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Minutes for To: Members of the Board From: Office of the Secretary July 81 1957 Attached is a copy of the minutes of the s of the Federal Reserve System on Governor of Board the above date. It is not proposed to include a statement with respect to any of the entries in this set of minutes in the record of policy actions required to be maintained pursuant to section 10 of the Federal Reserve Act. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, if you were present at the meeting, please initial in column A below to indicate that you approve the minutes. If you were not present, please initial in column B below to indicate that you have seen the minutes. Chin. Martin Gov. Szymczak 1/ Gov. Vardaman X Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson 1/ In accordance with Governor Shepardson's memorandum of March 8, 1957, these minutes are not being sent to Governor Vardaman for initial. 1888 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Monday, July 8, 1957. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Szymczak Mills Robertson Shepardson Mr. Carpenter, Secretary Mr. Kenyon, Assistant Secretary Mr. Riefler, Assistant to the Chairman Mr. Thomas, Economic Adviser to the Board Messrs. Robinson, Williams, Koch, Dembitz, Eckert, Miller, Altmann, Klaman, Paul Smith, Trueblood, Wernick, and Yager, and Miss Stockwell of the Division of Research and Statistics Messrs. Marget, Bangs, Furth, Katz, Reynolds, and Summers of the Division of International Finance Review of economic developments. The staff of the Division of International Finance commented on financial developments in selected foreign areas, United States foreign trade, and the extent to which deed by mand pressures within the United States economy were being reinforc d evelopments abroad. The review of domestic developments by the Division of Research and Statistics revealed in general a continuation of economic activity at a high level, but with somewhat diverse trends in various sectors of the economy. All of the members of the staff who were present except Messrs. Carpenter and Kenyon then withdrew from the meeting and Messrs. Hackley, 1889 7/8/57 -2- General Counsel, Masters, Director, Division of Examinations, Hostrup and Goodman, Assistant Directors, Division of Examinations, and Davis, Assistant Counsel, entered the room. had Items circulated to the Board. The following items, which been circulated to the members of the Board and copies of which are , attached to these minutes under the respective item numbers indicated were approved unanimously: Item No. Letter to The Colonial Trust Company, Waterbury, Connecticut, consenting to its proposed merger with The Naugatuck National Bank, Naugatuck, Connecticut, and approving the establishment of a branch in Naugatuck by the surviving institution. (For transmittal through the Federal Reserve Bank of Boston) 1 Letter to Farmers & Merchants National Bank of Blacksburg, Blacksburg, Virginia, granting its request for leermission to exercise a specific fiduciary power. aor transmittal through the Federal Reserve Bank of 9 Richmond) Letter to the Federal Deposit Insurance Corporation regarding the application of Iowa State Bank, Algona, with1°wa, for continuance of deposit insurance after System. Reserve Federal drawal from membership in the (With a copy to the Federal Reserve Bank of Chicago) 3 comment on report of Extension of time for Bank of America to examination (Item No. 4). Reference was made to a letter sent on July to August 6, 3, 1957, to Bank of America, New York, New York, extending 1957, at the bank's request, the time for filing a reply to the Board's or contemletter of June 7, 1957, requesting advice of actions taken as of Plated in the light of the report of examination of the bank -3- 7/8/57 December 11, 1956. Copies of the letter had been sent to the Federal Reserve Banks of New York and San Francisco. The action taken in sending the letter to Bank of America was ratified by unanimous vote. A copy of the letter is attached hereto as Item No. Discount rates. There were presented telegrams proposed to be sent to the following Federal Reserve Banks approving the establishment without change by those Banks on the dates indicated of the rates of discount and purchase in their existing schedules: Boston Atlanta New York Philadelphia Richmond Minneapolis July July July July July July 1 1 3 3 3 5 The telegrams were approved unanimously. Applicability of the Bank Holding Company Act to a Morris Plan 1)-1141k_lp New Hampshire (Item No. 5). There had been sent to the members of the Board copies of a memorandum from Mr. Davis dated July 3, 1957, relating to whether the Manchester Morris Plan Bank, Manchester, New 44Pshire, should be regarded as a bank within the meaning of section 2(c) Of the Bank Holding Company Act. The question had arisen because of the filing of a registration statement under the Act by Potomac Securities Corporation, Bethesda, Maryland, which indicated that as of May 9, 1956, the Corporation's "subsidiary banks" were The Bank of Silver Spring, Silver Spring, Maryland, and the Morris Plan Bank in New Hampshire. While the Silver Spring institution appeared to be clearly a bank, information 7/8/57 -4- received from Potomac Securities Corporation through the Federal Reserve Bank of Richmond indicated that the Manchester institution was essentially a small-loan company, engaging principally in the making of loans on an installment basis. This information showed that the in- stitution did not accept demand deposits, that its loans were secured by hypothecated investment certificates, and that it issued interest-bearing certificates to the public. After setting forth arguments for and against holding the Manchester institution to be a bank under the Bank Holding Company Act, the memorandum stated that, although the question was not entirely free from doubt, it appeared to the Legal Division that the stronger arguments were on the side of the view that the Act was not intended to be applicable to a case of this kind. The legislative history of the Act indicated that it was intended to apply only to commercial banks and the basic purpose of the Act was believed to be to regulate the Ownership or control by holding companies of banks which receive deposits, with particular reference to the preservation of competition among such banks and to whether or not the size of a bank holding company system extended beyond limits consistent with adequate and sound banking. Submitted with the memorandum was a draft of letter to the Federal Reserve Bank of Richmond which would express the opinion that the Manchester Morris Plan Bank should not be regarded as a bank within the meaning of the Bank Holding Company Act and that Potomac Securities Corporation therefore was not a bank holding company under the Act. Such findings would be in accord with the opinion of the Chief Examiner for the Richmond Reserve Bank. 1892 While no disagreement was expressed by the Board concerning the conclusion reached in this case by the Legal Division on the basis of the facts involved, certain questions were raised by Governor Balderston bearing on the possible consequences over a period of time that might result from exclusions from the coverage of the Bank Holding Company Act. The responses by Messrs. Hackley and Davis were in terms that each case arising under the Act should be examined carefully on its own merits, with due consideration to the trends that might evolve from decisions in individual cases. Agreement was expressed with a suggestion by Governor Balderston that questions concerning the scope of coverage of the Act might be raised by the Board, with a view to seeking clarification of statutory intent, in the report on the Act required to be made by the Board within two years after the date of enactment of the legislation. Thereupon, the proposed letter to the Federal Reserve Bank of Richmond, of which a copy is attached to these minutes as Item No. 5, was ARREgmtg. unanimously. Mr. Davis then withdrew from the meeting and Messrs. Thurston, Assistant to the Board, and Leonard, Director, Division of Bank Operations, entered the room. Testimony regarding the Financial Institutions Act of l97. The members of the Board had received copies of a draft of statement to be given by Chairman Martin before the House Banking and Currency Committee 0/1 July 15, 1957, regarding the proposed "Financial Institutions Act of 1957". (Two bills were before the House Committee, but they were identical ; 7/8/57 -6- as far as provisions affecting the Federal Reserve System were concerned.) The proposed statement would endorse the general objectives of the Pending legislation and, with the exception of certain matters commented upon therein, would approve its provisions insofar as they affected the Federal Reserve System. The text of the statement would contain sections covering the provisions of the bill which the Board endorsed, provisions questioned by the Board, and additional provisions recommended by the Board. In commenting on the draft of testimony, Mr. Hackley brought out that it was based almost entirely on the statement made last year by Governor Robertson on behalf of the Board before the Senate Banking and C urrency Committee concerning the proposed legislation then before that C ommittee. The draft did not contain any substantially new statements and it would not express any new positions. It would, how-ever, repeat recommendations concerning three changes in Federal Reserve law that were not included in the bill which passed the Senate. These suggested changes 114)111d (1) specifically authorize repurchase agreements by the Federal Reserve Banks, (2) make fiscal agency operations of the Reserve Banks 3Peoifically subject to supervision and regulation by the Board, and (3) ellrifY the meaning of the payment of interest on deposits and make the rules applicable to member and nonmember insured banks alike. Governor Robertson noted that the proposed statement would make n° reference to three items covered in the Board's testimony before the 7/8/57 .7... Senate Committee because, even though the Board's recommendations were not reflected in the bills before the House Committee, the matters were not deemed to be of enough significance to warrant further comment. These items dealt with (1) the taxation of Federal Reserve Bank stock, (2) Publication of member bank earnings and dividend reports, and (3) employee stock option plans for national banks. Governor Mills indicated that he would be somewhat inclined to repeat the Board's previously expressed position with regard to stock °Ptions and to refrain from further discussion of cumulative voting in elections of directors of national banks. With regard to cumulative voting, which, under the bills before the House Committee, would be permitted Only if provided for in the national bank's articles of association, he suggested that the testimony before the Senate Committee had brought out sufficient public opinion adverse to the principle of cumulative voting to make it seem questionable whether the Board would be justified in raising the matter again. Governor Szymczak expressed a different point of view, saying that he felt cumulative voting had become an important part of the banking eYstem and that he did not think the testimony in the Senate had brought forth evidence to show that cumulative voting was doing any harm. Re felt strongly that comments on fiscal agency operations and the payillent of interest on deposits should be included in the testimony, with an alaendment to the law on the subject of fiscal agency operations being of Particular importance. 7/8/57 -8Governor Mills then suggested that the payment of interest on deposits and fiscal agency arrangements might be considered subjects of Such fundamental importance as to go beyond the originally indicated Objective of the Financial Institutions Act, which envisaged principally 4 ons. codification of the Federal statutes relating to financial instituti In a discussion of the point raised by Governor Mills, agreement waS expressed that the Chairman's testimony should clearly indicate the B°ard's favorable attitude toward the general objectives of the pending legislation and that the testimony should not be couched in terms that would militate against enactment of the legislation. Several suggestions were 'bade for possible changes in the draft of statement which would emphasize the Board's over-all position. It was the general feeling, however, that to preserve the record the Board should include in the testimony some reference to its views in respect to legislation covering fiscal agency Operations and the payment of interest on deposits, despite the fact that it seemed doubtful whether provisions on these points would be included in the omnibus b111. With respect to cumulative voting, Chairman Martin suggested that a failure on the part of the Board to restate the views expressed in the Senate might lead to erroneous assumptions. Following further discussion relating to particular parts of the draft of testimony, it was understood that a revised draft reflecting the comments made at this meeting would be prepared for consideration at the meeting on Wednesday, ally 10. -9- 7/8/57 The meeting then adjourned. Secretary's Notes: In accordance with the procedure approved by the Board, the head of each division and office within the Board's staff had reviewed the work performance of employees in his division or office and had submitted to the Division of Personnel Administration the names of those employees for whom he recommended meritorious salary increases. In a memorandum dated June 26, 1957, the Division of Personnel Administration reviewed the proposed increases and recommended that they be approved by the Board. On this basis, Governor Shepardson approved on behalf of the Board on July 2, 1957, increases for the following members of the staff in the amounts indicated, effective July 14, 1957= Name Division Basic annual salary To From Office of the Secretary M. Elizabeth Jones, Supervisor, Miutes Unit Doreeno Dippre, Secretary „Irene D. Lewis, Clerk tlizabeth P. Vanni, Minutes Clerk $5,510 $5,645 4,755 3,755 3,585 4,890 3,840 3,670 4,075 4,210 $10,535 10,965 9,205 8,990 7,570 6,390 6,390 6,605 6,820 6,390 $10,750 11,180 9,420 9,205 7,785 6,605 6,605 6,820 7,035 6,605 Legal Eugene C. Harrison, Clerk Research and Statistics Arthur L. Broida, Economist 14,"man C. Trueblood, Economist rhn M. Culbertson, Economist 'aul. B. Klaman, Economist utePhen H. Axilrod, Economist Alfred P. Johnson, Economist J. Cortland G. Peret, Economist Chard C. Pickering, Economist .0z1viard P. Snyder, Economist lizabeth Ann Pike Ulrey, Economist 7/8/57 -10increases t _effective July 14, 1957 (continued) NATILq_ancl_title Division Basic annual salary To From Research and Statistics Helmut F. Wendel, Economist Theodore G. Flechsig, Economist Edward Kalachek, Economist Priscilla S. Goodby, Research Assistant ,9,9rnelia J. Motheral, Statistical Assistant Bettie M. Pomeroy, Secretary Natalie C. Strader, Statistical Assistant Margaret R. Hauser, Clerk $7,035 5,845 5,845 4,075 4,210 3,805 3,240 3,840 $7,250 5,980 5,980 4,210 4,345 3,940 4,075 3,925 4,210 4,075 5,710 4,345 4,210 5,845 11,610 3,940 11,880 14,075 5,710 5,575 4,525 5,065 4,215 3,515 5,845 5,710 4,660 5,200 4,350 3,600 7,570 3,260 3,84o 6,115 7,765 3,345 3,925 6,250 5,980 4,525 3,500 6,115 4,660 3,585 International Finance Bertha G. Brown, Secretary Catherine B. Davian, Secretary Dorothy L. Helprin, Economist Robert L. Sammons, Chief, Latin American Section Betty B. Taylor, Secretary Examinations Michael W. Flynn, Asst. F.R. Examiner Jerry B. Riley, Asst. F.R. Examiner ar1es E. Aikens, Asst. F.R. Examiner william E. Rumbarger, Asst. F.R. Examiner , 1,rrY G. Felix, Asst. F.R. Examiner -cinogene F. Frymier, Clerk-Typist 1 Bank Operations Le e W.Langham, Technical Assistant ' 4u 1 Marie Ma • Phipps, Clerk-Typist "Yart S.Sharigan, Clerk-Stenographer Harold F. Stone, Analyst Personnel Administration !!argaret H. Wolverton, Personnel Technician .1:, 4 athan B. Hughes, Jr., Personnel Technician l''aYe Davis, Clerk-Stenographer -11- 7/8/57 effective July 14. 1957 (continued Name and title Division Basic annual salary To From Administrative Services Joan C. Bell, Clerk-Stenographer Bishop Hart, Supply Clerk Manros A. Nickens, Messenger Lettie E. Green, Charwoman $3,500 3,600 2,775 2,975 $3,6 58 15 3:r50 .2 Defense Planning Catharine A. Fornof, Secretary4,350 4,485 Pursuant to recommendations contained in memoranda from appropriate individuals concerned, Governor Shepardson approved on behalf of the Board on July 3, 1957, the following appointments to the Boardls staff: James H. Joyce as Assistant Federal Reserve Examiner in the Division °f Examinations, with basic annual salary at the rate of $),080, effective -Lhe date he assumes his duties. Carolyn Anne Rison as Editorial Clerk in the Division of Research arid Statistics, with basic annual salary at the rate of $3,585, effective the date she assumes her duties. On July 3, 1957, Governor Shepardson also approved on behalf of the Board a telegram to the Federal Reserve Bank of San Francisco approving the appointment of Layer L. Bart as assistant examiner. A copy of the telegram is attached hereto as Item No. 6. In accordance with the recommendation contained in a memorandum dated July 1, 1957, from Mr. Noyes, Adviser, Division of Research and Statistics, Governor Shepardson approved on behalf of the Board on July 5, 1957, an increase in the basic annual salary of Mary T. Gregory, Clerk in that Division, from $3,345 to $3,500, effective July 14, 1957. 1899 7/8/57 -12Governor Shepardson behalf of the Board copies of which are the respective item today approved on the following letters, attached hereto under numbers indicated: Item No. Letter to the Federal Reserve Bank of Cleveland aPproving the appointment of Harry W. Huning as e xaminer. Letter to the Federal Reserve Bank of Richmond ,I3Proving the designation of Messrs. Cloud, '"kgY, and Layman as special assistant examiners. 8 Letter to the Federal Reserve Bank of Atlanta aPproving the designation of Messrs. Frame, Lee, and Stack as special assistant examiners. 9 Governor Shepardson also approved today on behalf of the Board recommendations from appropriate individuals concerned that full field investigations be made ofMazjorie Eaton, Secretary in the Office of the Secretary, and Evelyn Bryan, Supervisor of the Member Bank Statement Unit, Division of Bank Operations. 00 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 1 7/8/57 WASHINGTON 25. D. C. ADDRESS orrociAL CORRESPONDENCE TO THE BOARD July 8, 1957 Board of Directors, The Colonial Trust Company, Waterbury, Connecticut. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of Boston, the Board of Governors of the Federal Reserve System hereby gives its consent under section 18(c) of the Federal Deposit Insurance Act to the merger of The Naugatuck National Bank, Naugatuck, Connecticut, with and into The Colonial Trust Company, Waterbury, Connecticut, and approves the establishment of a branch in Naugatuck by the continuing bank at the present location of the national bank, provided (1) the merger Is effected substantially in accordance with the agreement between the parties dated May 24, 1957, (2) the transactions are completed within six months from the date of this letter, and (3) shares of dissenting stockholders of the constituent corporations which maybe acquired by the resulting corporation are sold 'Within six months of the date of such acquisition. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. BOARD OF GOVERNORS oto***4 01'00v1, OF THE 77> FEDERAL RESERVE SYSTEM Item No. 2 7/8/57 WASHINGTON 25, D. C. 4, ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD tt NI *0,..ttg.tt4 444**4 July 8, 1957 Board of Directors, Farmers & Merchants National Bank of Blacksburg, Blacksburg, Virginia. Gentlement The Board of Governors of the Federal Reserve System has given consideration to your application for fiduciary powers and grants you authority to act, when not in contravention of State or local law, as general receiver for the Circuit Court of Montgomery County, Virginia, the exercise of such authority to be subject to the provisions of the Federal Reserve Act and the regulations of the Board of Governors of the Federal Reserve System. A certificate covering such authorization La enclosed. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. Enclosure BOARD OF GOVERNORS Item No. 3 7/8/57 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD h tattt July 8, 1957 The Honorable H. E. Cook, Chairman, Federal Deposit Insurance Corporation, Washington 25, D. C. Dear hr. Cook: Reference is made to your letter of June 211 1957, concerning the application of the Iowa State Bank, Algona, Iowa, for continuance of deposit insurance after withdrawal from membership in the Federal Reserve System. No corrective programs which the Board of Governors continuance believes should be incorporated as conditions to the by the to agreed or of deposit insurance have been urged upon bank. Very truly yours, (Signed) Merritt Sherman herritt Sherman, Assistant Secretary. BOARD OF GOVERNORS OF THE ' ' 40 9CO A' TO0 Item No. h FEDERAL RESERVE SYSTEM el '"(11 7/8/57 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 3, 1957 1•;r. D. S. Langsdorf, Secretary, Bank of America, 40 Wall Street, New York, New York. Dear Sir: This will acknowledge your letters of June 19 and 20, 1957, regarding the report of examination of Bank of America, New York, New York, made as of December 11, 1956, by examiners for the Board of Governors of the Federal Reserve System. It is noted that the report of examination was presented to the Directors of your corporation at a meeting on June 17, 1957, and was referred by the Directors to the corporation's Auditing and Examining Committee for review and report. The Board's letter of June 7 requested advice within 30 days regarding the actions taken or contemplated with respect to the various comments, recommendations, and suggestions of the examiner. Your letter of June 20 states that the careful review of the report of examination and consideration of the important 1?caloY questions involved will require more time. Accordingly, In compliance with your request, the Board extends to August 6 the time within which your reply should be made to the Board of G overnors. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. 1904 BOARD OF GOVERNORS OF THE Item No. 5 FEDERAL RESERVE SYSTEM 7/8/57 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 8, 1957 Mr. Hugh Leach, President, Federal Reserve Bank of Richmond, Richmond 13, Virginia. Dear Mr. Leach: This refers to Mr. Sneadts letter of June 10, 1957, with enclosures, relating to the question whether Manchester Morris Plan Bank, a subsidiary of Potomac Securities Corporation, should be considered a bank within the meaning of the Bank Holding Company Act of 1956. The Board has given consideration to the facts of this matter as presented by the letter and its enclosures in the light of the intent of the statute and its legislative history. It Should be mentioned, of course, that although administration of the Act is vested in the Board, its enforcement as a criminal statute falls within the jurisdiction of the Department of Justice, and conceivably the Board's interpreta tion might not be followed bY that Department if it should have occasion to consider the matter. However, in the opinion of the Board, Manchester Morris plan Bank ls not, on the basis of the information presented, to be regarded as a bank within the meaning of section 2(c) of the Bank Holding Company Act of 1956. Therefore, Potomac securities Corporation is not a bank holding company under the Act. It will be appreciated if you will advise Potomac Securities Corporation of the Board's views as expressed in this letter. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. 1905 TELEGRAM BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 6 7/8/57 WASHINGTON JulY 3, 957 TELEGRAM Merrill - San Francisco Reurlet July 1, 1957, Board approves appointment of Loyer L. Bart as assistant examiner for Federal Reserve Bank of San Francisco. Please advise as to effective date of appointment. (Signed) Merritt Sherman Sherman OPpi , rIZIAL h.. —usiN • C4 Pt ESs lae, ENT RATES or GOVERNORS OF THE FEDERAL. RESERVE SYSTEM BOARD OF GOVERNORS OF THE evotocop*. 0% er FEDERAL RESERVE SYSTEM Item No, 7 7/8/57 WASHINGTON 25. D. C. ' ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 8, 1957 Pa% Paul C. Stetzelberger, Vice President, Federal Reserve Bank of Cleveland, Cleveland 1, Ohio. Dear 1. Stetzelbercer: In accordance with the request contained in your letter of June 28, 1957, the Board approves the appointment of Harry W. Huning as an examiner for the Federal Reserve BLInk of Cle\ieland. Please advise as to the date on which this appointment is made effective. Very truly yours, (Signed) Merritt Sherman lierritt Sherman, Assistant Secretary. 190' BOARD OF GOVERNORS OF THE Item No. FEDERAL RESERVE SYSTEM 8 7/8/57 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD 41.*13,0 July 8, 1957 Mr. G. Harold Snead, Chief Examiner, Federal Reserve Bank of Richmond, RichNond 13, Virginia. Dear Mr. Snead: In accordance with the request contained in your letter of July 1, 1957, the Board approves the designation of James W. Cloud, Talbott D. Cockey, and Ronald K. Layman as special assistant examiners for the Federal Reserve Bank of Richmond for the purpose of participating in examinations of State member banks only. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. 1908 BOARD OF GOVERNORS OF THE Item No. 9 7/8/57 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 8, 1957 Mr. J. E. Denmark, Vice President, Federal Reserve Bank of Atlanta, Atlanta, Georgia. Dear Mr. Denmark: In accordance with the request contained in your letter of July 1, 1957, the Board approves the designation of George R. Frame, Robert Eduard Lee, and Wiliam J. Stack as special assistant examiners for the Federal Reserve Bank of Atlanta for the purpose of participating in examinations of State member banks only. Very truly yours, (Signed) Merritt Sherman Aerritt Sherman, Assistant Secretary.
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