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The attached minutes of the meeting of the Board of Governors of the Federal Reserve System on January 19, 1965, Which you have previously initialed have been amended at the request of Governor Daane to revise his comments appearing in the first paragraph on page 9. If you approve the minutes as amended, please initial below: Governor Daane Chairman Martin Governor Robertson Governor Shepardson Governor Mitchell Minutes for January 19, 1965. 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. Chm, Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. Mitchell Gov. Daane Minutes of the Board of Governors of the Federal Reserve System on Tuesday, January 19, 1965. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Mills Robertson Shepardson Mitchell Daane Sherman, Secretary Kenyon, Assistant Secretary Molony, Assistant to the Board Cardon, Legislative Counsel Fauver, Assistant to the Board Hackley, General Counsel Farrell, Director, Division of Bank Operations Mr. Solomon, Director Division of Examinations Mr. Johnson, Director, Division of Personnel Administration Mr. Shay, Assistant General Counsel Mr. Hooff, Assistant General Counsel Mr. Leavitt, Assistant Director, Division of Examinations Miss Hart, Senior Attorney, Legal Division Mr. Egertson, Supervisory Review Examiner, Division of Examinations Mr. Lyon, Review Examiner, Division of Examinations Mr. Noory, Assistant Review Examiner, Division of Examinations Mr. Furth, Consultant Mr. Mr. Mr. Mr. Mr. Mr. Mr. Discount rates. The establishment without change by the Federal Reserve Bank of Boston on January 18, 1965, of the rates (34 discounts and advances in its existing schedule was approved unanimously, with the understanding that appropriate advice would be sent to the Bank. r . 1 -2- 1/19/65 Circulated or distributed items. The following items, copies of which are attached to these minutes under the respective item numbers indicated, were approved, the action being unanimous in each case except that Governor Robertson abstained from voting on Item No. 10: Item No. Letter to The First Pennsylvania Banking and Trust Company, Philadelphia, Pennsylvania, approving the establishment of a branch in the vicinity of Bleigh and Bustleton Avenues. 1 Letter to Union Bank and Trust Company, Grand Rapids, Michigan, approving the establishment of a branch in the vicinity of Leonard Street, N. E., and Plymouth Avenue, N. E., branch operations now conducted at 1225 Leonard Street, N. E., to be discontinued simultaneously with the establishment of the new branch. 2 Letter to Piedmont Trust Bank, Martinsville, Virginia, approving an investment in bank premises. 3 Letter to Progress National Bank, Toledo, Ohio, granting its request for permission to maintain reduced reserves. 14- Letter to the Federal Reserve Bank of Minneapolis waiving the assessment of a penalty incurred by Escanaba National Bank, Escanaba, Michigan, because of a deficiency in its required reserves. 5 Letter to the Federal Deposit Insurance Corporation arding the application of Park State Bank, Milwaukee, w iseonsin, for continuation of deposit insurance after withdrawal from membership in the Federal Reserve System. 6 Letter to the Federal Deposit Insurance Corporation the application of First State Bank, Bangs, Texas, 4exas, for continuation of deposit insurance after W ithdrawal from membership in the Federal Reserve System, 7 Kori 1/19/65 -3Item No. Letter to the Federal Deposit Insurance Corporation regarding the application of Corydon State Bank, Corydon, Iowa, for continuation of deposit insurance after withdrawal from membership in the Federal Reserve System. 8 Letter to the Federal Reserve Bank of Minneapolis approving the appointment of Maxine M. Crider as a Federal Reserve Agent's Representative at the Helena Branch. 9 Letter to Flabanco, Inc., Lake Worth, Florida, granting a, determination exempting it from all holding company affiliate requirements except for the purposes of section 23A of the Federal Reserve Act. 10 In connection with the request of Progress National Bank, Toledo, Ohio, for permission to maintain reduced reserves (Item Mr. Farrell mentioned that there was coming before the Board for consideration a request for termination of the designation of Toledo as a reserve city. It was the Board's view, however, that this circumstance did not warrant deferring action on the request of Progress National Bank. In connection with the appointment of Maxine M. Crider as a Federal Reserve Agent's Representative at the Helena Branch (Item Mr. Johnson commented, in reply to a question relating to the relatively low salary classification of the employee, that there were not too many people at this small branch who would qUalify to serve in the capacity of Agent's Representative, particularly since the currency function was one of the larger operations. 4 ) 4- x;;o4 1/19/65 He also mentioned that there were two other Agent's Representatives at the Helena Branch, which indicated that Mrs. Crider's services Probably would be needed only sparingly. Application of Security-Peoples Trust Company. There had been distributed drafts of a proposed order and statement reflecting approval by the Board on January 7, 1965, of the application of Security-Peoples Trust Company, Erie, Pennsylvania, for permission to merge with The Girard Battles National Bank, Girard, Pennsylvania. A dissenting statement by Governor Robertson also had been distributed. Governor Mitchell outlined a number of suggested changes in the proposed majority statement, and after discussion of these suggestions it was understood that the Legal Division would review them to determine whether they could be woven into a revised draft Of majority statement that would be acceptable to all members of the Board who had voted to approve the merger, an alternative possibility being that Governor Mitchell might prefer to issue a concurring statement. Messrs. Farrell, Johnson, Shay, Hooff, Egertson, Lyon, and Noory then withdrew, as did Miss Hart, and Messrs. Young, Adviser to the Board and Director, Division of International Finance, Noyes, Adviser to the Board, and Brill, Director, Division of Research and Statistics, entered the room. -5- 1/19/65 Legislation regarding Reserve Bank advances. with the Board's discussion on November 18, 1964 In accordance there had been distributed a memorandum from Mr. Hackley dated January 15, 1965, sUbmitting a revised draft of proposed letter to the Chairmen of the Banking and Currency Committees of Congress again recommending legislation that would permit member banks to borrow from Federal Reserve Banks on the security of any sound assets without paying a Penalty rate of interest. The memorandum, which identified changes from the draft letter previously considered by the Board, also noted that the proposed bill to be transmitted would be identical with the draft bill recommended by the Board in August 1963. Certain suggestions were made by members of the Board for changes in the proposed letter in the interest of clarification and emphasis, and it was understood that these suggestions would be taken into account in preparing the letter in final form. It waS also understood that the letter would be transmitted to the Chairmen of the Banking and Currency Committees at the same time as letters recommending other changes in the law that the Board had previously approved as parts of a legislative package. Foreign lending by banks. Pursuant to the understanding at Yesterday's meeting, there was further discussion of alternative aPProaches to the problem of lending by U. S. banks to foreigners, -6- 1/19/65 a factor that had been contributing to the balance of payments deficit. The discussion was again based on the material distributed 'with Mr. Young's memorandum of January 11) 1965) which included a memorandum from President Hayes of the New York Reserve Bank dated December 21) 1964, suggesting a program of selective moral suasion and a memorandum from Mr. Young dated January 8, 1965, proposing that such an effort be buttressed by amending the general principles Of Regulation Al Advances and Discounts by Federal Reserve Banks. Both Mr. Hayes and Mr. Young also suggested a moderate tightening Of bank reserve positions as part of the program. There had also been distributed a memorandum from Mr. Brill dated January 18) 1965, reflecting his personal reactions to the Hayes-Young memoranda. Mr. Young commented that the deficit in the U. S. balance °f payments for the fourth quarter of 1964 apparently would develop to have run at around a $6 billion annual rate) producing a deficit for the year of around $3 billion) only a modest reduction from 1963. When published, the figures would create concern in international financial markets, and the U. S. seemed certain to lose quite a bit °f gold in the months ahead. The U. S. also would have to pay to the International Monetary Fund in the fall a $258 million gold subscription in consequence of the increase in Fund quotas, and Other countries similarly required to make gold contributions 7 t -7- 1/19/65 Probably would be drawing some of the gold from the U. S., which might mean a further loss of perhaps $100 million from the U. S. gold stock. The balance of payments deficit reflected substantially the extent of capital outflow. In the circumstances something had to be done, and Mr. Hayes had suggested an effort at selective moral suasion, sponsored jointly by the Treasury and the Federal Reserve System. It had occurred to Mr. Young that perhaps a better approach -one with more bite in it—would be to amend Regulation A to supplement any moral suasion effort. Two alternative amendments haa been suggested, either one of which should accomplish the purPose of indicating that when a member bank wished to borrow from a Reserve Bank the extent of its foreign lending would be taken into account. In any case, a Federal Reserve program had to be looked upon as supplementary to a possible extension of the interest equalization tax to longer term foreign lending by banks, a step that the Treasury would have to consider through use of the socalled Gore amendment. And whatever was done would need to be made effective by some reduction in the availability of reserves to the banking system. In that respect, the program he (Mr. Young) had suggested was quite a modest one. It was not intended to stop hank credit expansion, but only to reduce--by perhaps 1 per cent or a little more--the rate of recent expansion. It would, however, 208 -8- 1/19/65 no doubt result in some increase in discounting and in full resort by large banks to the Federal funds market, to which they had been resorting freely for the past year. There followed a general discussion during which Governor Mills expressed the view that the balance of payments situation deserved drastic action. He felt that basically this action should be in the area of fiscal controls, whether in the form of exchange control, extension of the interest equalization tax, or controls over tourist expenditures. Sternness was the only thing that would be recognized abroad and understood by the business and financial community. When it came to Regulation Al he was fearful of distort- its role as a general control over the supplying of reserves through the discount window, traditionally the borrowing facility °r last resort for member banks. Therefore, he did not enthuse about its use for punitive purposes, and he found Mr. Brill's arguMerits in this regard quite persuasive. He was not fearful, on the Other hand, that some cutback in the supply of reserves and bank credit would be damaging to the domestic economy, for he thought "ne curtailment was overdue. Governor Daane said he was not particularly anxious that the Board go out of its way to spell out the appropriate purposes (If member bank borrowing in Regulation A. But the present situation 1/19/65 -9- one where this needed to be done, in particular because it would provide a better springboard for exercising moral suasion along the lines urged by President Hayes. Perhaps something could be done via the bank examination route, but he was a little skeptical because this might tend to distort the purposes of the examining function and also because of the time lag in the examination procedure. National banks definitely should be brought in under any Program; a full measure of supervisory support from that quarter was needed. He subscribed fully to the seriousness of the present prob- lem and to the need on the part of the Federal Reserve to do everything within its power in the monetary area--consistent with its over-all Objectives—to deter capital outflows. The Regulation A aPProach might have some effect, in company with a program of moral sUasion, and it would seem appropriate to think about some reduction in reserve availability to make the whole program effective. Governor Robertson did not feel that a change in Regulation A such as proposed would have much more than a psychological effect. Banks engaged in foreign lending could meet their reserve needs through the Federal funds market or through other means of borrowing instead of resorting to the discount window. We If Regulation A amended to deal with this particular problem, the System would be thrown squarely into the position of picking and choosing areas -10- 1/19/65 to which it wanted or did not want to direct funds, which would get away from the general credit control principle. He did not think that such a step was needed at this juncture. As to moral suasion, it could better be exerted by the President, in his opinion, than by the Federal Reserve System. The interest equalization tax could be extended, through legislation, to short-term as well as longer term foreign lending by banks, with the extension made retroactive. This would forestall capital outflow through bank lending, and it could be coupled with an attack on capital outflow through direct corporate investments. While he did not have strong feelings, if he had to make the decision himself, he would be averse to the use of Regulation A. Governor Shepardson agreed that without question something needed to be done, rand also that whatever was done by way of legislati°n, regulation, or moral suasion, a reduction in the availability reserves would be needed to make the program effective. Personally he did not like the moral suasion approach, for it penalized the Ilarties who were willing to go along with it as against others who lere not. If used, moral suasion should be exerted through the President to be most effective. Governor Robertson. On Regulation A, he felt much like He would reluctantly consider its use only if 8Uch a move seemed to be necessary in the final analysis. 1/19/65 -11Governor Mitchell agreed that it was essential to get the balance of payments in shape. In the event of a domestic economic downturn, monetary policy should be available for appropriate use, but as things stood the use of monetary policy to meet domestic Objectives was constrained. Furthermore, in dealing with European counterparts on the question of international liquidity the U. S. should be talking from a position of surplus rather than deficit. In these circumstances he felt that the System should be doing something soon. He did not particularly like the use of a program °f moral suasion. Much of what Mr. Hayes said was persuasive, and Igith some changes what Mr. Hayes suggested might be the best available procedure, but there was a different procedure that he thought 17ould be suitable and appropriate. He would propose dropping Regulation Q ceilings, which would curb the availability of funds to banks doing the principal foreign lending and put them under s°111e Pressure, while small banks should not be hurt particularly. 14 his view, if the matter was properly handled, it should be 1)(Isaible to have some form of moral suasion without imposing restra-int on bank credit availability as a quid pro quo. Bank " 'linings had been at an all-time high, at least in recent experi'V, b and he saw no need for an incentive to be held out 'Go the to go along with a program of moral suasion. 1/19/65 -12Governor Mitchell went on to say that he shared the views that had been expressed about the use of Regulation A, and in any event he did not think that such an effort would accomplish a great deal. Potential leakages would be too great to make this approach operative. The Federal funds market was available, and there could be discount window borrowing by banks other than those the Federal Reserve was trying to reach. Further, it would be virtually im- Possible, considering the ways in which large bank portfolios were managed, to stop the thing the Federal Reserve was trying to stop. Pullds could be rolled around in ways that discount officers could haraly uncover. Governor Mitchell observed that the situation was one in /tillich the purpose of foreign lending, not the term of a loan, would cletermine whether the loan was appropriate. If foreign lending /gas not primarily for the financing of U. S. exports, it should riot be considered appropriate. One of the persuasive things about Mr. Hayes' memorandum was that it contemplated looking at the purPose of foreign loans. But Governor Mitchell did not feel that the initiation of a program of moral suasion should be delegated to the Reserve Bank Presidents. It was understood that no more the4 about nine banks were principally involved. Therefore, the hairMan of the Board of Governors could invite the chief executives 4. t 1/19/65 -13- of those banks to come to Washington to discuss the problem around the table. would work. It might be that under such a procedure moral suasion Perhaps just indicating to the bankers the seriousness of the problem would bring results. In further discussion Governor Mills pointed out that bank fc)reign lending was only part of the total problem of capital outfl°w. Corporate investments abroad, either direct or through sub- sidiaries, constituted another significant factor. Governor Daane agreed that the total problem deserved attention, but he noted that the Federal Reserve's particular responsibility was in the hank credit area. He felt, therefore, that everything possible Should be done in this area, as part of the over-all effort that 1411.8 needed to bring the balance of payments situation under control. While he did not like the Regulation A approach, he did think there /roUld be some advantage in using it in company with a program of 111°1"al suasion. He had been led to believe, however, that quite a 411111her of banks should be brought into the picture from the standOf their foreign lending operations. On the last point Mr. 1°1-Ing commented that the best figures available on bank foreign lerlding related to commitments for longer term loans. These figures Inliicated that about nine to twelve banks accounted for the bulk of th18 type of lending. In the area of shorter term lending, a larger 1/19/65 -14- number of banks became involved. One concern about going to a limited group of banks to seek their cooperation was the possibility that other banks might move into the picture. Mr. Young also dis- cussed rates on foreign loans understood to be available to U. S. banks. In view of the attractiveness of these rates, a difficult Problem was posed from the standpoint of the economics of the situation. The differential in rates available from foreign loans might about offset the tax levied if the interest equalization tax should be extended to over-one-year bank loans under the Gore amendment. After discussion as to whether the volume of foreign lending aPPeared to reflect more the efforts of foreigners in seeking loans from American banks or aggressiveness on the part of U. S. banks in searching for borrowers, Governor Robertson commented that Governor Mitchell!s idea of having representatives of the banks principally "gaged in foreign lending meet with the Board in Washington might 13 coupled with a program whereby the Reserve Banks would take care 01' discussion with the balance of the banks making foreign loans. Governor Daane indicated that he was attracted by this suggestion. Governor Mitchell then commented that he was not attracted to a m°1.4 L suasion effort as a first choice. His first choice would be to extend the interest equalization tax to all foreign lending by With the rate of tax flexible at the discretion of the 4 /7.: IL% 7 -15- 1/19/65 Secretary of the Treasury. Governor Daane noted that this would involve the legislative process, which could be time-consuming, but Governor Robertson observed that the current interest equalization tax was effective before it became law; also that it was made effective on a retroactive basis. Governor Daane observed that the interest equalization tax, as presently in effect, would be subject to loopholes if extended by the Gore amendment to longterm bank lending because short-term loans could be renewed and 4150 because of the attractiveness of rates on foreign loans. Governor Mills noted that the voluntary credit restraint 1Drogram instituted in 1951 operated for only a short time before being discarded, and other members of the Board commented that the °gram did not appear to have been notably successful during the ' 131 1Deriod of its existence. Governor Daane said, however, that in vielg of the urgency of the balance of payments situation he still felt that the Federal Reserve should do what it could. For what- ever value they might have, he would be inclined to try the Regulation A 4PProach and also moral suasion. 4 If such a program should work for only short time, nevertheless that much good would have been done. A legislative program should involve extension of the interest equali48.ti°n tax to bank foreign lending, short or long, but there was the ti e element he had mentioned earlier. 216 1/19/65 -16Governor Shepardson said he was not convinced that moral suasion was a program on which to rely. In the first place, it Ilas not equitable to all; parties who went along with it were Penalized vis-a-vis those who did not. .The only way to get an eqUitable and significant result over any period of time was to Obtain legislation broad enough to cover the whole field that was involved. He had doubts about moral suasion except possibly as a short-run stopgap. Chairman Martin then suggested that the members of the Board continue to study the problem, and the matter was left on that basis. 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 Dallas (attached Item liN R -2-!--t±) approving the appointment of Carroll D. Blake as assistant examiner. pr Memorandum from Mr. Schwartz, Director of the Division of Data ,2ce8sing, dated January 15, 1965, recommending that a new proPosition be provided in the Financial Statistics Section that Division, it being understood that the position would be garded as established when a programmer was actually hired. Memoranda recommending the following actions relating to the 4"uard , s staff: 1/19/65 -17- Robert E. Kopp as Summer Law Clerk, Legal Division, with basic annual salary at the rate of S5,000, effective the date of entrance Upon duty. Herbert D. Miller, Jr., as Summer Law Clerk, Legal Division, lath basic annual salary at the rate of $5,000, effective the date Of entrance upon duty. Secretary o BOARD OF GOVERNORS Q Item No. 1 1/19/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD January 19, 1965 Board of Directors, The First Pennsylvania Banking and Trust Company, Philadelphia, Pennsylvania. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment by The First Pennsylvania Banking and Trust Company of a branch in the vicinity of the intersection of Bleigh and Bustleton Avenues, Philadelphia, Pennsylvania, provided the branch is established within one year from the date of this letter. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. (The letter to the Reserve Bank stated that the Board also had approved a six-month extension of the period allowed to establish the branch; and that if an extension should be requested, the procedure prescribed in the Board's letter of November 9, 1962 (S-1846), should be followed.) a-V4111 r<io BOARD OF GOVERNORS Item No. 2 1/19/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD January 19, 1965 Board of Directors, Union Bank and Trust Company, Grand Rapids, Michigan. Gentlemen: The Board of Governors of the Federal Reserve System establishment of a branch by Union Bank and Trust the approves Company, Grand Rapids, Michigan, in the vicinity of the intersection of Leonard Street, N.E., and Plymouth Avenue, N.E., Grand Rapids, Michigan, provided the branch is established Within one year from the date of this letter and provided further that branch operations now conducted at 1225 Leonard Street, N.E., Grand Rapids, are discontinued simultaneously With the establishment of the new branch. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. (The letter to the Reserve Bank stated that the Board also had approved a six-month extension of the period allowed to establish the branch; and that if an extension should be requested, the procedure prescribed in the Board's letter Of November 9, 1962 (S-1846), should be followed.) 74'7 BOARD OF GOVERNORS Item No. 3 1/19/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 ADDRESSOFFICIAL CORRESPONDENCE TO THE BOARD January 19, 1965 Board of Directors, Piedmont Trust Bank, Martinsville, Virginia. G entlemen: Pursuant to the provisions of Section 24A of the Federal Reserve Act, the Board of Governors of the Federal _leserve System approves an investment in bank premises by Piedmont Trust Bank, Martinsville, Virginia, in an amount not 41 exceed $151,500. This amount consists of $106,500 for the Purchase of a lot adjoining the main office property and $45,000 for the grading and paving of such lot and the construction of drive-in teller facilities. .Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. , BOARD OF GOVERNORS Item No. 4 1/19/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, CI. C. 20551 ADDRESS arriciAL CORRESPONDENCE TO THE BOARD January 19, 1965 Board of Directors, Progress National Bank, Toledo, Ohio. Gentlemen: With reference to your request submitted through the Federal Reserve Bank of Cleveland, the Board of Governors, acting under the provisions of Section 19 of the Federal Reserve Act, grants permission to the Progress National Bank to maintain the same reserves against deposits as are required to be maintained by nonreserve city banks, effective as of the date it opens for business. Your attention is called to the fact that such permission is subject to revocation by the Board of Governors. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. 2 $1-t."71 BOARD OF GOVERNORS Item No. 5 1/19/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD January 19, 1965 Mr. Frederick L. Deming, President, Federal Reserve Bank of Minneapolis, Minneapolis, Minnesota. 55440 Dear Mr. Deming: This refers to your letter of December 21) 1964, regarding the penalty of $105.13 incurred by the Escanaba National Bank, Escanaba, Michigan, on a deficiency in its required reserves for the period ended December 9, 1964. It is noted that (1) this deficiency occurred because of errors made on a worksheet which had recently been adopted to enable the bank to maintain closer surveillance over its reserve position; (2) your Bank is satisfied that the errors were inadvertent; and (3) the bank has rather consistently maintained a reserve balance in excess Of requirements. In the circumstances, and in view of your recommendation, the Board authorizes your Bank to waive the assessment of the penalty of $105.13 for the reserve computation period ended December 9, 1964. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. fle)3 .Se Ito BOARD OF GOVERNORS Item No. 6 1/19/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, 0, C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD January 19, 1965 The Honorable Joseph W. Barr, Chairman, Federal Deposit Insurance Corporation, Washington, D. C. 20429 Dear Mr. Barr: 1964, Reference is made to your letter of December 29, Wisconsin, concerning the application of Park State Bank, Milwaukee, membership t°r continuance of deposit insurance after withdrawal from in the Federal Reserve System. the bank, There have been no corrective programs urged upon or and, in agreed to by it, which have not been fully consummated, tahe Board's opinion, there are no such programs that it would be bank to _civisable to incorporate as conditions of admitting the Reserve Federal membership in the Corporation as a nonmember of the 8Yetem. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. BOARD OF GOVERNORS Item No. 7 1/19/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOAR° January 19, 1965 The Honorable Joseph W. Barr, Chairman, Federal Deposit Insurance Corporation, Washington, D. C. 20429 Dear Mr. Barr: • Reference is made to your letter of December 29, 1964, concerning the application of First State Bank, Bangs, Texas, for continuance of deposit insurance after withdrawal from membership in the Federal Reserve System. The Reserve Bank's transmittal letter to subject bank In connection with the report of examination as of June 30, 1964, urged the bank's board of directors to make every effort to strengthen its capital accounts. There have been no other corrective programs urged upon the bank, or agreed to by it, which have not been fully consummated, and, in the Board's opinion, there are no such programs that it nuld be Avisable to incorporate as conditions of admitting the ".,41.1k to membership in the Corporation as a nonmember of the Federal geserve sybtem. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary.. 0 BOARD OF GOVERNORS Item No. OF THE 8 1/19/65 FEDERAL RESERVE SYSTEM WASHINGTON, 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD January 19, 1965. The Honorable Joseph W. Barr, Chairman, Federal Deposit Insurance Corporation, Washington, D. C. 20429 Dear Mr. Barr: Reference is made to your letter of December 28, 1964, concerning the application of Corydon State Bank, Corydon, Iowa, for Continuance of deposit insurance after withdrawal from membership in the Federal Reserve System. Subject is viewed as a problem bank, based on an examination ! onducted by the Federal Reserve Bank of Chicago as of June 27, 1964. The total of classified loans plus 50 per cent of other loans specially ,!ntioned was equal to 55 per cent of the bank's gross capital structure. management of the bank at the time of the examination was considered tj°Dr. The chief executive officer apparently lacks the ability to Pr'ovide competent management for the bank. The bank does have a new fesident, who has been a director of the bank for many years, and during , ILle last examination he expressed a positive attitude toward improving bankfs general condition. Subject bank has also been a frequent rtIrrower from the Federal Reserve Bank of Chicago in order to meet its serve requirements. T t In a transmittal letter forwarding the examination report, the 1, a„ wank's board of directors was urged to take prompt and effective 'ion to improve the condition of the loan portfolio. The board of The Honorable Joseph W. Barr directors was urged to reduce tne Dank's loan account to .proportions that could be handled by the official staff or to strengthen management so the present volume could be more adequately serviced. There have been no other corrective programs urged upon the bank or agreed to by it, which have not been fully consummated, and, , Jal the Board's opinion, there are no such programs that it would be visable to incorporate as conditions of admitting the bank to embership in the Corporation as a nonmember of the Federal Reserve 8Yetem. r Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. BOARD OF GOVERNORS Item No. 9 1/19/65 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD January 19, 1965 Mr, Atherton Bean, Federal Reserve Agent, Federal Reserve Bank of Minneapolis, Minneapolis, Minnesota. 5544o. Dear Mr. Bean: letter of In accordance with the request contained in your tment of appoin the s 5 1965, the Board of Governors approve Mrs. at ntative Represe s Agent' Nin axe M. Crider as a Federal Reserve "Helena Branch. -"Uarlr Mrs. This approval is given with the understanding that and Agent e Reserv l er Will be solely responsible to the Federa , duties her of ance exc Board of Governors for the proper perform e Reserv l Federa the of A ePt that, during the absence or disability the to be will ibility A ent or a vacancy in that office, her respons : 8iStant Federal Reserve Agent and the Board of Governors. as Federal When not engaged in the performance of her duties al of approv the with may, the-';:fe Agent's Representative, Mrs. Crider Rei v ederal Reserve Agent and the Vice President in charge of the j_;etilla Branch, perform such work for the Branch as will not be inconent with the duties as Federal Reserve Agent's Representative. ed of It will be appreciated if Mrs. Crider is fully inform the , of the pede'MPortance of her responsibilities as a member of the staff tro ral Reserve Agent and the need for maintenance of independence ties. m the operations of the Bank in the discharge of these responsibili Office which Please have Mrs. Crider execute the usual Oath of notification of the `; be forwarded to the Board of Governors along with O ffective date of her appointment. Very truly yours, Should (Signed) Merritt Sherman Merritt Sherman, Secretary. Item No. 10 1/19/65 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD January 191 1965. Mr. R. W. Talmo, President, Flabanco, Inc., P. 0. Box 1449, Lake Worth, Florida. Dear Mr. Talmo: This refers to the request contained in your letter of January 13, 1965, submitted through the Federal Reserve Bank of Atlanta, for a determination by the Board of Governors of the Federal Reserve System as to the status of Flabanco, Inc., as a holding company affiliate. From the information presented, the Board understands that Flabanco, Inc., is a holding company affiliate by reason of the fact that it owns 17,600 of the 35,000 outstanding shares °f stock of Commerce National Bank in Lake Worth, Lake Worth, Plorida; and that it does not, directly or indirectly, own or control any stock of, or manage or control, any other banking institution. In view of these facts, the Board has determined that Plabanco, Inc., is not engaged, directly or indirectly, as a ! )nsiness in holding the stock of, or managing or controlling banks, banking associations, savings banks, or trust companies wfithin the meaning of section 2(c) of the Banking Act of 1933 12 U.S.C. 221a); and, accordingly, it is not deemed to be a nolding company affiliate except for the purposes of Section 23A (3 ,f the Federal Reserve Act and does not need a voting permit xrom the Board of Governors in order to vote the bank stock which it owns. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM r. R. W. Talmo .M6 If, however, the facts should at any time indicate that Flabanco, Inc., 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 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) Karl E. Bakke Karl E. Bakke, Assistant Secretary. BOARD OF GOVERNORS 230 OF THE FEDERAL RESERVE SYSTEM Item No. 11 1/19/65 WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD January 19, 1965. CONFIDENTIAL (FR) Mr. Thomas R. Sullivan, Vice President, Federal Reserve Bank of Dallas, Dallas, Texas. 75222 Dear Mr. Sullivan: In accordance with the request contained in your letter of January 13, 1965, the Board approves the appointment of Carroll D. Blake as an assistant examiner for the Federal Reserve Bank of Dallas, effective today. It is noted that Mr. Blake is indebted to The Farmers & Merchants National Bank of Kaufman, Kaufman, Texas, and Republic National Bank of Dallas, Dallas, Texas. Accordingly, the Board's approval of the appointment of Mr. Blake is given with the understanding that he will not participate in any examination of either bank to which his indebtedness remains unliquidated. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary.
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