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879 A meeting of the Board of Governors of the Federal Reserve Systern was held in Washington on Thursday, June 24, 1957, at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Broderick Szymczak McKee Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Clayton, Assistant to the Chairman Consideration was given to each of the matters hereinafter reto and the action stated with respect thereto was taken by the Board: The minutes of the meeting of the Board of Governors of the Federal Reserve System held on June 25, 1957, were approved unanimously. Telegram to Mr. Stewart, Secretary of the Federal Reserve Bank ar St. Louis, stating that the Board approves the establishment without char— '66u . bly the bank today of the rates of discount and purchase in its ":isting schedule. Approved unanimously. Letter to Mr. Wayne C. Taylor, Assistant Secretary of the Treasury, reading as follows: "This refers to your letter of June 17 in reply to the Board's letter of June 2 with respect to the Board's providing a vault clerk for duty at the Bureau of Engraving and Printing in connection with the custody of the reserve stock of Federal Reserve notes. "Since you state in your letter that the present incumbent is without Civil Service status and that, accordingly, his transfer to and retention in the Treasury service is not Possible, the Board will be agreeable to the retention of the Present vault clerk, who it is understood is now 62 years of age, on the payroll of the Board until he reaches the retirement age of 65. The Board will appreciate arrangements being 880 6/24/37 -2- however, whereby, after the retirement of the present vault clerk, whatever costs are necessary in connection with the custody of the reserve stock of Federal Reserve notes are included in the regular printing charge." "made, Approved unanimously. Letter to the board of directors of "The Atoka State Bank", Atoka, Oklahoma, stating that, subject to the conditions of membership numbered 1 to 6 contained in the Board's Regulation H and the following special conthe Board approves the bank's application for membership in the Federal Reserve System and for the appropriate amount of stock in the l'ederal Reserve Bank of Dallas: "4. Such bank shall make adequate provision for depreciation in its banking house and furniture and fixtures." Approved unanimously, together with a letter to Mr. McKinney, President of the Federal Reserve Bank of Dallas, reading as follows: "The Board of Governors of the Federal Reserve System approves the application of 'The Atoka State Bank', Atoka, Oklahoma, for membership in the Federal Reserve System, subject to the conditions prescribed in the inclosed letter Which you are requested to forward to the board of directors of the institution. Two copies of such letter are also inclosed, one of which is for your files and the other of which You are requested to forward to the Bank Commissioner for the State of Oklahoma for his information. "It will be noted that the Board has not prescribed the sPecial condition of membership as recommended by your Committee. Engaging as a business in the sale of mortgages representing real estate loans with or without the guarantee of the bank is prohibited by standard condition numbered 3. However, it does appear that, while the bank is not exercising such Powers at this time, it is also authorized under its articles Of incorporation to exercise certain additional unusual powers which are not specifically covered by the standard conditions; but, in this connection, the Board has taken the position that, in cases where applying banks are not exercising anY unusual powers, a special condition is unnecessary 881 6/24/37 -3- "inasmuch as the matter is covered by condition of membership numbered 1. In lieu, therefore, of prescribing a Special condition, in the letter to the bank particular attention is called to the provisions of that condition." Telegram to Mr. Clerk, First Vice President of the Federal Reserve Bank of San Francisco, reading as follows: "In accordance with your recommendation Board approves establishment and operation by 'Peoples Bank and Trust Company', Seattle, Washington, of branch at Kent, Washington, subject to approval of appropriate State authorities. Please furnish Board with a copy of the approval given by the State authorities. "The purchase of assets and assumption of liabilities of The First National Bank of Kent by the Peoples Bank and Trust Company would not appear to result in any material change in the character of assets or scope of corporate powers exercised bY trust company within meaning of general condition of membership. Accordingly, approval of Board to acquisition of the business of the national bank is not required. It is noted that assets of The First National Bank of Kent include some securities which are reported to be ineligible for purchase by member banks under section 5135 and the Comptroller's regulation. President Brygger's letter of June 3 to Sargent indicates that bank may be contemplating taking over some of such issues. It is assumed, however, that you will satisfy Yourself that no securities ineligible for purchase by member banks will be acquired in the transaction." Approved unanimously, together with the following letter to Mr. Clerk: "As you were advised in a telegram sent you today, the Board has approved the application of the Peoples Bank and Trust Company, Seattle, Washington, for permission to establish a branch at Kent, Washington, after acquisition of the business of The First National Bank of Kent. The transaction, however, raises a question as to the future program of the trust company. "In the spring of this year the trust company was negotiating for the acquisition of the business of the Citizens Bank of Bremerton, Bremerton, Washington, with the expectation of establishing a branch at that location. The trust company advised, however, that negotiations were dropped because of the competition of other institutions for the 882 6/24/37 -4- purchase of the Citizens Bank of Bremerton. In June the trust company absorbed the Bank of Hoquiam, Hoquiam, Washington, and established a branch at that location, and since then the trust company has applied for permission to acquire the business of The First National Bank of Kent, Kent, Washington, and establish a branch at that location. These developments might indicate that the bank is contemplating further extension of its branch banking system. While the Board has approved the application for permission to establish a branch at Kent without requiring an increase in the capital of the trust company, the Board wishes it to be definitely understood that such approval is not indicative of the action which may be taken in connection with any future applications of the Peoples Bank and Trust Company for the establishment of branches. "The Board feels that it is essential that capital of a bank be commensurate with its responsibilities and that any expansion program through the absorption of other banks and the establishment of branches should involve, if a bank's capital structure is not altogether adequate to support such increased liabilities, an increase of capital either through the addition of capital of the bank absorbed to the capital of the continuing bank, or through the introduction of new funds. The acquisition of the business of The First National Bank of Kent was made on a basis which not only did not result in an increase of the trust company's capital through the transaction, but which involved the payment by the trust company of a premium for the business of the national bank. "If you are in agreement with the opinion that any further expansion program of the trust company through the establishment of branches should involve a commensurate increase in the bank's capital or be deferred until the capital structure has been increased from earnings or other sources, it is suggested that you acquaint the management of the trust company with the Board's views and your own views with respect to the matter. If, on the other hand, you do not concur with the views herein expressed, or feel that circumstances are such as to render the suggested advice to the bank unnecessary or inadvisable, the Board would like to hear further from you as to the situation." Letter to the Presidents of all Federal reserve banks, reeding "follows: "The amendment to subsection 2 of Section 3 of the Rules and Regulations of the Retirement System of the Federal Reserve banks reducing the minimum age for retirement on a special 883 6/24/37 -5- service retirement allowance to 50, and eliminating the reduction in the pension of 5 percent for each year a pensioner lacks of having attained age 60 on retirement, necessitates some modification of the authority given in the Board's letters X-9405 of December 27, 1935, X-9541 of April 6, 1956, and X-9707 of September 28, 1956, to pay dismissal wages to employees involuntarily separated from the service or to make Special contributions to the Retirement System for their benefit. Accordingly, the authority granted by the above mentioned letters is rescinded. "If, on the separation of an employee from the service of tha bank, your directors are of the opinion that a contribution by the bank in the form of a dismissal wage or otherwise is advisable and should be made) either to him or to the Retirement System for his benefit, your bank is authorized: (a) To pay an amount equal to not more than 10 percent of terminal salary for each year of service up to five in the case of any employee separated from the service, with or without a retirement allowance, including those retired for disability. Such payment may be made to the Retirement System for the purpose of supplementing the immediate or deferred retirement allowance, if any, to which the employee is entitled, or, except in the case of an employee 65 years of age or more, may be paid to the employee in cash, either in a lump sum or in not to exceed six monthly payments; provided, however, that no more than an amount equal to three months' salary may be paid in cash to an employee who is to receive a pension, immediate or deferred. In addition to the above, where an employee not entitled to receive a pension leaves his accumulated contributions with the Retirement System for the purpose of purchasing an annuity to begin at or after age 50 a further payment may be made to the Retirement System, for the purpose of supplementing such annuity, equal to 3 percent of terminal salary for each year of service rendered in excess of five. Or (b) To pay to the Retirement System, in lieu of any payments authorized in paragraph (a), for the benefit of an employee separated from service after attaining age 50 (including those retired for disability), a special contribution sufficient to increase the regular retirement allowance to which the employee is entitled to a retirement allowance 884 6/24/37 -6- "on a straight life basis equal to $4.50 for each month of service up to 15 years, or to the actuarial equivalent thereof under any option offered by the Retirement System that the employee may select. Such retirement allowance in the case of an employee under age 65 shall be deferred to age 65, or be converted into a retirement allowance of equal actuarial value beginning at an earlier age. "In applying the above any salary in excess of $12,000 Per annum shall be treated as a salary of $12,000, and in computing length of service all service to date of retirement may be counted, even though a portion of such service may not be creditable service as defined in Section 1 of the Rules and Regulations of the Retirement System." Approved unanimously. Letter to the Presidents of all Federal reserve banks, reading follows: "Recently the Washington representative of the Retailers National Council called at the Board's offices and stated that the National Retail Dry Goods Association had taken up With him a protest lodged with that association by an association of merchants in one of the Federal Reserve bank cities. This representative stated that the purchasing agent of one of the Federal Reserve banks buys various articles for the employees of the Federal Reserve bank at substantial reductions below retail prices, and that the local merchants are Protesting such action on the part of the purchasing agent. The Washington representative of the Retailers National Council did not voice any opposition to employees of the Recerve banks forming associations for the purpose of purchasing supplies at a discount, provided the supplies were not Purchased through the bank's purchasing agent. The Washington representative stated that the association lodging the protest was informed that all Federal Reserve banks had arrangements similar to the one complained of, and asked whether that were true. "For the information of the Board, it will be appreciated if you will advise whether arrangements exist whereby employees at your bank or branches, if any, may purchase merchandise at considerably less than retail prices, and, if so, how the arrangements were established; whether the Purchases made for the account of employees are made direct 885 -7- "by the employees themselves, upon proper credentials, or whether they are purchased for the account of the employees by one of their own representatives or by the purchasing agent of the bank, and whether the purchases are paid for direct by the employees themselves, by their own representatives, or by the bank and reimbursement obtained from the employees. The Board will also appreciate advice as to whether, in your opinion, employees of a Federal Reserve bank should be allowed to make purchases of supplies through the bank's purchasing agent." Approved unanimously. Mr. Morrill submitted a recommendation, which had been approved by Messrs. McKee and Clayton for the Personnel Committee, that the Board 'allthorize the purchase of Addressograph with attachments (Model 3400) and a Boston Wire Stitcher (Model No. 7) for use in the Board's new buildas listed in purchase orders numbered 1668 and 1669, at a total cost t -t3 156.14. Approved unanimously. Thereupon the meeting adjourned. APProved: Chairman.
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