee on Banking and
QurrencYs
;111tod States Senate,
"ashington 25, D. C.
1/ear Mr. Chairman:
This is in response to your request of September 19, 1961,
f:,tho Board's views on the bill S.2528 "To authorize the establish"6 of Federal mutual savings banks."
The Board reported on S.3796 to your Committee by letter
-ved
tob December 9/ 1960, and the views expressed at that time appear
o equally applicable to S.2528.
In summary, the Board's report of December 9, 1_9600 raised
a
e tain broad questions as to whether this legislation would actually
1,41,,Iil
ea8e the flow of savings within the economy as a whole and
',"or a system of Federally chartered mutuals would result in a
ilVangement of the present pattern of relationships ahiong Ciriaricial
'
141It1ons that would best serve the public interest. The Board
0ferred to specific provisions of the bill and suested that
'
t1:41
1111ootment powers of Federal mutuals appear to be more liberal
'
th,,,4
co'qu those currently possessed by other thrift institutions and
,,1lerotal banks. In this connection the report mentioned that
eq
mutuals would be permitted to invest in stocks in an amount
.fund
a4* to 5 per cent of their assets or 100 per cent of their reserve
(1110,,s and undivided profits, whichever is greater. The Board also
or ,,tioned the wisdom of permitting investment in 30-year 90 per cent
4143Praised value conventional mortgages and the inclusion of
Illort°
,
1'itY to invest in 75 per cent .of appraised value conventional
Pier '-'42;os on unimproved land. Finally the Board pointed out that the
ol..r and consolidation provisions of the bill are subject to none
"o standards provided in the Federal bank merger act.
,
4
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
Win. NCC. Nartin, Jr.
4
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No. 5
1/18/62
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
January l8, 1962.
l'Irs Erie Cockel Sr., Chairman,
Federal Deposit Insurance Corporation,
Washington 25, D. C.
Dear Mr. Cocke:
m
In a letter to Mr. Noyes dated January 10, 1962,
Ars Cramer outlined plans for the Federal Deposit Insurance
°rPoration to collect information from banks on conventional
,
tt1c)rteage interest rates and related items. Enclosed with his
letter were drafts of two statements regarding the series which
14°111d indicate that the arrangement proposed had the approval
cif the Board of Governors of the Federal Reserve System.
As your office has been advised by telephone the
Boa
rd has no objection to the inclusion of statements indicating
its
support of the proposal.
Very truly yours,
(signed) Merritt Sherman
Merritt Sherman.
Secretary.
@FedFRASER