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Minutes for To: Members of the Board From: Office of the Secretary June 12, 1961 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. Chm. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Minutes of the Board of Governors of the Federal Reserve System on Monday, June 12, 1961. PRESENT: Mr. Mt. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Martin, Chairman Balderston, Vice Chairman Mills Robertson Shepardson Kenyon, Assistant Secretary Thomas, Adviser to the Board Shay, Legislative Counsel Molony, Assistant to the Board Fauver, Assistant to the Board Hackley, General Counsel Noyes, Director, Division of Research and Statistics Mr. Solomon, Director, Division of Examinations Mr. Masters, Associate Director, Division of Examinations Mr. Brill, Associate Adviser, Division of Research and Statistics Mr. Conkling, Assistant Director, Division of Bank Operations Mr. Landry, Assistant to the Secretary Mr. Mr. Mr. Mr. Mr. Mr. Mr. Items circulated to the Board. The following items, which had been minutes circulated to the Board and copies of which are attached to these under the respective item numbers indicated, were approved unanimously: Item No. Letter to Liberty State Bank of Hillside, Hillside, New Jersey, approving its application for membership in the Federal Reserve SYstem. Letter to The First National Bank of Oakland, Oakland, Maryland, approving its application for fiduciary powers. 2 Letter to The Scott County State Bank, Scottsburg, Indiana, approving an investment in bank premises. 3 6/12/61 -2Item No. 4 Letter to Citizens Fidelity Bank and Trust Company, Louisville, Kentucky, approving the establishment of a branch in the Dahlem Center. 5,6 Letter to the Presidents of all Federal Reserve Banks regarding revised procedures for handling calls for reports of condition; letter to the Federal Reserve Bank of Kansas City regarding calls for reports of condition of First Trust Company, St. Joseph, Missouri. Mr. Conkling then withdrew from the meeting. Report on S. 902. Mr. Noyes dated June 9, Copies had been distributed of a memorandum from 1961, submitting a draft of report to the Budget Bureau on S. 902, a bill to amend the Small Business Investment Act of 1958 in various respects, principally by enlarging the permissible scope Of Governmental financial assistance to small business investment companies, both by way of capital subscriptions and loans. The draft report would state that the Board was not in a position to assess the need at this time for increasing the initial capitalization of investment companies; however, if qualified observers were convinced of the need for increasing said capitalization, the techniques used should conform to the policy stated in the 1958 Act of insuring maximum participation by private financing sources. In this connection the reply would indicate that the Board questioned the desirability cr section 4 of S. 902, which would increase the authority of small business investment companies to borrow supplemental funds from the Small Business 1969 6/12/61 Administration; if such an amendment were adopted, such companies could Operate with $3 of Government funds for every $1 of private funds obtained, compared with a maximum ratio of $2 to $1 at present. Accompanying the draft report was a memorandum from Mr. Brill dated June 9, 1961, describing the proposed amendments in greater detail. In response to a question, Mr. Shay said there were no indications at present of any consideration by the Senate of S. 902. It seemed unlikely, he said, that Committee hearings would be held on the bill this year. In this regard, Mr. Shay noted that the request for the Board's views on S. 902 had come from the Budget Bureau and not from the Congress. In further discussion, reference was made by Governor Mills to press reports on activities of some small business investment companies that seemed to go rather beyond the original concept of the 1958 legislation. He also noted that one of the proposed amendments to S. 902 would permit granting restricted stock options to officers and employees of these companies. It 'as his suggestion that the report to the Budget Bureau be expanded to include an adverse comment on the propriety of permitting companies heavily aePendent on Government funds and tax concessions to grant such options. Other members of the Board concurred in this suggestion. There was also general agreement that the report as drafted properly expressed an 44verse view on the section of the bill that would increase the proportions °f borrowed funds available to small business investment companies from the 6/12/61 Small Business Administration. In addition, it was suggested by Governor Balderston that the letter to the Budget Bureau contain a more firm statement on the lack of evidence that the present ceiling on Government subscriptions to the capitalization of smn11 business investment companies was a critical factor limiting the growth of such companies. After further discussion it was agreed that the letter to the Budget Bureau would be redrafted along the lines of the suggestions made and that the revised draft would be submitted to the Board for consideration. Answers to questions submitted by Commission on Money and Credit. At the Board meeting on January 25, 1960, it was understood that the staff would of undertake to draft answers to questions on the formulation and execution n on monetary policy presented by Frazar B. Wilde, Chairman of the Commissio Money and Credit of the Committee for Economic Development, in a letter dated January 12, 1960. Pursuant to this understanding, a group of 11 draft answers was considered by the Board on June 13, 1960, and subsequently forwarded to the Commission; on July answers were approved for transmission. 8, 1960, 12 additional draft Draft replies to the two remaining 2 and questions were approved for transmission to the Commission on August September 27, 1960, respectively. of June 5, There had now been distributed to the Board under date 1961, the final draft of answers to the Commission's questions. A transmittal Memorandum from Mr. Noyes noted that the final draft of answers incorporated 6/12/61 -5- suggestions, mainly of an editorial nature, received at a seminar of System economists last October. Also, a summary of each reply had been incorporated Preceding the detailed reply. Only a few changes of a substantive nature had been made in the preliminary drafts, although some of the answers had been revised to take into account monetary and credit developments in the past several months. Although no specific publication date for the Board's answers had been set, the Commission had expressed the hope that the edited copy of the Board's replies could be received as soon after June 1, 1961, as possible. In a discussion, general satisfaction with the proposed answers was exPressed, and the members of the Board indicated that they would be favorably inclined toward sending the answers in approximately the form distributed. However, some revisions, principally of an editorial and clarifying nature, were suggested. and The transmission of the final answers to the Commission on Money Credit was then authorized, with the understanding that certain changes would be made in line with the suggestions that had been agreed upon at this meeting. The meeting then adjourned. Secretary's Note: Governor Shepardson today approved on behalf of the Board the following items: 6/12/61 -6- Memorandum from the Division of Bank Operations recommending an increase in the basic annual salary of Judith S. Scully from $4,460 to $4,6751 with a change in title from Clerk-Stenographer to Secretary, effective June 12, 1961. Letter to the Federal Reserve Bank of New York (attached Item No. 7) approving the appointment of seven persons as examiners. p . Assistant cretary BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 1 6/12/61 WASHINGTON 25, D. C. Lk; ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD . June 121 1961 Organization Committee, Liberty State Bank of Hillside, Hillside, New Jersey. Gentlemen: The Board of Governors of the Federal Reserve System approves the application made on behalf of Liberty State Bank of Hillside, Hillside, New Jersey, for stock in the Federal Reserve Bank of New York, effective if and when the bank opens for business under appropriate State authorization, subject to the numbered conditions hereinafter set forth. 1. Such bank shall at all times conduct its business and exercise its powers with due regard to the safety of its depositors, and, except with the permission of the Board of Governors of the Federal Reserve System, such bank shall not cause or permit any change to be made in the scope of the corporate powers exercised by it at the time of admission to membership. 2. The net capital and surplus funds of such bank shall be adequate in relation to the character and condition of its assets and to its deposit liabilities and other corporate responsibilities. 3. At the time of admission to membership, such bank shall have paid-in and unimpaired capital stock of not less than than $200,000, and other capital funds of not less $300,000. membership, In connection with the foregoing conditions of Board's the of ns provisio Rarticular attention is called to the institutions in the sgulati0n H, regarding membership of State banking 208.7 thereof. Section to e referenc l .litderal Reserve System, with especia 4 copy of the Regulation is enclosed. bank's charter If at any time a change in or amendment to the furnishing is made, the bank should advise the Federal Reserve Bank, determined "Pies of any documents involved, in order that it may be member of the ether or not such change affects the bank's status as a rederal Reserve System. n j -2- Liberty State Bank of Hillside Acceptance of the conditions of membership contained in this letter should be evidenced by a resolution adopted by the board of directors after the bank's charter has been issued, and a certified coPY of such resolution, together with advice of compliance with the condition to be complied with prior to admission to membership, should be filed with the Federal Reserve Bank. Arrangements will thereupon be made to accept the payment for an appropriate amount of Federal Reserve Bank stock, to accept the deposit of the required reserve balance, and to issue the appropriate amount of Federal Reserve Bank stock to the bank. The time within which admission to membership in the Federal Reserve System in the manner described may be accomplished is limited to six months from the date of this letter, unless the bank applies to the Board and obtains an extension of time. When the Board is advised that all of the requirements have been complied with and that the approPriate amount of Federal Reserve Bank stock has been issued to the bank, the Board will forward to the bank a formal certificate of membership in the Federal Reserve System. The Board of Governors sincerely hopes that you will find menEership in the System beneficial and relations with the Reserve Bank Pleasant. The officers of the Federal Reserve Bank will be glad to 2ist you in establishing your relationships with the Federal Reserve ,21item and to discuss at anytime with representatives of your bank means -Or making the services of the System more useful to you. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. fl Closure BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM \ Item No. 2 6/12/61 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD t ROOft :O.:z4' 40;1 4 June 12, 1961 Board of Directors, The First National Bank of Oakland, Oakland, Maryland. Gentlemen: The Board of Governors of the Federal Reserve System has given consideration to your application for fiduciary Powers and grants The First National aank of Oakland authority to act, when not in contravention of State or local law, as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates 5)f lunatics, or in any other fiduciary capacity in which State .b anks, trust companies, or other corporations which come into competition with national banks are permitted to act under the laws of the State of Maryland. The exercise of such rights hall be subject to the provisions of Section 11(k) of the Fed' ' 1 41 Reserve Act and Regulation F of the Board of Governors of the Federal Reserve System. A formal certificate indicating the fiduciary powers "91at your bank is now authorized to exercise will be forwarded ln due course. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. 1966 BOARD OF GOVERNORS OF THE 02,1 py.* FEDERAL RESERVE SYSTEM Item No. 3 6/12/61 WASHINGTON 25. O. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 14., 1961 Board of Directors,. The Scott 'County State Bank, Seottsburg, Indiana. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of St. Louis, the Board of Governors of the Federal Reserve System approves, under the provisions of Section 24A of the Federal Reserve Act, an investment by The Scott County State Bank, Scottsburg, Irdiana, of 3278,32.5 in bank premises. It is understood that proceeds from the sale of the banking house presently occupied are to be applied , 'F:ainst the carrying value of the bank's investment in ueott County Building Corporation. Very truly yours, • (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 1 1, WASHINGTON 25, D. C. Item N0. Il- 6/12/61 ADDRESS °maw. CORRESPONDENCE TO THE BOARD * 44' tV, 4,t MEV' June 12, 1961 Board of Directors,Citizens Fidelity Bank and Trust Company, Louisville, Kentucky. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of St. Louis, the Board of Governors of the Federal Reserve System approves the f'stablishment by Citizens Fidelity Bank and Trust Company, Louisville, Kentucky, of a branch in the Dahlem Center, near the corner of Shelby Street and •Rastern Parkway in Louisville, Kentucky, provided the branch is establishoct wAhin nine months from the date or this I,J,Uur. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. S-1799 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 5 6/12/61 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 129 1961. bear sir: This supersedes the Board's letters of May 12, 1941, S-262-a, andJune 11 1956, S-1593 and its enclosure(F.R.L.S. #36)4) regarding $ the Re, u.!-stribution of call reports: a revised memorandum of "Procedures -1-atIng to Call Reports of Condition" is attached. For some time the procedure for handling calls for reports ondition of State member banks has differed from the procedure used 0.1, the Comptroller's Office in announcing calls for reports of condition I.;-1 national banks. Under the recent amendment of the Federal Deposit t:urance Act, all three Federal bank supervisory agencies are required poecall for reports of condition at least four times a year. The purpose to of this letter is to achieve a greater degree of uniformity in call Pc/rt practices among the agencies. The current practice of the Comptroller's Office is to mail its t r to ansmittal letter, forms, and notice of the call all in one envelope Ilitational banks the evening before the date of the call announcement, ideu the call notice post-dated by one day and the transmittal letter aripified, for example, by "Fourth call 1960." State member bank forms 41i4etter5 of transmittal have been mailed the evening before, but the letterlhas been a separate mailing on the announcement date. , In the interest of simplification in avoiding a second mailing, arid 0 Iles 4 uniformity with respect to member banks, the Board authorizes the ve Banks to adopt the procedures currently followed by the Office Of j at00"e Comptroller of the Currency in handling these calls. It is under that the Federal Deposit Insurance Corporation will adopt the prothe of mailing both the forms and the call letter from Washington on 4a3r prior to the announcement. ' The code word IPJEV announcing the call for reports of condition Ot t S ate member banks is amended to mean the following: "Pursuant to the provisions of section 7 of the Federal Deposit Insurance Act, the Chairman of the Board of Directors of the Federal Deposit 196 S-1799 -2- Insurance Corporation, the Comptroller of the Currency, and the Chairman of the Board of Governors of the Federal Reserve System have fixed the date first hereinafter given as the date as of which all insured banks shall submit condition reports and such reports of affiliates as are required. At 9 a.m. on the date second hereinafter given, please announce call made upon insured State member banks to submit reports of condition and such reports of their affiliates as are required as of the call date. The Comptroller of the Currency and the Federal Deposit Insurance Corporation will at that time announce a call made upon national banks and insured nonmember banks, respectively, for condition reports as of the same date. Call date should be held in strict confidence until call is made. Blank forms for the use of insured State member banks in submitting such reports have been forwarded to you, as stated in the Board's letter of the date third hereinafter given. Transmittal letters containing forms and the call letter should be placed in mail 5 p.m. your time on date fourth hereinafter given. (date of call) (date call to be made) (date of Board's letter) (date for placing transmittal and call letters in mail)." Because of the recent amendment to section 7 of the Federal 1,32sit Insurance Act requiring four calls for reports of condition IE); , : fo 4 Year for all insured banks, code words IPJIG and IFJOB, heretodate advising the Reserve Banks whether a spring call or fall call e is contemplated, will be discontinued. Very truly yours, Merritt Secretary. T° THE Pmnumus cailfiam FEDERAL MOM ims. S-1799-a Procedures Relating to Call Reports of Condition (Revised March 1961) P..!1.12ns Re arding Calls g Pursuant to section 7 of the Federal Deposit Insurance Act, as'.s amended, each insured bank will be required to submit four calls for .'?1)erts of condition each year and the selection of these call dates 7 , 1-11 be by the Chairman of the Federal Deposit Insurance Corporation) Comptroller of the Currency, and the Chairman of the Board of Govors of the Federal Reserve System, or a majority thereof, The Act ther provides that the dates selected shall be the same for all :4!sured banks and that two call dates shall be selected within the semi Period of January to June, inclusive) and two call dates shall selected within the semiannual period of July to December, inclusive. 4d1razce Printing of Report Forms The printing orders are necessarily placed considerably in advanc e of a call date, Because of this advanced printing, the Reserve pr"4's should notify the Boards Division of Bank Operations as early as el ticable of any changes in the quantity of the various forms that ".°111d be forwarded at future calls, 1)11112.1E of Report Forms Blank forms are sent to the Federal Reserve Banks around ' for 1 for the spring call, June 1 for the mid-year call, September 1 sho fall call, and December 1 for the year-end call. These forms th,14(1 be held at the Federal Reserve Banks until receipt of advice from /30ard authorizing their distribution, Around the foregoing dates, 11;1Z receipt of the blank forms, the Reserve Banks should contact State ka4 Departments with which joint publication arrangements have been 0 ascertain whether the State Banking Department will make a call ?,},the Federal call date, and whether to forward forms F,R. 105e or LO5e.1 to the State members. the, The Board will notify all Federal Reserve Banks by telegram of offi''ate when the forms should be mailed to the State member banks. The call letters should be placed in the same envelopes transmitting ms and such envelopes should be posted at 5 p,m, on the designated clate Ileze; thus eliminating a second mailing on the day the call is annoumed, r e Banks may adopt the practice of dating this letter on the maiij 4t 9 ate9 and saying in effect that this is a call that will be announced tte m on (date), or the Comptrollers practice of post-dating the to carry the date of the announcement of the call, 19 -2- S-i799-a Reserve Banks may also wish to adopt the Comptroller's tice of identifying their transmittal letters by the phrase rlrst call 1961,” for example, rather than an actual date, in order that transmittal letters may be prepared in advance of date of mailing. Under the procedure outlined above, it is theoretically PoE3E;ille for an in-town bank operating a night shift to tap its local 14 'st office box and receive notice of the call prior to the official ! riouncement time or, under highly theoretical conditions, to pick up 1Te letter and put the call date on a bank wire to West Coast bankers „(T)re the latter close. This possibility has been considered care: 4-1.3r and, while it is entirely possible that such a sequence of events e°111d occur, it is believed that the chances are remote. However, if i?Terience 'roves early information pertaining to calls has been obj9ted through this means, mail to in-town banks that operate night 'flirts should be delayed until the following morning. These changes in procedure do not affect any existing pracat Reserve Banks that notify some banks of the call by telephone - tielegraph on the date of the announcement. tire_ Al'Inn ', -.1,ment of Call Date The three Federal bank superviscry agencies have adopted the : 1 1"lee of notifying every State Banking Department by a joint coded tim,egralm regarding the forthcoming call date and the date of announcing th c,. call* l'ihen this information is distributed the Board will, as in Past imnediately notify the Reserve Banks by coded telegram, 19";2 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 6 6/12/61 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 12, 1961 Hr. George H. Clay, President, Federal Reserve Bank of Kansas City, Kansas City 6, Missouri. Dear Mr. Clay: Pursuant to section 7 of the Federal Deposit Insurance Act, as amended, each insured bank will be required to submit four reports of condition each year, and selection of the call dates Will be by the Chairman of the Federal Deposit Insurance Corpora the of n tion, the Comptroller of the Currency, and the Chairma y Board of Governors of the Federal Reserve System, or a majorit thereof. The Board has amended the meaning of code word IPJEV, Which previously announced the call for reports of condition of member State member banks, to announce calls made on insured State a As . therein d outline are banks. Necessary related procedures definicurrent the in on provisi no result of this revision there is on tion of IPJEV for your Bank to make a call for reports of conditi on the First Trust Company, Et. Joseph, Missouri, a noninsured State System that memter bank. This is the only State member bank in the is not insured. telegrams at your In the future, upon receipt of IPJEV First Trust Bank, please call for the report of condition of the calls are that date Company, St. Joseph, Missouri, as of the same on this Calls t. flade 2n insured State member banks in your Distric provithe to t pursuan noninsured State member bank should be made date call the with Act, sions of section 9 of the Federal Reserve rather System, Reserve Federal fixed by the Board of Governors of the Act ce Insuran Deposit Federal than made pursuant to section 7 of the d followe details other All as specified by the definition of IPJEV. , Company TrIlst First !II obtaining reports of condition of the the procedures t• Joseph, Missouri, should be in accordance with ) ' sPecified in IPJEV. noninsured State Copies of fcrms F.R. 105 furnished the e to official respons in on conditi member bank for reporting its of the face bottom the from calls should have the following deleted Deposit Insurof the form: n. . and one copy sent to the 'Federal ance Corporation, Washington 25, D. C." -3 19; -2In the event the First Trust Company, St. Joseph, Missouri, at some future date withdraws from membership or becomes an insured member bank, the provisions of this letter would, of course, be functus officio. Very truly yours, (Signed) Merritt Merritt Sherman, Secretary. ri-7317. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 7 6/12/61 ADDRESS OFFICIAL CORRESPONDENCE TO THE •OARD June 12, 1961 CONFIDENTIAL (F.R.) Mr. Howard D. Crosse, Vice President, Federal Reserve Bank of New York, New York 45, New York. Dear Mr. Crosse: In accordance with the request contained in your letter of May 24, 1961, the Board approves the appointment or the following, at present assistant examiners, as examiners for the Federal Reserve Bank of New York, effective today: Robert F. Moreschi Robert D. Burrill J. Murphy Patrick Donald F. Gaffney Nelson B. Jerome Edward J. Mizerski Edward M. Reilly It is noted that Messrs. Burrill, Moreschi, and aollly are indebted to Atlantic Bank of New York, New York, NeJw York, a nonmember bank, in the amounts of $392, $60, and $5581 respectively. Accordingly, the Board's approval or their appointmf:ilts as examiners is given with the under:.,..Landlin,a, that they will not participate in any examination Of that bank until such indebtedness has been liquidated. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary.
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