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Minutes for To: Members of the Board From: Office of the Secretary June 18, 1959 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, if you Were present at the meeting, please initial in column A below to indicate that you approve the minutes. If you were not present, please initial in column B below to indicate that you have seen the minutes. Chin. Martin Gov. Szymczak Gov, Mills Gov, Robertson Gov. Balderston Gov. Shepardson Gov. King ' Minutes of the Board of Governors of the Federal Reserve System 04 Thursday, June PRESENT: 13, 1959. The Board met in the Board Room at 10:00 a.m. Mr. Mr. Mr. Mr. Mr. Martin, Chairman 1/ Szymczak Robertson Shepardson King Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Sherman, Secretary Kenyon, Assistant Secretary Hackley, General Counsel Farrell, Director, Division of Bank Operations Hostrup, Assistant Director) Division of Examinations Nelson, Assistant Director, Division of Examinations Benner, Assistant Director, Division of Examinations Hill, Assistant to the Secretary Langham, Chief, Call Report Section) Division of Bank Operations Items circulated to the Board. The following items,which had beeh , - circulated to the Board and copies of which are attached to these 411411tes under the respective item numbers indicated, were approved 1-1118.4imously : Item No. Lette_ ph„ 4 to the Fidelity-Philadelphia Trust Company, o -phia, Pennsylvania, approving the establishient of a branch at Roosevelt Boulevard and Welsh an additional investment in bank premises. Letter to the Guaranty Bank & Trust Company, Hammond, to : e 411a) granting an extension of time within which Alleri ablish a branch at West Thomas Street and Richardson e. Letter appr to the National Bank of Fairbury, Fairbury, Illinois, g its application for fiduciary powers. zaltered meeting at point indicated in minutes. 1 2 3 6/18/59 -2Application to convert into a national bank. There had been circulated to the Board a file relating to a request from the Comptroller of the Currency for the Board's recommendation on an 4PPlication of the State Bank of Des Moines, Des Moines, Iowa, to convert into a national banking association and concurrently to establish a branch at Urbandale. Since the applicant bank was owned by a bank holding company, COnsideration of the Comptroller's inquiry was deferredl at the request or the Division of Examinations, until the Legal Division could study 14hether acquisition of the stock of the national bank into which the State 1, - -ank was to be converted would appear to require approval under the Bank Holding Company Act. Possible amendment to Regulation Y. to There had been circulated th_ Board a memorandum from Mr. Hackley dated June 12, 1959, in hlch he referred to the letter dated January 22, 1958, wherein the advised a New York law firm that section 3(d) of the Bank 11°Iding Company Act (the prohibition against crossing State lines) %1°1-11(1. not preclude consideration of an application by a Delaware corPoration, with its principal office in that State, for the Board's 41)P1 ' °v3.1 to become a bank holding company through the acquisition of 1)444 ia Michigan. Although not so stated in the letter to the law lt was pointed out by the staff at that time that under Regu4t1°11 Y' Benjç Holding Companies, any application would have to be _3.. 6/18/59 tiled with the Reserve Bank of the district in which the applicant comPany had its principal office and that the Regulation therefore 'would require a Delaware corporation to file its application with the Federal Reserve Bank of Philadelphia, even though its subsidiary banks and its principal operations would be in the Chicago District. According'y, it was understood that the staff would study that phase Of the matter further and consider whether an amendment to Regulation Y /I°1114 appear desirable. Mr. Hackley's memorandum noted that the case referred to did llot result in an application being filed and that the Board had leeeived no other application from an applicant having its principal ' trice in one district and its principal operations in another. It the view of the staff that there was only a remote possibility Of stich a situation arising in the future and that in such event it 1'1°434 be possible for the Board to handle the matter administratively by referring the application, wherever it might be filed, to the ve Bank of the district in which the applicant proposed to carry ' Resel °4 its 4--4 , 711 , ncipal operations. Accordingly, it was the opinion of the Le1641 Division, in which the Division of Examinations concurred, that 4° am endment to Regulation Y was necessary. Following comments by Mr. Hackley, unanimous agreement was elqlress A eu with the view stated in his memorandum. 6/18/59 1. Mr. Nelson then withdrew from the meeting. Processing of member bank been . There had reports (Item No. IQ. distributed to the Board a memorandum from the Division of Bank OPerations dated June 11, 1959, proposing that key-punching of data iii member bank condition and earnings reports be decentralized to the Pederal Reserve Banks, with subsequent processing on the Board's ecerNter. (This was the second step in a program to expedite the PUb—.cation of data from these reports and to eliminate duplication r effort. The first step, discontinuance of editing of the reports at the Board prior to their tabulation, was covered in the Board's letter to the Federal Reserve Banks dated May 6, 1959.) There was 84.bulit4.ed with the memorandum a draft of letter to the Presidents of all Federal Reserve Banks explaining the plan and transmitting enclosures 1141e4 discussed the matter in greater detail and set forth standardized Procedures to be followed by the Reserve Banks. In commenting on the proposal, Mr. Farrell said the program 1184 been discussed at the recent Kansas City meeting of System planning 411413114oh card personnel and with individuals at several Reserve Banks. e 11°ted that four of the Banks continued to hand tabulate the condition rePorte while the others utilized punch cards in their tabulations, each 1144k h.-, ' vlag its awn card format. The proposed plan contemplated a etknaard 14-card format, which would permit the most efficient use of 6/18/59 -5- the Board's computer, and an objection originally interposed by several Reserve Banks would be met substantially by making available member bank operating ratios to those Banks requesting them. Chairman Martin entered the room at this point, along with Mr. Thomas, Economic Adviser to the Board, and Mr. Shay, Legislative Cowlsel. In response to questions by Governor Shepardson, Mr. Langham said that the 14-card format would permit tabulation of practically 411 of the data presently prepared by the Reserve Banks and would el iminate several tabulations made by the Banks under current Procedures. The Banks now making manual tabulations either had btained punch card equipment or expected to have it within the next several months. In response to Governor Shepardson's inquiry as to participation of the Comptroller's Office and the Federal Deposit 14ellra1ce Corporation, Mr. Langham stated that arrangements had been made for the Comptroller to use the Board's computer for 1)1'c'ee8sing cards punched by a firm under contract for the remaining aXls of this year. It was hoped that the Reserve Banks would be able to key punch the national bank data beginning with the spring 4 call of 1960. The Federal Deposit Insurance Corporation had been al3Pr°ftched informally at staff level and interest had been displayed 14 formulating plans for the processing of nonmember insured bank reP°Ite beginning with the June 1960 call. 6/18/59 -6- Thereupon, unanimous approval was given to the letter to the Presidents of all Fderal Reserve Banks, a copy of which is attached hereto as Item No. 4. Messrs. Farrell, Langham, and Hill then withdrew and Messrs. M°10 Y, Special Assistant to the Board, and Hexter, Assistant General Counsel, entered the room. H.R. 6092 and 6093. Mr. Shay reported conversations with a start member of the House Banking and Currency Committee concerning 4eve1opments with regard to H.R. 6092 and 6093, bills to amend the national banking laws on which the Board made a report to Subcommittee No, 2 of the Banking and Currency Committee under date of June 14 lieu of testifying. 1, 1959, In substance, it appeared that one member of the Su bcommittee, opposed to the bills on the grounds that they re151'esented "further handouts to the banking fraternity," cited the 41Terent difference of opinion between the Board and the Comptroller Or the Currency on certain provisions of the bills in support of his 11°sition that they should not be reported favorably. This complication '446 rePorted to be of some concern to Chairman Brawn of the Subcommittee. Mr. Shay then reviewed the four provisions of the bills on which the b_ Doard had offered comments or suggestions and described changes that had 'ien made in two of those provisions by the Subcommittee upon con- "er ti a--°n of the Board's comments. As to the other two provisions, he 6/18/59 -7- noted that the Board's views had resulted in no change in the bills as introduced. Mr. Shay also remarked that there had been included in the printed record of the Subcommittee hearings on the bills a letter written by the Comptroller of the Currency at the request of the Subcommittee in reply to the Board's report. Governor Robertson then covered in more detail the provisions °f the two bills that had been the subject of Board comment and stated reasons why the Board's position appeared to be sound in each instance. In this connection, he Observed that the Board had commented on only fc)ur Of approximately forty provisions contained in the two bills, according to his understanding, had been introduced at the -gation of the banking fraternity rather than the Comptroller of the currency. He also reported telephone conversations with Deputy Comptroller of the Currency Jennings that had served to clear up 1/Parent misunderstandings on the latter's part with respect to s°111e of the comments included in the Board's report to the Sube°111nlittee, Chairman Martin then suggested that he might call upon Ch 'wan Brown for the purpose of discussing the Board's report, the qkirit in which the comments and suggestions contained therein vere de to the Subcommittee, and the reasons why the Board considered its c°rnments sound. It was Chairman Martin's thought also to indicate t oCh --Qui Brown that the Board, in submitting comments reflecting 6/18/59 -8- its best judgment on certain provisions of the bills, did not do so 1 1th the intent of defeating favorable action on the bills as a whole, It the Stibcommittee should consider such action appropriate. There was agreement that it would be desirable for Chairman Martin to discuss the matter with Chairman Brown along the lines he had indicated. Messrs. Hexter, Hostrup, and Benner then withdrew. Letters from Senator Proxmire. At the meeting of the Board Yesterday, reference was made to letters received from Senator Proxmire luader date of June 15, 1959, by at least one Board member and several st4ft members, with which the Senator transmitted a questionnaire 801iciting their views on monetary policy as a tool of economic 11'41) It appeared that the letter had been distributed widely to pleithers of some professional society, and it was the view of the Board thet each individual who had received such a letter should handle the tatter in his awn discretion. It was now reported that certain Reserve Bank officers, also 14' lscaipt of the letter, had inquired as to the procedure that would 8"111 aPpropriate for them to follow. Accordingly, in the light of the itie/l expressed by the Board yesterday, there had been drafted a telegram to the Presidents of all Federal Reserve Banks which, after referring to the Proxmire letter, would state that it was the Board's reaction that such letter was sent to the addressees as individuals and not _9_ 6/18/59 because of their connection with the Federal Reserve System. Therefore, the telegram would go on to say, the Board felt that whether the individuals replied, and in what tone, was a matter for each of them to decide. Following a discussion, it was agreed unanimously that the Proposed telegram should be sent. Maximum interest rates on time and savings deposits. Chairman Martin reported having received a telephone call from Mr. John J. MeC1°Y, Chairman of the Board of The Chase Manhattan Bank, New York CitY) who again suggested the need for action by the Board to increase the maximum rates of interest payable on time deposits, stating that the lIew York City banks were losing such deposits regularly and that the situation was becoming acute. An earlier request by Chase Manhattan, Made in a letter dated January 26, 1959, was denied by the Board on 1959. Mr. McCloy now indicated that he would like the Board t0 1.1re further consideration to the situation with which the New York CitY banks were confronted and that perhaps either Chase or one of the Other New York City banks would write a letter to the Board. Chairman Martin said he told Mr. McCloy that the Board would be review the matter again in the light of whatever proposal might be re ceived, that he would cause the earlier letter from Chase to be t to the attention of the Board members, but that nothing further volaa ue done for the moment. 6/18/59 -10Chairman Martin also said that Chase Manhattan, according to MeCloy, had given serious consideration to making a request for an illerease in the maximum rate payable on savings deposits but that the 8ituation in that respect was not pressing at the moment. The Secretary reported receipt by the Board of a letter dated dune 12/ 1959, from the City National Bank and Trust Company, Hackensack, tre14 JerseY, which contained the request of the Board of Directors of that bank that a poll of the membership of the Federal Reserve System be take . --n if and when an increase in the maximum rates payable to time s:-tors came under serious consideration. It was the directors' view that "a policy matter of this type affecting the earnings, reserves, eaPital of commercial banks in the entire country should not be influby the wishes of a few banks in New York City." A draft of reply had been prepared which would offer assurance that tc, 'any proposal of such kind were brought under serious consideration, the Bo ara would weigh every aspect of the possible effects of such a move. It Was agreed that the proposed reply was appropriate and should be sent. Hearings before Ways and Means Committee. Chairman Martin commented ititorra allY on certain aspects of the continued consideration by the House Wa Y8 ana ' leans Committee of Administration proposals to eliminate the -o interest rate payable on Treasury bonds and to increase the rates inter , st on United States savings bonds. 6/18/59 -11- The meeting then adjourned. Secretary's Notes: Pursuant to recommendations contained in memoranda from appropriate individuals concerned, Governor Shepardson today approved on behalf of the Board the following items affecting the Board's staff: A Pointments .LGail J. Payne as Draftsman Trainee in the Division of Research and ,_:'Etuistics, with basic annual salary at the rate of *3,495, effective 'ne date of entrance upon duty. a„ Susan W. West as Research Assistant in the Division of Research Statistics, with basic annual salary at the rate of Ifective the date of entrance upon duty. 4.1CaY J. Maddock as Research Assistant in the Division of Inter4, ei7,1°nal Finance, with basic annual salary at the rate of :1;41980, 4 ective the date of entrance upon duty. ' Acceptance of resignation Aa,,Paul G. Hutts, Operator (Tabulating Equipment), Division of -nistrative Services, effective June 26, 1959. —" Governor Shepardson also approved today on behalf of the Board a memorandum from the Office of the Controller dated June 12, 1959, recommending deferral of the creation of a proposed new position Of Clerk-Stenographer in the Division of Bank Operations, which position was not provided for in the Board's 1959 budget. Governor Shepardson likewise approved on behalf of the Board the recommendation contained in another memorandum from the Office of the Controller, also dated June 12, 1959, that the creation of a new position of Stenographer in the Legal Division, which was not provided for in the Board's 1959 budget, be deferred. ./18/59 -12In the light of the issuance of Executive Order No. 10825, dated June 12, 1959, Governor Shepardson today approved on behalf of the Board the recommendations contained in a memorandum from the Division of Personnel Administration dated June 17, 1959, with respect to excusing most Board employees from duty on Friday, July 3, 1959. Secre ary BOARD OF GOVERNORS OF THE Item No. 1 6/18/59 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE wat: ' 040 TO THE BOARD Julie 182 1959. Board of Directors, Pidelity-Philadelphia Trust Company, Philadelphia, Pennsylvania* Ge ntlemen: Pursuant to your request submitted through the Pederal Reserve Bank of Philadelphia, the Board of Governors ,pproves the establishment of a branch in the vicinity of ,,T15 t intersection of Roosevelt Boulevard and Welsh Road, ; " - iladelphia, Pennsylvania, by Fidelity-Philadelphia Trust .171PanY, Philadelphia, Pennsylvania. This approval is ren provided the branch is established uithin one year 43111 the date of this letter and formal approval of State o .(11thrities is effective at the time the branch is eslished. The Board of Governors also approves, under arjre provisions of Section 24A of the Federal Reserve Act, additlonal investment in banking premises not to exceed 05000 1. 2 Very truly yours, (Signed) KennethA. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS ,011114 O.'4441.1 OF THE Item No. 2 6/18/59 FEDERAL RESERVE SYSTEM WASHINGTON 25, O. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 18, 1959. Board of Directors, Guaranty Bank & Trust Company, Hammond, Louisiana. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of Atlanta, the Board of Governors extends the time within which Guaranty Bank & Trust Company may establish a branch at the corner Of West Thomas Street and Richardson Avenue, Hammond, Louisiana, to October 22, 1959, under the authorization contained in the Board's letter dated September 22, 1958. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS 44',00,1t6;7 4 a t•••• OF THE A Item No. 3 FEDERAL RESERVE SYSTEM 6/18/59 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDEN CE TO THE EIOARC.) June 18, 1959. Board of Direc tors, National Bank of Fairbury, Fairbury, Illinois. Ge ntlemen: The Board of Governors of the Federal Reserve System has • given consideration to your application for fiduciary powers arid grants you authority to act, when not in contravention of otate or local law, as trustee, executor, administrator, regis, of stocks and bonds, guardian of estates, assignee, reelver, committee of estates of lunatics, or in any other fiduci: 2 1 r capacity in which State banks , trust companies, or other a;rporations which come into competition with national banks exe Permitted to act under the laws of the State of Illinois, the seefeise of all such rights to be subject to the provsio ins of Doe'ion 11(k) of the Federal Reserve Act and Regulation F of the ard of Governors of the Federal Reserve Syste m. that v L. A formal certificate indicating the fiduciary powers be aulonal Bank of Fairbury is now authorized to exercise will forwarded to you in due course. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. 4 'I, BOARD OF GOVERNORS OF THE Item No. 4 6/18/59 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE 00ARD June 18, 1959. tear sir: The Board's letter of May 6, regarding the discontinuance of prior g hje_re of reports of condition and earnings of State member banks 1)rocramo,uheir tabulation, mentioned that this was the first step in a 3 expedite the publication of data from these reports; and that the ' thestep was consideration of the possibility of decentralizing to m -erve Banks the key punching of condition and earnings reports of ember banks, matter has been considered further and the Board believes 03;',21an outlined below would expedite the availability of member Ok i--''tion and earnings data and also minimize the duplication of n the SYtem's processing of such data. The plan is as follows: Condition data would be key punched at the Reserve Banks in the attached 14-card format, which has been designed for efficient utilization of the Board's computer. State member bank reports would be key punched at the Reserve Banks after review and editing° National bank reports would be key punched at the Reserve Banks from the duplicate copies and the cards forwarded to the Board's offices, without detailed editing, Present planning is that this part of the Program would not begin on a full scale until the first call in 1960, For the remaining calls in 1959, national bank key punching will be done at the Service Bureau in Washington° th) Data reported in Schedules H and I of reports of condition would not be tabulated; this will save considerable time in processing the reports. -2(5) Member bank operating ratios, for 1960 and subsequent years, would be prepared here, for all Reserve Banks requesting them, from the proposed lit-card format. This would minimize duplicate Punching at those Reserve Banks where the 1h-card format is not completely adaptable to the Bank's needs. (6) Reports of State member banks would be forwarded to the key punch units of the Reserve Banks as quickly as practicable, key punched, partially machine processed, and forwarded to the Board's offices on a daily basis, where they would be computer verified and written on magnetic tape. Thus, member bank call report data would be available for use at the Board approximately four hours after the last report was Placed on tape. (7) Only calendar year earnings data would be computer processed. At least for the present, no change would be made in current procedures in processing mid -year earnings figures; they will continue to be tabulated by hand at the Board and the Office of the Comptroller of the Currency. ›ain, Two a ttachments discuss the plan in greater detail. Attachment 1,1'tirllet.€7,eneral comments and Attachment B contains technical instructions; simil,r to the latter, relative to earnings reports will be -Later, t414 It ls realized that the adoption of these proposals will necessie subs+ -'1143 illachanaes in processing member bank data at all of the Reserve Y increase costs at some. However, it is believed that the th litiori"*.lailability of summary data and other System benefits ore worthe effort and cost. Therefore, it is hoped that all of the Reserve 1°11 repor,be able to undertake the key punching of all member bank condi.the first call date in 1960. 11! h the rle. °111e of the Reserve Banks have indicated that they would be able to Z-, . 11itted-; Procedures for processing the State member bank condition reports 1)1,7desirtresp0nse to the recent mid-year call. This arrangement would 14;11.e where possible particularly since it will afford a testing. Procedures before the complete change-over. However, the decision e is being left to the judgment of each Bank in order to permit e--84-deration of the problems that may be involved in the change-over. Z The Board would like to receive any comments your Bank may hot6 With ca„, it ,regard to the proposed change in procedures including when De made effective at your Bank.
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