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Minutes for To: Members of the Board From: Office of the Secretary July 2, 1959. 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. A Chm. Martin Gov. Szymczak Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King x C/1>13 Minutes of the Board of Governors of the Federal Reserve System on Thursday, July 2, 1959. PRESENT: Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Balderston, Vice Chairman Szymczak Mills Shepardson King Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Sherman, Secretary Kenyon, Assistant Secretary Riefler, Assistant to the Chairman Marget, Director, Division of International Finance Johnson, Director, Division of Personnel Administration Hackley, General Counsel Shay, Legislative Counsel Noyes, Adviser, Division of Research and Statistics Furth, Associate Adviser, Division of International Finance Nelson, Assistant Director, Division of Examinations Goodman, Assistant Director, Division of Examinations Items circulated or distributed to the Board. The following items, which had been circulated or distributed to the Board and copies of which are attached to these minutes under the respective item numbers indicated, were approved unanimously: Item No. Letter to the Riverside Trust Company, Hartford, Connecticut, approving the establishment of a branch at 111 Pearl Street. 1 Letter to The Vermont Bank and Trust Company, Brattleboro, Vermont, waiving the requirement of six months, notice of withdrawal from membership in the Federal Reserve System. 2 7/2/59 -2Item No. Letter to Bank of America, New York, New York, granting an extension of time within which to purchase shares of Malaya Industrial Development Finance Limited. 3 Letter to the Federal Reserve Bank of New York regarding reports of condition as of June 30, 1959, to be obtained from foreign banking and foreign financing corporations. 4 Letter to The Detroit Bank and Trust Company, Detroit, Michigan, approving the establishment of a branch in Plymouth Township. 5 Letter to the United Home Bank & Trust Co., Mason City, Iowa, approving the establishment of a branch at 23 West State Street. 6 Memorandum from the Division of Personnel Administration recommending that no action be taken by the Board with respect to the change in title of an officer at the Federal Reserve Bank of Richmond. 7 Letter to the Chairman of the Presidents' Conference Committee on Fiscal Agency Operations approving the continued services of Messrs. Hackley and Kiley as associate members of specified subcommittees. 8 Application to organize national bank at Rockville, Maryland. The Comptroller of the Currency had requested a recommendation with respect to an application to organize a national bank at Rockville, Maryland. On the basis of a field investigation, the Federal Reserve Bank of Richmond suggested an unfavorable recommendation on the grounds that little dissatisfaction had been expressed with the services of the 7/2/59 existing banks, those banks should be able to handle the increased volume of business resulting from the anticipated further growth of the city of Rockville and its environs, a number of the individuals listed to serve as directors of the proposed bank were not residents of the immediate area, it seemed unlikely that the directors would be able to contribute materially toward obtaining business for the proposed bank, and definite provisions had not been made for active management of the bank. The Division of Examinations concurred in the findings of the Reserve Bank, and the file circulated to the Board included a draft of letter to the Comptroller of the Currency indicating that the Board would not feel justified in recommending approval of the application. In discussion, Governor Mills referred to favorable aspects of the application, particularly the substantial and continuing growth of the area surrounding the city where the bank would be located. In these circumstances, it seemed doubtful to him whether the statement could be made that the area was overbanked. While several of the proposed directors were not residents of Rockville itself, he noted that all of them were from Washington, D. C., or suburban communities in the general vicinity of Rockville. Accordingly, although he did not regard the application as a particularly impressive one, he felt that the Board would be adapting a rather severe approach in recommending unfavorably to the Comptroller. He suggested, therefore, that the application be -4- 7/2/59 referred back to the Richmond Reserve Bank for review and analysis, with the statement that the Board found the case difficult to decide and that there were favorable characteristics of the application which seemed to deserve further study. Mr. Nelson then reviewed factors that had influenced the Division of Examinations, including the recent organization of two banks in the general area and the establishment of a branch by a neighboring bank just outside the city. He indicated that the Division considered the application of a borderline nature but that the points brought out in the investigation by the Reserve Bank were regarded as strong enough to warrant an unfavorable recommendation. Comments by the other members of the Board suggested that they would have been prepared to go along with the position of the Reserve Bank and the Division of Examinations, recognizing that the case was a rather close one. However, in view of the points raised by Governor Mills, it vas agreed that the Richmond Bank should be requested by the Division of Examinations to review the matter prior to further consideration of the application by the Board. Mr. Johnson then withdrew and Mr. Thomas, Economic Adviser to the Board, entered the room. Request for report on Senate Concurrent Resolution 50. The Senate Finance Committee had requested a report on Senate Concurrent Resolution 50, submitted by Senator McNamara of Michigan, which would 7/2/59 -5- express the sense of the Congress that the Federal Reserve System should be guided by a balanced interpretation of the policy objectives of the Employment Act of 1946 and should utilize the monetary means and tools that would best assist in the economical and efficient management of the public debt, subject to the requirements of a sound monetary policy. There had been distributed to the Board copies of the proposed resolution) excerpts from comments by Senator McNamara appearing in the Congressional Record of June 22) 1959) at the time he submitted the resolution, and a proposed draft of letter to the Chairman of the Senate Finance Committee, to which the resolution had been referred. The proposed letter expressed the view that the provisions of the resolution would not conflict with the present policies of the Federal Reserve System and that it seemed unlikely whether they would conflict With future policies that might be adopted by the System. However, Senator McNsmprats remarks on the floor of the Senate had indicated that he viewed the resolution as "an alternative to the demand by the Administration that Congress remove the statutory ceiling of 4-1/4 per cent interest on Treasury bonds" and that he believed "the effect Of this language would be to require the Federal Reserve to enter the Government security market, if necessary, to help hold down the interest rate." Accordingly, the draft letter pointed out, adoption of the resolution might result in a misunderstanding, for nothing the Federal -6- 7/2/59 Reserve could do, within the confines of a sound monetary policy, would constitute an alternative to the request for elimination of the interest rate ceiling on savings bonds and longer-term marketable debt and the System, within the confines of a sound monetary policy, could not "help hold down the interest rate." At the beginning of a discussion of the matter, Governor Mills distributed copies of, and read, an alternative draft of letter to the Finance Committee. While the fundamental position reflected therein waS substantially the same as that taken in the draft submitted by the staff, the contents of the letter had been rearranged and certain substitutions of language made in the interest of developing a more persuasive presentation while acknowledging the right of others to differ from the Federal Reserve viewpoint. Comments by the members of the Board indicated that they would be prepared to approve a letter along the lines of the draft submitted by Governor Mills, subject to certain modifications that were suggested. During the discussion, Mr. Shay commented that the Board appeared to be under no pressure for an immediate report on the concurrent resolution. He also expressed the point of view, later concurred in by Mr. Hackley, that the Congress, if it should decide upon action to limit the area of Federal Reserve discretion in formulating policy decisions, should take such action in the form of legislation rather than a concurrent 7/2/59 -7- resolution which, although it would not have the effect of law, would nevertheless have a history such as to suggest a Congressional mandate. It was suggested, in the light of the comments by Messrs. Shay and Hackley, that redrafting of the letter to the Senate Finance Committee take into account the point they had mentioned. Inasmuch as it did not appear that a report on the proposed concurrent resolution was urgent, it was agreed at the conclusion of the discussion to refer the matter back to the staff for preparation Of a revised draft of letter for the Board's consideration. Messrs. Thomas, Shay, Noyes, and Nelson then withdrew from the meeting. Application for Federal :Reserve gold loan. At the request of the Vice Chairman, Mr. Marget discussed the circumstances surrounding inquiry at the Federal Reserve Bank of New York by Banco do Brasil regarding the possibility of securing a 50 million Federal Reserve gold loan, with renewal options up to a period of one year. Although the matter had been reviewed with Mr. Marget by telephone by President Hayes and Vice President Coombs of the New York Bank, it had not yet been considered by the Bank's directors. Upon consideration of the information supplied by Mr. Marget, it was the unanimous view of the Board that the proposed loan could not be regarded as falling within the scope of Federal Reserve gold loan 7/2/59 -8- policy and that the circumstances would not appear to justify a deviation from that policy. Accordingly, it was understood that Mr. Marget would get in touch with Mr. Coombs and advise him that Vice Chairman Balderston would present the Board's point of view to President Hayes. Messrs. Marget, Furth, and Goodman then withdrew from the meeting. Action on reserve requirement bill. Reference was made to the action taken by the House of Representatives yesterday in approving the bill on member bank reserve requirements reported by the Banking and Currency Committee, subject to an amendment submitted by Congressman Reuss which had the effect of providing a range of reserve requirements Of 10 to 22 per cent, rather than 10 to 20 per cent, for reserve city banks. It was noted that a motion to recommit the bill had been defeated by a vote of 309 to 60. Vice Chairman Balderston commented that he had informed Chairman Martin, who was out of the city, concerning the action taken by the House. Statement by Congressman Patman. With reference to the statement on Federal Reserve Bank expenditures released to the press by Congressman Patman under date of June 22, 1959, Governor Shepardson commented that the Division of Bank Operations was assembling material compiled by the respective Reserve Banks in response to the Board's telegram of June 23, 1959, and that question had arisen whether the Division should 7/2/59 Proceed to draft for the Board's consideration a statement that might be transmitted to the Senate and House Banking and Currency Committees. After discussion, it was agreed that such a statement should be prepared, with the understanding that the Board would then consider what use to make of it. The statement, it was suggested, should be Similar in form to the communication sent last year to the Banking and Currency Committees with respect to the similar charges made at that time by Mr. Patman. The meeting then adjourned. Secretary's Notes: On July 1, 1959, Governor Shepardson approved on behalf of the Board the recommendations contained in a memorandum dated June 26, 1959, from Mr. Kelleher, Director, Division of Administrative Services, that (1) the Head Messenger's Office be transferred to the Mail Room and the tube station in Room 1015 be rendered inoperative; a possible budget overexpenditure be authorized for relocating the tube station to Room 1016 if the need for such action should be determined within less than six months; and, if necessary, contingent provision be made in the 1960 budget of the Division of Administrative Services for the cost of such relocation. On the basis of information contained in memoranda from staff members of the Divisions of Bank Operations and Research and Statistics dated June 11 and June 18, 1959, Governor Shepardson also approved on behalf of the Board on July 1, 1959, the purchase of a Flexowriter and certain related 7/2/59 -10equipment at an estimated cost of $5,530.27. The amount of 65,000 had been provided for this purpose in the 1959 budget of the Division of Administrative Services, and Governor Shepardson's authorization included approval of the excess expenditure. Pursuant to recommendations contained in memoranda from appropriate individuals concerned, Governor Shepardson approved on behalf of the Board on July 1, 1959, the following items affecting the Board's staff: Salary increases James H. Joyce, Assistant Federal Reserve Examiner, Division of Examinations, from $4,790 to $4,980 per annum, effective July 12, 1959. L. Waite Waller, Jr., Accounting Technician, Office of the Controller, from $5,470 to $5,985 per annum, effective July 12, 1959. Change in title Adrian P. Francoeur, from Assistant Federal Reserve Examiner to Federal Reserve Examiner, Division of Examinations, with no change in his basic annual salary of $7,030, effective July 12, 1959. Louis W. Zidek, from Assistant Federal Reserve Examiner to Federal Reserve Examiner, Division of Examinations, with no change in his basic annual salary of $7,030, effective July 12, 1959. Secretary BOARD OF GOVERNORS OF THE tt. A , Item No. 1 FEDERAL RESERVE .SYSTEM * 7/2/59 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD t? July 2, 1959. Board of Directors, Riverside Trust Company, Hartford, Connecticut. Gentlemen: Pursuant to your request submitted through the Bank of Boston, the Board of Governors of Reserve Federal the Federal Reserve System approves the establishment of a branch at 111 Pearl Street, Hartford, Connecticut, to house the bank's trust department only, by Riverside Trust Company, provided the branch is established within six months from the date of this letter. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE Item No. 2 7/2/59 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 2, 1959. Board of Directors, The Vermont Bank and Trust Company, Brattleboro, Vermont. Gentlemen: The Federal Reserve Bank of Boston has forwarded to the Board of Governors your letters of June 12 and June 18, 1959, and the accompanying resolution signifying your intention to withdraw from membership in the Federal Reserve System and requesting waiver of the six months' notice of such withdrawal. In accordance with your request, the Board of Governors waives the requirement of six months' notice of withdrawal. Upon surrender, to the Federal Reserve Bank of Boston, of the Federal Reserve Bank stock issued to your institution such stock will be cancelled and appropriate refund will be made thereon. Under the provisions of the Board's Regulation H, your institution may accomplish termination of its membership at any time within eight months from the date the notice of intention to withdraw from membership was given. It is requested that the certificate of membership be sent to the Federal Reserve Bank of Boston for disposition. Very truly yours, (Signed) KennethA. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS *), OF THE 4 Item No. 3 FEDERAL RESERVE SYSTEM 4,4 .t 7/2/59 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORNESPOIN:10ENCE 10 THE BOARD July 2, 1959. Mr. Tom B. Coughran, Executive Vice President, Bank of America, 40 Wall Street, Nell York 15, New York. Dear Mr. Coughran: In accordance with the request contained in your letter of June 18, 1959, transmitted through the Federal Reserve Batik: of New York, the Board of Governors extends to January 15, 1960, the time within vhich your Bank may purchase 1500 ordinary shares of Malaya Industrial Development Finance Limited, Kuala Lumpur, Malaya, for MA50,000 (equivalent to approximately US50,000), subject to the understandings stated in the Board's letter dated July 15, 1958. It is noted that organizational difficulties have been encountered in the incorporation of the company and that it is not expected to be formed until after July 15, 1959, the expiry date of the Board's authorization of July 15, 1958. Very truly yours, (Signed.) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE Item No. 4 7/2/59 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 21 1959. Mr. R. B. Niltse, Vice President, Federal Reserve Bank of New York, New York j York. Dear Mr. Niltse: Enclosed are copies of letters calling for reports of condition as of June 30, 1959, from the following foreign banking and foreign financing corporations in the Second District operating under the provisions of Section 25 and Section 25(a) of the Federal Reserve Act: Bankers Company of Hew York Chase Manhattan Overseas Corporation International Banking Corporation American Overseas Finance Company Bank of America Chase International Investment Corporation Chemical International Finance, Ltd. The First Bank of Boston (International) Also enclosed is a copy of a letter to American Overseas Investing CamPanY, Inc. You will observe that the letters request that the reports called for be submitted in duplicate to the Federal Reserve Bank of New York for transmittal to the Board of Governors. Upon receipt of the reports it will be appreciated if you will have a proof made of the footings and obtain the correction of any obvious errors in the reports. Please forward the original copy of the reports to the Board and retain a copy for your files. A complete review of the reports will be made in the Board's Division of Exnmiwitions, and any correspondence which may be necessary as a result thereof will be initiated by the Board with a copy to you for your information. Enclosures Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE Item No. 5 FEDERAL RESERVE SYSTEM 7/2/59 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD Jay 2, 1959. Board of Directors, The Ebtroit Bank and Trust Company, Detroit, Michigan. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of Chicago, the Board of Governors approves the establishment of a branch near the intersection of Wilcox Road and Schoolcraft Road, Plymouth Township, Nhyne County, Michigan, by The Detroit Bank and Trust Company, provided the branch is established within six months from the date of this letter and the approval of the State authorities is in effect as of the date of the establishment of the branch. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS .v.,„. z); 0044 1Z011,i OF THE Item No. 6 FEDERAL RESERVE SYSTEM 2• 7/2/59 WASHINGTON 25. D. C. tC1. ADOU•ESS OFFICIAL CORRESPONDENCE TO THE BOARD **".4111..irolV• tI July 21 1959. Board of Directors, United Home Bank & Trust Co., Mason City, Iowa. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of Chicago, the Board of Governors of the Federal Reserve System approves the establishment of a branch at 23 West State Street, Mason City, Iowa, by United Home Bank & Trust Co., Mason City., Iowa, provided the branch is established within six months from the date of this letter. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS or THE FEDERAL RESERVE SYSTEM Ace Correspondence Board of Governors IIMU„Pivision of Personnel Administration Item No. 7 7/2/59 Date June 24, 1959 of Officer's Position -Subject: Approval Federal Reserve Bank of Richmond Reserve Bank In the attached letter of June 8, 1959, the Federal of Richmond advises that the Board of Directors on last May 14 established he position of Assistant Counsel and Assistant Secretary and named The letter states Assistant Counsel Welford S. Farmer to the new position. tf.lat the change does not involve any difference inthe level of responsinew bility, and it has been ascertained that Mr. Farmer's salary in the position remains unchanged at $9,500 per annum. Comments Law, Mr. Farmer, a graduate of the T. C. Williams School of Credit r Consume a became University of Richmond, is 35 years of age. He Discount Chief ently subsequ Investigator at the Reserve Bank in 1950, and was status officer to on promoti Clerk, Law Clerk, and Assistant to Counsel. His as Assistant Counsel was effective January 1, 1959. in title The practice heretofore, where there has been a change salary, g existin Only, has been to advise the Bank of approval of the review whether or not requested. Considering Governor Balderston's current Federal all of of the procedures followed in connection with appointments for Reserve Bank officers and the approval by the Board of compensation cate communi Such officers, it would seem advisable at this time not to rather further with the Bank, particularly as its letter is one of advice than a request for approval. Recommendation by the Board It is recommended that no further action be taken . records its revise with regard to this position, except to 0:17, BOARD OF GOVERNORS OF THE Item No. 8 FEDERAL RESERVE SYSTEM 7/2/59 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 2, 1959. Mr. Hugh Leach, Chairman, Committee on Fiscal Agency Operations, Conference of Presidents, Federal Reserve Bank of Richmond, Richmond 13, Virginia. Dear Mr. Leach: Your letter of June 23, 1959 requests the Board's approval of the re-appointment of Mr. Howard H. Hackley as an associate member of the President's Conference Subcommittee of Counsel on Fiscal Agency Operations, and Mr. John N. KileY, Jr., as an associate member of the Subcommittee on Fiscal Agency Operations. The Board approves the ccntinued services of Messrs. Hackley and Kiley in the capacities indicated. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary.
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