The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
)65„ 9161 Minutes for To: Members of the Board From: Office Of the Secretary January 23, 1963 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 Yon 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 00r: f•W i Minutes of the Board of Governors of the Federal Reserve System on Wednesday, January 23, 1963. The Board met in the Board Roam at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Robertson Shepardson Mitchell Mr. Sherman, Secretary Miss Carmichael, Assistant Secretary Mr. Young, Adviser to the Board and Director, Division of International Finance Mr. Molony, Assistant to the Board Mr. Fauver, Assistant to the Board Mr. Hackley, General Counsel Mr. Noyes, Director, Division of Research and Statistics Mr. Solomon, Director, Division of Examinations Mr. Connell, Controller Mr. Shay, Assistant General Counsel Mr. Brill, Adviser, Division of Research and Statistics Mr. Goodman, Assistant Director, Division of Examinations Mr. Smith, Assistant Director, Division of Examinations Mr. Leavitt, Assistant Director, Division of Examinations Mr. Sprecher, Assistant Director, Division of Personnel Administration Mr. Bakke, Senior Attorney, Legal Division Mr. Potter, Senior Attorney, Legal Division Mr. Doyle, Attorney, Legal Division Mr. Poundstone, Review Examiner, Division of Examinations Mr. Reynolds, Chief, Special Studies and Operations Section, Division of International Finance Mr. Maroni, Senior Economist, Division of International Finance Report on competitive factors (Utica-Dolgeville, New York). There had been distributed a draft of report to the Comptroller of the 1/23/63 -2- Currency on the competitive factors involved in the proposed merger of The First National Bank of Dolgeville, Dolgeville, New York, into The Oneida National Bank and Trust Company of Central New York, Utica, New Thrk. As drafted, the conclusion of the report would indicate that the Proposed merger would eliminate the small amount of competition existing between the two institutions. It would state further, while the Proposed merger might by itself have little effect on the present ceoPetitive situation of other banks in the two-county area concerned, the concentration of banking resources in that area was already such that any increase therein, such as this merger would effect, must be viewed adversely from the standpoint of banking competition. Prior to the meeting, Governor Shepardson had raised a question regarding the proposed conclusion of the report and had asked whether the Division of Examinations could verify statements in the report (It the Federal Reserve Bank of New York to the effect that the proposed fl1erger would eliminate a small unaggressive independent bank that had been unable to acquire new business or even retain the business it had. The Reserve Bank report had stated also that this bank's record of management earnings, declining deposits, and unsatisfactory 14dicated that the bank was not competitive. he felt that If this were true, Governor Shepardson said, he conclusion of the proposed report to the Comptroller of the Currency 1/48 Unduly harsh. If, as the New York Reserve Bank had suggested, First _3_ 1/23/63 liational of Dolgeville was a noncompetitive bank, he believed that this should be reflected more clearly in the conclusion. Mr. Leavitt commented on the information furnished by the New Ic)rk Reserve Bank and suggested a substitute conclusion for the Board's report. During the discussion that followed, Governor Robertson referred to the importance of having accurate information covering any statements included in competitive factor reports. It was then agreed that the staff would obtain additional information regarding the operations of The First National Bank of 1)°1geville, after which the proposed report would be considered further by the Board. Mr. Leavitt then withdrew from the meeting. Retail credit statistics. Distribution had been made of a nieniorandum from Mr. Noyes dated January 21, 1963, recommending that a SIII ' veY he undertaken for the purpose of reviewing retail accounting 'I'Etctices, techniques for financing consumer receivables, and the extent tes 14hich some of the newer types of retail credit plans had gained 4ecePtance in the industry. It was pointed out in the memorandum that information in these areas was particularly needed in view of recent institutional developments in the retail credit industry and problems sociated with making meaningful classifications of credit under the new " °Ption-type credit plans. 1/23/63 The proposed survey would involve interviews in March 1963 by Federal Reserve Bank staffs with selected large retail outlets throughout the country. Plans for the survey had been developed and Pretested by the System Committee on Current Reporting Series; they had been considered and approved by a majority of the System Research Advisory Committee; and the Presidents' Conference Subcommittee on Research and Statistics had recommended approval of the survey. A qUestionnaire form and a document describing the survey in detail were attached to the memorandum. After comments by Mr. Noyes, and discussion based thereon, ullarlimous approval was given to the proposed survey. Messrs. Noyes and Brill then withdrew from the meeting. Gold loan to Colombia. Reserve Mr. Young reported that the Federal Bank of New York had received a request from Banco de la Relaliblica de Colombia for a gold loan of $30 million for a term of 180 d4Y8. The directors of the New York Reserve Bank had not acted on the l'equest, but Mr. Young had been asked to determine whether the Board ' 41,a be favorably inclined. The Colombian bank had indicated that the loan was needed PlixtlarilY for seasonal financing of the country's coffee exports. This of financing, Mr. Maroni pointed out, was really domestic financing 44a did not fall within the criteria included in the statement of policy °11 gold loans approved by the Board on December 6, 1955. However, the 1/23/63 -5- real need for financing in Colombia was to lend temporary support to the financial stabilization program recently adopted by Colombia 14 cooperation with the International Monetary Fund. The program in Colombia included restrictive measures of monetary policy put into effect during the past six weeks, fiscal measures, some of which were still pending, and a 25 per cent devaluation of the official exchange rate Mr. Maroni went on to say that some uncertainty had arisen in Colombia with respect to fiscal performance. Tax measures were pending, but there was a question as to how soon or in what form they would be sPProved. Moreover, the government had postponed the effective date of increases in the price of gasoline, bus fares, and other transportation rateS in view of a call for a general strike by the labor confederations end riots in some urban centers. The increased rates were scheduled to go 14t0 effect February 1, after the expected passage of a law granting /14ge increases. Current conditions in Colombia had weakened the e°11fidence of the people and led to a run on the peso during the past Ireek, severely straining the official position in view of the policy to suPport the exchange rate in the free market. On January 21, 1963, 14 Order to enable the Colombian authorities to continue this policy, the International Monetary Fund had agreed to increase the amount that 0°10Mbia might draw from the Fund in the early months of the stand-by Period. 1/23/63 -6Mr. Maroni stated further that the staff of the Fund continued to believe that the new official exchange rate was a realistic one end to consider it essential that confidence in the viability of the official rate be firmly established in the early weeks of the Program. This would require that the spread between the official and free exchange rates remain relatively small and that the extent of the °fficial support of the free rate not become general knowledge. For these reasons, Mr. Maroni said, it was important that the international reserve position at the end of January, the next statement date, not show the deterioration that had occurred. A loan from the Federal Reserve System before the end of January would be entirely consistent th the objectives that the Fund was pursuing in Colombia, and such a 1°141 would appear to fall within the criteria contained in the 1955 P°11cY statement on gold loans. Members of the staff of the Fund and or the State Department had indicated that they would favor a loan to C°10mbia at this time. Mr. Young mentioned that Mr. Coombs, Vice President of the F'e(leral Reserve Bank of New York, had expressed the hope that the SYstem could over a period of time withdraw from the business of making '31c1- loans. have In circumstances such as this, the New York Bank would preferred that Colombia work out some other arrangement for eecuring a loan. For example, there might be the possibility of a gold 8/14 with the Bank for International Settlements. This would be less ,eA 1/23/63 -7- "Pensive to Colombia, but it would not meet the window-dressing need of the country at this time. During the course of discussion, it was pointed out that the financial position of Colombia was stronger now than a year ago, when the System had granted gold loans to the country. Mr. Young then commented further on the proposed loan, and ecincluded by saying that in the light of all the circumstances, including 841vice from the State Department and the Fund that the loan would be l'egarded with favor, he thought the System would be justified in complying Igith the loan request. At the end of the discussion Chairman Martin suggested that Mr* Young be authorized to advise the New York Reserve Bank that, if the ilank's Board of Directors should approve the $30 million loan, the hara of Governors would be prepared to approve it also when the matter 1/48 Presented formally. No objection being expressed to the suggested 1)Iteedure, it was understood that Mr. Young would advise the New York Reserve Bank along the lines indicated. Mr. Maroni then withdrew from the meeting. Regulation K. Pursuant to the understanding at the meeting °t the Board on January 22, 1963, there had been distributed later that 44Y a memorandum from Mr. Goodman transmitting a draft of Regulation K, C°rPorations Doing Foreign Banking or Other Foreign Financing Under the l'ederal Reserve Act, which had been revised to reflect suggestions made at that meeting. 1/23/63 -8Mr. Goodman summarized the revisions that had been made in Portions of the regulation considered at the January 22 meeting. During the discussion that ensued, a number of other suggestions for Changes were advanced. In connection with the consideration of appropriate language in the portion of the regulation covering the establishment of foreign branches, Mr. Shay mentioned some of the problems involved in revising 4 regulation as complicated as Regulation K. It was his impression that in it8 current consideration of the regulation the Board was thinking in terms of establishing a general format. After that had been done, it was his hope that there would be an opportunity for the Board's legal staff to review carefully the entire regulation before it was approved tc)r Publication in the Federal Register for comments. Along this line, Governor Mitchell expressed the hope that the Legal Division, in making such a review, would bear in mind the attempt that had been made to streamline Regulation K. Consideration then turned to the section covering investments in stock of other corporations. Following a description by Mr. Goodman °t the proposed changes, Governor Mitchell commented on the basic reasons r°r them. had been made to In his remarks he mentioned that an effort away from granting general consents to individual corporations to 13Urchase stock. the It was proposed instead to include in the regulation basic provisions of existing general consents, which would then serve .413 1/23/63 -9- as criteria for all Edge Act corporations. Such corporations would not be required to have the Board's approval for stock investments except in those instances where there was doubt as to the desirability °r Propriety of such investments. In the ensuing discussion of the proposed revisions in the section, a number of changes were suggested. At one point Governor Mitchell referred to a memorandum that Mr. Furth of the Division of International Finance had prepared on the subject of equity investments Of Edge Act corporations and the Board's responsibilities in connection t herewith. At the conclusion of the discussion it was agreed that a clean draft of the section on investment in stock of other corporations *10113..d be prepared and distributed, together with the memorandum by Mr* Furth to which Governor Mitchell had referred. Request of Trans-Nebraska Co. (Item No. 1). Prior to the Illeeting there had been distributed a memorandum from the Legal Division dated January 23, 1963, regarding a request from Counsel for TransNebraska Co., Lincoln, Nebraska, for a three-day extension of time for tiling exceptions to the Report and Recommended Decision of the Hearing 44miner in connection with the October 2-5, 1962, hearing on the application of Trans-Nebraska Co. to acquire shares of three banks. C°Ples of the Report and Recommended Decision had been served on the 1)4rt1es to the proceeding on January 9, 1963, and under the Board's 34 1/23/63 -10- Rules of Procedure 15 days were allowed within which exceptions thereto might be filed. A telegram from Counsel for Trans-Nebraska Co. stated that the exceptions and brief had been mailed to the Board on January 22 and the extension of time was requested in view of the present blizzard conditions in Nebraska, which might prevent delivery of the documents by January 24, the date on which they were due. It was recommended in the memorandum that the request be granted, and a draft of proposed telegram to that effect was submitted. There being no objection, the telegram was approved unanimously. A Copy is attached as Item No. 1. The meeting then adjourned. I A ik Secretary TELEGRAM 4.011‘,0 BOARD OF GOVERNORS Item No. 1 OF THE 1/23/63 FEDERAL RESERVE SYSTEM WASHINGTON January 23, 1963 Plavel A. Wright Esq., Suite 300, Lincoln Building, Lincoln, Nebraska. Board of Governors has granted your request, filed by telegra dated January 22,1963, for three-day extension in date for filing 66, Exceptions to Hearing Examiner'S Report in Docket No. BHC because of uncertainty of mail delivery due to weather conditions. (Signed) Merritt Sherman Merritt Sherman, Secretary. A Nis ti, N 4ESS t11(;41RI TES -P. GOVERNORS OF THE FEDERAL RESERVE SYSTEM
@FedFRASER