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Minutes for
To
Members of the Board
Prom:
Office of the Secretary
July 20, 1962
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, please initial
1?elow. If you were present at the meeting, your
Initials will indicate approval of the minutes. If
You were not present, your initials will indicate
c/nlY that you have seen the minutes.
Chm. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell
C
Minutes of the Board of Governors of the Federal Reserve
aYstem on Friday, July 20, 1962. The Board met in the Board Room
at 1000 a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Robertson
Shepardson
Mitchell
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Sherman, Secretary
Kenyon, Assistant Secretary
Molony, Assistant to the Board
Cardon, Legislative Counsel
Fauver, Assistant to the Board
Noyes, Director, Division of
Research and Statistics
Koch, Adviser, Division of Research
and Statistics
Brill, Associate Adviser, Division
of Research and Statistics
Furth, Adviser, Division of International Finance
Eckert, Chief, Banking Section,
Division of Research and Statistics
Yager, Chief, Government Finance
Section, Division of Research and
Statistics
Keir, Senior Economist, Division of
Research and Statistics
Mattras, General Assistant, Office of
the Secretary
_Maig* market review. Mr. Koch reported on developments in
tlie Government securities market, along with bank credit, liquidity,
445I related matters.
Mr. Brill commented on tables that he had
liEltributed bearing on the question of the adequacy of credit
44sion during the periods subsequent to the trough of recession
141 1958 and in 1961.
7/20/62
-2All members of the staff except Messrs. Sherman, Kenyon,
14°10111r, Cardon, Fauver, and Mattras then withdrew and Messrs.
liexter and Hooff, Assistant General Counsel, Goodman and Leavitt,
4sistant Directors, Division of Examinations, and Young, Senior
kttCYM, Y1 Legal Division, entered the room.
Discount rates.
The establishment without change by the
Perla
—•ral Reserve Banks of New York, Philadelphia, Chicago, and
81"ranc1sc0 on July 19, 1962, of the rates on discounts and
841%1:Ices in their existing schedules was approved unanimously,
litIlthe understanding that appropriate advice would be sent to
those &mks.
Circulated or distributed items.
The following items, which
1184 been circulated or distributed to the Board and copies of which
411
'
e attached under the respective numbers indicated, were approved
11148.411flously:
Item No.
L.e t
c er to Morgan Guaranty International Banking
tçcl‘Pcr
) ation, New York, New York, granting permission
(
eUrChase additional shares of Trust Corporation
Ekhamas Limited, Nassau, N. P., Bahama Islands.
1
tette), to
First National City Bank, New York
ezu.,1-?Ilt, approving an extension of time to
ish a branch in the Castel() District of
Itte
Janeiro, Brazil.
2
d
1 Zer to The Bank of Wood County Company, Bowling
11.,' °hi°, approving an extension of time to
estem,
„:4-ist1 a branch between East Court and East
.
-4er Streets.
3
7/20/62
-3Item No.
Iretter to the Deputy Comptroller of the Currency
e8arcling a question presented by First National
Bank
, of Hillsboro, Hillsboro, Kansas, as to
/blether the bank may pay an accumulation of six
il11. 110 interest to the holder of a twelve-month
t
14e certificate of deposit.
'
letter to Chairman Spence of the House Committee
011
ming and Currency reporting on S. 1486, a
-44-1. to regulate service charges by national banks
0
11 dormant accounts.
5
Messrs. Hooff and Goodman then withdrew.
Ttport on competitive factors (Rapid City, South Dakota).
There had been distributed a draft of report to the Comptroller
q the Currency on the competitive factors involved in a proposed
e°118°11dation of The Western National Bank of Rapid City, Rapid
it,
e
South Dakota, and Rapid. City Trust Company, Rapid City, South
;a, with American National Bank of livid City, Rapid City,
"
1514
8011th Dakota.
The report, in which the conclusion read as follows, was
Wed unanimously for transmittal to the Comptroller:
Applicant banks are commonly owned and operated
and are not regarded as competitive institutions. There
Should, be no adverse competitive effects from the proPosed consolidation.
Application of United California Bank (Items
6 and 7).
15/11'61%1ft to the decision by the Board on July 12, 1962, to approve
the aPPlication of United California Bank, Los Angeles, California,
4
V20/62
-4-
to merge with Farmers and Merchants Bank of Blythe, Blythe,
California, there had been distributed drafts of an order and
statement
reflecting that decision.
The issuance of the order and statement was authorized.
C°131es of the documents, as issued, are attached as
Items 6 and 7,
l'es13
ectively.
The meeting then adjourned.
Secretary's Notes: The steps contemplated
by the Board's action on May 7, 1962, in
issuing a preliminary permit to Bamerical
International Financial Corporation, New
York, New York, having been completed, a
final permit to commence business was
issued today to that corporation.
Pursuant to recommendations contained in
memoranda from appropriate individuals
concerned, Governor Shepardson approved
on behalf of the Board on July 19, 1962,
the following actions relating to the
Board's staff:
Ret laarbara R. Sills as Statistical Clerk in the Division of
and Statistics, with basic annual salary at the rate of
n vu, effective the date of entrance upon duty.
Dere Edith M. Fenton as Clerk (Librarian) in the Division of
at the°Ilnel Administration on a temporary basis, with annual salary
elitr rate of $2,038 (half-time position), effective the date of
ance upon duty.
Ac
'-ance of resignation
err Katherine E. Olson, Records Clerk, Office of the Secretary,
ective at the close of business August 3, 1962.
7/20/62
-5Pursuant to the recommendation contained
in a memorandum from the Division of
International Finance, Governor Robertson,
acting in the absence of Governor Shepardson,
a roved on behalf of the Board on July 19,
1962, the appointment of Alan Sokolski as
Economist in that Division, with basic annlial
salary at the rate of $8,955, effective the
date of entrance upon duty. It was understood that the requirement for completion
of a full-field investigation prior to
employment would be waived in this case.
4
'a-4(
BOARD OF GOVERNORS
oil'Ata:(4
OF THE
04
4,44 optiltov.,
Item No. 1
7/20/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 20, 1962
Mortsan Guaranty International
Banking Corporation,
23 Wall street,
New York 8, New York.
Gentlemen:
In accordance with the request and on the basis of the
information furnished with your letters of May 31 and June 26,
9621 transmitted through the Federal Reserve Bank of New York, the
iLx)Ard of Governors grants its consent for Morgan Guaranty International
llking Corporation ("MGIBC") to purchase and hold up to 587 addilonal shares, par value Bahamian L20 each, of the capital stock of
1:rust Corporation of Bahamas Limited, Nassau, N. P., Bahathas, at a
cost not to exceed approximately US$55,000, provided such stock is
4equired within one year from the date of this letter.
The Board's consent is granted upon condition that MGIBC
134411 dispose of its holdings of stock of the Trust Corporation, as
Promptly as practicable, in the event that the Trust Corporation
I euld at any time (1) engage in issuing, underwriting, selling or
!
lletributing securities in the United States; (2) engage in the
'
general business of buying or selling goods, wares, merchandise or
,,c)Intilodities in the United States or transadt any business in the
Ited States except such as is incidental to its international or
!
m reign business; or (3) otherwise conduct its operations in a
-;:nner which, in the judgment of the Board of Governors, causes
hue continued holding of its stock by MGIBC to be inappropriate
flder the provisions of Section 25(a) of the Federal Reserve Act
'
°r regulations thereunder.
r
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
Item No. 2
7/20/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 20, 1962
First National City Bank,
399 Park Avenue,
New York 22, New York.
Gentlemen:
In view of the request contained in your letter
Of July 5, 1962, transmitted through the Federal Reserve
Bank of New York, and on the basis of the information
furnished, the Board of Governors extends to August 1, 1964y
the time within which your Bank may establish a branch in
the Castel() District of Rio de Janeiro, Estado da Guanabra,
Brazil, as authorized by the Board on July 21, 1960, and as
extended by the Board's letter of July 21, 1961.
Please advise the Board of Governors in writing,
through the Federal Reserve Bank of New York, when the
branch is opened for business, furnishing information as
to the street address of the branch.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
Item No.
3
7/20/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 20, 1962
Board of Directors,
The Bank of Wood County Company,
Bowling Green, Ohio.
Gentlemen:
The Board of Governors of the Federal Reserve
8Ystem extends to November 26, 1962, the time within
which The Bank of Wood County Company, Bowling Green,
Ohio, may establish an in-town branch between East Court
and East Wooster Streets at the New York Central Railway,
under authority granted in the Board's letter dated
July 6, 1961.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
Item No. 4
FEDERAL RESERVE SYSTEM
7/20/62
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 20, 1962
Mr. C. C. Fleming,
Deputy Comptroller of the Currency,
Treasury
Department,
Washington 25, D. C.
Dear Mr. Fleming;
g a
This refers to your letter of July 6? 1962, enclosin
from
letter of June 23; 1962, to the Comptroller of the Currency
.,!1". P. F. Friesen, President of First National Bank of Hillsboro,
11illeboro, Kansas. Mr. Friesen presents the questi.on whether his
bank may pay an accumulation of six months' intsrest to the holder
a twelve-month time certificate of deposit, n?py of which was
enclosed.
The Supplement to Regulation Q estabshes the maximum
interest a member bank may pay on a time certif_cate of deposit.
The
when such interest
Regulation does not prescribe any rules as to
the bank and the
betwesn
contract
of
11
:laY
be paid. This is a matter
may pay the
ben's
a
agree,
parties
both
eustomer. Therefore, if
of deposit any
ate
certific
time
onth
twelve-m
.1,1.?crued interest on a
'Ime or times before its maturity at the maximum rate of 4 per cent
41.3!r annum, compounded quarterly. Of course, as taas been stated by
'"e Board in a previous interpretation (1960 F.R. Bulletin 630), if
accrued interest is constantly being paid out, the provision which
basis is not
aernlite the compounding of interest on a quarte-fly
P
which interest
upon
PPlioable as there will be no interest retained
may be paid.
of the
Your attention is invited to the last sentence
the
bank
reserves
"this
c?rtificate of deposit which states that
notice
written
before
-L•ght, at its option, to require thirty days
rmitting withdrawal." The purpose of this sentence is unclear.
()Ince the depositor has made a contract to leave a certain amount
money on deposit until a specified date, he cannot demand its
eepaYment until that date. Also, since the date of maturity is
1t1Plioit in the certificate itself, there should be no need for
t)
lrtY days written notice prior thereto.
f
r
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
tx:
441406,y,
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No.
WASHINGTON
7/20/62
OFFICE OF THE CHAIRMAN
114 20 1962
The Honorable Brent Spence, Chairman,
C°minittee on Banking and Currency,
!!)11se of Representatives
washington 25, D. C.
j°ear lir. Chairman:
ot 41
This is in response to a telephone request by a member
s .nAti staff of your Comittee for the views of the Board on
:
4 J.486, a bill "To authorize the Comptroller of the Currency
establish reasonable maximum service charges which may be levied
OXI
dormant accounts by national banks."
You are advised that the Board has no objection to
vurable consideration of the bill.
Sincerely yours,
(Signed) W. MeC.
"W. McC. Nartin, Jr.
in, Jr.
5
.•4
Item No.
UNITED STATES OF APERICA
6
7/20/62
BLTORE THE 31 (1,RD OF GOVERNORS OF THE FEDERa RESERVE SYSTEM
IZSHINGTON, D. C.
the hatter
of the Application of
IJIT-TTP:n
CALIFORNIA BANK
for ,
QP!)roval of merger with
and Merchants Bank of Blythe
ORDER APPROVING IERGER OF BANKS
There has come before the Board of Gcyrernors, pursuant to
the larik. lerger ;,ct of 1960 (12 U.S.C. 1828(c)), an application by
d California Bank, Los Angeles, California, a member bank of
11111:Lc
'
tild°1
'41 Reserve System, for the Board's prior approval of the
°f that bank and Farmers and 14erchants Bank of Blythe, Blythe,
4111°rIlia, under the charter and title of the former and, as an
'idett to the
merger, a branch would be operated at the location
?al'illers and Merchants T3ank of Blythe.
Notice of the proposed
in form approved by the Board, has been dublishod pursuant
t() 2aid
Upon consideration of all relevant material in the light
trte
the
furnished by
actor:3 set forth in said Act, including reports
°11Ptro1ler of the Currency, the Federal Deposit Insurance
4
1)°rti°n, and the Department of Justice on the competitive factors
4,4‘r
'
4 In the proposed merger,
-2IT IS HEREBY ORDERED, for the reasons set forth in the
kardts
Statement of this date, that said application be and hereby
PProved, provided that said merger shall not be consummated
(4) 'fritain seven calendar days after the date of this Order or
(b)
later than three months after said date.
Dated at '!ashington„ D. CO2 this 20th day of July, 1962.
air ord3r of the noard of Governors.
Voting for this action: Chairman Ifartin, and
Governors Balderston, Robertson, Shepardson, King,
and Mitchell°
Absent and not voting: Gavernor Mills.
(Signed) Forritt Sherman
Merritt Sherman,
Secretary.
SZAL
BOARD OF GOVERNORS
Item No. 7
7/20/62
OF THE
FEDERAL RESERVE SYSTEM
APPLICATION BY UNITED CA,Lrallii.ZA BANK
FM APPROVAL 07 MERGER JILI
FARMS AND :I.:MIMS BANK OF 'BLYTHE
STATENENT
United California Bank, Los Angeles, California ("United")
atc member ban1(1 with deposits of aporoximately.39,1 billion, has
Pursuant to the Bank Merger Act of 1960 (12 U.S.C. 1828(c)),
Boardts prior approval of the merger of that bank and Farmers
e4
de
l)
Mc chants Bank of Blythe, Blythe, California ("Farmors4 )„ with
1 3
of ap9roximatoly $3.8 million.
The banks wollld m rge under
the
charter and titl- of United and, as an incident to the merger,
the
3rf1ce of Farmers would be operated as a branch of United.
Under the Act, the Board is required to consider (1) the
'11Thricial history
of the banks involved, (2) the
and condition of ach
a4(-q1acY of
its capital tructure„ (3) its future earnings prospects,
(4) the
°noral character of its management, (5) —h thor its corporate
Do-T i.,3 aro
consistent with the purpose of 12 U.S.C., Ch 16 (the
'-(1Q'rekl 'Deposit Insurance Act), (6) the convenience and needs of the
to be
ervod, and (7) the effect of the transaction en
zti°/1
(including any tendency toward monopoly). The Board my
-2-
ri()t a.Drove the transaction unless, after considering all these factors,
finOs' the transaction to bc in the public interest.
Bankjnz factors. - United has been authorized to establish
11 off,.
- ices fl addition to the 140 which it is presently operating and
ilE)a
'
4Ier branch applications rending or to be filed. In connection
ITith
a-Ls Program to provide additional facilities, United Diens to issue
(i.ei4 „
''"---"a-L Capital stock -when necessary, thus providing a desirable
'
8 ilening of its caDital position. The capital structure of Farmers
--sl?etory, as would be true of the resultfng bank under the program
ctL sci'lbed.
Dc'ets
The financial history and condition and earnings pros-
Of each of the banks are satisfactory, as would be true of the re-
`1111-tne,
bank.
The manali.,,ment of each of the banks is regarded as
satisf
--e'°r. However, Farmers does not now have a chief executive
Cr and in
the past several months two of its directors
i
taken
Follow-
fr°L1 thefr principal business acti7itics to operate the
consur.r.ation of the proposeC. merger, United, through its co --)rel-lensive
tflariE,c,,rilc-at -training and recruitment 12roratm, woulc" be able to provide
(1111iff.cd personnel
to operate the branch that would replace Farmers.
ITiona-,ement of the resulting bank -would be satisfactory.
l-stericy
No incon-
lit1-1 the purposes of 12 U.S.C., Ch. 16, is indicated.
Convenience and needs of the cor_mnity. - Blythe, California
(1?°13111E't-.1.on about 6,000), is located in the Palo Verde Valley of Yiversidc
e°1111tY, 20
miles cast of Los Anr__;e1co, and is separated from the populous
tal
communities b mountain ranges. The main economic pursuit of the
conGists
of irrigation farming and cattle fcedin7.
TrlitiLral Production.
The farms in tie
There is also
real many of which e::ceed
-3'
1 000 ocres, require lines of credit ranging from "25,000 on a short-
basis for small operations to 2 million for continuing lines o2
tc)I'l
c11-‘6;4.
for large oocrations.
11rces ennbl-: it to
Carmersi lending limits and its limited
supply only a small pert of the local require-
or cattle feeding and crop
production.
The bank presently
- no real estate loans on farm properties or 'Tif, or VA mortgages,
d
lz
it handle automoblic "floor plan" or corZitional sales contracts.
area (poouladot of the farm financing in the Blythe service
'Lion
- out 13,000) is provided by an office of ;Jecurity First National
I
size
-05 1^,n7ele5„ the second largest ban' in the 3tate. -jith the
arc_ r •
larger
-Lcultur al units raoidly increasing, there is demand for
e,
development of additional
t3te loans to aid in the reclamation and
'
for
present time
gricultural use under irrigation, uhich at the
0 .11 b
a s'2tisfied b; Farmers only through participations.
O
Farmers,
of its relatively limited resources, Ls additionally handicapped
ih
aeTiCUltUrl
as
loans usually do not generate deposits, since
4L,
purchasing
- 'uqY must be disbursed quickly for crop planting r:nd
Of
credit
limited would have ample resources to meet these
::ould offer a wider range of banking services.
2
largest bank in the
20mPotition, - United is the fourth
and one of three operating state-wide branch systems.
'
It 140 operating offices are located in 29 of the
Its
58 counties
otate. Its offices nearest to Farmers are at -T1 Centro?
165 m.
lies
southwest, and Hemet,
161 miles most. The primary service
s
Of Farmers includes all of the Palo Verde Valley, extending
,,
irriately 20 miles north and south and 15 miles east and west.
There
virtuall- no competition between the two banks.
As previously mentioned, the on]y other banking office within
er
Primary cervice area is the Blythe office of Security First
'*-°1-181 Bank, Los Angeles, and the proposed merger should result in
hf-lalthy increase in competition in the area.
On a state-uide basis,
the
e4'0Posed merger would have virtually no effect on competition.
Summary and conclusion. - The 7alo Verde Valley is an
lacaated
Posed
area where loan requirements are often quite large.
The
merger would provide another bank which, under experienced
c'Pable management, could offer the farmers and ranchers a wider
allge Of
banking services, including the relatively large loans needed
- area. Uhile virtually no competition would be eliminated, the
kr er
should result in a healthy increase in competition with the
°rtle„
'
t of the second largest bank in California that also serves the
Accordingly, the Board finds the proposed merger to be in
1*
interests
J
0 1962
@FedFRASER