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Minutes for July 19, 1966
To:
Members of the Board
From:
Office of the Secretary
Attached is a copy of the minutes of the Board of Governors
of the Federal Reserve System on the above date.
It is proposed to place in the record of policy actions
required to be kept under the provisions of section 10 of the
Federal Reserve Act an entry covering the item in this set of
minutes commencing on the page and dealing with the subject
referred
to below:
Page 12
Disapproval of rates on discounts and
advances established by Federal Reserve
Bank of Boston.
Should you have any question with regard to the minutes,
It will be
appreciated if you will advise the Secretary's Office.
°therwise, please initial below. If you were present at the
meeting, your initials will indicate approval of the minutes. If
You were not
present, your initials will indicate only that you
rlave seen the minutes.
Chairman Martin
Governor Robertson
Governor Shepardson
Governor Mitchell
Governor Daane
Governor Maisel
Governor Brimmer
Minutes of the Board of Governors of the Federal Reserve
System on Tuesday, July 19, 1966.
The Board met in the Board Room
at 10:00 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Robertson, Vice Chairman
Shepardson
Daane
Maisel
Sherman, Secretary
Kenyon, Assistant Secretary
Bakke, Assistant Secretary
Solomon, Adviser to the Board
Molony, Assistant to the Board
Cardon, Legislative Counsel
Fauver, Assistant to the Board
Hackley, General Counsel
Farrell, Director, Division of Bank
Operations
Mr. Solomon, Director, Division of Examinations
Mr. Johnson, Director, Division of Personnel
Administration
Mr. Kakalec, Controller
Mr. Hexter, Associate General Counsel
Mr. Shay, Assistant General Counsel
Mr. Hooff, Assistant General Counsel
Mr. Koch, Deputy Director, Division of Research
and Statistics
Mr. Partee, Associate Director, Division of
Research and Statistics
Mr. Sammons, Associate Director, Division of
International Finance
Mr. Daniels, Assistant Director, Division of
Bank Operations
Miss Wolcott, Technical Assistant, Office of
the Secretary
Messrs. Forrestal and Via of the Legal Division
Messrs. McClintock and Poundstone of the Division
of Examinations
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Approved items.
The following items were approved unanimously
after consideration of background information that had been made available to the Board.
indicated.
Copies are attached under the respective numbers
12
7/19/66
-2Item No.
Letter to Wells Fargo Bank, San Francisco,
California, approving the establishment of
a branch near Florin Road and Stockton
Boulevard, Sacramento County.
1
Letter to Wells Fargo Bank, San Francisco,
California, approving the establishment of
a branch near Clayton and Bailey Roads,
Concord.
2
Letter to United California Bank, Los Angeles,
California, approving the establishment of a
branch near Florin Road and Stockton Boulevard,
Sacramento County.
3
Letters to (1) Chase Manhattan Overseas Banking Corporation and (2) Chase International
Investment Corporation (both section 25(a)
corporations, wholly owned by The Chase
Manhattan Bank (National Association), New
York, New York), rescinding previous approval
by the Board of amendments to their articles
of association.
4-5
Letter to the Federal Reserve Bank of Atlanta
advising that the Board is prepared to grant
Permission to The First National Bank of Miami,
Miami, Florida, to invest in stock of First
Foreign Investment Corporation, Miami, Florida,
and for the latter corporation to invest in
stock of First National Holdings Limited, a
Proposed Bahamian corporation, upon execution
by First Foreign Investment Corporation of an
agreement pursuant to section 25 of the Federal
Reserve Act.
6
Letter to the Federal Reserve Bank of Chicago
a pproving the payment of salaries to the Bank's
firemen at rates above the maximums of their
grades.
7
In accordance with a suggestion by Vice Chairman Robertson, the
letters to Chase Manhattan Overseas Banking Corporation and Chase
7/19/66
-3-
International Investment Corporation (Items 4-5) were modified so as
to avoid the appearance of tacit approval by the Board of the manner
in which the corporations proposed to obtain funds for foreign investment activities.
The letters, as approved, simply stated that since
their capital stock had not been increased within 90 days following
Board approval of their requests for permission to do so, as required
by section 25(a), paragraph 12, of the Federal Reserve Act, the Board
had rescinded its approval of the related amendments to their articles
of association.
Reimbursement of expenses of the Comptroller related to Federal
Reserve notes.
Federal Reserve notes in the $1 denomination were first
issued in November 1963, and shortly thereafter began to be returned to
the Federal Reserve Banks in unfit condition for redemption.
In the
hope of avoiding the expense of sorting these notes by Bank of issue
and, after cancellation, shipping both upper and lower halves to
Washington for verification and destruction (as required by the provisions of section 16 of the Federal Reserve Act then in effect), the
Board instructed the Reserve Banks to hold and store such notes, unsorted,
Pending legislative authority for local destruction.
By the end of October 1965 the legislation in question had still
hot been enacted, and the accumulation of unfit $1 Federal Reserve notes
at the Reserve Banks had reached unwieldy proportions.
Accordingly, at
a meeting on November 1, 1965, the Board acted to implement interim
7/19/66
-4-
procedures, previously developed in consultation with the Treasury
Department, for shipment of part of the accumulating unfit $1 Federal
Reserve notes to Washington.
In connection with these arrangements,
a Board letter of November 26, 1965, to the Secretary of the Treasury
authorized a procedure whereby verification count of lower halves of
such unfit notes by the Treasurer of the United States would be on a
5 per cent sample basis, supplemented by a package count of upper halves
by the Comptroller of the Currency.
In a letter of December 10, the
Secretary agreed to this verification procedure.
Under date of January 7, 1966, the Comptroller sent a letter to
the Treasury Department indicating that his Currency Issue and Redemption Division had been receiving unfit $1 Federal Reserve notes at the
rate of 75-80 bags per day, and had been able to process only four bags
a day.
Accordingly, he indicated that his facilities were such that he
believed it would be impractical to receive further shipments of these
notes after January 19.
On January 17, Chairman Martin discussed this matter with Secretary Fowler.
He showed him a Board staff memorandum and a draft of
Proposed letter indicating that, on the basis of available information,
°Ile of the reasons the Comptroller had developed such a backlog of upper
halves of unfit $1 Federal Reserve notes was that his Office was making
a complete piece count of all notes received, rather than merely a package count as agreed to in the Secretary's letter of December 10, 1965.
'7!)
7/19/66
-5-
The draft letter also raised the question whether the Board would be
justified in reimbursing the Comptroller for more than the previously
agreed -upon package count.
The matter was then referred to the Under
Secretary of the Treasury for exploration.
On February 11, 1966, a letter was received from the Treasury
Department advising that the Comptroller had declined to accept further
Shipments of the upper halves of unfit $1 Federal Reserve notes, but
that the Treasury Department itself would be willing to see to the
storage of such incoming shipments until the matter could be resolved.
This procedure was followed until May 20, at which time enactment of Public Law 89-427, and subsequently issued regulations of the
Secretary of the Treasury thereunder, authorized the Reserve Banks to
destroy the upper halves of unfit $1 Federal Reserve notes locally,
without sort by Bank of issue.
On June 8, the Director of the Comptroller's Currency Issue and
Redemption Division called the Board's staff to discuss a forthcoming
request for an advance from the Board to cover his Division's expenses
incident to issue and redemption of Federal Reserve notes during the
Period June-December 1966.
In the course of this discussion, the Comp-
troller's representative was advised of the position stated in the draft
letter to Secretary Fowler that the Board would not feel justified in
r eimbursing the Comptroller for a complete verification count of unfit
$1 Federal Reserve notes.
Thereafter, pursuant to another telephone
7/19/66
-6-
call from the Comptroller's Office, representatives of that Office, the
Treasurer's Office, and the Board's staff met to discuss (1) the extent
to which the Currency Issue and Redemption Division of the Office of
the Comptroller would continue to verify unfit $1 Federal Reserve notes,
and (2) how much, if any, reimbursement the Board would allow the Office
of the Comptroller for work done in verifying unfit $1 Federal Reserve
notes, over and above a package count of upper halves on hand.
The fol-
lowing tentative agreement had been worked out at that meeting:
(1) Approximately 100 million notes (upper halves) in
unopened bags would not be processed by the Comptroller
of the Currency. For these notes, the Treasurer, U. S.,
would give the Comptroller receipts stating that the
lower halves of such notes had been verified to the
satisfaction of the Treasurer.
(2)
Twenty-one million notes (upper halves) on shelves
in the Office of the Comptroller would be verified
by that Office under whatever procedures they chose
to follow, but with the understanding that no reimbursement would be requested by the Comptroller from
the Board for any Federal Reserve note redemption
work after July 31, 1966.
(3)
Reimbursement to the Comptroller through July would
permit orderly transition of the regular redemption
work from the Comptroller to the Office of the Treasurer of the United States. (This transfer would not
include the 21 million notes mentioned above.)
There had now been distributed a memorandum dated July 11, 1966,
from Mr. Daniels, referring to the salient points in the foregoing
sequence of events, and indicating that a voucher had been received
from the Comptroller's Issue and Redemption Division requesting an
advance for expenses for June-December 1966, based upon the foregoing
Av.t
7/19/66
-7-
understanding.
The memorandum concluded with a recommendation that the
voucher be paid, stating that "It will have the effect (1) of allowing
the Comptroller to recover costs incurred during the period January 1June 30, 1966, for verification work which the Comptroller considered
necessary but which the Board considered unnecessary, and (2) of terminating reimbursement to the Comptroller as of August 1, 1966, for
verification and any other redemption work."
After discussion of the situation in the light of the circulated
memorandum and Mr. Daniels' supplementary remarks, unanimous approval
was given to the payment in question.
Messrs. Daniels, Shay, McClintock, and Poundstone withdrew from
the meeting at this point and Mr. Shull, Senior Economist, Division of
Research and Statistics, entered the room.
Administration of discount window (Item No. 8).
In accordance
With a suggestion made at the meeting on July 14, 1966,there had been
d istributed a draft of letter to the Federal Reserve Banks that would
request the Presidents and discount officers to review the administration
of their discount windows so as to make certain that administration was
consistent with the general principles of Regulation A (Advances and
W-scounts by Federal Reserve Banks) and the current objectives of monetary policy.
The letter would point out that while access to Federal
Reserve discount facilities should be available to member banks for
a ppropriate purposes as outlined in Regulation A, in the present situation
7/19/66
-8-
every effort should be made to induce member banks to liquidate their
borrowings as promptly as possible, not only by appropriate portfolio
adjustments but also by the adoption of tighter lending policies.
The
letter would further suggest that the recent expansion of borrowing by
country banks warranted review, cautioning that demands for longer-term
accommodations from country banks should be guarded against.
Several suggestions were made for possible additions to and
Changes in language, to meet points raised by members of the Board during discussion of the draft.
During the discussion Governor Daane raised
a question about indicating that the discount window was to be administered in harmony with the objectives of prevailing monetary policy.
It
was his understanding that the Board's position in the past had been
that the discount window should be administered in a generally consistent
fashion to accommodate genuine liquidity needs of member banks, rather
than as an adjunct of monetary policy at any given time.
Comments by
Other members of the Board made it clear that they would have no objection to including language along the lines contained in the draft letter.
At the suggestion of Governor Robertson, it was agreed that the
dis tributed draft would be edited to cover the suggestions made at today's
meeting, and the sending of a letter, so edited, was approved unanimously.
4 copY of the letter in the form in which it was subsequently transmitted
to the Presidents is attached as Item No. 8.
Regulation Q matters (Items 9-10).
There had been distributed
for the Board's information a statement prepared by the Legal Division,
4,
4)679
7/19/66
-9-
dated July 18, 1966, (copy attached as Item No. 9), explaining certain
a pplications of the amendments to Regulation Q (Payment of Interest on
Deposits) and its Supplement providing for reduced interest rate ceilings on multiple maturity time deposits.
The amendments were to become
effective July 20.
The statement (1) further defined multiple maturity time deposits, (2) set up a guideline by which to determine the maximum rate on
such deposits, (3) pointed out that the amendments would apply only to
deposits received on or after July 20, 1966, and (4) attempted to clarify the application of the amendments through illustrative cases.
Mr. Hackley advised that the text of the distributed statement
had been sent yesterday by wire to the Reserve Banks in an effort to
Clarify points about which questions had been raised; a copy had also
been furnished to the Federal Deposit Insurance Corporation.
There had also been distributed copies of telegrams dated
July 18, 1966, from (1) Marine Midland Trust Company, Buffalo, New York,
and (2) First National City Bank, New York, New York, relating to questions involving application of the amendments to Regulation Q.
In its telegram, Marine Midland Trust Company indicated that time
dePosit, open account, agreements with alternate maturities and the privilege of withdrawal before maturity upon 30 days' prior written notice
had been a valuable operating tool of municipalities, and questioned
whether it was now the intent of the Board to penalize municipalities
e4inkAL)kfi
7/19/66
-10-
by elimination of their privilege of using that type of agreement without rate reductions.
The telegram from First National City Bank noted that the Board's
July 15 statement with respect to the amendments to Regulation Q and its
Supplement would seem to indicate that, while the Board intended by its
action to cover only domestic "consumer type" certificates of deposit
in member banks, the definition of "multiple maturity time deposit"
would seem to include a large volume of time deposits, open account,
not in the "consumer type" category, such as those of private domestic
corporations, State and local governments and their agencies, and private
foreign corporations and individuals.
Normally, these deposit accounts
would include renewal options and withdrawal options, however, if these
Provisions had to be excluded from such deposit contracts written on or
after July 20, the ability of the bank to compete for new domestic and
foreign money would be seriously impaired.
In the circumstances, the
bank requested prompt clarification of the regulation as amended.
During discussion, it was noted that under present law the Board
had no authority to prescribe different maximum interest rates according
to category of depositor, and there was agreement that the purpose of
the amendments to Regulation Q and its Supplement was to bring within
the ambit of lower interest rate ceilings all time deposits except those
that provided for payment at single fixed maturity.
In this connection,
Governor Robertson observed that, as a practical matter, the reach of
0.'4)81
7/19/66
-11-
the amendments had to be broad in order to obviate evasion of the Board's
intent.
After further discussion of the intended scope of the amendments
in question, unanimous approval was given to transmittal of responses
to Marine Midland Trust Company and First National City Bank, incorporating the points made at today's meeting.
A copy of the reply subsequently
sent to First National City Bank is attached as Item No. 10; a similar
telegram was sent to Marine Midland Trust Company.
In connection with the foregoing, Mr. Hackley reported that a
representative of the Federal Deposit Insurance Corporation had told him
that the Corporation was considering issuance of a public statement to
clarify the reach of the action it had taken paralleling that of the
Board regarding interest rates on multiple maturity time deposits.
This
raised the question whether, if the Federal Deposit Insurance Corporation
did issue such a statement, the Board would wish to do the same.
After some discussion of this point, Governor Robertson commented
that the consensus seemed to favor no public statement at this time, but
that if the Corporation decided to issue an explanatory statement the
matter would be given further consideration and, at that time, the Board
would decide whether to follow suit.
This expression of sentiment was
co ncurred in by the other members of the Board.
Following a brief report by Mr. Cardon on pending legislative
Proposals, all members of the staff except Messrs. Sherman, Kenyon, and
Bakke withdrew from the room.
2S2
7/19/66
-12Discount rates.
Advice had been received that the Board of
Directors of the Federal Reserve Bank of Boston had, on July 18, 1966,
established rates of 5 per cent on discounts and advances to member
banks under sections 13 and 13a of the Federal Reserve Act, 5-1/2 per
cent on advances to member banks under section 10(b) of that Act, and
6 per cent on advances to individuals, partnerships, and corporations
other than member banks under the last paragraph of section 13 of that
Act, subject to review and determination by the Board of Governors.
In line with the action by the Board at its meeting on Friday,
July 15, with respect to similar rates established by the Boards of
Directors of the Federal Reserve Banks of New York, Cleveland, Chicago,
and St. Louis on July 14, the rates established by the Boston Reserve
Bank were disapproved by unanimous vote, with the understanding that
aPPropriate advice would be sent to that Bank.
This meant that the
rates on discounts and advances in the Bank's existing schedule continued
in effect.
The establishment without change by the Federal Reserve Bank of
Kansas City on July 18, 1966, of the rates on discounts and advances in
its existing schedule was approved unanimously, with the understanding
that appropriate advice would be sent to that Bank.
The meeting then adjourned.
Secretary's Notes: On July 18, 1966, a letter
was sent to First National City Bank, New York,
New York, acknowledging receipt of notice of
its intent to establish an additional branch in
Colombia, to be located in the Parque Nacional
area of Bogota. The letter noted that expenditures required to establish the branch would be
provided from funds available in Colombia.
2583
7/19/66
-13Acting in the absence of Governor Shepardson,
Governor Robertson approved on behalf of the
Board on July 18, 1966, the following items:
Letter to the Federal Reserve Bank of Atlanta (copy attached as
Item No. 11) approving the designation of Francis A. D'Amico, William J.
Geerken, and Enrique Soriano as special assistant examiners.
Letter to the Federal Reserve Bank of Dallas (copy attached as
Item No. 12) approving the appointment of Robert L. Cotter as assistant
examiner.
Letter to the Federal Reserve Bank of San Francisco (copy attached
as Item No. 13) approving the designation of R. A. Remedios, H. L. Benson,
and R. D. Edmund as special assistant examiners.
Letter to the Secretary of the Retirement System of the Federal
Reserve Banks (copy attached as Item No. 14) regarding continuation of
supplemental retirement benefits for annuitants under the Board Plan;
letter to the Federal Reserve Bank of Richmond (copy attached as Item
-.2j) regarding continuation of the supplemental retirement benefit
Payable to Mrs. Irene H. Flagg, widow of Maurice P. Flagg.
Memoranda recommending the following actions relating to the Board's
staff:
Aap..aiataaL
.
Linda M. Snyder as Statistical Clerk, Division of Bank Operations,
wlth basic annual salary at the rate of $4,953, effective the date of
e ntrance upon duty.
T
ransfers
._
tion
i
with
July
Jean S. Barber, from the position of Accounting Clerk to the posiof Supervisor, Payroll and Disbursing, Office of the Controller,
an increase in basic annual salary from $6,662 to $7,097, effective
18, 1966.
Helen L. Lee, from the position of Payroll Clerk to the position
of Accounting Clerk, Office of the Controller, with no change in basic
flflusl salary at the rate of $5,352, effective July 18, 1966.
„ 2584
7/19/66
-14Governor Shepardson today approved on
behalf of the Board a memorandum from
the Division of Administrative Services
recommending acceptance of the resignation of Barbara Jane Greenspan, Clerk
in that Division, effective the close
of business July 19, 1966.
2a8f)
BOARD OF GOVERNORS
Item No. 1
7/19/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 19, 1966
Board of Directors,
Wells Fargo Bank,
San Francisco, California.
Gentlemen:
The Board of Governors of the Federal
Reserve System approves the.establishment by
of
Wells Fargo Bank, San Francisco, California,
of
ction
interse
the
of
y
a branch in the vicinit
nto
Sacrame
rd,
Bouleva
Florin Road and Stockton
estabCounty, California, provided the branch is
letter.
this
of
date
the
lished within one year from
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)
20SG
BOARD OF GOVERNORS
Item No. 2
7/19/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS
orriciAL
CORRESPONDENCE
TO THE BOARD
July 19, 1966
Board of Directors,
Wells Fargo Bank,
San Francisco, California.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishmemt by Wells Fargo Bank,
San Francisco, California, of a branch in the vicinity
of the intersection of Clayton and Bailey Roads, Concord,
is
Contra Costa County, California, provided the branch
letter.
this
of
date
established within one year from the
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)
258
BOARD OF GOVERNORS
Item No. 3
7/19/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
•
ADDRESS OrrICIAL CORRESPONDENCE
TO THE •OARD
July 19, 1966
Board of Directors,
United California Bank,
Los Angeles, California.
Gentlemen:
The Board of Governors of the Federal
Reserve System approves the establishment by
United California Bank, Los Angeles, California,
of a branch in the vicinity.of the intersection
of Florin Road and Stockton Boulevard, Sacramento
County, California, provided the branch is established within one year from the date of this letter.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)
2588
BOARD OF GOVERNORS
Item No. 4
7/19/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADORESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 19, 1966.
Chase Manhattan Overseas
Banking Corporation,
One Chase Manhattan Plaza,
New York, New York, 10005
Gentlemen:
This will acknowledge your letter of May 5, 1966, referring
to the Board's letters of January 4 and April 11, 1966, which, among
Other things, approved amendments to the Articles of Association of
Your Corporation to effect two increases in capital from $11,810,000
to $13,254,000, consisting of 13,254 shares of $1,000 par value per
Share, and then to $13,717,000, consisting of 13,717 shares of $1,000
Par value per share. Approval of these amendments was given in connection with proposed investments by your Corporation in the capital
stock of Banque de Commerce, Antwerp, Belgium, and Privat-und
Kommerzbank, Vienna, Austria.
Par,12 of Section 25(a) of the Federal Reserve Act provides
in part:
. . . The capital stock of any such corporation may be
increased at any time, with the approval of the Board of
Governors of the Federal Reserve System, by a vote of
two-thirds of its shareholders or by unanimous consent
in writing of the shareholders without a meeting and
without a formal vote, but any such increase of capital
shall be fully paid in within ninety days after such
approval; . . ."
Since the capital increases were not effected within the
time prescribed, the Board's approvals of the amendments are rescinded.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
BOARD OF GOVERNORS
Item No. 5
7/19/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 19, 1966.
Chase International
Investment Corporation,
One Chase Manhattan Plaza,
New York, New York. 10005
Gentlemen:
This will acknowledge your letter of May 9,
1966, referring to the Board's letter of February 9, 1966,
which approved an amendment to the Articles of Association
of your Corporation increasing the capital stock to
$9,000,000, consisting of 90,000 shares of the par value
of $100 each.
Par,12 of Section 25(a) of the Federal Reserve
Act provides in part:
. . . The capital stock of any such corporation
may be increased at any time, with the approval
of the Board of Governors of the Federal Reserve
System, by a vote of two-thirds of its shareholders
or by unanimous consent in writing of the shareholders without a meeting and without a formal
vote, but any such increase of capital shall be
fully paid in within ninety days after such
approval; . . ."
Since the capital increase was not effected within
the time prescribed, the Board's approval of the amendment
is rescinded.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
2590
Item No. 6
BOARD OF GOVERNORS
7/19/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 19, 1966.
Mr. R. M. Stephenson, Vice President,
Federal Reserve Bank of Atlanta,
Atlanta, Georgia. 30303
Dear Mr. Stephenson:
This is in reference to the application dated June 6, 1966,
of The First National Bank of Miami, Miami, Florida, for permission
under the provisions of Section 25 of the Federal Reserve Act, to
invest approximately $300,000 in the stock of a corporation to be
known as "First Foreign Investment Corporation" ("First Foreign"),
to be organized under the laws of the State of Florida to engage
Principally in international or foreign banking.
The Board of Governors is prepared to grant the requested
Permission upon condition that First Foreign shall deliver to you,
within ninety days from the date of this letter, two copies of the
enclosed agreement duly executed by the appropriate officers of
First Foreign. Upon receipt of a duly executed copy of such agreement, the Board will forward the requested permission directly to
The First National Bank of Miami with a copy to you for your information and files. Accordingly, please have two copies of the
enclosed agreement executed on behalf of First Foreign by its appropriate officers and forward the original executed copy thereof to
the Board of Governors. The other copy of the agreement should be
retained for the records of the Reserve Bank.
The Board is also prepared to grant consent to First Foreign
tO Purchase and hold approximately 30 per cent of the capital stock
of First National Holdings Limited, a corporation to be organized
under the laws of the Bahamas, and the letter to the applicant referred to above will grant such consent.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.
Enclosures
2591
AGREEMENT
In consideration of the granting by the Board of Governors of
the Federal Reserve System (hereinafter referred to as the Board of
Governors), under the provisions of section 25 of the Federal Reserve
Act and pursuant to an application filed with the Board of Governors
by The First National Bank of Miami, Miami, Florida, of permission to
ac quire and hold stock of First Foreign Investment Corporation (hereinafter
referred to as the Corporation), the Corporation, in accordance
With the
provisions of said section 25 of the Federal Reserve Act,
hereby undertakes and agrees with the Board of Governors as follows:
1.
Compliance with Section 11 of Regulation K:
That the Corporation shall not purchase or hold any
asset, or otherwise exercise any of its powers in
the United States or abroad in any manner, which
would not be permissible under the provisions of
Regulation K issued by the Board of Governors.
Further Limitations and Restrictions:
That the Corporation shall restrict its operations
and conduct its business in such manner and under
such other or further limitations and restrictions
as the Board of Governors may hereafter from time
to time prescribe, in Regulation K or otherwise.
3.
Examinations and Reports:
(a)
That at such times as may be fixed by the
Board of Governors the Corporation shall
submit to examination by examiners selected
or approved by the Board of Governors;
(b)
That the Corporation shall pay the expenses
of all such examinations in the amount
determined by the Board of Governors;
(c)
That the Corporation shall do everything
necessary to facilitate such examinations
and shall make available to the examiners
all information which they may require;
-2-
S
(d) That the Corporation shall make reports to
the Board of Governors at such times and in
such form and covering such matters as the
Board of Governors may prescribe.
This agreement is executed in duplicate.
First Foreign Investment Corporation
By
Date
Attest
Secretary
2
l2b93
BOARD OF GOVERNORS
Item No. 7
7/19/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 19, 1966
CONFIDENTIAL (FR)
Mr. Hugh J. Helmer,
First Vice President,
Federal Reserve Bank of Chicago,
Chicago, Illinois. 60690
Dear Mr. Helmer:
Board
As requested in your letter of June 29, 1966, the
Reserve
Federal
of Governors approves the payment of salaries by the
of
maximums
the
Bank of Chicago to the Bank's Firemen at rates above
the
on
the grades in which the positions are classified, effective
dates indicated, as follows:
Title
Effective
7-4-66
Annual Salaries
Effective
7-4-67
Effective
7-4-68
Firemen
$7,654.40
$8,174.40
$8,590.40
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
2594
BOARD OF GOVERNORS
Item No. 8
7/19/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 19, 1966.
Dear Sir:
In light of the current objectives of monetary policy and
in order to make doubly sure that approp
riate general principles are
being applied with reasonable uniformity, the Board believes
that it
would be helpful if the Presidents
and Discount Officers of all
Federal Reserve Banks would review carefully the administrati
on of
their discount windows. Among the matter
s that the Board considers
it important to have clearly in mind under presen
t conditions are
tb°8e mentioned in the following paragraphs. Each Reserve Bank can,
°f course, think of others
.
On any occasion when monetary policy becomes more restrictive,
it can be
expected that borrowing activity at the discount window will
tiend to increase. In fact,
growth in aggregate borrowing is an
L ndicator of the degree of
monetary restraint on banks. As banks
errow, they come
under pressure to make adjustments, thereby
s lPing to spread the effects of restraint throughout the banking
stern. To this end, Regulation A provides that credit extended
b rough the discount window should be short term and on a noncontinuous
81-11, except in exigent circumstances.
r
Access to Federal Reserve discount facilities should, of
Course contin
ue to be available to member banks for appropriate
iurPoses as outlined in Regulation A. In the curren
t situation,
,T4ever, every effort should be made to induce member banks
to
:"iuidate their borrowings as promptly as possible, not only by
appropriate portfo
lio adjustments but by the adoption of more
1.?5trictive lending policies. Moreover, fuller utiliz
ation of credit
"les and larger takedowns of commitments to lend do
not constitute
r
-2-
2595
adequate justification for extended use of the discount window.
And, of course, extension of Federal Reserve credit to member
banks borrowing for the purpose of selling funds in the Federal
funds market is clearly inappropriate.
The recent expansion of borrowing by country member banks
suggests the need for particularly careful review. The fact that
large city banks are cutting down on advances to correspondent
country banks is not, of itself, a sufficient justification for
extended or continuing country-bank borrowing from the Federal Reserve
Banks. Also to be guarded against are demands by country banks for
longer-term accommodation on the ground that their lines of credit
to national or regional firms, which may have found that they are
unable to get all the credit they desire from their usual sources,
are now being activated.
The Board will appreciate your special review of discount
window administration against the background of considerations of
this kind. It would be glad to receive your comments, including
advice on developments that would appear to be of significance to
the Federal Reserve System generally.
Very truly yours,
Merritt Sherman,
Secretary.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
2696
EXPLANATORY STATENENT
REGARDING MAXIIIUTI INTEREST RATES ON
MULTIPLE MATURITY TINE DEPOSITS
Item No. 9
7/19/66
The following statement is designed to aid in the
by the Board
interpretation and application of the amendments made
of Governors on July 15, 1966, to its Regulation Q, Payment of
Interest on Deposits, and to the Supplement to that Regulation.
or
The amendments prescribe maximum rates of 5 per cent
depending upon the
4 Per cent on "multiple maturity time deposits",
d in the
maturities or terms of withdrawal or repayment specifie
deposit contract.
A multiple maturity time deposit is a time deposit
that permits
(whether a certificate or a time deposit, open account)
one date,
Withdrawal by the depositor, at his option, at more than
payable
including deposits payable on alternative specified dates,
at any time after prior written notice, or providing for automatic
renewal at maturity.
A deposit with a single fixed date of payment,
such as one payable only on a specified date, is not a multiple
interest
maturity deposit, and such a deposit may continue to bear
UP to a maximum rate of 5-1/2 per cent.
e
In determining whether the maximum rate on a multipl
the length
maturity deposit is 5 per cent or 4 per cent, the test is
al and
Of the interval between the date of any permissible withdraw
the date of the deposit or the last preceding date when withdrawal
would have been permissible.
If the interval is 90 days or more, the
the maximum
maximum rate is 5 per cent; if it is less than 90 days,
rate is 4 per cent.
-22597
The amendments apply only to deposits received on or after
July 20, 1966.
They do not affect deposits made before that date even
though the bank may have a right to terminate the deposit contract or
to modify the contract rate.
Following are some illustrative cases regarding the
sPplication of the amendments:
1.
A deposit is payable three months, six months, or nine
months after the date of deposit.
2.
The maximum rate is 5 per cent.
A certificate is payable one year after date or at any
time prior thereto after 30 days' written notice.
The maximum rate
is 4 per cent.
3.
at
A six-month certificate provides for automatic renewal
maturity for a further six months.
4.
The maximum rate is 5 per cent.
A certificate is payable one year after date and
thereafter
upon 30 days' written notice.
The maximum rate is 5 per
cent for the one-year period and 4 per cent for any period after one
Year,
5.
A deposit contract specifies no fixed maturity but
permits withdrawal at any time after 30 days' written notice.
The
zaximum rate is 4 per cent.
6.
A certificate issued prior to July 20, 1966, provides
for automatic renewal every 90 days and optional withdrawal at any
time after 30 days' notice.
The new lower rates do not apply; the
Ill ximum rate remains 5-1/2 per cent.
-3-
7.
A time deposit, open account, opened prior to July 200
1966, permits withdrawals after 30 days' notice.
The maximum rate
Ott deposits made in the account before July 20 is 5-1/2 per cent; the
maximum rate on deposits made on or after July 20 is 4 per cent.
8. A deposit made by a foreign central bank is payable
six months after date or on 30 days' written notice.
By reason of
C special statutory provision, time deposits of foreign governments
and foreign central banks, until October 15, 1968, are not subject to
maximum rate limitations prescribed by the Board.
Legal Division,
Board of Governors of the
Federal Reserve System.
July 18, 1966.
2:399
Item No. 10
7/19/66
TELEGRAM
July 19, 1966.
James S. Rockefeller, Chairman,
First National City Bank,
New York, New York.
Re your wire July 18. Revised Supplement to Regulation Q
effective July 20, 1966, regarding maximum interest rates on
multiple maturity time deposits, covers any time deposits
Payable after written notice of withdrawal, including time
deposits, open account, whether received from individuals,
corporations, or municipalities. Purpose was to cover all
time deposits except those which at time of deposit provide
for payment at single fixed maturity. Under present law
Board may not prescribe different maximum interest rates
according to nature of depositor.
(Signed) Merritt Sherman
Merritt Sherman, Secretary,
Federal Reserve Board.
2600
BOARD OF GOVERNORS
OtC01;••
Item No. 11
7/19/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 18, 1966
Mr. R. M. Stephenson, Vice President,
Federal Reserve Bank of Atlanta,
30303
Atlanta, Georgia.
Dear Mr. Stephenson:
ed
In accordance with the request contain
s
approve
in your letter of July 12, 1966, the Board
es
employe
the designation of each of the following
l
as a special assistant examiner for the Federa
Reserve Bank of Atlanta:
Francis A. D i Amico
William J. Geerken
Enrique Soriano
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
2601
BOARD OF GOVERNORS
Item No. 12
7/19/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 18, 1966
Mr. Thomas R. Sullivan, Vice President,
Federal Reserve Bank of Dallas,
75222
Dallas, Texas.
Dear Mr. Sullivan:
In accordance with the request contained
in your letter of July 12, 1966, the Board approves
the appointment of Robert L. Cotter as an assistant
examiner for the Federal Reserve Bank of Dallas,
effective today.
The authorization heretofore given your
bank to designate Mr. Cotter as a special assistant
examiner is hereby canceled.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
2602
BOARD OF GOVERNORS
Item No. 13
7/19/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 20, 1966
Mr. Irwin L. Jennings, Vice President,
Federal Reserve Bank of San Francisco,
94120
San Francisco, California.
Dear Mr. Jennings:
In accordance with the request contained in
Your letter of July 14, 1966, the Board approves the designation of R. A. Remedios, H. L. Benson, and R. D. Edmund
as special assistant examiners for the Federal Reserve Bank
of San Francisco.
Appropriate notations have been made of the names
to be deleted from the list of special assistant examiners.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
2603
BOARD OF GOVERNORS
Item No. 14
OF THE
7/19/66
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 18, 1966
14rs. Valerie R. Frank,
Secretary, Retirement System
.v of the Federal Reserve Banks,
m
-ederal
Reserve Bank of New York,
"el/York, New York. 10045
1)ear
Mrs. Frank:
With reference to the Board's letter of May 31, 1963, interposing
11°
be_ob•
Jection to incorporating into the Board Plan the increased retirement
sy:efits provided by Public Law 87-793, it is requested that the Retirement
to relal bill the Board of Governors for the cost of continuing these benefits
is °tine 30, 1967, for those annuitants on the rolls as of June 30, 1966. It
pe. .
tInderstood that this cost will be in the neighborhood of $27,390 for the
rlod involved.
It is also requested that the Retirement System continue to bill
Board
e
at the time of retirement for the individual cost of providing
this
betw suPPlementary benefit to those members of the Board's staff who retire
een July 1 and December 31, 1966.
th
The U. S. Civil Service Commission has not, as yet, received its
;t
Ic oPriations for the current fiscal year. However, H.R. 14921, the Indee0litent Offices and Housing and Urban Development Appropriation Act of 1967,
:
ins provisions to continue the supplementary retirement benefits provide
This bY Public Law 87-793 to Civil Service annuitants through June 30, 1967.
A jo.bill has passed the House, but has not reached the floor of the Senate.
hoelnt Resolution (1180) was introduced in the House of Representatives on
Pro2 27 which would provide appropriations until August 31, 1966, for those
Illen't'rns and projects of a continuing nature, including the increased retireuenefits provided by Public Law 87-793. This Resolution was signed by
the,
rresident on June 30, 1966, and became Public Law 89-481.
Congress reconvened on July 11, and H.R. 14921 is expected to be
the sr the first items of business in the Senate. After the bill has passed
the ,enate and has been signed by the President, we will send you a copy of
rublic Law as soon as it becomes available.
°Ile 0,
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
2604
BOARD OF GOVERNORS
Item No. 15
7/19/66
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 18, 1966
Mr, Edward A. Wayne, President,
Federal Reserve Bank of Richmond,
Richmond, Virginia. 23213
Dear Mr. Wayne:
Please refer to our letter of June 30, 1964, concerning
the supplemental retirement benefit payable to Mrs. Irene H. Flagg,
widow of Maurice P. Flagg, under Public Laws 87-793 and 88-25. As
this benefit is being extended for another year, please remit $72
to the Retirement System of the Federal Reserve Banks when billed
by that office to cover the cost of continuation through June 30,
1967.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
@FedFRASER