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Minutes for To: July 12, 1957 Members of the Board From: Office of the Secretary Attached is a copy of the minutes of the Board of Governors of the Federal Reserve System on the above date. It is not proposed to include a statement with respect to any of the entries in this set of minutes in the record of policy actions required to be maintained pursuant to section 10 of the Federal Reserve Act. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, if you were present at the meeting, please initial in column A below to indicate that you approve the minutes. If you were not present, please initial in column B below to indicate that you have seen the minutes. Chm. Martin Gov. Szymczak .1 Gov. Vardaman X Gov. Mills Gov. Robertson Gov, Balderston Gov. Shepardson / Withdrew from etlr at point indicated in mi 194. Minutes of actions taken by the Board of Governors of the Federal Reserve System on Friday, July 12, 1957. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mt. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Szymczak Vardaman 27./ Mills Robertson Shepardson Carpenter, Secretary Sherman, Assistant Secretary Kenyon, Assistant Secretary Hackley, General Counsel Masters, Director, Division of Examinations Mr. Hostrup, Assistant Director, Division of Examinations Mr. Hooff, Assistant Counsel Mr. Mr. Mr. Mr. Mr. Items circulated to the Board. The following items, which 484 been circulated to the members of the Board and copies of 'which ere attached to these minutes under the respective item numbers indicated, were approved unanimously: Item No. Letter to the Federal Reserve Bank of Minneapolis "roving the temporary retention in active service ' five employees beyond normal retirement dates. Letter to Carlen Realty Company, Tarpon Springs, Pio e„fida, regarding the company's status as a holding -"TanY affiliate. to the Federal Reserve Bank of Atlanta regarding 1Ttterpreceding item. Y With —drew from meeting at point indicated in minutes. 1 2 3 1948 7/12/57 -2Item No. Letter to the Internal Revenue Service inquiring 'Whether there would be any Objection on the part Of the Service to the proposed deletion of a ,Pecified footnote to section 10(c) of Regulation F. tWith the understanding that the letter would be sent after the subject had been discussed with the Office of the Comptroller of the Currency) 4 Letter to the Federal Reserve Bank of San Francisco concerning the application of section 4(c) of Regulation T, relating to special cash accounts. (With the understanding that copies would be sent to the Presidents of all Federal Reserve Banks) 5 Letter to Bank of America, New York, New York, approving the purchase of shares of Societe Anonyme Immdbiliere and a change in the location of the bank's Paris branch. For transmittal through the Federal Reserve Bank of New York) 6 Discount rates. There were presented telegrams proposed to be sent to the following Federal Reserve Banks approving the establishMeat without change by those Banks on the dates indicated of the rates (If discount and purchase in their existing schedules: San Francisco New York Cleveland Richmond Atlanta Chicago St. Louis Kansas City Dallas July July July July July July July July July 10 11 11 11 11 11 11 11 11 The telegrams were approved unanimously. Mr. Hooff then withdrew from the meting and Mr. Thomas, e°nc)mic Adviser to the Board, entered the room. 7/12/57 Salt Lake City Branch building program (Item No. 7). In a telegram dated July 11, 1957, President Mangels of the Federal Reserve Bank of San Francisco advised that the directors of the Bank had voted to approve the installation of additional piling at an estimated cost of *7,500 to permit the construction of additional vault facilities in the new Salt Lake City branch building. Mr. Mangels' telegram also stated that when estimates became available, consideration could be given to the desirability of proceeding with construction of another vault, depending on the need for additional racilities for emergency storage of currency. In any event, the Proposed expenditure for piling at this time would be good insurance exid would effect considerable savings if the vault were needed later. In a memorandum dated July 11, 1957, which had been distributed to the members of the Board along with copies of Mr. Mangels' telegram, Leonard explained that the proposal to install additional piling resulted from discussions arising out of the suggestion that Salt Lake City would be a desirable location for the storage of emergency 811PPlies of currency as part of the defense planning program. A ProPosed telegram to President Mangels which would state that the BOA,,A approved the installation of the additional piling was submitted With the memorandum. Following a brief discussion, unanimous approval was given to the proposed telegram to President Mangels. to these minutes as Item No. 7. A copy thereof is attached 7/12/57 -4111Xtension of time for filing Hearing Examiner's report (Item trat..a. In a memorandum dated July 9, 1957, Mr. Arthur Leff, Hearing Examiner on the applications of General Contract Corporation, St. Louis, Missouri, for determinations pursynnt to section 4(c)(6) of the Bank Holding Company Act, requested, for reasons stated, that the time within which he might file his report be extended from July 16, 1957, to September 15, 1957. Copies of Mr. Left's memorandum had been sent to the members of the Board with a memorandum from the Legal Division dated July 10, 1957, which expressed the view that the Hearing Examiner's request was reasonable, particularly because the case presented important and novel questions under the pertinent statutory provisions. Submitted vith the Legal Division's memorandum was a draft of Order which might be issued by the Board. Pursuant to the Legal Division's recommendation, the Board '=Izes.znal unanimously the issuance of an Order extending until September 15, 1957, the time for filing of the Hearing Examiner's report, with the understanding that copies of the Order would be sent to the Hearing Xe-miner, General Contract Corporation, and other appropriate parties. A coPY of the Order is attached to these minutes as Item No, 8. Application of Hamilton National Associates, Inc., for general 4'5.1 1:11L2e .Imit (Item No. 92. There had been distributed to the members °I' the Board copies of a memorandum from the Division of Examinations thated July 9, 1957, discussing the application of Hamilton National Associates, Inc., Chattanooga, Tennessee, for a general voting permit 1951 -5- 7/12/57 Covering its stock in eleven subsidiary banks. A supplemental memo- randum snalyzed the application in the light of the factors required to be considered by the Board pursuant to section 5144 of the Revised Statutes of the United States. On the basis of this analysis, it Igas the recommendation of the Division that the general voting permit be granted. After Mr. Hostrup had commented in response to certain questions raised by Governor Balderston, the Board voted unanimously in favor of issuance of the requested general voting permit. Seat A copy of the telegram to the Federal Reserve Agent at Atlanta pursuant to this action is attached to these minutes as Item No. 9. At this point Messrs. Riefler, Assistant to the Chairman, and Cc/nkling, Assistant Director, Division of Bank Operations, entered the room. Response to questions raised by Congressman Patman (Item No. lal. At the meeting of the Board on July 10, 1957, preliminary con- sideration was given to the response that should be made to certain Itlestions concerning the operations of the Federal Reserve System that /gere raised by Congressman Patman in a letter to Chairman Martin dated J41,, 8, 1957. Pursuant to the understanding at that time, the staff Ilaa. compiled proposed answers to the respective questions to the extent 7/12/57 -6- that time and the available information permitted. The suggested answers had been distributed to the members of the Board before this meeting, along with a draft of transmittal letter to Congressman Patman. The proposed replies were reviewed by the Board in detail, certain suggestions were made for changes therein, and the phrasing or the transmittal letter also was changed slightly. During the discussion Governor Vardaman withdrew from the illeeting. Before leaving, however, he indicated that he was satisfied Lth the proposed replies, subject to their being revised to the extent agreed upon at this meeting. At the conclusion of the discussion, the replies to the re8Pective questions, revised in the light of the comments made at this meeting, were approved unanimously for transmittal to Congressman Patman early Monday morning. The letter of transmittal was approved in the form attached to these minutes as Item No. 10. pata on local government bond sales (Item No. 11). There been sent to the members of the Board copies of a memorandum dated a4-101 "4-1., 1957, from Mr. Riefler, Mr. Koch, Assistant Director, Division Research and Statistics) and Miss Stockwell, Economist in that sion, submitting a draft of letter to the Presidents of all Federal ReBerve Banks which would request certain information on interest costs 44(1 credit ratings of small bond issues of municipal and other local 1953 7/12/57 -7s old during the first quarter of 1957. This would supplement the Boardls earlier inquiry of February 15, 1957, made in connection with its report on S. 775, a bill to encourage member h4nk investment in State and local government obligations through the medium of specialized investment companies. It was stated that the data proposed to be requested would be useful in connection with P°esible Congressional inquiries, and also in arriving at a judgment with regard to the effect of monetary restraint on the small municipality. Pursuant to the recommendation contained in the memorandum, it .u.a191. unanimously to request the Federal Reserve Banks to supply the information in question. A copy of the letter sent to the Banks Pursuant to this action is attached hereto as Item No._11. Mr. Conkling then withdrew from the meeting. Survey of Consumer Finances. In a memorandum dated July 10, 195,7 1, copies of which had been sent to the members of the Board, 14e8"e. Robinson, Adviser, and Williams, Assistant Director, Division t Research and Statistics, recommended that the staff be authorized to enter into a contract at this time with the Survey Research Center or the University of Michigan for continuation in 1958 of the Survey °t Consumer Finances. The proposed budget provision for this work was 4163,000, $13,000 higher than in 1957, and the amount would be incorP°1"sted in the regular budget of the Division of Research and Statistics. Ihe memorandum pointed out that since 1951 the annual budget for the I9, 7/12/57 -8- Survey had been held at $150,000, and actual outlays had been within a few thousand dollars of that figure, despite rising salaries and Other costs. However, two recent cost of living increases granted by the University had further affected the Research Center's costs Etna the proposed increase in the contract cost for the 1958 Survey uas considered to be warranted. As in the past, the contract amount Would be a maximum figure, with actual disbursements to be based on the submission of certified vouchers of direct and indirect costs. Governor Shepardson stated that he had discussed the matter with representatives of the Division of Research and Statistics and the Controller's Office, that the Board's staff had for some years been resisting an increase in the contract figure, and that the number °I' interviews in the Survey had been reduced to what appeared to be a illinimum consistent with appropriate sampling techniques. These steps having been taken, it seemed to him that the proposed increase in the contract amount was justifiable in the light of the Survey Research Center's increased costs. Governor Balderston then made a statement in which he said that while he would have no objection to authorizing a continuation Of the Survey of Consumer Finances in 1958, he felt that upon the l'eturn of Mr. Young, Director of the Division of Research and Statistics, th°11ght should be given to the possibility of turning the Survey over tO 'he sponsorship of some private organization such as the Ford Foun- t1°11. He observed that although the Survey, a unique pioneering 7/12/57 effort, was expensive for the System to conduct, criticisms had been made by the special committee which looked into the matter at the Board's request in connection with the Talle Subcommittee studies relating to Government statistics. These criticisms pointed to the need for changes which would make the Survey more effective but which vould also involve additionAl expense. Therefore, he suggested that the year ahead be devoted to studying ways and means of placing the Survey on the soundest possible basis, looking toward its eventual financing by some other interested organization. Governor Balderston's comments having been noted, Chairman Martin suggested that the staff be authorized to enter into a contract for the 1958 Survey on the basis recommended, with the understanding that this represented no commitment on the part of the Board to continue the Surveys after 1958 and that before the middle of next year the staff 'would explore all aspects of the matter. The procedure suggested by Chairman Martin was approved unani- During the foregoing discussion Mr. Robinson, Adviser, Division Of Research and Statistics, was called into the meeting. System for mechanization of check processing (Item No. 12). In a memorandum dated July 10, 1957, which had been distributed to the members of the Board, Messrs. Riefler, Assistant to the Chairman IC°ch, Assistant Director, Division of Research and Statistics, and 19,513 -10- 7/12/57 Eckert, Chief of the Banking Section in that Division, recommended that the Board send a letter to the Technical Committee on Mechanization Of Check Handling of the American Bankers Association inviting the Committee's attention to the desirability of incorporating a coding sYstem for identification of type of depositor in the automated check handling procedures being developed by the Committee. The memorandum stated that provision for such coding would minimize the cost and the reporting burden on respondent banks in supplying information such as that obtained in the annual deposit ownership survey and would also mean that needed information, such as data on debits by ownership gl'°uP, might be obtained in the not too distant future. The owner- ship coding problem had been discussed informally by members of the Board's staff with members of the Committee, and it was understood that a communication from the Board would be desirable as a basis for Placing the matter on the Committee's agenda. The memorandum also noted that interest had been expressed by the Bureau of the Budget in the coding problem. Pursuant to the recommendation contained in the memorandum, 114antmous approval was given to the letter to the Chairman of the Technical Committee of which a copy is attached hereto as Item No.12. Arrangements for Otto Bremer Company hearing At the meeting of the Board on July 3, (Item No. 13). 1957, the staff was authorized t° make arrangements for the hearing required under the Bank Holding C°mPanY Act with respect to a request by Otto Bremer Comparv, St. Paul, 7/12/57 -11- Minnesota, for a determination under section 4(c)(6) of the Act. In a memorandum dated July 11, 1957, which had been distributed to the members of the Board, Mr. Hackley reported that arrangements had been made for the detail of Mr. Arthur Leff to the Board as Hearing Examiner for an additional period of six months beginning August 1) 1957, that Mr. Leff therefore would be able to preside at the Otto Bremer Company hearing, that Mr. Sigurd Ueland, Vice President and Counsel of the Federal Reserve Bank of Minneapolis, had agreed to serve as Board Counsel in connection with the hearing, and that Mr. G. W. Lamphere) Assistant General Counsel for the Federal Reserve Bank of Chicago, had agreed to assist Mr. Ueland. After consultation, it appeared that it would be convenient for ell parties to begin the hearing at the Minneapolis Reserve Bank °4 August 20, 1957. Accordingly, there was submitted a draft of Order for Hearing which might be issued by the Board. Pursuant to the recommendation contained in Mr. Hackley's temorandum, unanimous approval was given to the Order, of which a COPY is attached hereto as Item No. 13, with the understanding the.t copies would be sent to Otto Bremer Company and other approPriate parties and that the Order would be published in the Federal Register. The meeting then adjourned. 1958 7/12/57 -12Secretary's Note: Pursuant to recommendations contained in memoranda from appropriate individuals concerned, Governor Shepardson approved on behalf of the Board on July 11, 1957, the following items affecting the Board's staff: Transfer and salary increase Nyart S. Sharigan, from the position of Clerk-Stenographer in the Division of Bank Operations to the position of Secretary in the Division of International Finance, with an increase in basic annual salary from Y3,925 to $4,075, effective the date she assumes her new duties. .§.:214111:7 increases, effective July 14, 1957 llama and title Division Basic annual salary From To Office of the Secretary $4,890 $5,065 3194C 4,075 3,415 6,820 3,500 7,035 Patricia C. Fitmaurice, Clerk 3,175 IlancY S. Martino, Economist5,440 3,260 5,575 Doreen Dippre, Secretary Legal EUgene C. Harrison, Clerk Research and Statistics Eleanor J. Pratt, Clerk Relmut F. Wendel, Economist International Finance Bank Operations 4Yart S. Sharigan Clerk-Stenographer thleen Edwards, ' Clerk-Stenographer 3,755 3,840 3,415 3,500 1959 7/12/57 -13- Salary increases, effective July 14, 1957 (continued) Name and title Division Basic annual salary To From Examinations Jerome T. Kelley, Senior Federal Reserve Examiner $10,535 $10,750 Administrative Services Robert H. Craft, Operator, Tabulating Equipment 3,755 3,840 4,930 Donald B. Fitzhugh, Tabulation PlEtnner 5//AO 4,350 4,525 Rerbert E. Haney, Operator, Tabulating Equipment 7)465 Davis H. Wilson, Chief, Machine Tabulation and 7,785 Telegraph Section 1960 BOARD OF GOVERNORS OF THE Item No. 1 7/12/57 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 12, 1957 Mr. Frederick L. Deming, President, Federal Reserve Bank of Minneapolis, Minneapolis 2, Minnesota. near Mr. Deming: In view of the circumstances outlined in your letter of hne 26, 1957, to Mr. Sprecher concerning the extension of retirement d4tes for five of your employees, the Board of Governors approves the retehtion in service and the payment of salary to the following persons throucth the dates indicated: Name James A. McDonald Gregg Wilson James P. Clark Emma A. Engen Edward A. Daly the fh Extended Through October 21, 1957 October 23, 1957 November 3, 1957 December 29, 1957 December 30, 1957 It is understood that if the benefits from the changes in p ,Letirement System become effective prior to any of these dates, se retentions will extend only to such prior date. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. BOARD OF GOVERNORS 0,010,44,4. - 44 1, 0 Item No. 2 OF THE , ,%9•10'Qop,*4, 7/12/57 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. 14Z; , tva4t ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 12, 1957 Mr. A. L. Ellis, President, Carlen Realty Company, Tarpon Springs, Florida. Dear Mr. Ellis: This refers to the request contained in your letter of May 20, 1957, submitted through the Federal Reserve Bank of Atlanta, !:or a determination by the Board of Governors of the Federal Reserve ,ystem as to the future status of Carlen Realty Company, Tarpon Springs, 'Iorida, as a holding company affiliate. From the information submitted, the Board understands that Carl -en Realty Company is principally engaged in the business of acquiring developing, remodeling and constructing buildings and other;!'se improving real estate for investment, income and profit from sales; that Carlen Realty Company owns 16,250 of the 20,000 outstanding shares Of stock of First National Bank in Tarpon Springs, Tarpon Springs, -orida, and 3,200 of the 5,000 outstanding shares of stock of Central aldwin Bank, Robertsdale, Alabama; that Carlen Realty Company plans to distribute to its stockholders all or substantially all of the stock ofIch it owns of Central Baldwin Bank; and that after this distribution tock is accomplished, Carlen Realty Company will not, directly or .1 1rectly, own or control any stock of any other banking institutions, manage or control any banking institution other than First National ank in Tarpon Springs. W 7 In view of these facts, the Board has determined that Carlen Company, after it distributes all or substantially all of the ek which it owns of Central Baldwin Bank, will not be engaged, mar neetlY or indirectly, as a business in holding the stock of, or 4.11ing or controlling banks, banking associations, savings banks or ' rust companies within the meaning of section 2(c) of the Banking Act ' de„,„„Of 1933; and, accordingly, Carlen Realty Company will not be t6"ed to be a holding company affiliate for any purposes other 11; 4/1 those of section 23A of the Federal Reserve Act and will not the eci a v9ting permit from the Board of Governors in order to vote stock of First National Bank of Tarpon Springs. Rea1.4. r HOARD Mr. A. L. Ellis or GOVERNORS or THE FEDERAL RESERVE SYSTEM -2- If, however, the facts should at any time differ from those set out above to an extent which would indicate that Carlen Reaty Company might be deemed to be so engaged, this matter should again be submitted to the Board. The Board reserves the right to rescind this determination and make a further determination of this matter on the basis of the then existing facts. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. 1962 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 3 7/12/57 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 12, 1957 Mr. J. E. Denmark, Vice President, Federal Reserve Bank of Atlanta, Atlanta 3, Georgia. Dear Mr. Denmark: This refers to your letter of May 31, 1957, relating to the holding company affiliate status of Carlen Realty Company, Tarpon Springs, Florida. There is enclosed for transmittal, a letter of this date addressed to Mr. A. L. Ellis, President of Carlen Realty Company, advising him of the action taken by the Board with respect to this Matter. A copy of the letter is also enclosed for your files. Mr. Ellis' letter of May 20, 1957, indicates that Carlen Company intends to dispose of its stock in Central Baldwin Bank Diank by a distribution that would be entitled to the tax advantages .Provided by sections 1101-1103 of the Internal Revenue Code, and it i3 s noted that the Company wishes to expedite the proposed distribu.1. Presumably the Company is aware that the tax benefits are vallable only if the Board makes the necessary certifications before 812,e distribution takes place. In any event, the Company's attention wruld be directed to section 5(c) of Federal Reserve Regulation Y, ich Provides that applications for tax certifications shall be filed not c less than 60 days in advance of the proposed distribution. The should also be informed that certification as to "qualified bank : 114 holding corporation" status, under section 1103(b) of the Code, the ascertainment of certain factual matters; and since this 'flay be complex and time-consuming, the Company may wish to file its :application for tax certification with your Bank as soon as plans for the d istribution become definite. Z Very truly yours, igned) Merritt Sherman Merritt Sherman, Assistant Secretary. 11-1e1oeures 1964 BOARD OF GOVERNORS OF THE Item No. FEDERAL RESERVE SYSTEM 4 7/12,67 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD Honorable Russell C. Harrington, Commissioner, Internal Revenue Service, 12th and Constitution Avenue, N. W., Washington 25, D. C. Nar Mr. Harrington: Section 584 of the Internal Revenue Code exempts common rust funds from Federal income taxation. The term "common trust .tund" is defined to mean a fund maintained by a bank (1) exclusively for the collective investment of funds held by the bank in fiduciary capacities, and (2) "in conformity with the rules and regulations, prevailing from time to time, of the Board of Governors of the Federal Reserve System pertaining to the collective investment of trust funds by national banks." After section 584 was enacted in 1936, the Board of Governors con suited the Bureau of Internal Revenue in 1937 before issuing rules .1L2d regulations on this subject, which were (and still are) embodied -" section 17 of Federal Reserve Regulation F (12 C.F.R. 206.17). As you know, section 584 was enacted chiefly for the Purn Pose of eliminating a tax burden on collective investment of aller trusts, resulting from the holding in Brooklyn Trust Company Zilljg1 1.212.212..1111E (C.C.A. 2, 1936), 80 Fed. 2d 865, that collective by "'orient of the funds of a number of individual trusts administered taxa bank gives rise to an "association" that is subject to income ation as a corporation. In 1954 the Board of Governors was informed by a national that it pens desired to invest collectively funds of a number of or Tlon and profit-sharing trusts administered by it. Section 10(c) 'egulation F then prohibited collective investment of trust funds aexcePt as permitted in section 17." However, section 17 prescribes TruZu2000 maximum on the investment of any one trust in a Common Fund maintained in accordance with that section, and consegilentiv or 4„. -.vestment in such a Common Trust Fund would not take care '"4a situation, since it was desired to invest collectively funds BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Honorable Russell C. Harrington 196'5 -2- Of individual pension trusts in amounts far in excess of the $100,000 Illaxinum. Also, it was not practical to comply with other detailed requirements of section 17. After consideration of the problem, the Board in 1955 allended section 10(c) of Regulation F so that it now not only permits national banks to invest collectively in accordance with section 17, but also provides that "funds of a trust which forms part of a pension, profitsharing, or stock bonus plan of an employer for the exclusive benefit of his employees or their beneficiaries and which is exempt from Federal income taxes under the Internal Revenue Code may be invested collectively with funds of other such pension, profit-sharing, or stock bonus Plan trusts if such collective investment is specifically authorized by the instrument creating the trust or by court order." Copies of Regulation F, as amended, are enclosed. After this proposed amendment to section 10(c) had been Pklblicized bnt before its adoption, the Board learned that some banks Ir;e4,garded it as constituting "rules and regulations . . . of the Board Governors . . . pertaining to the collective investment of trust 14,11ds by national banks" within the purview of section 584. The Board i:s under the impression that section 584 contemplated only collective i,41estment of smaller trusts in accordance with relatively detailed pe1ec and regulations. Since the proposed collective investment of tv,nsion trusts did not fall within this category, the Board assumed f2t such a collective fund would not constitute a "common trust "d" within section 584. Accordingly, in order to avoid what the thought might be a misunderstanding of the effect of the amendthe following footnote was added to section 10(c) of Regulation P: 4 -ection 584 of the Internal Revenue Code of 1954 provides that a common trust fund maintained in conformity with rules and regulations of the Board of Governors of the Federal Reserve system 'pertaining to the collective investment of trust funds by national banks' and meeting certain other riequirements shall not be subject to Federal income taxation. The rules and regulations of the Board of Governors for the oses of section 584 are contained solely in section 17 of regulation; and the permission contained in exception (11) of section 10(c) is not intended to confer exemption from Federal income taxation under section 584." Pt7s BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 4110rable Russell C. Harrington _3_ The Internal Revenue Service in 1955 ruled that when pension were invested collectively, in specified circumstances, "the ,T7r°443 trust will . . . constitute a qualified trust under section 401(a) the 1954 Code and will be exempt from tax under section 501(a) of that Code." Rev. Rul. 56-267, C.B. 1956-1, p. 206. Consequently, for ane°me tax purposes the question of the applicability of section 584 IParently became immaterial, in such cases, However, it is understood t at the applicability of section 584 to collective investment of pension inirli, sts Pursuant to section 10(c) of Regulation F is important in deterto1.4ng. whether certain transactions by such collective funds are subject se the documentary stamp tax imposed by section 4301 of the Code, since cPi°n 4303 exempts from that tax "the issue of shares or certificates ab 4 common trust fund, as defined in section 584." Apparently the "_quoted footnote to section 10(c), particularly the last sentence re°f, constitutes an impediment to a ruling by the Internal Revenue ss; sec ce that collective funds of pension trusts, as permitted by -on 10(c), are "common trust funds" within the meaning of section 5a4" ta,and therefore are within the exemption from documentary stamp 'es that is provided by section 4303. tnasts J The Board of Governors is considering the deletion of the hece -quoted footnote from Regulation F, since that footnote is not , 8sary to the effectiveness of the Regulation from the point of vie rid- of the Board's supervisory responsibilities with respect to ti:V-arY activities of national banks. However, the deletion of adirl:&00tnote probably would be interpreted by banks and their tax as indicating that collective funds of pension trusts that NV with section 10(c) constitute "common trust funds" within the Iew of section 584 of the Code. Accordingly, the Board would app; the "tate being informed whether there would be any objection on 134rt of the Internal Revenue Service to the proposed deletion. above Very truly yours, S. R. Carpenter, Secretary. Zneic EtUres BOARD OF GOVERNORS OF THE 4 al FEDERAL RESERVE SYSTEM A* Item No. 7/12/57 5 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE 44k a TO THE BOARD '7,,A1 IMO ttri 44o*** July 12, 1957 Mr. H. F. Slade, Vice President, Federal Reserve Bank of San Francisco, San Francisco 20, California. Dear Mr. Slade: This is in further reference to your letter of June 12, 1957, concerning whether purchases of securities by certain municiPal employees' retirement or pension systems on the basis of arrange: 1l ent5 for delayed delivery and payment, might properly be effected OY a creditor subject to Regulation T in a special cash account Wider section 4(c) of the regulation. It appears that in a typical case the supervisors of the retirement system meet only once or twice each month, at which times aecisions are made to purchase any securities wished to be acquired for.the system. Although the securities are available for prompt , ellvery by the broker-dealer firm selected to effect the system's PI:Irchase, it is arranged in advance with the firm that the system Will not accept delivery and pay for the securities before some te more than seven business days after the date on which the securities are purchased. Apparently, such an arrangement is oc casioned_ by the monthly or semimonthly meetings of the system's : upervisors. It is indicated that a retirement system of this kind aY he supervised by officials who administer it as an incidental Partof their regular duties, and that meetings requiring joint tpc.,'1°n by two or more supervisors may be necessary under the sys-w s rules and procedures to authorize issuance of checks in Parent for the securities purchased. It is indicated also that the Purchases do not involve exempted securities, securities of the kind covered by section 4(c)(3) of the regulation, or any shipof securities as describbed in section 4(c)(4) The regulation provides that a creditor subject thereto not effect for a customer a purchase in a special cash account i l ter section 4(c) unless the use of the account meets the limitaca_a of section 4(a) and the purchase constitutes a "bona fide ofn transaction, ' which complies with the eligibility requirements be! ecti°n 4(c)(1)(A). One such requirement is that the purchase ' lade "in reliance upon an agreement accepted by the creditor litay BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Mr. H. F. glade -2- [broker-dealer] in good faith" that the customer will "promptly" !flake full cash payment for the security, if funds sufficient fo the purpose are not already in the account; and, subject to certain exceptions, section 4(c)(2) provides that the creditor shall promptly cancel or liquidate the transaction if payment is not made by the Cus Wailer within seven business days after the date of purchase. As indicated in the Board's interpretation at 1940 Federal Reserve Bulletin 11724 a necessary part of the customer's undertaking pursua9t to section b(c)(1)(A) ia that he "should have the necessary means 01 payment readily available when he purchases a security in the Pecial cash account. He should expect to pay for it immediately ?r in any event within the period (of not more than a very few days) alat is as long as is usually required to carry through the ordinary becurities transaction." The arrangements for delayed delivery and payment in the ease under consideration clearly would be inconsistent with the ! *equirement of section 4(c)(1)(A) that the purchase be made in rethe upon an agreement accepted by the creditor in good faith that e customer will "promptly" make full cash payment for the security. i.ccordingly, the transactions would not qualify as a "bona fide cash 31,ransaction!' and, therefore, could not properly be effected Tra Peoial cash account, unless a contrary conclusion would be justified the exception in section 4(c)(5) to which you referred. Section 4(c)(5) provides that if the creditor, uacting in °°d faith in accordance with" section 4(c)(1), purchases a security for cL customer ' ,with the understanding that he is to deliver the -11.:,urity promptly to the customer, and the full cash payment to be Promptly by the customer is to be made against such delivery'', the ;e creditor may at his option treat the transaction as one to which t e Period applicable under section 4(c)(2) is not the seven days erein specified but 35 days after the date of such purchase. It will be observed that the application of section 4(c)(5) is s pecifically conditioned on the creditor acting in good faith in !ic_cordance with section 4(c)(1). As noted above, the existence of '4! arrangements for delayed delivery and payment in the present cos? would prevent this condition from being met, since the customer 4240 : 1 not be regarded as having agreed to make full cash payment sr_olnptlyn. Furthermore, such arrangements clearly would be incon,Zt?nt with the requirement of section 4(c)(5) that the creditor -4-lver the security promptly to the customer". BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM *. H. F. Slade Section 4(e)(5) was discussed in the Board's published ; 1: 141terpretation, referred to above, which states that "it is not Purpose of section 4(c)(5) to allow additional time to custotrs., for making payment. The prompt delivery described in section ,(5) is delivery which is to be made as soon as the broker or ) rir. can reasonably make it in view of the mechanics of the securi: files business and the bona fide usages of the trade. The provision ee!ely recognizes the fact that in certain circumstances it is an as uablished bona fide practice in the trade to obtain payment ry Cainct delivery tact the c-ecurity to the customer, and the further to the customer's 1„.e. .that the mechanics of the trade, unrelated adlness to pay, may sometimes delay such delivery to the customer." 'C • reason for the In this case it appears that the only is 10 related solely to the customer's readiness to pay and keen.° way attributable to the mechanics of the securities business. exception in section 11 -nglY, it is the Board's view that the the transactions in permitting k)) should not be regarded as account. cash tion to be effected in a special delay 4(4 Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. I 4 BOARD OF GOVERNORS 1 4010**, Copr*po r OF THE FEDERAL RESERVE SYSTEM ) Item No. 6 7/12/57 WASHINGTON 25, D. C. ADDRESS OFFICIAL. CORRESPONDENCE TO THE BOARD July 12, 1957 tr Russell G. Smith, 4xecutive Vice President, 1,3ank of America, Wall Street, Ileu York, New York. DearlIr. Smith: In accordance with the request contained in your letter June 21, 1957, transmitted through the Federal Reserve Bank of York, as supplemented by your letter of July 3, 1957, the Board Governors grants its consent to your bank to purchase 9,500 shares .()00 Francs par value each) of Societe Anonyme immobiliere du 28 Place :?ndome for the Franc equivalent of approximtely A20,000. These it is understood, represent the total outstanding capital stock the company, which was organized under French law for the sole purVs, of acquiring the land and building located at 28 Place Vendome, 41 ' 183 Fr- ce. r The Board's approval of the proposed purchase is given vith the understanding that (1) the activities of the building I ,TanY will be restricted to holding the property at 28 Place ti7zome and (2) Bank of America will be expected to dispose of pre stock of Societe Anonyme Immobiliere du 28 Place Vendome as Alic4VtlY as practicable in the event that operations of Societe Immobiliere du 28 Place Vendome should at any time be Itee°flsistent with the provisions of Section 25(a) of the Federal aerve Act or regulations thereunder. Z The Board understands that it is the desire of your bank to el, de ange the location of its present Paris Branch from 9 Boulevard nadeleine to 28 Place Vendome as soon as the building can be theled to meet the requirements of your Paris Branch. Accordingly, oard of Governors approves the change in location of your Paris atrh from its present address to 28 Place Vendome, with the under1.,0 ding that such removal will be accomplished within nine months 1/1 the date of this letter. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 1,r. Russell G. Smith - 2- Please advise the Board of Governors in writing, through the Pederal Reserve Bank of New York, when the branch is noved to the new location anri cpened for business. It is understood, of °urse, that the new location approved will not be changed without : 6he prior approval of the Board of Governors. Very truly yours, (Signed) Merritt Sherman nerritt Sherman, Assistant Secretnry. J71 TELEGRAM BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 7 7/12/57 LEASED WIRE SERVICE WASHINGTON July 12, 1957 Mengels - San Francisco Re your wire July 11. Board approves change of plans t°14 new Salt Lake City Branch for installation of additional Piling to permit construction of additional vault facilities either in connection with original construction or at a later date. It is understood that, before proceeding with the conatruction of the additional vault, the matter will be submitted to the Board under the usual procedure. (Signed) S. R. Carpenter Carpenter. 1_973 Item No. 7/12/57 UNITED STATES OF AMERICA BEFORE THE BOARD OF GOVERNORS OF THE kEDERAL RESERVE SYSTEM WASHINGTON, D. C. N THE MAIgER OF THE APPLICATIONS OF GENERAL CONTRACT CORPORATION FOR DETERMINATIONS PURSUANT TO SECTION 4(c)(6) OF BANK HOLDING COMPANY ACT OF 1956 ORDER EXTENDING TIME FOR FILING OF REPORT BY HEARING EXAMINER Additional time having been requested by the Hearing Examiner within which to file with the Secretary of the Board his teport containing his recommended decision and it appearing to the Board that such request should be granted, it is hereby ORDERED that the time within which the Hearing Examiner may file such recommended decision be, and the same hereby is, extended to and including September 15, 1957. This 12th day of July , 1957. By order of the Board of Governors. (Signed) S. R. Carpenter S. R. Carpenter, Secretary. (SEAL) 8 1974 TELEGRAM BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 9 7/12/57 LEASED WIRE SERVICE WASHINGTON July 12, 1957 MITCHELL - ATLANTA KEBJE A. Hamilton National Associates, Inc., Chattanooga, Tennessee. B. The Calhoun National Bank, Calhoun, Georgia; The First National Bank of Cartersville, Cartersville, Georgia; The Commercial National Bank Cedartown, Georgia; First National Bank in Harriman, Harriman, Tennessee; The Hamilton National Bank of Johnson City, Johnson City, Tennessee; The First National Bank of Lenoir City, Lenoir City, Tennessee; The First National Bank of Loudon, Loudon, Tennessee; The Hamilton National Bank of Morristown, Morristown, Tennessee; The First National Bank of Oneida, Oneida, Tennessee; The First National Bank of Pikeville, Pikeville, Tennessee; The First National Bank of South Pittsburg, South Pittsburg, Tennessee. C. nor to issuance of general voting permit, authorized herein, applicant shall execute and deliver to you in duplicate an agreement in form accompanying Board's letter S-964 (FRLS #7190). (Signed) Merritt Sherman SHERMAN Ittga The Board authorizes the issuance of a general voting permit, under the provisions of section 5144 of the Revised Statutes of the United States, to the holding company affiliate named below after the letter "A", entitling such organization to vote the stock which it owns or controls of the bank(s) named below after the letter "B" at all meetings of shareholders of such bank(s), subject to the 1975 -2- condition(s) stated below after the letter "C". The period within which a permit may be issued pursuant to this authorization is limited to thirty days from the date of this telegram unless an extension of time is granted by the Board. Please proceed in accordance with the instructions contained in the Board's letter of March 10, 1947, (S-96h). 1976 t,itt v• r BOARD OF GOVERNORS Item No. 10 OF THE FEDERAL RESERVE SYSTEM c'6 ".` 7/12/57 WASHINGTON OFFICE OF THE CHAIRMAN July 15, 1957. he Honorable Wright Pathan, 11se of Representatives, w ashington 25, D. C. ear M. Patman: theThis letter is for the purpose of sending to you before commencement of the hearings on the Financial Institutions Act the3hi answers as we could prepare, in the short time available, to li ,questions attached to your letter of July 8, 1957. As you tcl'-; realize, these answers, which are attached, of necessity had h °e relatively brief and limited to the information readily at 4411. If, after the hearings, it is your judgment that the v, wra should be fully developed along the lines suggested in ;;;u:r questions, we shall endeavor to assemble such information as to,Fan. However, that will take a considerable amount of time wl here and at the Federal Reserve Banks. Sincerely yours, Wm. McC. Martin, Jr. trIciosure8 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 11 7/12/57 WASHINGTON 25, D. C. ADOWESS OFFICIAL CORRESPONOENCE TO THE BOARD July 12, 1957. Dear sir: to su,s The Board's letter of February 15, 1957, asked the Reserve Banks urits'lleY developments in financing by State and runicipal governmental and the resulting information furnished has been helpful. A Of 19necific check of municipal borrowing costs during the first quarter is now being made. The Investment Bankers Association has supplied °f all municipal bond issues of less than „250,000 that were sold ast,g that quarter. For most of the issues listed, however, information credit quality and the cost of borrowing was not available. 80ard, To assist in the check now being made of borrowing costs the period and ereclit rc)uld ascertain the borrowing cost froni quai appreciate having Your Bank ity for small bond issues in your district during the °ItaineruarY through 14arch where such information has not already been Your di', The attached tabulation lists all of the small bond issues in cost a-sLrict during the three months in question, and the issues for which Credit quality are available are indicated. Your assistance in ;ztylillzsinf0rmation for the other issues is desired. In cases where are not made by nationally recognized rating authorities, 11-141. 1 .1e / able to obtain roughly comparable information on quality from Sta ' ;",a , securities underwriters specializing in bonds of a particular area, some of which firms may have informal rating systems. sqes. in Your Examinations Department may also be helpful in rating i%es In order to minimize the reporting burden, a sample of the bond rpreInt:i whieh cost and quality information is desired has been selected or whif st supplied by the Investment Bankers Association. Theindicated issues It is hoped you will be able to furnish information are TrIclosed list by a check mark to the left of the name of the issuer. ' o. ou be able readily to obtain information on other issues, that rIal data also would be helpful. t() It will be appreciated if the requested information can be sent Ile Board's offices by July 31. Tit P'• Inrz 7-NT OF ALL BANKS Very truly --,..... 116, gift N32A 1.4.A A C:1).A/\___AA, _ ,'-Merritt Sh6rman Assistant SOH,5,4ry. ( I BOARD OF GOVERNORS OF THE 4n.4.346/ v,01„:,40 e X g•4 I Item No. 12 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ; 41 &11 742/57 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD * July 12, 1957 Mr. John A. Kley, Chairman, Technical Committee on Mechanization Of Check Handling, Bank Management Commission, American Bankers Association, 12 East 36th Street, New York 16, New York. Dear Mr. Kley: The Board has been following with much interest the progress being made by your Committee in developing an optimum system for st andardized mechanization of check processing. It is our understanding that you are now considering the items of information regarding each check that would be necessary in such a system, and the items to be Prioted in magnetic ink on the face of the check. In this connection, the Board willies to invite the attention of Your Committee to the desirability of making provision in the new check processing system for identification of type of depositor. By incorporating into the system a simple standardized set of code numbers Jaito the depositor, information such as is now reported on the anntlal deposit ownership survey could be supplied at minimum cost and inecnvenience to respondent banks. Moreover, information needed to "tietY needs of bank management and the public for data on deposit "ti'ity by ownership group would be readily obtainable. t 1_979 *. John A. Kloy, Chaiman -2- The Board has no specific coding to propose at this time. Hover, if this suuestion meets with your approval members of our staff 41'0 availnble to assist your Committee in any way they can to develop itchle coding system. V3ry truly yours, (Signed) Merritt Sherman Merritt Shormn, AcAtant Secretary. a 1980 FEDERAL RESERVE SYSTEM OTTO BREMER COMPANY ST. PAUL, MINNESOTA Item No. 13 7/12/57 NOTICE OF REQUEST FOR DETERMINATION PURSUANT TO SECTION h(c)(6) OF BANK HOLDING COMPANY ACT OF 1956 AND ORDER FOR HEARING THEREON Notice is hereby given that request has been made to the Board of Governors of the Federal Reserve System, PlIrsilant to section h(c)(6) of the Bank Holding Company Act Of 1956 212 U.S.C. 184j7 and section 5(b) of the Board's Regulation Y 212 CFR 222.5(1317, by Otto Bremer Company, St. Paul, Minnesota, a bank holding company, for a determination by said Boa rd that each of the companies listed below and the activities ther__„ uol. are of the kind described in those provisions of the Act and the regulati on so as to make it unnecessary for the prohibitions c)f section 4 of the Act with respect to retention of shares in "nbenking organizations to apply in order to carry out the purposes °f the Act: 1. Citizens Agency, Inc. 2. 3. The Saulpaugh Corporation 4. Western State Agency, Inc. s. New England Insurance Agency Drovers Exchange Agency & 6. 7. WiRealty, Inc. lliston Realty Company Willmar Investment Company Inasmuch as section h(c)(6) of the Bank Holding Company Act Of , 4.956 requires that any determination pursuant thereto be made bY thc, - Board after due notice and hearing and on the basis of the record made at such hearing, IT IS HEREBY ORDERED That pursuant to section 4(c)(6) of the Bank Holding Company Act of 1956 and in accordance with sections 5(b) and 7(a) of the Board's Regulation Y 25-.2 CFR 222.5(b), 222.7(a17, Promulgated under the Bank Holding Company Act of 1956, a hearing with respect to this matter be held commencing on August 20, 1957, at 10 °clock a.m., at the office of the Federal Reserve Bank of Minneapolis, 73 South Fifth Street, in the City of Minneapolis, State of Minnesota, before a hearing examiner selected by the Civil Service Commission Pursuant to Sec. 11 of the Administrative Procedure Act, such hearing to be conducted in accordance with Rules of Practice for Formal Hearings °t the Board of Governors of the Federal Reserve System CFR Part 262. The Board's Rules of Practice for Formal Hearings provide, in part, that all such hearings shall be private and shall be attended only by respondents and their representatives or counsel, representatives of thR Board) witnesses, and other persons having an official interest in the Proceedings; Provided, however, That on the written request of one or more respondents or counsel for the Board, or on its own motion, the 1)(34rd, when not prohibited by law, may permit other persons to attend or rnsY order the hearing to be public." Any person desiring to give testimony in this proceeding Should file with the Secretary of the Board, directly or through the ?ederal Reserve Bank of Minneapolis, on or before August 9, 1957, a written request relative thereto, said request to contain a statement Of the reasons for wishing to appear, the nature of the petitioner's 1982 interest in the proceeding, and a summary of the matters concerning Which said petitioner wishes to give testimony. Such request will be Presented to the designated hearing examiner for his determination in the matter at the appropriate time. Persons submitting timely requests • 411 be notified of the hearing examiner's decision in due course. By order of the Board of Governors. (Signed) S. R. Carpenter S. R. Carpenter, Secretary. July 12, 1957.
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