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Minutes of actions taken by the Board of Governors of the Federal Reserve System on Friday, January 23, 1953. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Szymczak, Acting Chairman Evans Vardaman Mills Robertson Mr. Carpenter, Secretary Mr. Kenyon, Assistant Secretary Mr. Allen, Director, Division of Personnel Administration There was presented a telegram to Mr. Powell, President of the Federal Reserve Bank of Minneapolis, reading as follows: "Reurtel January 22, Board approves effective January 26, 1953, rates of 3 per cent on advances to individuals, partnerships, or corporations other than member banks under last paragraph of Section 13, and 3 to 5-1/2 per cent on loans under Section 13b direct to industrial or commercial businesses, including loans made in participation with Cinancing institutions. Otherwise, Board approves establishment, without change, of rates of discount and purchase in Bank's existing schedule." Approved unanimously. There were presented telegrams to the Federal Reserve Banks of New York, Philadelphia, Cleveland, Chicago, and St. Louis stating that the Board approves the establishment without change by the Federal Federal Reserve Bank of St. Louis on January 19, and by the 156 1/23/53 Reserve Banks of New York, Philadelphia, Cleveland, and Chicago on January 22, 1953, of the rates of discount and purchase in their existing schedules. Approved unanimously. Governor Mills said that yesterday he had a visit from Mr. John E. Corette, President and General Manager of the Montana Power Company, Butte, Montana, who has been serving as a Board-appointed director of the Helena Branch of the Federal Reserve Bank of Minneapolis since August 112 1950, and whose present term expires December 31, 1954; that Mr. Corette had received an invitation to become a director of the Metals Bank and Trust Company, of Butte, Montana; and that he wished to know what the position of the Board would be with regard to his continuing as a director of the Helena Branch should he become a director of the commercial bank. Governor Mills went on to say that apparently Mr. Corette and his family have been very close to the management of the Metals Bank and Trust Company, and that Mr. Garotte would have to make a decision regarding the bank directorship by the time of a stockholder's meeting early next week. The Secretary stated that Mr. Powell, President of the Minneapolis Reserve Bank, called on the telephone yesterday afternoon 15t -3- 1/23/53 regarding the matter and expressed the view that Mr. Corette should make a choice between service on the branch board and the board of the commercial bank. During a discussion of the matter, reference was made to the section of the Board's regulations relating to branches of Federal Reserve Banks which provides that branch directors appointed by the Board shall be persons who are not primarily engaged in banking and preferably are not directors of banks although they may be stockholders; and it was brought out that this provision was intended to assure representation of nonbanking interests on the branch boards in view of the fact that in most cases the branch directors appointed by the respective Reserve Banks are bankers. There was agreement among the members of the Board that the regulation represented a desirable policy which should be adhered to as closely as possible. Question was raised as to what practice the Board had followed in the past in situations similar to Ir. Corette's, and Mr. Allen cited several cases where the Board had taken the position that a branch director who became a director of a commercial bank subsequent to his appointment by the Board might continue to serve 1oS 1/23/53 as a branch director until the end of the calendar year. Following further discussion, it was agreed unanimously that Governor Mills should say to Mr. Corette that the Board would prefer not to have a Board-appointed branch director serve at the same time as a director of a commercial bank, and that, if Mr. Corette should decide to become a director of Metals Bank and Trust Company, the Board would prefer that he resign as a director of the Helena Branch not later than the end of the current calendar year. The meeting then adjourned. During the day the following additional actions were taken by the Board, with all of the members except Chairman Martin present: Minutes of actions taken by the Board of Governors of the Federal Reserve System on January 22, 1953, were approved unani- mously. Letter to Mr. Sproul, President, Federal Reserve Bank of New York, reading as follows: "Reference is made to your letter of January 13, 1953, advising of the actions taken by the Board of Directors with respect to the officers of the Federal Reserve Bank of New York and the Buffalo Branch. "In accordance with the request contained in your letter, the Board of' Governors approves the payment of 159 -5- 1/23/53 "salary to Mr. Frederick L. Smedley, as Manager assigned to the Personnel Department, for the period January 8, 1953, through March 31, 1953, at the rate of $10,000 per annum, which is the rate fixed by the Board of Directors as indicated in your letter." Approved unanimously. Letter to Mr. Wiltse, Vice President, Federal Reserve Bank of New York, reading as follows: "In accordance with the request contained in your letter of January 20, 1953, the Board approves the appointment of Edmund J. McMullen as an assistant examiner for the Federal Reserve Bank of New York. "Please advise us of the date upon which the appointment becomes effective." Approved unanimously. Letter to Mr. Neely, Federal Reserve Agent, Federal Reserve Bank of Atlanta, reading as follows: "In accordance with the request contained in of January 19, 1953, the Board of Govertelegram your the appointment of Mr. J. Frank Fortune approves nors Federal Reserve Agent, effective Assistant as Alternate present salary of $4,000 per his at 1953, 1, February M. Barnett. Genevieve Yrs. succeed to annum, "This approval is given with the understanding that Mr. Fortune will be placed upon the Federal Reserve Agent's pay roll and will be solely responsible to him or, during a vacancy in the office of the Agent, to the Assistant Federal Reserve Agent, and to the Board of Governors, for the proper performance of his duties. When not engaged in the performance of his duties as -6- 1/23/53 "Alternate Assistant Federal Reserve Agent he may, with the approval of the Federal Reserve Agent or, during a vacancy in the office of the Federal Reserve Agent, of the Assistant Federal Reserve Agent, and the President, perform such work for the Bank as aill not be inconsistent with his duties as Alternate Assistant Federal Reserve Agent. "Mr. Fortune should execute the usual oath of office which should be forwarded to the Board of Governors." Approved unanimously. Letter to Mr. Dawes, Vice President and Secretary, Federal Reserve Bank of Chicago, reading as folloas: "Reference is made to your letter of January 9, 1953, advising of the various actions taken by the Board of Directors at the Annual Meeting held on January 8. "The Board of Governors approves the reappointments of Messrs. Doyle, Harnischfeger, Kerwin, Moxley, and Palmer as members of the Industrial Advisory Committee for the Seventh Federal Reserve District for terms of one year each beginning March 1, 1953. "It does not appear that any of the other matters mentioned in your letter require action by the Board at this time." Approved unanimously. Letter to the Board of Directors, Garden City Bank and Trust Company, Garden City, New York, reading as follows: "Pursuant to your request submitted through the Federal Reserve Bank of New York, the Board of Governors approves the establishment and operation of a branch at 675 Middle Neck Road, Great Neck, Nassau 1123/53 -7- "County, New York, by Garden City Bank and Trust Company, and hereby gives its written consent under the provisions of Section 18(c) of the Federal Deposit Insurance Act, to the merger of the Garden City Bank and Trust Company and the Bank of Great Neck without increasing the capital of your trust company to an amount which will equal the aggregate capital of the two banks involved in the merger upon condition that (a) the merger is effected substantially in accordance with the merger agreement dated December 20, 1952, a copy of which has been supplied to us by the Reserve Bank, and (b) formal approval of the appropriate State authorities is obtained. "The authority to establish the branch will apply to Long Island Trust Company in the event that name has been adopted by your institution prior to the time the branch is established." Approved unanimously, for transmittal through the Federal Reserve Bank of New York. Letter to the Board of Directors, Nassau County Trust Company, Mineola, New York, reading as follows: "Pursuant to your request submitted through the Federal Reserve Bank of New York, the Board of Governors approves the establishment and operation of a branch by Nassau County Trust Company, Mineola, New York, at a site approximately 450 feet southeast from the southeast corner of Old Country Road and Clinton Road, Town of Hempstead, Nassau County, New York, provided the branch is established within six months from the date of this letter." Approved unanimously, for transmittal through the Federal Reserve Bank of New York. 1/23/53 y, Letter to the Board of Directors, Camden Trust Compan Camden, New Jersey, reading as follows: "Pursuant to your request submitted through the Federal Reserve Bank of Philadelphia, the Board ion of Governors approves the establishment and operat of ection inters of a branch in the vicinity of the Clements Bridge Road and Lindsay Avenue, in the Borby ough of Runnemede, County of Camden, New Jersey, apformal the Camden Trust Company, provided that proval is obtained from the appropriate State author within ities and that such branch is established twelve months from the date of this letter." Approved unanimously, for transmittal through the Federal Reserve Bank of Philadelphia. Reserve Bank Letter to Mr. Diercks, Vice President, Federal of Chicago, reading as follows: 12, "Reference is made to your letter of January nts Mercha and s Farmer 1953, submitting the request of The outits retire to Bank, Boswell, Indiana, for permission standing B debentures in the amount of 0.5,000. "The bank's outstanding debentures were not issued accordingly to the Reconstruction Finance Corporation, and es of purpos the for are not considered as capital stock H). tion Regula 6, n membership. (See footnote 5, Sectio such of ment retire Therefore, the Board's consent to the debentures is not required. in"It is noted that in your opinion the bank should at, nd divide stock crease its common capital by means of a al propos Your the time of retirement of the debentures. for the will provide a better balanced capital structure managethe upon s bank and it is hoped that you will impres l stock." capita common its ment the desirability of increasing Approved unanimously. 1/23/53 -9Letter to Mr. Purrington, Assistant Vice President, Federal Reserve Bank of Chicago, reading as follows: "This refers to your letter of January 13, regarding the penalty of $136.44 incurred by The Farmers National Bank, Shelbyville, Indiana, on a deficiency in its reserves for the period ended December 31, 1952. "It is noted that the deficiency was attributable to a delay in the mail during the Christmas rush, as a result of which the subject bank's correspondent did not receive the bank's request to transfer 4400,000 to the Reserve Bank until about two weeks after it was mailed; that the subject bank always maintains a very substantial excess reserve; and that this is the first deficiency since the bank reopened in 1933. "In the circumstances, the Board authorizes your Bank to waive the assessment of the penalty in this case." Approved unanimously. Letter to the Comptroller of the Currency, Treasury Department, Washington, D. C., (Attention: Mr. L. A. Jennings, Deputy Comptroller of the Currency), reading as follows: "Reference is made to your letter of December 2, 1952, enclosing a photostatic copy of an application to organize a national bank at Painesville, Ohio, under the title of The Lake County National Bank of Painesville and requesting a recommendation as to whether or not the application should be approved. "We have received information from the Federal Reserve Bank of Cleveland with respect to the factors usually considered in connection with such applications and it appears that definite arrangements have not been made for the active management of the bank. Other factors appear to warrant favorable action and the Board of Governors recommends approval of the application provided the bank is placed under management satisfactory to your office. 164 -10- 1/23/53 "It is understood that other applications to establish national banks in the community under the titles of National Bank of Lake County of Painesville and First National Bank of :dickliffe have been withdrawn and we will appreciate definite advice with respect thereto. "The Board's Division of Examinations will be glad to discuss any aspects of this case with representatives of your office and bring to the Board's attention any matter which you feel should be given further consideration." Approved unanimously. Letter to Mr. Stetzdlberger, Vice President, Federal Reserve Bank of Cleveland, reading as follows: "This refers to your letter of October 20, 1952, transmitting the request of Mellon National Bank and Trust Company, Pittsburgh, Pennsylvania, that the Board consider the desirability of amending section 17 of Regulation F to increase from $1,200 to 42,500 the maximum limitation applicable to investment of the funds of any one trust in common trust funds established under the provisions of subsection (b) thereof. "It is understood that the national bank has recently established a common trust fund known as Collective Trust Fund D, designed exclusively for the collective investment of trusts created for the benefit of cemeteries or for a specific lot or lots therein, and of trusts created for exclusively charitable purposes; that investments of the funds of such common trust fund are limited to direct obligations of the United States Government. Although the provisions of section 17(b) do not require it, it is noted that the fund in question is supported by a written plan which incorporates administrative provisions relating, among others, to admission and withdrawal of participations, periodic valuation of assets, audits of accounts, and compensation of the trustee. The administration of the fund has, in this manner, been circumscribed to a considerably greater extent than is required by the Regulation for 16F; l/23/53 -11- "funds established under the provisions of section 17(b). Incidentally, these circumstances give rise to the question of whether the provisions of section 17(c) might not be better suited to the underlying purposes of Collective Trust Fund D and the administrative features apparently desired in its operation. "As you know, when Regulation F was amended effcctive December 31, 1937, authorizing the establishment of common trust funds, subsection (c) provisions, applicable to common trust funds for general investment, imposed a variety of requirements and restrictions relating to the administration and operation of such funds. Subsection (b), on the other hand, permitted the commingling of cash balances of fiduciary accounts considered too small to be invested separately to advantage, without imposing the various administrative restrictions which were deemed necessary or desirable as regards common trust funds for general investment. This virtual freedom from administrative restriction permitted to subsection (b) funds was concomitant with the basic concept of their use solely as an administrative medium to facilitate investment of very small trust balances -- balances generally under one thousand dollars. "Following a careful review of the origin of subsection (b) provisions and concepts pertaining to the purposes of such provisions, and after giving consideration to the accumulated experience with common trust fund administrationgenerally, it appears to the Board that any increase in the existing maximum limit on participation under such provisions would likely involve such a change in the extent and nature of the use of funds so established as to make necessary the imposition of at least some of the administrative restrictions now applicable only to common trust funds established under the provisions of subsection (c) of Regulation F. "However, it seems clear that a subsection (b) fund broadened somewhat as to the dollar limitation on participation but further circumscribed by administrative requirements would offer little advantage to trust institutions not presently available through common trust funds created -12- 1/23/53 "under the provisions of subsection (c) of Regulation F. Furthermore, amendments of existing provisions in such a manner would largely destroy the present advantage which subsection (b) funds have for banks which find them administratively useful within their limited range of application. "In all the circumstances, therefore, it is the view of the Board that no change should be made at this time in the existing provisions of section 17 relating to common trust funds authorized under subsection (b) thereof. Will you please advise the Mellon National Bank and Trust Company accordingly." Approved unanimously. Letter to Mr. Neely, Federal Reserve Agent, Federal Reserve Bank of Atlanta, reading as follows: "In accordance with the request contained in your telegram of January 19, 1953, the Board of Governors approves the appointment of Mr. Hudson Johnson as Alternate Assistant Federal Reserve Agent, effective February 1, 1953, at his present salary of i35,500 per annum, to succeed Mr. Olin W. Hammond. "This approval is given with the understanding that Johnson will be placed upon the Federal Reserve Agent's pay roll and will be solely responsible to him or, during a vacancy in the office of the Agent, to the Assistant Federal Reserve Agent, and to the Board of Governors, for the proper performance of his duties. When not engaged in the performance of his duties as Alternate Assistant Federal Reserve Agent he may, with the approval of the Federal Reserve Agent or, during a vacancy in the office of the Federal Reserve Agent, of the Assistant Federal Reserve Agent, and the President, perform such work for the Bank as will not be inconsistent with his duties as Alternate Assistant Federal Reserve Agent. -13"Mr. Johnson should execute the usual oath of office which should be forwarded to the Board of Governors." Approved unanimously.
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