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Minutes for July 11, 1962
Members of the Board
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 proposed to place in the record of policy actions
!equired to be kept under the provisions of section 10 of the
rederal Reserve Act entries covering the items in this set of
1111nutes commencing on the pages and dealing with the subjects
referred to
below:
Page 16 Revision of Regulation tt, Reserves of
Member Banks.
e 20 AmenemPnt to 1947 Rule for Classification
of Reserve Cities.
Should you have any question with regard to the minutes,
It
-14-4- be appreciated if you will advise the Secretary's Office.
kfchertrt
NA ---se, please initial below to indicate that you approve the
utes.
Chin. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov, Shepardson
Gov. King
GOV. Mitchell
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Federal Reserve Bank of St. Louis
Minutes of the Board of Governors of the Federal Reserve
SYstem on Wednesday, July 11, 1962. The Board met in the Board Room
at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Mills
Robertson
Shepardson
King
Mitchell
Mr, Sherman, Secretary
Miss Carmichael, Assistant Secretary
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. Farrell, Director, Division of Bank
Operations
Mr. Hexter, Assistant General Counsel
Mr. Shay, Assistant General Counsel
Mr. Hooff„ Assistant General Counsel
Mr. Dembitz, Associate Adviser, Division
of Research and Statistics
Mr. Conkling„ Assistant Director, Division
of Bank Operations
Mr. Masters, Associate Director, Division
of Examinations
Mr. Goodman, Assistant Director, Division
of Examinations
Mr. Benner, Assistant Director, Division
of Examinations
Mr. Leavitt, Assistant Director, Division
of Examinations
Mr. Thompson, Assistant Director, Division
of Examinations
Mr. Young, Senior Attorney, Legal Division
Mr. Collier, Chief, Current Series Section,
Division of Bank Operations
Mr. Thompson, Review Examiner, Division of
Examinations
Mr. Smith, Assistant Review Examiner, Division
of Examinations
Mr. Harris, Assistant Review Examiner, Division
of Examinations
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Discount rates. The establishment without change by the
Federal Reserve Bank of Boston on July 9, 1962, of the rates on
discounts and advances in its existing schedule was approved unanimously,
vith the understanding that appropriate advice would be sent to that Bank.
Distributed item. The following item, which had been distributed
to the Board
Pnd
a copy of which is attached to these minutes as Item
was approved unanimously:
Letter to Morgan Guaranty International Banking
Corporation, New York, New York, granting consent to the
Purchase of shares of Banque d' Escompte et de Credit
a l'Industrie en Tunisie.
Report on draft bill to amend Home Owners' Loan Act and Federal
2I2E122,oan Bank
AcI
.
SItem No. 21.
A draft of report to the Bureau of the
BlIdget on a revised draft bill to amend the Home Owners' Loan Act of
wad
1933
the Federal Home Loan Bank Act to permit broader authority for Federal
savings and loan associations to engage in the financing of multiple
414elling units had been distributed. The letter would indicate that the
13°4rd considered the revised draft a substantial improvement on the
earlier draft on which the Board reported unfavorably to the Bureau of
the Budget by letter dated March 16, 1962, The proposed letter would state
that the Board believed it particularly important that undue concentratl°4 in multiple family and commercial loans be avoided, both in the
84gregate and also in individual instances where large projects were
Involved.
On the latter point the letter you'd note with approval that
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the Home Loan Bank Board was presently considering an appropriate
regulation that would limit individual loan amounts to a single borrower.
Following comments by Mr. Young, Governor Balderston expressed
concern regarding the proposed legislation.
Having in mind the lending
practices of savings and loan associations and the current real estate
situation in which the total starts in multi-family construction were
on the rise, he wondered if it might not be preferable for the bill itself
to specify
the aggregate amount of investments that might be made by
Federal savings and loan associations in structures containing more than
°Ile- to four-family dwelling units rather than leave the determination
°f the limitation to the Federal Home Loan Bank Board.
Governor Shepardson stated that he had some of the same reservations as those mentioned by Governor Balderston.
Governor Mitchell Observed that, if savers wanted to put their
41°IleY in savings and loan associations and the building trend was away
r1b°a1 individual residences and toward apartments, he believed that it was
4PPropriate to go in the direction of the proposed bill.
Governor Robertson expressed the view that the question was
whether there should be an inflexible statute or whether the Federal
11°111e Loan Bank Board should be given authority to determine loan limitati°as for new multi-family units.
He did not believe it was appropriate
for the Board to take the position that the limitation should be included
in the
statute.
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Mr. Noyes then referred to the portion of the Board's letter
of March 16, 1962, reporting on the earlier draft of the bill in which
it was stated that "If such broadened investment authority is to be
granted, it should be accompanied by additional supervisory authority
in the Federal Home Loan Bank Board to regulate both the standards to
be applied to individual investments and the total amount of assets an
association may hold in loans of the type to be permitted."
In view of
the position taken in that letter, he believed it would be unfair at this
time to indicate that the loan limitation should be specified in the
statute.
After further discussion, the letter was approved.
A copy is
a
ttached as Item No. 2.
Study by Council of Economic Advisers.
Mr. Noyes reported that
the Council of Economic Advisers had plans for making a study of the
mortgage credit situation in the United States and had asked if it would
he P°sstble to receive some assistance from the Federal Reserve Banks.
Acc°rdingly, if agreeable to the Board, he proposed to send a letter to
the head of research at each Reserve Bank advising of the Council's plans
encl suggesting that assistance be provided.
Mr. Noyes went on to say that
the Proposed study would be desirable and useful and he thought the only
cillestion was whether the Board would wish to ask the Reserve Banks to send
their reports directly to the Council or to the Board for consolidation
414 review.
He mentioned that the Council in its analysis of the study
lIc)uld probably quote verbatim comments received from Reserve Banks.
'
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-5Governor Mills stated that the sending of the reports through
the Board would not result in delay of any consequence and, by following
this procedure, the Board would be familiar with the reports submitted.
He also raised a question whether it would be more appropriate to
communicate with the Reserve Bank Presidents rather than the heads of
research regarding the proposed study.
In the latter connection, Mr.
Noyes said that he had suggested sending an informal communication to
the heads of research with the thought that the intent here was to
obtain information that was already available rather than to initiate
new projects.
If the letter was sent to the Presidents, the request
for information might generate more activity than was intended.
Chairman Martin said he thought it would be appropriate for the
Reserve Banks to submit their reports directly to the Council, and
certainly no effort should be mRde to censor in any way the material
that they furnished.
Also, he would be agreeable to sending the Reserve
Banke a wire indicating that the Board was aware of the study and would
be glad to have a copy of the information sent to the Council.
Governor Mills commented that he had in mind that the information
submitted by the Reserve Banks would be of value to the Board, and that
/148 the basis of his suggestion that the reports be sent through the
Board.
However, he would have no objection to the Banks' sending them
clirecti_
y to the Council if copies were also furnished the Board.
During the discussion Governor Robertson said he considered
the request of the Council to be proper, adding that it had come directly
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to the Board rather than to the Reserve Banks.
He thought that it might
be appropriate merely to call the heads of research at the Reserve Banks
and advise them of the request.
He believed that the reports should not
come to the Board before being transmitted to the Council.
In these
circumstances he observed that the Board would have no responsibility for
41Y part of the study.
Governor Balderston then questioned whether the Board would wish
to ask the Secretary to advise the Reserve Bank Presidents that the request
had been received mai was being handled informally with the heads of
research
of their Banks. The Secretary responded that this could be done,
Or Perhaps Mr. Noyes might send a wire to the heads of research as he had
Bum.,
--at5eSted and ask them to be sure that the Reserve Bank Presidents were
informed of the request, thereby keeping the procedure on an informal
baSis.
There being no objection, Mr. Noyes was authorized to communicate
with the heads of research at the Reserve Banks regarding the proposed
study.
Application of State Bank of Salem. There had been distributed
a IlleraOrandUM from the Division of Examinations dated July
5, 1962, recom-
illendin8 favorably on an application by The State Bank of Salem, Salem,
ladiena, to purchase the assets and assume the liabilities of State Bank
Or Hardinsburg, Hardinsburg, Indiana, and incident thereto to establish
a branch at the sole office of the latter bank.
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-7At the Board's request Mr. Leavitt commented on the applica-
tion, his remarks being based largely on information contained in the
memorandum that had been distributed.
During the course of his comments, Mr. Leavitt mentioned that
both the Comptroller of the Currency and the Federal Deposit Insurance
Corporation had reported favorably on the competitive factors involved
in the proposed transaction and the Department of Justice had reported
unfavorably.
He noted, however, that the latter report had been based
On some misinformation relating to the distance between Salem and
Hardinsburg.
He had in mind calling the matter to the attention of the
Department of Justice with the thought that the Department might wish
t° change its report.
After a brief discussion the application was approved unanimously,
and it was understood that the Legal Division would prepare drafts of an
Order and supporting statement for the Board's consideration.
It was also understood that as a matter of courtesy the staff
17°111(1 advise the Department of Justice regarding the mistaken information
14 its report.
Secretary's Note: On the basis of a
telephone call to the Department of
Justice pursuant to this understanding,
the Board's staff was advised that the
Department planned to submit a revised
report on the competitive factors
involved in the proposal.
Messrs. Young and Harris then withdrew from the meeting.
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-8United Security Account Plan (Item No. 3).
on July
At the Board meeting
9, 1962, consideration had been given to a draft of letter to
Citizens Bank & Trust Company, Park Ridge, Illinois, that would order
the bank to comply with provisions of section 217.1(e)(3) of Regulation
Q, Payment of Interest on Deposits, by discontinuing its operation of the
United Security Account Plan which in effect permitted withdrawals
bY the bank from savings accounts in payment of checks.
The draft
letter would indicate that if the bank failed to discontinue the plan,
the Board would have no alternative but to institute a proceeding to
terminate the bank's membership in the Federal Reserve System in
aceoniance with provisions of section
9 of the Federal Reserve Act.
As a substitute for that letter, at the July
9 meeting
Governor Mitchell had suggested that the Board advise the bank that since
it (the bank) was presently evaluating the United Security Account program
aad might decide voluntarily to abandon the plan if it were found not to
cIffer Prospects for profitable operation, the Board would postpone until
Allust 27, 1962, any action with respect to the bank's violation of
Reglalation Q.
by
It had been agreed at the meeting that the approach suggested
Governor Mitchell would be brought to the attention of the Federal
ReSerVe Bank of Chicago before any action was taken by the Board.
Governor Mitchell reported that he had talked with President
Scanlon and First Vice President Helmer of the Chicago Reserve Bank who
11841 indicated that they would not wish to modify the letter as originally
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drafted except, perhaps
to omit the final sentence which would indicate
that if the bank did not discontinue the plan, the Board would have no
alternative but to institute a termination of membership proceeding.
Governor Mitchell stated, however, that his own position had
not changed.
He still did not see how the Board could defend its position
that the plan violated Regulation Q and he did not favor sending the
Proposed letter ordering the bank to abandon the plan by August 27, 1962.
Governor Robertson said that he would not object to omitting
the final sentence relating to termination of membership, but otherwise
he thought that the letter as originally drafted should be sent.
The letter in the form attached as Item No,
3 was then approved,
Governor Mitchell dissenting.
Mr. Hackley requested that the record show that both he and
Mr. Shay had not participated in the consideration of the action taken
In this matter.
Messrs. Hexter, Hooff, and Benner then withdrew from the meeting
8t1C1
Messrs. Chase, Assistant General Counsel, and Potter, Senior Attorney,
Legal
•
Division, entered the room.
Applications of First Virginia Corporation (Item No.
4). On
June 27, 1962, there was a preliminary discussion as to whether the Board
v°1aldwi- sh to
have some form of an oral presentation in connection with
aPPlioations of The First Virginia Corporation, Arlington, Virginia, to
acquire
80 per cent or more of the outstanding voting shares of (1) Farmers
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and Merchants National Bank, Winchester, Virginia; (2) Southern Bank
of Norfolk, Norfolk, Virginia; and (3) Peoples' Bank, Mount Jackson,
Virginia.
In a memorandum dated June 26, 19620 the Legal Division suggested
that certain policy questions were involved in the applications because
of the fact that First Virginia had outstanding two classes of common
stock, one of which (Class A) had only limited voting powers.
Holders
Of the other type of common stock (Class B) had the right to elect 80
Per cent of the directors.
Class B shareholders already had a minority
equitY in the corporation, and the disproportion between control and
investment would be increased by the approval of any of the applications
in view of the plan to issue Class A stock to shareholders of each of the
banks that First Virginia proposed to acquire.
Since the Board had not
Previously taken a formal position on the subject of classified common
st°ck in holding company matters, it had been decided at the June 27
meeti
ng to consider the question further when all members of the Board
vere
present.
Subsequent to the June 27 meeting there had been distributed a
Inemc)randum from the Division of Examinations dated July
6, 1962, with
reference to
a fourth application of First Virginia Corporation involving
4 Proposed acquisition of
8o per cent or more of the outstanding shares
Shenandoah County Bank and Trust Company, Woodstock, Virginia.
As
in the case of
the other three applications, the Division of Examinations
recommended approval subject to the Board's views with reference to the
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i8suance of Class A shares in exchange for voting shares of the bank
to be acquired.
There had also been distributed a memorandum from the Legal
Division dated July 10, 1962, advising the Board regarding the legal
supportability of decisions for or against approval of the applications
by First
Virginia Corporation.
With respect to the proposed stock
distribution, the memorandum suggested the advisability of further
discussion with First Virginia representatives in order that the
corporation might have an opportunity to present any legal and practical
justifications that might support its stock ownership and distribution
Plan. The memorandum suggested also that further discussion of certain
Other points relating to the applications might be helpful.
Since
questions of fact were not so much involved as those of policy and
judgment, it was felt that it would be appropriate for the Board merely
to request the appearance of representatives of First Virginia and/or
the banks
to be acquired at a private meeting with the Board or designated
members thereof.
Such a proceeding might or might not be designated an
°ral presentation.
At Chairman Martin's request Mr. Hackley commented on the question
f Procedure, indicating that it was the view of the Legal Division that,
f the Board was inclined to look with disfavor on the four applications
Solely because of the two classes of stock, the applicant would be taken
by
had not
Qurprise inasmuch as this would be an adverse consideration that
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heretofore been advanced by the Board in bank holding company cases.
In
the event that the Board should turn down any of the applications principally
on that ground, the Legal Division thought that it would at least be
desirable to afford the applicant an opportunity to present arguments in
Support of the propriety of the proposed stock distribution.
Mr. Hackley
added that there seemed to be no reason for holding a public proceeding.
A meeting with representatives of First Virginia and the four banks at
4
convenient time would seem to be appropriate.
Mr. Potter suggested that the Board might wish to give some
thought to issuing a policy statement in the form of an amendment to or
44 interpretation of Regulation Y, Bank Holding Companies. The matter
Of stock distribution involved a general policy question and was not
selnetbing directed specifically at First Virginia Corporation.
Mr. Thompson (Assistant Director, Division of Examinations) said
that it would be helpful to have certain financial information with respect
to oPerations of First Virginia and the four banks involved for the first
six months of 1962.
Accordingly, he thought it might be desirable to
request this information if it was decided to confer with representatives
Of Pirst Virginia.
Governor Robertson said that he was sympathetic with the position
taken by the Legal Division.
At this time he would be inclined to deny
the four applications because of the proposed stock distribution. However,
before disapproving the applications on this ground he thought that it would
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be desirable for members of the staff to meet with representatives of
First Virginia and the four banks. Following the meeting, the staff
could present recommendations on the whole picture to the Board.
Mr. Potter commented that if First Virginia were notified of
the problem, there was a possibility that it might wish to withdraw
the applications and resubmit them after making certain structural
changes in its capitalization, rather than risk whatever adverse effects,
in the eyes of the public and its Class A stockholders, might result
from a formal denial of the applications.
While the Board might have to
Publish notice of the withdrawal of the applications, this would be
less adverse than direct negative action on the applications.
Alterna-
tively, it might be worked out with First Virginia that the Board would
Proceed to act on the applications on the basis of an undertaking by the
corporation to make changes in its capital stock structure within a
s
pecified time.
Governor Mitchell said it seemed to him that this question of
v0t3.ag and limited voting stock might be handled most appropriately by
alberlding Regulation Y as had been suggested.
He would not be favorably
iaclined toward any of the four applications under the present corporate
°I.ganization.
He believed it would be useful to have a full-scale review
14 order to
determine whether it appeared desirable for the Board to take
a deri
• ,,
nIte position on this question, and he thought that all holding
cctaPanies rather than First Virginia only should have an opportunity to
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present their views.
He realized, of course, that this might result
in some delay in handling the four applications.
With respect to the suggestion made earlier in the discussion
that members of the Board's staff meet with First Virginia representatives
ana then report their findings to the Board, Governor Mills expressed
the view that it would be appropriate for at least some members of the
Board to be present at such a conference.
Chairman Martin commented that he could see no reason why the
conference should be considered a Board operation but there would certainly
be no objection to any members of the Board attending if they wished
to do 80.
Mr. Hackley then pointed out that there might be a legal
question whether the matter of stock ownership and distribution would
be 414 appropriate consideration in reaching a decision on a bank holding
e°11113anY application unless it could be clearly shown that the proposed
distribution
had a bearing on such factors as management and the public
interest
u
He added that he liked the idea of an amendment to Regula-
ti°4 Y so that all holding companies would be on notice of the Board's
Position on this question.
Referring to a possible amendment to Regulation Y, Governor
141118 inquired whether this would not be an attempt to cure by regulation
1144t //as permitted by law.
Mk. Hackley replied that there was no doubt
48 to the legality of the proposed transaction. There was, however, a
(11148tion whether it should be considered an adverse factor in a bank holding
e°mPany application.
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-15Governor Mitchell observed that the Board might take the
position that control of the organization by a minority of the shareholders was not in the public interest.
Replying to an inquiry as to whether other bank holding companies
had the same corporate structure with regard to voting and limited voting
stock, Mr. Thompson (Assistant Director, Division of Examinations) replied
that several corporations had a similar structure.
However, the Board
had not previously acted on any holding company applications involving
the type of stock distribution contemplated in the First Virginia proposals.
Chairman Martin said he thought a conference along the lines
suggested should be arranged with representatives of First Virginia and
the four bpriks concerned.
He also believed that consideration should be
given to holding a hearing, open to all holding companies, on the subject
of stock distribution with a view to a possible amendment to Regulation Y.
During the ensuing discussion Governor Robertson noted that an
°trice of the Association of Registered Bank Holding Companies was located
izi Washington
and it would seem appropriate to secure the views of that
'
cffice on the subject.
Mr. Potter suggested that the Board might wish to consider
i8elling an interpretation rather than amending Regulation Y. This would
all°%7 somewhat more flexibility and the Board could still request the views
or
interested parties in advance.
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After further discussion, it was agreed to arrange a meeting
with representatives of First Virginia along the lines that had been
suggested. It was also understood that steps would be taken to explore
the possibility of either amending Regulation Y or issuing an interpretation covering the matter of the issuance of two classes of stock with
unequal voting rights.
Secretary's Note: Pursuant to the foregoing decision to arrange a meeting with
representatives of First Virginia, the
letter of which a copy is attached as
Item No. 4 was sent to The First Virginia
Corporation on July 17, 1962.
Messrs. Masters, Thompson (Assistant Director, Division of
Examinations), Smith, and Thompson (Review Examiner) then withdrew and
Mr. Furth, Adviser, Division of International Finance, and Mrs. Semia,
Techni
--44.oal Assistant, Office of the Secretary, entered the roam.
Revision of Regulation D (Items
5 and 6). There had been
distributed a memorandum dated June 21, 1962, from Mr. Hackley in
connection with several pending questions relating to reserves of member
batiks, The Congress had provided, in Public Law 86-114, approved July 28,
1959/ that the classification "central reserve cities" should terminate
Q4 JulY 26, 1962.
With that date approaching, it would be necessary to
revise Regulation DI Reserves of Member Banks, and its Supplement to
c°11form to the law and to make certain changes in the 1947 Rule for
Classification of Reserve Cities.
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-17Since the Regulation would thus have to be revised in any event,
the Board might wish to consider other possible changes, namely, minor
changes in language to conform to 1960 Board interpretations of the provisions relating to computation periods and to the counting of vault cash
as reserves, and inclusion in the Regulation of criteria considered by
the Board in granting permission for individual banks to carry reduced
reserves.
(Action on a possible amendment of the definition of "savings
deposit" in Regulation D could appropriately be deferred to await the
Board's decision on corresponding amendments of Regulation Q, Payment
Of Interest on Deposits, that had been suggested.)
Mr. Hackley's memorandum included, or was accompanied by,
sPecific amendatory language that would accomplish the changes he
suggested that the Board consider.
In regard to the criteria for grant-
individual banks permission to carry reduced reserves, which had been
Published in the Federal Register on March 1, 1961, he recommended that
the language of the Regulation reflect a change suggested by the Federal
Reserve Bank of New York subsequent to that publication.
A question of much greater magnitude than the foregoing was
hether or not the Board wished to act at this time to provide new
tandards for the classification of reserve cities, a matter that had
been the subject of consideration by the Board for many years.
In 1947
the Board adopted standards, effective March 1, 1948, that were based
Prinlarily upon interbank demand deposits.
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permitted vault cash to be counted as reserves, made more flexible
the Board's authority to permit individual banks in reserve cities
to carry reduced reserves, and provided for the termination of the
central reserve city classification.
These changes in law prompted
the Board to renew its consideration of the matter of classification
cr reserve cities.
After considering various proposals, the Board in March 1961
Published in the Federal Register for comment by the public proposed
standards
that would, in effect, classify as a reserve city (in
a
ddition to Federal Reserve Bank and branch cities) any city in which,
during the calendar year 19600 (1) all member banks had average demand
deposits of two-fifths of one per cent (about $500 million) or more
Of the
United States total for all member banks, or (2) one member
batik had average demand deposits of one-fourth of one per cent (about
$3°C) million) or more of the United States total, or (3) all member
b4nks had average interbank demand deposits of two-fifths of one per
cent
(about $50 million) or more of the United States total.
Adoption of the 1961 proposal would result in the designation
Of six new reserve cities.
A number of objections were received from
banks in four of those cities and from the Senators and Congressmen from
the States
concerned.
Because of these objections, the Board deferred
Consideration
of the matter.
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-19During the ensuing discussion Chairman Martin stated that if
the Board wished to act today on the question of standards for classification of reserve cities, he was willing to follow the wishes of the
However, he had made commitments to consult with a number of
majority.
Congressional committee members on the subject, and his preference
vould be to defer action at the present, but with the expectation that a
decision as to appropriate standards for reserve city classification
vould be made near the end of the year.
The other members of the Board concurred in Chairman Martin's
suggestion that action on these standards be deferred, although Governor
Mitchell expressed misgivings that further delay meant prolongation of
44 inequitable situation in regard to the reserve city status of Federal
Reserve branch cities.
In his view, there were a number of small banks
ill those cities for which the reserve city designation, with its accompanying
necessity to maintain reserves at the reserve city level, was a real
hardship.
After a discussion of the impact that the proposed standards
f°1* reserve city classification would have on certain cities, there was
geriers1 agreement that the Board's decision on those standards should be
deferred, but that the changes in Regulation D recommended by Mr. Hackley
might be made at the present time.
Accordingly, the Board approved unanimously a revision of
Regulation D and its Supplement, effective July 2160 19620 that would
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(1) make the changes necessary to reflect the termination of the central
reserve city classification, (2) incorporate in the Regulation the
Position taken by the Board in its 1960 interpretations relating to
reserve computation periods and to counting vault cash as reserves,
and (3) incorporate in the Regulation the criteria considered by the
Board
in granting permission for individual banks to carry reduced
r
eserves.
Secretary's Note: Attached under Item No. 5
are a copy of the revised Regulation D, a
copy of the revised Supplement to Regulation
D, and a copy of the amended Classification
of Cities (referred to hereinafter in these
minutes as the Rule for Classification of
Reserve Cities), all as submitted for publication in the Federal Register. A copy of the
letter sent to the Federal Reserve Banks in
this connection is attached as Item No. 6.
Amendment to 1947 Rule for Classification of Reserve Cities.
There also had been distributed a memorandum dated June 28, 1962, in
%thich Mr. Hackley called to the Board's attention the fact that at the
tilne of the last triennial designation of reserve cities, effective
Me-reh 1, 1957, five cities that did not fall within the 1947 Rule were
e°4tinued as reserve cities solely because of the requests of member
"in those cities for such continuance (the "grandfather clause").
13441
The
cities so continued were Wichita, Kansas;
Kansas City, Kansas;
T°1ed0, Ohio; Topeka, Kansas; and Pueblo, Colorado,
Under the Rule
48 then in effect, member banks in those cities were entitled to assume
that
they
Lie would have an opportunity to be relieved of reserve city
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requirements at the time of the next following triennial review in 1960.
However, on February 10, 1960, the Board suspended until further notice
the provisions of the 1947 Rule providing for triennial reviews,
Conse-
quently, it seemed inequitable to require the indefinite continued
designation of the five cities as reserve cities, where that was contrary
to the wishes of member banks in such cities; it was possible that the
Board might become subject to justifiable criticism for inaction in
this
matter, particularly since it had become evident that some of the
cities would welcome relief from reserve city designation.
Mr. Hackley suggested that a possible means of removing the
inequitY to the five cities would be to add to the 1947 Rule a provision
that: in effect, would allow the Board to terminate the reserve city
designation of any cities so classified solely because of the "grandfather clause," if one or more member banks in the city should request
the termination of its designation and if the request should be granted
by the Board.
Under such a provision, the Board could at any time (and
not Only at the time of a triennial review) terminate the reserve city
classification of any of the five cities involved if requests should be
received from member banks and if the Board, after weighing all the
circumstances, should feel that the request should be granted.
Mr.
114e4leY set out in his memorandum two versions of such an addition to
the 1947 Rule.
The first version would allow any city that had reserve
eitY status through the choice of its member banks to discontinue that
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status, by request to and approval by the Board, at any time beyond one
Year after a triennial review that had continued the reserve city
designation.
If the Board eventually adopted the standards for classifi-
cation of reserve cities published in 1961, such a paragraph could be
incorporated in those standards, at the Board's discretion. The second
alternative would extend a similar privilege limited in effect to the
five cities presently designated as reserve cities under the "grandfather
clause."
Mr. Hackley recommended that the Board adopt the second alterna-
tive, since the five cities appeared to need prompt relief, and since
that alternative would defer until the Board's decision on the broader
question of standards for classification of reserve cities the question
Whether or not the Board wished to write into the standards an "out"
f°r anY city that chose reserve city status though not qualified for it.
After discussion, Mr. Hackley's recommendation was approved
unanimously.
The language of the paragraph added to the 1947 Rule,
effective July 28, 1962, to implement this action read as follows:
B 204.51(e) In any case in which a city is classified
asa reserve city solely by reason of the continuance of its
c
!esignation
as such, effective March 1, 19570 pursuant to
g 204.52(c), the reserve city designation of such city will
be terminated, effective as of such time as the Board may
Prescribe, if a written request for such termination is
received by the Federal Reserve bank of the district in which
the city is located from one or more member banks with head
offices in such city and if such request is granted by the
Board of Governors.
Secretary's Note: For reference to the
material published in the Federal Register
pursuant to this action, see Item No. 5.
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-23Messrs. Noyes, Chase, Dembitz, Conkling, and Collier then
Withdrew.
Foreign banking and financial operations.
July
At its meeting on
3, 1962, the Board requested Mr. Hackley to obtain additional
information regarding legislative proposals that it was understood
the Treasury Department expected to make, especially relating to foreign
banking and financial operations.
In a memorandum dated July 9, 1962,
which had been distributed, Mr. Hackley reported that on July
5 Mr. Knight,
General Counsel of the Treasury Department, had visited his office and
left with him a draft of a proposed bill and a draft of a proposed letter
from the Secretary of the Treasury to the President of the Senate recommending that Congress consider the bill.
If the Treasury should go forward
With the proposal, the draft of letter would be submitted to the Bureau
Of the
Budget for comment before it was transmitted to the Senate.
draft
The
of bill would repeal the present sections 25 and 25(a) of the
Federal Reserve Act and incorporate their substance in a new "Foreign
Banking Operations Act."
The principal change would be to transfer to
the Comptroller of the Currency the Board of Governors' authority with
respect to foreign branches of national banks, investments by national
banks in stock of foreign banking corporations, and the chartering and
regulation of foreign banking and financing corporations.
The provisions
regarding foreign branches of national banks would include the language
c)f the
pending bill S. 1771, to liberalize the powers of such branches,
ill the form in which that bill passed the Senate on August 21, 1961.
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M1?. Knight had showed Mr. Hackley a memorandum from the Comptroller
of the Currency to the Secretary of the Treasury, a memorandum from
M. Roosa, Under Secretary for Monetary Affairs, to the Secretary, and
a memorandum from Mr. Volcker, Director of the Office of Financial
Analysis in the Treasury Department, to Mr. Daane, Deputy Under Secretary
for Monetary Affairs.
Comptroller Saxon's memorandum argued that authority
over foreign branches of national banks should logically be in the Comptroller; and that the chartering of Edge Act corporations should be in
the Treasury because the Treasury's responsibilities in foreign trade and
financial matters "far exceed" those of the Federal Reserve.
Mr. Volcker's
memorandum seemed to express opposition to the proposal on the ground that
it would result in a division of authority in this field; he expressed
the4
v-Lew that this authority should be in a single agency, preferably the
Federal Reserve.
Mr. Roosa's memorandum expressed doubt only with respect
to the proposed transfer of authority over Edge Act corporations; he felt
that that authority should be either in the Board or the Secretary of
the Treasury, and that there might be some advantages in the latter.
Governor Mills expressed the view that time was of the essence.
If the Board was of the opinion, as he was, that the proposals should be
(3143°sed, a formal expression of that opinion should be sent to the Secretal...,
-J of the Treasury before the Budget Bureau became involved.
Further discussion disclosed a consensus that the proposals should
be
oPPosed, and it was pointed out that, contrary to implications in the
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draft of
of' letter from the Secretary of the Treasury to the President of
the Senate, the proposal would not unify authority but would divide
authority that was now unified. The Comptroller of the Currency would
be given authority over all Edge Act institutions, whether they were
affiliated with national or State banks. Thus a new supervisory authority
would become involved in State bank problems, an encroachment upon the
dual banking system that would be likely to evoke a great outcry by State
banks.
At the conclusion of the discussion the staff was instructed to
draft a letter to the Secretary of the Treasury strongly opposing all
three of the transfers of authority contemplated by the draft legislation.
At this point all of the members of the staff withdrew except
Messrs. Sherman, Hackley, Leavitt, Shay, and Potter.
Continental Bank and Trust Company (Item No. 7). Governor
Robertson stated that while he was not withdrawing from the room during
this discussion of a matter regarding The Continental Bank and Trust
C°1761Pany of Salt Lake City, he would, in keeping with the position he had
taken consistently in this case, not participate in the discussion or
e°nsideration of any matters relating to it.
Before this meeting there had been distributed a draft of
nilnutes of the meeting of the Board on July 20 1962/ covering the discussion that Mr. Kenneth J. Sullivan, President of The Continental Bank and
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Trust Company, had that day with the Board, as well as the sessions of
the meeting both before and after Mr. Sullivan met with the Board.
also had been distributed a memorandum from Mr. Hackley dated July
There
6,
1962,
with respect to legal aspects of a possible settlement of the proceeding
against Continental Bank other than by pursuing the matter through the
courts to its ultimate conclusion, and a memorandum from the Division of
Examinations dated July
5,
1962, presenting in summary form information
relating to the condition of Continental Bank as revealed at the latest
examination as of January
8,
1962, and by a sheet that Mr. Sullivan had
left with the Board showing certain figures as of March 26, 1962.
At Chairman Martin's request, Mr. Hackley commented on his
tilemorandum of July 6, which set forth at the outset two separate but
el°selY related questions as follows:
1.
How should the Board deal with overtures made by
President Sullivan at his meeting with the Board
on July 2 for a "settlement" of the case that
would avoid further legal proceedings?
2.
How should the Board act on three pending motions
filed by Continental in connection with the show
cause hearing now scheduled to commence on July 231
1962?
Mr. Hackley commented that the Board's approach to the handling
the motions would be affected by its decision as to the first question.
Beeellse of the importance of the matter and the desirability of prompt
l'esolution of the two problems as stated, his memorandum presented (1) a
stlainlarY of the background of the case, (2) the present procedural situation,
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(3) comments on Mr. Sullivan's overtures for a "settlement" of the
case, and. (4) preliminary comments on the three motions now pending
before the Board.
As to the first question, Mr. Hackley noted that there were
now eight complex, technical documents before the Board--three motions
bY Continental Bank, three replies by Board Counsel, and two counterrePlies by Continental Counsel. In addition, there would be another
counter-reply by Continental to be filed no later than July 16. These
involved extremely difficult and complex matters, Mr. Hackley said, and
he
believed it would be a serious mistake if the adjudicatory members
°I* the staff were to attempt the preparation of hasty comments on these
matters for the use of the Board or for the Board to attempt to arrive
at a hasty decision on the motions involved. Consequently, his first
recommendation would be that the Board issue an order at this meeting
that would continue the date for commencement of the show cause hearing,
naw scheduled to start July 230 for a period adequate to allow time for
"all and Board to give appropriate consideration to the matters.
He
suggested that this date be fixed at September 10, 1962, approximately
sixty days hence, noting that this was not an unreasonable length of time
t0
'*;
- 44Y the case and that it would presumably allow the Board to reach
4
c°nclusion on the motions some little time in advance of the new
date for start of the hearing in Salt Lake City.
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-28Turning to the second question, which he noted was directly
related to his first recommendation, Mr. Hackley stated that a number
Of serious considerations were involved in determining how to respond
to Mr. Sullivan's inquiry as to whether the present proceeding could
in any way be settled without pursuing it through the courts.
On this
question, Mr. Hackley said that he wished to emphasize and in certain
respects supplement comments made in his memorandum of July
6.
First,
consideration of a reasonable offer of "settlement" of this case should
not be regarded as in the nature of a "compromise."
On the contrary,
Such consideration would be in accordance with a requirement of the
Administrative Procedure Act, and in his opinion the Board was required
bY that statute to consider any reasonable proposal for settlement of
this case.
He then referred to section 5(b) of that Act, noting that
it Provided that, in every case of adjudication required by statute
to be determined on the record after opportunity for an agency hearing,
It
the agency shall afford all interested parties opportunity for (1) the
submi
asion and consideration of facts, arguments, offers of settlement,
°I‘ 131%0Posals of adjustment where time, the nature of the proceeding, and
the public
interest permit. • ." Mr. Hackley commented that the present
"was of the kind referred to in the Act.
ea
He went on to say that
the Attorney General's Manual on the Administrative Procedure Act,
Published in 1947, emphasized that this provision makPs it incumbent upon
an an„
-'w"IcY to afford free opportunity to a party to present an offer for a
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settlement either before or after the institution of a formal statutory
proceeding.
He then quoted excerpts from the Attorney General's Manual
commenting on this provision.
These provisions, Mr. Hackley said, made
it clear that the Board's consideration or its acceptance of any reasonable
Proposal by Mr. Sullivan that would provide Continental Bank with reasonably adequate capital should not be regarded as in any sense a "compromise" or as contrary to the main objective of the Board's proceeding,
vhich was to assure maintenance of adequate capital by Continental.
Mr. Hackley noted that, in addition to the initial purpose of
the proceeding, there had developed a second objective -- the maintenance
°I' the Board's legal authority in the general field of capital of member
banks-
If there were a court decision that clearly upheld the Board's
authority, that would be ideal.
However, Mr. Hackley did not believe
that the Board would be losing or impairing its legal authority even
th°11gh it never got such a decision, assuming any settlement of this
ease would provide Continental with reasonably adequate capital -- a
settlement that would accomplish the first objective of the proceeding.
AccaPtance of such a settlement would be tantamount to concession by
Continental Bank of the Board's legal authority, although quite understaticlahlY Mr. Sullivan had stated that his bank could not concede the
Il°ard's legal authority.
Mr. Snllivan had also said at the meeting on
JillY 2 that his bank never again would question the Board's legal authority,
and that no other bank would be likely to do so.
said
Furthermore, Mr. Hackley
even if the Board should go forward with the proceeding, there was
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no assurance that a final court decision would be in the Board's favor.
Conversely, if the Board should proceed to issue an order requiring
forfeiture of membership in the face of an offer of settlement that
would provide reasonably adequate capital, the Board's position in
anY future case would be weakened.
As to what constituted reasonably adequate capital, Mr. Hackley
said that the Board should bear in mind that the ABC formula was never
intended to be conclusive:
it was only a screening device, and there
was an element of judgment left, including the weight to be given to
such factors as management.
In applying the screening device to Conti-
nental, the Board should do so as it would to any other bank.
One other minor point, Mr. Hackley said, related to Mr. Sullivan's
comment at the time he met with the Board to the effect that he would be
glad to have representatives of his bank confer with representatives of
the Board as to a precise amount of capital that would now be needed to
"'Use the bank to be reasonably adequately capitalized.
He said he
th°Ught it natural for Mr. Sullivan to feel that any suggestion for a
Precise amount of capital should come from the Board, not from the member
bellke
The Board had taken the position in the past that it is not for
the member bank to determine what amount of capital is adequate, that
that is a matter for the supervisory agency.
As to Mr. Sullivan's indication that consideration of the matter
be coupled with a branch application, his (Mr. Hackley's) first reaction
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vas that that sounded like a proposal for a "deal."
However, he did
not think it necessary to consider the matter in that light.
If the
bank were to submit an application for a branch, and if the Board felt
that Continental's capital was inadequate, the Board could refuse such
an application for Continental just like that of any other member bank
OM, 41M,
unless and until the bank would agree to raise additional capital sufficient to support the establishment of the branch.
In this case, if
Continental proposed establishment of a branch and that required additional
capital of, say, $200,0000 the Board could so indicate.
At the same
time it could also indicate that even with that addition, the capital
/rould not be adequate unless the bank also provided additional capital
in some specified amount.
Mr. Hackley vent on to say that another point that he wished to
bring to the attention of the Board had to do with the members of the
staff who may properly participate in negotiations looking to a settlemeat Without violating the "separation of functions" requirements of the
A°Jainistrative Procedure Act.
Section 5(c) of the Act, he noted, provides
that "no officer, employee, or agent engaged in the performance of investigative or prosecuting functions • • • shall • . • participate or advise
in the decision. . ." A more detailed study of the statute and the
Attorney General's Manual had confirmed the view that he had expressed
earlier:
if the Board were to go forward with the possibility of working
°Ilt a settlement of this case, members of the staff who might participate
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in negotiations looking to a settlement would not later be eligible
to advise the Board in its adjudicatory or judicial capacity.
This
°Pinion also had been confirmed by telephone conversations with Mr.
Charles W. Schneider, Associate Chief Hearing Examiner of the National
Labor Relations Board, and with a Mr. Williams, an attorney in the
°Ifice of Administrative Procedure of the Department of Justice.
Mr.
Hackley noted that in the present case Messrs. Solomon, Leavitt, and
Achor in the Division of Examinations, and Messrs. Shay, Potter, and
himself in the Legal Division had not been involved in the prosecuting
°r investigative functions of the Continental Bank matter, and they
are Presently assigned to advise the Board in connection with its
ediudicatory functions.
If, however, any of those persons were to
Participate in negotiations for a settlement, they would lose their
right later to advise the Board in its adjudicatory capacity.
Mr. Hackley concluded his statement by saying that, in his
ion) the public interest would be served if the proceeding against
Cont
inental Bank could be terminated promptly without going forward
further formal proceedings and without years of legal pleadings,
r°vided such termination would be based on a settlement that placed
Cont.
nental Bank in an adequate capital position -- a kind of settlement
that Igcluld imply the Board's authority to require maintenance of adequate
eaPitel, even though such authority was not acknowledged by Continental
1384k•
For the reasons he had stated, Mr. Hackley recommended that
eve
rY avenue be left open that might lead to a "settlement" that would
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cause Continental Bank's capital to be reasonably adequate: even though
it be in connection with approval of a branch application and even though
tt would not be accompanied by an express concession by the bank as to
the Board's legal authority.
: of the two recommendations
Chairman Martin suggested that
Presented by Mr. Hackley
: the Board first take up the recommendation
that an order be issued today continuing the show cause hearing until
September 10
: 1962.
He inquired whether there was objection to that
recommendation.
Governor Mills stated that he would approve this recommendation
but that in doing so he would couple his comments with the other recommendation Mr. Hackley had wile. The motions and the pleadings before
the Board:
: were such that Continental Bank had
as he interpreted them
Chosen the Federal courts for its remedy in this matter and had challenged
the legal authority of the Board to mske a demand on it for additional
e4Pit41. Mr. Sullivan in his meeting with the Board on July 2 had
Indicated clearly and beyond debate that his proposal to introduce
4441tiona1 capital into the bank heti nothing to do with the position
that the bank and his associates had taken that the Board did not have
Ituth°ritY to make such legal demands: and he had said that he would not
ec/neede that authority.
As to Mr. Sullivan's proposal to put in
addi-
tl°441 capital
: Governor Mills commented that the memorandum prepared
144der date of July 5 by the Division of Examinations was subject to
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different evaluations.
His own evaluation would be that, because of
the character of business done by Continental Bank in the past and
Probably to be continued, the proposal was probably at best marginal
as a means of improving the condition of the bank and placing the
institution in a capital position that would be comparable to what the
Hoard would require for other banks doing the same type of business.
He disagreed completely with Mr. Hackley:
he did not think the Board
had anY choice) in consequence of the position taken by Mr. Sullivan
that he would not concede the Board's legal authority, but to carry
the case through the courts and let the courts decide.
Mr. Hackley stated that, while this might be looking ahead)
he had contemplated that if any settlement of the case were acceptable
to the Board) the Board in closing the case would do so by issuing an
Order that would make perfectly clear that, because the bank had attained
8. certain capital position, the Board had in its discretion exercised
it8 right not to terminate membership.
The order would make clear that
the Board was not conceding as to its legal authority, even though the
bank had stated that it would not concede the Board's legal authority.
Chairman Martin stated that he thought it would be desirable
to e°nsider the two recommendations of Mr. Hackley separately.
He in-
qtlirsd again as to whether any members of the Board would object to
e°ntinuing the show cause hearing until September 10, 1962, as recomillended by Mr. Hackley.
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-35Mr. Hackley, in response to a question, stated that this date
was suggested primarily to allow adequate time to consider and act upon
the motions and pleadings before the Board, all of which must be disposed
of before the show cause hearing could commence.
His second recommendation
he would prefer not to term it a recommendation but comments presented for
the consideration of the Board -- was intended to assist the Board in
considering during a period of postponement of the start of the show cause
hearing whether there was any purpose in exploring further the possibility
Of a settlement of the case.
He assumed that some response should be
given to Mr. Sullivan's question as presented to the Board on July 2.
Chairman Martin then inquired whether any member of the Board
'w°111d oPpose the issuance of an order today continuing the show cause
hearing until September 10, 1962, and all members of the Board excepting
Governor Robertson, who took no part in the consideration of or action in
this matter, indicated that they would approve the issuance of such an
c)rder.
Chairman Martin next turned to the second matter presented by
Mr. Hackley and inquired whether any of the members of the Board wished
ri'llther discussion from the staff before taking up the question.
Since
no members indicated further questions, he then called upon Governor Mills,
Who
stated that he would oppose exploring a possible settlement of the
ease
on the terms suggested by Mr. Sullivan.
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-36Chairman Martin said that this morning was the first time that
he had been aware of the point that Mr. Hackley had presented as to the
requirement of the Administrative Procedure Act and the Attorney General's
Manual that an agency stand ready to consider a settlement or a compromise
Or a negotiation of a case such as this at any time. This put the matter
in a different light than he previously had understood, but if that was
the provision of the Administrative Procedure Act, it seemed apparent
that the Board had no option but to explore a possible settlement of the
ease since Mr. Sullivan had expressed a desire for such a procedure.
This of course did not mean that the Board would necessarily accept a
Proposal
for settlement.
Governor King stated that he agreed with the comments made
13Y Mr• Hackley:
if the issue could be settled to the Board's satisfaction,
vould be in the public interest to effect such a settlement.
However,
he did not believe that it was now up to the Board to come forward with
a different figure for capital than it previously had specified.
100ked upon this as in the nature of a trade:
He
the Board had specified an
ejlicsunt and, in his opinion, if that was not accepted the only practical
1184r to proceed was for the bank to make an offer.
Mr. Hackley stated that the purpose of the show cause hearing
I'laa to give the bank an opportunity to show that the Board did not have
the legal authority to require additional capital, or to assert that its
caPital was now adequate, or to present any other reason why the Board
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sho111d not terminate the bank's membership because of its failure to
comply with the Board's 1960 order for furnishing additional capital.
However, there was a sharp distinction between the question whether the
bank had violated the Board's 1960 order -- admittedly it had done so
and the question whether its capital was now adequate.
This made it
necessary for the Board to consider the bank's present condition and
to arrive at a decision as to its capital needs on a current basis.
In response to a question by Governor Mitchell as to whether
the Board would have to fix a figure for capital needed, Mr. Shay stated
that there was the presumption that as a matter of law only the supervisory
agency could determine what constituted adequate capital. This was not
a matter of a trade between the supervisory agency and the bank:
in
this case, the Board had taken the position that it should make the
dete
rmination as to what constituted adequate capital, and at this point
the bank had a right to expect some indication from the Board as to
%/tether it now hnd adequate capital and if not how much was needed.
Mr. Hackley commented that it was quite possible Mr. Sullivan,
if
called upon to do so, would make only a token offer, but on the other
hand it was possible he would suggest the addition of a substantial
841°11nt of capital, particularly if this were necessary in order to obtain
aPProval of a branch.
his
Governor Mills expressed the view that Mr. Sullivan had had
hearing with the Board and in a sense had made an offer.
He suggested
there was nothing to prevent his making another offer which would come
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through legal channels and could then be moved on through the Federal
courts) if the case was carried to a final decision in the Federal
Judiciary. If that were to be the procedure, there would be no point
in
the Board's sitting down with Mr. Sullivan for any further consulta-
tion since the Federal court route had been chosen for that purpose and
he could see no reason to change that course.
Governor Mitchell stated that he thought there was a reason for
trYing to negotiate with Mr. Sullivan for a possible settlement of this
question. In addition to the legal requirement that Mr. Hackley had
mentioned under the Administrative Procedure Act, he believed that Mr.
Sullivan had met with the Board in a sincere effort to effect a settleOf the case. Perhaps Mr. Sullivan was thinking of a minimum amount
Of eaPital for his bank, but the Board should receive his proposal as
4 good faith
approach; Mr. Sullivan was entitled to fair consideration
from the Board in connection with a possible settlement.
Governor
Mitchell went on to say that the memorandum from the Division of Examinations
dated July
5 did not by any means resolve all the issues between
the Board's method of analyzing capital and the approach used by Mr.
Sullivan. It was incumbent upon the Board to review its methods of
analning capital, and when that had been done and when the Board had
e°48idered whatever information could be developed from Mr. Sullivan's
allgUnients, it would be in a position to determine what the present capital
15"ition of the bank was and what the absolute minimum amount of additional
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capital would be in order to permit the Board to consider that the
bank was adequately capitalized in view of the nature of its business
and all other factors.
Should not haggle:
Once such a figure was arrived at, the Board
it should determine this figure for Mr. Sullivan
just as it would determine it for the court if the matter were to proceed through the court.
It should be a figure that the Board could
defend through the courts and that it could defend with Mr. Sullivan.
With such a figure, Governor Mitchell said, the Board would be in
Position to hear what Mr. Sullivan had to say.
In response to a question from Chairman Martin, Governor Mitchell
added that by this he meant that the Board should make a complete review
the present condition of Continental Bank, that it should analyze the
131'ssent capital needs of the bank on the basis of all information produced
fr°1131 its own methods of judging capital and the arguments Mr. Sullivan
illight Present; that it should then fix a minimum figure for capital needed
141144 it would give to Mr. Sullivan, and then if necessary use that figure
in earrYing the case on through the courts.
Governor Shepardson said that the Board had laid the basis for
SlAch
°4 approach in its 1960 order, which took account of the current
Pcisiti°4 of the bank. In the meantime, the situation had changed and in
his °Pinion the Board should now review its earlier demand on the basis
Of current
information.
Personally, he would like to know in detail the
basis of Mr. Sullivan's computations as presented on July 2 and the reasons
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yhY they did not reconcile with those prepared by the Division of Examinations and shown in their memorandum of July
5.
Mr. Leavitt said that, according to the adjustments that Mr.
Sullivan explained to the Board and which he (Mr. Sullivan) had stated
he believed
to be reasonable in arriving at a fair evaluation of the bank's
condition,
his computations indicated that the bank was now approximately
95 per cent capitalized. The Division of Examinations had not been able
to determine just how Mr. Sullivan arrived at that particular figure;
U8ing
his adjustments as far as they had been able to identify them, they
arrived at a figure that shoved the bank to be 89 per cent capitalized.
The D
ivision's analysis, based strictly on the ABC formula, currently
lnaicated that the bank was approximately 67 per cent capitalized; if
8°01e of the less controversial adjustments that Mr. Sullivan had suggested
'ere accepted, the ratio might be about 78 per cent. In order to reconcile
the Division's computations with those Mr. Sullivan had presented on July 21
it 'would be necessary for someone to sit down with him and go through the
eQuPutations in
detail.
Governor King said that he, too, would like to have an explanation
or anY differences in the figures Mr. Sullivan had presented from those
1"tecl up by the Division of Examinations. His earlier comments had been
ilatended
to say that, as far as he was concerned, it was premature to say
at thiS
time what figure of additional capital would put the bank in
4"4:table condition -- he would not regard a figure such as the $8000000
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mentioned in the memorandum from the Division of Examinations dated
July 5 as having much basis for a negotiation.
Mr. Leavitt commented that the figure of $800,000 he had
mentioned was in no sense presented as a precise figure -- it was
sImPlY a very preliminary figure that he thought might be of some use
in the present discussion.
Chairman Martin inquired of Governor Mitchell whether the
suggestion he had mmie as to the next step was that the staff be
authorized
to explore the current condition of Continental Bank and
submit a further memorandum to the Board.
Governor Mitchell stated that this was the substance of his
suggestion, including the express need for getting in touch with Mr.
SUllivan for further detailed information.
Mr. Hackley said that if any member of the staff were to talk
Mr. Sullivan it should not be a person presently assigned to the
a4Judicatory function.
Such a discussion might imply that the individual
Ilas in a position of negotiating snd he thus would become ineligible under
the
Administrative Procedure Act to advise the Board subsequently with
l'espect to the case.
Governor Mitchell said that the term "negotiate" troubled him.
Re
understood that the purpose of getting in touch with Mr. Sullivan at
this stage was to get factual information to help in understanding the
c0111Putation5 he had presented to the Board on July 2 and any other factual
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information that might be useful to the Board at this point.
He did
not understand that the Board was in a position to negotiate until it
had more factual information.
tion it
Governor Mills stated that in looking for that informa
/1°111d seem to him that there should be no contact with Mr. Sullivan
Until the Division of Examinations had had access to the latest condition
report of Continental. The information in that report should then be
br°1-Ight to the Board's attention.
As far as he was concerned, he thought
the Board should eschew any further contact with Mr. Sullivan.
ly approached
Governor Balderston noted that Mr. Sullivan had initial
President Swan of the Federal Reserve Bank of San Francisco regarding a
Possible settlement of the case, and that Bank was involved in this whole
arrangement.
considIt occurred to him that discussions of the type under
ntatives of
erati°n might well be handled in the earlier stages by represe
the San
Francisco Bank.
reasons
Mr. Leavitt commented that, in his opinion, there were
IfilY a would be preferable not to bring the San Francisco Bank into
di8cuasions with Continental that might involve negotiations.
not need to
Chairman Martin said that he thought the Board did
cr°es the bridge of who would talk with Continental about any negotiations
144ti1 it had first acquired the factual information it needed, along the
114es suggested by Governor Mitchell.
Governor Shepardson then referred to the order to be issued
10,
13°8t1)°11ing the date of the show cause hearing from July 23 to September
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-143-
and Mr. Hackley read a draft of an order that he had prepared for this
Purpose.
He noted that the order would make clear that the nature
and complexity of the issues presented in the motions and pleadings
nov before the Board was such that additional time was required for
their consideration.
Approval was then given to the issuance of an order continuing
the date for the show cause hearing in the matter of The Continental
Bank and Trust
Company from July 23 to September 10, 1962, Governor
Robertson
not participating.
as Item No.
A copy of the order, as issued, is attached
7.
The meeting then recessed at 12:05 p.m. and reconvened at
31(4 P.m. with the following in attendance:
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman 1/
Balderston, Vice Chairman
Mills
Robertson
Shepardson
King
Mitchell
Mr. Sherman, Secretary
Mr. Johnson, Director, Division of Personnel
Administration
Assistant Director, Division of
Leavitt,
Mr.
Examinations
Mr. Hart, Personnel Assistant, Division of
Personnel Administration
Salaries of Federal Reserve Bank examiners (Item No.
date
8). Under
or April 10,
1962, a memorandum from the Division of Personnel
Mflhl
Lastration presenting information regarding salaries of bank examiners
Entered this session at point indicated in minutes.
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emP1oyed by the Federal Reserve Banks, the Comptroller of the Currency,
and the Federal Deposit Insurance Corporation had been distributed in
response to an earlier request of the Board.
This memorandum presented
comparative information on salary levels for various groups of examiners,
including officers of the Federal Reserve Banks in charge of examinations.
Governor Balderston opened the discussion by recalling that
some months ago
the Board had asked for a report on salaries of examiners
Of the
Federal Reserve Banks and at another time had asked for a report
°4 salaries of the officer staff of the Federal Reserve Banks.
general
This
subject had been a matter of discussion in meetings of the Board's
Budget Committee with Reserve Bank Presidents in past years, and at the
time the officer salaries of the Federal Reserve Banks for 1962 were
sPProved by the Board on December 11, 1961, the suggestion had been
made that
prior to the next time the Reserve Banks submitted salary
rse001endations for officers there be a discussion of the procedure
r°11oved in fixing and approving such salaries with the thought that
guidance
might be given that would be helpful to the Reserve Banks. Gover-
4Or Balderston noted that on the latter subject a memorandum had been
distributed to the Board under date of May 31, 1962, and that this had
been
Preceded a year earlier by a memorandum on the general subject of
Reserve Bank officers' salaries (memorandum of June 19,1961).
He suggested
that the
Board first take up the question of examiners' salaries, and at
his request Mr. Johnson commented on the April 10 memorandum, a copy of
Ilieh has been
placed in the Board's files.
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-45In his remarks, Mr. Johnson stated that much of the information
Used in preparing the summary report had been obtained, with the assistance
of the Division of Examinations, from the Office of the Comptroller of
the Currency
and from the Federal Deposit Insurance Corporation.
An
effort also had been made to obtain current data with respect to salaries
Paid to State examining forces, but only a limited amount of such information was available at the time this study was completed.
In general,
it vas Mr. Johnson's impression that salaries paid examiners by States
were well
below those paid by the Federal supervisory agencies.
the
Among
Federal agencies, starting salaries for examiners at the Federal
Reserve Banks were fairly comparable with those paid by the Comptroller
or
the Currency and the Federal Deposit Insurance Corporation.
Salaries
Paid senior examiners by the Reserve Banks represented a weak spot in
0111Parison with the other agencies, partly because the Reserve Banks
Were
not using existing headroom within grades.
Salaries of the second
fficers in the Reserve Banks' examination function compared well with
th08e for the number two men in the other Federal agencies.
Salaries
Of the Vice Presidents in charge of examinations at the Reserve Banks
Were
in excellent relation to those paid the top ranking men in the other
aaneies.
the report,
After commenting briefly on the tables included in
Mr. je,l,
'unson concluded his remarks with a suggestion that, if the Board
•
felt at
to be desirable, copies of the report--with certain deletions--
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be sent to
the Presidents of the Federal Reserve Banks for their use
and that of selected members of their staffs.
Governor Mitchell expressed the view that it would be desirable
for the Federal Reserve Banks to receive copies of the report on examiners'
salaries.
He was not at all sure that the Board knew better than the
Reserve Banks what should be paid to any particular kind of help, but he
felt that
there was a problem among the Reserve Banks in getting positions
Classified competently.
The document might suggest something to the
Banks in that respect, but otherwise he thought it was mainly informational.
Governor Robertson stated that the way to get an improved
structure of salaries for examiners throughout the System was to provide
the Presidents with information of the kind covered in the memorandum.
It wn,,
-m-Ld take time, he recognized, but distribution of information of this
sort would assist in getting better salary administration in this area.
He
therefore favored sending the report to all Reserve Bank Presidents.
approve
Governor Balderston said that he gathered the Board would
the sending of copies of the report to the Federal Reserve Bank Presidents
with d
for the
eletions suggested by Mr. Johnson, pointing out that it was
Inf°rmation of themselves and selected members of the staff in reviewing
the si
tuation at their Banks.
There was agreement with Governor Balderston's statement.
18,
Secretary's Note: Under date of July
1962) a letter in the form of attached
Item No. 8 was sent to the Presidents of
all Federal Reserve Banks.
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Mr. Leavitt withdrew from the meeting at this point.
Salaries of Federal Reserve Bank officers.
Pursuant to the
discussion at the meeting of the Board on December 11, 1961, there had
been
prepared and distributed under date of May 31, 1962, a memorandum
from the Division of Personnel Administration presenting information
With respect to officer salaries at the Federal Reserve Banks.
The
information included a current review of the officer salary ranges, size
of increases over the years 1958-1962, selectivity in granting increases
during that period, and frequency with which such increases were given.
An aPpendix presented a slimmary of the Plan for Administration of
Officers' Salaries that had been approved by the Board on March 18,
1953,
and Which was designed to provide a common basis for determination of
seaaries of officers below the President and First Vice President, subject
t0 approval or disapproval of each individual officer's salary by the
13451ard.
The May 31 memorandum also presented comments with respect to
the recognized salary level of the First Vice Presidents at the ten
Reserve Banks outside New York and Chicago.
Under date of July 11, 1962, an additional memorandum from the
bivision of Personnel Administration had been distributed presenting a
suzzar
Y and charts reviewing the effect that a 10 per cent increase in
the recognized salary level of the First Vice Presidents at those Banks
°light have on the salary structures for officers below the First Vice
President level.
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At Governor Balderston's request, Mr. Johnson made a statement with respect to the background of the plan for administration of
officer salaries at the Federal Reserve Banks, the application of the
Plan in recent years, changes that had occurred in salary ranges at
the
different Reserve Banks, and the relationship between the maxima
Or those ranges and the salaries paid First Vice Presidents.
that,
He noted
while there was considerable overlapping between the lower ranges
Of officer salaries and the upper non-officer salary levels, most Reserve
1344ke now had headroom available for making further increases in individual
salaries before revisions at the top of the structures became imperative.
However, the maximum salary for officers below the rank of First Vice
Pr esident was $22,500 at all of the Banks except New York and Chicago,
4 figUre
10 per cent below the $25,000 level recognized for First Vice
Presidents at those ten Banks, and this limited the maneuverability of
8°me Banks in adjusting their officer salary structures.
Mr. Johnson also commented on the size of increases in salaries
thItt had been granted in the past five years, pointing out that there
aPPeared to be a tendency for increases to be in the amount of $10000
8411-18-1 rate, with some being given for lesser amounts and with a number
or
increases in excess of that figure.
As to frequency, it appeared that
64 per
cent of the officers received increases each year; roughly, each
°Irieer averaged an increase every other year.
This meant that the
a4jUstments per officer throughout the System averaged approximately $500
Year, with individual increases being given every other year.
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.J49.
With respect to the salaries of First Vice Presidents, Mr.
Johnson stated that the recognized level of $25,000 for all but the
New York ana Chicago Banks had existed since January 10 1957.
Non-
officer salary structures at the Reserve Banks had increased approximately
13 per cent on the average since then, and it would appear appropriate
to increase the salary level for the First Vice Presidents of the ten
13snk3 to $27,500, a change of 10 per cent. If this were done, these
Reserve Banks could then propose increases in their officer salary
structures to provide a maximum for Group A officers of $25,0000 assuming
that the top of the Group A range should continue to be about 10 per cent
below what would then become the recognized salary level of the First
Vice President. By permitting a higher ceiling for officers in Group
A) the Banks could get a wider spread in structures for other officer
salary groups, something in which they were now restricted because of the
relationship to non-officer groups.
Mr. Johnson noted that there had
been an increasing compression in officer salary ranges at the ten Reserve
13anks concerned. This had resulted because of the retention of the
$22)500 ceiling at the top of Group Al while upward adjustments in the
bottom of the lowest officer salary group (usliFilly Group D) had been
ileesssary because of upward adjustments in the non-officer salary structures.
In response to a question from Governor Balderston, Mr. Johnson
elaborated
upon his comment that there was headroom between the salaries
"tnally being paid and the maximum for Group A officers at most of the
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Reserve Banks.
One reason why most of the Reserve Banks had headroom
for many officers in the upper groups was that there had been considerable
turnover in recent years with numerous retirements of longer service
senior officers.
Also, because of greater selectivity in granting
increases in the past two or three years, some leeway had been retained
at most of the Reserve Banks.
Thus, the reason for his suggestion of
an increase in the Group A maximum at Reserve Banks other than New York
and Chicago was to allow potential increases in ranges in the future
8° as to permit better aligning of the more senior officer salaries with
those in the lower groups.
If the Board should decide that the maximum
°f the Group A range at the ten Banks referred to could go as high as
$25)000 this would simply permit those Reserve Banks that felt they needed
t° d° so to come in to the Board with a request for a revised salary
structure; there would be no need to suggest to the Banks that they should
have higher ranges than now existed, nor would any Bank need to ask for
a higher range until its local situation called for a change.
At this point Chairman Martin joined the meeting, and Governor
Balderston reviewed for him the discussion thus far during this session.
that, if the anchor
Governor Balderston continued with a remark
for the Group A officers at Banks other than New York and Chicago were to
be increased from $22,500 to $25,000, that would be the result of a
ts
cleelsion to permit increases in the salaries of the First Vice Presiden
to 4 figure above the present $25,000 level.
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Federal Reserve Bank of St. Louis
He assumed that if this were
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done the presentation to the Reserve Banks of a change in those ceilings
would not be in terms that the top for Group A officer salaries was to
be 10 per
cent below the recognized level for the First Vice President.
Mr. Johnson responded to the effect that the $270500 figure for
Pirst Vice Presidents that had been mentioned was 10 per cent above the
$25,000 being discussed as a new ceiling for Group A officers at the ten
I3enks other than New York and Chicago. If these new ceilings were adopted,
they might be presented in dollar amounts rather than percentage relationSO as to avoid any expectation that the Board would approve a
eherlge in the existing ceiling for Group A officers at the Federal Reserve
1144k Of New York ($35,000) where the First Vice President's salary is
$401000,
Chairman Martin inquired whether there had been Board discussion
or
changes along these lines and, if so, what the reaction of the members
or the Board
was.
Governor Mitchell stated that he kept returning to the problem
°f how much the Board should interfere with management decisions at the
l'eciellal Reserve Banks in fixing salaries.
His general approach was that
the initiative for changes in officer salaries should come from the Reserve
BEttlits) not from the Board.
The Board should say to the Reserve Banks that
vere in charge of their organizations, that they were expected to
1'44 the Banks, that they had a certain range of officer salaries within
Which
to work, and that if those renges were not sufficient to permit them
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to carry forward satisfactorily they then could come to the Board.
The Board had to say specifically what the salaries of the Presidents
and the First Vice Presidents should be, but, in his opinion, it should
not be in the position of saying that if the Reserve Banks would pay
Other officers certain amounts their organizations would run satisfactorily.
G°vernor Mitchell said that he also felt that there was some reason for
treating the Federal Reserve Bank of San Francisco as it did the Federal
Reserve Banks of Chicago and New York -- like those two Banks, San
Francisco differed in significant ways from most of the Reserve Banks,
ancl he expected these differences to continue to grow in coming years.
Governor Mitchell went on to say that the question of administrati°n of officer salaries at a Federal Reserve Bank was one that troubled
111111. He was under the impression that the Board attempted to interfere
unnecessarily with the local administration.
Shod
It was his view that there
be guidance from the Board as to the amount and frequency of
increases that would be appropriate) rather than that the Board should
Pass upon individual salary changes.
He would prefer to say to the
114nks that they could give salary increases to
r the
4o
per cent, for example,
officer staff each year, leaving the selection of that
4o
per
cent to the Bank within applicable ranges for the officer groups.
He also
thclught that the amount of an individual increase that could be given in
411 °Ile year should be indicated to the Banks. For example) this might
be
4."terms of an increase not to exceed) say, a fifth or a fourth of the
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Interval between the maximum and the minimum of the range for the
Particular group.
the
In this way, the local people would have to make
decision as to how to use the groups and ranges. Within such a
general guide, Governor Mitchell did not believe that the Reserve Banks
should have to come to the Board for specific approval of officer
salaries other than for the President and First Vice President.
If
a sPecific case arose in which they felt they should depart from the
general
policy, they would then come to the Board.
Governor Balderston said that he thought the responsibility
(/f the headquarters office was to look for inconsistencies in salary
ranges and administration among the various regional offices. The only
gr°1113 in the System familiar with what all Banks were doing was the
icsetrcl, and it was up to the Board to observe any lack of consistency
t1r°143/lout the System that might arise from a lack of knowledge by one
Bank of what another Bank was doing.
He agreed completely that the
13anks should take the initiative and should have complete freedom as
to
vhether they were to apply for a new schedule of salary ranges. He
felt that the practice of the past had involved less in the way of
sullervision from the Board than was implied by Governor Mitchell's comments.
?°1* himself,
Governor Balderston said, he would not object to making more
clear to the Banks just what the Board's approach to salary administration
vas,
The Board had been perfectly clear in saying that the Banks should
t*IY. vithiri their
salary ranges, and within those ranges each Bank was
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free to suggest which members of the officer group might receive increases
ami how much.
If a Bank proposed increases for an unduly high percentage,
the Budget Committee of the Board would point that out to the President,
and it also had commented on amounts of individual increases.
Governor Mitchell said he was thinking about the way in which
the Policy worked from the Board's standpoint.
He did not think the
l'ecord had been very good in terms of frequency of increases, and he
'would be disposed to tell the Banks that they should come in a little
lass frequently with increases than had been the case in the past.
Governor Balderston said that he agreed with this; he thought
that most of the Banks had now gotten a pretty good idea of the Board's
approach in this respect.
e
Governor King added that the main purpose of the Budget Committe
Banks these
111"till8A, as he had observed them, was to discuss with the
aspects of officer salary administration. They had been used to make
large
the Presidents aware of the Board's reaction to too frequent or too
Increases in officer salaries.
Governor Balderston cited specifically discussions with the
President
?ederal Reserve Bank of New York, particularly the meeting with
1111Yes and First Vice President Treiber in January 1961.
That Bank had
complained a great deal about the competition that it faced and had
t411 eli of
salary limitations as a reason for the loss of a great deal
or talent among their younger men.
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Federal Reserve Bank of St. Louis
He felt that a much better understanding
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1ad come about as a result of such discussions between the Board or its
Budget Committee and the Presidents.
Chairman Martin then inquired whether it was desirable to send
the memorandum with respect to officer salaries to the Reserve Banks,
arld Mr. Johnson stated that the memorandum had been prepared with the
thought that it would be only for the Board's information and review
Pllor to the next time it would be discussing officer salary administration with the Reserve Bank Presidents.
Governor Balderston then asked whether the Board would now wish
to indicate to the Reserve Bank Presidents that it would be receptive
to 111°ving the upper anchor for Group A officer salaries to $25,000.
If
8°) he wondered how best to convey to them such information.
Mr. Johnson recalled that a couple of years ago the Board took
the view that it would not say to the Banks when they should raise their
salarY structures.
However, there would have to be some means of commu-
nleating to them that a new maximum of $25,000 for Group A officers was
acceptable.
Some of the Reserve Bank Presidents had commented that the
established maximum of $22,500 was not adequate for their districts,
and the Board
might let those Presidents know that it would not object
to their submitting a structure that would use a $25,000 maximum.
Governor Mitchell inquired whether this was not the sort of
thing that should be taken up with the Presidents when they come in for
1344get meetings in a few months.
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-56Governor Balderston suggested that those meetings were for the
Plarpose of discussing specifically the ideas that the Presidents had
as to salary adjustments for the coming year.
There was a time element,
44a if they were to make plans for discussions this fall on the basis
Of a change in the anchor for their Group A officers, they would have
to know about it in advance.
Governor Mitchell said that this brought up another thing that
disturbed him about these meetings with the Presidents.
OA
He had sat in
8°Itle of the meetings in the fall of 1961; many of the Reserve Bank
°ttioers discussed by the Presidents were not personally known to him.
Re Irss thinking of getting some system that would avoid explanations by
the Presidents of what they planned to do for individual officers unless
their
Plans ran counter to a general policy. This would mean that these
illeetings would be only for discussing changes in policy or special
situations outside the general policy.
Governor Shepardson said that, as he understood the officer
841arY administration plan, it was set up with two anchors; the minimum
the lowest group of officers was set at about the midpoint of Grade
15 Of the non-officer structure; and the top for Group A officers was
set at a figure 10 per cent below the recognized level for the First
Vice P
resident. Then there was a spread between the salary for the First
Viee
President and that of the President. It seemed to him that, if this
1148 to be the philosophy in the future, there was not much that would be
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gained by changes unless the Board was ready to do something about the
salaries of the Presidents and the First Vice Presidents.
He thought
it would be desirable for the Board to consider whether it was ready
to review the salaries of the Presidents, as well as those of the First
Vice Presidents and the Group A officer range, rather than to proceed
piecemeal.
Governor Mills said that there had been many changes since
the officer
salary administration plan was first adopted in 1953.
Salaries of the Presidents and First Vice Presidents had been increased
since then, and now it was suggested that the maximum for salaries
below those officers be brought up. He felt that a great deal had
been
accomplished already, unless the Board wished to bring the Presidents
Who were now at the $35,000 level up to $40,000. As far as he
Itas concerned, this would take more consideration than the Board would
to put in today.
Governor Shepardson said he still did not see how any real change
143111c1 come about without getting into the salaries of the President and
First Vice
President. The First Vice President was involved in the
diaelAssion of a change in the Group A ceiling, and it seemed to him that
the recognized
level for the First Vice President would have to be raised
it the Group A ceiling was increased. The Banks would have to know of
this; and a number of Banks had come in with proposals for raising the
l'reeidents which had been turned dawn by the Board.
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He felt that any
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of these changes would bring in the question as to what the Board was
going to do about the Presidents.
Chairman Martin then asked about the salary ranges for
Presidents and First Vice Presidents that had been proposed by Governor
King at a discussion of this question in the fall of 1961.
It had been
his thought that Governor King's plan should also be discussed at this
Meeting.
Governor King said that last fall he distributed to the members
Of the Board a schedule that suggested some salary ranges be established
tor Presidents and First Vice Presidents and that, within those ranges,
the boards of directors of the Federal Reserve Banks could initiate
recommendations to the Board of Governors on a specified scale.
His
thought was that if the regional basis for the Federal Reserve System
'was to be maintained it was essential that the Board do everything
11°ssible to make the jobs of the Presidents of the Reserve Banks and
the functions of the directors of those Banks important.
The directors
Ilere responsible men and should have great responsibility for the
11144agement of the Banks.
If they had a plan on which they knew that
they could depend for salary administration for the Presidents and First
1/1ce Presidents, he thought they would do their jobs in an intelligent
taehion.
They would sit more in the position of judges or directors
14 terms of providing the kind of management to the Bank that was required;
4°14, to a considerable extent, their function was to "help the President
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fight the Board" on what the President's salary should be and perhaps
in other ways.
At the present time, Governor King noted, the Board
lias approving salaries for all other persons at the Federal Reserve
Thanks by the use of ranges for the non-officer staff and for the officer
Staff up to the First Vice President.
This system of ranges would be
extended under his suggestion to the Presidents and First Vice Presidents and would involve no violation of the statutory requirement that
the Board approve the payment of their salaries. His main point in
sUggesting a range system within which the directors could initiate
salarY recommendations to the Board for the Presidents and First Vice
Presidents was that it would give the directors of the Banks a responsi-
hilitY that would help them and the System in recruiting and in knowing
hev to handle the Presidents after they got them on the job.
He did
11°t suggest that the details of his proposal were necessarily correct;
the Plan had limitations, but he had presented it in the spirit just
stated, and he believed that it would help get better administration
at the Federal Reserve Banks.
Chairman Martin said that, perhaps through a misunderstanding,
414teria1 on Governor King's plan had not been included with that presented to the Board for this discussion.
He felt that it would be
hs1Prul if the Board could have a chance to study a memorandum that would
I've the details of this plan, including the salary ranges proposed and
the way they would be applied.
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Federal Reserve Bank of St. Louis
7/11/62
-60Governor Mitchell said that he had thought, when the Board
took action in executive session on June 27, 1962, increasing the
salary of the President of the Federal Reserve Bank of Cleveland to
$40,0000 that it was also talking about general action in this area.
If that had not been his understanding, he would not have been willing
tO have teken the action that was then taken.
His recollection was that
the discussion at that time contemplated an early review of the salary
limits for the Presidents looking to a figure of $40,000 as a maximum
for all Reserve Banks other than New York, Chicago, and San Francisco.
Re vould like to see such action taken and he did not think that this
114s the kind of thing that lent itself to study; it was a matter of
illdgment and of arriving at a figure that could be agreed upon.
Chairman Martin responded that when the Board approved the
irlcrease in the salary of President Fulton referred to by Governor
Mitchell, its discussion was along the lines Governor Mitchell indicated
4111
he had had that in mind in setting dawn the topic for consideration
ti3daY•
The Board did not want its action in increasing Mr. Fulton's
larY to suggest that it was being done as a matter of longevity for
'
se
MI% Fulton.
Governor Balderston said that in that case he thought the
I/°ard may have overlooked the fact that the First Vice President was
°214 one year younger than the President of the Cleveland Bank.
It
1144. not intended to widen the differential that had existed between the
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Federal Reserve Bank of St. Louis
7/11/62
-61-
5alaries of the President and the First Vice President.
He recalled
that Governor Mills had mentioned before the point of the differential
between the First Vice President and the President of the Banks, which
had been $10,000 at the Banks outside New York and Chicago for several
ears.
4
If the First Vice President at one of these Reserve Banks was
first-class man, he wondered whether the past differential of $10,000
b
etween the President and the First Vice President was not too large:
Perhaps a differential of $7,500 would be more appropriate -- for
example) if the President's salary was $35,000, the First Vice President
should be at $27,500 in order to provide a better spread.
It was thus
e°11ceivab1e that if the Board were to increase from $35,000 to $40,000
the rate for the Presidents at the Reserve Banks other than New York
er4 Chicago, it might wish to make the differential between the President
and the First Vice President less than it had been in the past.
Governor Mitchell said that all of the arguments that he could
thiak of would be on the side of providing a larger differential between
the salary of the President and that of the First Vice President at a
ecieral Reserve Bank, but he would like to be able to accommodate the
eases where the differential should be less.
Chairman Martin then suggested that Governor King present and
eXIDlain the ranges for salaries of Presidents and First Vice Presidents
that he had sent to the members of the Board last fall.
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Federal Reserve Bank of St. Louis
1
7/11/62
-62Governor King then read from a tabulation of ranges that
'Would apply to the Presidents and First Vice Presidents at (a) the
Federal Reserve Bank of New York, (b) the Federal Reserve Bank of
Chicago, and (c) all other Federal Reserve Banks.
He also described
the conditions under which these salaries might be applied by the
directors and the intervals at which increases in individual salaries
might be made, together with the maximum amount of an increase for
either the President or the First Vice President. In his view, if
those ranges were adopted, the Federal Reserve Bank directors would
have ranges within which they could work satisfactorily.
If they were
to reach the end of the line too soon, that would be their responsibility
arti it would do them no good to come to the Board for increasing the
Illaximum just because they had used up their headroom.
After several comments had been made as to the ranges Governor
ng had suggested, the proposed amounts of increases, and the intervals
at Which increases could be given under the plan, Chairman Martin said
that in his opinion a plan such as Governor King suggested would provide
better salary administration and would give some latitude to the Board
as lrell as to the directors.
An objection, of course, could be that
it there was a repetition of what had happened to the price level in the
past 25 years, there would be pressure to increase the maximums under those
liallges•
provide
Otherwise, these might stand for some period of time and
the Reserve Bank directors with a system within which they could work.
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Federal Reserve Bank of St. Louis
d
-63-
7/11/62
Th16 would be applying the same kind of system to the Presidents and
First Vice Presidents that previously had been applied to other officers
and to the staff. This would also assist the Board, he said, noting that
"lazy administration in itself presented a rather colossal problem to
the Board.
Governor Balderston noted that in the table Governor King had
distributed previously to the members of the Board he had provided that
an increase in salary of
a President or a First Vice President might be
•ade once in three years, whereas he originally had discussed an increase
°nee every five years.
He (Governor Balderston) raised the question
14tether the three years was ideal, noting that some of the boards of
directors had indicated in appointing a new President that they did not
lish to set his salary too high at the outset, but they would not like
to feel that if the salary was set too low they would be unable to make
"adjustment in less than three years.
He wondered whether a two-year
Period might be better.
Governor King said that this would be all right with him although
by
he felt the situation Governor Balderston spoke of could be met
given to a man
84Yitig that the first increase after an original salary
48 President could be given in two years, and thereafter at intervals not
41c)re frequent than three years.
This would help to keep the Reserve Bank
directors from using up their headroom too rapidly.
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Federal Reserve Bank of St. Louis
7/11/62
Governor Mitchell referred to the amount of leeway that would
be provided in the ranges Governor King had presented, stating that in
terms of size and importance the Federal Reserve Bank of San Francisco
belonged with the New York and Chicago Banks rather than being grouped
vith the other nine Reserve Banks.
He suggested, therefore, that perhaps
there should be a separate range for San Francisco, or perhaps it could
be combined with that for Chicago.
Governor Mills inquired whether the proposal that the Board
/fished to consider today was an increase in the maximum salary for the
Vice President at the ten Banks to $27,500.
Pl'epared today to discuss all of
He did not feel
the questions that had been raised,
Ilaving understood that this was a first-stage presentation so as to give
8c/14e indication whether the maximum for Group A officers could be raised.
Governor Mitchell said that he had understood that the function
(It this discussion was to consider the whole problem of administration
officers' salaries.
Chairman Martin stated that perhaps the matter had not been
1444 out as well as it might have been.
He would assume responsibility
'that and perhaps it would be better if, before the Board took any
t°1
Iletiorly it was to have another memorandum on the subject that would include
a Presentation and analysis of the salary ranges that Governor King had
814Zested and the way they might be applied.
As Governor Shepardson had
14clioated, there was a point in not taking action piecemeal.
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Federal Reserve Bank of St. Louis
-65-
7/11/62
Governor Balderston said that this would be satisfactory with
him) although he had not been sure but that the Board was prepared
to act today on the maximum of the salary range for Group A officers
Of the Federal Reserve Banks outside New York and Chicago.
Chairman Martin stated that he thought it better if the Board
17041d take action this afternoon only on sending out to all Reserve
Batik Presidents the memorandum prepared by the Division of Personnel
Administration relating to salaries of examiners and to defer action
On these other questions until Mr. Johnson had worked out with Governor
King a memorandum perfecting the salary ranges that the latter had
suggested, with the thought that that memorandum would be distributed
414
brought up for consideration at an early meeting in the fall when
411 members of the Board could be present.
Governor King said that it would help him in preparation of
the memorandum that Chairman Martin suggested if the Board could indicate
Ithether it felt that there should be separate scales for three Reserve
13444) i.e., New York, Chicago, and San Francisco, and a fourth set
ranges for the other nine Reserve Banks.
Governor Mills said, in response to a question from Chairman
Martin, that he certainly felt that the San Francisco Bank should have
XiMUM
'
e.rile
different from the other nine Reserve Banks outside New York
414 Chicago.
Whether it should be a single one, or whether it should be
e°Mbined with Chicago, he was not sure.
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Federal Reserve Bank of St. Louis
7/11/62
-66During a brief discussion, the consensus was that it would be
Preferable to place San Francisco in the same category as Chicago,
and Chairman
Martin stated that it would be understood that the
m
emorandum to be prepared would present ranges that included San
Francisco and Chicago in the same categories.
Governor Balderston then inquired whether this would mean that
Mr. Johnson could not initiate any informal discussions with the Federal
Reserve Banks as to a higher maximum for Group A officer ranges until
after the Board had had a further discussion of this subject.
Chairman Martin replied in the affirmative, stating that the
B°ard was not acting today on any of the salary limitations or ranges
and that it
would take up the memorandum to be prepared presenting Governor
Kingi s plan for ranges and administration of salaries of Presidents and
First Vice
Presidents, as well as the question of a higher maximum for
Group A
officers, at an early meeting in the fall at which a full Board
was
present.
Thereupon the meeting adjourned.
Secretary's Notes: Pursuant to the recommendation contained in a memorandum from
Governor Balderston, Governor Shepardson
approved on behalf of the Board on July 10,
1962, the transfer of James E. Caldwell from
the position of Messenger in the Division
of Administrative Services to the position
of Messenger in the Board Members' Offices,
with an increase in basic annual salary
from $4,025 to V!,130, effective July 22,
1962.
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Federal Reserve Bank of St. Louis
4-)11
7/11/62
-67Governor Shepardson today approved on
behalf of the Board the following items:
Memorandum from the Division of Administrative Services recommendincrease in the basic annual salary of James E. Caldwell, Messenger
ln that Division, from $3,815 to $4,025, effective July 22, 1962.
in
Memorandum from the Division of Research and Statistics recommendappointment of Professor Almarin Phillips as Consultant effective
December 31, 1962, on a temporary contractual basis with compensanrn at the rate of $50 per day and with the understanding that any
wocessarY transportation and per diem for time spent in travel status
uld be paid
in accordance with the Board's travel regulations.
ing th
Letter to Dr. Claude Yves Meade (attached Item No. 9) confirming
arra
ngements for him to conduct a course in Conversational French for
members
of the Board's staff as an activity of the Employee Training
d Deve
lopment Program.
Letter to Professor Edwin S. Mills confirming arrangements for
to
him,
the
conduct a course in Advanced Economic Statistics for members of
ardl s staff as an activity of the Employee Training and Development
pro
st gram, such course to consist of 20 to 30 sessions, with the underanding that Professor Mills would be paid a fee of $100 for each session.
Letter to the Federal Reserve Bank of San Francisco (attached
Item N
2
-..J2) approving the appointment of W. W. Hook as assistant examiner.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
44
Item No. 1
7/11/62
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
4t.ver:4'*"'
July 11, 1962
Morgan Guaranty International
Banking Corporation,
23 Wall Street,
New York 8, New York.
Gentlemen:
In accordance with the request and on the basis of the
information furnished in your letters of Nay 22 and June 19, 1902,
transmitted through the Federal Reserve Bank of New York, the Board
of Governors grants consent for Morgan Guaranty International Banking
C°rPoration to purchase and hold 6,000 shares, par value 10 Tunisian
Dinars each, of Banque d'Escompte et de Credit a l'Industrie en Tunisie
,i1:3ECIT11), a Tunisian banking corporation in formation, at a cost of
0,000 Dinars, or approximately USal4t,600, provided such stock is
acquired within one year from the date of this letter.
The Board's consent is granted upon condition that your
Corporation shall dispose of it holdings of stock of BEC1T, as
Iromptly as practicable, in the event that DECIT should at any time
engage in issuing, underwriting, selling or distributing securities in the United States; (2) engage in the general business of buying
or selling goods, wares, merchandise or commodities in the United State:3
or transact any business in the United States except such as is inci.
clental to its international or foreign business; or (3) otherwise conduct
its operations in a manner Which, in the judgment of the Board of GoverL(in;,
causes the continued holding of its stock by Morgan Guaranty International
B,nking Corporation to be inappropriate under the provisions of Section 25(a) of the Federal Reserve Act or regulations thereunder.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
OF THE
Item No. 2
7/11/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 11; 1962
W. H. Rommel,
uePuty Assistant Director
t,..._10r Legislative Reference,
14:ecut1ve Office of the President,
.;:lureau of the Budget,
”ashington 25, D. C.
1/ear Mr. Rommel:
This is in response to your request of July 2,1962, for
a r„
zPort on a revised draft bill to amend the Home Ownerts Loan Act
and the Federal Home Loan Bank Act to permit broader authority
'
07 Federal savings and loan associations to engage
in the financing
multiple dwelling units. The Board notes the changes made in the
i'°Posed legislation and considers the revised draft a substantial
;
1,
4 ment on the earlier draft on which the Board reported by
uter dated
March 16, 1962.
The Board believes it particularly important that undue
%fl2entration in multi-family and commercial loans be avoided,
both
are°1e aggregate and also in individual instances where large projects
Ho involved. On the latter point, it is noted with approval that the
whTe Loan Bank Board
is presently considering an appropriate regulation
ill',;c
:111 would limit individual loan amounts to a single borrower, as
mr,41cated on page 3 of Chairman McMurray's letter of June 26 to
Turner,
le gislati .
IZ le Board has no further specific comments on the proposed
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 3
7/11/62
WASHINGTON 25, D. C.
ADDRESS OFFICIAL coRRESPONDENCE
TO THE noARD
July 11, 1962
Board of Directors,
Citizens Bank & Trust Company,
Park Ridge, Illinois.
Ge
ntlemen:
The Board of Governors has received a copy of your
--r of June 5, 1962, addressed to the Federal Reserve Bank of
i3juicago in reply to the Board's letter of May 3, 1962, to the
G°ard of Directors of your Bank. The letter of the Board of
hOvernors stated that the "United Security Account" plan is proci bited by section 217.1(e)(3) of Regulation Q and should be
ills?ontinued by your Bank after allowing a reasonable time for
°tlfication of customers party thereto.
let
Your reply implies that the plan will be discontinued if,
after an
evaluation thereof, it is determined by your Bank to be
°mically unsound. But, mainly, your letter attempts to explain
th 8°me detail the reasons for disagreeing with the Board's view
at the plan is in violation of Regulation Q.
The points mentioned in your letter regarding the adverw. -Lng and operation of the plan and the possible changes therein
14e the subject of the two conferences to which you referred,
c0,11,een representatives of the Board and your Bank. Since those
of"-Lerences, minor changes were made in the advertising and operation
essthe Plan, but, as stated in the Board's letter of May 3, 1962, the
tl:]tial purpose of the plan appears to remain unchanged - namely,
int
'
e velapment and use of a device to provide for the payment of
erest on an account that is, in effect, subject to withdrawal by
Th;11,
,
8 of checks whenever the customer deems it .expedient to do so.
silf,
3
"pard believes that the points mentioned in your letter were
rj ciently
discussed during the conferences referred to so that
Ilsher discussion thereof, as suggested by you, would serve no
.'.4111 purpose.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
rs
Accordingly, the Board of Governors orders Citizens Bank
tTrust Company to comply with the above-cited provisions of
"
4egulation Q, by discontinuing the operation of the "United Security
ri,,c
,,
°111-1t" plan. In order to allow a reasonable time for appropriate
cation of all customers participating in the plan, the Board
:Pecifies that the discontinuance of the plan shall be completed not
later than August 27, 1962.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
OF THE
Item No. 4
FEDERAL RESERVE SYSTEM
7/11/62
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 17, 1962
I!r r. Ralph A. Beeton, President,
First Virginia Corporation,
2924 Columbia Pike,
Arlington, Virginia.
Dear Mr, Beeton:
Corporation
Before acting on the applications First Virginia
11°I,dhas pending before the Board under section 3(a)(2) of the Bank
•
Rol ing
tion
Company Act, the Board desires to give full considera
Bo
the
this,
do
To
ons.
acquisiti
certain aspects of the proposed
described
be
will
that
on
informati
loard desires additional ffnancial
si!ter in this letterl and it believes that representatives of First
be given an opportunity to discuss with members of the Board's
i7aff the mPtte of the issliAnce of stock with limited voting rights
4 exchange for the voting shares of banks to be acquired.
The matter of the classified common stock is of primary
conc
ern
n
because it involves questions of policy going beyond the
tecific applications now pending. The holders of First's Class B
e ock with voting control of the corporation now have a minority
,,quitY interest therein. This was not the case when First's last
;PPlication to the Board under section 3(a)(2) was approved. Any
erther acquisitions accomplished through the issuance of Class
c ek would further increase the disparity between the majority
'
int
shareholders and their power to elect only
20 erest of the Class
,Per cent of the directors of First (or a minimum of one director
i
each class). The Board is concerned as to whether it would be
ev the public interest to approve acquisitions having such effect
tr,,,11 if they might properly be approved under other statutory con2Lc_Leration8. Accordingly, a meeting between Board staff members
nIct one or more representatives of First is proposed to give First
aspects
,cPPicrtunity to present its views of the legal and practical
0
for
ns
.4.1.k_ the use
suggestio
submit
to
Use of classified common stock or
ory from
'no
of the matter in a way that will be satisfact
e
L
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Federal Reserve Bank of St. Louis
BOARD
OF
Ralph A. Becton
GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
-2-
Policy as well as a practical standpoint. If First wishes to
8ubmit views in writing on this matter, they will be received
and
onsidered, but they are not requested in written form
and
it
is
pelieved that
a conference in person would be useful in any case.
4
If you will indicate when it would be convenient for First's
eresentatives to meet with members of the Board's staff at the
Board's offices, and who such representa
tives might be, arrangements
then be made for the mutual convenience of the participants.
",,6
L is not intended that the subjects for discussion be limited
cluoively
to those mentioned herein, and if there is reason to
olseuss other aspects of the pending applicatio
ns, there will be
PPortunity to do so.
re n
7
In view of the fact that most of the present and all of
proposed subsidiaries of First in the first six months of 1962
134"c:creased the rate of interest on time and savings deposits, the
4,
11ird wishes to have the following informatio so
n
that it may consider
effect of such increases on earnings and dividend payments by
the
banks and the holding company.
the
1. Balance sheet of First Virginia Corporation ("First")
as at June 30, 1962, prepared on the same basis as that included
in its 1961 report to shareholders, together with data showing
for each subsidiary the number
of shares outstanding and owned
rilrliel.amount of First's carrying value of its investment
t
2. An income statement of First (corporation anly) for
the first six months
of 1962, in a form similar to that required
by Form F.R. Y-6 (Annual
Report to the Board), together with
(a) amounts of dividends and service fees from each subsidiary,
and (b) a schedule
showing by types and total amounts items of
!xpense incurred (other than those covered by service fees)
°Y First on behalf of First's subsidiary banks in the six-month
Period ending June 30, 1962, which were or are reimbursable
Tio the Corporation; if none,
so state.
3. Analysis of each surplus account of First for the
period January 1 to June 30, 1962.
4. A statement of consolidated income and surplus of
First and subsidiaries for the first six months of 1962.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Mr. Ralph L. Beeton
5. Copy of statement of condition (front and back thereof)
submitted to the appropriate Federal supervisory authority as
at June 301 1962, by (a) each of First's subsidiary banks, and
(b) each bank proposed to be acquired.
6. Information as to income and dividends for the six
months ended June 301 19621 of (a) each of First's subsidiary
banks, and (b) each bank proposed to be acquired, in a form
(front and back thereof) like that which would be furnished,
if required, to the appropriate Federal supervisory authority.
7. where different in amounts than those shown in 6 above,
tor each of the banks proposed to be acquired, a statement of
income and dividends for the six months ended June 30, 19621
in a form like that shown in First's preliminary prospectus
dated May 9, 19620 at pages 13-15. (Note: Only where differences
are involved, are details desired.)
eturi
It would be desirable if the staff could have an opportunity
the above financial information prior to the proposed meeting,
cia+
.411-18 would not be essential if the compilation of the financial
ati;:would unduly delay discussion of the matter of the classified
but
Very truly yours,
-4
,
Merritt .he..
Secretary.
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Federal Reserve Bank of St. Louis
4- L.,
TITLE 12 - BANKS AND BANKING
Item No. 5
7/11/62
CHAPTER II - FEDERAL RESERVE SYSTEM
SUBCHAPTER A- BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
[Reg. D]
PART 204 - RESERVES OF Pal ER BANKS
1. Effective July 28, 1962, Part 204 is revised to read as
Natows:
PART 204 - R1,SE1VES OF MEMBER BANKS
Regulations
See,
20)40.
Definitions.
Computation of reserves.
Deficiencies in reserves.
20)4,5 (Reserved)
Supplement.
204.2
2014.3
20144
Classification of Cities
2011.51
201453
2014ok
Classification of reserve cities.
Desi-gnat4on of reserve cities.
Designation of an additional reserve city.
1 ,,JTHORITY:
262. .1
204.1 to 204.53 issued under sec. 11(1)„ 38 Stat.
Stat
1J.S.0. 248(i). Interpret or apply secs. 11(c), (e), 19, 38
465.. 262, 270; 12 U.S.C. 248(c)„ (e), 461, 462, 462a-1, 462b, 464,
Regulations
204a
Definitions.
(a) Demand deposits.
The term "demand deposits" includes all
deP°sits except "time deposits" as defined below.
ce
"time
.11.112_E1222ELE. The term "time deposits" means
(b) 2
rtifa.cates of deposit," "time deposits, open account" and "savings
tleN, .
'-'slts111 as
defined below.
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Federal Reserve Bank of St. Louis
-2(o) Z1L12_certificates of deposit. The term "time certificate of
deP"it" means a deposit evidenced by a negotiable or nonnegotiable
ins"t;rument
which provides on its face that the amount of such
dePosif ls
•
payable to bearer or to any specified person or to his
Order (1) On a certain date, specified in the instrument, not less
thahn
-- -10 days after the date of deposit, or
(2) At the expiration of a certain specified time not less than
30 daYs after
the date of the instrument, or
(3) Upon notice in writing which is actually required to be
1/
not less than 30 days before the date of repayment,—
and
(4) In all cases only upon presentation and surrender of the
inStrIlMent,
(d) Time
deposits, open account. The term "time deposit, open
aee°unt" means a deposit, other than a "time certificate of deposit"
a H savings
deposit," with respect to which there is in force
a wrIt
ten contract with the depositor that neither the whole nor
any .r,a
rt of such deposit may be withdrawn, by check or otherwise,
kur
-0 the date of maturity which shall be not less than 30 days
1
,
eP°sit with respect to which the bank merely reserves the
iquillzL.0 require notice of not less than 30 days before any
eIgal 18 made is not a "time certificate of deposit".
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Federal Reserve Bank of St. Louis
91"A
-32/
after the date
of the deposit,— or prior to the expiration of the
Period of notice which must be given by the depositor in writing not
less
than 30 days in advance of withdrawal.'2/
(e) Savings deposits. The term "savings deposit" means a
dePosit
(1) which consists of funds deposited to the credit of one or
Iriel'e individuals, or of a corporation, association, or other
°I'eanization operated primarily for religious, philanthropic,
ellaIltable, educational, fraternal, or other similar purposes and
operated for profit;4/ or in which the entire beneficial
illtest is held by one or more individuals or by such a corporation,
-uulation, or other organization; and
2 n
1,111:4rPosits such as Christmas club accounts and vacation club accounts,
,re made under written contracts providing that no withdrawal
shall ,a
d
rnade ue made until a certain number of periodic deposits have been
'
ll/lng a period of not less than three months constitute "time
depo
Vith,sits/ open account" even though some of the deposits are made
ii4n 30 days
end of such period.
tors., deposit from the
with respect to which the bank merely reserves the right
Trtade-c.luire notice of not less than 30 days before any withdrawal is
Dle not a "time deposit, open account".
elass?Posits in joint accounts of two or more individuals may be
of lfied as savings deposits if they meet the other requirements
Drofit
the above
definition, but deposits of a partnership operated for
ialdiv.,:alaY not be so classified. Deposits to the credit of an
corlooluual of funds in which any beneficial interest is held by a
l'or n ai°n, partnership, association or other organization operated
char l(plit or not operated primarily for religious, philanthropic,
able, educational, fraternal or other similar purposes may not
be Clas
sified as savings deposits.
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Federal Reserve Bank of St. Louis
-4(2) with respect to which the depositor is required, or may at
arlY time be required, by the bank to give notice in writing of an
intended withdrawal not less than 30 days before such withdrawal is
Dade.
(f) Gross demand deposits.
The term "gross demand deposits"
Mean
s the sum of all demand deposits, including demand deposits made
bY other
banks, the United States, States, counties, school districts
and other governmental subdivisions and municipalities, and all
°Iltstanding certified and officers' checks (including checks issued
the bank in
payment of dividends), and letters of credit and
travelers _
' checks sold for cash.
(g) Cash items in process of collection.
The term "cash items
in Process of
collection" means:
(1) Checks in process of collection, drawn on a bank, private
barae
Or
any other banking institution, which are payable immediately
111or113r
esentation in the United States, including checks with a
PedeReserve bank in process of collection and checks on hand
14hiell will be presented for payment or forwarded for collection on
the following
business day;
(2) Government checks and warrants drawn on the Treasurer of the
Nited 0
Qtates which are in process of collection;
(3) Such other
items in process of collection, payable immeditelY upon
presentation in the United States, as are customarily
e.eared or
collected by banks as cash items.
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Federal Reserve Bank of St. Louis
Items handled as noncash collections may not be treeted as "cash
items in process of collection" within the meaning of this part.
(h) Net demand dePosits.
The term "net demand deposits" means
gross demand deposits as defined in paragraph (f) of this section
less the
deductions allowed under the Provisions of § 204.2(b).
(i) Currency and coin.. The term "currency and coin" means United
States currency and coin owned and held by a member bank, including
eurrencY and coin in transit to or from a Federal Reserve bank.
2 4.2
Computation of reserves.
(a) Amounts of reserves to be maintained. (1) Every member bank
hall maintain on deposit with the Federal Reserve bank of its district
an
actual net balance equal to 3 Der cent of its time deposits, plus
7 Per cent of its net demand deposits if it is not located in a reserve
eitY or 10 per cent of its net demand deposits if it is located in a
rieserve city, or such different percentages of its time deposits and
d
emand deposits as the Board of Governors of the Federal Reserve
SYstsm,
pursuant to and within the limitations contained in section 19
cr the
Peaeral Reserve Act,Y may prescribe from time to tine in
204 e
*-J (the Sunplement to this part); Provided, That a member bank's
Ciarre
IleY and coin shall be counted as reserves in determing compliance
th s
uch requirements to such extent as the Board of Governors of the
Federal
Reserve System, pursuant to section 19 of the Federal Reserve
Act ma
Y permit from time to time in
204.5.
such different percentages prescribed by the Board may not be.
ithan 3 per cent of time deposits, 7 per cent of net demand deposits
o?).4._ not located in reserve cities, or 10 per cent of net demand
orvt
u6 of banks located in reserve cities, nor more than 6 per cent
localM!
deposits, 14 per cent of net demand deposits of banks not
http://fraser.stlouisfed.org
bank'
e in reserve cities, or 22 per cent of net demand deposits of
s loceted
Federal Reserve Bank
of St. Louis
in reserve cities.
-6(2) Notwithstanding the provisions of subparagraph (1) of this
ParagraPh,
a member bank located in a reserve city may hold and
r4aintain the reserve balances which are in effect for member banks
not located in reserve cities if, upon application to the Board of
G°11
ernors, the Board grants permission for the holding and maintaining
°I4 such lower reserve balances after consideration of all factors
relating to the character of such bank's business, including, but not
limited to, the amount of such member bank's total assets, the amount
Qf its total
deposits, the amount of its total demand deposits, the
alllount of its
demand deposits owing to banks, the nature of its
deP°sitors and borrowers, the rate of activity of its demand deposits,
its ge
ographical location within the city, and its competitive position
With r
elation to other banks in the city. Any such permission shall
be s L.
uuJect to revocation by the Board at any time in the light of
Changed circumstances, and all such grants of permission may be
ellbject to annual review by the Board.
(3) For the purposes of this part, a member bank shall be
e°n8idered to be in a reserve city if the head office or any branch
thereof is located in a reserve city.
(b) Deductions allowed in computinF; reserves.
In determining
the
reserve balances required under the terms of this part, member
bank
8 maY deduct from the amount of their gross demand denosits the
aMe'unts of
balances subject to imnediatP withdrawal due from other
bank
3
and cash items in process of collection as defined in
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Federal Reserve Bank of St. Louis
204.1(g).
(
lances "due from other banks" do not include balances due from
Federal Reserve banks, balances (payable in dollars or otherwise)
clue from foreign banks or branches thereof wherever located, or
balances due from foreign branches of domestic banks. The word
"baro,
in the term "due from other banks" refers to incorporated
6/
banks and does not include private banks or bankers—
(c) Availability of cash items as reserve.
Cash items forwarded
to a Federal Reserve bank for collection and credit cannot be counted
a3 Part of the minimum reserve balance to be carried by a member bank
Ilith its Federal Reserve bank until the expiration of such time as may
be
specified in the appropriate time schedule referred to in part 210
Of this chanter. If a member bank draw against items before such
tiThe 3
the draft will be charged against its reserve balance if such
balanp be
-e
sufficient in amount to pay it; but any resulting impairment
of reserve balances will be subject to the penalties provided by law
and by this
Part: Provided, however, That the Federal Reserve bank
rnaY3 in its discretion, refuse at any time to permit the withdrawal
o
0ther use
of credit given in its reserve account for any item for
Which
the Federal Reserve bank has not received payment in actually
arid .
finally
collected funds.
bal,A liember bank exercising fiduciary powers may not include in
Ilitrees "due from other banks" amounts of trust funds deposited
°ther banks and due to it as trustee or other fiduciary. If
trus,
funds are deposited by the trust department of a member bank
ai ,e commercial or savings department and are then redeposited in
lot"er bank subject to immediate withdrawal they may be included by
the
pro D.lember
bank in balances "due from other banks," subject to the
l'Isichs of § 204.2(b).
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Federal Reserve Bank of St. Louis
(d) Rcservi3s against trust funds.
member bank cercising trust
r .11s need not maintain reserves against trust funds which it keeps
P°s'"
"
1)1°c 1 segregated as trust funds and apart from its general assets
cYrItIch it deposits in another institution to the credit of itself
truste3 or
other fiduciary.
If, however, such funds are mingled
“e gcneral assets of the
as )efmitted to national banks
1111( r authority of section 11(k) of the 7edera1 Reserve Act
(40 &tat.
thereby arises
909; 12 U.S.C. 248(k)), a deposit liability
agairlstItich
reserves must be maintained.
deposit which at
(e) 22nuance of "time deposit" status. A
the 4..
kame of
certificate of
deposit was a "deposit evidenced by a time
clepos.
it," time deposit, open account," or "savings deposit" continues
to be
a "time deposit" until maturity or the expiration of the period
lee of withdrawal, although it has become payable within
30 days
• After the date of maturity of any time deposit, such deposit
:Is a d°Inand
notice
deposit, liter the expiration of the period of
n.von
•
other
Illth respect to the repayment of any savings deposit or
tute
"ePosit, such deposit is a demand
deposit, except that, if the
will
°f such deposit advise the bank in writing that the deposit
r.otb
Ilithdrawn pursuant to such notice or that the deposit will
ap21icable
art°1
' again be subject to the contract or requirements
to su
savings deposit
oh
deposit, the deposit will again constitute a
her Li-Lme deposit, as the case may be, after the date upon which
—
civic° is received by the bank.
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Federal Reserve Bank of St. Louis
-92U
40J
Leficiencies in reserves.
(a) Computation of def5ciencies, (1) Deficiencies in reserve
baian
computed on the
-ces of member banks in reserve cities shall be
basic, of
average daily net deoosit balanc2s and average daily currency
and
°1n covering weekly periods-1/ Deficiencies in reserve balances
ccither member banks shall be computed on the basis of average daily
net
dePosit balances and average daily currency and coin covering
/3111&?-kl,r periods.
(2) In computing such deficiencies the required reserve balance
of e
aell member bank at the close of business each day shall be based
lloon • 4.
It's net deposit balances and currency and coin at the opening of
referred
-"-")3 on the same day; and the xcekly and biweekly periods
t()
fl
to be
Paragraph (1) hereof shall end at the close of business on days
fixed by the Federal Reserve banks with the approval of the Board
Of :0
-criferriors of the Federal Reserve System. :1 Then, however, the reserve
()11.Plit
• akaon period ends with a nonbusiness day, or two or more
corise
eutive nonbusiness days, of the member bank or its Federal Reserve
11410k
3 such nonbusiness day or days nay, at the option of the member
and whether or not it had a reserve deficiency in such computati on
Pc-riod, be included in the next reserve computation period.
(b)
Penalties
assessed
(1) Penalties for such deficiencies will be
during
monthly on the basis of average daily deficiencies
?
-1/evcr, deficiencies in reserve balances of member banks in
.i7.0z3,
iricie* ve cities which have been authorized by the Board of Governors,
reor the
provisions of § 204,2(a)(2)„ to hold and maintain the
Irl'Oe balances in effect for member banks not in reserve cities
"k- computed on the basis provided for such latter member banks.
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Federal Reserve Bank of St. Louis
—10—
eacl of the reserve computation periods ending in the preceding
Calendar month.
(2) Such penalties will be assessA at a rate of 2 per cent
Per(lnnum above the Federal Reserve ban: rate applicable to discounts
°t 90 d-AY
commercial paper for member banks, in effect on the first
daY of the
calendar month in which the de2iciencis occurred.
(c) Notice to directors of banks deficient in reserves, Whenever
it
all appear that a member bank is not paying due regard to the
14`44ten
—ance of its reserves, the Federal Reserve bank shall address
al
'-etter to each director of such bank calling attention to the situation
41clad1Iising him of the requirements of the law and of this part
r(
l'cling the maintenance of reserves.
(d)
, Continued deficiencies.
If, after the notice provided for in
raph (c) of
this section has been given, it shall appear that the
Ilelllber bank
is continuing its failure to pay due re7ard to the
rliThlterlance of its reserves, the Federal Reserve bank shall report
such
fact to the Board of Governors of the Vederal Reserve System
1/44 a
ecommendation as to whether or not the Board should:
'
(1) In the case of a national bank, direct the Comptroller of
the
ourrcnoY to bring suit to forfeit the charter of such national
blcPlIrsuant to section 2 of the Federal Reserve Act (38 Stat. 252;
12
U•S.C• 501a); or
(2) In the
case of a State member bank, institute proceedings
to
requirc, such bank to surrender its stock in the Federal Reserve
balli"nd to forfeit all rights and privileges of membership pursuant
to
section 9 of the Federal Reserve Act (46 Stat. 251; 12 U.s.r3. 327); or
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Federal Reserve Bank of St. Louis
911*
-11Reserve
(3) In either case, take such other action as the Federal
Reserve
13841kIllaY recommend or the Board of Governors of the Federal
aYstem
-May consider advisable.
2°4..4 (Reserved)
'`''O4-5
Supplement.
Reserve percentages.
Pursuant to the provisions of section 19
the Federal Reserve Act and § 204.2(a), but subject to paragraph (b)
tI
System
section, the Board of Governors of the Federal Reserve
liereby
member bank
Prescrfbes the following reserve balances which each
°:ethe Federal Reserve System is required to maintain on deposit with
the Federal Reserve bank of its district:
(1) If not in a reserve city (1) 5 per cent of its time deposits, plus
(ii) 12 per cent of its net demand deposits.
(2) If in a reserve city (except as to any bank located in such
ettY
- which is permitted by the Board of Governors of the Federal
serve
System, pursuant to § 204.2(a)(2), to maintain the reserves
%ified in subparagraph (1) of this paragraph) (1) 5 per cent of its time deposits, plus
(11) 16 1/2 per cent of its net demand deposits.
(b) Counting of currency and coin.
The amount of a member bank's
erleY and coin shall be counted as reserves in determining compliance
14'411 the
reserve requirements of paragraph (a) of this section.
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Federal Reserve Bank of St. Louis
,
-12Classification of Cities
§
20
4e5l Classification of reserve cities.
(a) The city of Washington, D. c., and every city in which there
is s·1 t
Uated a Federal Reserve bank or a branch of a Federal Reserve
bank are hereby classified ( and continued ) as reserve cities.
(b) The following are also classif ied as reserve cities:
(1) Every city in which, on the dates of official call reports
Of
cond;t;on
'"'-
..1..
1· n
the t \.v.To years ended June 30, 19 47, member banlcs of th e
Feder 1
a Reserve System, exclusive of their offices in other cities,
held
an aggregate amount of demand deposits owing to banks equal, on
the a
verage, to one-third of one per cent or more of the aggregate
atnount
of demand deposits owing to banks by all member banks of the
Fede
ra1 Reserve System; and
(2) Every city in which, on the dates of official call reports of
condi t.
lon in the two years ended June 30, 1947, member banks of the
F'ed
era1 Reserve System, exclusive of their offices in other cities,
held
an aggre gat e amount of demand depos i ts owing to banks equal, on
the a
Verage, to one-fourth of one per cent or more of the aggregate
alllount of
demand deposits
o~dng
to banks by all member banks of the
Fe de
:t'al Reserve System and also equal, on t he average, to 33 1/3 per
cent
or more of the aggregate amount of all demand deposits held by
the
Ineml::er banks in such city.
0n the basis of subparagraphs (1) and (2) of this paragraph, the
follawimg cities, in addition to the res erve cities classified as such
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Federal Reserve Bank of St. Louis
"' r:: ~' "\,
Illider Paragraph (a) of this section are hereby classified (and
coxitinued) as reserve cities:
Columbus, Ohio; Des Moines, Iowa; Indianapolis, Indiana;
ukee, Wisconsin; St. Paul, Minnesota; Lincoln, Nebraska; Tulsa,
C/klahn
-Ina; Wichita, Kansas; Fort Worth, Texas; Cedar Rapids, Iowa;
aliciSioux City, Iowa; the following city is hereby added and is hereby
classified as a reserve city:
National City (National Stock Yards),
Illincis; and the designation of the following cities as reserve
cities is
hereby terminated (unless the present classification of such
cities
la continued in accordance with paragraph (c) of this
4ttion\.
Toledo, Ohio; Dubuque, Iowa; Grand Rapids, Michigan;
Illinois; Kansas City, Kansas; Pueblo, Colorado; St. Joseph,
1'488°141; Topeka, Kansas; Galveston, Texas; Waco, Texas; Ogden, Utah;
4418pokane, Washington.
(c) The Board of Governors of the Federal Reserve System, prior
t0Iriarch 1, 1948, will also designate (and continue) as a reserve
1117' city now classified as a reserve city (although not within
the
sc°Pe of paragraphs (a) or (b) of this section) if a written
for the continuance of such city as a reserve city is received
bY thp
— vederal Reserve bank of the district in which the city is
'
ed on or before February 16, 1948, from every member bank which
114s its h
-ead office or a branch in such city (exclusive of any member
an outlying district of such city permitted by the Board of
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Federal Reserve Bank of St. Louis
raors to maintain reduced reserves) together with a certified copy
G
I' a resolution of the board of directors of such member bank duly
allialorizing such request.
0-) Effective
as of March 1 of each third year after March 1, 1948,
designate
the B°ard of Governors (1) will continue as reserve cities or
48 4claitional reserve cities all cities then falling within the scope
or
then meet the
'
tj ragraPh (a) of this section and all cities which
d prescribed in paragraph (b) of this section based upon official
starl
reports of condition in the two-year period ending on June 30 of
the,
4eax
preceding such third year; and (2) will terminate the designation
as re
Illerve cities of all other cities, except that the Board will continue 4.
'Ile designation as a reserve city of any city which then has the
II
of a reserve city and does not then fall within the scope
or
agraPhs (a) or (b) of this section based upon the new two-year
Doriod
If a request for the continuance of such designation is made by
illeillber bank (as specified in paragraph (c) of this section) in
sikia c.
ltY and, together with a certified copy of a resolution of the
4
s
'board of directors authorizing such request, is received by the
PQkr
al Reserve Bank of the district not later than the 15th day of
?ebro.m.
"--4 of such third year: Provided, That the designation of any
qty a5
°4 additional reserve city under this paragraph because it
fleet
8
standard prescribed in paragraph (b) of this section, shall
llotb
ec°me effective until after one year, or such longer period as
The
Governnrs
(
;:btaleetirlsz of this Paragraph were suspended by the Board of
1397,
F.R.
(25
notice.
a
eserve System until further
T
17) 1960)
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Federal Reserve Bank of St. Louis
-15-
the Board of Governors may determine, from the date as of which such
cleqgnation would be effective in the absence of this proviso.
(e) In any case in which a city is classified as a reserve city
8131e4 bY reason of the continuance of its designation as such,
l'ective March 1, 1957, pursuant to § 204.52(c), the reserve city
llation of such city will be terminated, effective as of such time
'
d"rsi4
4s the
Board may prescribe, if a written request for such termination
is r- .
celved by the Federal Reserve bank of the district in which the
City
is located from one or more member banks with head offices in
Ilch city and if such request is granted by the Board of Governors.
5 204
*.1c
Designation of reserve cities.
Acting in accordance with § 204.51, and pursuant to authority
ectiferred upon it by section 11(e) of the Federal Reserve Act (73 Stat.
264; 12 U.S.C. 248(e))and other provisions of that Act, the Board of
C"rn°rs has taken the following actions to become effective March 1,
1957.
(a) The
city of Washington, D. C., and every city in which there
is
sitllated a Federal Reserve bank or a branch of a Federal Reserve
batik a
re hereby continued as reserve cities.
(b) The following cities fall within the scope of § 204.51(b)
4.8ea
Upon official call reports of condition in the two-year period
on June 30, 1956, and, therefore, such cities, in addition to
the
reserve cities classified as such under paragraph (a) of this
secti
°11, are hereby continued as reserve cities:
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Federal Reserve Bank of St. Louis
Milwaukee, Wisconsin; Fort Worth, Texas; Indianapolis, Indiana;
St
'Paul, Minnesota; National City (National Stock Yards), Illinois;
Tillsa, Oklahoma; Des Moines, Iowa; and Columbus, Ohio.
(e) The following cities do not fall within the scope of § 204.51(b)
bed
Upon official call reports of condition in the two-year period
eliding June 30, 1956, but a written request for the continuance of each
41ch eitY as a reserve city was received by the Federal Reserve bank
"he district in which the city is located on or before February 15,
1957
"'rom every member bank having its head office or a branch in such
*tiy.(
exclusive of any member bank in an outlying district in such city
I llattea by
the Board to maintain reduced reserves), together with a
etiried Copy of a resolution of the board of directors of such member
batik aulY authorizing such request; and, accordingly, in accordance
S 204
.51(c), the following cities, in addition to the reserve
eities c
lassified as such under paragraphs (a) and (b) of this section,
e'l'ellerebY continued as reserve cities:
Wichita, Kansas; Kansas City, Kansas; Toledo, Ohio; Topeka, Kansas;
4tici
tki
ebloy Colorado.
(d) The following cities do not fall within the scope of
204
`11(b) based upon official call reports of condition in the twoYear t
c)d ending June 30, 1956, and written requests for their
ee as reserve cities were not received from all member banks
14 811ch
cities; and, accordingly, the designation of such cities as
ve cities is hereby terminated:
Cedar Rapids, Iowa, and Sioux City, Iowa.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-17(e) The Board has deferred, pending further consideration and for
Pellod not exceeding three months from March 1, 1957, the question
141 thcr the city of Miami, Florida, will be designated as a reserve
eitY in
accordance with § 204.51. [See § 204.53.]
204.-3
Designation of an additional reserve city.
Acting in accordance with § 204.51, as amended effective March 1,
1957
the
and pursuant to authority conferred upon it by section 11(e) of
p
'
Q eral Reserve Act and other Provisions of that Act, the Board of
G()vernors has taken the following action:
The city of Miami, Florida,
118 within the
scope of § 204.51(b) based upon official call reports
uol.ltion in the two-year period ending on June 30, 1956, and,
the et
ore, such
city is hereby designated and classified as a reserve
tY ef
fective May 15)
1958'
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Federal Reserve Bank of St. Louis
2a. The purposes of this revision are (1) to reflect changes
lthe law,
effective July 28, 1962, abolishing the designation of
ocela
traa
(2) to set forth in section 204.2(a) the
reserve cities",
factors
considered by the Board in acting upon applications by
individual member banks in reserve cities for permission to maintairl th
-e lower reserves applicable to member banks not in reserve
CI:tie8
("country banks"), (3) to make possible the termination of
tile r
°sere city designation of certain cities which, at the request
of Die
rrther banks in such cities, were continued by § 204.52 as reserve
°hies
effective March 1, 1957, although such cities did not fall
ith
the standards for classification of reserve cities set forth
2 I, n
and which do not presently fall within such standards,
44d (4) to
make certain minor clarifying changes in sections 204.1(i),
2°4.2( \
'
a), 204.3(a), and 204.5.
b. With respect to the changes indicated in clause (2) above,
tkar
"ision was the subject of a notice of proposed rule making
e
the Federal Register (26 F.R. 1956) and was adopted by
:
,tlard after consideration of all relevant views and arguments
1, e8
lired from
interested persons. With respect to other changes
415te 1„.
this revision, the notice and public procedure described in
4t1..°11e 4(a) and (b) of the Administrative Procedure Act and the
Arto,
'Pub
lication described in section 4(c) of such act are not
ed in connection with this amendment for the reascns and good
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
dr)
4118a foas stated in § 262.1(e) of the Board's rules of procedure
(l'al't 262) and especially because such notice procedure and prior
Publication are unnecessary since they would not aid the persons
affected and would
serve no other useful purpose.
(Sec. 11, 38 Stat. 2610 as amended; 12 U.S.C. 248. Interprets
°IaPlaies sec. 19, 38 Stat. 270, as amended, sec. 19, 48 Stat.
amended; 12 U.S.C. 461, 462, 462b,
464, 465; Public Law 86-114,
2R
444,
v, 1959)
BOARD OF GOVENNORS OF THE FEDERAL RESERVE SYSTEM
(Signed) Merritt Sherman
(8414
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Federal Reserve Bank of St. Louis
54,
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
OF THE
Item No.
7/11/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25, 0. C.
ADDRESS OFFICIAL CoRESPONOtNC.t
TO THE BOARD
July 26, 1962
11"'1" Sir.
In accordance with advice contained in the Boardis
tee-ahl of July 25, there are enclosed several copies of the
tQ tillit/n of Regulation DI effective July 28, 1962, and amendment
1947 rule for Classification of Reserve Cities, as sent
to
the
"e Federal Register for publication.
theAs stated in the telegram, no action has been taken
°11
qaae.,ProPosed section 20i4.4 with respect to standards for
the
cation of reserve cities, as published for comment in
tion,ederal Register in March 1961. Pending further considera1947 c`f this matter, suspension of triennial reviews under the
s
tandards will continue.
availab Printed copies of the revised Regulation will be
le in about three weeks and a supply will be furnished
Y01.4
,
vpank at that
time,
Very truly yours,
Merritt 8.he11
Secretary.
'closures.
PR ESIDENTS OF ALL FEDERAL RESERVE BANKS
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Federal Reserve Bank of St. Louis
Item No.
UNITED STATES OF AIERICA
7
7/11/62
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
In the
Matter of:
T
s ,O
NTINENTAL BANK AND TRUST COMPANY
a.ct, Lake
City 10, Utah
ORDER CONTINUING DATE FOR SHOW CAUSE HEARING
On June 28, 1961, the Board of Governors of the Federal
114erv
e System issued an order (26 Fed. Reg. 6044) for a hearing
(herei
-n referred to as "Show Cause Hearing") to be held in connection
with th4
matter for the purposes therein stated. The date for commencekent of
such hearing was continued by Orders of the Board dated
411g118
t 21) 1961 (26 Fed. Reg, 7991), and May 28, 1962 (27 Fed. Reg. 5357),
for,
'
e"ons therein stated, and is presently scheduled to commence on
235 1962.
°11 May 31, 1962, Respondent filed with the Board a "Motion
proa
lice" and a "Demand for Particularsu. On June 11, 1962, Board
0011489i
filed a "Memorandum in Reply to Respondent's Motion to Produce"
On
Statement of Board Counsel in Response to Demand for Particulars".
29) 1962, Respondent, with the Board's permission, filed a
lqieltranci
in Support of Respondent's Motion to Produce and in Response
t()Ie131.Y Memorandum of Counsel of the Board" and "Respondent's Statement
SIIPPort of
Respondent's Demand for Particulars". In the meantime,
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Federal Reserve Bank of St. Louis
4 71k
-2°I1 thine 25, 1962, Respondent filed a "Motion to Dismiss and Demand
t°r Final Order", with a request that the Board rule on such motion
Pri°r to ruling on Respondent's previously filed "Motion to Produce"
411d "Demand for Particulars". On July 5, 1962, Board Counsel filed a
"Mott n
°- in Opposition to Respondent's Motion to Dismiss and Demand for
Order". On July 6, 1962, the Board granted Respondent permissicl/ t° submit comments with respect to the last-mentioned memorandum
"°ard Counsel not later than close of business July 16, 1962.
In view of the importance and complexity of the issues
1)1'esented by the above-mentioned motions and other documents now pend11 ber°re the Board and in order to afford the Board adequate time and
13Pcaltunity to consider such issues,
IT IS HERESY ORDERED:
(1) That the Show Cause Hearing in this
matter presently scheduled to commence on
July 23, 1962, shall be continued to commence
at 10 a.m. on September 10, 1962, in the offices
of the Salt Lake City, Utah, Branch of the Federal
Reserve Bank of San Francisco; and
(2) That the said hearing be held in
accordance with the substantive and procedural
requirements designated and specified in the
Board's original Order for Hearing dated June 28,
1961, except that, as provided by the Board's Order
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Federal Reserve Bank of St. Louis
•
4 -14•1',`
of June 8, 1962 (27 Fed. Reg. 5679)5 such hearing
shall be open to the public provided that, in accordance with the Board?s Order of June 28, 19615
the names or identities of persons indebted to
Respondent shall not in any way be disclosed or
introduced in evidence.
Dated at Washington
D. C., this 11th day of July,
1962.
By order of the Board of Governors.
Voting for this action: Chairman Martin, and
Governors Balderston, Mills, Shepardson, King,
and Mitchell.
Governor Robertson took no part in the Boardts
consideration of this matter or in the Boards
action of this date, having voluntarily withdrawn
from participation in the matter for the reasons
set forth in the Statement issued by him on
:June 30, 1959, and made a part of the record
in these proceedings.
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
L)
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Federal Reserve Bank of St. Louis
?fl
BOARD OF GOVERNORS
OF THE
Item No.
FEDERAL RESERVE SYSTEM
8
7/11/62
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 18, 1962.
Dear Sir:
The attached study of salaries paid bank examiners
emPloyed by the Federal Reserve Banks and those employed by
t
2le Comptroller of the Currency and the Federal Deposit insure Corporation was prepared for the use of the Board of
,uvernors. At the Board's request copies also are being sent
a•I
Ja Reserve Bank Presidents for their information.
It will be noted that, in view of the confidential
nature
or much of the information that has been assembled,
'
-18 study bears a label of "Confidential (FR)". However, the
ard believes that you and selected members of your staff
14,111d find the material informative and useful in reviewing
'46 situation at your Bank.
Z
Very truly ypurs„
Merritt Sherman,
Secretary.
Enclosure.
O
TIIE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
Item No.
OF THE
9
7/11/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 12, 1962.
. Claude Yves Meade,
211 Egan
Drive,
Fairfax, Virginia.
Dear Dr.
Meade:
This letter, which supersedes the one sent to you on July
will confirm verbal arrangements that the Division of
co'.-sonnel Administration has made with you to conduct a course in
;
0 wersational French for members of the Board's staff as an activity
the Zmployee Training and Development Program.
6.
04 r%
'7U4)
pj
e
,
It is understood the course will consist of two 16-week
!
183tginni
m?sters, with classes meeting twice a week from 4:30 to 6:00 p.m.,
Personsng on September 25, 1962. The maximum enrollment will be ten
The Board agrees to pay you $450 for each semester, payable
at the conclusion of each semester. This fee would include any
,
Materi
,
° J..s supplied by you to the course participants, and would
itla.7 all preliminary preparation of lectures and appropriate examwilli°ne and the correction of papers. Textbooks for participants
'
be provided by the Board.
If the above arrangements are satisfactory with you,
Please
to th
your acceptance on the enclosed copy and return it
e Board.
Very truly yours,
.,-"---
c-------,
,
-(
Enclosure
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Federal Reserve Bank of St. Louis
Merritt Sh‘rma
Secretary.
1,---•-
BOARD OF GOVERNORS
4001***4
Item No. 10
OF THE
7/11/62
FEDERAL RESERVE SYSTEM
3
*
o
*
*
WASHINGTON 25. D. C.
1
1*
A00101E811
orricIAL
CORRCIIIPONOCNOIC
TO THIC NIOARO
July 12, 1962
CONFLFR
Hr. H. E. Hemmings,
First Vice President,
Federal Reserve Bank of San Francisco,
San Francisco 20, California.
.
Dear Mr. Hemmings;
In accordance with the request contained in
Your letter of July 6, 1962, the Board approves thrJ appointment of W. W. Hook as an assistant examiner for the
Federal Reserve Bank of San Francisco. Please advise
the effective date of the appointment.
It is noted that Mr. Hook is indebted to Bank
of America, NT&SA, Sunnyvale Branch, Sunnyvale, California,
and that he is indebted to, and owns 18 shares of stock
0f, Valley First National Bank, Cupertino, California.
Accordingly, the Board's approval of the appointment of
Mr. Hook is given with the understanding that he will not
Participate in any examination of Bank of America, NI&SA
until his indebtedness has been liquidated, or of Valley
First National Bank so long as he is indebted to, or owns
stock of, that institution.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
@FedFRASER