Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, June 14, 1962, Volume 49, Part 6

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Minutes for

To:

Members of the Board

From:

Office of the Secretary

June 14, 1962

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
ee Secretary's Office. Otherwise, please initial
4 low. If you were present at the meeting, your
J.nitials will indicate approval of the minutes. If
You were not present, your initials will indicate
(InlY that you have seen the minutes.

V

Chm. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell

Minutes of the Board of Governors of the Federal Reserve
SYstem on Thursday, June 14, 1962.

The Board met in the Board Roam

at 10:00
a.m.
PRESENT:

Mr.
Mr.
Mr.
Mr.

Mills, Acting Chairman
Robertson
Shepardson
King
Sherman, Secretary
Kenyon, Assistant Secretary
Fauver, Assistant to the Board
Hackley, General Counsel
Solomon, Director, Division of
Examinations
Mr. Sprecher, Assistant Director, Division
of Personnel Administration
Mrs. Semia, Technical Assistant, Office of
the Secretary
Mr. Young, Senior Attorney, Legal Division
Mr. McClintock, Supervisory Review Examiner,
Division of Examinations

Mr.
Mr.
Mr.
Mr.
Mr.

Circulated items.

to

The following items, which had been circulated

the Board and copies of which are attached to these minutes under the

resPective item numbers indicated, were approved unanimously:
Item No.

utter to
Bankers Trust Company, New York,
Ne1,7
br
4ork, approving the establishment of a

1

EInch at 1660 Second Avenue, Borough of
ianhattan.
'
Lett,„
- to the Federal Reserve Bank of New
tay-jegarding the status of Jamcor, Inc., Hewlett
ark, New York, as a holding company affiliate.
-'
Letter 4.
t 01. - -0 the Federal Deposit Insurance Corporafegarding the application of Security Trust
,
;
0014
4.d741Y, St. Louis, Missouri, for continuation
or '
sili:I?osit insurance after withdrawal from memberIn the Federal Reserve System.

2

3

6/14/62

-2Conflicts of interest.

There had been circulated a memoran-

tham dated June 5, 1962, from the Division of Personnel Administration.
The

memorandum pointed out that on November 13, 1961, the Board informed

its employees and consultants of the existing laws relating to conflicts
°II interest by Government personnel.
the

The 1961 memorandum grew out of

President's special message to Congress of April 27, 1961, on

ecotlicts of interest.

That message had now been supplemented by a

nienlorandum from the President dated February 9, 1962, directing all
G°vernment departments and agencies to take administrative steps to
°Versee the activities of advisers and consultants employed by the
Gc)vernment in order to insure that the public interest was protected
fl‘c)M improper conduct, and that advisers and consultants would not,
thr°11€01 ignorance or inadvertence, embarrass the Government or themselves.
The President's memorandum discussed the need for disclosure
of f• inancial interests by consultants and stated that each department
•46€encY of the Government should at the time of the employment of a
(111slaltant or adviser require him to supply a statement of his private
etliP1°Yment and financial interests.

The statement was to indicate the

tietznes of all companies, firms, research organizations, and educational
illst
itutions in which he served as a member, officer, employee, director,
°11 e• °nsultant and also companies in which he had any other significant
financial interests.

It was pointed out that the consultant or adviser

Ileea not reveal the precise amounts of investment.

Each statement of

6/14/62
financial interest was to be sent to the chief legal officer of the
department or agency concerned for information and for advice as to
Possible conflicts of interest, snd it was required that the statement
from the consultant be kept current during the period of his employment.
Attached to the Division memorandum were a pamphlet copy of

the President's memorandum and a proposed questionnaire to be filled
14 by consultants.

The Division recommended that these be sent to the

130ardis consultants, and attached a draft of transmittal memorandum
for that purpose.

The Division had reviewed this material with the

Legal Division.
The Division memorandum noted that the Board at present employed
81:4 or seven consultants.

While several of those appointments were

°Pen-ended, it was thought advisable to restrict the period of appointIllents to the calendar year, with specific renewals.

Consequently, the

Division proposed that by the first of 1963 each consultant be informed
s
that
11,.1 appointment was being extended only through the ensuing calendar
Year and that renewal, if necessary, would be on a year-to-year basis.
During discussion it was brought out that it was understood
t° be the intention that eventually all employees of the Government
14°111d be brought under the requirements now proposed for consultants.

The

implementation of the plan covered consultants as a first step

1-use it was thought that the possibilities of conflicts of interest
'
greater than in the case of full-time employees.

TLe questionnaire

21 61;
6/14/62
devised by the Division of Personnel Administration was intended to
e°14PlY with the minimum terms of the President's request; if it
developed that the questionnaire devised for general use by Government
agencies went farther, the Board could consider amending its questionnaire.
It was observed that the President's memorandum referred to
"advi• sers and consultants."

Since the Board had "advisers" on its

flal-tdrce staff, however, the suggestion was made that misunderstanding
14ight be avoided if the Board questionnaire referred to "consultants"
Question then was asked whether economists who were brought in
Ora

seminar, and who were paid a fee, must be considered consultants

rcIr this
purpose.

Responses indicated that that appeared to be the case.

Thla led to the comment that if a professor of economics, for example,
.ler'e asked to come to Washington for a seminar, but found that he must
file the proposed questionnaire, he might well conclude against partici13ation in the meeting.

Thus, question was raised whether a line could

t Properly be drawn to exclude persons such as seminar participants
i'l"(3m the definition of "consultant."
After further discussion of possible problems that might arise
aQe°rding to the definition of "consultant," there was general agreethat the matter should be held for further consideration by the
Board.
In the meantime, it was understood that the Division of Personnel
klmi •
nistration would inquire among the personnel officers of other agencies
•
t° determine
what interpretations were being made by those agencies.

6/14/62

-5Bank Holding Company Act.

At the request of Governor Mills,

it was understood that the Legal Division would prepare a memorandum
On the Board's statutory responsibilities in bank holding company
eases where question was raised as to the possibility of an intent
to circumvent State laws on branch banking.
Protest against Whitney decision.

Mr. Sherman referred to a

l'eosntly circulated memorandum dated June 1, 1962, regarding a visit
that President Bryan of the Federal Reserve Bank of Atlanta had had
fraill Mr. Lawrence A. Merrigan, President of Bank of New Orleans and
Trust Company,
regarding the formation of Whitney Holding Corporation
anci its operations in Jefferson Parish, Louisiana.

Mr. Sherman noted

that the Board's order approving the application of Whitney Holding
C°1"Porati0n was dated May 3, 1962, and that the Bank Holding Company
"e"t allowed
sixty days from the date of such an order within which
jlIcileia1 review might be sought.

There had been indications that

Merrigan's bank might join with two others, Merchants Trust and
Savillgs Bank, Kenner, Louisiana, and Guaranty Bank and Trust Company,
Latalrette, Louisiana, in seeking judicial review of the Board's decision.
R°14ever, the three banks late yesterday filed a petition with the Board
reconsideration of its decision.
The information reported by Mr. Sherman was noted, with the
ec)rninent that
the Board should act on the petition for reconsideration
Plice1Pt1y,
institute

in order not to deprive the three banks of their right to
court proceedings if the petition should be denied.

2168
6/14/62

-6The meeting then adjourned.
Secretary's Notes: The steps contemplated by the Board's action of May 22,
1962, in issuing preliminary permits
to First Chicago International Banking
Corporation, New York, New York, and
First Chicago International Finance
Corporation, Chicago, Illinois, having
been completed, final permits to commence
business were issued to those corporations on June 13 and June 14, 1962,
respectively.
Pursuant to the recommendation contained
in a memorandum from the Division of
Administrative Services, Governor Shepardson
today approved on behalf of the Board
acceptance of the resignation of James
J. Cava, Tabulating Equipment Operator
in that Division, effective at the close
of business June 22, 1962.

Lrn
Sectet

2119
BOARD OF GOVERNORS

0400144,4
t#4000

OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.

Item No. 1
6/14/62

ADDRESS. OFFICIAL CORRESPONDENCE
TO THE BOARD

June 140 1962

Board of Directors,
Bankers Trust Company,
New York, New York*
Gentlemen:
The Board of Governors of the Federal
Reserve System approves the establishment by
Bankers Trust Company, New York, New York, of
a branch at 1660 Second Avenue in the Borough
Of Manhattan, New York, New York, provided the
branch is established within one year from the
date of this letter*
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.

7's

BOARD OF GOVERNORS
,,40
4 )

401,N4;,
apt,
84
*

OF THE

FEDERAL RESERVE SYSTEM

Item No. 2
6/14/62

WASHINGTON 25. D. C.

ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

June 14, 1962

141% Howard
D. Crosse, Vice President,
jedere.1 Reserve Bank of
New York,
17ell York 45,
New York.
Ile4r Mr. Crosse:
This refers to your letter of May 24, 1962, in which you
Estate t
of 4.41, hB.t Mr. J. A. Melnick of New York
City has purchased control
1114,1 /14 e American Trust Company of New York and
plans to retain a
coni°
.,,fitY of the outst4nd1ng stock in the name of his personal holding
Jamcor, Inc., of Hew;ett Bay Park, New York. Your letter
b';:es the question
of the possibility of jarneor'
s now having become
11°1cling company affiliate as defined in section 2(c) of the
44€ Act of 1933, as
amended.
In its letter of February 12, 1959, the Board of Governors
iatorm
dire„e
i ci !qr. Melnick of its determination that Jamcor was not engaged,
'
44- or indirectly, as a business in holding the stock of,
or
or--c`
tru
(3111g or controlling, banks, banking
associations, savings banks,
Etecol,rii
8t companies within the meaning of section 2(c), and that,
Jaracor„ Inc.,was not duemed to be a holding company
Aet.14-ate except for the purposes of section 23A of the
Federal Reserve
This determination was made because at that time Jamcor
coritr,,thA- majority of the stock in only one bank and did. not own or
'
tIttioh 841Y stock of, or manage or control, any other banking instiThat factual situation has not substantially changed. Jamcor
C0/1434 "Tris the majority of stock in only one bank, the American Trust
Per 'ellY• The fact that it also owns a very small percentage
(0.5
BEtait :
eni_t) of the stock of a second bank, the Meadow Brook National
`40e8 riot,
0t, in the opinion of the Board, call for rescission of
out
determination. It Will be appreciated if your Bank
ill-form Mr. Melnick.
Very truly Yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.

14.0

BOARD OF GOVERNORS
OF THE

FEDERAL RESERVE SYSTEM

Item No.

3

6/14/62

WASHINGTON 25. D. C.

AOOFIESMI OPTIOIAL OORRIMPONOINOIC
TO THE NOARO

June 14, 1962

The Honorable Erie Cooke, Sr., Chairman,
Federal Deposit Insurance Corporation,
Washington 25, D. C.
Dear Mi. Cocks;
Reference is made to your letter of June 5, 1962,
concerning the application of Security Trust Company,
St. Louis, Missouri, for continuance of deposit insurance
after withdrawal from membership in the Federal Reserve
System.
No corrective programs which the Board of Governors
believes should be incorporated as conditions to the continu!nee of deposit insurance have been urged upon or agreed to by
the bank.
Very truly yours,
(Signed) Kenneth A. Kenyon

Kenneth A. Kenyon,
Assistant Secretary.