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Minutes for January 28
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
1966
398
Minutes of the Board of Governors of the Federal Reserve
System on Friday, January 28, 1966.
The Board met in the Board Room
at 9:30 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Balderston, Vice Chairman
Robertson
Daane
Maisel 1/
Mr. Sherman, Secretary
Mr. Kenyon, Assistant Secretary
Mr. Young, Senior Adviser to the Board and
Director, Division of International Finance
Mr. Holland, Adviser to the Board
Mr. Molony, Assistant to the Board
Mr. Cardon, Legislative Counsel
Mr. Fauver, Assistant to the Board
Mr. Hackley, General Counsel
Mr. Brill, Director, Division of Research and
Statistics
Mr. Farrell, Director, Division of Bank Operations
Mr. Solomon, Director, Division of Examinations
Mr. Koch, Deputy Director, Division of Research
and Statistics
Mr. Partee, Associate Director, Division of
Research and Statistics
Mr. Gramley, Associate Adviser, Division of
Research and Statistics
Messrs. Goodman and Leavitt, Assistant Directors,
Division of Examinations
Miss Eaton, General Assistant, Office of the
Secretary
Mr. Eckert, Chief, Banking Section, Division of
Research and Statistics
Mr. Ettin, Economist, Division of Research and
Statistics
Mr. Maguire, Supervisory Review Examiner, Division
of Examinations
Discount rates.
The establishment without change by the Federal
Reserve Banks of Cleveland, Richmond, Atlanta, Chicago, St. Louis,
Minneapolis, Kansas City, and Dallas on January 27, 1966, of the rates
11
Withdrew at point indicated in minutes.
399
1/28/66
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on discounts and advances in their existing schedules was approved
unanimously, with the understanding that appropriate advice would be
sent to those Banks.
Distributed items.
The following items, copies of which are
attached to these minutes under the respective item numbers indicated,
were approved unanimously:
Item No.
Letter to United California Bank, Los Angeles,
California, granting an extension of time to
establish a branch near Moorpark Road and Village
Lane, Ventura County.
1
Letter to Bankers International Corporation, New
York, New York, granting permission for Bankers
International (Luxembourg), S.A.P.F., Luxembourg,
to acquire additional shares of Banque G. & C.
Kreglinger S.A., Antwerp, Belgium.
2
Report on competitive factors.
A report to the Federal Deposit
Insurance Corporation on the competitive factors involved in the proposed
merger of First National Bank, Taneytown, Maryland, into Birnie Trust
Company, Taneytown, Maryland, was approved unanimously for transmittal
in a form in which the conclusion read as follows:
Birnie Trust Company and First National Bank are the only
banks located in Taneytown, and there appears to be substantial
competition between them. The overall effect of the proposed
merger on competition would be adverse.
Reserve requirements on time deposits.
At hearings before
the Joint Economic Committee in December 1965 Congressman Reuss asked
Chairman Martin why, if the 4 per cent reserve requirement on time
400
1/28/66
-3-
deposits was meaningless, the Federal Reserve did not lower it or ask
Congress for its abolition; and, if it was not meaningless, why the
Federal Reserve, as an anti-inflationary step, did not raise the requirement to 6 per cent.
He also asked, at another point, why the Board did
not increase the required reserve on negotiable certificates of deposit
from 4 per cent to 6 per cent.
A memorandum from the Division of Research and Statistics dated
January 26, 1966, discussing a possible increase in reserve requirements
against certificates of deposit had been distributed and considered preliminarily at yesterday's Board meeting.
There had now been distributed
a memorandum from Messrs. Cardon and Brill dated January 27.
With this
memorandum there was submitted a draft of letter to Congressman Reuss.
On the question whether reserve requirements on time deposits were
meaningless, the draft letter would express the view that the present
authority was far from meaningless and that it should be continued.
It
would also state that a discussion of the considerations supporting this
view was enclosed.
On the question of the desirability of raising reserve
requirements on time deposits as an anti-inflationary measure, the draft
letter would state that the Board had not felt, at least thus far, that
a change in the level of reserve requirements on time deposits would be
appropriate in the economic circumstances prevailing.
It would note
that the Board had been authorized to adjust these requirements from
time to time in response to developments in the economy, that such a
401
1/28/66
-4-
decision could not be made in the abstract, that the Board had the
matter under review and expected to continue to review possible use of
the authority, along with other measures, in the light of economic conditions as they developed, and that it was believed that any further
comments on this point at this time could impair the flexibility provided
by the Congress for the use of the authority.
There was also submitted with the memorandum a statement of the
main points for and against retaining reserve requirements against time
deposits.
Governor Balderston suggested that the Board consider first the
final paragraph of the proposed letter to Congressman Reuss, relating
to the question of raising reserve requirements on time deposits as an
anti-inflationary measure.
Accordingly, attention was directed to that
Paragraph and various suggestions were made, the consensus appearing to
be that the Board should point to its authority to adjust these requirements in response to developments in the economy, should emphasize that
such a decision could not be made in the abstract, and should indicate
that it had the matter under continuing review.
Consideration then was given to the second paragraph of the
draft letter, in response to Mr. Reuss' first question, and it was the
general view of the Board members that the present authority to fix
reserve requirements on time deposits was not meaningless and should
be continued.
Accordingly, the question was what discussion should be
402
1/28/66
-5-
presented in support of that view.
In this connection, Governor Balderston
distributed copies of a paper that Mr. Brill had handed him outlining
alternative courses that a memorandum on the matter might take.
During the discussion of this point, Governor Maisel noted that
a separate question involved whether action should be taken to establish
a higher reserve requirement against negotiable certificates of deposit
than against other time deposits.
Governor Daane cited reasons why,
although he might be agreeable to this under certain circumstances, he
would not favor such action in the current market and banking environment.
Governor Balderston recalled that in the past the legal staff had explained
difficulties that it found in differentiating between negotiable and nonnegotiable certificates for control purposes.
Governor Balderston also
observed that a graduated scale of reserve requirements, if instituted,
might weigh somewhat more heavily against the city than the country banks,
and that a penalty reserve requirement on negotiable certificates might
then impose a second burden on the city banks.
Governor Maisel indicated
that he had raised with the staff certain questions to which he felt that
answers should be available before further consideration was given to
raising the requirement against negotiable certificates.
It was generally
agreed that further study in this area was indicated.
The staff then observed that the issues raised by Mr. Reuss'
question were of such complexity as to require considerable time and
effort for the preparation of a substantive reply of appropriate quality.
403
-6-
1/28/66
This point was recognized by the Board, and Governor Robertson suggested
a type of reply to Mr. Reuss that, in answer to his first question, would
draw heavily on the pros and cons of retaining reserve requirements against
time deposits, as summarized in the attachment to the Cardon-Brill memorandum.
This approach was favorably received, although some members of
the Board expressed a preference for avoiding a "debate type" of letter,
and therefore for using only the arguments for retaining reserve requirements against time deposits.
Governor Robertson indicated that he would
not object, although he felt that the use of some of the negative arguments
might make for a more effective letter.
At the conclusion of the discussion, it was understood that the
staff would prepare a draft of letter along the lines suggested, for
consideration at a meeting of the Board early next week.
Governor Maisel withdrew from the meeting at this point.
Messrs.
Farrell, Goodman, Leavitt, and Maguire also withdrew and the following
entered the room:
Messrs. Axilrod, Bernard, and Keir of the Division of
Research and Statistics
Messrs. Katz, Reynolds, and Baker of the Division of
International Finance
Mr. Furth, Consultant
Money market review.
Mr. Bernard reported on recent developments
in the Government securities market and on the current Treasury financing,
and Mr. Eckert commented on bank credit developments.
Mr. Furth reported
on latest developments in foreign exchange markets and on the balance of
,
1/28/66
404
-7-
payments.
Tables were distributed affording perspective on the money
and capital markets and on bank reserve utilization, along with a table
on the Treasury refunding.
The meeting then adjourned.
Secretary's Notes: By letter dated January 27,
1966, Chairman Rebsamen of the Federal Reserve
Bank of St. Louis advised that the Board of
Directors had that day, subject to the approval
of the Board of Governors, appointed Dale M. Lewis,
currently Vice President, as First Vice President
of the Bank effective February 1, 1966, for the
unexpired portion of the term ending February 28,
1966, and for the five-year term beginning March 1,
1966, and had fixed his salary at the annual rate
of $27,500 for the period February 1 through
December 31, 1966. At its meeting on January 20,
1966, the Board of Governors had authorized the
transmittal of informal advice to Chairman Rebsamen,
pursuant to his inquiry, that the Board would approve
such action if taken by the St. Louis Board of Directors. Accordingly, the letter of which a copy is
attached as Item No. 3 was sent today to Chairman
Rebsamen.
Acting in the absence of Governor Shepardson,
Governor Robertson today approved on behalf of
the Board memoranda recommending the following
actions relating to the Board's staff:
Appointments
Patricia Ann Cuneo as Statistical Clerk, Division of Research and
Statistics, with basic annual salary at the rate of $3,814, effective
the date of entrance upon duty.
.
Jane Hill as Statistical Assistant, Division of Research and Statistics, with basic annual salary at the rate of $5,181, effective
February 1, 1966. (Dual occupancy of position for a few business days.)
Annie Louise Liles as Clerk-Typist, Division of Research and
Statistics, with basic annual salary at the rate of $4,149, effective
February 1, 1966.
1/28/66
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Appointments (continued)
Harry Allan Tomkinson as Statistical Clerk, Division of Research
and Statistics, with basic annual salary at the rate of $4,641, effective February 1, 1966.
Jeannie Chipouras as Clerk-Typist, Division of Personnel Administration, with basic annual salary at the rate of $4,149, effective the
date of entrance upon duty.
Herman C. Bounds as Chauffeur, Division of Administrative Services,
with basic annual salary at the rate of $5,200, effective February 1, 1966.
Salary increases, effective January 30, 1966
Name and title
Division
Basic annual salary
From
To
Research and Statistics
Judith Kay Schoenberg, Economist
$8,241
$8,961
5,523
5,894
3,983
4,102
6,036
4,641
6,207
5,181
5,894
6,269
6,476
6,476
International Finance
Bette L. Robinson, Statistical Assistant
Administrative Services
Thresia Elting, Cafeteria Helper
Data Processing
Bessie M. McCrae, Statistical Clerk
Concetta M. Nobilio, Secretary
(change in title from Stenographer)
Ray M. Reeder, Digital Computer Systems Operator
Charles M. Wrenn, Digital Computer Programmer
_AAA
SecretAr
P,ApAyki\./`
406
BOARD OF GOVERNORS
•
Item No. 1
1/28/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
AooRims orricim. CORRESPONDENCE
TO THE BOARD
January 28, 1966
Board of Directors
United California Bank,
Los Angeles, California..
Gentlemen:
The Board of Governors of the Federal Reserve
System extends to August 19, 1966, the time within which
United California Bank, Los Angeles, California, may
establish a branch in the vicinity of the intersection of
Moorpark Road and Village Lane, Ventura County,
California.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
4(17
BOARD OF GOVERNORS
Item No. 2
1/28/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20531
ADDRESS
OFFICIAL
CORRESPONDENCE
TO THE SOARO
4L R
•••••
February 2, 1966.
Bankers International Corporation,
16 Wall Street,
New York 15, New York.
Gentlemen:
In accordance with the request made on behalf of your
Corporation in letters dated January 12 and 20, 1966, the Board
of Governors amends its letter of December 6, 1965, and grants
consent for Bankers International (Luxembourg), Societe Anonyme
de Participations Financieres ("BILSe), Luxembourg, to purchase
and hold approximately 33-1/3 per cent of the shares of Banque
G. & C. Kreglinger S.A., Antwerp, Belgium, at a total cost of
approximately US$860,000 (equivalent), provided such stock is
acquired within one year from the date of this letter.
It is noted that BILSA plans to pay for the shares by
borrowing any necessary funds in the European capital market.
Accordingly, the foregoing consent is given with the understanding
that the total amount of foreign loans and investments of your
Corporation, combined with those of Bankers Trust Company, for
the purposes of the voluntary foreign credit restraint effort,
will not be affected bythis transaction.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
408
BOARD OF GOVERNORS
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Item No. 3
1/28/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
...
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
January 28, 1966.
CONFIDENTIAL (FR)
Mr. Raymond Rebsamen, Chairman,
Federal Reserve Bank of St. Louis,
P. 0. Box 442,
St. Louis, Missouri.
63166
Dear Mr. Rebsamen:
The Board of Governors has approved the appointment of Mr. Dale M. Lewis as First Vice President of the
Federal Reserve Bank of St. Louis, effective February 1,
1966, for the unexpired portion of the five-year term
ending February 28, and for a term of five years beginning
March 1, 1966, in concurrence with the actions taken by
your Board of Directors, as reported in your letter of
January 27.
The Board of Governors has also approved the
payment of salary to Mr. Lewis as First Vice President,
for the period February 1 through December 31, 1966, at
the rate of $27,500 per annum.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
@FedFRASER