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Minutes for July 20, 1959. 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 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 Chin. Martin Gov. Szymczak Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov, King Minutes of the Board of Governors of the Federal Reserve System 04 Monday, July 20, 1959. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Balderston, Vice Chairman Szymczak Mills Robertson Shepardson King Sherman, Secretary Thomas, Economic Adviser to the Board Hackley, General Counsel Farrell, Director, Division of Bank Operations Mr. Shay, Legislative Counsel Mr. Young, Assistant Counsel Mr. Mr. Mr. Mr. Discount rates. The establishment without change by the Federal Reserve Banks of New York and Philadelphia on July 16, 1959, and by the Pedsral Reserve Bank of Minneapolis on July 17, 1959, of the rates on 648°0unts and advances in their existing schedules was approved unanini°1141Y2 with the understanding that appropriate advice would be sent to those Banks. Items circulated or distributed to the Board. ite The following which had been circulated or distributed to the Board and copies or Vhich are attached to these minutes under the respective item numbers Ladle ated were approved unanimously: Item No. Let r to !!7 to the Bureau of the Budget with respect bezliolied bill S. 1120, relating to member reserve requirements. to or ,_ 610 the Bureau of the Budget with respect x'Ir.olled bill H. R. 7789, to amend paragraph (b) Bection 401 of the National Housing Act. 1 2 7/20/59 -2Item No. Letter to regarding 4sa15tant scheduled the Federal Reserve Bank of Richmond the retention of R. L. Honeycutt, Cashier, for two months beyond retirement. 3 In connection with Item No. 1, Governor Robertson raised the question whether it was desirable to include in the letter any comment Other than that the Board recommended approval of the bill, S. 1120, relating to bank reserves. Other members of the Board expressed the Ifiey that it would be desirable to send the letter in the form of the draft submitted, particularly since legislation on this subject had bean introduced at the Board's request, and subsequently had been c)dified by the Congress in a manner differing from that suggested by the Board. Accordingly, the letter was approved in the form of attached Item No. 1. Letter from Congressman Patman. There had been distributed before this meeting a letter to Chairman Martin from Congressman Patman dated 14.-LY 17, 1959, requesting information concerning bank reserves, ' 46 Pressed in eleven numbered questions contained in Mr. Patman's lett r a-. Following a brief discussion, it was understood that the staff 11°1114 Prepare a draft of reply for the consideration of the Board. Messrs. Thomas, Shay, and Farrell withdrew from the meeting "this Point. 7/2o/59 Appointment of director at New Orleans Branch. At the meeting °a July 16) 1959/ the Board agreed to request Chairman Mitchell of the Federal Reserve Bank of Atlanta to ascertain whether Dr. Robert W. French) Vice President of Tulane University, would be eligible to serve as a director of the New Orleans Branch and whether, if eligible, he would be willing to accept appointment, if tendered, for the unexPired portion of the term ending December 31, 1961. In a telegram aated July 16, 1959, Mr. Bryan) President of the Atlanta Bank, reported that at Chairman Mitchell's request he had checked with Mr. Shaw, Vice President of the New Orleans Branch, and learned that Dr. French haa resigned his connection with Tulane University and accepted a 11111-time appointment as Director and Chief Executive Officer of the P°rt of New Orleans. Mr. Bryan's telegram raised the question whether) 14 view of this change in Dr. French's status, the public nature of his office might serve to disqualify him as being inconsistent with the December 23, 1915, resolution of the Board regarding the holding r Political office by Reserve Bank directors. Mr. Bryan added that /'rench had not yet been approached regarding whether he would e`ccePt the Appointment if tendered. A memorandum from Mr. Walter Young, dated July 20, 1959, pointed °Ilt that the question involved in the possible appointment of Dr. French Vas entirely a question of policy for determination by the Board since 7/20/59 there was no statutory provision that would forbid the service in Vestion. On The memorandum noted that the Director of the Port of New apparently was appointed by the Board of Commissioners of the Port and that these Commissioners were appointed by the Governor of the State of Louisiana without consent of the State Legislature. The nielzorandum also stated that it seemed evident that service as Director (If the Port was a full-time job, probably with substantial compensation. In commenting on the Legal Division's memorandum, Mr. Hackley stated that in applying the 1915 resolution, the Board had made a raszber of exceptions, as in the case of a Class A director of the Federal Reserve Bank of New ecmalliasioner of the Port of New in 1951 when he was appointed a Authority. In that case, however, the C°11missioners served without compensation, which distinguished their service from the position of Dr. French, who apparently served full-time capacity and received substantial compensation. Mr. eY also noted Mr. Bryan's comment that the policies of the Port Of Nev Orleans Board were subject to public discussion and occasional ecttroversy. After a discussion of all available information concerning the 4ature of the position held by Dr. French, the Board agreed that it '4%234 not be appropriate to tender him an appointment as a director °I' the New Orleans Branch in view of possible political implications g'") 7/20/59 _5_ Of the office that he now holds and that, accordingly, additional names 8hould be reviewed for possible appointment to the unexpired portion of the term for which Dr. French had been considered. The meeting then adjourned. Secretary's Note: Governor Shepardson today approved on behalf of the Board a letter to the Federal Reserve Bank of Dallas (attached Item No. 4) approving the designation of George W. Saunders, Carrol E. Duke, George W. Stover, Roy S. Stapleton, Jr., and Marvin C. McCoy as special assistant examiners. Secretary f)tir 4 ,Ate4! ,001.1 4*4.4 BOARD OF GOVERNORS OF THE Item No. 1 7/20/59 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE 10 TI-4E BOARD July 20, 1959. Mr. Phillip S. Hughes, hsistant Director for 4 Legislative Reference, -areau of the Budget, Room 253, ',13(ecutive Office Building, 'I thington 25, D. C. Attention: Mrs. Garziglia Dear Mr. Hughes: This is in response to your communication received by the board the 0/1 July 17, 1959, requesting the Board's views with respect to pe4 enrolled bill, S. 1120, ”To amend the National Bank Act and the 'Lain'Reserve Act with respect to the reserves required to be mainby member banks of the Federal Reserve System against deposits eliminate the classification 'central reserve city'." per Those provisions of the bill that authorize the Board to to 'nit member banks to count vault cash as part of their reserves and Nrrmit individual member banks in certain circumstances to carry ill.teced reserves would, in the Board's opinion, be desirable in the tirlests of more flexible and equitable administration of provisions law relating to reserves of member banks of the Federal Reserve 111. These provisions are in accordance with recommendations heretoto ' made by the Board to Congress. The Board did not recommend, and has expressed its oppositi°r1 to, qtu provisions of the bill that would abolish central reserve and the Board continues to feel that these provisions are undeeis, bila-41 ' ,1e. Nevertheless, because of the desirable features of the 4pro u°11e mentioned, the Board recommends that the legislation be 'ed by the President. Very truly yours, 0Q> k Merritt Sherm1113, Secretary./ C t. oiatti,)4,4 COp.: )4 BOARD OF GOVERNORS OF THE ii .0t Item No. 2 FEDERAL RESERVE SYSTEM 7/20/59 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE Nu% 404444- TO THE BOARD July 20, 1959. *. P hillip S. Hughes, Assistant Director for Legislative Reference, kreau of the Budget, Room 253, Xxecutive Office Building, Washington 25, D. C. Attention: Nar Itr. Mrs. Garziglia Hughes: This is in response to your communication of July 16, 1959, 4T0 sting the views of the Board on the enrolled bill, H.R. 7789, amenA as Lt Paragraph (b) of section 401 of the National Housing Act, amendedo, It is ci °rrect understood that the purpose of this legislation is to ;:insuran,T1 inequity which exists under present law with respect to por' -- °f savings accounts by the Federal Savings and Loan Insurance clit4r,ation in States where there are community property laws. Apparn accouttlril such an account in the name of the husband, a i-L,n the jurisdictions name of the wife, and an account in the name of both t :1 11 the --,,"1,1_1munitY Property and insured in the total maximum amoun 'Jill, iittoualWhile in common law States in a similar situation, insurance 4 maximum amount of30,000 may be provided. The enrolled cf accon -Ls understood, would permit in the above situation insurance c°111nlon ;-rits in community property -, aw n, States in the same amount as in otates. (,?' a0,0-6.g eRl latioT nhis is to advise you that the Board has no objection to this Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. • BOARD OF GOVERNORS OF THE Item No. 3 7/20/59 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 20, 1959. Mr. Alonzo G. Decker, Jr., Chairman of the Board, Federal Reserve Bank of Richmond, Richmcmd 130 Virginia. Dear Mr. Decker: In view of the circumstances outlined in your letter Zr JulY 9, 1959, the Board of Governors interposes no objection _o a the C shierretention in service of Mr. R. L. Honeycutt, Assistant at the Charlotte Branch until November 1$ 1959, two months beyond his scheduled retirement date, and the payment of sai arY to Mr. Honeycutt at his present annual rate during that Period, Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. BOARD OF GOVERNORS 3,titittt+u,1,4_ ,,9•0900 ., % .,, bp:40, OF THE Item No. 4 7/20/59 FEDERAL RESERVE SYSTEM A u WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD -tinipl.r.** July 20, 1959 Mr. L. G. Pondrom, Vice President, Federal Reserve Bank of Dallas, Dallas 2, Texas, Dear Mr. Pondrom: In accordance with the request contained in your letter of July 14, 1959, the Board approves the designat ion of George W. Saunders, Carrol E. Duke, George W. Stover, and Roy S. Stapleton, Jr., aS special assistant examiners for the Federal Reserve Bank of Dallas for the purpose of participating in the examination of Southern Arizona Bank and Trust Company, Tucson, Arizona. The Board also approves the designation °f Yarvin C. McCoy as a special assistant examiner for the Federal Reserve Bank of Dallas for the purpose of participating in the examination of State member banks only. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, E.eoretary.
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