Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, June 2, 1959, Volume 46, Part 6

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The attached set of minutes of the
meeting of the Board of Governors of the Federal
Reserve System on June 20 1959, which you have
Previously initialed, has been amended at the
request of Governor Mills to insert the paragraph
beginning at the bottom of page 13.
If you approve these minutes as amended,
please initial below.




Ohm. Martin
Gov. Szymczak
Gov. Robertson
Gov. Shepardson
Gov. King




Minutes for

To:

Members of the Board

From:

Office of the Secretary

June 2, 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.
A
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
On. Tuesday, June 2, 1959.
PRESENT:

Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

The Board met in the Board Room at 10:00 a.m.

Martin, Chairman
Balderston, Vice Chairman
Szymczak
Mills
Robertson
Shepardson
King
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Sherman, Secretary
Kenyon, Assistant Secretary
Thomas, Economic Adviser to the Board
Young, Director, Division of Research and
Statistics
Johnson, Director, Division of Personnel
Administration
Hackley, General Counsel
Farrell, Director, Division of Bank Operations
Molony, Special Assistant to the Board
Shay, Legislative Counsel
Noyes, Adviser, Division of Research and
Statistics
Sprecher, Assistant Director, Division of
Personnel Administration
Smith, Assistant Director, Division of
Examinations
Kiley, Assistant Director, Division of
Bank Operations
McIntosh, Analyst, Division of Bank Operations

Correspondence with Congressman Reuss (Item No. 1). In a
letter dated May 28, 1959, Congressman Reuss of Wisconsin referred to

previous correspondence with the Board concerning pending reserve
requirement legislation and noted that the bill passed by the Senate
and the bill reported by the House Banking and Currency Committee

both would abolish the central reserve city classification.




After

6/2/59

-2-

expressing the view that there was reason for continuation of that
classification, Mr. Reuss reviewed his proposed amendment pursuant
to which member banks in New York and Chicago would remain subject
to a maximum reserve requirement against demand deposits of 26 per cent
even though the two cities would be classified as reserve cities rather
than as central reserve cities.

Mr. Reuss inquired whether the Federal

Reserve supported or opposed such an amendment and stated that he felt
this question had not been answered in the previous correspondence.
There had been distributed to the members of the Board a draft
of reply to
Congressman Reuss which suggested that the proposed amendment would fail of its
purpose because of conflict with other provisions
of the law.

After spelling out these conflicts, the draft indicated

that even if they
were not present the amendment would create problems
of interpretation
and administration and that the Board could not
approve its enactment.

The draft concluded by bringing out that the

Board was in agreement with the apparent objective of the amendment
insofar as it would reestablish a third category of cities for reserve
Purposes, an objective that could be accomplished by elimination of
the provisions
of the pending bill that would abolish the central
reserve city classification.
In discussion, Governor Robertson suggested consideration of a
more affirmative
response to Congressman Reuss which would cs11 to his




6/2/59

-3-

attention the possibility of amending the pending bill so as to
conform it to existing law except for provisions relating to vault
cash and broadened power in the Board to deal with the classification
of individual banks.

Governor Robertson indicated that he was not

making this suggestion with a view to influencing the Board to
change its position on reserve requirement legislation, but rather
With a view to advising Mr. Reuss haw he might accomplish his apparent
objective.
Following consideration of these and other possible changes
in the proposed
reply to Mr. Reuss, it was the majority view that
a letter along
the lines of the draft submitted by the staff would
constitute an appropriate response, and one consistent with the
position taken by the Board from the time it first requested the
introduction of a bill on reserve requirements.

A different type

of reply, it was
suggested, might run the risk of creating the
Impression that the Board was attempting to use Mr. Reuss as a channel
for obtaining
amendment of the pending bill.
Accordingly, after minor changes in the draft had been agreed
up°11,

aanyal was

given to a reply to Congressman Reuss in the form

attached as Item No. 1, with the understanding that copies would be
sent to Chairman Spence of the House Banking and Currency Committee
and to Chairman
Brown of Subcommittee No. 2 of the Banking and
Currency Committee.




6/2/59

-4Mr. Shay then withdrew from the meeting.
Major medical insurance

(Item No. 2).

At the joint meeting

on May 26, 1959, the Reserve Bank Presidents presented for the Board's
consideration a proposed major medical insurance program for the
Federal Reserve Banks.

Under date of May 29 there had been distributed

to the Board
copies of a memorandum from the Division of Personnel
Administration submitting a summary of the recommendations of the
Presidents' Conference for which Board approval was requested.

It

had been
verified with Mr. Erickson, Chairman of the Conference, that
it was the
intention of the Presidents to have the Board base its
consideration
on a program reflecting modifications of the proposal
of the
Subcommittee on Personnel which were supported by a majority
of the
Presidents who attended the special session of the Presidents'
Conference on February 10,

1959. The first year premium cost of

such a program was estimated to be approximately i;14-78,000, of which
the Reserve
Banks' share, based upon absorption of two-thirds of the
cost by the Banks, would
be approximately is5318,000.

The Division of

Personnel Administration recommended that this program and the
expenditures by
the Reserve Banks in connection therewith be
approved by the Board.

There was submitted with the memorandum

a draft of
letter to Mr. Erickson granting such approval, and
similar letters would be sent to each of the other Presidents.
At the joint meeting on May 26, President Hayes had stated
that he hoped any
Reserve Bank desiring to offer a program




6/2/59

-5-

incorporating certain modifications of the basic plan would be free
to come to the Board
and request consideration of such modifications.
The draft of letter
to Chairman Erickson would state that the Board
concurred in the proposal that if any Reserve Bank should desire
coverage in addition to that provided in the uniform contract, the
Bank concerned would request Board approval for the supplementary
coverage.
In commenting on the matter, Mr. Johnson mentioned certain
minor changes that
should be made, in the interest of accuracy, in
the summary of
the major medical insurance plan submitted with the
memorandum from the Personnel Division.

Copies of the summary, he noted,

would be sent to the
Reserve Bank Presidents if the Board should approve
the plan.

Mr. Johnson also referred to the last paragraph of the

proposed letter to Chairman Erickson and raised for consideration the
question whether it should be retained, modified, or eliminated.

Its

incorporation in the letter, he noted, would clarify the procedure that
should be followed by a Reserve Bank desiring to make modifications in
its program.

However, the inclusion of the paragraph might seem to

suggest that the door was open to additions by individual Reserve Banks
to the
basic program.
In response to questions by the Board, Mr. Johnson commented on
a number of
the features of the proposed program, particularly the
differences
between the Subcommittee plan and that urged by a majority




6/2/59

-6-

of the Presidents in attendance at the meeting of the Conference on
February 10, 1959.

He also summarized the latest available information

concerning legislation to provide a major medical program for Federal
employees, making special reference to the indication that any program
Sponsored by the Administration was likely to provide for approximately
an equal sharing of
the cost between the Government and the employee.
At the same time,
he brought out that the trend among major medical
Plans seemed definitely to be in the direction of more liberal benefits
and absorption
of a larger proportion of the cost by the employer.

The

Reserve Bank Presidents, he indicated, may have been influenced considerably by the fact that the proportion of cost absorbed would be
the same as in
connection with the Blue Cross-Blue Shield program and
by the
thought that a less liberal contribution might make it difficult
to sell the
program to employees, particularly in the lower salary
brackets.
Comments by the members of the Board revealed a unanimity of
°pinion in favor of a major medical program for the Federal Reserve
Banks.

While it was recognized that the package proposed by the

Presidents might be considered somewhat ahead of the trend, both in
terms of
benefits and in the suggested proration of cost, the Board
members, With one exception, did not indicate that they would find
the plan
objectionable on that score.

Governor Robertson expressed

certain reservations, both from the standpoint of the liberality of




6/2/59

_7_

some of the benefit features and because he felt that an equal sharing
of the cost between
the Reserve Banks and the employees would be
reasonable.

He noted that it would always be possible to liberalize

over the course of
time and that this probably would be the trend.

His

major objection, however, stemmed from the view that the plan provided
for employees of
the Federal Reserve Banks should be on no more than a
Parity with the
plan provided for employees of the Board of Governors.
Accordingly, he indicated that, despite some reservations such as he
had mentioned,
he would be willing to vote for a Reserve Bank plan
which was no
more liberal in benefits or as to cost-sharing than the
plan applicable
to Board employees.
Governor Robertson's comments led to discussion regarding the
possibility of liberalizing the Board program during which Governor

shepardson

and Mr. Johnson indicated that it had been the thought, if

dividends should accrue, to develop recommendations for additional
benefits.

Mr. Johnson also stated that consideration was being given

to the
possibility of linking the Board program with the Reserve Bank
Program, if that could be done and if it would prove advantageous.
The sense of the meeting was that the approach to the Reserve
Bank major
medical insurance program should be uniform and that it would
not be

desirable to have deviations at individual Banks.

Accordingly,

it was felt desirable that the Board's letter approving the Reserve
Bank program
indicate in positive terms that the Board favored a




6/2/59

-8-

uniform approach and that all Reserve Banks would be expected to keep
their programs within the maximum benefits provided under the approved
plan.
It was also the sense of the meeting that studies should be
Pursued looking toward the presentation to the Board of recommendations
that would tend to bring the Board's major medical plan more closely
into conformity with the Reserve Bank plan.
With reference to the reversion of accrued dividends to the
Reserve Banks, Governor King pointed out that question might be raised
whether such reversion would be appropriate unless the Reserve Banks
contributed substantially to the cost of the program.

This consider-

ation, he said, influenced him in favor of approving a contribution
of two-thirds
of the cost by the Reserve Banks.
At the conclusion of the discussion, unanimous approval was
given to a letter to Chairman Erickson of the Presidents' Conference
in the form attached as Item No. 2.

This action was taken with the

un
derstanding that the Division of Personnel Administration, in
c

onsultation with Governor Shepardson, would proceed to develop

recommendations for the Board's consideration relating to liberalization
of the major
medical insurance program in effect for Board employees.
During the foregoing discussion Mr. Thomas withdrew from the
meeting.

At its conclusion Messrs. Dembitz, Research Associate, and

Thompson,

Economist, Division of Research and Statistics, entered the

room.




6/2/59

-9Federal Reserve district boundaries.

In pursuance of the

Board's request, most recentl at the meeting on April
y

8, 1959, there

had been
distributed to the Board, with a covering memorandum from
Messrs. Noyes and Farrell dated April 23,

1959, three documents bearing

on the questio
n of Federal Reserve district boundaries.

The first

document, prepared by Mr. Thompso
n, was an assembly of basic economic
information with respect to the area covered by the Twelfth Federal
Reserve District, as
constituted prior to January
respect to Alaska
and Hawaii.

1959, and also with

The second document, prepared by Mr.

Dembitz, discussed
the regional structure of the Federal Reserve System
and possible
criteria for changes.

The third document, prepared by the

Division of Bank Operati
ons, comprised a set of tables and charts
comparing

land area, total bank deposits, and population in each of

various arrange
ments of Federal Reserve districts.

Both the tables

and the charts
compared on a percentage basis the present arrangement
of
districts with examples of alternative arrangements. The alternative
a
rrangements were not intended to represent recommendations or even
suggestions; rather, they were intended to serve as a basis for
discussion and as an aid
in the development of more meaningful criteria.
Using the tables and charts, along with a series of display
'naps of the
United States, the staff presented possible alternative
ar
rangements of Federal Reserve districts based on the factors of
land area, bank
deposits, and population, and a blending of those




6/2/59
factors.

-10While the presentation did not include recommendations, Mr.

Farrell commented that in the light of the results, which he said had
been developed without
any advance bias, it was his feeling that perhaps
the present
arrangement of Federal Reserve districts distributed land
area, deposits, and population about as well as could be accomplished
by any
alternative arrangement.

To put it another way, it appeared

to him that the
cost of rearrangement would be greater than any advantages
that might be
derived.
Consideration then was given to how the study of Federal
Reserve district
boundaries might proceed from this point, and Governor
Robertson noted that factors such as transportation, communication,
and topography
had thus far not been taken into account. It was agreed
that such
factors, considered from the standpoint of their bearing upon
the most
effective performance of Federal Reserve services, were
matters that should
be considered in the next phase of the study. As
a means of
approach, the staff suggested the preparation of a

questionnaire which would be sent to the respective Federal Reserve
Banks.
There was agreement that the inquiry might well proceed along
such lines
and that for the time being it should be handled within the
Federal Reserve
System. In this connection, Chairman Martin mentioned
various reasons 'which
led him to conclude that utilization of the




6/2/59

-11-

services of System personnel would be preferable to the retention of
outside consultants.

He also stated, and there was agreement with

his view, that
continuation of the study was important from the standpoint of enabling the Board to answer questions that might arise with
respect to the composition of the Reserve districts.
At the conclusion of the discussion, the staff was requested
to proceed
with the preparation of a questionnaire that might be
distributed among the Reserve Banks with a view to providing information
pertinent to appraising how Federal Reserve services might be affected

by the
arrangement of Federal Reserve district boundaries.
Messrs. Dembitz, Thompson, and McIntosh then withdrew from
the meeting.
Price Waterhouse suggestions (Item No. 3).
the meeting
of the Board on February 18, 1959

Following up on

at which representatives

of Price
Waterhouse & Co. discussed the proposals contained in the
accounting firm's report dated December 15, 1958, concerning its study
of
techniques and procedures used in making examinations of Federal
Reserve Banks, there
had been distributed to the Board copies of a
memorandum from the Division of Examinations dated April 6, 1959,

refle0-4- further consideration by that Division of the Price Waterhouse

suggestions.

The memorandum was devoted for the most part to

a presentation
of reasons believed to militate against adoption of




6/2 59

-12-

the suggestion that the
Board substitute for the present annual over-all
examination of each Reserve Bank a program of more frequent visits at
which teams of examiners would review or survey segments of a Reserve
Bank's operations, with
emphasis on internal auditing activity and
Other types of
internal controls.
Mr. Smith stated that the Board's examining staff was currently
engaged in an examination of the Federal Reserve Bank of Richmond and
that Price
Waterhouse representatives

ere making the 1959 study of

techniques and procedures in connection with that examination.
Mr. Smith then referred to the 1958 suggestions of Price
Waterhouse
and said it was the desire of the Division of Examinations
to have a
directive from the Board as to how to proceed in the light
of those
suggestions.

The Division, he said, was not persuaded that

it would be
desirable to discard current examining procedures in favor
Of the
suggested program of surveys, for it did not appear to the
Division that such a program as altogether feasible or that the
advan
tages would be sufficient to warrant the experiment. In further
comments, Mx. Smith raised the question whether the fragmented survey
approach would fulfill the mandate contained in the law relating to
examinations of
Federal Reserve Banks, suggested that decentralization
of the
field staff would present a difficult recruitment problem, and
e xpressed the
view that a greater degree of dependency upon internal




6/2/59

-13-

controls might give credence to charges that the System was self-auditing.
He indicated that
the results of a complete examination were believed to
be more
satisfactory then those achievable through piecemeal examination
procedures and said that it was felt that the Price Waterhouse conclusions
might have been based on certain misconceptions.

For example, the point

had not yet been
reached where complete examinations were impracticable
and the
examinations did not duplicate the work of the Reserve Bank
auditing staffs.

Further, he did not agree that surprise had ceased

to be an
important element in the present scheme of examinations.
Comments by the members of the Board reflected appreciation of
the study
that had been devoted to the Price Waterhouse recommendations
by the
Division of Examinations and suggested no strong disagreement
With the
position of that Division.

At the same time, it was the view

of the Board
that the Price Waterhouse suggestions should not be
dismissed from further consideration at this point.

With this thought

in mind, it was
suggested that the Division's memorandum of January
16, 1959,
be transmitted to Price Waterhouse for review and to provide
a b
ac.ground for comments that the firm might deem appropriate at the
conclusion of its current
survey.
Governor Mills said that he was apprehensive about abandoning
positions recklessly and
going out into uncharted seas, but that he
thought
a middle ground was available for further exploration of the
Price Waterhouse
suggestions.




Although he would consider it a mistake

6/2/59
to have groups of Board examiners stationed in different parts of the
country, he was impressed by the Price Waterhouse comments about the
duplication between some parts of the work done by the Board's examining
staff and work performed by the Reserve Bank auditors.

Accordingly,

he felt that it would be advisable to study further the possibility of
Placing reliance to a greater extent than at present on the Federal
Reserve Bank auditors, who were in effect responsible to the Board of
Governors through the Chairmen of the respective Reserve Banks.

This

might include a study of the feasibility of periodic spot examinations
Of various
functions of a Federal Reserve Bank rather than the comprehensive examinations undertaken at the present time.

In essence,

Governor Mills felt that the Price Waterhouse suggestions should not
be dropped at
this time for he was impressed by many of the statements
and ideas the firm had presented, seemingly in a polite and sincere
fashion.

Instead, he believed that those ideas should be explored

more completely and that the Board should take advantage of the Price
Waterhouse offer to make available the services of its personnel in
helping to reach
a judgment as to whether the tentative ideas offered
by the firm actually had substantive merit.
There was unanimous agreement that the aforementioned procedural
suggestion should be followed, and a copy of the letter sent later in
the day to Price Waterhouse & Co. is attached as Item No.




3.

6/2/59

-15In this connection, Governor Shepardson referred to a question

that had been raised as to Whether there was sufficient reason to
warrant the cost incident to a review of field staff techniques and
Procedures once each calendar year by an independent accounting firm.
In the light of
the discussion and procedure agreed upon at this meeting,
he expressed
the opinion, with Whidh there was agreement, that it -would
be desirable
to await the results of the current survey by Price
Waterhouse before considering further the question to which he had
referred.
Approval of appointment of research officers.

There had been 4

circulated to the members of the Board a draft of letter to the Federal
Reserve Bank of New York which mould approve the appointment of Mr.
Robert V. Roosa as Vice President in charge of the research function
at that
Bank.

The Bank had not requested approval of Mr. Roosals

aPpointment in
this capacity, and the proposed letter had been prepared
by the
Division of Personnel Administration following receipt of a
revised organization chart from the Reserve Bank.

It had been assumed

by the
Personnel Division that the Board would wish to indicate such
approval in the light of its letter to the Chairmen of all Federal
Reserve

Banks

of March 251 1936, (as supplemented by the Board's letter

to the New
York Bank dated September l4, 1936, and similar letters to
the other Banks sent around that time), which stated among other things




6/2/59
that appointments of officers in charge of the research and examination
functions at the respective Reserve Banks would be subject to the
approval of the Board of Governors.
During a brief discussion of the matter, Chairman Martin
inquired as to the Board's authority to require that appointments of
officers in charge of the research function be approved by the Board.
Mr. Hackley commented that, as contrasted with the appointment
of an officer in charge of the examining function, there might be a
legal question as to whether the Board actually had authority to
re quire

such approval.

The law,he pointed out, specifically authorizes

approval by the Board of appointments, as distinguished from compensation,
Only in the ease of the President, First Vice President, and examiners
Of a
Reserve Bank.
The Chairman then stated that the subject would be placed on
the

agenda for further consideration at the meeting of the Board

tomorrow.

The meeting then adjourned.




Secretary's Note: Pursuant to the recommendation
contained in a memorandum dated May 28, 1959, from
Mr. Marget, Director, Division of International Finance,
Governor Shepardson, acting on behalf of the Board,
today granted_permission to Robert L. Sammons, Associate
Adviser in that Division, to teach a course on Economic
Problems of Latin America at George Washington
University during the academic year beginning September
1959.

Secretary

BOARD OF GOVERNORS
./
1

y.

V•

OF THE

Item No. 1
6/2/59

FEDERAL RESERVE SYSTEM
WAS H I NGTON

110

OFFICE OF THE CHAIRMAN

LIL

June 2, 1959.
The Honorable Henry
S. Reuss,
House of Representatives,
Washington 25, D. C.
Dear Mr. Reuss:
This is in response to your letter of May 28 to Vice Chairman Balderston
with further reference to your suggestion for an
amendment to the pending reserve requirements bill.
Under the language of the amendment suggested in your letter,
the Board
would be authorized to set higher requirements, up to 26 per
eent, for demand
deposits at member banks in New York City and Chicago
than for member banks in other reserve cities. By thus fixing a
Inaxiinum for these two cities higher than the 20 per cent maximum prescribed for reserve cities generally, the amendment would in effect
re
establish a third classification of cities although not designated
as such.
It appears to us, however, that the amendment would fail in
its Purpose
because of conflict with other provisions of the law. The
IBoardis
o
present statutory authority to change reserve percentages must
e exercised
uniformly for (1) member banks in central reserve cities,
or (2) member banks in reserve cities, or (3) "country" member banks,
or (4) all member banks. The pending bill would eliminate the central
t
city category; but it would still be necessary for the Board
to
?make any change in requirements for reserve city banks applicable
alike to all
banks in such cities, except as the Board may permit
Individual banks to carry lower reserves. Since New York and Chicago
would be reserve
cities, the Board could not fix a particular
Percentage for member banks in those cities without fixing the same
Percentage for member banks in other reserve cities; and, since the
?cimum fixed for reserve cities would be 20 per cent, the Board could
not fix a
higher percentage for member banks in New York and Chicago.
,
4 11Y further amendment for the purpose of resolving this conflict would
necessarily mean the restoration of a third classification to cover
Yw York and Chicago, contrary to the provisions of the bill as passed
the Senate and reported by the House Banking and Currency Committee.

r

Even if it were not for the conflict just mentioned, your proamendment would seem to require that all member banks in New York




The Honorable Henry S. Reuss

-2-

and Chicago be subject to the same requirement and thus nullify the
Board's authority to permit individual banks in reserve cities to
carry reserves lower than those prescribed for such cities generally.
At present, only some of the banks in New York and Chicago are
classified as central reserve city banks, the others having been
authorized to maintain the lower reserves prescribed for reserve city
or country banks.
As you know, one of the provisions of the pending
bill would make more flexible the Board's authority to permit
Individual banks to carry reduced reserves.
For the reasons above indicated, the Board believes that the
suggested amendment would not be effective to accomplish its purpose
because of conflict with other provisions and that, even if this were
not the case, it
would create problems of interpretation and adminstration.
The Board could not, therefore, approve its enactment. The
Board is in agreement with the apparent objective of the amendment
111 so far as it would reestablish a third category of cities for
reserve purposes; this objective could of course be accomplished by
??Anunation of the provisions of the pending bill that would abolish
the central
reserve city classification.




Sincerely yours,

(Signed) Wm. McC. Martin, Jr.
McC. Martin, Jr.

BOARD OF GOVERNORS
;

OF THE

FEDERAL RESERVE SYSTEM
r

WASHINGTON 25, 0. C.

Item No. 2
6/2/59

CORRESPONDENCE
ADDRESS OFFICIAL
TO THE [WARD

4

June 2, 1959.

Mr, J. A. Erickson, Chairman,
Conference of Presidents,
Federal Reserve Bank of Boston,
Boston 6, Massachusetts.
Dear Mr. Erickson:
medical plan
The Board of Governors approves the major
for the Federal Reserve Banks as presented by the Presidents'
two-thirds
Conference on May 26, 1959, including the payment of
effective
employees,
and
of the premium cost for their officers
as soon as necessary arrangements are completed* Enclosed is a
summary of the principal features of the plan for which Board
approval is given.
approach,
In the interests of maintaining a uniform
keep their
will
Banks
it is understood that all Federal Reserve
programs within the maximum benefits provided under the approved
Plan.
President
Advice of this action is being sent to the
of each Federal Reserve Bank today.
Very truly yours,

Merritt She
Secretary*

Enclosure.




BOARD OF GOVERNORS

holotl*„_
\c)

OF THE

Item No. 3

FEDERAL RESERVE SYSTEM
, `.'
c4WASH
INGTON 25, D. C
.0c,c.

0

'

0

6/2/59

4.1
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

4

June 2, 1959.
Mr. Theodore Herz,
Price Waterhouse & Co.,
1000 Vermont Avenue,
Washington, D. C.
Dear Mr. Herz:
The report submitted by your firm under date of
December 15, 1958, covering your study of the techniques and
procedures used by the Board's Division of Examinations in
making examinations of Federal Reserve Banks was again discussed at a meeting of the Board today. During the course of
the discussion, it was suggested that there be made available
to you the
commentary of the Board's Division of Examinations
as contained
in its memorandum dated January 16, 1959. It
was felt that
the material in this memorandum might be helpful to you in
the study you are now making in connection with
the examination
of the Federal Reserve Bank of Richmond and
provide a background for comments you may think appropriate
at the
conclusion of your current study.
Accordingly, there are transmitted with this letter
five copies of the memorandum referred to. It is assumed you
Will restrict the circularization of the memorandum to interested persons within your firm.
Very truly yours,

Merritt Sherman,
Secretary.

Enclosures