The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
6 Minutes for To: Members of the Board From: Office of the Secretary July 25, 1963 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 Approval of a discount rate of 3-1/2 per cent for the Federal Reserve Bank of Kansas City. 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 below. If you were present at the meeting, your initials will indicate approval of the minutes. If ?_rou were not present, your initials will indicate only that you nave seen the minutes. Chin. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Gov. Mitchell Minutes of the Board of Governors of the Federal Reserve System on Thursday, July 25, 1963. The Board met in the Board Room at 10:00 a.m. Present: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Mills Robertson Shepardson Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Sherman, Secretary Molony, Assistant to the Board Cardon, Legislative Counsel Fauver, Assistant to the Board Hackley, General Counsel Noyes, Director, Division of Research and Statistics Farrell, Director, Division of Bank Operations Solomon, Director, Division of Examinations Johnson, Director, Division of Personnel Administration Connell, Controller Koch, Associate Director, Division of Research and Statistics Furth, Adviser, Division of International Finance Conkling, Assistant Director, Division of Bank Operations Daniels, Assistant Director, Division of Bank Operations Goodman, Assistant Director, Division of Examinations Benner, Assistant Director, Division of Examinations Leavitt, Assistant Director, Division of Examinations Langham, Assistant Director, Division of Data Processing Spencer, General Assistant, Office of the Secretary Bakke, Senior Attorney, Legal Division Veenstra, Chief, Call Report Section, Division of Bank Operations Kakalec, Assistant to the Controller, Office of the Controller 7/25/63 -2- Circulated or distributed items. The following items, copies Of which are attached to these minutes under the respective item numbers indicated, were approved unanimously: Item No. Letter to State Bank of Albany, Albany, New York, approving the establishment of a branch at 1245 Washington Avenue. 1 Letter to First National City Bank, New York City, authorizing the establishment of a branch in the Vallejo District, Mexico, D. F., Mexico. 2 Inquiry regarding distribution of coins (Item No. 3). • There had been distributed under date of July 22, 1963, a draft of letter to Coin World, a numismatic publication, replying to a letter of June 7, 1963, submitting a list of questions about Federal Reserve distribution of c°in, particularly silver dollars. The draft of reply included as an attachment a copy of the questions and a draft of proposed responses. At the Board's request Mr. Farrell commented, pointing out that C°in World had submitted questions typifying those presented by its readers, and that the request seemed to be a sincere attempt on the part cf this publication to obtain the position of the System on the distribution of coin, information about which presumably would be helpful to c°in dealers and collectors. Mr. Farrell noted that Coin World had addressed its letter of June 7 to Mr. Daniels, Assistant Director of the Division of Bank Operations, and that certain questions called for an expression of individual opinion; however, the proposed responses '4M'It" 7/25/63 -3- had been drafted in a manner that would not reflect an individual opinion. In discussion, several questions were raised relating to numismatic publications. Governor Robertson inquired whether a Board reply in the manner proposed might not constitute, in a sense, a contribution toward the profits of Coin World, in reply to which Mr. Farrell stated that this publication was considered to be a reputable magazine in the numismatic field and was widely read. Also, Coin World had made an effort to develop specific questions; and a substantial portion of the information being furnished had been made available in the past in reply to other inquiries on the same subject. Further discussion of the point raised by Governor Robertson concluded with a consensus that the Board should reply to the questions and that if there were subsequent inquiries for the same information, a copy of the Board's reply to Coin World could be made available. Discussion then turned to the individual questions and the draft resPonses. Governor Balderston called attention to one question that asked whether it was fair for a member bank to allow a coin dealer to pay for the Special privilege of acquiring sizable numbers of silver dollars, and yet deny a collector a small number of silver dollars if he was willing to pay the handling charges, the draft response to which indicated that this matter was beyond the area of Federal Reserve responsibility. -4- 7/25/63 Governor Balderston pointed out that this answer might be taken out Of context. He suggested that the answer be changed to state that this was not a matter covered by statute, and that it was believed to be beyond the jurisdiction of supervisory authorities and subject to the discretion of commercial bank management. There being agreement with the change suggested by Governor Balderston, the letter and proposed responses to the questions submitted by Coin World were approved subject to the change decided upon at this zeeting. A copy of the letter is attached as Item No. 3. It was under- stood that copies of the letter and its enclosure would be sent to the Federal Reserve Banks. Messrs. Daniels, Goodman, and Bakke withdrew from the meeting , at this point and Mr. Holland, Adviser, Division of Research and Statistics eatered the room. Management succession survey (Item No. 4). At the meeting on jillY 8, 1963, the Board was informed that a letter dated July 3, 1963, end draft questionnaires had been received from Chairman Patman of the Rouse Banking and Currency Committee regarding a proposed survey of Illsured commercial banks with respect to (a) compensation and succession interest rates on Of bank management, (b) correspondent banking,and (c) business loans. The letter requested suggestions on the form and content the questionnaires and inquired whether the Board would be willing to h c:11e their collection and tabulation. In discussion at the July 8 fleeting, it was pointed out that the draft questionnaires had been sent ' 7/25/63 -5- to the Reserve Banks for comment, with advice to Chairman Patman that this procedure was being followed. As to the question whether the Board would be adverse to handling the collection and tabulation of the completed questionnaires, it was understood that this subject would be considered further following the receipt of comments from the Federal Reserve Banks. There now had been distributed a memorandum dated July 24, 1963, regarding the bank management survey. The memorandum stated that in accordance with an understanding with the staff of the House Banking and Currency Committee, attention had been concentrated first on this questionnaire and that technical comments from the Reserve Banks and the Board's staff had been conveyed to the Committee staff. The memo- randum went on to discuss certain features of processing the survey, it being indicated that the total amount of programming that would be needed was still uncertain. It was estimated, however, that a cost of approxi- mately $7,000-•.:,000 would result. The survey would probably necessitate contracting for outside services since a large part of the workload involved key punching, programming, and tabulation. The value of the data that the Committee might derive from the information on the bank management survey was then discussed in the memorandum, it being brought out that primary reliance by the Federal Reserve System in this respect was placed on the bank examination process. Rowever, information from that source could not be made available to the Public nor was it desirable to draw upon examination reports as an Z413!3' -6- 7/25/63 alternative source of the information sought by the Committee. Turning to the subject of respondent and Congressional relations, the memorandum indicated that Reserve Bank comments on the questionnaire emphasized that probably there would be a problem of respondent relations, with the possibility of substantial nonresponse, large scale follow-up activity, and need for resort to the subpoena power by the House Banking and Currency Committee. The Reserve Banks had suggested minimum System involvement. The memorandum pointed out that there was not uniform staff agreement with respect to involvement in the survey. In general, however, the staff concern was that Federal. Reserve activity with respect to the questionnaire be limited to technical advice on survey design and routine editing, key punching, and tabulation of results, with supplemental assistance from outside service bureaus to the extent necessary. If the recommended arrangements appeared feasible for the handling of the bank management questionnaire, similar treatment might be accorded the correspondent banking survey. A different treatment might be in order for the proposed interest rate survey, since the System would have greater interest in, and need for, such data. There was attached to the memorandum of July 24 a draft of letter to Chairman Patman commenting on the management survey and expressing the view that it would be appropriate that the questionnaire be sent to all respondent the banks under a covering letter from the Committee, with replies addressed to the Committee. The letter indicated, however, that 7/25/63 -7- the Board would be willing to undertake routine editing, processing, and tabulation of the replies as a service to the Committee. The letter also pointed out that processing of the survey would appear to involve a substantial expenditure of both staff time and money. In this respect, inquiry was made whether the Committee's request for assistance with the survey was intended to include the absorption by the Board of such costs. At the Board's request, Mr. Holland commented, his remarks being based substantially on information presented in the memorandum of July 24. In discussion, Governor Mills observed that without question any survey of this kind was likely to be resented by a great many bankers. He thought there was much to be said for the view of the Reserve Banks that the questionnaire should be sent out under a covering letter from the House Banking and Currency Committee, and not from the Reserve Banks, and that responses be directed to the Committee rather than the Reserve Banks. It was noted that the proposed letter to Chairman Patman, as dzafted, asked whether the request for Board assistance was intended to include absorption of certain costs connected with the survey. Reference l'ae made, during consideration of this aspect of the matter, to the chain banking survey that had been undertaken in 1962 at the request of the House Select Committee on Small Business, some of the cost of which the Board had assumed. It was brought out that certain information gathered 2441 7/25/63 -8- in the chain banking survey was felt to be useful to the Federal Reserve System; however, the results of the survey of management succession would be of more doubtful benefit. On the other hand, it might be said that the management survey related to a phase of the banking Picture and that it would also be of interest. It was noted that the estimated out-of-pocket expense involved was relatively small; however, if the Board assumed the cost, that might set a precedent for other requests. Agreement was than indicated with editorial changes in the draft Of letter to Chairman Patman, and the letter was approved unanimously with the understanding that it would be changed to reflect such changes. A coPy of the letter in the form sent to Chairman Patman is attached as Item No. 4 . . Examination reports. Following approval of the letter to Chair- man Patman, Governor Robertson directed attention to a statement in that letter which indicated the Federal Reserve followed carefully the quality of bank management and the availability of capable succession in each State member bank through its examination and supervisory contacts. lei1.h reference to this statement, Governor Robertson suggested that a 134rticular effort should be made by the bank examiner to bring problem involving bank management and succession to the attention of a bank's board of directors. In this connection Mr. Benner noted that the confidential section °r a report of examination included a question concerned with bank 24el 7/25/63 management. The examiner was required to render a brief appraisal of management and also of the board of directors. The practice and policy had been for the Federal Reserve Bank to follow up any problems of this kind that were developed in the confidential section of an examination report. After discussion, it was understood that further consideration would be given by the Division of Examinations to the matter mentioned by Governor Robertson. Messrs. Farrell, Johnson, Connell, Conkling, Benner, Leavitt, Longhorn, Veenstra, and Kakalec then withdrew from the meeting. Questions submitted by House Banking and Currency Committee. At the invitation of the House Banking and Currency Committee, members °f the Board appeared before the Committee on July 22, 1963, in connection with Board approval of the change effective July 17, 1963, in the rates on discounts and advances at Federal Reserve Banks. Sub- sequently, the Committee submitted a list of supplementary questions for inclusion in the record, a copy of which had been distributed to each member of the Board with a covering memorandum dated July 23 from Messrs. Young (Adviser to the Board) and Noyes. There also had been distributed in this connection a memorandum from Governor Balderston dated July 24, 1963, discussing the relation of economic growth to money supply, comment on which subject had been invited by Congressman Reuss during the appearance before the Committee. 7/25/63 -10- In discussion Mr. Noyes called attention to the variety of questions submitted by the Committee, noting that while some questions were addressed to Chairman Martin, others seemed to be addressed to the Board in general with the exception of one question (numbered 11) • apparently directed to Governor Mills. The matter now being raised vas one of procedure with respect to the preparation of replies to the respective questions. Following discussion regarding the form of response to be made, it was understood that the staff would prepare draft replies for consideration by the Board, except that Governor Mills would prepare the response to question number 11. Article by Beryl Sprinkel. Mr. Noyes referred to a recent letter from Senator Proxmire that apparently had been received by each member °I) the Board requesting an evaluation and views on a study by Mr. Beryl W. Sprinkel, Vice President of Harris Trust and Savings Bank, Chicago, Illinois, entitled Relative Economic Growth Rates and Fiscal-Monetary P olicies. There ensued a brief discussion regarding Senator Proxmire's l'equest and the manner in which it should be handled, during which Governor Mills indicated that he had responded to Senator Proxmire's letter. There was general agreement with a suggestion that the handling of the letter from Senator Proxmire should be left to the diseretion of each member of the Board, but that the staff would draft for i -11- 7/25/63 consideration a general reply that might be used by members who wished to do so. Request for information regarding bank stock owned by Class B directors. Mr. Sherman reported that a request had been received from staff of the House Banking Professor Harvey C. Mansfield, a member of the and Currency Committee, for information on bank stock owned by Class B directors of Federal Reserve Banks. In this connection Mr. Sherman noted that at the time of Chairman Martin's appearance before the House 2, 1954, question was raised Committee on Government Operations on June regarding bank shareholdings by Class B directors. Subsequently, in order that the Board might have current information, it was decided by the Board at a meeting on June 11, 1954, to have each Reserve Bank contact its Class B directors with a view to ascertaining the extent Of their bank shareholdings. Similar information was obtained by the Board through the Reserve Banks in 1956 and was furnished in summary form to the House Banking and Currency Committee, at the Committee's request, at that time. Mr. Sherman went on to point out that there is no statutory provision prohibiting Class B directors from owning bank stock. Martin noted that it In the discussion that followed, Chairman shoUld be made clear to Professor Mansfield that the information obtained several years ago did not reveal any questionable situations and that -12- 7/25/63 there would appear to be no particular reason to undertake such a survey at this time in the absence of a statutory requirement against holdings of bank stocks by Class B directors. There being no indication of views different from those expressed by Chairman Martin, it was understood that Mr. Cardon would talk further With Professor Mansfield on that basis. Mr. Koch then withdrew from the meeting. Balance of payments. Mr. Furth presented for the information of the Board a brief report on current U. S. balance of payments figures. The meeting then adjourned. Secretary's Notes: A telegram was received today from the Federal Reserve Bank of Kansas City stating that the directors of that Bank had established, subject to review and determination by the Board of Governors, a rate of 3-1/2 per cent (rather than 3 per cent) on discounts for and advances to member banks under sections 13 and 13a of the Federal Reserve Act, a rate of 4 per cent on advances under section 10(b), and a rate of 4-1/2 per cent on advances to individuals, partnerships, and corporations other than member banks under the last paragraph of section 13. Pursuant to the authorization given at the meeting on July 16, 1963, the Secretary informed the Kansas City Reserve Bank by telegram of the Board's approval of the rates established by the Bank's directors, effective July 26, 1963. A press statement was issued at 4:00 p.m. EDT, all Reserve Banks and branches were notified by telegram, and arrangements were made for publication of a notice in the Federal Register. 7/25/63 -13Pursuant to the recommendation contained in a memorandum from the Division of Administrative Services, Governor Shepardson today approved on behalf of the Board termination of the employment of Elsie E. Perkins (Anderson), Charwoman in that Division, effective immediately. 24/,17 Item No. 1 7/25/63 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 25, 1963 Board of Directors, State Bank of Albany, Albany, New York. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment by State Bank of Albany, Albany, New York, of an in-town branch at 1245 Washington Avenue, provided the branch is established within one year from the date of this letter. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, 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 prescribe in the Board's letter of November 9, 1962 (S-1846), should be followed.) .244 4 Item No. 2 7/25/63 BOARD OF GOVERNORS ..... '00VCC114'.. OF THE FEDERAL RESERVE SYSTEM >1. w• Li • WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD ' R 0.• ••••••• July 25, 1963 First National City Bank, 399 Park Avenue New York 22, New York. Gentlemen: The Board of Governors of the Federal Reserve System authorizes First National City Bank, New York, pursuant to the provisions of Section 25 of the Federal Reserve Act, to establish an additional branch in Mexico, D. F., Mexico, to be located in the Vallejo District; and to operate and maintain such branch subject to the provisions of such Section. Unless the branch is actually established and opened for business on or before August 1, 1964, all rights granted hereby shall be deemed to have been abandoned and the authority hereby granted will automatically terminate on that date. Please advise the Board of Governors, in writing, through the Federal Reserve Bank of New York, when the branch is opened for the business, furnishing information as to the exact location of branch. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. Board also had (The letter to the Reserve Bank stated that the to establish aflowed period aPProved a six-month extension of the the requested, be should the branch; and that if an extension November 9,1962 of letter Procedure prescribed in the Board's (S-1846), should be followed.) 44 BOARD OF GOVERNORS Item No. 7/25/63 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL. CORRESPONDENCE TO THE BOARD July 26, 1963. Marion Russell, t4xecutive ir8. Editor, Coin World, SidneY News Building, SidneY, Ohio. 1)ear Mrs. Russell: This refers to your letter of June 7, 1963, submitting %ist of questions typifying those posed by readers of Coin World 40 ut the Federal Reserve distribution of coin, particularly silver d°11ars. Enclosed are answers to your questions, which have been rtura bered for convenient reference and also rearranged from the order • wiach they were submitted. It is hoped the answers will enable Coin World to make satisf_ 4ctory responses to inquiries from readers. If desired, the ewers may be published in their entirety. Very truly yours, Merritt She an, Secretary. Erleic'sure BOARD OF GOVERNORS Item N5) 7/25/63 OF THE FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE CHAIRMAN July 26, 1963. The Honorable Wright Patman, Chairman, Banking and Currency Committee, House of Representatives, Washington 25, D. C. Dear Mr. Chairman: This is in further reply to your letter of July 3, concerning three sample surveys of commercial banks that your Cftmittee is considering undertaking. In accordance with arrangements made with members of your staff, the Federal Reserve System has concentrated its review of these matters first upon the proposed questionnaire regarding bank Personnel and provision for management succession. Numerous technical comments and suggestions have already been conveyed to your staff representatives regarding the content and design of this questionnaire. The aim of these suggestions has been to facilitate editing and tabulation procedures, eliminate duplication of data already available or planned to be available to the Committee, !educe respondent burden, and minimize the problems of nonresponse. °astheless, we feel compelled to point out that substantial ad! partly ,1,_rerse be e respondent reaction may be engendered by the survey, because partly it deals with some sensitive subjects and 14c)re and more bankers have been objecting to the burdens of reP°rting in a variety of special surveys as well as regular series. Attention has also been given to your inquiry as to Aether the Board would be adverse to handling the collection and tabulation of these questionnaires. The discharge of its super8°rY responsibilities in this field would not ordinarily lead that the Board to the distribution of a questionnaire such as the carefully q 8igned by your staff. The Federal Reserve follows succescapable ,1alitY of bank management and the availability of 81 vrn in each State member bank through its examination and supere are c_ °rY contacts. We understand that broadly similar procedures 011owed by the Comptroller of the Currency and the Federal Deposit o_surance Corporation in the exercise of their supervisory authority ver respectively. national banks and insured nonmember banks 2451 To: The Honorable Wright Patman -2- Since the questionnaire under discussion was originally developed by the Committee staff and the analysis and publication of the results of the survey will be undertaken by the Committee and its staff, it seems appropriate that the forwarding of the questionnaire to all respondent banks be done under a covering letter from the Committee and that the replies be addressed to the Committee. This will permit suitable follow-up actions directly by the Committee or its staff in instances of nonresponse to part or all of the questionnaire. The Board will stand ready to undertake the subsequent routine editing, processing, and tabulation of the replies as a service to the Committee, within the limitations upon extent and timing of work to be done that are inevitable because of a need to discharge other assignments. In this connection, it can be expected that Board personnel will refer the more s ubstantive editorial questions to the Committee staff for the exercise of their professional judgment or, if necessary, for the Purpose of obtaining clarification from respondents. While estimates of the size of the task represented by the survey must remain tentative until specifications are complete, it appears to involve a substantial expenditure of both staff time and money. Because of the press of other assignments upon the Board staff, it would be necessary to contract with an outside service bureau for the card punching and preparation of computer Programs. The resulting out-of-pocket cost to the Board is .!-ikely to be in the neighborhood of $8,000 at a minimum. The 160ard assumes that the Committee request for assistance with the urveY was intended to include reimbursement by the Committee to ! Lbe Board for such out-of-pocket costs. You may rest assured that the Board staff will continue Provide technical advice on questions of survey design, tabu' tion procedures, and methods of analysis whenever requested by the Committee's representatives. After the first priority accorded ,13 the considerations of the bank management questionnaire, the Reserve Banks and the Board staff have been asked to turn their _ qeir attention to a similar consideration of the proposed correPondent banking survey and the survey of charges on business in that order. The first informal comments on these surveys have already been exchanged between the Board and Committee staffs. "on as the focus and content of these surveys have been settled, o the Board will write the Committee further concerning ssible collection and tabulation arrangements for these later surveys. to I Sincerely yours, (Signed) Wm. McC. Martin, Jr. Wm. McC. Martin, Jr.
@FedFRASER