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FR 609
Rev. 10/59
Minutes for
To:
July
5, 1960
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, please initial below.
If you were present at the meeting, your initials will
Indicate approval of the minutes. If you were not present,
your initials will indicate only that you have seen the
minutes.
Chin. Martin
Gov. Szymczak
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
2429
Minutes of the Board of Governors of the Federal Reserve System
on Tuesday, July
PRESENT:
5, 1960.
Mr.
Mr.
Mr.
Mr.
Mr.
The Board met in the Board Room at 10:00 a.m.
Balderston, Vice Chairman
Szymczak
Mills
Shepardson
King
Sherman, Secretary
Kenyon, Assistant Secretary
Thomas, Adviser to the Board
Young, Adviser to the Board
Fauver, Assistant to the Board
Marget, Director, Division of International
Finance
Mr. Koch, Adviser, Division of Research and
Statistics
Mr. Robinson, Adviser, Division of Research
and Statistics
Miss Burr, Associate Adviser, Division of
Research and Statistics
Mr. Dembitz, Associate Adviser, Division of
Research and Statistics
Mr. Williams, Associate Adviser, Division of
Research and Statistics
Mr. Furth, Associate Adviser, Division of
International Finance
Mr. Hersey, Associate Adviser, Division of
International Finance
Mr. Sammons, Associate Adviser, Division of
International Finance
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Messrs. Eckert, Fisher, Keir, Manookian, Solomon,
Trueblood, and Wernick, and Miss Dingle, of
the Division of Research and Statistics
Messrs. Anderson, Dahl, Elrod, Irvine, Katz, Maroni,
and Wood, of the Division of International
Finance
Messrs. N. M. Miltiadou, K. N. Lazarides, and M. M. Ferdi, of
Cyprus, who were visiting the United States under the sponsorship of the
International Educational Exchange Service of the Department of State,
also were present.
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7/5/60
Economic review.
The staff of the Division of International
Finance presented a summary of recent developments with respect to
international trade and foreign financial matters, following which the
staff of the Division of Research and Statistics commented on domestic
economic developments.
All of the members of the staff except Messrs. Sherman, Kenyon,
Young, and Koch then withdrew, as did the three Cypriot officials.
Messrs.
Hackley, General Counsel, Solomon, Director, Division of Examinations,
and Nelson, Assistant Director of that Division, entered the room at this
point.
Discount rates.
The establishment without change by the Federal
Reserve Banks of Philadelphia and San Francisco on June 30, 1960, of the
rates on discounts and advances in their existing schedules was approved
unanimously, with the understanding that appropriate advice would be sent
to those Banks.
Application to organize national bank at Winter Park
(Item No. 1).
Florida
There had been circulated to the members of the Board a
file relating to an application to organize a national bank at Winter
Park, Florida.
The Federal Reserve Bank of Atlanta and the Division of
Examinations suggested an unfavorable recommendation on the application,
and a draft of letter to the Comptroller of the Currency containing such
a recommendation was submitted with the file.
The reasons cited in the
proposed letter were that it was questionable whether the management of
7/5/60
-3-
the bank would be entirely satisfactory and that there did not appear
to be sufficient need for the bank at this time.
Governor King stated that he recognized some of the objections
regarding the application and realized the Board was only making a
recommendation to the Comptroller of the Currency for the latter's consideration.
He noted, however, that the majority of the stock of the two
existing banks in Winter Park was owned by the same group of stockholders,
that there were interlocking directors and officers, and that these were
the only two banks in a growing area.
While he had noted the comments
with respect to some of the organizers of the proposed bank, it occurred
to him that in many cases the list of organizers could be expected to
include persons who were not ideal.
Relatively few people were in a
position to subscribe for large amounts of stock of a new bank, and he
was inclined to feel that it would often be necessary to gloss over
certain objections.
Also, while the proposed president of the new bank
had been ill in 1958, the report of investigation indicated that he was
well regarded in the community from which he came.
Governor King pointed out that there were two savings and loan
associations in Winter Park, one of substantial size and the other newly
organized.
He suggested that consideration be given to whether commercial
banks were to be allowed to hold their own in competition with other
financial institutions.
While he was not completely familiar with the
Winter Park area, it was his impression that growth was likely to
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7/5/6o
continue for some time even if there should be an economic downturn
generally throughout the country.
For these reasons, he was inclined to
recommend favorably to the Comptroller regarding the current application.
Mr. Nelson commented that Vice President Denmark of the Atlanta
Reserve Bank had recently been in the Winter Park area and, following
a personal inspection, had come to the conclusion that the establishment
of the proposed bank would be premature, considering the stage of development of the area and the banking facilities now available in Winter Park
and Orlando.
The two locations that the proponents had primarily in
mind involved properties owned by some of the organizers who were planning
to develop a shopping center.
Also, a new State bank had recently been
chartered at Maitland, about 4.5 miles northwest.
These factors, coupled
with the questions that had been raised about the management of the
proposed bank, seemed to the Atlanta Bank and the Division of Examinations
to warrant an unfavorable recommendation.
There followed comments by the other members of the Board which
indicated that they concurred in the position taken by the Division of
Examinations.
In the course of the discussion Mr. Sherman reported having been
advised by Governor Robertson that the latter would favor recommending
that the requested charter be granted.
Governor Robertson noted that
the two banks now operating in Winter Park had a common ownership and a
third bank would provide competition.
He felt that the community was
7/5/60
-5-
large enough to support another banking institution and that any question
as to the proposed management should be resolved favorably, particularly
since reports on the individual scheduled to assume the presidency were
highly complimentary in all respects and the examiner reported no
noticeable after-effects of a near breakdown suffered in
1958.
At the conclusion of the discussion, approval was given to the
letter to the Comptroller of the Currency of which a copy is attached as
Item No. 1, Governor King voting "no" and Governor Robertson's comments
having been noted.
Proposed merger in Oklahoma City, Oklahoma.
The Comptroller of
the Currency had requested a report by the Board on the competitive factors
involved in a proposed merger of The Bank of Mid-America Savings and Trust
Company, Oklahoma City, Oklahoma, into The Liberty National Bank and Trust
Company of Oklahoma City.
A suggested report had been circulated to the
members of the Board with a memorandum from the Division of Examinations
dated June 20, 1960.
The conclusions stated in the proposed report were
as follows:
The proposed merger would diminish competition because it
would eliminate one bank and one teller facility in the downtown
business district. The diminution in competition would be
limited by the relatively small size of the merging bank. There
would not appear to be any significant tendency toward monopoly
because of the relatively wide range of existing alternative
banking sources.
Mr. Sherman reported having been advised by Governor Robertson
that in the latter's opinion the conclusion stated in the proposed report
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7/5/60
with regard to the competitive factors involved in the merger should
be modified.
Governor Robertson agreed that there would not be a
significant tendency toward monopoly due to the merger of an
bank into one of $170 million.
$8
million
Nevertheless, the proposed transaction
would eliminate some competition through the absorption of an
$8
million
bank, and Governor Robertson noted that this competition probably could
not be replaced because of the absence of branch banking, except to a
limited degree, in the State of Oklahoma.
There followed discussion based on the comments of the Federal
Reserve Bank of Kansas City and the study of the Division of Examinations,
during which Mr. Nelson answered a number of questions pertaining to the
banking situation in Oklahoma City and the status of the smaller bank
involved in the proposed merger.
From this discussion it developed that
the members of the Board present concurred generally in the report proposed
to be made to the Comptroller of the Currency.
However, question was
raised as to the statement in the conclusion of the report that the merger
would not involve any significant tendency toward monopoly.
After a
discussion of this point, including the interpretations that might be
placed upon such language, it was agreed to substitute the words "there
would not appear to be a tendency toward monopoly" in lieu of the words
"there would not appear to be any significant tendency toward monopoly."
Subject to this change, and Governor Robertson's views having been
noted, the proposed report on the competitive factors involved in the merger
was approved unanimously for transmittal to the Comptroller of the Currency.
2435
7/5/60
-7Retail trade statistics
(Item No. 2).
There had been distributed
to the members of the Board copies of a letter dated June 20, 1960, from
Mr. Raymond T. Bowman, Assistant Director for Statistical Standards,
Bureau of the Budget, inquiring whether the Federal Reserve System might
be willing to provide some financial support (estimated at $125,000 a
year) for a program of improved retail trade data being considered for
inclusion in the 1962 budget proposals.
The program, to be conducted
by the Bureau of the Census, would not displace any part of the department
store statistics for which the System was responsible, and its adoption
would not preclude the Federal Reserve System from eliminating some or
all of the department store statistics now being prepared, if the System
should reach a decision that such action would be appropriate.
There had also been distributed to the members of the Board copies
of a draft of proposed letter to the Presidents of all Federal Reserve
Banks requesting the views of the Banks regarding the desirability of
supporting a program such as outlined in Mr. Bowman's letter.
In discussion, Mr. Sherman brought out that Mr. Bowman had talked
to him and to Mr. Noyes, Director, Division of Research and Statistics,
regarding a program of this kind before sending his letter.
The
principal question raised by Mr. Bowman was how such a program would fit
in with the current review of the department store trade statistics being
conducted by a committee representing the trade, the Federal Reserve
System, and the Bureau of the Budget.
Mr. Sherman said he and Mr. Noyes
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7/5/60
felt that the program proposed by Mr. Bowman could go ahead without
affecting whatever the Federal Reserve might wish to do in the department
store field.
The undertaking of this program of improved retail trade
data with Federal Reserve financial support might, of course, strengthen
the assumption that ultimately there would be a single agency collecting
all retail trade data and that the department store figures collected
by the Federal Reserve would be worked into that program.
Therefore, if
the Federal Reserve had a strong feeling that it wanted to retain the
collection of department store figures indefinitely, perhaps it would
not be wise to express agreement with the current proposal even to the
extent of giving financial support for a single year.
Nevertheless, Mr.
Sherman felt that concurrence in the proposal would not be an irrevocable
step.
If the Federal Reserve Banks should comment favorably, the Board
should conclude that financial support ought to be given to this program,
and the retail trade program then moved ahead, this might facilitate
elimination of the department store reports from the Federal Reserve, at
least in the longer run, assuming the Census Bureau demonstrated its
ability to compile the data effectively.
After further discussion, the proposed letter to the Federal
Reserve
Banks, a copy of which is attached as Item No. 2, was approved
unanimously, with the understanding that copies would be transmitted to
the respective Banks today and that copies also would be handed to the
Reserve Bank Presidents when they were in Washington tomorrow to attend
a meeting of the Federal Open Market Committee.
3'?
7/5/60
-9Assessment to cover Board expenses.
At the meeting on June 22,
1960, consideration was given to a proposed assessment upon the Federal
Reserve Banks to cover estimated expenses for the Board for the second
half of 1960, but action was deferred in view of questions raised with
respect to legislation then pending which provided for an increase in the
salary scale for classified Civil Service employees.
This legislation
having now been passed over a Presidential veto, reference again was made
to the proposed assessment for Board expenses.
However, since it appeared
that the levying of the assessment was not a matter of extreme urgency,
action again was deferred in order that Governor Shepardson might have an
opportunity to review the matter.
The meeting then adjourned.
Secretary's Notes: On June 16, 1960, the Board
advised the Federal Reserve Bank of Philadelphia
that it was prepared to grant permission to The
First Pennsylvania Banking and Trust Company,
Philadelphia, Pennsylvania, to purchase and hold
substantially all of the 5,000 shares of stock
of Virgin Islands National Bank, Charlotte Amalie,
St. Thomas, Virgin Islands, at a cost of approximately $1,500,000 plus expenses, upon condition
that the Virgin Islands National Bank execute and
deliver within 90 days four copies of an enclosed
agreement. The agreement having been executed
under date of July 1, 1960, the letter of which
a copy is attached as Item No. 3 was sent today
to The First Pennsylvania Banking and Trust
Company. In addition, there was sent to the
Virgin Islands National Bank the letter of which
a copy is attached as Item No. 4.
2438
7/5/60
-10On July 1, 1960, Governor Robertson, acting in
the absence of Governor Shepardson, approved on
behalf of the Board the following items:
Memorandum dated July 1, 1960, from Mr. Kelleher, Director,
Division of Administrative Services, recommending the appointment of
Frances L. Hornbeck as Charwoman in that Division, with basic salary
at the rate of $1.57 per hour when actually employed, effective the date
of entrance upon duty.
Memorandum dated June 27, 1960, from Mr. Farrell, Director,
Division of Bank Operations, recommending that the budget of that Division
be amended by the authorization of a new position in the Administration
Section at Grade FR-9. At the suggestion of the Division of Personnel
Administration in a memorandum dated June 30, 1960, in which the Division
of Bank Operations concurred, it was understood the title of the new
position would be "Data Processing Analyst".
Telegram to the Federal Reserve Bank of St. Louis (attached Item
No. 5) approving the appointment of Jack E. Barton and Harold Norris Moore
as assistant examiners.
Secretary
24'39
BOARD OF GOVERNORS
OF THE
Item No. 1
7/5/60
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
July 5, 1960
Comptroller of the Currency,
Treasury Department,
Washington 25, D. C.
Attention Mr. W. M. Taylor,
Deputy Comptroller of the Currency.
Dear Mr. Comptroller:
Reference is made to a letter from your office dated
April 5, 1960, enclosing copies of an application to organize
a national bank at Winter Park, Florida, and requesting a recommendation as to whether or not the application should be
approved.
Information contained in a'report of investigation of
the application made by an examiner for the Federal Reserve Bank
of Atlanta indicates favorable findings with respect to the
proposed capital structure and prospective earnings of the institution. According to the information available, it is questionable
whether the proposed management of the bank would be entirely
satisfactory and there does not appear to be sufficient need for the
bank at this time. Accordingly, the Board of Governors does not
feel justified in recommending favorable consideration of the application.
The Board's Division of Examinations will be glad to discuss
any aspects of this case with representatives of your office if you so
desire.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No. 2
7/5/60
ADDRES• OFFICIAL CORRESPONDENCE
TO THE INDARD
July
5, 1960.
Dear Sir:
Enclosed is a copy of a letter dated June 20, 1960, from
Mr. Bowman, Assistant Director, Bureau of the Budget, in which he inquires as to whether the Federal Reserve System might be willing to
provide some financial support for a program of improved retail trade
data that is being considered for inclusion in the 1962 budget proposals. This program would not displace any part of the department
store statistics for which the System is responsible, and its adoption
would not preclude the Federal Reserve from eliminating some or all of
the department store reports now being prepared, if the System reaches
a decision that such action would be appropriate.
As is apparent from Mr. Bowman's letter, the principal
features of the new program would be the production of weekly and
monthly total retail trade and GAAFF sales figures for the United
States, and monthly GAAFF figures for a number of large metropolitan
areas. It is proposed that appropriated funds would be requested by
the Bureau of the Budget to cover the cost of national and regional
figures and data for the 20 largest SMSAls. The specific metropolitan
areas included are listed in the supplement to Exhibit A of Mr. Bowman's
letter. His letter suggests that, in addition, the System might undertake to defray the cost of the 40 next largest metropolitan areas, which
are set forth in Exhibit B. The estimated cost of this supplementary
service would be $125,000 per year.
While the new program would not directly overlap or duplicate
the System's present department store statistics program, and while at
least initially it would not justify the discontinuance of that program,
it should provide both useful economic information and a practical test
of the capacity of the Bureau of the Census to produce weekly and metropolitan area data promptly and efficiently. If such data were developed
successfully, their availability might lessen the relative usefulness
of local department store data for general economic analysis. It should
also be borne in mind that Mr. Bowman's proposal relates to the 1962
budget, and it is entirely possible that significant changes in the
Federal Reserve department store reports may well have been made prior
244:
-2-
to the time the retail trade data contemplated in the Bowman proposal
could become a reality.
In considering Mr. Bowman's proposal, the Board would appreciate the views of the Federal Reserve Banks as to the usefulness of
monthly information on total GAAFF sales for the 40 metropolitan areas
listed in Exhibit B, as well as any general views that your Bank may
have as to the desirability of supporting a Census program of this kind
in the present circumstances. It would be helpful if your reply to
this letter could be received no later than July 13, 1960.
Very tru y yo
Merritt She
Secreta
Enclosure
TO Thh PRESIDENTS OF ALL FEDERAL RESERVE BANKS
2112
BOARD OF GOVERNORS
OF THE
44° COGOk;'4
44..
.0
0
Item No. 3
FEDERAL RESERVE SYSTEM
7/5/60
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
**A
A2A.
-btititi**
July
5, 1960.
The First Pennsylvania Banking and
Trust Company,
Philadelphia 1, Pennsylvania.
Gentlemen:
This refers to the application of The First Pennsylvania
Banking and Trust Company ("First Pennsylvania") dated May 9, 1960,
transmitted through the Federal Reserve Bank of Philadelphia, for
permission of the Board of Governors, under the provisions of Sections 9 and 25 of the Federal Reserve Act, to purchase and hold
stock of Virgin Islands National Bank ("National Bank"), a member
bank in Federal Reserve District No. 2, Charlotte Amalie, St. Thomas,
Virgin Islands. Reference is also made to the agreement dated
July 1, 1960, executed by National Bank in accordance with requirements of Section 25 of the Federal Reserve Act, by which National
Bank agrees to restrict its operations and conduct its business in
the manner set forth therein.
After consideration of such application and agreement,
the Board of Governors of the Federal Reserve System approves the
application and grants permission to First Pennsylvania, subject
to all of the provisions of Sections 9 and 25 of the Federal Reserve
Act) to purchase and hold substantially all of the 5,000 shares of
stock of National Bank at a cost of approximately $1,500,000 plus
expenses (total amount not to exceed 01,650,000); provided, that
First Pennsylvania shall not carry on its books the shares of National
Bank at a net amount in excess of the proportionate share of the book
capital accounts of National Bank at the time of purchase, after
giving effect to the elimination of all known losses.
Your letter of May 9, 1960, commented that, although National
Bank obviously would require additional capital, you were not prepared
to say haw these capital needs would be met. In your letter of June 9,
1960) it was stated that you plan to retain the earnings of National
Bank in the capital structure of that bank for the foreseeable future
and also to make capital contributions when necessary and appropriate.
It is understood that discussions have been held between management of
BOARD
OF
GOVERNORS
OF THE FEDERAL RESERVE SYSTEM
The First Pennsylvania Banking and
Trust Company
-2-
National Bank and representatives of the Office of the Comptroller of
the Currency as to the adequacy of the capital structure of National
Bank, but that adoption of a capital increase program had been postponed for such reasonable period of time as may be required to effect
orderly transition of National Bank's ownership. The Board of Governors
recognizes that National Bank needs additional capital, and this authorization is given with the understanding that, within nine months from
the date of the acquisition of the shares of National Bank by First
Pennsylvania, First Pennsylvania will take such steps as ma be necessary to increase the capital accounts of National Bank in such amount
as may be agreed upon between the Office of the Comptroller of the
Currency and National Bank, but in no event in an amount less than
$500,000 of new capital.
The Board of Governors is granting permission to National
Bank to exceed the prescribed limits of Section 10(b) of the Board's
Regulation K relating to "Aggregate liabilities of Corporation", provided National Bank maintains a condition of liquidity which, in the
judgment of the Board of Governors, is consonant with the nature of
its liabilities, subject to the right of the Board to terminate the
permission upon 90 days' written notice. Enclosed for your information is a copy of the Board's letter.
Very truly yours,
(:
Merritt Sherm
Secret
Enclosure
"f..:(5,11
BOARD OF GOVERNORS
OF THE
00,1_GCV 4
4e
0,*ti
gR
*
*
0
0
Item No.
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
14°444***
July 5, 1960.
Virgin Islands National Bank,
Charlotte Amalie, St. Thomas,
Virgin Islands.
Gentlemen:
Section 10(b) of the Board's Regulation K
("Corporations Doing Foreign Banking or Other Foreign
Financing Under the Federal Reserve Act" as revised
January 15, 1957) provides that, except with the prior
permission of the Board of Governors, the aggregate
outstanding liabilities of a Banking Corporation on
account of acceptances, monthly average domestic and
foreign deposits, borrowings, guaranties, endorsements
and any other such obligations shall not exceed ten
times the amount of the Corporation's capital and surplus.
This is to inform you that the Board of
Governors grants its permission for Virgin Islands
National Bank to exceed the prescribed limits, provided
Virgin Islands National Bank maintains a condition of
liquidity which, in the judgment of the Board of
Governors, is consonant with the nature of the Bank's
liabilities. The right is reserved to terminate this
permission upon 90 days' written notice.
4
7/5/60
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
‘)(145
TELEGRAM
Item No. 5
LEASED WIRE SERVICE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON
7/5/60
July 1, 1960
KRONER -- ST. LOUIS
REURLETS JUNE 23 AND JUNE 29, BOARD APPROVES APPOINTMENT OF
JACK E. BARTON AND HAROLD NORRIS MOORE AS ASSISTANT EXAMINERS
FOR FEDERAL RESERVE BANK OF ST. LOUIS, EFFECTIVE JULY
1, 1960.
AUTHORIZATIONS FOR ALL SPECIAL ASSISTANT EXAMINERS CANCELED AS
REQUESTED.
(Signed) Merritt Sherman
SHERMAN
@FedFRASER