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Minutes for January 27, 1966 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. Robertson Gov. Balderston Gov. Shepardson Gov. Mitchell Gov. Daane Gov. Maisel 384 Minutes of the Board of Governors of the Federal Reserve System on Thursday, January 27, 1966. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman 1/ Balderston, Vice Chairman Robertson Daane Maisel Mr. Mr. Mr. Mr. Mr. Sherman, Secretary Kenyon, Assistant Secretary Holland, Adviser to the Board Hackley, General Counsel Solomon, Director, Division of Examinations Mr. Frank Wille, Superintendent of Banks, New York State Mr. John K. Lundberg, Deputy Superintendent and Counsel, State Banking Department, New York State Meeting with Mr. Wine. Pursuant to previous arrangements, this meeting was held with Mr. Wille for discussion of the New York State banking structure and legislation suggested by Mr. Wille that would reduce the disparities between national and State banks in conducting interstate business. A memorandum of the meeting has been placed in the Board's files. Chairman Martin and Messrs. Wille, Lundberg, and Solomon then Withdrew from the meeting and the following entered the room: Mr. Mr. Mr. Mr. Mr. Mx. Molony, Assistant to the Board Cardon, Legislative Counsel Fauver, Assistant to the Board Brill, Director, Division of Research and Statistics Hooff, Assistant General Counsel Koch, Deputy Director, Division of Research and Statistics Withdrew at point indicated in minutes. 385 -2- 1/27/66 Mr. Sammons, Associate Director, Division of International Finance Messrs. Goodman and Leavitt, Assistant Directors, Division of Examinations Mrs. Semia, Technical Assistant, Office of the Secretary Messrs. Eckert and Fry of the Division of Research and Statistics Mr. Poundstone, Review Examiner, Division of Examinations Approved letters. Appropriate background material, including staff recommendations, had been submitted to the Board regarding the following matters. The letters were approved unanimously after discussion of various questions raised by members of the Board. Copies are attached under the indicated item numbers. Item No. Letter to Citizens Bank, Smithville, Tennessee, approving an investment in bank premises. 1 Letter to Chemical International Finance, Ltd., New York, New York, granting permission to Purchase stock of Northwest Iron Co., Ltd., Cleveland, Ohio. 2 Letter to The National Shawmut Bank of Boston, Boston, Massachusetts, granting permission to organize a corporation under section 25(a) of the Federal Reserve Act to be known as Shawmut International Corporation, Boston, Massachusetts. 3 Letter to Peoples Bank and Trust Company, Russellville, Arkansas, approving the establishment of a branch in Pottsville and an investment in bank premises. 4 Item No. 3, in the form approved, included a paragraph suggested by Governor Robertson regarding compliance with the guidelines of the v oluntary progrpl for foreign credit restraint. Inclusion of approval 386 -3- 1/27/66 of an investment in bank premises in Item No. 4 reflected a report by the staff that information obtained after the memorandum on the branch application had been distributed indicated that approval was required also for the investment. Report on competitive factors. A report to the Federal Deposit Insurance Corporation on the competitive factors involved in the proposal by First State Bank, Armour, South Dakota, to acquire the assets of and assume liability to pay deposits made in Delmont State Bank, Delmont, South Dakota, was approved unanimously for transmittal to the Corporation. The conclusion read as follows: The proposed acquisition of Delmont State Bank, Delmont, South Dakota, by First State Bank, Armour, South Dakota, would eliminate some competition between the two banks; however, in view of the relatively small size of Delmont State Bank as well as the existence of other banking alternatives, the overall effect on competition should not be adverse. Unattended facilities with TV communication (Item No. 5). There had been distributed a memorandum dated January 24, 1966, from the Legal Division regarding two instances, described in the memorandum, in which State member banks had opened nearby drive-up facilities unoccupied by bank personnel and not connected to bank property except by closed circuit TV and pneumatic tubes. The Board had notified the two banks in October 1964 that it did not object to the operation of such facilities but that the question whether a branch, requiring Board approval, would be thus established was being studied and, if it should be decided in the future 387 1/27/66 -4- that the facilities did constitute branches, specific approvals would be issued for the locations. The memorandum proposed that unattended TV facilities situated Within close proximity to an existing office not be regarded as separate branches requiring Board approval. The recommended position was based Primarily on the fact that the facility was unmanned and constituted only a remote-control operation by a teller in the bank building rather than a separate "place of business." Attached to the memorandum was a draft of letter that would inform the Federal Reserve Banks that the Board had taken such a position. It was not contemplated that the letter would be published in the Federal Register or the Federal Reserve Bulletin, but it was suggested that copies be sent to the Comptroller of the Currency and to the Federal Deposit Insurance Corporation. During discussion the view was expressed that the proposed letter might be read as allowing more latitude than would seem desirable in aPPlying the general position to varying situations, and Governor Robertson suggested that the letter be rephrased to tie the ruling more specifically to the circumstances of the two cases considered in 1964. There being agreement with Governor Robertson's suggestion, unanimous approval was given to a letter in the form attached as Item 14°• 5. Reserve requirements against time deposits. There had been d istributed a memorandum dated January 26, 1966, from the Division of 388 1/27/66 -5- Research and Statistics regarding the question of raising reserve requirements against negotiable certificates of deposit from 4 per cent to the statutory maximum of 6 per cent. It was the conclusion of the Division that the case for such an increase was not sufficiently strong to offset the negative considerations. It was brought out during discussion that the memorandum was not intended as a document for transmission to the Joint Economic Committee. Rather, it had been submitted as a basis for discussion by the Board of its position on the issue involved, preliminary to determining what response should be made to two requests by Congressman Reuss during hearings held by the Committee in December 1965. Mr. Reuss had asked, in essence, whether reserve requirements on time deposits were meaningless and why the Board did not raise the current requirement as an anti-inflation measure. Comments indicated that the inimediate problem was to have a response to Mr. Reuss' requests in the hands of the Committee in time for inclusion in the record of the December hearings, which was soon to be Printed. Also, it was expected that next week the Committee would begin its hearings on the President's Economic Report. It was noted that the Board had not arrived at a conclusion on the question whether or not reserve requirements on time deposits should be increased, and that it would not be desirable to submit any material t0 the Committee containing such an indication. 389 -6- 1/27/66 Governor Maisel expressed strong reservations concerning the memorandum, and Governor Daane said that he had not yet had an opportunity to study it. At the conclusion of the discussion it was understood that the response to be made to Congressman Reuss' questions would be considered further at tomorrow's meeting of the Board. The meeting then adjourned. Secretary's Notes: A letter was sent today to First National City Bank, New York, New York, acknowledging receipt of notice of its intent to establish an additional branch in Greece, to be located in Piraeus. The letter contained the following paragraph: "As you are aware, with respect to the establishment of foreign branches, funds provided by home office (whether in the form of allocated capital, advances, or otherwise) should be regarded as foreign assets for purposes of the voluntary foreign credit restraint effort. However, it is understood that no additional capital investment abroad is required for the proposed branch." Acting in the absence of Governor Shepardson, Governor Robertson today approved on behalf of the Board a memorandum from Helmut F. Wendel, Economist, Division of Research and Statistics, requesting permission to teach a course in Economics at American University. 390 Item No. 1 1/27/66 BOARD OF GOVERNORS OF THE Okgg FEDERAL RESERVE SYSTEM .• WASHINGTON, D. C. 20551 1,1!Tie: N.z1 ADDRESS OrrICIAL CORREIBPONOIENCE TO THE SOAR° January 27, 1966 Board of Directors, Citizens Bank, Smithville, Tennessee. Gentlemen: Pursuant to the provisions of Section 24A of the Federal Reserve Act, the Board of Governors of the Federal Reserve System approves an investment in bank premises of not to exceed $105,000 by Citizens Bank, Smithville, Tennessee, for the purchase of land and construction of new banking quarters. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. Item No. 2 1/27/66 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD January 27, 1966. Chemical International Finance, Ltd., 20 Pine Street, New York, New York. 10015 Gentlemen: As requested in your letter of December 7, 1965, the Board of Governors grants consent for your Corporation to purchase and hold 80,000 shares of common stock, par value $1 each, and 4,000 shares of 6 per cent cumulative preferred stock, no par value, of Northwest Iron Co. Ltd., Cleveland, Ohio, at an aggregate cost of approximately $480,000, provided such stock is acquired within one year from the date of this letter. The foregoing consent is given with the understanding that the investment now being approved, combined with other foreign loans and investments of your Corporation, Chemical Bank New York Trust Company, and Chemical International Banking Corporation, will not cause the total of such loans and investments to exceed the guidelines established under the voluntary foreign credit restraint effort now in effect and that due consideration is being given to the priorities contained therein. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. 392 Item No. 3 1/27/66 BOARD OF GOVERNORS ...... OF Got;:_. OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS orriciAL CORRIMPONDICHCK TO THC BOARD January 27, 1966. Mr. Nigel R. Godwin, Vice President, The National Shawmut Bank of Boston, Boston, Massachusetts. Dear Mr. Godwin: The Board of Governors has approved the Articles of 16, 1965, Association and Organization Certificate dated December and setts, Massachu Boston, of Shawmut International Corporation, ion that Corporat ing authoriz permit there is enclosed a preliminary the of 25(a) Section by d to exercise such of the powers conferre Federal Reserve Act as are incidental and preliminary to its organization. K, Except as provided in Section 211.3(a) of Regulation d conferre powers other the of the Corporation may not exercise any Board the from permit final a by Section 25(a) until it has received . Before the Board authorizing it generally to commence business , the president, business commence Will issue its final permit to of the directors, three least at with treasurer, or secretary, together United States; the of citizen a is director must certify (1) that each and owned held is stock capital of shares (2) that a majority of the by citizens of the United States, by corporations the controlling United States, charinterest in which is owned by citizens of the a State of the of or States United tered under the laws of the controlling interest United States, or by firms or companies the and (3) that States; United the of citizens in which is owned by the Articles of Assoof the authorized capital stock specified in paid in in cash and that each ciation at least 25 per cent has been in cash at least 25 per cent Shareholder has individually paid in treasurer or secretary of his stock subscription. Thereafter the g instalments as and Shall certify to the payment of the remainin When each is paid in, in accordance with law. Federal Reserve Bank of Boston Vice President Hoyle of the International Corporahas advised that you are aware that Shawmut y foreign credit voluntar the tion will have no separate base under nts would investme or loans restraint effort and that any foreign BOARD OF GOVERNORS or THE FEDERAL RESERVE SYSTEM 393 Mr. Nigel R. Godwin -2- need to be made under the ceiling of your bank. Accordingly, the foregoing approval is given with the understanding that any foreign loans and investments of the Corporation, combined with The National Shawmut Bank of Boston, will not cause the total of such loans and investments to exceed the guidelines established under the voluntary foreign credit restraint effort now in effect and that due consideration will be given to the priorities contained therein. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. Enclosure 394 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON January 27, 1966 Preliminary Permit IT IS HEREBY CERTIFIED that the Board of Governors of the Federal Reserve System, pursuant to authority vested in it by Section 25(a) of the Federal Reserve Act, as amended, has this day approved the Articles of Association dated December 16, 1965, and the Organization Certificate dated December 16, 1965, of SHAWMUT INTERNATIONAL CORPORATION duly filed with said Board of Governors, and that SHAWMUT INTERNATIONAL CORPORATION is authorized to exercise such of the powers conferred upon it by said Section 25(a) as are incidental and preliminary to its organization pending the issuance by the Board of Governors of the Federal Reserve System of a final permit generally to commence business in accordance with the provisions of said Section 25(a) and the rules and regulations of the Board of Governors of the Federal Reserve System issued pursuant thereto. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (Seal) BY (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. 395 BOARD OF GOVERNORS Item No. 4 1/27/66 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 AooRtss orriciAL coRacaeamocNct TO THE BOARD January 27, 1966. Board of Directors, Peoples Bank and Trust Company, Russellville, Arkansas. Gentlemen: l Reserve The Board of Governors of the Federa by Peoples branch System approves the establishment of a in as, Arkans Bank and Trust Company, Russellville, ished establ is branch Pottsville, Arkansas, provided the within six months. n 24A Pursuant to the provisions of Sectio ors of Govern of Board of the Federal Reserve Act, the in ment invest an the Federal Reserve System approves Bank s People by 0 bank premises of not to exceed $15,00 and construction and Trust Company, for purchase of land ille. of new banking quarters. in Pottsv Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. 396 BOARD OF GOVERNORS Item No. 5 1/27/66 OF THE FEDERAL RESERVE SYSTEM S-1982 WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD February 1, 1966. Dear Sir: The Board's opinion has been requested as to whether the °Peration by State member banks of nearby facilities, unoccupied by bank personnel and not connected to bank property except by closed cxrcuit TV and pneumatic tube, requires Board approval for the establishment of branches. In one case, a branch was located in a large °PPing center and the bank wished to open a TV facility about 'uO feet from the existing branch on the parking area. In another ease, the bank wished to open a TV facility approximately 150 feet from the bank building on a parking lot diagonally across from the bank at a street intersection. In neither case was competition with other banks a Illatter of importance. n Federal statutes define a branch to include any "place of business. . .at which deposits are received, or checks paid, or money lent," The answer, therefore, depends upon whether such a TV facility s a place of business at which deposits are received or checks are paid. ' A typical unit consists of a two-way screen and sound system. The customer presses a button to signal the teller who then appears on t the Iv screen. The customer's image also appears on a screen in the eller i s booth. The door of the cash tray is opened by the teller 8t through remote control and the customer places his deposit or withdrawal 14 therein. A pneumatic tube system sends the carrier to the teller's :tation inside the bank. The teller's actions may be watched by the ustomer. The teller places the pass book, receipt, or cash in the Car ie_ and sends it back to the customer. There are no mechanical ontrols by the customer, the entire operation being performed by the inside the bank. However, the customer and the teller see each Other 'her during the entire transaction and may converse freely at all times. Z The Board has consistently taken the position that any facility bto i'Len a teller is stationed and which is separated from the bank's 1-ding by property not owned or controlled by the bank is a "branch", 114: ila'ess the facility is connected to the bank building by a bank-controlled fnss age through which people may pass. Thus, in several cases where the -eilities were located only across a street or alley and there was no at , 39 of -2- connecting passage (bridge or tunnel) over which the bank had exclusive control, Board permissions were given for the establishment of branches. However, in the facilities under consideration, the funds would Pass immediately through a tube to or from an employee in the bank building and the facilities would not be occupied by an employee of the bank who even temporarily held funds in his custody. This fact differentiates such facilities from those considered in the past at which a teller is stationed. Accordingly, the Board has concluded that the operation of the TV facilities described above would not constitute the establishment of branches. In cases arising in the future under similar conditions the Board's permission to establish a branch would not be necessary. If the conditions are substantially dissimilar, the matter should be subm4tted to the Board for its consideration. Very truly yours, 4'71 Kenneth A. Kenyon, Assistant Secretary. THE PRESIDNNTS OF ALL FEDERAL RESERVE BAOS
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