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Minutes for June 19, 1957 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, 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. Chm. Martin Gov. Szymczak Gov. Vardaman Gov. Mills Gay. Robertson Gov. Balderston Gov. Shepardson x 0(6 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Wednesday, June 19, 1957. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Vardaman Mills Robertson Shepardson Mr. Mr. Mr. Mr. Mr. Kenyon, Assistant Secretary Thurston, Assistant to the Board Riefler, Assistant to the Chairman Hackley, General Counsel Noyes, Adviser, Division of Research and Statistics Mr. Masters, Associate Director, Division of Examinations Mr. Hexter, Assistant General Counsel Mr. O'Connell, Assistant General Counsel Items circulated to the Board. The following items, which had been circulated to the members of the Board and copies of which are attached to these minutes under the respective item numbers indicated, were approved unanimously: Item No. Letter to the Federal Reserve Bank of Boston approving the payment of salaries at rates fixed by the directors for Messrs. Groot, Ellis, King, and Willis. 1 Letter to The Black Rock Bank and Trust Company, Bridgeport, Connecticut, approving the establishment of a branch in Trumbull, Connecticut. (For transmittal through the Federal Reserve Bank of New York.) 2 Letter to the Federal Reserve Bank of PhiladelPhia regarding sales of branch bank premises by Camden Trust Company, Camden, New Jersey, under 3 lease-back arrangements. 1669 6/19/57 -2Item No. Letter to Farmers Bank of Clinch Valley, Tazewell, Virginia, approving the establishment of a branch in North Tazewell. (For transmittal through the Federal Reserve Bank of Richmond.) 4 Letter to the Federal Reserve Bank of Atlanta approving an additional investment in bank Premises by Jeff Davis Bank & Trust Company, Jennings, Louisiana. 5 Letter to The State National Bank of Corsicana, Corsicana, Texas, approving its application for permission to exercise fiduciary powers. (For transmittal through the Federal Reserve Bank Of Dallas.) 6 Letter to the Presidents of all Federal Reserve Banks advising of the Board's position that it would not be advisable at this time to amend the margin regulations to facilitate the exercise of executives' stock purchase options. Letter to the Comptroller of the Currency recommending approval of the application of Security Banking Company, Springfield, Massachusetts, to convert into a national banking association. (With a copy to the Federal Reserve Bank of Boston.) 8 Letter to the Department of Justice concerning complaints received by the Department regarding mortgage insurance tie-in practices on the part of a State member bank in Missouri. (With copies to the Presidents of all Federal Reserve Banks.) 9 Letter to Donald J. Veldman, Esq., Muskegon, Michigan, regarding whether the existing trust investment committee of a national bank in Muskegon may act also as the investment committee for a common trust fund Proposed to be established by the bank. 10 1670 -3- 6/19/57 Extension of arrangement for services of hearing examiner (Item No. 11). There had been distributed to the members of the Board prior to this meeting a memorandum from Mr. O'Connell, dated June 14, 1957, recommending that the National Labor Relations Board be formally requested to extend until December 31, 1957, the detail of Mr. Charles W. Schneider as a hearing examiner for the purpose of presiding at hearings ordered by the Board of Governors under the Bank Holding Company Act of 1956. The memorandum proposed that the arrangement be on the same basis of reimbursement as set forth in the Board's letter of December 7, 1956, with respect to the original request for Mr. Schneider's services. Pursuant to the recommendation, unanimous approval was given to the letter to the National Labor Relations Board of which a copy is attached to these minutes as Item No. 11. Messrs. Hexter and O'Connell then withdrew from the meeting and Mr. Koch, Assistant Director, Division of Research and Statistics, entered the room. Designation of Virgin Islands as part of the Second Federal Reserve District (Items 12 and 13). In a memorandum dated June 18, 1957, which had been distributed to the members of the Board, Mr. Hackley discussed a request from the Federal Reserve Bank of New York that the Virgin Islands be designated as being in or of the Second Federal Reserve District for the purposes of Regulations G, Collection of Noncash Items, and J, Check Clearing and Collection. The request was made because, following the admission to membership in the Federal Reserve System on May 31, 1957, of -4- 6/19/57 the Virgin Islands National Bank, the West Indies Bank and Trust Company, Charlotte Amalie, St. Thomas, Virgin Islands (a nonmember bank) asked to be placed on the par list and filed an agreement to remit at par for cash letters forwarded by the New York Reserve Bank and conform to all other provisions of the operating circulars of the Reserve Bank relating to the collection of cash and noncash items. After recalling the circumstances surrounding the amendments to RegulationsG and J adopted effective July 15, 1954, pursuant to which the Board designated Alaska and Hawaii as being in or of the Twelfth Federal Reserve District for the purpose of those regulations, the memorandum recommended the designation of the Virgin Islands as a part of the Second Reserve District, effective immediately, since it now appeared desirable to extend the collection services of the Federal Reserve System to that area. It was not felt that such action would be inconsistent with the fact that, when the Virgin Islands National Bank was admitted to membership, the Board reserved the right to require that bank to transfer its membership to some Other Reserve District, because it would be possible for the Board to revoke the proposed designation of the Virgin Islands at any time such action seemed advisable. Following a review of the matter by Mr. Hackley, during which he emphasized that the designation could be changed at any time, the recommendation contained in his memorandum was approved unanimously. Telegrams sent to the Federal Reserve Bank of New York and to all Federal 1672 -5- 6/19/57 Reserve Banks and branches pursuant to this action are attached to these minutes as Items 12 and 13, respectively, and it was understood that notice of the Board's action would be published in the Federal Register. Testimony on S. 2160. Pursuant to the understanding at the meeting on Monday, June 17, there was a further discussion of the testimony to be given by Chairman Martin tomorrow before the Small Business Subcommittee of the Senate Banking and Currency Committee concerning S. 2160, a bill which would provide for the formation of national investment companies. In addition, a request had now been received by the Board for a report on S. 2286, introduced by Senator Fulbright, which would authorize the Small Business Aaministration to purchase investment securities issued by State-chartered development, credit, or finance corporations formed to assist, develop, and expand the economy of a State. The purchase of such securities would be in amounts not in excess of the amounts of such securities held by private investors and in no event more than $5 million in any one State. In order to finance this activity the Smart Business Administration would be authorized to borrow $27,500,000 from the Treasury. For this purpose, section 13b of the Federal Reserve Act would be repealed and the Federal Reserve Banks would be required to pay to the United States the amount -6- 6/19/57 to the Reserve which the Secretary of the Treasury had heretofore paid Banks under section 13b. An additional $2 million would be made avail- sities, for able for grants to States, including colleges and univer the management, studies, research, and counseling in connection with provision that financing, and operation of smnil businesses, with the any year. no more than $)4O,000 could be granted to any one State in paragraph There was distributed at this meeting a draft of a ent to be made concerning S. 2286 for possible inclusion in the statem by Chairman Martin. This paragraph would indicate that the Board did Administration not feel it would be appropriate for the Small Business contemplated by the to provide funds to State corporations of the kind since, in the bill through the purchase of their investment securities foster the developBoard's opinion, public funds should not be used to emergency situations. ment of particular sections of the country except in attention was drawn In connection with the proposed paragraph, to the Board's letter of June 7, 1957, to the Chairman of the Senate respect to bill S. 2185, Banking and Currency Committee which stated, with advisability of using that the Board had certain reservations as to the pment corporations and Federal funds for the assistance for local develo would be carefully that it assumed that the pros and cons of the matter considered. 2286, it was Following a discussion of the provisions of S. included in the statement agreed that no comment on this bill should be 1674 -7- 6/19/57 to be made by Chairman Martin and that the matter should be covered by the Chairman in oral testimony. While, in reaching this decision, principle it was unmembers of the Board expressed the view that in l for local desirable for Federal funds to be used to provide capita that the corporations such as contemplated by S. 2286, it was noted l Reserve Board had recommended repeal of section 13b of the Federa the Act and the repayment to the Treasury of the amounts advanced to Federal Reserve Banks when this legislation was enacted. Also, the and it was amount of public funds involved would be relatively small be interconsidered doubtful whether objection could appropriately credit posed to the program in terms of its effect on monetary and Policy. ation, In other words, if the Congress should favor such legisl it seemed difficult to find a basis for expressing strong opposition. The contemplated grants to States and colleges for research and counsupported by seling were felt to constitute a program which could be the Board. With regard to the suggestion that the funds would be used other States, Primarily to attract businesses to particular States from ion to a the thought was expressed that there would be no great object of economic Program under which particular areas of the country in need program admindevelopment would be assisted to a modest extent under a stration. istered in the discretion of the Small Business Admini the hearing Chairman Martin then suggested that his comments at be along the lines indicated and there was general agreement with this 1675 -8- 6/19/57 suggestion. Governor Mills, however, expressed the view that a nega- tive attitude toward legislation providing for the establishment of felt that national investment companies would be inadvisable, and he such a position could be inferred from an expression of preference for the approach embodied in S. 2286. With regard to Governor Mills' comment, Chairman Martin said hes, that there were obviously advantages and disadvantages in both approac the that personally he would favor the State approach as opposed to on national, but that he did not consider the proposed statement n S. 2160 as being of a negative character. To recognize the positio of Governor Mills, he suggested that in oral testimony he could simply Say to the Subcommittee that, although there were certain differences of opinion within the Board, in his personal view the State approach would be preferable. He would also make it clear that whatever de- as cision was reached by the Congress, the Board would be as helpful Possible. Governor Mills indicated that the handling of the testimony in this way would be agreeable to him, as did Governor Vardaman. In further discussion, Governor Mills noted that other bills had been introduced in the Congress to provide financial assistance to depressed areas and that the enactment of S. 2286 along with other situabills having the same general purpose might create a confusing tion. He suggested that in oral testimony the point might be made that it was rather difficult to express a helpful opinion on this 6/19/57 particular bill until disposition had been made of the other proposed legislation. With regard to the content of the statement to be made by Chairman Martin, certain suggestions for minor changes in the latest draft of testimony were made and it was understood that the statement would be presented in a finnl form satisfactory to the Chairman. Proposed changes in the Retirement System of the Federal Reserve Banks. It was agreed that the Board would meet with President Johns tomorrow afternoon for further discussion of the proposed changes in the Bank Plan of the Retirement System of the Federal Reserve Banks. In this connection, Governor Shepardson stated that he could not be present at the meeting tomorrow because of an out-of-town engagement. However, he had reviewed the latest correspondence received from Mr. Johns and from Industrial Relations Counselors Service and he was favorably inclined toward the amended proposals that had developed from this correspondence. The meeting then adjourned. Secretary's Note: On June 18, 1957, Governor Shepardson approved the following items on behalf of the Board: Memoranda from appropriate individuals concerned recommending the following actions regarding the Board's staff: 167 6/19/57 Salary increase Harold L. Emerson, Personnel Assistant, Division of Personnel Administration, from $5,980 to $6,390 per annum, effective June 30, 1957. (With a change in title from Personnel Technician.) Transfer and salary increase Margaret M. Tunstall, from the position of Clerk in the Division of Administrative Services to the position of Clerk-Typist in the Division of Examinations, with an increase in her basic salary from $3,260 to $3,415 per annum, effective June 30, 1957. Letter to the Federal Reserve Bank of Chicago approving the designation of Roger E. Schultz as special assistant examiner. A copy of the letter is attached hereto as Item No. 14. Assistant Secret BOARD OF GOVERNORS OF THE rW4144 4 4 1'ir Item No. 1 FEDERAL RESERVE SYSTEM 6/19/57 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 19, 1957 CONFIDENTIAL (FR) Mr. J. A. Erickson, President, Federal Reserve Bank of Boston, Boston 6, Massachusetts. Dear Mr. Erickson: The Board of Governors approves the payment of salaries to the following officers of the Federal Reserve Bank of Boston for the period of July 1, 1957/ through December 31, 1957, at the Directors rates indicated which are the rates fixed by the Board of as reported in your letter of June 4, 1957. Name Benjamin F. Groot George H. Ellis William R. King Parker B. Willis Title Vice President Vice President and Director of Research Asst. Vice President Economic Adviser Annual Salary $14,500 15,000 12,000 12,000 Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. 167,, BOARD OF GOVERNORS OF THE 4 a* .* A* Item No. 2 6/19/57 FEDERAL RESERVE SYSTEM I'Mr} * 0 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD 0 June 19, 1957 Board of Directors, The Black Rock Bank and Trust Company, Bridgeport, Connecticut. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of New York, the Board of Governors of the Federal Reserve System approves the establishment of a branch by The Black Rock Bank and Trust Company, Bridgeport, Connecticut, at 5900 Main Street in the Town of Trumbull, Fairfield County, Connecticut, provided the branch is established within one year from the date of this letter. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. 1680 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 3 6/19/57 WASHINGTON 25, O. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 19, 1957 Mr. E. C. Hill, Vice President, Federal Reserve Bank of Philadelphia, Philadelphia 1, Pennsylvania. Dear lalr. Hill: This refers to the matter of interpreting section 24A of the Federal Reserve Act in connection with sales of branch bank Premises by Camden Trust Company, Camden, New Jersey, under leaseback arrangements. The member bank has $3 million capital stock and $6 million surplus and carries on its books investments in bank premises of 2,605,812. During recent years the bank sold to Price and Company, nc., for 81,412,800, branch properties carried on its books at ' 0-'045,591.09. Approximately one third of the sale price (473,800) 14as paid in cash and purchase-money mortgages were given for the remainder ($939,000). Of this amount, 8571,791.09 represents the difference between the book value of such premises and the actual cash received by the bank, and $367,208.91 represents profits from the sales. Apparently the entire $939,000 was entered on the books as an asset and $367,208.91 was added to the bank's undivided profits. I From the point of view of conservative banking practice, all of the cash received in these transactions should have been applied first to reduce the book value of the branch premises and the profits ( . ) .11 the sales should not have been taken into undivided profits until 1:,1111 payment in cash had been received for the assets. Actually 71,791.09 of the book value of the branch premises remains unllquidated. However, due to the manner in which the bank handled these transactions, the purchase-money mortgages of $939,000 represent an indirect investment in bank premises for the purposes of section 24A of the Federal Reserve Act. The reason for this position is set forth below: Section 24A provides that "no State member bank, without the ,PProval of the Board of Governors of the Federal Reserve System, shall kl) invest in bank premises, or in the stock, bonds, debentures, or Other such obligations of any corporation holding the premises of such BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Mr. E. C. Hill -2- bank or (2) make loans to ... any such corporation, if the aggregate Of all such investments and loans, ... will exceed the amount of the capital stock of such bank." It is believed that the entire situation should be viewed in the light of the purpose and intent of section 24A--namely, the requirement of Board permission before a State member bank may have an amount exceeding its capital stock invested in bank premises. Unquestionably the branch buildings were part of the bank's investment in bank premises before the sales to Price and Company. Accordingly, the burden is on the bank to show that the sales eliminated these investments in bank premises. In view of the purpose of section 24A, it seems reasonable to hold that once a bank has directly owned bank premises, the investment continues until the bank recovers the money which it put into the premises (or eliminates such investments from its books by normal charge-off). After the sales, a portion of the bank's investment still remained tied up in bank premises and was secured by mortgages on such PI:emises; consequently, it continued to be an investment in bank premises within the meaning of section 24A. In this case, however, the bank has placed on its books the entire amount of the balance secured by purchase-money mortgages, and not merely that part of the original investment that has not been recovered. If the bank insists on thus "capitalizing" the entire amount Of the mortgages, that figure must be regarded as part of the bank's Investment in bank premises. In the Board's opinion, the words "make loans to" as contained in clause (2) of section 24A are broad enough to include any extension of credit to a corporation holding bank preIt may be said that it was clearly the intention of Congress Lo cover the investment of bank funds in bank premises in a general 4nd complete manner, and it would be inconsistent with this purpose to interpret the statute in such a way that it could be circumvented merely by giving credit, secured by purchase-money mortgages, for P,oPerties purchased from the bank, when the bank could not make uirect loans for the same purpose without coming within the statute. Accordingly, the Board is of the opinion that the purchase11°neY mortgages of Price and Company, to the extent that they are .?arried on the books of the bank, should be included in computing he aggregate investment in bank premises for the purposes of !eotion 24A. While it is apparent that this aggregate investment "as exceeded the bank's capital and that approval of certain additional BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Mr, E. C. Hill -3- expenditures should have been obtained, the aggregate investment is not disproportionate to total capital structure at this time, and the Board offers no objection in this case. When advising the member bank of the Board's position in his matter, please notify the bank that the Board's approval should oe applied for in advance for any future investments in bank premises, as long as the total investment in bank premises, including loans representing bank premises, exceeds the amount of the bank's capital stock. At the same time, you may wish to call attention to the fact that the bank should show at item 9 of the report of condition (Investments and other assets indirectly representing bank premises or other real estate) the total of the purchase-money mortgages. t Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. 1.682 1683 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 4 6/19/57 WASHINGTON 25, D, C. ORREBPONOENCE • ADORERS OFfiCIAL TO The BOARD June 197 1957 Board of Directors, Farmers Bank of Clinch Valley, Tazewell, Virginia. Gentlemen* Pursuant to your request submitted through the Federal Reserve Bank of Richmond, the Board of Governors of the Federal Reserve System approves the establishment of a branch by the Farmers Bank of Clinch Valley, Tazewell, Virginia, on the northwest corner of the intersection of State Highway No. 16 and State Route No. 61 in North Tazewell, Virginia, provided the branch is established within six: months from the date of this letter, and the approval of the State Corporation Commission is effective as of the date the branch is established. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. 1684 BOARD OF GOVERNORS OF THE Item No. 5 FEDERAL RESERVE SYSTEM 6/19/57 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 19, 1957 J. E. Denmark, Vice President, Pederal Reserve Bank of Atlanta, Atlanta 3, Georgia. Dear Mr. Denmark: Reference is made to your letter of iday 31, 1957, sub.tting with a favorable recommendation a request of the Jeff Davis V Dank & Trust Company, Jennings, Louisiana, for permission under ' Section 24A of the Federal Reserve Act for investments in land and building for the purpose of constructing new bank premises on a lot approximately two blocks north of its present leased quarters. The Board has given consideration to the information (.011 have submitted and approves the investment of not exceeding ? ,145,000 (including air conditioning, site work, and paving) by the Jeff Davis Dank & Trust Company in bank premises with the 12.nderstanding that the carrying values of its bank premises and f urniture and equipment will be reduced to ',100,000 and R20,000, resPeetively, on completion of the program through the establishIllent of applicable valuation reserves. It also is understood -that a conservative dividend policy is to be continued and that all fixed assets will be written down as rapidly as earnings Permit. Please advise the bank accordingly. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant secretary. I f3Sr. BOARD OF GOVERNORS OF THE Item No. 6 FEDERAL RESERVE SYSTEM 6/19/57 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 19, 1957 Board of Directors, The State National Bank of Corsicana, Corsicana, Texas. Gentlemen: The Board of Governors of the Federal Reserve System has given consideration to your application for fiduciary powers and grants you authority to act, when not in contravention of State or local law, as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies or other corporations which come into competition with national banks are permitted to act under the laws of the State of Texas, the exercise of all such rights to be subject to the provisions of the Federal Reserve Act and the regulations of the Board of Governors of the Federal Reserve System. A formal certificate indicating the fiduciary Powers which The State National Bank of Corsicana is now authorized to exercise will be forwarded to you in due course. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. z- 4459 168-6 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 7 6/19/57 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 19, 1957 Dear Sir: The Board's letter to all Federal Reserve Banks of June 8, 1955, indicated that the Board had declined to amend . its margin regulations to facilitate the exercise of stock Purchase option plans by corporate employees. Since that time the Board has received additional suggestions that its margin regulations, particularly Regulat?on U, be amended to provide special treatment for loans to finance stock purchases pursuant to executives' stock option Plans. Two suggestions of this kind have been considered by the Board in recent months. This is to advise that the Board indicated in reply 30 these suggestions that, while arguments can be advanced on it 0th sides of the matter, on balance it would not ue advisable at, this time to adopt such an amendment. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. To THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS 168 BOARD OF GOVERNORS OF THE „ Item No. 8 FEDERAL RESERVE SYSTEM 6/19/57 WASHINGTON 25, D. C. ADDRESS j orricIAL CORRESPONDENCE TO THE HOARD June 19, 1957 Comptroller of the Currency, Treasury Department, Washington 25, D. C. Attention: Mr. G. W. Garwood, Deputy Comptroller of the Currency. Dear Mr. Comptroller: Reference is made to a letter from your office dated April 18, 1957, enclosing copies of an application of the Security Banking Company, Springfield, Massachusetts, to convert into a national banking association and requesting a recommendation as to whether or not the application should be approved. Information supplied by the Federal Reserve Bank of Boston about the Security Banking Company is generally favorable with respect to its financial history, the adequacy of its capital structure, future earnings prospects, management, and services to the community. Accordingly, the Board of Governors recommends approval of the application of Security Banking Company to convert into a national banking association, The Board's Division of Examinations will be glad to discuss any aspects of this case with representatives of your office if you so desire. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. 1688 BOARD OF GOVERNORS OF THE Item No. 9 FEDERAL RESERVE SYSTEM 6/19/57 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE e0AR June 19, 1957 Mr. Victor R. Hansen, Assistant Attorney General, Antitrust Division, Department of Justice, Washington 25, D. C. Dear Mr. Hansen: May 15, 1957, This is in response to your letter of complaints vith enclosures, to Chairman Martin, relative to practices of which your office has received concerning certain ouri, in Miss the Pine Lawn Bank & Trust Company of St. Louis, erty which prop insurance on connection with the placing of hazard You . bank by that rIlaY be the subject of mortgage loans made as sion deci d for state that these complaints have been forwarde with on acti take to whether the Federal Reserve Board desires to respect to them. in which the In brief, it appears that the practice ower to permit bank allegedly is engaging is to require a borr place hazard the bank's President, in his individuAl capacity, to It is s. loan mortgage insurance in connection with the bank's be a to considers this Understood that the Antitrust Division man Act. form of coercion and a violation of the Sher ory agency, is The Board, as a Federal bank supervis nt of Justice in what— desirous of cooperating with the Departme the course of ever way it may properly do so. Heretofore, in have not made a bank examinations, Federal Reserve examiners il insurance activities of special point of investigating in deta banking laws or unsound banks except where it is indicated that given situation, the banking practices may be involved. In a could result in poor mortgage 80—called "tie—in insurance" possibly and, if so, Federal loan administration on the part of the bank practice. In this connec— Reserve examiners would criticize the the Pine Lawn Bank & tion however, no case other than that of attention of the Board, Trust Company has been brought to the l— fact that some banks have faci although the Board is aware of the which they have financed. ities for placing insurance on property 1_689 Mr. Victor R. Hansen -2- It has been noted that your Division has informed the Veterans Administration of your position with respect to insurance tie-in practices, and that in turn, the Veterans Administration has circulated your views to lenders, builders, sellers, and others Participating in the V. A. loan guarantee program. As a result of this action it is probable that most banks which are nembers of the Federal Reserve System are already aware of the Antitrust Divission's views in the matter. Nevertheless the Board has instructed Federal Reserve examiners who, during the course of an examination of a bank, discover tie-in insurance practices in connection with Tortgage loans, to bring to the bank's attention the views of your sion, and will cooperate with you in such other manner as may be proper in the circumstances. In regard to the situation at the Pine Lawn Bank & Trust ompany the Federal Reserve Bank of St. Louis has been requested to secure full information and report to the Board for such action aa the Board, in its supervisory capacity, considers appropriate. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 10 6/19/57 WASHINGTON 25, D. C. ADORE:S'S OFFICIAL CORRESPONDENCE TO THE HOARD June 19, 1957 Donald J. Veldman, E6q., Hathaway, Latimer, Clink & Robb, 512 Hackley Union National Bank Building, Muskegon, Michigan. Dear Mr. Veldman: Your letter of Aay 27 raises the question whether or not the existing Trust Investment Committee of Hackley Union National Bank and Trust Company of Muskegon may also act as the investment committee for a common trust fund which that bank proposes to establish, presumably under the provisions of section 17(c)0 Regulation F of this Board. The provisions of section 17(c), in prescribing the functions of the trust investment committee pertaining to common trust fund administration, do not contemplate that the required functions and responsibilities be assigned to a committee of directors or offIcers of the bank separate from the regularly constituted trust investment committee. On the other hand, there is no reason why a committee specially constituted and charged could not be created by the board of directors; in fact, some of the larger banks maintaininp common trust funds have adopted spch arrangements. In general practice, the responsibilities for committee action detailed in section 17(c) are reposed in the regularly constituted trust investment committee of the bank maintaining the common trust fund. The creation, composition, and responsibilities of any such committee should, of course, conform to the stated requirements and over-all purposes and intent of the provisions of paragraphs (b) and (c) of section 6, Regulation F. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. 1691 BOARD OF GOVERNORS ee(ip ri • OF THE ;q,0 titpi 0..1, FEDERAL RESERVE SYSTEM \Vk7 Item No. 11 6/19/57 WASHINGTON 25. D. C. a-A* 2:g* ADDRESS OFFICIAL CORRESPONOENCE TO THE BOARD 4.4 t14**41* June 19, 1957 National Labor Relations Board, South Building, Health, Education & Welfare, 330 C Street, S. W., Washington, D. C. Attention Mr. Arthur 1,4 Lang Gentlemen: of Governors Reference is made to the detail to the Board sly previou -15, Of Mr. Charles W. Schneider, Hearing Examiner, GS agreed to by you under letter dated December 102 1956. was made Under the terms of Mr. Schneider's detail, he January 12 available to this Board for a 6-month period beginning be held under 1957, to preside at one or more hearings ordered to the the Bank Holding Company Act of 1956. It was agreed that Schneider's Mr. for sed reimbur be National Labor Relations Board would expenses salary at the rate of $12,690 per annum, and for any travel which in involved, salary reimbursement to be made only for the time Mr. Schneider was actually engaged in connection with the said hearings. be required It now appears that Mr. Schneider's services will e his complet fO' an additional period of time in order that he might lt difficu 14(Irk on the hearing over which he is now presiding. It is rebe will at this time to predict the precise additional time which an additional quired to complete this work. However, it is believed that services which Period of 6 months would reasonably cover any remaining 1,7111 be required. that the National Therefore, the Board of Governors requests nal tabor Relations Board extend Mr. Schneider's detail for an additio as the same basis Period of 6 months beginning July 1, 1957, on the dated office, this from letter a °r1ginal detail as set forth in uecember 7, 1956. 1692 HOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Na onal Labor Relations Board It will be appre of the reimbursable detail can be made with the Civil confirmation of the extens iated if you will confirm this extension in order that the necessary arrangements Service Commission in connection with on of Mr. Schneider's services* Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary* TELEGRAM BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 12 6/19/57 LEASED WIRE SERVICE WASHINGTON June 19, 1957 Rarris - New York Reurlet June 12. In view of recent admission to membership in System of Bank of Virgin Islands National Banks stockholder of Your Bank and agreement by West Indies Bank and Trust Company, a nonMeMber bank, to remit at par and conform to operating circulars of Your Bank relating to collection of cash and noncash items, Board has today taken actions, pursuant to footnote 1 of Regulation G and footnote 1 of Regulation Jo respectively, designating Virgin Islands 48 being in or of Second Federal Reserve District for purposes of Such regulations, effective immediately. Advice of such action being given all Federal Reserve Banks and Branches. (Signed) Merritt Sherman Sherman * Should have read: Virgin Islands National Bank TELEGRAM BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 13 6/19/57 LEASED WIRE SERVICE S-1632 WASHINGTON June 19, 1957 TELEGRAM TO PRESIDENTS OF ALL FEDERAL RE11ERVE BANKS AND VICE PRESIDENTS IN CHARGE AT ALL FEDERAL RESERVE BRANCHES Islands In view of recent admission to membership of Virgin and 46tional Bank as stockholder of Federal Reserve Bank of New York 4greement by West Indies Bank and Trust Company, a nonmember bank, to e reMit at par and conform to operating circulars of Federal Reserv Bank of New York relating to collection of cash and noncash items, Board has today taken following actions: THE DESIGNATION OF VIRGIN ISLANDS AS BEING IN OR OF OF ES PURPOS FOR SECOND FEDERAL RESERVE DISTRICT REGULATION G of Governors Pursuant to Footnote 1 of Regulation G) the Board ha taken the following action: be For purposes of Regulation GI the Virgin Iolanda shall District, deemed to be in or of the Second Federal Reserve effective on and after June 19, 1957. THE DESIGNATION OF VIRGIN ISLANDS AS BEING IN OR OF OF ES PURPOS FOR CT DISTRI SECOND FEDERAL RESERVE REGULATION J Board of Governors Pursuant to Footnote 1 of Regulation J, the taken the following action: s shall be For purposes of Regulation J) the Virgin Island e District, deemed to be in or of the Second Federal Reserv effective on and after June 19) 1957. (Signed) Merritt Sherman Sherman BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 14 6/19/57 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TD THE BOARD June 18) 1957 Mr. W. R. D ercks, Vice President, Federal Reserve Bank of Chicago, Chicago 90, Illinois. Dear Mr* Diercks: In accordance with the request contained in your letter of June 12, 1957, the Board approves the designation of Roger E. Schultz as a special assistant examiner for the Federal Reserve Bank of Chicago. Please advise as to the date upon which the designation is made effective. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary.
@FedFRASER