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Minutes for _Igne 12, 1964 To: 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. Chm. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. Mitchell Gov. Daane Minutes of the Board of Governors of the Federal Reserve System On Friday, June 12, 1964. PRESENT: Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Martin, Chairman Mills Robertson Shepardson Mitchell Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Sherman, Secretary Broida, Assistant Secretary Bakke, Assistant Secretary Noyes, Adviser to the Board Molony, Assistant to the Board Cardon, Legislative Counsel Brill, Director, Division of Research and Statistics Holland, Associate Director, Division of Research and Statistics Koch, Associate Director, Division of Research and Statistics Furth, Adviser, Division of International Finance Hersey, Adviser, Division of International Finance Katz, Associate Adviser, Division of International Finance Spencer, General Assistant, Office of the Secretary Axilrod, Chief, Government Finance Section, Division of Research and Statistics Eckert, Chief, Banking Section, Division of Research and Statistics Beard, Economist, Division of Research and Statistics Gemmill, Economist, Division of International Finance Money market review. Mr. Axilrod reported on recent developments in the Government securities market, after which Mr. Eckert commented on /34nk reserves, bank credit, and the money supply. Mr. Gemmill then l'iscussed recent foreign exchange market developments. A table on capital 6/12/64 -2- flows and data relating to monetary developments in the five-week period ended June 10, 1964, had been distributed and was referred to during the course of the review. Following discussion based on those reports, all members of the staff except Messrs. Sherman, Bakke, Noyes, Molony, Cardon, Brill, Holland, Spencer, and Gemmill withdrew from the meeting and the following entered the room: Hackley, General Counsel Farrell, Director, Division of Bank Operations Solomon, Director, Division of Examinations O'Connell, Assistant General Counsel Shay, Assistant General Counsel Hooff, Assistant General Counsel Goodman, Assistant Director, Division of Examinations Smith, Assistant Director, Division of Examinations Leavitt, Assistant Director, Division of Examinations Thompson, Assistant Director, Division of Examinations McClintock, Supervisory Review Examiner, Division of Examinations Mr. Rumbarger, Review Examiner, Division of Examinations Mr. Smith, Review Examiner, Division of Examinations Mr. Kakalec, Assistant to the Controller Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Discount rates. The establishment without change by the Federal Reserve Banks of Cleveland, Richmond, Atlanta, St. Louis, Minneapolis, 1Cansas City, and Dallas on June 11, 1964, 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. Circulated or distributed items. Of The following items, copies which are attached to these minutes under the respective item numbers indicated, were approved unanimously: ' PC. d 6/12/64 -3Item No. Letter to the Federal Deposit Insurance Corporation regarding the application of The Peru Trust Company, Peru, Indiana, for continuation of deposit insurance after withdrawal from membership in the Federal Reserve System. 1 Letter to Farmers' State Bank of Chadwick, Chadwick, Illinois, waiving the requirement of six months' notice of withdrawal from membership in the Federal Reserve System. 2 Letter to Marion State Bank, Marion, Texas, waiving the requirement of six months' notice of withdrawal from membership in the Federal Reserve System. 3 Letter to the Federal Reserve Bank of Chicago inter13(psing no objection to the Bank's proceeding with a revised program for fallout shelter facilities in the head office building. 4 Letter to the Bureau of the Budget reporting on a Treasury draft bill that would permit member banks of the Federal Reserve System to purchase and hold directly stock interests in foreign banks. 5 In connection with the approval of Item No. 5, Mr. Shay stated that the principal objection to the Treasury's proposal was that it //c)uld divide authority over member banks in this area between the Board 8.11d the Office of the Comptroller of the Currency. Governor Robertson Stated that he did not like the position that would permit member banks to hold direct stock interests in foreign banks but that since the Board had, taken this position, he would approve sending the proposed letter. Mr. Gemmill then withdrew from the meeting. Issuance of money orders by nonbank concerns (Items 6 and 7). Mere had been distributed a memorandum from Mr. Bakke dated June 10, 1964 submitting for Board consideration draft replies to letters of 6/12/64 -4- inquiry from Senators Robertson and Long, dated March 20 and April 7, 1964, respectively, concerning the issuance of money orders by nonbanking organizations. The memorandum stated that there would be enclosed with each letter a copy of a 22-page summary, previously distributed to the Board under date of June 5, 1964, of replies from the Reserve Banks to the Board's request of April 3, 1964, for information on the subject. It was also pointed out that the draft letters expressed the view that Federal legislation regulating the issuance of such money orders would be difficult to administer effectively, and that neither the problem of 4°nPayment upon presentation for collection or the incidence of bankruptcy °r money order issuers appeared to be of a magnitude suggesting the necessity for Federal intervention. Following comments by Mr. Bakke supplementing the information Presented in his memorandum, there was a brief discussion, and the letters to Senators Robertson and Long were then approved unanimously. or A copy the letter to Senator Robertson is attached as Item No. 6; a copy of the letter to Senator Long is attached as Item No. 7. A copy of the document summarizing the information furnished by the Reserve Banks on 4°nbank issuers of money orders, transmitted with each letter, has been 1314ced in the Board's files. Report on competitive factors (Lewistown-Mifflin, Pennsylvania). there had been distributed a draft of report to the Comptroller of the ellrrency on the competitive factors involved in the proposed merger of 11,2 4..',LIk_3•* 6/12/64 -5- The Peoples-Farmers National Bank, Mifflin, Pennsylvania, into The Russell National Bank of Lewistown, Lewistown, Pennsylvania. Governor Mills stated that in his opinion the adverse aspects Of this merger were more pronounced than the proposed conclusion would suggest. He observed that while the Board had itself approved mergers in the same general geographic area, those cases had involved smaller banks where the consolidation afforded potential for positive benefit to the community through the enhanced service capabilities of the continuing bank. In the present case, however, the proposal would merely serve to make a large institution larger, and in his view this constituted a clefinitely adverse factor. Following further discussion, in the course of which certain suggested changes in wording of the conclusion were agreed to, the report /418 approved unanimously for transmittal to the Comptroller in a form containing the following conclusion: Consummation of the proposed merger of The Russell National Bank of Lewistown and The Peoples-Farmers National Bank, Mifflin, would eliminate direct competition between the two institutions and form the largest bank in the twocounty area, controlling 34.7 per cent of the deposits of the two counties. It is concluded that the over-all competitive effects of the merger would be moderately adverse. Mr. McClintock then withdrew from the meeting. Letter to Chairman Fascell regarding float (Item No. 8). There 44d been distributed under date of June 10, 1964, a draft of reply to a I 6/12/64 -6- letter of April 6, 1964, from Chairman Fascell of the Legal and Monetary Affairs Subcommittee of the House Committee on Government Operations regarding "float." The letter from Chairman Fascell observed that the level of total float kept rising, that float on occasions had approximated 10 per cent of the estimated required reserves for all member banks, and that float constituted cost-free reserves to member banks. He asked whether (1) there was any defined point at which the amount of float in such reserves was to be considered too high, and (2) if any consideration had been given to a question whether banks utilizing float as reserves should Pay a reasonable charge therefor. The draft of reply discussed each of these questions in turn, stating that float would be considered too large only if necessary offsetting sales from the System Open Market Account would absorb the bulk of Government securities held in the portfolio, which was wholly beyond the realm of expectation, and that the inequities inherent in levying 4 charge for float-based reserves would far outweigh any virtue in such practice. Governor Mitchell indicated that he did not think the draft letter was the type of response that should be sent. It seemed to him that since Chairman Fascell was concerned over the size of float, figures r°r average float should be used in the discussion rather than citing a single instance where there had been a large fluctuation. Further, he 6/12/64 -7- did not think that the matter of member bank reserve requirements should be introduced in this letter, because it was a greater issue than float. Pinally, he was of the opinion that the most effective response would be to suggest to Congressman Fascell that collection float could be eliminated entirely if the Federal Reserve Act were to be amended to provide for immediate credit on checks cleared through the Federal Reserve Banks. There followed a discussion of certain factors bearing upon float, at the conclusion of which Governor Mills stated that he would favor sending the draft letter as submitted, because he thought it was responsive to the inquiry made by Chairman Fascell and did not raise 411Y revolutionary new issues such as would be the case if the subject °f immediate credit were to be broached. The discussion having disclosed general agreement with the views expressed by Governor Mills, the letter was approved, Governor Mitchell dissenting for the reasons he had stated at the beginning of the discussion. A Copy of the letter sent to Chairman Fascell is attached to these minutes 8.8 Item No. 8. Messrs. Noyes, Brill, and Holland then withdrew from the meeting. Organizations affected by possible Bank Holding Company Act azen --„Aments (Item No. 9). There had been distributed a memorandum from the Division of Examinations dated June 4, 1964, to which there were 4ttached copies of certain tables and lists that had been prepared for 14)ssible insertion in the record if hearings were held on H. R. 10872, a 20S3 6/12/64 -8- bill to amend the Bank Holding Company Act of 1956 in certain respects, including repeal of various exemptions from the Act's coverage and redefinition of the term "bank holding company" to include a stated Proportion of ownership or control of one or more banks. The memorandum described the contents of the tables and lists, concerned currently registered bank holding companies and the known additional organizations that would become bank holding companies if R. R. 10872 were enacted. Also included was a recommendation that each Of the detailed lists should carry a note at the beginning, as had similar lists forwarded to Chairman Spence of the House Banking and Currency Committee with the Board's letter of February 2, 1959, to the effect that since the lists were based in large part on information obtained from confidential and other unpublished sources, the Board was °f the opinion that individual names appearing in the lists should not be published. During brief discussion, Mr. Cardon noted that Mr. John Stark °f the House Banking and Currency Committee staff had requested the lists at a time when it was thought hearings would be held on H. R. 10872. While it was still possible the Committee might hold such hearings, it Igas not so likely as when the request had been made. Nevertheless, Mr. eardon thought it still desirable to furnish the information. The gllestion then arose whether in addition to the tables, which had been e°mPiled from publicly available source material, the detailed lists 6/12/64 -9- showing the names of the additional companies that would be affected by H. R. 10872 should be sent, since there was no guarantee the confidential aspects of the information would be preserved. Governor Robertson commented that in his opinion both the tables and the detailed lists should be sent to Chairman Patman, with a note On the lists as recommended in the June 4 memorandum, calling attention to the confidential nature of the information. There being concurrence with Governor Robertson's suggestion, it was agreed that the material would be furnished to the Committee. A coloy of the letter of transmittal to Chairman Patman is attached as If copies of the documents submitted with this letter have been Placed in the Board's files. Messrs. Molony, Cardon, O'Connell, Rumbarger, and Smith (Review (aminer) then withdrew from the meeting. Valuation of shares of foreign corporations (Item No. 10). There had been distributed three memoranda from the Division of Examinations aated May 22, 1964. The first of these discussed certain questions that haa been raised regarding the proper basis for the valuation of shares cif foreign corporations on the books of "Edge Act" and "agreement" corrations established under sections 25 and 25(a) of the Federal Reserve Act) and in reports of examination of these corporations. The second Ille morandum related to a request by Bankers International Corporation, New York, New York, for rescission of a condition prescribed by the Board 6/12/64 -10- in granting its consent to the purchase of shares of l'Union des MinesLa Henin, Paris, France, a French banking corporation. The third memo- randum concerned a request by International Banking Corporation, New York, New York, for permission to make further advances to The Mercantile Bank of Canada, Montreal, Canada, either in the form of capital or as subordinated loans, and to include contingency reserves in computing the book value of the bank's shares. The thrust of the first memorandum was that, despite obvious Shortcomings in the use of any uniform appraisal procedure, the Board 'would probably be warranted in trying to establish a single criterion regarding the manner in which shares of foreign corporations should be carried on the books of Edge and agreement corporations. It was pointed Out that in valuing marketable securities of ordinary business enterprises in this country for balance sheet purposes, the normal practice was to take the latest available price paid in an actual sale or the latest bid Price, but that in the case of bank holding companies, the Board had taken the position that investments of a bank holding company in subsidiaries should be carried in financial statements at not more than the company's interest in the net assets of its subsidiaries. It was 8Uggested that: (1) ... The Board would be warranted in approving a plan for valuing shares of foreign corporations held by section 25 and 25(a) corporations as determined on a proportionate share of the net capital accounts of the foreign corporation as shown by the latest available balance sheet in the possession of the 41.,f 6/12/64 -11- Edge corporation. This would contemplate ... the elimination of items of good will and intangibles, except where of significant value. In the absence of audited reports, ... it would be appropriate to use balance sheets furnished by responsible corporation officers except in the case of obvious inaccuracies. The values so shown in the local currency should be converted at the current rate of exchange at date of examination of the section 25 or 25(a) corporation. Any depreciation shown would be classified in the report of examination as loss. However, any appreciation in other stocks held would be applied to reduce or offset any such depreciation. (2) In the case of shares of foreign banks and corporations that had an established market, such as listed or traded on a national securities exchange, the Board might wish to suggest that in lieu of values calculated as described above the market values converted at the current rate of exchange be used, if such market values would result in the valuation of an individual stock in excess of that calculated as above. (3) A third possibility would be to provide that, in the absence of obvious distortion and unsound operation, the shares of foreign companies might be carried at cost even though such cost would be in excess of the appraised value on the balance sheet method indicated second ... above, provided that where there is depreciation on the balance sheet method any income received as dividends from such shares should be set aside into a valuation reserve until the net carrying value would be equal to the value of such shares on the balance sheet method. The memorandum concluded by saying that the establishment of a uniform NralUation procedure would facilitate examinations and avoid misunderstandings between the examiners and the Board's Division of Examinations, and between the supervised institutions and the Board and its staff. The second memorandum related to a request of Bankers Inter44tional corporation that the Board rescind the condition prescribed at the time consent was granted for the purchase of shares of l'Union des 41hes-La Henin, Paris, France, that the shares not be carried at a net 205 c' 6/12/6L1. -12- amount in excess of the book capital accounts, after giving effect to the elimination of all known losses. In lieu of this basis of valuation, Bankers International Corporation wished to be allowed to carry the stock Qf lt Union des Mines-La Henin at cost. The memorandum stated that while it had been felt that the condition prescribed was appropriate at the time consent was granted, the Board might feel that reconsideration was in order and some relief warranted. Since the matter was one that related to the general question of valuation of shares of foreign corporations for balance sheet and examination purposes, it was believed that the oard might wish to consider this request in light of the general question raised by the first memorandum of the series. There was attached a draft of proposed reply setting forth alternative bases for denial of Bankers International Corporation's request. The third memorandum discussed the request of International 138'nking Corporation for permission (1) to make further advances to The Mercantile Bank of Canada,Montreal, either as additions to capital or as 81Abordinated loans, and (2) to include contigency reserves in computing the book value of the shares of that bank. A draft of reply granting the request was attached to the memorandum. At the Board's request, Mr. Goodman summarized the information t/reaented in the three memoranda of May 22. In the discussion that followed, Governor Mitchell indicated th4t he thought the balance sheet of a corporation should show the value ;1 #(.**OL,k 6/12/64 -13- of stock at the time the stock was acquired, but that the report of examination should contain information showing net book value and market value at the then-current exchange rate, in addition to the acquisition cost, so that the Board would have before it all pertinent information should some adjustment be called for under particular circumstances. Governor Mills observed that the subject of valuation of shares of foreign corporations for balance sheet purposes was a difficult one, and that it might be better to approach each case on an ad hoc basis. If Bankers International or other Edge corporations were to acquire a volume of stock in the course of trading in such shares, there would be good reason to list them at the lower of market value or net book value, However, Bankers International had a static investment in a coMpany of diverse activities, and it seemed to him, therefore, that the market factor should be ignored and that the cost value should be Used unless the affairs of the foreign corporation should deteriorate, 111 which case the shares could then be written down. In his view, the Shares in question were, in effect, in the same category as unmarketable llotes insofar as concerned the proper book entry procedure, and therefore they should be carried at cost. He recognized that this might not be the best accounting practice but expressed the opinion that it nevertheless seemed to be the most practical approach. He further stated that it would obviously be necessary to reflect the actual amount realized rl'om the sale of such shares when the investment was liquidated, until 2089 6/12/64 this situation arose he believed that the shares should be carried at cost because it would be unfair to compel a stringent write-down of the investment purely for bookkeeping purposes. Chairman Martin said that he was not convinced of the merit in having a uniform practice with respect to valuation and that he was inclined to favor an ad hoc approach in considering such matters. He added, however, that the subject was one that aught to be explored at greater length than was possible at this meeting. After further discussion, it was understood that an alternative tiraft of letter to Bankers International Corporation would be prepared for the Board's consideration and that the subject of valuation of shares °f foreign corporations would be discussed further at another meeting °f the Board. Mr. Goodman then inquired whether the Board would be disposed to approve the request of International Banking Corporation for permission to make further advances to The Mercantile Bank of Canada and to include Contingency reserves in computing the book value of the bank's shares. tlere being no objection, the letter to the Corporation was approved Iltanimously. A copy of the letter is attached as Item No. 10. The meeting then adjourned. Secretary's Note: Governor Shepardson today approved on behalf of the Board the following items: 6/12/64 -15- Letter to the Federal Reserve Bank of New York (attached Item No. 11) aPProving the reappointment of Michael Randall as assistant examiner. Memorandum from the Division of Data Processing dated June 9, 1964, recommending that a fifth tape unit be leased for the remaining time the 1410 system is the primary computer at the Board's offices, and that the lease order be for the Model 729 IV, at a monthly rental of $900. Memoranda recommending the following actions relating to the Board's staff: AP ointments Carol Ann Wade as Clerk-Typist, Division of Research and Statistics, With basic annual salary at the rate of $3,880, effective the date of entrance upon duty. . Howard W. Betts as Messenger, Division of Administrative Services, With basic annual salary at the rate of $3,305, effective the date of entrance upon duty. Carl S. Hackney as Messenger, Division of Administrative Services, 'with basic annual salary at the rate of $3,305, effective the date of entrance upon duty. Leroy Jackson as Messenger, Division of Administrative Services, vith basic annual salary at the rate of $3,305, effective the date of entrance upon duty. u. William W. Wiles as Summer Research Assistant, Division of Data Irocessing, with basic annual salary at the rate of $5,795, effective °Ie date of entrance upon duty. -12 1:T1ss1on to engage in outside activities Barbara A. Bosworth, Statistical Clerk, Division of Research and at tics, to work part time as a clerk and instructor in bowling in a earbY recreation center. George J. Viksnins, Economist, Division of Research and Statistics, to work part time for Voice of America, U. S. Information Agency, and to do summer tutorial work for Georgetown University. 2091 BOARD OF GOVERNORS Item No. 1 6/12/64 OF THE 1 FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 ADDRESS OFFICIAL TO CORRESPONDENCE THE BOARD June 121 1964 The Honorable Joseph W. Barr, Chairman, Federal Deposit Insurance Corporation, Washington, D. C. 20429 Dear Mr. Barr: Reference is made to your letter of May 13, 1964, Peru, concerning the application of The Peru Trust Company, wal withdra after Indiana, for continuance of deposit insurance from membership in the Federal Reserve System. There have been no corrective programs urged upon the bank, or agreed to by it, which have not been fully consummated, and in the Board's opinion, there are no such Programs that it would be advisable to incorporate as conditions of admitting the bank to membership in the Corporation as a nonmember of the Federal Reserve System. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. BOARD OF GOVERNORS Item No. 2 6/12/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 12, 1964 Board of Directors, Farmers' State Bank of Chadwick, Chadwick, Illinois. Gentlemen: The Federal Reserve Bank of Chicago has forwarded to the Board of Governors your letter dated May 19, 1964, and accompanying resolution signifying your intention to Withdraw from membership in the Federal Reserve System and requesting waiver of the six months' notice of such withdrawal. In accordance with your request, the Board of Governors waives the requirement of six months' notice of Withdrawal. Upon surrender to the Federal Reserve Bank of Chicago of the Federal Reserve Bank stock issued to your institution, such stock will be canceled and appropriate refund will be made thereon. Under the provisions of Section 208.10(c) of the Board's Regulation H, your institution may accomplish termination of its membership at any time within eight months from the date the notice of intention to withdraw from membership was given. It is requested that the certificate of membership be returned to the Federal Reserve Bank of Chicago. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. 2093 BOARD OF GOVERNORS o Item No. OF THE GOV 3 6/12/64 FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 ADDHESS OFFICIAL CORRESPONDENCE ID THE BOARD June 12, 1964 Board of Directors, Marion State Bank, Marion, Texas. G entlemen: The Federal Reserve Bank of Dallas has forwarded to the 80ara of Governors two letters, one dated May 19, 1964, and the th 2er dated May 22, 1964, both of which are signed by Cashier v4ndelia Schulz, and resolution dated May 19, 1964, signifying Ysour intention to withdraw from membership in the Federal Reserve ?stem, and requesting waiver of the six months' notice of such wl tharawal. The Board of Governors waives the requirement of six ths'notice of withdrawal. Under the provisions of Section .,(38•10(c) of the Board's Regulation H, your institution may accomplish nation of its membership at any time within eight months from ' 1?e date that notice of intention to withdraw from membership was ?'!en. Upon surrender to the Federal Reserve Bank of Dallas of the be e"ral Reserve stock issued to your institution, such stock will canceled and appropriate refund will be made thereon. mon It is requested that the certificate of membership be returned to the Federal Reserve Bank of Dallas. Attention is invited to the fact that if your bank is desi— memrus of continuing deposit insurance after withdrawal from tha, ership in the Federal Reserve System, it will be necessary co aPplication be made to the Federal Deposit Insurance rPoration. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. 2094 BOARD OF GOVERNORS Item No. 4 6/12/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OrFICIAL CORRESPONDENCE TO THE BOARD June 12, 1964 Mr. C. J. Scanlon, President, Federal Reserve Bank of Chicago, Chicago, Illinois. 60690 bear Mr. Scanlon: This refers to the proposed revisions in the plans for allot shelter facilities in the Head Office building described in your letter of May 22, 1964. It is noted that the cost of providing an emergency Shelter area under the revised plan would be reduced from $400,000 to approximately $142,000, which amount includes about $17,000 fOr work done by the architects and others in connection with the ?rlginal proposal. It is noted also that the directors of the Bank feel that the revised program will provide adequate emergency shelter facilities. The Board will interpose no objection to your Bank's Proceeding with the revised program at an estimated cost of $142,000. Very truly yours, (signed) Merritt Sherman Merritt Sherman, Secretary. ')() BOARD OF GOVERNORS Item No. OF THE FEDERAL RESERVE SYSTEM 5 6/12/64 WASHINGTON, D. C. 20551 1: ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 12, 1964. Mr. Phillip S. Hughes, Assistant Director for Legislative Reference, Executive Office of the President, Bureau of the Budget, Washington, D. C. 20503 Attention: Mx. J. E. Reeve Dear Mr. Hughes: Your memorandum of June 1, 1964, requested the Board's views regarding a draft bill, submitted by the Treasury Department, to permit member banks of the Federal Reserve System to purchase and hold directly stock interests in foreign banks. Any such Purchase and holding would have to be in conformity with rules and regulations of the Comptroller of the Currency in the case of national banks, and of the Board in the case of State member banks; and the amount of such stock so purchased or held could not exceed certain specified limitations. There is no authority in present law for member banks to Purchase and hold directly the stock of foreign banks, although ember banks may hold such stock, as indicated below, through interediate foreign banking subsidiaries organized under State or Pederal law. Z The Board would favor enactment of legislation pursuant . Which member banks, subject to appropriate safeguards, would be ! ble to conduct operations overseas directly through the means of ;.1.11)8 idiary foreign banks. The Board's letter of May 13, 1963, to t e Bureau of the Budget submitted a draft of possible amendment to accomplish this purpose as an alternative to a proposed amendment section 23A of the Federal Reserve Act. to However, the Board is of the view that the draft bill enc., Losed with your memorandum not only proposes an inadvisable 216(; Mr. Phillip S. Hughes -2- distribution of Federal authority with respect to the overseas Operations of American banks, but is subject to other objections, as noted below. The conduct of overseas operations by member banks, Whether national banks or State member banks, is dependent under Federal law on administrative action, the responsibility for which Congress, over the years, has centered in the Board. Thus, member banks may establish direct branches in foreign countries, but only With the approval of the Board and upon such conditions and under such regulations as the Board may prescribe, as provided in section 25 and section 9, paragraph 3, of the Federal Reserve Act. Overseas operations may be conducted by member banks also through the means of stock ownership in domestically-chartered 'Agreement" corporations engaged in foreign banking, as provided by section 25 and section 9, paragraph 20, of the Federal Reserve Act, if the Board has given its approval and the corporations involved have entered into agreements with the Board to restrict their operations in accordance with such limitations and restrictions as the Board may prescribe. In addition, the Board is authorized by section 25(a) of the Federal Reserve Act to charter, supervise, !I'd regulate "Edge" corporations engaged in foreign banking or inancial operations in which member banks are authorized under the Act to invest. With the Board's approval, a member bank having 4 subsidiary "Agreement" or "Edge" corporation may extend its over:eas operations either through branches of such subsidiary or through °rPorations controlled by such subsidiary. As recently as August 15, 1962 (Public Law 87-588), Co flgress reaffirmed its consistent position of centering in the Ibloard authority with respect to foreign operations of United States sanke, by authorizing the Board to issue regulations permitting ! t me expansion of the powers of foreign branches of national banks enable them to compete on improved terms in the countries where tocated. If the draft bill submitted with your memorandum were to be fo enacted, the overseas operations of national banks through direct reign bank subsidiaries would be under the authority of the ) Hr. Phillip S. Hughes -3- Comptroller of the Currency, while such operations by State member banks, and also the overseas operations of both national and State member banks through direct branches and through subsidiary "Edge" Or "Agreement" corporations and their branches or subsidiaries, would remain under the authority of the Board. In addition to the general administrative disadvantages of the proposed division of authority, some differences in the administration of the law by the Comptroller and by the Board would seem to be inevitable. This would result in unequal application of the law depending on whether a national or a State member bank was involved. Whether the overseas Operations of member banks should be conducted through direct foreign branches, through the medium of "Edge" or "Agreement" corporations, or through direct ownership of stock of a foreign bank, as is now Proposed, ought not to be influenced by whether the law is adminstered by different Federal agencies. These disadvantages could avoided by placing responsibility for administration of the draft !1-11 entirely in the Board consistent with the pattern which the i(3/1gress has established with respect to overseas operations of member banks. It is important to note also that the international ! ctivities of United States banks are of great importance for the flOW of funds between the United States and the rest of the world nd thus for United States monetary policy. This policy has Increasingly been affected by the United States balance of inter, 1 atlonal payments, in which capital movements, and especially changes 'aI41 International bank lending and international money market transctlons, play a decisive role. Thus, the Board's concern with ' a-liternational activities of United States banks, including tae setivities of their foreign branches and of their banking or financial oli fbeidiaries, is intimately related to the Board's primary function taking monetary policy action. In addition to the foregoing, the draft bill submitted by Treasury does not specifically require prior approval for the P lurchase or holding of stock interests in foreign banks. This at coast creates an ambiguity, since such approval is a specific inndition to the establishment of direct foreign branches and to the arvestment in "Agreement" corporations under the first three parathaPhs of section 25 of the Federal Reserve Act. The Board believes i„at Prior administrative approval should be expressly required for ' vestments of the kind proposed by the draft bill. the Mr. Phillip S. Hughes -4- It is noted also that the draft bill would permit the Purchase and holding of stock in a foreign bank without any requirement that the investment in the foreign bank involved be sufficiently large to permit the purchasing bank effectively to conduct overseas operations through the means of the investment. Thus, it would seem that the apparent purpose of the draft bill submitted with your memorandum would be better expressed by requiring that the stock of a foreign bank purchased or held directly by a member bank be sufficient to assure control of the foreign bank. Under the first proviso of the draft bill, the aggregate amount invested by a member bank in foreign banks, together with the total amounts invested in any "Agreement" corporations and any "Edge" corporations, could not exceed 10 per cent of the member bank's capital and surplus. This limitation is patterned after the limitations now in section 25 and section 25(a) of the Federal Reserve Act. The further limitation in the second proviso of the draft bill on the total amount that could be invested in any one foreign bank, While probably not unduly restrictive at this time, would not seem to be necessary. Finally, in view of the specific language in the exemption from section 23A of the Federal Reserve Act in clause (3) of the third paragraph of that section, the last sentence of the draft bill seems to be redundant. On the basis of the considerations outlined above, the Board would oppose enactment of a bill like the draft enclosed with the Bureau's memorandum of June 1, 1964. The Board, however, would favor enactment of an amendment to section 25 of the Federal Reserve Act along the lines of the draft bill enclosed herewith. Sincerely yours, (signed) MOrritt Sherman Merritt Sherman, Secretary. Baclosure 409(1 DRAFT BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM A BILL To amend section 25 of the Federal Reserve Act Be it enacted by the Senate and the House of Representatives ( -121—_tte United States of America in Congress assembled, That section 25 Of the Federal Reserve Act, as amended (12 U.S.C. 601), is further amended (a) by striking out the words "either or both of" in that Patt of the first sentence of said section before the colon; and (b) by adding the following new paragraph after paragraph Second Of said section: "Third. To acquire and hold, directly or indirectly, the controlling interest in one or more banks organized under the law of a foreign country or a dependency or insular possession of the United States and not engaged, directly or indirectly, in any activity in the United States except as, in the judgment of the Board of Governors of the Federal Reserve System, shall be incidental to the international or foreign business of such foreign bank: the Provided, That aggregate amount invested under this and the next Preceding paragraph of this section, together with the total amount of stock held in corporations organized under section 25(a) of this Act, shall not exceed 10 per cent of the association's capital and surplus." 444e 12, 1964. 2100 Item No. 6 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 6/12/64 WASHINGTON OFFICE OF THE CHAIRMAN June 12, 1964. The Honorable A. Willis Robertson, Chairman, ommittee on Banking and Currency, united States Senate, Wa 20510 -sulngton, D. C. E Dear Mr. Chairman: letter of Pursuant to the request contained in your Mar Federal the 0 ch 20, 1964, the Board has collected, through money orders of e i;eserve Banks, information regarding the issuanc ding (exclu States nonbanking concerns throughout the United e United States Post Office Department). that the The replies of the Reserve Banks indicate . The issuers ive. extens "'Nate" money order business is quite doing business, s concern eelf these instruments range from a number of (e.g., basis -State multi 'ther directly or through agents, on a Am ers' Travel Inc., , Orders Money - "erican Express Company, Republic -Wide Nation Inc., Co., ion 'c4,(Press Company, Inc., U. S. Navigat to what wueck Corporation, Western Union Telegraph Company, etc.) aould appear to be literally thousands of local "currency exchanges" markets, and individual merchants (particularly drugstores, de as principal, or variety stores) that sell money orders, Lc'r the accommodation of their customers. Nebraska, Rhode Eight States (Florida, Kansas, Kentucky, t this activity, and, South Dakota, Vermont, and Wyoming) prohibi 1;,..._Lher by statute or administrative ruling, in addition, the question issuance of ether existing banking laws of West Virginia preclude the before now AtneY orders by organizations other than banks is torney General of that State. 4 statutes proWhere the practice is not prohibited, State from those that vary sing for the regulation of money order issuers to those that is, Illino quite detailed, such as in California and BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM -2provide for only nominal regulation. A number of States have neither legislation nor administrative rulings on the subject. For your convenience, thereis appended hereto a summary by Federal Reserve Districts of the information gathered by the Federal Reserve Banks pursuant to your request. Regarding the matter of legislation in this area, the Board is of the opinion that to the extent greater regulation of the private money order business may be desirable, it would be preferable to encourage the States themselves to take the necessary initiative rather than for the Federal Government to enter the field. The bankruptcy of Security Currency Services, Ltd., in January of this year, would appear to be an exceptional, albeit dramatic, occurrence. Although the information furnished by the Reserve Banks suggests there may be instances of localized default on or delayed payment of Private money orders when presented for collection, the problem does not appear to be one of significant proportions, considering the number Of active issuers of such instruments. Under these circumstances, it ls the Board's view that the need for Federal action is not so compelli ng that entry into a field traditionally reserved to the States would be w arranted. It might also be pointed out that effective regulation of commercial activity in a manner that seeks to prevent undesired results rather than to provide a remedy after the fact inevitably involves active supervision. A difficult choice would have to be made in deterTilling the extent of this supervision that could be feasibly undertaken :1 ): a Federal agency. On the one hand, the Federal role could be strictly timited--for example, it might be confined to making sure of the financi al rsponsibility of the issuer alone where the issuer is engaged in the ' business in more than one State-but limited supervision of that kind ght not provide adequate assurance against losses by the public. On Other hand, it seems questionable whether any Federal agency could 7rfectively supervise the activity of the innumera ble agents of the large interstate companie s or the thousands of currency exchanges, drugstores, Pool halls, markets and , other small local businesses that issue money .irders as principals. In either case, Federal supervision of this business w!uld entail a risk that the public might place unwarranted reliance on Such supervision as a guarantee of safety. j 2102 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Nweral For the foregoing reasons, the Board would not recommend Supervision of private money order issuers. Sincerely yours, Wm. McC. Martin, Jr. 1Qsure BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 7 6/12/64 WASHINGTON OFFICE OF THE CHAIRMAN June 12, 1964. The Honorable Russell B. Long, United States Senate, 20510 Washington, D. C. Dear Senator Long: requesting This is in reply to your letter of April 7, 1964, he Board's comments regarding the sale of money orders, the advisability of Federal regulatory legislation, and the form such legislation might take. some Apart from the United States Post Office Department, money issue s concern or es compani private banks and a great number of the and orders. It is assumed, both from the tenor of your letter uent, a constit your by ed submitt l proposa nature of the legislative two latter copy of which was enclosed with your inquiry, that only the t. categories of issuers are within the purview of your interes National A few banks, including Bank of America and First basis, -State inter City Bank of New York, issue money orders on an virtually n, additio In through agents that are primarily other banks. instrument an checks, 's cashier all banks stand ready to "sell" their own order. money a as having many of the same characteristics it is On the bais of information available to the Board, than other s concern by orders ,aPParent that the issuance of money 1?sanks is quite extensive. The issuers of these instruments range y or a number of large companies doing business, either directl Irom I , Company Express n America (e.g., basis hrough agents, on a multi-State Company, Inc., U. S. Republic Money Orders, Inc., Travelers' Express Western Union tion, Corpora Check -Wide !avigation Co., Inc., Nation relegraph Company, etc.) to what would appear to be literally thousands (particularly °f local "currency exchanges" and individual merchants sell money irugstores, markets, and department or variety stores) that ' rs. orders, as principal, for the accommodation of their custome Nebraska, Rhode Eight States (Florida, Kansas, Kentucky, t the issuance of Island, South Dakota, Vermont, and Wyoming) prohibi 2104 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM -24 private" money orders, either by statute or administrative ruling; addition, the question whether existing banking laws of West vlrginia preclude issuance of money orders by organizations other than banks is now before the Attorney General of that State. Where the practice is not prohibited, State statutes providing for the 12,egulation of money order issuers vary from those that are quite rtailed, such as in California and Illinois, to those that provide ;el...only nominal regulation. A number of States have neither legislation nor administrative rulings on the subject. fl For your convenience, there is enclosed a summary of information regarding the issuance of money orders by nonbanking concerns in the twive Federal Reserve Districts. Regarding the question whether there exists a need for Pederal regulatory legislation, the Board is of the opinion that no need is apparent. Insofar as concerns banks that engage in the money order business, it is believed that the supervisory and regulatory tJ urisdiction exercised over these institutions by the Board, the Compeller of the Currency, and the Federal Deposit Insurance Corporation the Federal level, together with complimentary or collateral regulation by State banking authorities, provides a means for assuring the solvency ,nd propriety of conduct of those banks that now or in the future may issue money orders or equivalent instruments. j With respect to Federal regulation of "private" issuers of money -Y orders, the Board is of the opinion that to the extent greater : . .,!gulation of the private money order business may be desirable, it :'_411d be preferable to encourage the States themselves to take the necessary initiative rather than for the Federal Government to enter the field. The bankruptcy of Security Currency Services, Ltd., and its , sister organization, American Security Currency, Ltd., to which your ;°nstituent refers, in January of this year, would appear to be an i'.ce ptional, albeit dramatic, occurrence. Although the information ' lornished by the Reserve Banks suggests there may be instances of prealized default on or delayed payment of private money orders when siesented for collection, the problem does not appear to be one of su gnificant proportions, considering the number of active issuers of theh instruments. Under these circumstances, it is the Board's view the need for Federal action is not so compelling that entry into a "'old traditionally reserved to the States would be warranted. HOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM -3It might also be pointed out that effective regulation of "mmercial activity in a manner that seeks to prevent undesired results rather than to provide a remedy after the fact inevitably involves a tive supervision. A difficult choice would have to be made in deterl!ining the extent of this supervision that could be feasibly undertaken a Federal agency. On the one hand, the Federal role could be strictly "alted--for example, it might be confined to making sure of the financial fesPonsty of the issuer alone where the issuer is engaged in the f..Isiness in more than one State--but limited supervision of that kind Tlght not provide adequate assurance against losses by the public. On Other hand, it seems questionable whether any Federal agency could ffectively supervise the activity of the innumerable agents of the large ! interstate companies or the thousands of currency exchanges, drugstores, P000l halls, markets, and other small local businesses that issue money wrders as principals. In either case, Federal supervision of this business s°41d entail a risk that the public might place unwarranted reliance on uch supervision as a guarantee of safety. In view of the above-stated conclusions regarding the absence need for Federal regulation of banks and private concerns that issue 14,?neY orders, the Board has no recommendation to make regarding the form , ur content of implementing legislation. Of Sincerely yours, Wm. McC. Martin, Jr. Enclosure 2106 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 8 6/12/64 WASHINGTON OFFICE OF THE CHAIRMAN AL RES., June 12, 1964. The Honorable Dante B. Fascell, C hairman, Legal and Monetary Affairs Subcommittee, Committee on Government Operations, House of Representatives, Washington, D. C. 20515 Dear Mr. Chairman: By letter of April 6, 1964, you have requested certain information regarding "float" in check clearings to supplement the 130ard'a response of March 13 to a previous inquiry from you on this .”me subject. In your most recent letter, you observe that the ' evel of total float keeps rising, that float on occasions has aPProximated 10 per cent of the estimated required reserves for all member banks, and that float constitutes cost-free reserves to a mber banks, and you ask whether (1) there is any defined point 4 ,_t which the amount of float in such reserves is to be considered o high, and (2) if any consideration has been given to the quesa,i,.°n whether banks utilizing float as reserves should pay a reason°le charge therefor. r 21. 1.§...1gnificance of Float In the absence of countervailing action, each time float ll 'aea or falls there would be a corresponding increase or decrease as total reserves of member banks. However, such movements in float, 0„ well as a variety of other technical factors affecting the volume 1,44i reserves, are carefully offset by Federal Reserve actions consistent ellth current policy to keep the banking system as a whole from experiAseing any excessive addition to or contraction of total reserves. A an illustration, member bank float increased $542 million between ' 1 1.1 1 and April 15, 1964, to a level of $1,729 million, but the f,atam offset this rise in float (and also the net of other market getoro rnill. ioni by reducing its holdings of Government securities by $557 4 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM The Honorable Dante B. Fascell -2- So long as float does not grow so large that necessary °ffsetting sales would absorb the bulk of Federal Reserve holdings ?f Government securities (and there is no expectation of any rise n float even remotely approaching this dimension), its sheer size is not a matter of particular importance. Nor do we believe that there is any ground for concern in the fact that float at times has reached 10 per cent of required l'eserves, even though on its face this might seem to raise questions about liquidity within the banking system. In practice, the relative , 11°unt of checks that are returned by drawee banks is very small, and re presenting bank almost always has assets at the Federal Reserve zank that total many times the amount of any returned checks that would be charged back against the previously given credit. Typically, otl1ese assets consist not only of the bank's reserve account, but also a continual stream of cash items being presented for collection on bts behalf. Also, as an ultimate recourse, a member bank is able to 011.0'w from its Reserve Bank in times of need. Consequently, the t°visional crediting to reserve accounts of checks presented for ! :.11ection is not believed to pose any practical liquidity risk lther to member banks or to the Federal Reserve Banks. T Vloat ar e To levy a charge for float-based reserves would be prohibltiv expensive if based on the actual payment experience of each h e-LY lZ e eck presented to the Federal Reserve for collection. There is no to tell, at the time of a deposit of checks for collection, how much de float may ultimately be involved in the credit given for the It would therefore be necessary to keep records showing tecsit. the Payment experience of the thousands of cash letters sent out rY day by the Federal Reserve Banks and branches, which receive fo ! 'collection checks drawn on the 12,000-odd commercial banks-me and nonmember alike--that remit at par. Last year, over cill'ee billion country checks were handled. There would also be itestions as to which bank should in fairness be charged, for example, ariwould be hard to justify charging the depositing bank for float th_8ing from delay in processing by a Reserve Bank or in payment by t drawee bank. In theory, it might seem possible to base charges on general the derived from average experience in check collection rather than exteactual experience of each check. But it seems likely that to the at this reduced administrative costs, it would become increasingly BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM The Honorable Dante B. Fascell 21 -3- Speaking more broadly, check collection is only one of a number of services that member banks are provided by the Federal Reserve Banks so that they, in turn, may provide good banking service to the public. Thus, the value of those services does not accrue solely or even primarily to the member banks, but extends to the bank etustomers in each community served. This service to the public -taliat the member banks is a basic objective of Federal Reserve o perations. Offsetting the benefits directly or incidentally received fr°m membership in the Federal Reserve System are various costs incurred by member banks as a consequence of belonging to the System, sruch as the maintenance of a required minimum of noninterest-bearing teserve deposits at the Reserve Bank and a variety of required opera°118, specified limitations on loans and investments, and the obligaslOn to maintain a prudent cushion of capital . These requirements e intended, of course, to benefit the public by assuring sound maonking conditions. However, taken together with the Federal Reserve renetary and service operations mentioned above, these supervisory b,quirements have given rise to a complex skein of banking costs and 'nefits, affecting both member banks and the customers. j j It has been the view of the Board that an attempt more or to balance the sum total of the burdens and benefits of Federal membership is not only desirable but necessary in the interest rtiodequitY. Until recently, it is believed that a satisfactory accomye ation in this respect has been approached. However, in the last or so an increasing number of member banks have been voluntarily dra wing from the System, mainly because of an earnings pinch. A 8; .ge for float-based reserves undoubtedly would further disturb many t-Cller banks that are now pondering the desirability of retaining caeir membership in the Federal Reserve System, both because float asnnot be controlled by the depositing bank and because such banks, bat: group, customarily maintain excess reserves. To charge these /10,-s for something they cannot control and, for the most part, do dri ' a- need or want, might well precipitate an accelerated rate of withis from membership in the System. les h 8 L‘ese of In sum, therefore, the float component of member bank .4: 4 ves would be a matter for concern only if offsetting transactions 'le System Open Market Account were to require liquidation of the BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM The Honorable Dante B. Fascell bulk of Federal Reserve holdings of Government securit ies an eventuality that is not perceived to be even a remote possibility, ?nd it is believed that the inequity of levying a charge on member banks for float-based reserves would far outweig h any possible virtue that such a practice might have. Sincerely yours, ati4f&I))14X; Wm. McC. Martin, Jr. 21- _10 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 9 6/12/64 WASHINGTON OFFICE OF THE CHAIRMAN June 25, 1964 The Honorable Wright Patman, Chairman, Committee on Banking and Currency, House of Representatives, Washington, D. C. 20515. Dear Mr. Chairman: In response to your request as transmitted by Mr. Stark, enclosed are tables and lists showing additional bank holding companies that would be subject to regulation under the Bank Holding Company Act if H. R. 10872 were enacted. Table I presents in summary form data concerning the 341 known additional companies (including 19 domestic commercial banks, with 166 banking offices and deposits of $5,079 million), with banks in 44 States and the District of Columbia, that would be subject to regulation as bank holding companies under a Would "one-bank" definition. As explained in the second paragraph of the footnote, percentage ratios are shown in relation to all commercial banks, and therefore the data do not include the 23 offices and $380 million aggregate deposits of 7 mutual savings banks, each Of which owns 25 per cent or more of the voting shares of one commercial bank. The third paragraph of the footnote in Table I explains that if a "one-bank" definition were adopted, 14 additional companies "'thin the present corporate structure of the Financial General Group 9hat own 25 per cent or more of the stock of 14 banks (not included In the basic table) would become bank holding companies. If the specific exemption for Financial General as contained in section of the Act were repealed, Financial General Corporation would itselff become a bank holding company, and the group could not thereafter acquire more than 5 per cent of the voting shares of any addi!lonal bank without prior approval of the Board. Also, the provisions Of section 4 of the Act (divorcement of nonbanking interests) would to this group. Table I-a shows all of the banks in this group that are 25 per cent or more controlled, those banks in the group that :,1:e presently subsidiaries of registered bank holding companies, and those ,), banks that would be subsidiaries of bank holding companies under ! one-bank" definition with the corporate structure as now constituted, ur upon repeal of section 2(a)(B). BOARD The OF GOVERNORS Honorable Wright Patman OF THE FEDERAL RESERVE SYSTEM -2- The fourth paragraph of the footnote in Table I also summarizes data with respect to the known organizations that would become bank holding companies if the Act were amended to remove the f e4empti0n for charitable, educational, and religious organizations Tf°m the definition of "company" as contained in section 2(b)(2). ,snere are 10 charitable or educational organizations that would become bank holding companies under a "one-bank" definition, and 4 of 4?ese would become bank holding companies if the "two-bank" definition were retained. There are no known religious organizations that would be affected. are also enclosed Tables II, III, and III-a, relating holding companies presently registered pursuant to the Bank 11, 1°ding Company Act of 1956. Information like that contained in alalres II and III is published annually in the Federal Reserve Bulletin. Tah: as indicated in the Bulletin, a list similar to that contained in ule III-a is available from the Board upon request. to batikThere In addition, two detailed lists are enclosed. The first list ii):!ludes the names of the 341 known additional companies that would wi'jme bank holding companies under a "one-bank" definition, together 6„11 ,. the names, number of offices, and amount of deposits of (a) those ."s that would themselves become bank holding companies (names only fo 7 mutual savings banks that are included) and (b) each bank that 1.101thed mor be a subsidiary of each such company. In some instances, two or in e related companies would be holding companies of the same bank, and heiVew cases two or more apparently non-related companies would be the 11311g companies of the same bank (in the latter situation, data for ank are included only once in order not to inflate office and de P°sit data). The second list contains detailed information relating ' 0 th "e 10 charitable and educational organizations referred to above. As indicated by the notes at the top of each of the two detailed list lar s, the Board feels that these lists should not be published. In tiar measure, they are based on information contained in the confidenbank.sections of reports of examinations made by the other two Federal clolsi tng agencies as well as by the Federal Reserve System. In the cirindiu, nces, the Board respectfully requests that the information as to .1dual cases contained in these two lists be treated as confidential. Sincerely yours, (Signed) Wm. McCe Martin, Jr. Wm. McC. Martin, Jr. 2112 BOARD OF GOVERNORS Item No. 10 6/12/64 OF ,THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADCRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 12 1964 International Banking Corporation, 399 Park Avenue, tlev York 22, New York. Ge ntlemen: In accordance with your request and on the basis of the info rmation furnished in your letter of April 23, 1964, transmitted rongh the Federal Reserve Bank of New York, the Board of Governors 6 ivanta consent for your Corporation to make further advances to Mercantile Bank of Canada, Montreal, Canada, either as additions : eaPital or as subordinated loans, in amounts not to exceed in the ggregate Canadian Dollars 1,100,000. 4 The Board of Governors also grants permission, in accordance Your request, for your Corporation to include free contingency Baberves in computing the book value of the shares of The Mercantile 111 ;of Canada to the extent that they have not been specifically a, rPLied to provide for anticipated losses. It is understood that such reserves are such as would be in , rl los Reserves for Contingencies as defined on page 10 of FR sta.:, 'Instructions for the Preparation of Reports of Condition by "Member Banks of the Federal Reserve System," copy enclosed. Very truly yours, (Sigaed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. trici °8nre. kJ, BOARD OF GOVERNORS Item No. 11 6/12/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 NDENCE ADDRESS OFFICIAL CORRESPO TO THE BOARD June 15, 1964. Mr. Howard D. Crosse, Vice President, Federal Reserve Bank of New York, New York, New York. 10045 Dear Mr. Crosse: In accordance with the request contained in Mr. Quackenbush's letter of June 10, 1964, the Board approves the reappointment of Michael Randall as an assistant examiner for the Federal Reserve Bank of New York, effective June 16, 1964. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary.
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