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Minutes for January 24, 1964
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.
Chin. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. Mitchell
Gov. Deane
clr- A
esda‘l.
Minutes of the Board of Governors of the Federal Reserve
System on Friday, January 24, 1964.
The Board met in the Board Room
at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Balderston, Vice Chairman
Mills
Robertson
Shepardson
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Sherman, Secretary
Kenyon, Assistant Secretary
Broida, Assistant Secretary
Bakke, Assistant Secretary
Noyes, Adviser to the Board
Fauver, Assistant to the Board
Brill, Director, Division of
Research and Statistics
Holland, Associate Director,
Division of Research and Statistics
Koch, Associate Director, Division
of Research and Statistics
Williams, Adviser, Division of
Research and Statistics
Furth, Adviser, Division of
International Finance
Katz, Associate Adviser, Division
of International Finance
Eckert, Chief, Banking Section,
Division of Research and Statistics
Axilrod, Senior Economist, Division
of Research and Statistics
Keir, Senior Economist, Division of
Research and Statistics
Bernard, Economist, Division of
Research and Statistics
Gekker, Economist, Division of
International Finance
Gemmill, Economist, Division of
International Finance
Money market review.
Mr. Bernard discussed recent developments
in the Government securities market, with particular reference to current
Trem.- urY financing, and commented upon the outlook for Treasury offerings
ill the coming year in light of the Federal budget.
Mr. Eckert discussed
255
-2-
1/24/64
the money supply, bank credit, and related matters, and was requested
to submit to the Board a memorandum reflecting his presentation, during
which he referred, among other things, to a distributed summary of
Monetary developments in the four-week period ended January 22, 1964.
Mr. Gekker discussed foreign exchange developments and commented upon
recent estimates of Russian gold reserves and production.
Messrs. Fauver, Holland, Koch, Williams, Furth, Katz, Bernard,
Eckert, Cekker, Gemmill, Axilrod, and Keir then withdrew from the
Meeting and the following entered the room:
Mr. Hackley, General Counsel
Mr. Solomon, Director, Division of Examinations
Discount rates.
The establishment without change by the Federal
Reserve Bank of Atlanta on January 22, l9641 and by the Federal Reserve
Banks of New York, Philadelphia, Cleveland, Richmond, St. Louis, Minneapolis/ Kansas City, and Dallas on January 23, 1964, of the rates on discounts
lind advances in their existing schedules was approved unanimously, with
the understanding that appropriate advice would be sent to those Banks.
Circulated items.
The following items, copies of which are
Elttached to these minutes under the respective item numbers indicated,
lere approved unanimously:
Item No.
:etter to Chemical International Finance, Ltd.,
1Llev
York, New York, regarding its purchase of
of a French corporation organized for
Ztock
he sole purpose of holding a lease for certain
arters at 12 Place Vendome, Paris, France, to
V
0 occupied by the Paris Representative of
!
emical Bank New York Trust Company, New York,
l'ew York.
1
1/24/64
-3Item No.
Letter to the Presidents of all Federal Reserve
Banks regarding the annual conference of representatives of Bank Examination Departments of
the Federal Reserve Banks to be held on March 9
and 10, 1964. 1/
Open Market Committee policy record.
There had been distributed
a memorandum from Mr. Sherman dated January 23, 1964, submitting a draft
material for inclusion in the Board's 1963 Annual Report concerning
Policy actions of the Federal Open Market Committee.
This included
revised drafts of policy record entries covering the meetings of the
Committee on December 3 and 17, 1963 (entries for the 17 meetings held
rl'oal January
8 through November 26, 1963, had already been approved by
the Board for inclusion in the Annual Report), and a statement proposed
"a preface to the set of policy record entries in the Annual Report.
After Mt. Sherman had commented briefly on the matter, Governor
Robertson stated that he had no objection to the material as drafted.
Referring, however, to previous approval by the Board, for inclusion in
the Annval Report, of the entry for the Committee meeting on October 22,
1963, and in particular to certain language therein that linked the
eaUction in U. S. capital outflows in the third quarter in part with
the
effects of the proposed interest equalization tax and increases in
interest rates, especially short-term rates, "associated with
the July rise in Federal Reserve Bank discount rates,' he said that his
'rev.
lew of the October 22 Committee minutes failed to disclose general
he Board's action included approval of the payment of the cost
°I' a dinner in connection with the conference.
1/24/64
-4-
agreement within the Committee as to such an association.
He did not
Propose reconsideration of the October 22 policy record entry but urged
that care continue to be exercised to make sure that the policy record
entries were fully supported by the minutes of the respective meetings.
Following discussion of Governor Robertson's comments, the draft
entries for December 3 and 17, 1963, were approved unanimously for
inclusion in the record of Open Market Committee policy actions in the
Annual Report, together with the proposed prefatory statement.
Governor Balderston inquired whether the record of Committee
end Board policy actions during 1963 would be in form for submission to
the Joint Economic Committee by next Friday (January 31), as requested
orally by a member of the Committee during recent hearings.
Mr. Sherman
replied that there appeared to be no reason why such a schedule could
not be met.
The material would be transmitted in mimeographed form
rather than in galley proof.
Mr. Cardon„ Legislative Counsel, and Mr. Smith, Assistant
krector, Division of Examinations, then entered the room.
Appearances of Reserve Bank Presidents before a Subcommittee
5211_,:e House Banking and Currency Committee.
Mr. Cardon advised that
he uad
been notified by the staff of the House Banking and Currency
Committee of a request by Chairman Patman that the Reserve Bank Presidents
bring with them the 1962 and 1963 reports of examination of their Banks
141en they testified during the current hearings on the Federal Reserve
stem being conducted by the Subcommittee on Domestic Finance.
It
258
1/24/64
-5-
wes understood that it was not intended that the contents of these
reports would he made a matter of record and that the only anticipated
line of questioning concerning the reports would be where, if at all,
the Chief Federal Reserve Examiner had commented in them upon the
Propriety of certain expenses about which the Presidents would be
asked.
Mr. Cardon expressed the view that it would be desirable to
explore means of getting into the hearing record copies of the Board's
letters to the Federal Reserve Banks concerning certain categories of
Reserve Bank expenditures to indicate why expenditures falling within
the scope of those letters were not itemized in the examination reports.
It was suggested that the Presidents should be made aware of
the probable line of questioning following presentation of their stateMents to the Subcommittee, and Mr. Cardon replied that they were being
kept advised of hearing developments.
Governor Balderston then stated that there appeared to be two
Ticstions before the Board; first, the matter of the reports of examination, and second, getting a clear statement of the Board's standards
l'egarding Reserve Bank expenses into the record.
Governor Mills observed that the request concerning the reports
r examination would seem difficult to refuse; all other documents
'
lequested had been furnished.
'
Mr. Cardon noted the fact that the Chairman of the Subcommittee
all'eady had in his possession the 1962 reports of examination, including
the confidential sections, and that the examiners' working papers had
been made available to the Subcommittee staff.
259
1/24/64
-6Governor Mills stated that tn view of this, the Presidents
presumably would not be asked to leave the reports with the Subcommittee.
Mr. Cardon replied that this would be true, at least for the 1962 reports
but more to the point, the request was not premised on a search for
information but rather a desire to show the absence of comment on
Particular Reserve Bank expenses in the reports.
Governor Balderston observed that the Presidents should be prepared to explain why no such comment was male, and Mr. Cardon agreed,
saYing that it would be desirable to counteract any suggestion that the
examiners either overlooked or were attempting to cover up certain
exPenses.
It was suggested that this could be done by stating that
various expenses were not criticized because they were within the
purview of the Board's standing instructions to the Banks.
Governor Robertson questioned whether the letters should
sPPropriately be offered for the record by the Presidents, and whether
the Presidents should attempt to comment on why something was or was not
included in the reports of examination.
These matters should be dealt
14ithy it seemed to him, by Board spokesmen.
Mr. Cardon stated that Chairman Patman already had copies of
the Board's S-letters.
The purpose of having the Presidents refer to
tIleM would be to counteract any implication that the examining procedure
l/as deficient.
Governor Balderston agreed that if a question arose as to why
the examiners had failed to criticize certain expenses
the Subcommittee
260
1/24/64
_7_
Should be referred to the Board for an explanation.
If, however, the
question was why certain expenses were justified, the Presidents could
refer to the guidelines set forth in the S-letters and offer them for
the record.
Governor Mills commented that he felt it desirable for the
Presidents to have the reports of examination with them at the hearing
so that they could refer to any particular question with respect to
entries therein raised by the Subcommittee.
Governor Balderston agreed but reiterated his view that a
President's comments should be confined to defending the propriety of
Particular expenses, which defense might include reference to the
130are's S-letters.
Governor Shepardson concurred in the view that it would be
advisable to have the S-letters put into the record because, although
Chairman Patman had them in his possession, other Subcommittee members
might not be familiar with them.
It was then agreed that the Reserve Bank Presidents would be
advised that the Board had no objection to their compliance with
Chairman Patman's request concerning the reports of examination and
that, while they should not undertake to deal with any questions conthe competence of the Board's examiners, questions concerning
Ilhether certain expenses were justified Obviously would have a relationto whether the examiners should have criticized them in light of
the outstanding S-letters. It was also agreed that introduction of
1/24/64
-8-
the Board's S-letters into the record of the hearing would not be
inappropriate.
All of the members of the staff except Messrs. Sherman and
Brill withdrew from the meeting at this point.
Assignment of Mr. Yager.
action of the Board on January
Governor Shepardson referred to the
9, 1964, in authorizing the assignment
Of Charles A. Yager of the Division of Research and Statistics to the
Position of Director of the National Accounts and Statistics Branch of
the Organization for Economic Cooperation and Development with headquarters in Paris, France, and to the policy approved by the Board for
financial arrangements in filling such assignments.
He stated that
confirmation had now been received from the Secretary General of the
Organization as to Mr. Yager's appointment to the position, and that
it was expected that he would take up the assignment the latter part
Of February.
Under the arrangements, Governor Shepardson noted,
Mr. Yager would be retained as a Board employee and would be provided
allowances in the same amount as those afforded foreign service officers of the Department of State in the Paris area, with the understanding
that the Board would obtain reimbursement for Mr. Yager's salary and the
Other allowances in the amount that would be paid by the Organization
t° an employee on its own staff for such services.
It was estimated
that the net cost to the Board in Mr. Yager's case would be about
$6,000 to $7,000 during the two-year period involved, running from
e''Proximately the end of February 19614 to the end of February 1966.
262
1/24/64
.9..
Approval was given to the assignment of Mr. Yager and to the
general arrangements outlined by Governor Shepardson, pursuant to the
Board's general authorization of January
Assignments of Section Chiefs.
9,
l964.
Governor Shepardson reported
that in connection with Mr. Yager's assignment to the aforementioned
Position in Paris, Mr. Brill proposed that, effective January 27, 1964,
Stephen H. Axilrod, presently Senior Economist in the Banking Section,
be appointed Chief of the Government Finance Section and Peter M. Keir,
Presently Senior Economist in the Government Finance Section, be apPointed Chief of the Capital Markets Section.
While Board action was
not required, Governor Shepardson stated that he was bringing the matter
to the Board's attention for any comments, and the members of the Board
the proposed assignments without objection.
Secretary's Note: On January 27, 1964,
Governor Shepardson approved on behalf of
the Board a memorandum from the Division
of Research and Statistics recommending
an increase in the annual salary rate of
Mr. Axilrod from 0.6,180 to $16,695, effective January 27, 1964.
Foreign travel.
Governor Shepardson stated that Glenn M. Goodman,
Assistant Director of the Division of Examinations, had requested approval
°r travel to attend the Bankers Association for Foreign Trade meeting
to be held in Quebec, Canada, May 24-28, 1964.
After a brief discussion, the proposed foreign travel
as approved.
At this point Messrs. Sherman and Brill withdrew from the meeting
the Board went into executive session.
263
-10-
1/24/64
Following the meeting, Governor Shepardson informed the
Secretary that during the executive session the Board took the following actions:
1.
Following a report by Governor Shepardson that the Employees'
Committee recently had presented to him a memorandum requesting that
the Board absorb a portion of the costs of luncheons for members of the
Staff who accepted invitations to official luncheons in the Board's
Private dining rooms, the Board decided that it would be inappropriate
for it to make an allowance for the differential in meal costs between
those that would be provided elsewhere and those that might be served
in the private dining rooms. The Board agreed, however, that as a
ratter of practice in making arrangements for such luncheons, staff
Members invited to attend should be made to understand clearly that
their attendance was oil a strictly voluntary basis and that no staff
Member should feel under any obligation to attend such official luncheons if he did not wish to do so.
2.
Governor Shepardson presented to the Board Bureau of the
IlUdget Circular No. A-221 Revised, dated December 19, 1963, having to
d° with the use of limousines and heavy and medium sedans by agencies
Of the Executive Branch, and after reviewing the material in the light
°I' study by Counsel of the Board and the Director of the Division of
Administrative Services, the Board concluded that the Circular issued
by the Bureau of the Budget did not apply to the automobiles used by
the Board, that there was no need for the Board to respond to the
264
1/24/64
-11-
Circular, and that no action should be taken with respect to retention
Of the Board's present cars other than to continue to apply the test of
Operating efficiency in meeting the Board's needs; but that consideration
be given at the time of replacement of the present automobiles to use
thereafter of "light weight" or "medium weight" automobiles.
In taking
this action the Board took cognizance of the Circular issued by the
Bureau of the Budget but noted that in the case of the Board no cars
were assigned for the use of individuals and that such cars as were
maintained by the Board were used solely to meet the official needs
Of the Board's organization.
The meeting then adjourned.
Secretary's Notes: On January 23, 1964,
Governor Shepardson approved on behalf
of the Board the following items:
Letter to the Federal Reserve Bank of Atlanta (attached Item No. 3)
ePproving the appointment of John M. Drennan as assistant examiner.
Memoranda from appropriate individuals concerned recommending the
following actions relating to the Board's staff:
Salary increases
Aaron Dortch, Operator (Xerox-Mimeograph), Division of Administrative
2ervices, from $4,888 to $5,138 per annum, effective January 19, 1964.
44,
Marla Lembo, Clerk-Stenographer, Division of Bank Operations, from
T7,495 to $4,850 per annum, with a change in title to Secretary, effece rebruary 2, 1964.
°Iltside activity
Julia G. Back, Library Assistant, Division of Research and Statistics,
t0 Perform
clerical work on a part-time basis for I. F. Stone's Weekly.
265
1/24/64
-12On January 23, 1964, Governor Shepardson also
noted on behalf of the Board a memorandum from
the Division of Examinations advising that
Henry Benner, Assistant Director in that
Division, had filed application for retirement,
effective at the close of business January 31,
1964.
Pursuant to recommendations contained in
memoranda from appropriate individuals concerned, Governor Shepardson today approved
on behalf of the Board the following actions
relating to the Board's staff:
APpointments
Judith K. Schoenberg as Economist, Division of Research and
Statistics, with basic annual salary at the rate of $7,490, effective
the date of entrance upon duty.
Winthrop Case, to assist the Economic Editing Unit in the Division
(3f Research and Statistics on a temporary contractual basis, effective
to June 30, 1964, with compensation at the rate of $55 per day, and
transportation expenses and per diem for time spent in travel status
to be paid in accordance with the Board's travel regulations. The
illemorandum stated that, for purposes of travel, Mr. Case's headquarters
l!ould he New York City, that he would receive a per diem of $16 when
!a Washington, and that transportation expenses would be limited to
the necessary round trip from New York City plus additional round
trips not to exceed one per month while on duty in Washington.
Outside activities
Diane Quick, Secretary, Office of the Secretary, to work part time
f°r a local printing firm.
Levon H. Garabedian, General Assistant, Division of Rescarch and
btatistics, to grarie papers at American University during the spring
8e mester.
Secreta
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Item No. 1—
1/24/611
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
RESd..."••
•••••••
January 24, 1964
Chemical International Finance, Ltd.,
20 Pine Street,
New York, New York 10015
Gentlemen:
Your letter of December 13, 1963, transmitted through
the Federal Reserve Bank of New York, referred to the Board's
letter of August 8, 1962, granting consent for Chemical International Finance, Ltd. to purchase and hold 100 per cent of the
capital stock of a French corporation ("Vendome") organized for
the.sole purpose of holding a lease for certain quarters at 12
?lace Vendome, Paris, France, to be occupied by the Paris Repre!entative of Chemical Bank New York Trust Company, New York, New
Iork, at a cost not to exceed approximately US$100,000, provided
the stock was acquired within one year from August 8, 1962.
It is noted that your Corporation acquired 5,150 shares
Vendome Decoration, S. A. at a total cost of $104,090.45. You
state that under French law a minimum of seven stockholders is
tequired for corporations, and, in order to comply with this
aquirement, stock certificates for six shares have been issued
!
13-11 the name of persons other than Chemical International Finance,
and are held by Chemical Bank's representative office in
aris with stock powers attached ready for transfer at any time.
of
It is also noted,without objection, that the final
ac •
L qUiSitiOn of 360 shares was made subsequent to August 8, 1963
uecause of the illness of a former stockholder.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 2
1/24/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRICSB OIFICIAL 00.11,11[111PONOENCi
TO THE •OARD
January 24, 1964.
Dear Sir:
tions at the
The vice presidents in charge of examina
the dates of March 9 and
Federal Reserve Banks have advised that
s
10, 1964, are satisfactory for the conference of representative
of Bank Examination Departments of Federal Reserve Banks. This
will be held in the
meeting has been approved by the Board and
Board's offices in Washington.
that each
The replies from the vice presidents indicate
charge
in
nt
vice
the
preside
by
nted
Reserve Bank will be represe
other
ces,
In
instan
some
r.
examine
Of examinations and the chief
.
attend
will
ents
ation
Departm
Examin
°fficers of the Reserve Bank
t topics
The vice presidents are being asked to sugges
you as
to
be
sent
will
agenda
the
f°r discussion, and a copy of
s°°n as it has been completed.
Very truly your
Merritt She
Secretary.
BANKS
T° THE PRESIDENTS OF ALL FEDERAL RESERVE
268
BOARD OF GOVERNORS
Item No.
3
1/24/64
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
January 23, 196h
.CONFIDENTIAL 011
Mr. J. E. Denmark, Vice President,
Federal Reserve Bank of Atlanta,
Atlanta, Georgia. 30303
Dear Mr. Denmark:
In accordance with the request contained in your
letter of January 20, 1964, the board approves the apPointment of John M. Drennan as an assistant examiner for
the Federal Reserve Bank of Atlanta, effective February
3,
1964.
It is noted that Mr. Drennan is indebted to The
Peoples Bank, Atlanta, Georgia, a nonmember bank.
Accordingly, the Board's approval of the appointment of
Mr. Drennan is given with the understanding that
he will
!lot participate in any examination of that bank until
his
indebtedness has been liquidated.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
@FedFRASER