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09 6/61 Minutes for To: Members of the Board From: Office of the Secretary July 10, 1961 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. King Minutes of the Board of Governors of the Federal Reserve System on Monday, July 10, 1961. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Martin, Chairman Balderston, Vice Chairman Mills Robertson Shepardson King Sherman, Secretary Kenyon, Assistant Secretary Thomas, Adviser to the Board Young, Adviser to the Board and Director, Division of International Finance Mr. Fauver, Assistant to the Board Mt. Landry, Assistant to the Secretary Mr. Petersen, Special Assistant, Office of the Secretary Mr. Mr. Mr. Mr. Messrs. FUrth, Hersey, Sammons, Irvine, Reynolds, Elrod, and Wall ace and Miss Logue of the Division of International Finance Messrs. Garfield, Koch, Brill, Dembitz, Williams, Solomon, Eckert, Wood, Millea, Altmann, Trueblood, Peret, Manookian, and Yager, and Miss Dingle of the Division of Research and Statistics Miss Nichols, Economist, Federal Reserve Bank of Chicago Economic review. The Divisions of International Finance and Research and Statistics presented a review of recent foreign and domestic economic and financial developments. At the conclusion of this presentation, Miss Nichols and all members of the staff except Messrs. Sherman, Kenyon, Thomas, and Landry withdrew and the following entered the room: 2324 7/10/61 -2Mr. Hackley, General Counsel Mr. Masters, Associate Director, Division of Examinations Mr. Hooff, Assistant General Counsel Mr. Conkling, Assistant Director, Division of Bank Operations Mr. Goodman, Assistant Director, Division of Examinations Mr. Leavitt, Assistant Director, Division of Examinations Mr. Sprecher, Assistant Director, Division of Personnel Administration Mr. Collier, Chief, Current Series Section, Division of Bank Operations Mr. Achor, Review Examiner, Division of Examinations Items circulated to the Board. The following items, which had been circulated to the Board and copies of which are attached to these minutes under the respective item numbers indicated, were approved unanimously: Item No. Letter to regarding the Federal Reserve Bank of Boston adjustment of the lower limits of GalarY grades 1 and 2. (With similar letters tothe Federal Reserve Banks of New York, Philadelphia, Richmond, Atlanta, St. Louis, Kansas City, and San Francisco.) Letters to the Federal Reserve Banks of Boston, New York, and Philadelphia regarding a call for f --'s of condition as of June 30, 1961, from ' 13reignbanking and foreign financing corporations. 1 2-4 Mr. Molony, Assistant to the Board, entered the room at this point, and Mr. Sprecher withdrew. Request from Franklin National Bank (Item No. 5). Franklin National Bank, Mineola, New York, had written to the Board under date of Ufle 1) 1961, indicating its intention to apply for two branches in New Y°11t City and requesting "a reasonable period of time to adjust to the 7/10/61 _3_ increased reserve requirements". In a letter dated June 27, 1961, the Federal Reserve Bank of New York expressed the opinion that "the granting Of country bank status even temporarily would . . give the bank a competitive advantage with little or no basis in logic or equity." Copies of a draft of letter to the Federal Reserve Bank of New York requesting it to advise Franklin National that the Board believed it would not be justified in granting permission to the bank to continue its country bank status, even temporarily, in the event it opened a branch in New York City had been distributed under date of July 7, 1961. In discussion, no disagreement with the view expressed in the Proposed reply was indicated. However, Governor Mills suggested that the letter be addressed to Franklin National Bank, rather than to the Federal Reserve Bank of New York, since the bank's request had been directed originally to the Board, and there was agreement with this s uggestion. Accordingly, the letter, addressed as suggested, was approved unanimously. A copy is attached as Item No. 5. Mr. Thomas then withdrew from the meeting. AUllsation of United California Bank (Item No 6). Distribution had been made of a memorandum from the Division of Examinations dated June 29) 1961, concerning an application by United California Bank, Los Angeles, for permission to merge with Farmers and Merchants Bank, Hemet, Calif ornia, and to operate a branch at the present location of the latter. 7/10/61 -4- The r ecommendations of both the Federal Reserve Bank of San Francisco and the Division of Examinations were favorable. Reports on competitive factors received from the Comptroller of the Currency and the Federal Deposit Insurance Corporation were not adverse, but the report received from the Department of Justice expressed certain reservations, principally from the standpoint of the general program of expansion of the applicant In commenting on the application, Mr. Leavitt noted that Farmers and Merchants was a small, one-office bank located in a community of some 5,400 persons approximately 85 miles east of downtown Los Angeles in Riverside County. Although Farmers and Merchants was the oldest bank in the area, it had failed to show appreciable growth during a time of considerable expansion of the Hemet area. It had not provided additional banking services, it followed ultraconservative lending policies, and management was not aggressive. The lack of growth of the bank was also tr aceable in part to strong competition from Security-First National 138alk) Los Angeles, whose branch in Hemet was the only other banking tacilitY serving that community. 17°4 eager Also, Farmers and Merchants' president to retire at an early date and there was no satisfactory successor. On the other hand, the resulting bank would provide the c4Imunity and the present and potential customers of Farmers and Mal'ehants with a stronger, more aggressive banking institution that wollld offer a complete range of banking services and be an active eoMpetitor in the area. ••• 7/10/61 -5Governor Robertson said that although he had opposed the merger of Bank of Encino into United California Bank (approved by the Board on June 16, 1961), he would vote to approve the present application, even though he felt there was much to be said for the position taken by the 12L'Partment of Justice. He cited as bases for his position on the present VI:a-testi= the weak and unaggressive management of Farmers and Merchants, the bank's weak capital structure, and its small size. These factors indicated that the resulting bank would provide better competition in this particular area with Security-First National Bank. At the same time, if future applications of United California Bank presented characteristics similar to the Encino case, he would expect to oppose them. Unanimous approval was then given to the application by United California Bank. A copy of the letter sent to the bank pursuant to this action is attached as Item No. 6. Messrs. Conkling, Hooff, Goodman, Collier, and Achor then withdrew. Letter to Congressman Moss (Item No. 7). There had been distributed under date of July 7, 1961, copies of a draft of letter to Chairman Moss of the PPecial Government Information Subcommittee of the House Committee on G(3vernment Operations, in reply to his letter of June 231 1961, inquiring 'Whether the Board permitted monitoring of incoming telephone calls, whether, if s0, electronic devices were used for that purpose, and Whether the Board regulations on the subject. The proposed reply would point out that no Irtl% ›CN 4 ,1‘ , ,S ,4 7/10/61 -6- monitoring was done by the Board's telephone operators, no electronic devices were used to monitor telephone calls, and no occasion had arisen that would suggest the necessity for the Board to promulgate any regulations covering the monitoring of telephone calls. In a discussion of the proposed reply, it was noted that there seemed no reason to believe that the Board was the only recipient of an inquiry of this kind. With reference to a possible additional paragraph in the draft reply which would refer to use by the Board of a dictaphone device to record certain incoming telephone calls during World War II and the use of a signal to warn those on the line that the call was being monitored, which device had been discontinued about 1950, a view was "Pressed that it would seem unnecessary to include such information. The equipment, it was noted, was no longer on hand. Unanimous apuoval was then given to the letter to Congressman 'a copy of which is attached as Item No. 7. M°66 All of the members of the staff then withdrew and the Board went into executive session. Deleptions of authority to Governor Shepardson. The Secretary ' lras later informed that the Board had vested in Governor Shepardson for the Year beginning August 1, 1961, the direction of its internal affairs a managerial nature. This meant that the directors of divisions would c°11tinue to take up with him matters pertaining to Board personnel, budget, anci housekeeping, and that the Board as a whole would continue to keep in touch with the operating problems of the staff and determine questions of 4,1 7/10/61 Polley, -7Governor Shepardson's designation included authorization to approve travel requests in accordance with the official travel regulations Of the Board. The action also continued the authorization conferred by the Board on Governor Shepardson at its meeting on June 26, 1957, to aPProve on behalf of the Board (1) all proposed personnel actions relating to Board employees other than members of the official staff; and (2) the proposed appointment of examiners, assistant examiners, and special or special assistant examiners of the Federal Reserve Banks, with the understanding that all such approvals would continue to be entered in the minutes as of the date of approval. Travel by Mr. YounIG.2. The Secretary was informed by Governor ShePardson that during the executive session the Board authorized travel by Mr. Young, Adviser to the Board and Director, Division of International /Inance, to attend meetings of the Economic Policy Committee of the °rganization for European Economic Cooperation, and of a working group °f such Committee, to be held in Paris during the period July 22-27, 1961. 1\11.ther, if it Should seem necessary or desirable that Mr. Young be accomPanied on this trip by another member of the Board's staff, the lit°ard likewise authorized similar travel on the part of such person. connection with this action, the Board authorized the providing of an appropriate representation allowance for Mr. Young. The meeting then adjourned. In Ak?(-I et Ir I Secretary's Note: Governor Shepardson today apuoved on behalf of the Board the following items: _ Letter to the Federal Reserve Bank of Cleveland (attached Item No. 8) approvi. v— 46 the designation of 15 persons as special assistant examiners. Telegram to the Federal Reserve Bank of St. Louis (attached Item No. 9) aiVroving the appointment of John McCarthy as assistant examiner. Menlorandum from the Division of Administrative Services recommending ' 41e aPpointment of James T. Jones as Messenger in the Division, with basic al salary at the rate of $3,185, effective the date of entrance upon duty. Secretay A BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. Item No. 1 7/10/61 ADDRESS OFFICIAL. CORRESPONDENCE TO THE BOARD July 11, 1961 Confidential (FR) Mr. George H. Ellis, President, Federal Reserve Bank of Boston, Boston 6, Massachusetts. Dear Mr. Ellis: Recent amendments to the Fair Labor Standards Act have increased the minimum hourly wage to $1.15 effective September 3, 1961. The Board feels that it would be inappropriate for a Federal Reserve Bank to have an employees1 salary structure containing a grade limit below this minimum of $2,392 per year, irrespective of whether actual salaries paid by the Bank are in excess of that level. Accordingly, you are requested to give consideration to raising the lower limits of Grades 1 and 2 in the employees! structure at Boston to $2,392, at least, prior to September 3 without raising the maximums of these ranges. The Board is prepared to approve such adjustments if recommended bY your Board of Directors. The Board is aware that in the grades affected, this will temporarily depart from the accepted concept of a uniform 35 per cent spread between the minimum and maximum of the grade. However, it is felt that adjusting the lower ranges in this Tanner will tend to lessen the effect of the increases on the Ibalance of the structure. A similar procedure was followed by the Reserve Banks concerned when the minimum wage was raised to $1.00 an hour in 1956. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 2 7/10/61 WASHINGTON 25. D. C. ADDRESS ,t.vastl, , \44,6 orrictAL CORRESPONDENCE TO THE •OARD 444*** July 10, 1961 Mr. B. F. Groot, Vice President, Federal Reserve Bank of Boston, Boston 6, Massachusetts. Dear Mr. Groot: to Boston Enclosed is a copy of a letter dated today, addressed Overseas Financial Corporation, calling for a report Of condition as of June 30, 1961. You will observe that the letter requests that the report called for be submitted in duplicate to the Federal Reserve Bank for transmittal to the board of Governors. Upon receipt of the report it will be appreciated if You will have a proof made of the footings and obtain the corrtl°n of any obvious errors in the report. Please forward the, original copy of the report to the Board and retain a copy for your files. A complete review of the report will be made in the Boar I Dl vi Division of Examinations, and any correspondence which may 12.e necessary as a result thereof will be initiated by the Board With a copy to you for your information. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. Enclosure BOARD OF GOVERNORS OF THE Item No. FEDERAL RESERVE SYSTEM WASHINGTON 25, O. C. AOOREBEI 3 7/10/61 orrictAL CORRIEBPONDIENCC TO THE BOARD July 10, 1961 Mr. Howard D. Crosse, Vice President, Federal Reserve Bank of New York, New York 45, New York. Dear Mr. Crosse: Enclosed are copies of letters calling for reports of condition as of June 30, 1961, from the following foreign banking d foreign financing corporations in the Second District operating der the provisions of Section 25 and Section 25(a) of the Federal Reserve Act: r Bankers Company of New York Chase Manhattan Overseas Corporation International Banking Corporation The Gallatin Company, Inc. Virgin Islands National Bank Bank of America Bankers International Corporation Bankers International Financing Company, Inc. Chase International Investment Corporation Chemical International Finance, Ltd. The First Bank of Boston (International) Morgan Guaranty International Banking Corporation Morgan Guaranty International Finance Corporation callYou will observe that the letters request that the reports ed for be submitted in duplicate to the Federal Reserve Bank for ' ranemittal to the Board of Governors. Upon receipt of the reports it will be appreciated if you have a proof made of the footings and obtain the correction of orY °I3vioue errors in the reports. Please forward the original copy the reports to the Board and retain a copy for your files. will A complete review of the reports will be made in the Board's • . Di71 81on of Examinations, and any correspondence which may be neces-, aarY as a result thereof will be initiated by the Board with a copy to You for your information. llolosures Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 4 7/10/61 WASHINGTON 25. D. C. AOORCSIS orrictim. CIORRCIIIPONOCHOC TO THC 'BOARD July 10, 1961 Mr. Joseph R. Campbell, Vice President, Federal Reserve Bank of Philadelphia, Philadelphia 1, Pennsylvania. Dear Mr, Campbell: Enclosed is a copy of a letter to Philadelphia International Investment for a report of condition as of June 30, that the letter requests that the report in duplicate to the Federal Reserve Bank Jdoard of Governors. dated today, addressed Corporation, calling 1961. You will observe called for be submitted for transmittal to the Upon receipt of the report it will be appreciated if You will have a proof made of the footings and obtain the cor!?otion of any obvious errors in the report. Please forward he original copy of the report to the Board and retain a copy for your files. complete review of the report will be made in the Board's t8 Division of Examinations, and any correspondence which maybe necessary as a result thereof will be initiated by the ,o0ard with a copy to you for your information. Very truly yours, "(Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. flelOgure BOARD OF GOVERNORS OF THE Item No. FEDERAL RESERVE SYSTEM 5 7/10/61 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 10, 1961. Mr. Arthur T. Roth, Chairman of the Board, The Franklin National Bank, Franklin Square, New York. Dear Mr. Roth: This refers to your letter of June 1, containing a suggestion that your bank be given a reasonable period of time to adjust to increased reserve requirements in the event it opens a branch in New York City. The Board has given sympathetic consideration to your suggestion, but has concluded that the granting of permission to continue its country bank status, even temporarily, would give yuur bank a competitive advantage over the New York bank that has recently opened branches in New York City and is maintaining the higher reserve requirement, as well as over the central reserve and reserve city banks of longer standing. The Board is of the opinion that the character of your bankl8 business, as reflected by its total demand deposits and its competition with other banks in the city, is more nearly like that of the central reserve and reserve city banks in New York than that of banks to which the Board has granted permission to maintain reduced reserves. Accordingly, the Board believes that it would not be justified in granting it permission to continue to carry lepcluntry bank reserves, even temporarily, in the event it opens a ranch in New York City. Very truly yours, (Signed), Merritt Sherman Merritt Sherman, Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 6 7/10/61 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE HOARD July 10, 1961 Board of Directors, United California Bank, Los Angeles, California. Gentlemen: The Board of Governors of the Federal Reserve System, after consideration of all the factor s set forth in section 18(c) of the Federal Deposit Insura nce Act, hereby consents to the merger of Farmers and Merchants Bank, Hemet, California, with and into United California Bank, under the Charter and title of the latter bank, as it finds the transaction to be in the public intere st. The Board of Governors also approves the operation branch by the resulting bank of a at 200 East Florida Avenue, Hemet, California. This approval is given provided (1) the proposed merger is effected within six months from the date of this letter and substantiall y in accordance with the Agreement of Merger, dated March 20, 1961, and (2) shares of stock acquired from dissenting shareholders are dispos ed of within six months from the date of acquisition. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 7 7/10/61 WAS HI NGTON OFFICE OF THE CHAIRMAN July 10, 1961 The Honorable John E. Moss, Chairman, Special Government Information Subcommittee of the Committee on Government Operations, House of Representatives, Room 217, George Washington Inn, Washington 25, D. C. Dear Mr. Chairman: Your letter of June 23, 1961, inquires as to whether the Board permits monitoring of incoming telephone calls; if so, Whether electronic devices are used for that purpose; and whether the Board has regulations on the subject. No monitoring is done by our electronic devices are used to monitor occasion has arisen that would suggest to promulgate any regulations covering calls. telephone operators, no telephone calls, and no the necessity for the Board the monitoring of telephone Inquiries made at offices of Board and staff members since the receipt of your letter show that, on occasion, secretaries are asked to listen to at least a portion of a telephone call for Information they may need in their work or for help they may Provide as, for example, in locating reference material pertinent ito the conversation. Frequently, a secretary is brought on the line to take down figures, or names and addresses for mailing PurPoses, or quoted matter that is needed in verbatim form, and that fact is made known usually to the other party to the call. In some cases, more extensive notes may be taken, but transcribing conversations is not customary, and certainly no practice is made of transcribing telephone calls to or from any particular groups or classes of callers: if a conversation is to be taken c.lown verbatim or in detail, that fact ordinarily would be indicated in advance to the other party to the call. Any question as to whether an individual should ask his secretary to listen to part or all of a telephone call is left to the judgment of the individual, and no circumstances have came to the attention of the Board to indicate reasons for handling the matter otherwise. The Honorable John E. Moss -2- The Board does not now foresee an occasion for installing any devices to monitor telephone calls, and it does not believe that the existing practice of permitting individuals t? have their secretaries listen in on some telephone conversatlons, either in part or in whole is objectionable. Sincerely yours, (Signed) -01m. McC. Martin, Jr. UM. McC. Martin, Jr. OR It 01 ,.ç BOARD OF GOVERNORS OF THE Item No. 8 FEDERAL RESERVE SYSTEM 7/10/61 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 102 1961 Paul C. Stetzelberger, Vice President, rp.!cteral Reserve Bank of Cleveland, Cleveland 1, Ohio, Dear Mr. Stetzelberger: June 30 In accordance with the request contained in your letter of em,, 3 1 961, the Board approves the designation of the following ' 45rees as special assistant examiners for the Federal Reserve Bank Of Cleveland: Thomas J. Kyde Ralph E. Perry James R. Curry William M. Fraysure Joseph L. Lacey- Thomas Petroze John Rothwell Rodney McCane Robert L. Pickett Jerry S. Wilson The aut Pe horizations heretofore given your Bank to designate Messrs. Kyde, c Petroze 3 and Rothwell as special assistant examiners are hereby anceled. The Board also approves the designation of the following as special assistant examiners for the Federal Reserve Bank bank "eland for the purpose of participating in examinations of member except those listed opposite their names!, Donald Ashcraft - The Central Trust Company, Cincinnati, Ohio en1Ployee Of el 8 Ronald Barnett - The First National Bank and Trust Company of Covington, Covington, Kentucky Lawrence Gibson - The American National Bank of Newport, Newport, Kentucky Arthur Kessnick - The Central Trust Company, Cincinnati, Ohio; and The Fifth Third Union Trust Company, Cincinnati, Ohio Ralph R. Voss - The Fifth Third Union Trust Company, Cincinnati, Ohio Mr. Paul C. Stetzelberger -2- authorizations to designate these individuals as special assistant examiners for your Bank are hereby canceled. records of the names to Appropriate notations have been made in our be deleted from the list of special assistant examiners. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 41,t 1‹,'1 • Item No. 9 LEASED WIRE SERVICE 7/10/61 TELEGRAM BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON July 10 1961 KRONER - ST. LOUIS Rennet June 30, 1961, Board approves appointment of John McCarthy as assistant examiner for Federal Reserve Bank of St. Louis. Please advise effective date of appointment. (Signed) Elizabeth L. Carmicael CARMICHAEL
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