The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
161.
Minutes for
To:
Members of the Board
From:
Office of the Secretary
June 26, 1962
Attached is a copy of the minutes of the
Board of Governors of the Federal Reserve System on
the above date.
It is not proposed to include a statement
with respect to any of the entries in this set of
minutes in the record of policy actions required to
be maintained pursuant to section 10 of the Federal
Reserve Act.
Should you have any question with regard to
the minutes, it will be appreciated if you will advise
the Secretary's Office. Otherwise, please initial
below. If you were present at the meeting, your
-Lnitials will indicate approval of the minutes. If
YOU were not present, your initials will indicate
(344 that you have seen the minutes.
Chin. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
*1
0:)•
4
Minutes of the Board of Governors of the Federal Reserve
System
on Tuesday, June 26, 1962.
The Board met in the Board Room
410:00 a.m..
PRESENT: Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Balderston, Vice Chairman
Mills
Robertson 1/
Shepardson
King
Mitchell
Sherman, Secretary
Molony, Assistant to the Board
Fauver, Assistant to the Board
Hackley, General Counsel
Solomon, Director, Division of
Examinations
Mr. Johnson, Director, Division of
Personnel Administration
Mr. Hexter, Assistant General Counsel
Mr. Conkling, Assistant Director, Division
of Bank Operations
Mr. Masters, Associate Director, Division
of Examinations
Mr. Sprecher, Assistant Director, Division
of Personnel Administration
Mrs. Semia, Technical Assistant, Office
of the Secretary
Mr. Potter, Senior Attorney, Legal
Division
Mr. Young, Senior Attorney, Legal
Division
Mr. Wood, Personnel Assistant, Division
of Personnel Administration
Mr.
Mr.
Mr.
Mr.
Mr.
Grand Haven-Spring Lake consolidation.
Governor Mills stated
that he u
1.4ad just had a telephone call from Mr. Slay, Michigan State
ntendent of Banks, regarding the order issued by the Board yesterday
41311rovi
- -ng the application of The Peoples Bank and Trust Company, Grand
RaveLI, Michigan, to consolidate with The Spring Lake State Bank, Spring
tab,
Michigan. Superintendent Slay had called about the provision in
Withdrew
from meeting at point indicated in minutes.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6/26/62
-2-
the Board's order that the consolidation should not be consummated
sooner than seven calendar days after the date of the order or later
than three months after that date. For reasons of convenience, the
banks involved would like to consolidate on July 2, 1962, which would
be the
a,sked.
seventh day after the Board's order, and Superintendent Slay
if the Board would be willing to waive its seven-day waiting
Period to allow them to do so.
Mr. Hackley Observed that the seven-day waiting period was
agreed uby the Board after consultation with the Department of
justice, and was incorporated in the Board's published Rules of Proeedllre. While he had sympathy with the desire to suit the convenience
of the
consolidating banks, Mr. Hackley hesitated, as a matter of print
make an exception to the Board's published rule.
The ensuing discussion brought out the fact that the Board's
("ex" provided that the consolidation should not be consummated "sooner
tilata seven calendar days" after the date of the order, and Mr. Hexter
ts :
1 that this should be interpreted as allowing the transaction to
Place on the seventh day, which in the case of the Grand Haven
voUld be July 2, 1962; the date on which Superintendent Slay had
indicated the banks were planning.
Governor Robertson expressed the opinion that no deviation
11°Uld be made from the provision of the Board's order under discussion,
ip
the rule could properly be construed as allowing consummation of
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ryof)i.:*
6/26/62
_3_
the Grand Haven consolidation on the seventh day, it would be appropriate
8° to inform Superintendent Slay.
Other members of the Board agreed that Superintendent Slay
should he informed by telephone that the Board's construction of its
°rder approving the Grand Haven-Spring Lake consolidation would permit
consummation of the transaction effective July 2, 1962.
Discount rates.
The establishment without change by the
Pederal Reserve Bank of Boston on June 25, 1962, of the rates on disc°1111ts and advances in its existing schedule was approved unanimously,
171th the understanding that appropriate advice would be sent to that
Application of Drovers National Bank (Item No. 1).
A draft
r letter, which had been circulated, approving the application for
ridilciary powers of The Drovers National Bank of Chicago, Chicago,
Illinois, was approved unanimously.
Itera
A copy of the letter is attached
NO. 1.
Trust powers of national banks (Item No. 2).
There had been
cit8tributed a memorandum dated June 25, 1962, from the Legal Division,
In connection with a request from the Bureau of the Budget for the
Ille/48 of the Board on a Treasury draft bill that would transfer from
the Board to the Comptroller of the Currency authority to grant to
118.ti°nea. banks the right to act in fiduciary capacities, and to regulate
the
exercise of fiduciary powers by national banks, including the operation
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6/26/62
-4-
°f common trust funds. This was a revision of a bill proposed by the
Treas_
Li-L-.Y in 1959, although the 1959 proposal did not contemplate the
transfer of common trust fund regulation.
The Board, in its report
Of April 24, 1959, on the earlier bill, stated that it was preferable
that regulatory authority over all aspects of trust activities of
national banks be vested in the Comptroller of the Currency, and
urged that the bill be amended to include the transfer of the Board's
Ettlthority to regulate common trust fund operation. The present draft
4111 included all of the Board's 1959 recommendations.
Attached to the
Legal Division's memorandum was a draft of letter stating that the Board
favored. the proposed bill.
Governor Robertson asked if the Board had received notice of
4 sUggestion for another bill that would transfer the currency function
rl'c'm the Comptroller of the Currency to the Board.
Staff responses
irldicated that it was understood that such a suggestion had been made,
444°116h the Board had heard of it only indirectly.
Governor Balderston noted the coincidence that the report on
the
Treasury draft bill came before the Board at the same meeting when
Ilsreliminary discussion of the operation of common trust funds was
selleallled (later on the agenda).
Governor Mills said that he too had noted that coincidence,
441 if there was any possibility that the draft bill would pass the
rent session of Congress, any actions taken by the Board on the pending
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6/26/62
-5-
questions regarding common trust funds would be in effect making preJudgments that might not be consistent with the thinking of the
Coniptroller of the Currency.
If that sort of situation should develop,
Governor Mills was of the opinion that the Board should withhold action
In order to allow the Comptroller of the Currency to make his own
decisions.
After further discussion, the letter to the Bureau of the
Budget was approved unanimously.
A copy is attached as Item No. 2.
Continental Bank and Trust Company (Item No. 3). There had
been distributed a memorandum dated June 25, 1962, from the Legal Division,
l‘egEtrdi-ng a
request by The Continental Bank and Trust Company, Salt Lake
Cit
Other
Utah, that the forthcoming show cause hearing be held in a building
than the Federal Reserve Branch building at Salt Lake City.
Conti-
nental Bank had requested that the hearing scheduled for July 23, 1962,
be °Pen to the public, and that the place of the hearing be changed from
the offices of the Salt Lake City Branch of the Federal Reserve Bank of
S414 FranCi8C0 to "some other public building in Salt Lake City on the
€Iroland that
the nature of the said office building with armed guards
114101 barred
doors is such as to deter the members of the public from
attending the hearing should they so desire."
On June
8, 1962, the Board had ordered that the hearing be
ipnbli°, but with respect to the request for change of location, Board
Coun„
Qel were given until June 18, 1962, to submit comments. On June 14,
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6/26/62
-6-
1962, Board Counsel submitted a statement in opposition to the request
slid a copy of the statement was served on Counsel for Continental Bank.
Inquiries that had been made indicated that access to the
Salt Lake City Branch building would not be such as would unreasonably
deter or inhibit public attendance at the hearing.
Especially, the
allnled guard" in the front door lobby served an informational function
rather than a protective function.
Also, it was felt by
13°alla Counsel that a sign in the public lobby of the branch building
in(lieeting in what room the hearing would be held would dispel any
hesitation that might be felt by persons desiring to attend the hearing.
Atta
eLIQ to the memorandum was a draft of letter to Counsel for Contidenying the request that the hearing be held in a different place,
44a citing the provisions of the Board's Rules of Practice for Formal
that seemed to support that view. It was also pointed out that
the Boats
Hearing Examiner had the right to change the location of the
hes.ring, regardless of the decision that the Board might now make.
After discussion, the letter to Counsel for Continental Bank
'Was
Governor Robertson not participating.
8 T
A copy is attached
N
Mr. Potter then withdrew.
112.11-y on employee-management cooperation (Item No. 4). There
had
O
been distributed a memorandum dated June 25, 1962, from the Division
pe
rs°nnel Administration in connection with an Executive Order issued
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
frTA 0Pf,
6/26/62
-7-
by the President on January 17) 1962, directing that certain policies
should govern officers and agencies of the Executive Branch in dealings
'with Federal employees and organizations representing them. Each agency
\last() issue policies, rules, and regulations for the implementation of
the order not later than July 1, 1962.
On the assumption that the Board's
Personnel program should include a policy with respect to recognition of
emPloYee organizations, the Division of Personnel Administration had
PrePared and attached to its memorandum a proposed statement of policy on
emP1°Yee-management cooperation.
The memorandum pointed out that many facets of the employeerillulagement cooperation program were still in the discussion stage, and
the general approach of Government agencies that had not had previous
"Perience with employee organizations had been to proceed slowly.
Theref°re, the proposed statement covered only the framework of the
Pl‘°grez) with the expectation that specific procedures could be provided
at 4
later date without revising the basic policy.
The Employees' Commit-
tee
the one employee organization already in operation, had reviewed
the,
vroloosed policy and had no suggestions to make.
During discussion it was observed that a question might be
raised
as to whether the Board was subject to the Executive Order.
How-
eve,„
') vithout raising that issue, the environment in which the Board
d
°De atepointed to the desirability that the Board adopt an employeemetrokr.
--s.ement cooperation policy essentially paralleling that of other
Go
vertment agencies.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
i1.#1,
1()
6/26/62
-8It was suggested that the second paragraph of the statement
laaderthe
subheading "Procedures" be deleted, and agreement was expressed
vith that suggestion.
unanimously.
With that deletion, the statement was approved
A copy of the statement in the form distributed to all
tembers of the Board's staff is attached as Item No. 4.
Messrs. Johnson, Sprecher, Young, and Wood then withdrew.
Common trust funds.
There had been distributed a memorandum
aatecl May 15, 1962, from Mr. Masters, relating to questions arising
fr°1m the bona fide fiduciary purpose provisions of Regulation F, Trust
PoIf r,
er° of National Banks.
The memorandum discussed in extensive detail
the historY of the Board's regulation of common trust funds, specific
13144s offered by particular institutions that seemed to depart from
the °riginal purpose of common trust funds, and developments leading
to the basic question with which the Board was now confronted, namely,
vhether the bona fide fiduciary purpose provisions of the regulation
Should be
strengthened in order to restrict the use of such funds within
the
kirue trust concept, or whether to relax the provisions of the
l'ellistion so as to allow wider use of common trust funds.
One of the
131111e1P8.1 apprehensions as to following the latter course, aside from
%tonment or weakening of the true trust concept, was that some banks
woiad
in effect be offering investment management services similar to
those
offered by mutual investment funds. The memorandum analyzed various
sal3 that had been made, some for enforcement of the true trust
coy,
44ce,n+
and others for liberalization of that concept. The conclusion
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
4
?,
6/26/62
Of the memorandum was a recommendation that the all-out liberalizing
approach be discarded as inconsistent with sound banking practice and
incomPatible with the traditions and principles of the American system
Of
trust business.
The recommendation would also discard all the
alternatives directed toward enforcing more strictly the original
Colleeptual purpose and apparent intent of the bona fide fiduciary
rPose provisions, on the premise that the concept, as it had been
interPreted and attempted to be applied, was so abstruse as to be
vi
rtually unenforceable except by measures so extreme as to impose
141varranted
burdens on trust business.
The recommendation would abandon
the b°110 fide fiduciary purpose test for the additional reason that it
1748 already too restrictive. This view was based on recognition of
the desirability in the public interest and the propriety (legally,
thicallY, and practically) of trust institutions providing investment
anagement services - with or without accompanying fiduciary purpose
or Et more specific nature - for the rapidly increasing number of individuals
l'ecliliring such services in connection with their estate accumulation plans.
Such
services seemed wholly consistent with the proper functions of trust
"
1 4t4tions, and the appropriate furnishing of such services by trust
1"4t4tions would require the use of common trust funds. Though not a
Vhoil
"Y satisfactory test, such services might be reasonably differentiated
more direct collective investment of funds (mutual fund investment)
necessity for use of the trust form in establishing such fiduciary
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
241.
6/26/62
-10-
relationships, (2) the discretion of the trust institution in authorizing
ec)Imnon trust fund investment of any such trust, and (3) a curb on common
trust fund advertising and publicity.
The recommendation would impose specific prohibitions on the
advertising and publicity of common trust funds designed to prohibit
their use as a means to attract trust business.
Removal of the present
regulatory language imposing qualifications on fiduciary purpose and
Use ("strictly," "true," and "bona fide") would broaden the use of
ecel on trust funds by and within a trust institution to serve the
irivestment needs of trusts normally seeking the fiduciary services
--m-Lng investment management services) it had to offer.
Curtailment
PUblicizing common trust funds would be relied upon to control misuse
of such funds as investment trusts for other than fiduciary purposes,
that is, to keep common trust funds from being offered to the public
48 an investment entity whether in competition with mutual funds or
°therwise, and to guard against creating in the public mind false
illiPressions of common trust fund purpose and use.
Mr. Masters' memoran-
d1141 e°ncluded by suggesting amendments to Regulation F intended to
111pement his recommendations.
In beginning the discussion, which was intended to be preliminary
44(1 nc4 to lead to action at today's meeting, Mr. Masters commented that
the
'filliatory problem confronting the Board defied simple solution.
It
had 1,
'een clear for sane time that a regulatory provision as indefinite as
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
r
6/26/62
the
-11-
present bona fide fiduciary purpose test was incompatible with effec-
tive supervision of common trust funds.
test
In its present ambiguous form, the
was bewildering to trust business and virtually useless to super-
visory enforcement.
Abandonment of the principle of the true trust,
however, could not only lead to abuses in which access to common trust
funds would be allowed to investors for whom that vehicle had never been
intended: but, conversely, could deny access to common trust funds to
Ille.rlYtrustors of the kind such funds had originally been intended to
serve. The fundamental question, therefore, was choice of the wisest
Principles to underlie common trust fund utilization and effective methods
t° clefine and preserve the principles so determined.
Unfortunately,
ri° really acceptable method had been suggested from any source that gave
"
1 41se of being effective in containing common trust funds solely within
the restricted use originally intended without, at the same time, imposing
bitrarY restrictions that would deny access to such funds by significant
Se
gnients of trust business that appropriately might be commingled.
Mr. Masters noted that a key point of his recommendation was
the
'wTosition of specific restrictions on all forms of printed advertisiript
Publicity regarding common trust funds; that restriction seemed
to .1,,
--c'.ve the virtue of striking at the single feature of the use of common
trias,
funds that gave them the appearance of mutual funds. In his view,
the
-ommon trust fund, authorized solely as an internal facility for
11111
ed investment administration of trust business obtained in the course
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
7 4 i .4
6/26/62
-12-
of trust department conduct, was not a trust service to be popularized
in
and of itself.
An alternative to his recommendation, Mr. Masters continued,
l'oula be to authorize broader use of common trust funds to permit
investment on behalf of any trust created for purposes of obtaining the
4"aal services of a trust institution, not excluding services primarily,
Or Perhaps solely, concerned with the investment management function.
tevelopments in trust business and in public uses of trust institutions,
esPecially since World War II, added strength to arguments for change
in the
original concept of limited use of common trust funds, suggesting
a. raOre
liberal regulatory view and consideration of less rather than
greater restriction on their scope.
fleet
The adaptation of services to
the developing investment management needs of the public in connection
with its
desires and plans to accumulate funds to serve long-range goals
1184
been receiving increasing attention by trust institutions. Certainly
tr°14/4 a theoretical approach, if trust form alone became the basic test
°I' the sole test for entry to a common trust fund, the way would be open
t°r th°se who wished to use such funds as an investment pool for the
lelleral public.
While the opportunity to employ common trust funds as
141restment trusts for general public participation would be enhanced if
.
the
existing regulatory provisions were liberalized, the probabilities of
stleh an alteration in the use of the common trust fund seemed unlikely.
This 1,
as so) Mr. Masters believed, because of fundamental differences
betw
een common trust funds and mutual funds; he then commented on several
Qt 81Ach differences.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
isS•
234,1
6/26/62
-13In developing the recommendation for the Board's consideration,
"lean between extremes had been sought.
An attempt had been made to
inject into the common trust funds regulations a little more liberalization
441 a little more restriction, both of which were believed needed.
The
84111 had been both to broaden and to contain the common trust fund within
the framework of conventional trust institution uses and, collaterally,
to eliminate problems long associated with the true fiduciary purpose
1)rc)visions.
Where to draw the line was a difficult question; an even
c)1.'e perplexing one was how to defend the line drawn.
If the Board adopted the proposed liberalization, it might appear
to acmdone a quasi-investment business for banks, and the risk would be
heightened that some trust institutions might go to extremes with a
e°1111110r1 trust fund so liberated. It might be that the Board should not
roll
°w a course that could create such an atmosphere or contribute to
slach risks,
remote as they might be under an effective ban on merchandis14. If the Board was of the view that the recommended restrictions on
ad'vel‘tieing and publicity, together with other built-in control features,
14°11141 not be sufficiently effective to restrain use of the common trust
ae an investment pool for wide-scale public use, perhaps it should
c04°1
a specific prohibition on common trust fund investment of
Vocable
trusts or some category of them.
In Mr. Masters' judgment, that
14°1234 be an unhappy solution and one that would be much too harsh in view
Or
the widespread and growing use of revocable trusts for purposes consistent
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6/26/62
both With
with the needs of individuals creating such appointments and with
traditional and appropriate trust institution activities.
Mr. Masters' comments, which he presented in substantially
greater detail than they appear in these minutes, were read from a
r°11gh draft of a prepared statement.
In the ensuing discussion, members of the Board referred not
°41,Y to the information in Mr. Masters' memorandum of May 15, 1962)
l'egarding the bona fide fiduciary purpose test for participation in
ec/mmon trust funds, but also to the information in his memorandum of
413/11 16, 19621 regarding proposals that had been made for increasing
the dollar limitation on the amount of any one trust participating in
e°tmon trust fund.
The Board discussed the proposals in the latter
nleni°randum at its meeting of April 30/ 1962.
The members of the Board then commented, beginning with Governor
tvalls) who stated that he believed he hnO some competence in the field
or e°mmon trust fund operation, and spoke from experience.
His opinions
ht be personal, but they were very strong, and they were completely
'
ti13
441:agonistic to what he considered a compromise of principle in the
l'ecommendation presented.
This was the second of two proposals born of
the allibitions of the trust people in the banking fraternity.
The first
1148 t° lift the ceiling on the amount that could be invested in a
eOtrtrn —
41
'
—4
Deopi
e
trust fund by any one participant; indeed, there were some trust
Who would have removed the ceiling entirely. To do so, of course,
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-
6/26/62
-15-
/1°111d completely invalidate the purity of the bona fide trust principle,
\glitch in Governor Mills' view should be retained.
The theory of common
trust funds - a desirable theory in his opinion - was the provision of
a vehicle through which the individual of smaller means could have the
advantage of trust services that were not otherwise available to him
at reasonable
cost because of the size of his estate. By commingling
their funds a number of people of smaller means could share the advantages
°I* trust supervision and custody of their affairs. The pressure for
i*elaing the ceiling had, of course, come from the larger trust companies,
1111°13e clientele was made up of people of far greater means than the
ec)untry_wide average of common trust participants.
If one looked at
the size of the trusts in all common trust funds, it would be seen that
44 estate of $100,000 was a substantial one, and that permitting an
estate
of that size to enjoy the advantages of a common trust fund would
serve the needs of the great majority of people who sought trust services
tc)r their
convenience and safety.
Raising the ceiling above $100,000
1434/41 in a sense deny the fact that a trust is a matter of highly personal
e°118equence, an individual and precious sort of thing. The person who
1411its trust service wants the counsel of a trust officer who will give
13"8°Iial attention to his affairs. Raising the ceiling for participants
14 e—
"Iumon trust funds would be tantamount to saying that a great many
Pe°Ple are
of a
nonentities; their resources would be merged with those
81beat InanY other people, and they would receive periodic reports of their
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
4)01111.'4
6/26/62
-16-
13articipation and income.
Thus a trust company, foolishly in Governor
Mills' opinion, would have lost the advantage of giving close attention
to the trustor's or testator's wishes.
An especially important consideration at the present time,
GI3vernor mills said, was that lifting the ceiling on common trust fund
Paltieipation might expose a trust company to suits by participants in
4 trust for surcharges.
If investments of trust funds fell substantially
in value and there was an implication of inferior investment judgment
°lithe part of the trustee, a suit by one participant for a surcharge
°11 the trustee might bring on demands by all participants for surcharges.
These vere not nebulous possibilities:
they were considerations that
1-1111"`d trust companies seriously in the late twenties and early thirties,
Etrd
many eases trust companies were justifiably surcharged.
In continuing, Governor Mills pointed out that the bulk of trust
business was conducted by the trust departments of commercial banks.
Thns, liberalization of the scope of trust activity would not only expose
eclitalercial bank capital to risk, but dissatisfaction among the participants
14 c
,
'
rnalon trust funds might expose the entire operation of such funds to
13111/11c criticism.
As he understood it, the Securities and Exchange Commis-
sijg°11 oPPosed common trust fund liberalization on the sound grounds that
it Ifeti'lld lead banks into the securities business, and also that if common
t s
'
funds were used as an investment medium, banks would be involved
14 the
mutual funds field. From recent reports emanating from the
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Oft
6/26/62
-17-
investigations by the Securities and Exchange Commission it appeared
that some mutual funds had become involved in suspect practices.
To
Gc)vernor Mills, it was not consistent with the regulatory responsibility
Qr the Board to put banks in a position where they possibly could engage
in a field in which, through ambitious salesmanship) they would be exposed
to
similar dangers.
As to the question of advertising common trust funds, Governor
11111s observed that the entire proposal under consideration arose because
the anibitious officers of certain banks stated quite frankly that their
trust departments were being foreclosed from the opportunity to engage
In the investment advisory field - that that field had been taken over
11.111Uttial funds and that banks should be permitted an opportunity for
that
business.
To allow that opportunity, in Governor Mills' opinion,
11°1111 contradict the reforms effected by legislation of the early thirties
1)1'°Ilibiting banks from engaging in the securities business.
Trust officers
vith 'whom Governor Mills had talked two months ago, when there was a
810
7 decline in stock prices) had told him that they were receiving fre-
cillent questions from the beneficiaries of trusts about the value of their
Ilivestments and the future status of their income.
when
At the present time,
there had been a major slide in stock prices recently, those questions
VoulA
"be multiplied endlessly.
In conclusion, Governor Mills expressed the view that if the
a)
merely because it had been pressured by ambitious business builders
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6/26/62
-18-
814o/1g trust men, should allow a further incursion by banks into a
field that did not belong to them, its conduct would be reprehensible.
Governor Robertson stated that he would like to present some
e°nsiderations on the other side of the picture, without committing himself to a final view on that side.
The proposals were very far afield
trft the original intent of the common trust fund, which was to make
c)ssible investment diversification for trusts that were too small to
1).4°4 diversification otherwise.
Common trust funds had served that
13141308e admirably, exceeding the expectations of almost everyone who had
sthroceted the concept.
He believed that there was some basis for allowing
e°nsiderably greater scope for common trust fund operations, but it
8ee111.eli
advisable to retain a top limit so that no single trust could
jecqmrdize the funds of others if it had to withdraw from the fund.
Theiser°re, Governor Robertson was of the view that it would be best to
back to the original proposal on the dollar limitation question, but
to 111113ose limits both in the dollar amount of any participating trust
414 in the percentage of the total fund that could be constituted by
alay.
8-Ingle participant.
Liberalization of common trust fund operations would not be
()Denial
g a new field to banks, in Governor Robertson's view. He thought
that,
uaaks were already engaged in the kind of activity that was cited
13°tential; he knew of one bank that was acting as investment adviser
to a
mutual fund and being paid for it. He did not believe banks should
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6/26/62
-19-
go so far as to sell securities to the public, but he could not quite
See
the justification for prohibiting a bank from advertising a service
thatit was authorized to perform.
To him, therefore, the proposed
Prohibition
on advertising had doubtful merit.
What concerned Governor Robertson most was the possible effect
°n Public confidence in commercial banks if there were a great volume
of funds in common trust funds and there should be such a development
"the recent slide in securities prices.
He had grave fears on that
Pc)int, though he was not sure whether they were well-founded.
His present
itlelination was to go along with the staff on a liberalization of the use
f e°rnmon trust funds, with advertising being allowed, but with limits
434 a Participating trust both in dollar volume and in its percentage
t the total fund, so that the withdrawal of any one trust would not
J"Pardize other estates in the fund.
Governor Robertson recalled the discussion earlier in this
fleet'ng of the proposal to transfer to the Comptroller of the Currency
811Pervision of trust powers of national banks, including supervision
Or tl,
14
operation of common trust funds.
If the Board took action on
the
e°mmon trust fund proposals now under consideration, that action
e0111
not become effective for at least two months.
ttlriate
It would be unfor-
lf it became effective only shortly before the function was
,
tra
''s4erred.
If such a situation appeared to be in the making, he
th°11ght the Board should delay action in order to see if the proposed
trallsfer legislation would be enacted.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
f
6/26/62
-20Governor Shepardson remarked that to himp as a layman, this
%las an extremely complex subject.
It appeared to him that there was
iUStification for some liberalization of the strict interpretation,
but it would be wise to provide the type of safeguard Governor Robertson
had mentioned to avoid danger to other trusts if one large participant
should withdraw.
He saw a little merit in combining the dollar and
13elicentage restrictions on the size of individual participating trusts.
It did not seem to him that common trust funds should be advertised as
'
7"e mutual funds, yet he had no firm idea as to what restrictions
sh°11-1d. be placed on advertising.
He believed that banks should be
free to advertise their trust services, but it seemed a desirable safeto preclude advertising a particular fund and its earnings. Perhaps
Etd-vertising limitations of the kind Mr. Masters had suggested would be
desirable.
The size limitation on individual participating trusts might
best be judged by efficiency of operating costs, Governor Shepardson
continued.
In the light of the rise in costs of all types of services,
it eould be that, whereas trusts of more than $100,000 previously had
been
considered able to afford individual trust services, they no longer
(:1111
d. SO, and the limit should be increased to whatever was now the
brenk.
ing point at which trusts could not afford individual service but
esort to common trust funds.
Setting the limit by that rule of
erIty coupled with the limitation on the percentage of the total fund
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6/26/62
-21-
One participant might represent, should minimize whatever danger there
Ilight be in raising the ceiling.
As to the bona fide fiduciary purpose, Governor Shepardson
believed that the strict interpretation was too narrow for many people,
and there was justification for liberalization along the line Mr. Masters
had
discussed.
Governor King stated that he had had some experience with trust
rIalas from the customer's point of view, and from that experience he could
'
leeognize some of the problems referred to by Governor Mills. Perhaps
hia (Governor King's) experience had not been typical, but he had not
been
/rell impressed with the quality of service rendered. He realized
tilat that could be a harsh judgment, because his view involved only a
telt' institutions. He thought that Governor Robertson's point as to what
"feet Unhappy experiences in trust matters would have on the prestige
est ballking institutions as a whole was a very real consideration. Poor
41Derience with the trust department could easily cause a person to
34ee l'espect for the entire institution.
Governor King did not believe banks should reach into the realm
Or
railtual funds; they should be banks. He was in favor of having them
tset
all the deposits they could, but he did not believe they should be in
he investment business. The public was going to have some unfortunate
4-'r1ences in investments, and he did not think it was vise for the
1104rd .o
+
allow those experiences and their accompanying reactions to
peat
04 the banking system of the country.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
/26/62
-22Definitions of common trust fund regulations should be as
clear as possible.
Perhaps a revocable trust should be limited in
ter; which might provide proof of its true trust character. In
Governor King's judgment, a minimum term of five years would indicate
that the trust was replly not just a temporary investment; others might
e°11slider a different term preferable.
Governor Mitchell expressed the opinion that the commercial
ba4ks must participate in a growing economy.
One of the Board's
re
asons for increasing the maximum rate of interest on time and savings
dePosits, effective January 1, 1962, was to enable banks to participate
economic growth.
It should be remembered that the base of the
e°1tunerc181 banking structure was growing in importance; the public was
ieltr4ing to use money more efficiently. If banks were allowed only to
deposits, they would gradually shrink in importance and cease to be
41"al factor in the economy.
When people saved money it had to be
lrivested by someone who would take responsibility for it.
It was impor-
t41A that the savings of the country be invested as effectively and
con
13etently as possible. Banks would make mistakes, to be sure, but
that vould not deter Governor Mitchell from favoring investment by
ballks
Of a larger share of the national savings. He had confidence in
141rilercial banking institutions and the men that ran them, and he
thotigh
t they were as good as any one who could be found to perform the
in\resting function.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
His general philosophical approach as to how to
23.
6/26/62
-23-
et People who had savings to use them was to employ the banking
structure as
much as possible.
If the economy was to be made to work,
batiks must be allowed to handle the savings.
in beaks, an
There was a lot of talent
they should be given a chance to exploit their ability.
In continuing, Governor Mitchell expressed the view that there
Should, be a limit on the amount of individual participation in a common
trust fund that would insure that the management of the fund would not
give a disproportionate amount of attention to any particular trust.
Re thought that the percentage of the total fund that one trust might
e°11stitute should be small,.
As to advertising, it was his view that
the
l'e was too much regulation, which should be minimized in a free
ec°11°mY.
It did not bother him that people aggressively tried to make
111°IleY by selling the services of their institutions.
Any practice that
Illight be questionable could be pointed up through examinations, and it
116.8 his impression that examination of a trust department or institution
1148111°re thorough than that of a non-trust institution.
Governor Balderston asked if the proposal before the Board
11°4141 control an abuse of a common trust fund such as an aggressive
tIllat
company sending a short form of trust paper to its correspondents
44i offering them participations in its fund.
He had reservations as to
Irhether in broadening the uses of common trust funds the Board might
be,
'Pening the door to practices that could not be controlled.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
o)4,11,
6/26/62
Mr. Masters responded that the trust investment committee of
each trust institution must consider the appropriateness of each investment and the admission of each participant and record its approval in
the institution's minutes.
He could not imagine that any trust officer
1401.11d countenance an abuse of the kind about which Governor Balderston
44 inquired. If any such situation should develop, the Board could
adopt restrictive measures promptly.
Governor Mills commented that he could foresee that a situation
that was a possibility now would become much more of a likelihood if
trust services of banks were greatly expanded; the reasoning of this
situation echoed the reasoning the Board had followed in its decision
°4 the Morgan application last spring.
The situation he had in mind
1148 one in which trust institutions with authority to invest vast sums
of m°11eY at their discretion would almost inevitably be tempted to favor
investments in corporations that were closest to them as borrowers and
dePositors.
at
There was also inherent in such a situation the danger that
institution would subscribe for such a substantial part of a
lielf corporate issue that it would gain a dominant voice in the manageLe t of the company.
There was further discussion of certain types of institutions,
the
kinds of services they rendered, and possible overlapping of their
ei'lrices with those of trust institutions.
Comments were also made as to
the
esirability, if bank services were to be expanded in the direction
'
thefr
" aad been proposed, of conducting those activities in a separate
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
tylY f:, I
6/26/62
-25-
dePartment of the bank with an identification that would distinguish
it from the
trust department.
In concluding the discussion, Chairman Martin said that
Mr
'Masters had presented this problem most effectively for the Board's
8t4d3r, and he asked that copies of Mr. Masters' statement be distributed
fclr further study.
Personally, he had complete sympathy with Governor
Mitchell's general position as to the service that the banks of the
e°1"ultrY might be expected to offer.
He recalled some of the difficulties
that had occurred in past years in securities distribution and investMerit of savings, and he suggested that a consideration for the Board was
the 1)11b110 interest in terms of offering savers needed facilities. In
Ilia view, the banking business should be given a fair opportunity to
c°111Pete for customers who had savings, assuming of course that there
ere adequate safeguards.
The Board would want to bear in mind that,
48 111°re and more of these fields of service were removed from the
l'eglaated banking system, the banks would find their functions shrinking
14 relation to financial activities outside.
The discussion closed with the understanding that Mr. Masters'
stEttezent would be distributed for further study by the members of the
Prior to another meeting on the subject.
Governor Robertson then withdrew, as did all members of the
ti4fr except Messrs. Sherman, Hackley, and Solomon.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
r 001
6/26/62
-26Continental Bank and Trust Company.
On June 8 1962,
Mr. Hackley presented to the Board a memorandum dated June 7 outlining
a discussion
with President Swan of the Federal Reserve Bank of San
PlIancisco by telephone concerning the possibility of a settlement of
the Board's capital adequacy proceeding against The Continental Bank
and Trust Company, Salt Lake City, Utah.
At that time, the Board agreed
that discussion of the matter would be carried over to a meeting when
all members could be present.
Governor Robertson had withdrawn from
this meeting in keeping with the position he had taken that he would
not
Participate in the discussion or consideration of any matters
l'elating to the proceeding against Continental Bank.
At Chairman Martin's request, Mr. Hackley reviewed the discussion
that he
had had with Mr. Swan as presented in his memorandum of June 7.
Re stated that the seeming overture on the part of Mr. Sullivan, President of The Continental Bank and Trust Company, looking to an alternative
1)164 for providing adequate capital that would in effect terminate the
proceeding had been presented on a confidential basis.
The
1111111rY called first for some indication to Mr. Sullivan as to whether
the 13
oard would be receptive to any offer of settlement, or whether the
kctrd,
would reject any offer of compromise because of its desire to obtain
J4clicial confirmation of its legal authority. Mr. Sullivan also sought
to
10w whether, if the Board were to consider and reject such an offer
Of
settlement,
the fact that Continental had raised the question of such
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6/26/62
-27-
an offer would prejudice its legal position in the present capital
adequacy proceeding.
Mr. Hackley stated that he had expressed the
view in his memorandum of June 7 that nothing would be lost and much
Might be gained if the Board should express its willingness to consider
a reasonable plan offered by Continental that might be regarded as
1311aging about reasonable compliance with Continental's condition of
membership as to the maintenance of adequate capital.
He went on to
allY that he still felt that it would be well to consider whatever offer
*. Sullivan might wish to make, even though the mere consideration of
sUch an offer possibly could be construed by some as an indication
clf a willingness to compromise.
liackleY's opinion,be correct.
Such interpretation would not, in Mr0
Rather, the mere making of such an
(3rter on the part of Continental would be tantamount to a concession
by
the bank of the Board's authority to require adequate capital of
4
member bank, aria in any event it seemed most unlikely that any
Other bank would ever be willing to go to the lengths that Continental
11411k had in challenging the authority of the Board.
Thus, from the
Stand
Point of the Board, Mr. Haekley said that he felt that an indication
that
the Board would be willing to permit Mr. Sullivan to meet with it
f°r the purpose of discussing the question would not in any way weaken
the Bo
ard s position in the proceeding.
On the question whether the Board might use a meeting solicited
by u-
Sullivan or an offer subsequently made by him to prejudice the
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6/26/62
-28-
bank's position if no alternative settlement could be effected, Mr. Hackley
felt there would be no reason why the Board should initiate the use of
84ch information later in the proceeding.
Such a discussion was not a
Part of the record and it would be a matter for Board decision whether
B°4rd Counsel might subsequently use such information.
However, Mr. Hackley
said that he believed the Board's position might be weakened if it rejected
Mr. Sullivan's offer to discuss the question and if the bank subsequently
itIcluded in the record a statement that the Board had turned down such
44 overture.
The bank could contend that the Board was persecuting the
1144k and that its unwillingness even to consider an alternative settleWS an indication of such an attitude on the part of the Board.
Therefore, if the Board was receptive to discussing the possibility of
8tich an offer with Mr. Sullivan, Mr. Hackley felt that it should be only
°4 the condition that if such a discussion did not lead to a settlement
the case, the bank would not introduce into the forthcoming proceedings
a4Y material relating to such discussion.
In summary, Mr. Hackley said
th4t, while he was not sanguine as to the outcome of any discussion such as
Sullivan had inquired about, he could see nothing to be lost from
the Board's standpoint in meeting with Mr. Sullivan and there was a
termination of the
1)°88tbilitY--even if remote--that this could lead to
position.
131'°"eding without in any way compromising the Board's
Accord-
ing to Mr. Swan, Mr. Sullivan was prepared to come to Washington to meet
with the
the staff or with the
Board for a preliminary discussion with
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
.
fttrVir
Or.
6/26/62
-29-
members of the Board.
In the event the Board was willing to meet with
Mr. Sullivan, Mr. Hackley felt that it would be preferable to present
in writing to Mr. Swan the basis on which the Board would be willing to
have
such a meeting, including a stipulation that the Board would not
Ilse this in the show cause hearing scheduled to commence on July 23 and
that it would not consider any such proposal without assurance on the
Part of Mr. Sullivan and the directors of his bank that, if the plan
should not be accepted by the Board, the bank would not introduce into
the record
anything having to do with its submission.
Chairman Martin commented that he did not see how a condition
such as Mr. Hackley suggested could be enforced against Continental.
C°41Isel for the bank could, regardless of the Board's letter, at any
ttrile introduce such information into the proceeding.
He noted that the
ilcsard had pursued this proceeding over a period of years and had spent
4 large sum of money in order to bring about adequate capital structure
r°r Continental and to meet the challenge to the Board's authority to
rsqUire such adequate capital.
He did not see how the Board could pro-
‘ri4e a satisfactory answer to the Congress or to others as to why it
had Pursued the matter as it had and then been willing to consider or
4ceePt a settlement that did not accomplish the objectives of the proceeding.
an adequate explaMr. Hackley responded that he thought there was
118:t1°r1 for such questions, provided any settlement that might be effected
%1°111d) in the judgment of the Board, cause the bank's capital position
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
6/26/62
-30-
to be adequate.
The Board's order of July 18, 1960, directed the bank
to increase its capital by $1,5000000 within six months, but the order
Provided only one way in which the adequate capital might be provided,
that is, through sale of common stock for cash.
However, in issuing the
°rder the Board had recognized that this was not the only way in which
e4Pit5l of the bank could be made adequate. Thus, there was at least
44 area for an alternative proposal which might clearly satisfy the
need for adequate capital of the bank.
If the bank were to submit an
slternative that the Board in its judgment felt would provide reasonably
satisfactory capital, the Board could issue a new order rescinding the
1963 order and directing the bank to carry out the alternative plan.
Stleh a settlement need in no way be considered as a compromise of the
tIal'a-1 8 authority to require adequate capital.
On the basis of Mr.
Sigall's comments, Mr. Hackley said that it appeared that Mr. Sullivan
'4°111a be very happy to terminate the proceeding in some manner.
Chairman Martin stated that he could understand this feeling.
11°11"er, if such a procedure were followed, how could the Board be sure
that it had clearly established its right to require adequate capital?
IA Other
words, would the Board's position be as clearly established by
that
Illeana as it would be if it continued the case through the courts
and e—
Qcured a favorable decision?
Mr. Hackley responded that he believed the Board's position
Q04101
be clearly established in this manner.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
As a lawyer, he would
6/26/62
be happy
happy to see a clear-cut decision by the court that said that the
13°ani had the authority to require a bank to maintain adequate capital.
If, however, an offer were to be maae by Continental that was acceptable
to the Board, the Board could say that the bank must comply with a new
°Ilder vhich afforded adequate capital in accordance with the condition
ot membership,
M. in his judgment this would effectively sustain the
1°13.M.'s position.
In response to Chairman Martin's request for additional comments,
*
1 , Solomon stated that he had no views different from those expressed
bY Mr. Hackley. He did think that it would be awkward for the Board
tO
be put in a position where a litigant could say that it had attempted
each a reasonable compromise or settlement of a proceeding against
tcll
'
it, and that the Board had insisted on litigating the matter to a final
°Ileinsion merely for the purpose of getting a judicial determination as
to its authority. The litigant could then contend that the Board was
Pixtting the bank to expense and embarrassment simply for the purpose of
1114kIng it a guinea pig.
Chairman Martin replied that this case had been going on for
513, that the bank was the one that had challenged the Board's
Itlithority, that it clearly was not a case of the Board making the bank
glittlea Pig. It did not seem to him that the Board could easily justify
the
expense and effort that hati gone into the proceeding thus far and,
tthi8
Stage,
permit itself to be put in a position of dickering for a
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
21,;t1
6/26/62
-32-
settlement.
On the other hand, if Mr. Hackley was correct that the
330ard's authority could be clearly established, that was another
platter.
He had no objection to entertaining any suggestion that
Mr. Sullivan might wish to make, but in his opinion it would be a
Mistake for the Board to be in a position of dickering with the bank
°4 anY basis that would not bear up in court later on if an offer were
414de and rejected by the Board.
A charge of persecution had been made
against one of the members of the Board for years in connection with
this case and before it started, and he was not particularly concerned
about the possibility that a firm position by the Board at this stage
*kid hurt the Board because of any further charge of persecution.
He
clta not think that it would be wise for the Board in any way to appear
t° be "soft" at this stage, that rather than be in such a position it
14°41d be wiser for the Board to take the position that this was just a
ease of carrying out the Board's responsibilities, that it had already
81)e4t 4 great deal of time and money in pursuing these responsibilities,
aad that its interest was in settling the issues in the right way as
1311°111PtlY as possible.
Governor King said that he was much inclined along the lines
14d4cated by Chairman Martin's comments.
However, he would want to
eX-Pl°re the question whether it appeared that the Board might win the
Of clear-cut decision as to its authority that had been mentioned.
Ile did not
think that a failure to get such a decision would be disastrous,
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
231;4
6/26/62
but he did think that it would be undesirable if the Board now took a
course that would leave unsettled the question of its authority under the
statute.
He would not be prepared to say that the Board would not consider
a reasonable plan for settlement of the case.
Neither did he think the
13°e-rd should indicate to Mr. Sullivan that submission of an alternative
Plan would not prejudice the bank's case, although he would see no objection to telling Mr. Sullivan that he might present a proposal of any kind
with assurance that if he did so the Board would not introduce that
Pr°Posal into the record later on.
It was possible that Mr. Sullivan was
genuinely interested in settling the case on some reasonable basis; even
though the Board might not "win" the case in the courts, it might get a
settlement that was virtually complete as far as its order for providing
adequate capital was concerned.
Governor King said he
also would be
illterested in Mr. Hackley's judgment as to haw long the present proceedings
'light continue if carried on to their ultimate legal conclusion.
Mr. Hackley responded that he could not judge how long such
litigation might continue, but he would not be optimistic about an early
e°4clusion.
The show cause hearing scheduled for July 23 could last
tc)r a few weeks or conceivably it could extend over a period of a year
or two
or more. If, after that, the Board were to issue an order requiring the bank
to forfeit membership, and if that were litigated, the
4Lse could go on for years.
As Governor King's remarks indicated, there
1418 no assurance that the Board would win the case in the end.
It
1148 because of these and the other considerations mentioned in the
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
23
6/26/62
-34-
discussion this morning that he felt it would be appropriate for the
Board to permit Mr. Sullivan to meet with it on the possibility that
there might be an offer of an alternative to further legal proceedings
that
would put the bank in a reasonable capital position.
Governor Mills said that he would be willing to hear what
Mr. Sullivan had to say.
Thus far the approach of Mr. Sullivan had
been informal, and it was his judgment that it would be preferable not
to write a letter to Mr. Swan or to Mr. Sullivan setting down any
ccloditions.
If Mr. Sullivan or anyone else from his bank wished to
discuss this question with members of the staff and in so doing to
"fer a compromise of some sort, that would be quite in order.
He
1:1()tecl that the bank had retained earnings and there was a question how
tar it
was now out of line with the capital position of similar banks.
Allether question was haw far the bank had corrected its banking practices
that had been objected to earlier--things that were ordinarily curable
113r examination procedure.
Mr. Solomon said that his impression was that the bank's
c4Pital position had improved since 1960 but that it was still not in
138-1'tietaarly favorable capital position, that there would still be a
84bstantial shortage of capital according to their analysis.
that the Board
Governor Shepardson commented that the fact
itlight ultimately lose the case in the courts would not bother him.
This
1/(111-14 then pave the way for requesting needed legislation to establish
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ri
6/26/62
-35-
the Board's authority in this area.
In the meantime, he would have
40 objection to talking with Mr. Sullivan and if he wished to submit
a Plan to provide adequate capital, he would be quite willing to consider
such a proposal.
Chairman Martin suggested that the Board proceed along the
litles indicated by Governor Mills--that is, let Mr. Sullivan know that
the Board would listen to him, but not put any conditions in writing.
The Chairman also suggested that, in informing Mr. Swan that Mr. Sullivan
light feel free to present anything he wiShed to the Board, he also be
informed that the Board was not in a position to say whether his doing
so l'ould prejudice Continental's case.
Further, he should not be given
44Y assurance that the Board would not use that information subsequently
If no settlement were reached.
No disagreement with Chairman Martin's suggestions was indicated.
The meeting then adjourned.
Secretary's Note: Pursuant to recommendations contained in memoranda from appropriate
individuals concerned, Governor Shepardson
today approved on behalf of the Board
increases in the basic annual salaries of
the following persons on the Board's staff,
effective the dates indicated:
W. Sutton Potter, Senior Attorney, Legal Division, from $8,080
to $8,955 per annum effective July 22, 1962.
Herbert H. Hagler, Review Examiner, Division of Examinations, from
$8,860 to $9,120 per annum, effective July 8, 1962.
Mary L. Morris, Stenographer, Division of Examinations, from
$3,970 to $4,145 per annum, effective July 8, 1962.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
24r
6/26/62
-36Governor Shepardson today approved on
behalf of the Board memoranda from the
Division of Administrative Services
dated June 12 and June 15, 1962) recommending:
(1) Establishment of a new position of Operator (Mimeograph)
in the Duplicating, Mail, Messenger and Supply Section
of the Division; and employment of one Operator (Mimeograph) at Grade PG-61 subject to determination by the
Division of Personnel Administration through normal
classification process.
(2)
Establishment of an additional position of Operator,
Tabulating Equipment, in the Division; and appointment, with full employee status, of Charles W. Wrenn,
presently Operator, Tabulating Equipment (temporary
appointee), to fill the position, subject to normal
review by the Division of Personnel Administration
with regard to promotion and transfer from within
the Board.
(
n
/1
I I
/)
A/1,1,
secreay
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1,1
67
2W4
BOARD OF GOVERNORS
Item No. 1
6/26/62
440**,1.4
OF THE
,
COtop*o,,,
;4
*
FEDERAL RESERVE SYSTEM
kt
WASHINGTON 25. D. C.
4_ 4
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
0V
-114010
\
444***
June 26, 1962.
Board of Directors,
The Drovers National Bank of Chicago
Chicago, Illinois.
Gentlemen:
The Board of Governors of the Federal Reserve
System has given consideration to your application for
fiduciary powers and grants The Drovers National Bank of
Chicago 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 Illinois.
The exercise of such rights shall be subject to the provisions
of Section 11(k) of the Federal Reserve Act and Regulation F
of the Board of Governors of the Federal Reserve System.
A formal certificate indicating the fiduciary powers
that your bank is now authorized to exercise will be forwarded
in due course.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Item No. 2
6/26/62
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
June
261 1962
*. Phillip S. Hughes, Assistant Director
for Legislative Reference,
Executive Office of the President,
Bureau of the Budget,
Washington 25, D.
C.
Dear Mr. Hughes:
This is in response to your Legislative Referral Memorandum
(:)t June 6, 1962, requesting the views of the Board on a draft bill
P
tF°Posed by the Department of the Treasury "To place authority over
ae trust powers of national banks in the Comptroller of the Currency."
This draft bill transfers from the Board to the Comptroller
authority (1) to grant to national banks the right to act in fiduciarY capacities, and (2) to regulate the exercise of fiduciary powers
bY national banks, including the operation of common trust funds.
This is to advise that the 3oard favors enactment of the
Proposed legislation.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
.44010040
4410°Q0C!,"4
Item No. 3
OF THE
FEDERAL RESERVE SYSTEM
kiVOLir, 11,1
6/26/62
WASHINGTON 25, D. C.
,11111,
5,-4*
.",
'
ADDRESS OFrICIAL CORRESPONDEN
CE
TO THE BOARD
June 26, 1962
AIR MAIL - REGISTERED
RETURN RECEIPT REQUESTED
Mr. Peter W. Billings,
Pn4bian
Clendenin,
uohtinental Bank
Building,
salt Lake City 1, Utah.
Re: In the Matter of The Continental
Bank and Trust Company
Dear Mr. Billings:
This is to advise you of the Board's decision with respect
to
Jour request, by letter to the Board
dated June 4, 1962, that the
show
Cause Hearing in the above matter scheduled for
July 23, 1962,
n held in
some public building other than the Salt Lake City Branch
the Federal Reser
ve Bank of San Francisco. As yc ,1 Ivre informed
0Y. the'Board's letter of June 8, 1962,
Board Counsel were given an
i!
:
yortunity to submit comments on your request befor
e June 18, 1962.
accordance therewith, a Statement
Board
of
Couns
el
in opposition
:
a .,Your request
was submitted to the Board under date of June 14, 1962,
.1.:;.0 service upon you of a copy
of such Statement has been certified
'4 the
Board.
After consideration of your request and the Statement in
°PPoe.i.
peci 1-ion thereto, the Board has decided that
the nature of the
eral Reserve Bank Branch building in
the
Salt
Lake
City and access
treto are not
such as to deter or inhibit public attendance at
.T :2 Hearing. Accor
dingly, the Board finds no reason to modify its
Z
a-c)r Orders desig
nating the Salt Lake City Branch building as the
c_e of hearing, and your request is therefore
denied. However,
IkZ attention
is invited to section 263.3 of the Board's Rules of
"ice, which provides as follows:
"Each hearing shall begin at
the time and place ordered
,
13Y the Board, except that, where
a hearing examiner has
.?..een designated to conduct a hearing, the time
and place
Icr beginning such hearing may, for
good cause shown, be
Changed by the hearing examiner. Thereafter, the hearing
maY be successively adjourned to such
time and place as
IllaY be ordered by the Board or by the heari
ng examiner."
Very truly yours,
(Signed) Merritt Sherman
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Merritt Sherman,
Secretary.
Item No. L.
6/26/62
June 26, 1962
1° ALL mEMBERS
OF THE BOARD'S STAFF:
The Board today approved the following policy on Employee-Management
Coo,
ver
'
stion, effective July 1, 1962:
To establish the basic policy of the Board with respect to
r - • ,
ecugnition of employee organizations.
Poli
Employees of the Board of Governors of the Federal Reserve
SYstem shall have, and shall be protected in the exercise of, the right,
freelyan
and without fear of penalty or reprisal, to form, join, and assist
Y employee organization or to refrain from any such activity.
As used in this policy the term "employee organization"
an lawful association, labor organization, federation, council,
oc:
ic urotherhood having as its primary purpose the improvement of working
unn
.ditions among Federal employees, or any craft, trade, or industrial
prl
i°n whose membership includes both Federal employees and employees of
(1)vate organizations; but such term shall not include any organization
ber:
11hich discriminates with regard to the terms or conditions of memwhisir_liP because of race, color, creed, national origin, or sex, or (2)
stac
tn asserts the right to strike against the Government of the United
etrir or any agency thereof, or to assist or participate in any such
parj-e, or which imposes a duty or obligation to conduct, assist, or
the lciPate in any such strike, or (3) which advocates the overthrow of
constitutional form of government in the United States.
Ri
hts
in
b Em lo ees. Recognition of employee organizations, in
whatev _Retaed
i_
em,
form accorded, shall not preclude any employee, regardless of
es;:"Yee organization membership, from bringing matters of personal conto the
attention of appropriate supervisors or officials of the
by ,t1 in accordance with procedures heretofore or hereafter established
oth'fle Board, or from choosing his own representative in a grievance or
er action.
Means
41-,,hts Retained
b Mana ement. The Board retains the exclusive right,
!
e the Provisions of the Federal Reserve Act, as amended, to determine
ithanagement
of its internal affairs.
Proced,
Employees or their representatives wishing to secure recogbY the Board of their employee organizations should submit their
est in writing to the Director, Division of Personnel Administration.
t
lVi;i1-149-32Z.
The Board may revise the above policy and any procedures
tive 'ated thereunder as it may deem necessary in the interest of effect
emPloyee-manag,ement cooperation, with due regard to the right of
'Yee organizations to be heard or consulted.
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
DIVISION OF PERSONNEL ADMINISTRATION
7'1
@FedFRASER