The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Minutes for July To: 14, 1959 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 Gov. Mills Gov, Robertson Gov. Balderston Gov. Shepardson Gov. King Minutes of the Board of Governors of the Federal Reserve System on Tuesday, July 14, 1959. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Szymczak Mills Shepardson King Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Discount rates. Reserve, The Board met in the Board Room at 10:00 a.m. 114 of Boston ' Sherman, Secretary Kenyon, Assistant Secretary Hackley, General Counsel Farrell, Director, Division of Bank Operations Noyes, Adviser, Division of Research and Statistics Hexter, Assistant General Counsel Hostrun, Assistant Director, Division of Examinations Nelson, Assistant Director, Division of Examinations Benner, Assistant Director, Division of Examinations Smith, Assistant Director, Division of Examinations Daniels, Assistant Director, Division of Bank Operations Gehman, Chief, Business Conditions Section, Division of Research and Statistics The establishment without change by the Federal on July 13, 1959, of the rates on discounts and a4vances in its existing schedule was approved unanimously, with the Iltierstandi ---ng that appropriate arlvice would be sent to the Bank. Items been circulated to the Board. The following items, which had . circulated to the members of the Board and copies of which are °:ttaellea to these minutes under the respective item numbers indicated, `!.q.-TI:Slaaa unanimously: r 7/14/59 -2Item No. Letter to the Manufacturers Trust Company, New York FltY, granting an extension of time to establish a branch at 1261-79 Avenue of the Americas. Letter to the Ypsilanti Savings Bank, Ypsilanti, Michigan, granting an extension of time to establish a branch in Washtenaw County. 2 Letter to the Central Savings Bank and Trust Company, onroe, Louisiana, approving the establishment of a ranch in West Monroe. 3 Letter to The First State Bank & Trust Company of Lufkin, Lufkin, Texas, approving its request for Permission to exercise fiduciary powers. 4 Letter to the Union Bank, Los Angeles, California, allPr°vIng the establishment of a branch in Torrance. 5 Letter to the Comptroller of the Currency recommending avordbly with respect to an application to organize national bank in Garden City, New York. 6 t r Letter to the Federal Reserve Bank of Chicago approving the Payment of salary during the period July 1-31, 1959, : ye . 11. employee who attained retirement age earlier this 7 In discussion preceding approval of Item No. 6, relating to an aPPlication to organize a national bank at Garden City, New York, Governn „„ PLI-Lls observed that the draft of letter to the Comptroller of the Currency, as circulated to the members of the Board, indicated th4t the board of directors of the proposed bank was generally un1111111lessive, a phrase suggested by the report of investigation of the New v , "orit Reserve B. While agreeing with the proposed unfavorable 7/14/59 -3- recommendation on the application, Governor Mills suggested that the d irectors, as a group, appeared reasonably satisfactory for a bank in aa outlying community and that the Reserve Bank might be unduly lanuenced by the caliber of the directors at larger banks in New York City. After discussion of this point in the light of the information contained in the report of investigation, it was agreed that the portion Of the draft letter referring to the directors should be modified. 4ccordingly, the letter was sent in the form attached as Item No. 6. Mr. Benner withdrew from the meeting at this point. Electric power statistics. There had been circulated to the ard a memorandum from Mr. Young, Director of the Division of Research 41141 Statistics, dated June 26, 1959, reviewing the results of efforts by members of the Federal Reserve staff since the summer of 1957 to clbtain the cooperation of major utility companies in establishing a iliclIthlY series on industrial electric power use, classified according t0 the standard industrial classification. Submitted with the memo- were (1) a report of the Bureau of the Budget recognizing the electric power undertaking as contributing directly to the Board's focal responsibility for the measurement of industrial production, 446 '(2) a report dated June 16, 1959 by an ad hoc subcommittee of the 7/14/59 85rstem Research Advisory Committee recommending a national approach to the development of electric power statistics. In view of the potential usefulness of such statistics for analyzing changes in national economic aetiv4Y and the substantial progress made by most of the Reserve Banks it developing working relationships with the utility companies, Mr. l'c 'ung ts memorandum suggested that data on electric power sales be made a regular part of the System's statistical program. After commenting on the exploratory work done to date, Mr. Noyes stated that it seemed appropriate at this stage to decide whether the collection of electric power data should be made a formal System project, and the necessary clearances from the Budget Bureau obtained, or Whether to abandon the project. The Board's staff was anxious to go forward and, as indicated by the report of the ad hoc subcommittee, it appeared that most/ -perhaps all, of the Reserve Banks would be both agreeable and enthusiastic. In addition to national totals, the program would provide l'egi°nal data that the Banks should find helpful for their own purposes. Mr. Noyes then suggested that it would be appropriate, if the Bo d - 14as favorably disposed toward the program, to send a letter to the R. .. --crve Bin order to give them an opportunity to express their viet-0 before the Board made a formal decision. An approach to the Banks aUggested because on them would fall the burden of getting the power comp—, exiles to report the statistics and of transmitting the statistics to the , 1 Board. On the other hand, the duties of the Board's staff would 7/14/59 be -5- relatively minor, consisting principnlly of consolidating the Reserve Bank reports and analyzing the data. It was the unanimous view of the Board that it would be desirable to go forward with the project. Accordingly, it was under- Stood that a letter such as suggested by Mr. Noyes would be sent to the Federal Reserve Banks. Messrs. Noyes and Gehman then withdrew from the meeting. Application by Firstamerica for voting permit (Items 8 9 and Pirstamerica Corporation, withits principal office now located in S Ar% 1 California, had applied for a general voting permit, under the authority of section 5144, Revised Statutes, entitling it to vote stock owned or controlled of California Bank, Los Angeles. Memoranda tr°1111 the Division of Exnminations and the Legal Division, dated June 8 exid JN1Y 9, 1959, respectively, had been distributed to the Board. The 4941irlations Division recommended that the voting permit be granted unless the Board should decide that a different course was advisable in view of the Pending suit against Firstamerica in which the Department of Justice alleged that Firstamerica's acquisition of stock of California Bank (and the Proposed merger of that bank with First Western Bank and Trust C°m1344n1r) violated section 7 of the Clayton Act and section 1 of the Shellilan Act. After reviewing the application in the light of the 411311-oations of the antitrust action, the Legal Division likewise stlegested that the voting permit be granted. However, the Division 7/14/59 -6- submitted proposed letters which would make it clear to the applicant and the Department of Justice that in granting the permit the Board was not passing on any aspect of the pending antitrust litigation. The letters would also make it clear that the voting permit did not authorize or enable Firstamerica to take any action that would be barred under the terms of a letter from Counsel for Firstamerica to the Justice Department dated March 23, 1959, which stated that Firstamerica would not proceed with the proposed merger of California Bank artQl. First Western during the pendency of the antitrust action except 1117*a court approval and after notice to the Department. Mr. Hostrup said that, except for the fact that the antitrust SUit was pending, this case was not different from several other cases Where requests for voting permits had been received and granted after the -4-Al authorized a stock acquisition under the provisions of the Bank Radii -41 Company Act. He pointed out that when the Board approved the acquion of stock of California Bank by Firstamerica Corporation, it 134sse(3- favorably, in terms of the Holding Company Act, on all of the factorS required by the earlier holding company affiliate legislation to be . sidered in connection with the issuance of a voting permit. Mr. Hackley said that in the view of the Legal Division the Pendenr, 'Y of the antitrust suit did not legally prohibit granting the VQtila Permit; in fact, it might be inappropriate to refuse to grant the Perm+ -- simply because of the pendency of the antitrust proceeding. 7/14/59 -7- However, the Division felt that it would be desirable in granting the Permit to send a letter to Firstamerica making it clear that the Board ' Ilas not passing on Questions relating to the antitrust suit, either Pr°cedurally or as a matter of substance. Copies of this letter would be sent to the Department of Justice and its Antitrust Division represe ntative in San Francisco. Mr. Hackley then commented that a letter had been received from CQunsel for Firstamerica urging the Board to file a brief amicus curiae iI1 SLIPPOrt of Firstamerica's petition to the Supreme Court for certiorari. • WhileFi rstamerica did not expect the Board to take sides in the proceecling, it would like to have the Board support the petition for eerti°rari to obtain clarification of the issues. Hexter agreed that in general principle there was little cillestion but that the voting permit should be granted. The only diffieultY was in the area of interdepartmental relationships, for e°4QeivablY the Justice Department might feel that the Board, in granting the Permit/ was in some way assisting Firstamerica from the standpoint of the current litigation. Therefore, the proposed lettersto First3urleriea and the Justice Department had been prepared. In further reference to the proposed letters, Nr. Hexter reviewed certain changes 811gEested by Governor Mills for the purpose of eliminating repetitive terial and expressed agreement with the view that the suggested 7/14/59 -8could, appropriately be made. esrti With regard to the petition for he pointed out that if the Board were to accede to First- allus request and ask the Supreme Court to review the dismissal by the United States District Court of Firstamericat s motion for summary Judgment, that also might be regarded by the Justice Department as an tilirrlendlY action. However, the Board would have to take whatever 13°8ition it deemed appropriate when the request came before it for dete rmination. Question was raised regarding the feasibility of contacting the alstice Department informally for discussion of the request for a voting Permit, and reasons were stated why it was felt by the Legal Division that such a step would be unnecessary and perhaps serve only t° complicate the matter. In further discussion, Mr. Hackley referred to certain technical chAh- that the staff would like to make in the proposed letters to america and the Department of Justice. Thereupon, unanimous approval was given to a letter to the Pede' 41 4 Reserve Agent at San Francisco authorizing him to issue a leneral voting permit to Firstamerica Corporation entitling that Corporation to vote its stock of California Bank at all meetings of ehareholders of that Bank. A copy of the letter is attached as Unanimous approval was also given to letters to 7/14/59 -9- Firstm a erica Corporation and to the Department of Justice in the form attached as Items 9 and 10) respectively. Messrs. Hostrup, Hexter, and Nelson then withdrew from the m eeting. Atlanta building program (Item No. 11). There had been dis- tributed to the Board copies of a memorandum from the Division of Bank °Perations dated July 10, 1959, discussing a request from the Federal Reserve Bank of Atlanta for authorization to obtain bids for a proposed clition to and alterations of the head office building on the basis of contract drawings and specifications submitted by the Bank. Submitted 'with t memorandum was a proposed telegram to the Reserve Bank which Ou3d grant the requested authorization subject to certain qualifications. At the Board's request, Mr. Farrell summarized the history of the he , g'41 office building program, reviewed the program now contemplated, oil' ined certain features of more than routine interest. At the conclusion of Mr. Farrell's comments and discussion ts'sea thereon, unanimous approval was given to the proposed telegram °f auth orization to the Atlanta Reserve Bank, a copy of which is attach ed as Item No. 11. Messrs. Daniels and Smith then withdrew and Mr. Johnson, plrect°r, Division of Personnel Administration, entered the room. 11-11229.19_al insurance • By letter dated June 2, 1959, the ' 1'*Lvised the Reserve Banks of its approval of a major medical 7/14/59 -10- 1nsurance program covering Bank personnel, with the understanding that all Banks would keep their programs within the maximum benefits provided under the approved plan. In a letter dated June 15, the New York Reserve Bank requested approval of certain coverage in addition to that provided by the uniform plan. The Bank pointed out that under its existing plan, Paid for in full by the participants, non-hospital confined cases 1v1ng nervous and mental disturbances were covered to the same extent as any other illness, whereas the uniform plan provided only liniited, coverage in such cases. full In these circumstances, and because coverage would involve only modest additional cost, the New York 11841t deSired to continue the coverage provided by its existing plan. Copieb of the letter from the Bank had been distributed to the Board Ell°4g with a memorandum from the Division of Personnel Administration dated julY 10/ 1959, which recommended, for reasons stated, that the request not be approved. Submitted with the memorandum was a draft of reePlY to the New York Bank to such effect. In an introductory comment, Chairman Martin stated that he had made a commitment to President Hayes of the New York Bank that the latter vould have an opportunity to discuss the New York request with the Board before a final decision was reached in the event that the after initial consideration of the matter, was inclined to feel that the request should not be granted. 7/14/59 -11The Chairman then turned to the other members of the Board for comment, and Governor Mills expressed agreement with the recommendation Or the Personnel Division, adding that he had not been enthusiastic about the increase in "lifetime" major medical coverage to a maximum or *2 0,000, a change from the original proposal of the Subcommittee on Personnel that was agreed upon by the Presidents' Conference at the suggestion of the Federal Reserve Bank of New York. Governor Shepardson likewise expressed agreement with the staff rec°mmendation, which he felt was amply supported by the general view of the Presidents' Conference and by the views of competent insurance c°11nselors who had advised the System on major medical insurance. Governor King expressed the same view and stated that he did not favor a deviation from the uniform plan at any individual Reserve 13ank at the present time. In his opinion, it was possible that the Ne14 York proposal might be subject to some abuse, as suggested by the 111111113er of claims that had arisen under the existing plan at that B. There followed discussion as to the appropriateness of offering aaditional coverage if paid for fully by the participants, and it was noted th at deviations from the uniform plan might have an adverse effect 111 obt in. a--lng the degree of employee participation that would be required 14 °I'der to place the uniform plan in operation. 7/14/59 -12Governor Balderston then commented that in his view the plan sh°111d be consistent throughout the Reserve Banks as a whole, regardless Of whether suggested additions to the plan were to be paid for by the Participants. Question was raised as to whether it was clear that the insurance e°111PallY handling the major medical plan would in fact be agreeable to Pr°viclint: the feature that the New York Dank was suggesting, and it was Understood that Mr. Johnson would make appropriate inquiry regarding this Point. It being evident that the tentative position of the Board favored clisaPProval of the New York request, a final decision on the matter was defer in order to provide Mr. Hayes an opportunity to meet with the BoarA " lor her discussion of the matter. Secretary's Note: Arrangements subsequently were made for the meeting with Mr. Hayes to be held at 9:30 a.m. on July 23, 1959. In this connection, Governor King stated that if he were not 131'esellt at the meeting with Mr. Hayes or at such time as a final decision 144s reached by the Board, he would like the record to show that as a €elle4tal Principle he was opposed to a proposal such as suggested by the TT "el*/ York Bank on the basis that it would be likely to cause more '"J-Le than it would alleviate. 7/14/59 -13Messrs. Hackley, Farrell, and Johnson then withdrew from the meeting and Messrs. Riefler, Assistant to the Chairman, and Thomas, Economic Adviser to the Board) entered the room. Interest rate ceilings (Item No. 12). At a meeting of the Board yesterday afternoon, there was preliminary discussion of a letter received by Chairman Martin under date of July 131 1959, from Congressman ranking member of the House Ways and Means Committee, n'Republican ho referred to the recent hearings before that Committee, including hearings in executive session, pertaining to interest rate ceilings on securities of the Federal Government and requested an evaluation of the 111'°Posed expression of the Congress affecting Federal Reserve monetary operations. It was indicated that Chairman Martin's reply might be included as a part of any supplemental or minority views filed in connection with the report by the Committee on this legislation. Pursuant to yesterday's discussion, a draft of possible reply had been prepared by Mr. Thomas for the Board's consideration and another draft of possible reply had been suggested by Governor Balderston. Chairman Martin stated that upon further deliberation he had reached the conclusion that Congressman Simpson's letter was addressed ° 441 Pere°nally — and that the most appropriate form of reply might be a letter sent by him (Chairman Martin) as an individual rather than a 7/14/59 -14- Board reply. It appeared to him that the intent was to have placed on record the substance of the views that he (Chairman Martin) had expressed at the meetings of the Ways and Means Committee in executive session. Acc ordingly, he had put these views in the form of a draft letter which /gas am being duplicated for distribution. It was the view of the other members of the Board that a Pers°nal response by Chairman Martin would be appropriate. At the Chairman's suggestion, the meeting then recessed in order that copies °f the draft of letter to Congressman Simpson might be made available to all of the members of the Board. The meeting reconvened at 11:15 a.m. with the same attendance or. the part of the Board members. Messrs. Sherman, Thurston, Riefler, RackleY, and Molony were also present. The draft of letter prepared by Chairman Martin for transmittal to co • agressman Simpson on a personal basis had been distributed to the members of the Board and was considered at this time. After the discussion, the Unanimous view was expressed that a handling of the Matter along the lines suggested by Chairman Martin was appropriate 414 that the letter should be sent in a finAl form satisfactory to him. A eery,— the letter subsequently sent to Mr. Simpson by Chairman Mai rt r, .2 4 le attached as Item No. 12. A copy was sent by Chairman Martin to cha4 'Merl Mills of the Ways and Means Committee. 7/14/59 The meeting then adjourned. Secretary's Note: Governor Shepardson today noted on behalf of the Board a memorandum from Mr. Kelleher, Director, Division of Administrative Services, dated July 10, 1959, advising that the application for retirement filed by Richard Shaker, Sergeant, Guard Force, Division of Administrative System, Services, had been approved by the Retirement effective August 1, 1959. BOARD OF GOVERNORS OF THE Item No. 1 7/14/59 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 141 1959 Board of Directors, Manufacturers Trust Company, New York, New York. Gentlemen: The Board of Governors extends to December 15, 1959, the time within which Manufacturers Trust Company, New York, New York, may, under the authority contained in the Board's letter of July 18, 1957, establish a branch at 1261-79 Avenue of the Americas, New York, New York. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. 6.5 BOARD OF GOVERNORS OF THE Item ;Jo. 2 7/14/59 FEDERAL RESERVE .SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 14, 1959 Board of Directors, Ypsilanti Savings Bank, Ypsilanti, Michigan. Gentlemen: Pursuant to your request submitted through the Federal Reserve ,Bank of Chicago, the Board of Governors extends the time within which Ypsilanti Savings Bank may establish a branch on the south side of East Michigan Avenue, near Harris Road, in Ypsilanti ownship, Washtenaw County, Michigan, to November 5, 1959, under the authorization contained in the Board's letter dated November 7, 1958. T Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE Item No. 3 FEDERAL RESERVE SYSTEM 7/14/59 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE ODARD July 14, 1959 Board of Central Directors, Savings Bank and Trust Company, Monroe, Louisiana. Ge ntlemen: Pursuant to your request submitted through the Feder -I Reserve Bank of Dallas, the Board of Governors ?! th:j. Federal r branch at Reserve System approves the establishment McGuire and Cypress Streets on Highway 80 lialleSt Monroe, Louisiana, provided the branch is estab— ed within twelve months from the date of this letter. z Very truly yours, (Signed) Kenneth A. Kel Kenneth A. Kenyon, Assistant Secretary. r v`i 6,'t L) BOARD OF GOVERNORS OF THE Item No. 4 FEDERAL RESERVE 'SYSTEM 7/14/59 WASHINGTON 25, D. C. ADDREBEi C1FFICIAL CORRESPONDENCE TO THE SOARED. July 14, 1959 Board of The FirstDirectors, State Bank &Trust Company of Lufkin, Lufkin, Texas, Ge ntlemen: aPplicableThis refers to your request for permission, under 1, provisions of your condition of membership numbered to exercise fiduciary powers. Following consideration of the information submitted „ 3 the Board of Governors of the Federal Reserve System ls permission to The First State Bank ?c Trust Company of auth Icin •t° exercise the fiduciary powers now or hereafter orlzed its charter and the laws of the State of Texas. Ti Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant SecreLary. 4 BOARD OF GOVERNORS 4400** eow OF THE Item No. 5 FEDERAL RESERVE SYSTEM 7/14/59 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 14, 1959 Board of Directors, Union Bank, Los Angeles, California. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of San Francisco, the Board of Governors of the Federal Reserve System approves the establishment of a branch in the vicinity of the intersection of Carson Street and Madrona Avenue, Torrance, California, by Union Bank, Los Angeles, California. This approval is given provided the branch is established within one year from the date Of this letter, and formal approval of State author— ities is effective at the time the branch is established. Very truly yours, (Si6ned) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE Item No. 6 FEDERAL RESERVE SYSTEM 7/14/59 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 14, 1959 ,ChtZtroller or - the Currency, Y Department, 1448hington 25, D. C. Attention Mr. L. A. Jennings, Deputy Comptroller of the Currency. D(lar Mr. Comptroller: erield8i Reference is made to a letter from your office dated March 10, 1959, Cop os of an application to organize a national bank at Garden City, Mould and requesting a recommendation as to whether or not the application ue approved. r Yo A rePort of c't the investigation of the application made by representatives atrilet pelerhl Reserve Bank of New York indicates that the proposed capital Ilesa of the bank would be adequate for the volume and character ofbus , or th:40eted during the first few years of oparation. The board of threctors is to be composed of individuals with business experience; how7h tofthem ' Zozi3 : 11 1= operate outside of the trade area of the proposed is expressed as to whether they would have sufficient time to 4icin to the affairs of the institution and provide adequate management pol" 4 th(, Ihe Pro8pects for profitable operations of the bank are only fair, 1441rice Preent banking facilities are reported to be furnishing adequate bral : 3 ' Although Garden City has had only one commrcial bant and its frmdZIIIC the past 35 years, there is available cowJdorable competi'1°11lehc -04n tis — 4'4 other commercial banking offices and offices of 3 savings and 4 2 ' 1 1 mer,: c1"-lons within a radius. Local sentiment among individuals : Acsatisfaction with present available facilities 4414?, theindicates poard recomvending of Governors does not feel justified in cif 111° aPPlication. 4, Breqs fr141.e %ard's Division of Examinations wil) be glad to discuss any case with representatives of your office if you so desire. Very truly yours, • At Kenneth A. Kenyon, Assistant Secretary. N BOARD OF GOVERNORS oloo* OF THE te, Item No. FEDERAL RESERVE SYSTEM 7/14/52 WASHINGTON 25, D. C. ADDRESS arriciAL CORRESPONDENCE TO THE BOARD July 14, 1959 , 11r° H. J. Newman, Vice President, 'rederal Reserve Bank of Chicago, Chicago 90, Illinois. Dear Mr. Newman: In view of the circumstances outlined in your letter of J une 29, 1959, the Board of Governors approves the payment ealary through July 30 1959 to M. Angela M. Duffy, an em N-0Yee of your Bank who reached age 65 on February 9, 1959. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. 7 BOARD OF GOVERNORS 4i,tattrtr 4.4. 0,0 4. qr,...v..„ ,I,V77\%, "3 4 4 44. A) OF THE FEDERAL RESERVE SYSTEM aI* ti A* No* ia WASHINGTON 25. D. C. Item No. 7/14/59 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 14, 1959. 444*** AIR MAIL Mr, A. H. Brawner, Federal Reserve Agent, Federal Reserve Bank of San Francisco, San Francisco 20, California. Dear Mr, Brawner: The Board of Governors today granted the request of Firstamerica Corporation for a general voting permit with respect to shares of California Bank. Because of the unusual circumstances of this case, the Board decided that the voting permit Should be accompanied by a letter (enclosed herewith) from the Board to Firstamerica. You are requested to issue a general voting permit in accordance with the procedure prescribed in the Boardls letter of March 10, 1947, S-964 (F.R.L.S. #7190), including the execution . the standard form of Agreement. The Boardls letter to j rstamerica should bear the same date as the voting permit and 6110uld accompany the permit. r Also enclosed are letters from the Board to the Washington Lian Francisco offices of the Antitrust Division of the Departof Justice. These should be dated and mailed (with the _Psecified enclosures) simultaneously with the execution and mailing wuliithe voting permit and the Boardss letter to Firstamerica. It be appreciated if the letter to the Washington office of the -4ALitrust Division is sent air mail. and referred Enclosed for your records are copies of the three letters to herein. Very truly yours, (signed) Merritt Sherman Ilclosures Merritt Sherman Secretary. 8 f BOARD OF GOVERNORS vxtit111**4 r c',4401Q0117,.:)0 if (ft OF THE 0,0 FEDERAL RESERVE SYSTEM Item No. 7/14/59 WASHINGTON 25, D. C. %1 9 ADDRESS OFFICIAL CORRESPONDENCE **A4t. vast , IP TO THE BOARD Pirstamerica Corporation, 629 South Spring Street, Los Angeles, California. Gentlemen : On March 20 1959, you applied for a general voting permit under s (12 Etu, tpol:ity of section 5144 of the United States Revised Statutes Calif• .u. 61) with respect to shares of California Bank, Los Angeles, vhichornia. The Board of Governors has granted the requested permit, is enclosed herewith. It entitles Firstamerica Corporation to Z4 ° !,the stock of California Bank Which it owns or controls, at all 'lngs of shareholders of that bank. Reference is made to United States of America v. Firstamerica Civil Action No. 36139 in the United States District Court vithche Northern District of California, Southern Division, an action conn respect to alleged violations of the Federal antitrust laws. In to trt, , ion with that litigation, Counsel for your Corporation delivered pirs e Department of Justice a letter dated March 28, 1959, stating that Califamerics Corporation will not proceed with the proposed merger of pend °rnis Bank and First Western Bank and Trust Company during the to treY of the antitrust action except upon court approval after notice , DePartment of justice. In order to avoid any possible misunder7 st enc and" this point, you are hereby informed that, in granting the riot" -j i_sed voting the Board of Governors is not passing (and is tio :uthorized trl= upon any aspect of the pending antitrust litigaperrilni.either substantive or procedural. Th e purpose and effect of the call ; () t is to enable Firstamerica Corporation to vote its shares of othe rnia Bank only to the extent that its voting of said shares is °r atil:,7 Permissible under applicable laws, regulations, agreements, ons, including the above -mentioned letter. corporati JUstiee ,A copy of this letter is being sent to the Department of lor its— information and use. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. 'cloeura BOARD OF GOVERNORS ptItIttth1.4 r OF THE t4; t , VIAi% * o 4 o 4 Item No. 10 7/14/59 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE 4°4:4 4 N'itt ,6 TO THE BOARD Mr. Robert A. Bicks, Acting Assistant Attorney General, Antitrust Division, Department of Justice, Washington 25, D. C. Dear Mr. Bicks: that, vi Section 5144 of the Revised Statutes (12 U.S.C. 61) provides co th certain exceptions, "shares controlled by any holding holltrY affiliate of a national bank shall not be voted unless such ng company affiliate shall have first obtained a voting permit" th Act (10e Board of Governors. Under section 9 of the Federal Reserve are U.S.C. 337), holding company affiliates of State banks that 13r:embers of the Federal Reserve System also are subject to this derilsion of section 5144. The term "holding company affiliate" is fled in section 2(c) of the Banking Act of 1933 (12 U.S.C. 221a). Pursuant to these provisions of law, Firstamerica Corpora0a11r Los Angeles, California, a holding company affiliate of c)rnia Bank, Los Angeles, California, a member State bank, applied to the Board of Governors for a permit authorizing it to vote its ,4es of that bank. In The Board of Governors today issued the requested permit the talc,-Ing this action, the Board considered whether the issuance of pir4:Mit could affect the course of United States of America v. bi8t,,t11!rica Corporation, Civil Action No. 38139 in the United States bivi-c'eL Court for the Northern District of California, Southern 'an action with respect to alleged violations of the Federal antiti°n Permit et laws. It was concluded that the issuance of the voting aspect of no bearing on any procedural or substantive Dossi thatcould bi BUit or upon its outcome. However, in order to avoid any Pirate. e misuhave nderstanding on this point, the Board has informed Board nierica C orporation that, in granting the voting permit, the did not pass upon any aspect of the pending antitrust litigation. Copies of the -2,irstam voting permit and the Board's letter to \-opies erica C orporation are enclosed for your information and use. sent t of those documents and a copy of this letter are also being pr : )Mr. Lyle L. Jones, Antitrust Division, Department of Justice, „else°, California. Very truly yours, (Signed) Merritt Sherman .11Q108ures Merritt Sherman, Secretary. ,S42, 1.1 TELEGRAM LEASED WIRE SERVICE Item No. 11 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON July 14, Bryan 7/111159 1959 Atlanta Board approves obtaining bids for the proposed construction at head office building as requested in Mr. Patterson's May 29 letter, provided alternates are obtained for (1) face brick in place of exterior marble, (2) omission of solar shades, and (3) if considered feasible after review by architects, minimum fallout shelter as referred to in Board's circular letter of May 6, 1959. While plans and specifications go somewhat beyond basi 8 of Board's authorization of June 19, 19581 Board will not 015 ' ject to new scheme for subbasement security entrance and court in view of circumstance outlined in your July 2, 1959, letter. (Signed) Merritt Merman SHERMAN 4.4 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON Item No. 12 7/14/59 OFFICE OF THE CHAIRMAN July 14, 1959 The Honorable Richard H. Simpson, House of Representatives, Washington 25, D. C. Dear Mr. Simpson: This response to the request contained in your letter of JulY 13 puts in writing the gist of the comments I made in the 4_rcutive session meetings of the Ways and Means Committee on the Zendments to the legislative proposals originally offered by the ^gministration. It is my considered judgment we are facing a serious financial situation. The limitation on interest rates is unrealistic in the light of present market quotations and denies the U. S. Treasury the tools essential to effective balanced handling of its borrowing needs. By statute the Treasury is now limited, because of the ceilings, to the issue of short-term securities which under present conditions of rising Prosperity is dangerous. These short-term obligations can readily be converted into money at the option of the holder. In effect, they are a substitute for money, and thus could swell the flow of money far beyond that r=ed to purchase available goods and services at curlipnce levels. The threat of a money flow out of hand a major impact on the cost of living and places a burden on all of us. It serves no useful purpose at the moment to argue !hose fault it is that we are in our present predicament. The fact of the matter is we are in it. The Committee : 3 8 not being asked to vote whether interest rates should or would go up or down, but merely to grant the Treasury authority to exercise its best judgment in meeting an existing Problem. We are discussing a crucial matter— the credit of , the United States. Failure to deal with :d.his could (and I wns careful not to threaten or assert hat it necessarily would) have the most serious implicarns. It was my duty to warn of this, much as I dis"ked the task. 'These are the basic facts with which The Honorable Richard M. Simpson -2— were dealing and any amendments must be considered in this light. The amendment to retain the statutory ceilings but permit them to be disregarded if the President found the national interest so required did not seem i t o me to present unworkable problems. Accordingly) did not raise objections, although I prefer the o riginal. The "sense of the Committee" amerdment is quite a different matter. I object to this on principle. The Open Market Committee and the Federal Reserve Board are given 4 the responsibility under the Federal Reserve Act for regulating the money supply. If the Congress wishes to spell out the means of doing this, it should amend the Federal Reserve Act and not tack this on to a debt management bill. Furthermore, under present conditions, I am convinced that this amendment, when stripped of all technicalities, and regardless of whether the language is peror mandatory, will cause many thoughtful people both at home and abroad to question the will of our o vernment to manage its financial affairs without recourse to the printing press. To me this is a grave matter. We are here dealing with trust and confidence ich is the keystone of sound currency. Therefore, I ,4 ,t oPpose this proposal as vigorously as possible, as .L aid during the hearings. r The two year,amendment limiting the President's authority to . sour ° is, in my judgment, unsound. It could be a t, ce of he then embarrassment to both the next President and Secretary of the Treasury. actually I have tried as faithfully as possible to summarize what I for I 114Y t1 , 1 insaid during the hearis, hearings, and not to introduce new ideas;# conclusion, thank you and all the members of the Commit ee_ out th! e c°urtesY and consideration shown me and my associates through lettel to meetings Cha. I am taking the liberty of sending a copy of this irman Mills. Sincerely yours, (Signed) Wm. Mee. Martin, Jr. Wm. McC. Martin, Jr.
@FedFRASER