The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Minutes for To: July 28, 1958 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 pith respect to any of the entries in this set of minutes in the record of policy actions required to bC 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 vere present at the meeting, please initial in colUmn A, below to indicate that you approve the minutes. !r you were not present, please initial in column B "elov to indicate that you have seen the minutes. Clam. Martin Gov. Szymczak Gov. Vardaman Gov, Gov. Robertson Gov. Balderston Gov, Shepardson v."6 2152 Minutes of the Board of Governors of the Federal Reserve System "Monday, July 28, 1958. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Martin, Chairman Balderston, Vice Chairman Vardaman Mills Robertson Shepardson Mr. Kenyon, Assistant Secretary Mr. Fauver, Assistant Secretary Mr. Riefler, Assistant to the Chairman Mr. Thomas, Economic Adviser to the Board Mr. Molony, Special Assistant to the Board Messrs. Young, Robinson, and Koch, Miss Burr and Miss Stockwell, and Messrs. Eckert, Flechsig, Kalachek, Keir, Paul Smith, Trueblood, Wood, and Yager of the Division of Research and Statistics Messrs. Marget, Hersey, Sammons, Bangs, Wood, Gemnill, and Reynolds of the Division of International Finance Economic review. The review by the Division of International 'maonce indicated that although there were some foreign areas with Pronounced economic difficulties, including shortages of foreign exchange reserves, the general picture abroad was not one, in the absence of flArth -er political turbulence in the Middle East, which would suggest a general deterioration such as to affect significantly the economic ituation in the United States. The summary of domestic developments by the Division of Research arid Statistics revealed, in a number of fields, further evidence of a Nthe r convincing nature that the recession had bottomed out and that an 1113sivi ng in the economy was in process. 215 7/28/58 -2All of the members of the staff except Messrs. Kenyon, Fauver, 'efler, Young, Eckert, and Molony then withdrew. At this point, also, Messrs. Leonard, Johnson, Masters, Connell, Solomon, Conkling, and Kakalec joined the meeting. -...9T.._t._ ,0._PA(_thl---...11-shiReuestforextensionoftirl'ertitemNosl. As recommended in a memorandum from Mr. Conkling dated July 22, 1958, which had been distributed to the Board, unanimous approval was given to a telegram to the Federal Reserve Bank of Dallas authorizing it to grant River Oaks State Bank, Houston, Texas, an extension until August 18, 1958, to Publish its report of a holding company affiliate, the American Health StuctiO8, Inc. A copy is attached under Item No. 1. Application of The Wolfe City National Bank. There had been irculated to the members of the Board a file containing the favorable recommendations of the Dallas Reserve Bank and the Division of Examinations lith respect to an application from The Wolfe City National Bank, Wolfe Cit'Texas, for fiduciary powers. Governor Balderston had attached a note ating that he would be inclined to wait until the bank demonstrated that, With better weather, it could improve its situation. Governor Robertson icated that he would deny the application because the bank was in no 1"3sition to undertake the responsibilities and risks involved in exercising ary powers. In discussion Governor Balderston expressed concern about the 4vora ble impression that might be given to the community through granting 215(1 7/28/58 the —.3— application when actually the applicant bank was experiencing certain difficulties, partially due to adverse weather conditions in the area last year. Governor Shepardson commented that the area had been deteriorating t04 'a number of years, with small farms, fertility down, and erosion high. There was a movement of population out of the area, he said, and the "nsral picture was not encouraging. All things considered, he viewed this as a doubtful case. Mr. Masters then stated that the case was recognized as borderline bilt that it seemed a little difficult to support denial. The bank's trcubles were somewhat the fault of weather conditions and its asset PNblems would not appear to have too great a bearing on whether it could discharge fiduciary appointments successfully. The management seemed about as good as typically found in a small bank and good legal counsel bic41111 be available. In making the application, the bank desired to compete lith other banks in the general area by affording a broad range of banking 414 trust services. Further, it did not appear that any great volume of trust business would be available and the business accepted was not likely to b_ of a difficult character. In those circumstances, the Division had ' c)110-11ded that the application could be approved. In further discussion of the applicant bank and its community, errior Robertson pointed out that the proposed legal counsel resided in 44other community, the bank's management was rated only fair, the volume 215.3 7/28/58 —4— of Potential trust business was not large, and none of the bank's personnel had trust experience. Also, it was stated in the memorandum from the Di.Vi 4 -on of Examinations that the reaction of the Comptroller's Office was --e, adverse. Governor Mills said that he would accept Mr. Masters' reasoning, although he recognized the borderline nature of the application. said I This, he was another one of the applications coming before the Board frequently which present the same kind of general problem, and to turn cielln the request would deny a community local trust service. Unless, ther-' .1,ore, there were criticisms that he had failed to discover, he would be,. '"ellned to approve the application. Governor Vardaman indicated that he could not see great distinctions betwe„ t,his application and many others approved by the Board over the Years• If it was the policy of the Board to encourage unit banking, h telt that the Board could not deny unit banks the right to exercise trust Po to era and thereby handicap their operations. He then referred to the , al- practice of the Board over a long period in granting trust powers 41411er banks, not always equipped with trust talent, and said this put thus lirden upon the bank examination function to see that the powers granted were policy not abused. This entailed some risks, but under the toil °wed by the Board for many years he could find no strong reason for reiecting the Wolfe City application. 7/28/58 —5— Chairman Martin said that he saw some merit in Governor Vardaman's 3sition on the basis of precedent, but he added that in the field of bank ' 811Pervi5i0n it is necessary to take a stand at some point. The question hie mind was whether the Board would be doing a favor to this institution bY D.,. A_ `"-nLing its application or whether favorable action would really do harm to the bank. If the matter had to come to a vote today, he continued, he w°111d have to cast his vote with the three members of the Board who had "Pressed reservations, for he felt that it was prudent to deny an PPlication whenever there was a strong feeling within the Board from the stalldPoint of safety and supervisory risks. In further discussion Mr. Masters commented that the reservations e4'ressed informally by the Comptroller's Office reflected the generally lve attitude of that Office toward trust power applications from small bardts • On the other hand, Board policy had long favored granting trust Power s to small banks even though the applications could not always stand lap as well under scrutiny as those of larger institutions. Chairman Martin then commented that the size of the applicant bank 11011.1c1 not be determining. In every instance, the benefit of the doubt g be given to the small bank that is rendering satisfactory service and kakin g Progress. In this case, however, the bank's record was such as to t'aise q4eetions in the minds of several of the members of the Board. It being noted that the recommendation of the Dallas Reserve Bank " h bee n favorable, it was then agreed to refer the matter back to that Bank 2157 7/28/58 With a clear indication that the Board was considering turning down the aPPlication. In that light, the Reserve Bank could determine whether it wi..shed to make further representations in support of the application. Iaproved statistics on bank credit and the money supply (Item In a memorandum dated July 22, 1958, which had been distributed to the Board, Messrs. Thomas, Leonard, and Young presented for consideration certain proposals for improving the quality and speeding up the availability of data needed for the analysis of current monetary and credit developments, Part icularly the data on total bank credit and the money supply. These recommendations had been approved for implementation at a recent meeting of the SYstem Research Advisory Committee and the Subcommittee on Research of the 10‘ . ":esidents' Conference. It was suggested that the proposals be sQb mitted to the Reserve Banks for review and comment, and at an appropriate title h ue discussed with the Budget Bureau, prior to formal submission of a definite Program. Following comments by Messrs. Eckert and Conkling concerning the PrOpo eals, unanimous approval was given to the letter to the Presidents of the 'ederal Reserve Banks of which a copy is attached under Item No. 2. Messrs. Riefler, Young, and Eckert then withdrew. of budget overexpenditures. In a memorandum dated July 18, 1958, which had been circulated to the members of the Board, Mr. Connell suggested an amendment to the Board's Statement of Budgetary Principles and Aroe edure, adopted September 16, 1953) which would give the Controller 2158 7/28/58 authority to approve division overexpenditures in any nonpersonal services budget account up to $2,500, rather than up to 10 per cent of the approved budget for such classification, provided the division's total budget for llonpersonal services was not exceeded. Following comments by Mr. Connell and by Governor Shepardson, who c°11curred in the proposal, the suggested amendment was approved unanimously. Messrs. Connell and Kakalec then withdrew. Items circulated to the Board. The following items, which had been circulated to the members of the Board and copies of which are attached to the . minutes under the respective item numbers indicated, were approved Ullanimously: Item No. Let ern to the Comptroller of the Currency recommending 3 1,1;-ultal of the application of Citizens Union Bank & riz, t Company, Lexington, Kentucky, to convert into a --(4-°nal banking association. Lette eorv..r to the Federal Reserve Bank of Cleveland approving to ' ni-rluation of the payment of salary at the present rate tv, ,aarence Go olpilm: Assistant Federal Reserve Agent, "'rough the end Letter the - to the Federal Reserve Bank of Chicago approvinf, ape PaYment of salary to carpenters and electricians a cified annual rates. 4 5 Prior to approval of the foregoing Item No. 4, Mr. Johnson explained the clreumstances surrounding the transfer of Mr. Goudreau from his former Po ii., -"'°n to that of Assistant Federal Reserve Agent and mentioned the P"sibi1i4 that Mr. Goudreaule present salary would be brought within the 2159 7/28/58 -8- aPProved range in the event of a general salary structure adjustment at the Cleveland Reserve Bank. In the absence of such an adjustment, he said, it appeared that the Reserve Bank should take steps to correct the abovegrade salary rate within a six-month period. The meeting then adjourned. Secretary's Notes: In the light of information furnished in a memorandum from the Division of Bank Operations dated July 16, 1958, Governor Shepardson, acting on behalf of the Board, authorized on July 25, 1958, giving Mr. David B. McCalmont, Assistant Professor of Economics at Franklin and Marshall College, access to certain unpublished data from the Board's files for use in writing a doctoral dissertation on "Federal Reserve System Policies in aid of Balanced Relationships between the Gold Certificate Reserves of the individual Reserve Banks." This authorization was granted on the basis that it was not a precedent and that each such request would be examined on its own merits. Pursuant to the request made in a memorandum dated July 28, 1958, Governor Shepardson today granted permission to Harold F. Stone, Analyst in the Division of Bank Operations, to engage in the sale of real estate for an authorized broker as an outside part-time activity. Assistant Secretary 2160 TELEGRAM LEASED WIRE SERVICE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON Item No. 1 7/28/58 July 28., 1958 ?()ricirom as Reurlet July 14 advising that River Oaks State Bank, Houston, tkra has requested an additional extension to August 18 1958 to Prep r 8 and publish its report of a holding company affiliate. The Board concurs in your recommendation and grants requested eXtenlo. "'an. Please advise the member bank accordingly. (Signed) Kenneth A. Kenyon KENYON 2161 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 2 7/28/58 WASHINGTON 25, D. C. AOORL5S OFFICIAL CC3RkESPONOENCE *ot — TU THE BOARD **,:qtvg• rw..* July 28, 1958 Dear sir: The Ad Hoc Subcommittee on Improvement of Iveekly Member Bank aPPointed last year by the Chairman of the System Committee on ber r.pit Reporting Series, recently submitted a report containing a numon 0,1 1,r ecommendations for needed improvement in our current statistics apprf'ing. This report was reviewed and some of its recommendations 17 of the System Research for implementation at a joint meeting on June Pre .reh Advisory Committee and the Subcommittee on Research of the sldents i Conference Committee on Research and Statistics. Data to irara• Two of the Subcommittee's recommendations appear susceptible Qjrinlerellate action. One of these is to speed up the availability of esbank data released in the monthly report on "Assets and t.11 i elbeiql of All Banks in the United States" (Board of Governors 7). The other is to inaugurate a new midmonth report G s ace D -areal ,. ' ing the end-of-month report of principal assets and liabilities Of aliel ember banks. In addition, to improve estimates of the money to re(T) Board staff have recommended that member banks be requested DortsP°1",t U. S. Government demand deposits and vault cash on their repozal °4 depos its for reserve computation purposes. The specific proconsideration, together with explanatory background informa)are covered in the enclosed memorandum. These proposed changes would make the data more useful for Ystem rnents ,,P°11cY decisions. The Board would appreciate having your comfor -r suggestions regarding these proposals before it takes them up ormal action. Very truly yours, .+•••• •'• • „ Kenneth A. Kenyon, Assistant Secretary. rO THE PRF:SIDENTS OF A LL FEDERAL RESERVE BANKS. ' 21 BOARD OF GOVERNORS OF THE Item No. FEDERAL RESERVE SYSTEM 3 7/28/58 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONOENCE TO THE BOARD July 28, 1958 Comptroller of the Currency, Treasu___ Department, Wasiungton 25, D. C. Attention tear mr. Hollis S. Haggard, Chief National Bank Examiner. W. Comptroller: office dated June 12 Reference is made to a letter from your N.__ 3 1958, enclosing copies of an application of Citizens un Bank dc Trust Company, Lexington, Kentucky, to convert into a na4. as ,"1°nal banking association and requesting a recommendation Whether or not the application should be approved. sentatiAn investigation of this application made by a repreta ,,ve of the Federal Reserve Bank of Cleveland discloses vobet,aule findings with respect to the financial history of the prZ, adequacy of the capital structure, its future earnings niti ects, character of management, and services to the commuAc ordingly, the Board of Governors recommends approval of L' 1 c conv e aPplication of Citizens Union Bank & Trust Company to ert into a national banking association. The Board's Division of Examinations will be glad to orri;"'s any aspects of this case with representatives of your e if you so desire. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. ,2 2163 Item No. 4 BOARD OF GOVERNORS 7/28/58 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS orriciAL CORRESPONDENCE TO THE BOARD July 28, 1958 CONFIDENTIAL (FR) irs W. D. t;cleral Fulton, President, Reserve 3ank of Cleveland, -'‘eveland 1, Ohio. 1)e4r Mr. Fulton: Ih view of the circumstances outlined in your letter of thine the JO, 1956, the Board of Governors approves the continuation of ratjaYme.ht of salary to Mr. Clarence J. Gaudreau, at his present becemi?1 47,644 per annum, for the period July 1, 1958 through --r 31, 1956, while serving as Assistant Federal Reserve Agent. It is noted that this salary will exceed by 4416 the the 4111 of the crade to which the position is assigned. In approving ttlIcie munt of slary in excess of the grade maximum, the Board , aqarstands that the Bank will take steps to bring Mr. Gaudreau s PeriZ within appropriate grade limits before the expiration of the i ndicated. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. Item No. 5 BOARD OF GOVERNORS OF THE 7/28/58 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 28, 1958 CONFIDFATIAL (FR) 4r. N. J. Newman, Vice President, Federal Reserve bank of Chicago, Chica,.,fp 90, Illinois. Dear Hr. Newman: The Board of Governors approves the payment of .”lary by the Federal Reserve dank of Chicago to the 44cumbents of the positions listed below at the rates shown, retroactive to June 1, 1958, in accordance with the request contained in your letter of July 7, 1958. Title dead Carpenter Cdrpenter Head Slectrician Electrician Annual Salary 592.00 6,832.80 8,028.80 7,225.92 Very truly yours, (Signed) Kenneth A. Ken3ron henneth A. Knyon, Assistant Secretary.
@FedFRASER