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Minutes for To: Members of the Board From: Office of the Secretary June 27, 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 : 1.:elow. If you were present at the meeting, your 4nitials will indicate approval of the minutes. If You were not present, your initials will indicate °n1Y that you have seen the minutes. Chm. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Gov. Mitchell 41,11 rr' Minutes of the Board of Governors of the Federal Reserve %%tem on Wednesday, June 27, 1962. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Robertson Shepardson King Mitchell Mr. Sherman, Secretary Miss Carmichael, Assistant Secretary Mr. Fauver, Assistant to the Board Mr. Hackley, General Counsel Mr. Farrell, Director, Division of Bank Operations Mr. Solomon, Director, Division of Examinations Mr. Johnson, Director, Division of Personnel Administration Mr. Hexter, Assistant General Counsel Mr. Kiley, Assistant Director, Division of Bank Operations Mr. Goodman, Assistant Director, Division of Examinations Mr. Thompson, Assistant Director, Division of Examinations Senior Attorney, Legal Division Potter, Mr. Review Examiner, Division Thompson, Mr. of Examinations Distributed items. The following items, which had been dis- tIlbuted to the Board and copies of which are attached to these minutes 1114er the respective item numbers indicated, were approved unanimously: Item No. tetter to Chemical International Banking Corpoto -n, New York, New York, granting consent 44-444 of Liberia, Inc., Monrovia, Liberia, establish a mobile banking unit in Liberia. 1 6/27/62 -2Item No. Letter to the Federal Reserve Bank of Dallas 413Proring the appointment of Linwood F. Moss ! It Federal Reserve Agent's Representative at ' 4e Houston Branch. 2 Mr. Goodman then withdrew from the meeting. Federal Reserve Bank budget procedures. Pursuant to the understanding at the Board meeting on April 11, 19620 a letter was 0.4 April 16, 19620 to the Chairman of the Conference of Presidents of the Federal Reserve Banks enclosing a early of a Inenlorandum from Mr. Farrell, dated March 20, 1962, which discussed 1°80-bilities for simplifying and improving procedures under which Reserve Bank budgets were compiled and submitted to the Board. In the letter the views of the Conference of Presidents with respect t°1117e specific proposals were requested. A memorandum from Mr. Farrell, dated June 25, 1962, reported that the Conference of Presidents at a meeting on June 18, 19620 44141ted the following recommendations of its Subcommittee on Account14g tor revisions in the procedures for preparing and submitting 4serve Bank budgets: 1* Submission of budgets either by departments or by functions. 2. Submission of two budgets each year, one covering the Period January 1-June 30 and the other covering the Period July 1-December 31. 21. 6/27/62 -3- 3. Comparisons of budget estimates with actual expenses for the same period one year ago. 4. A budget report form showing by departments or functions the average number of employees and total expenses for the base period and for the budget period, and the amount and percentage change in expenses. 5. Limiting explanatory material accompanying the budgets to the reasons for (a) the significant developments resulting in substantial gross increases or gross decreases in departmental or functional expenses, and (b) changes in the number of employees in Grade 12 and above experienced in the budget period, as compared with the number of such employees on the last day of the base period. 6. Elimination of the budget experience reports. W. Farrell recommended that the Board adopt these proposals, '4401 were similar in most respects to those set forth in his March 20 raenlorandum that had been sent to the Presidents on April 16. The most significant difference was that the March 20 memorandum proposed that budgets be submitted by departments, whereas the Conference l'ecommended that individual Reserve Banks determine whether to 811brait their budgets by departments or by functions. The Presidents' 1.1c4/n 1endations also suggested that the budget periods cover six 1)1()Irths starting January 1 and July 1, whereas the March 20 memoranc1141 proposed six-month periods starting April 1 and October 1. Mr. Farrell also recommended in his June 25 memorandum that the Reserve Bank budgets for the period January 1-June 30 be submitted t° l'each the Board by November 22, and the budgets for the period 1-December 31 be submitted by May 22. , 6/27/62 In view of the proposed new procedures requiring two budgets Year, the Presidents' Conference had raised a question as to 'whether the Board might wish to re-examine the practice of having 411111/al conferences between a committee of the Board and the individual Reserve Bank Presidents prior to submission of their budgets. Mr. .tarrell suggested that, in lieu of changing the present procedures and requiring conferences twice a year, the Board might consider a 1)r°°edure under which each Reserve Bank President would, meet with a c0411311ttee of the Board during the latter part of the calendar year, 4t Ilhich time there would be a discussion of officer salaries and ellYmaior changes contemplated in Reserve Bank programs, including 81zab1e building projects, but with no intention of an over-all blziget review. With respect to the Presidents' proposal for submitting butigets on either a functional or a departmental basis, Mr. Farrell 8414 that this would mean that the budget of one Reserve Bank could 11°.t be readily compared with that of another Reserve Bank, but he clla not consider this to present a problem. As to the meetings of R erv -e Bank Presidents and a committee of the Board for preliminary blab. -' 15ec discussions) he noted that there had been some feeling on the 1541't of the Presidents that these annual conferences had served a 118erla Purpose but had become somewhat burdensome. This had occurred bee /48e some of the Presidents felt that they should have in their 6/27/62 -5_ hands a complete set of their budget figures before meeting with the Board committee, a practice that had resulted in considerable additional work for the Reserve Banks concerned. Mr. Farrell said that Mr. Johnson believed that it would be helpful for a Board coltallittee to continue the practice of discussing officer salaries /fIth the Presidents at least once a year in advance of budget 811balissions, and it was thought that at the same time there could be a discussion of any major changes contemplated in operating laro cedures. Chairman Martin suggested that the matter of meetings of Inaividual Reserve Bank Presidents with a Board committee for the P 14115°se of discussing officer salaries be discussed later today in e)teeUtive session; he then invited comments on any of the other 11'()Iposals for changes in budget procedures. Governor Mitchell inquired as to the option for submission ef bUdgets either by functions or by departments, suggesting that the,, 4 be encouraged to report by departments. Mr. Farrell responded that this would be his preference, htlt he felt that most of the Reserve Banks had fairly definite a on this point and that at least one or two of the Reserve Ilank s 'would definitely prefer to submit budgets by functions. There ensued a general discussion, after which the six omme ndations of the Presidents' Conference with respect to budget 6/27/62 -6- Procedures were approved unanimously. Also approved was the recommenda- tion that Reserve Bank budgets be submitted to the Board by May 22 tuid November 22. It was understood that the matter of conferences of Reserve Ikat Presidents with a committee of the Board prior to the preparation Of budgets *would be considered in executive session later in this ineeting and that appropriate advice regarding the revised budget 15r°cedures would be forwarded to the Reserve Banks. _Ilpplications of First Virginia Corporation. There had been stributed (1) a memorandum from the Division of Examinations, dated 4144e 20, 1962, recommending approval of three applications of The st Virginia Corporation, Arlington, Virginia, under the Bank ROi44-lag Company Act to acquire 80 per cent or more of the outstand- ite voting shares of Farmers and Merchants National Bank, Winchester, Southern Bank of Norfolk, Norfolk, Virginia, and Peoples' 1141121k, Mount Jackson, Virginia; and (2) a memorandum from the Legal 411rUion, dated June 26, 1962, which was designed to assist the Board 14 its consideration of the advisability of holding a hearing or oral l'esentation of views in connection with the three applications. According to the Legal Division memorandum, no objections to -1Trova1 of the applications had been received and it appeared that . 110''' rther proceeding was necessary for the development of primary t4etuAl ------ information. However, certain policy questions were involved 6/27/62 because of the fact that First Virginia had outstanding two classes of common stock (Class A and Class B), one of which (Class A) had °114 limited voting rights. It was proposed to issue additional shares of the Class A stock to shareholders of the three banks Involved in exchange for their voting shares. As pointed out in the memorandum, First Virginia's Class A alla Class B stock had the same par value, essentially the same rights tcs dividends and upon liquidation, and thus essentially the same itterest per share in the net worth of the company. The principal clitterences were (1) that Class A shareholders had no pre-emptive or allbscription rights in additional Class B stock, and (2) that all the Power was vested in the holders of the Class B stock except that Of Class A directors, voting as a class, could elect 20 per cent the directors (but no less than one director) and could vote on "CY alteration to the privileges, rights, and powers given to the Class B stock. Thus the holders of Class B stock would be in a position to evoid dilution of their voting control of the corporation. At the same time, with each acquisition financed in the manner proposed her e 14an8gement's investment in the holding company (now only 43 ' per cent) would become less and less proportionate to its control. This situation raised a question whether the proposed issuance of C1488 A stock was pertinent to the Board's responsibilities in bank 6/27/62 -8- h°1cling company applications. In order to secure more information regarding this aspect of the case, it was suggested that the Board rilight wish to have an opportunity to explore the matter further tame to face with representatives of First Virginia. The Legal sion was of the opinion that an informal oral presentation Prc'eeeding rather than a formal hearing would adequately afford such oPportunity since the matter was one of administrative judgment rather than a means of ascertaining facts. Such a proceeding would 418° afford the Board an opportunity to inquire further into other 4ePects of the merits of the proposal. Chairman Martin commented that, while he was not prepared to 11(rte on the applications today, he believed that it was desirable to have the views of the staff as to the advisability of having an Presentation. In commenting on the matter, Mr. Solomon said it appeared that the principal question in connection with the three applications 1148 that involving the proposal of First Virginia to issue limited Ircting shares of stock to the shareholders of the three banks. 1148 the view of the It Division of Examinations that questions relating to this subject would not be particularly susceptible to public tliselission and, therefore, if any presentation were scheduled, it 1148 tbonght that it should be closed to the public. 6/27/62 Mr. Solomon recalled that, on the most recent occasion on Ilhich the Board considered an application of First Virginia, the Class B stockholders, with about 50 per cent of the company's stock, had control of the holding company. Since that time one of the banks inthe First Virginia group had absorbed another bank, giving in exchange limited voting stock in the company, thereby further increasing the number of Class A stockholders. As a result, Class B stockholders, with about 43 per cent of the stock, were now in conIf First Virginia were to acquire the additional three banks, Class B stockholders would then have only about 25 per cent of the Stock but they would continue to elect 80 per cent of the directors. Mr. Solomon commented that, as had been pointed out in the allns 26 memorandum from the Legal Division, the question here was Illat interest, if any, the Board should take with reference to the 131'crPosed issuance of stock. Perhaps the Board should take the 15°81tion that the matter was of no concern to it as long as disclosure Ifte nime to the stock purchasers. 84011.101 look On the other hand, maybe the Board at the proposal more critically, having in mind it Ir°1414 have an effect on the character of management. If the Board t°°k that position, then there was a question as to the point at 1141ch the Board should draw the line and advise the company that it could go no further in the issuance of limited voting stock. ITIcA 6/27/62 -10Chairman Martin then asked if any members of the Board favored 84 oral presentation with respect to the three applications. Governor Balderston responded in the affirmative, indicating that he would favor an oral presentation confined to the subject of the proposed distribution of stock. He thought there was no need to discuss the substantive issues with the applicant. Governor Robertson said he also favored having an oral presentat1°11, although he did not think the discussion should be confined 8°44 to the matter of stock distribution. For example, there was 4180 the point as to just what purpose First Virginia was serving 14 getting control of banks throughout the State of Virginia and Irhether that control was beneficial to the public and the banking 81.Stem. He believed that this question and any others that might 8-la1se should also be explored. Mr. Hackley said he agreed with Mr. Solomon that there was little need for any public proceeding. The Legal Division was of the °Pinion that, if the Board had any question regarding the tter of voting control and distribution of stock, it would be ' tne 'table to have an oral presentation in order that this question nlIgIlt be explored further with the applicant. He noted that under the )ard's Rules of Procedure any oral presentation was public -‘ 11111ess otherwise ordered. In this case the Board could merely to the applicant indicating the desire to have an oral 901,0-4() 6/27/62 -11- Presentation and noting that this would not be a public proceeding. 4160, if desired, the principal questions that the Board would wish to have discussed at the presentation could be mentioned in the letter. If the matter of stock ownership were mentioned, this would suggest that the Board considered this question to be relevant under the Bank Holding Company Act. It was the View of the Legal Division t that the question could well be relevant not only to the managemen El-ctor but also to the public interest factor. Mr. Hackley mentioned that the Congress had in the past indicated a policy against stock c°ntrol situations of the type proposed in this instance. If the 11()arcl decided to have an oral discussion, Mr. Hackley thought it Might be preferable to hold it in the Board Room rather than in Room 1202, thus getting away from a more formal type of procedure. Governor Mitchell inquired whether any interested party h°111d be invited to attend any oral presentation that might be Ile41 on the applications. While he had no strong feelings in the he leaned in the direction of inviting all interested parties. ion in this case Mr. Potter suggested that an oral presentat lig}-1-t be considered more in the nature of a means to clarify infortnati°n already in the Board's hands, rather than a means of securing a4k4tional information. also The Board might wish to consider tirig the three banks that First Virginia sought to acquire to be r ePresented in order to present their views on the proposed stock 6/27/62 -12- distribution. Chairman Martin invited comments on the problem, indicating that when the general public interest was involved in an application he leaned toward permitting any interested party to present views. Governor Balderston stated that, on the basis of the slalstantive issues, he would at this time be inclined to approve the three applications if the holding company would agree to give the Class A stockholders the same voting rights as the holders of the He would be unwilling to vote favorably if holders Class B stock. "25 per cent of the company's stock would have control of the c)rgianization. If the Board approved the three applications under e°4s1deration, it was to be expected that there would be other 8ilaile-r applications from First Virginia in the future and the percent4ge of Class B stock would decrease even further. Accordingly, he believed that now was the time to act in the direction of preventr€ any further distribution of Class A stock with its limited Irc)ting rights. As had been mentioned earlier, on the most recent clecaElion on which the Board had considered an application of First 1111‘gillia to acquire stock of a bank, the Class B stockholders held 1°1'e than 50 per cent of the stock. That percentage had now tirm, to 43 per cent as a result of a merger over which the Board 44 no tklacier control. If the Board should approve the three applications consideration, the control of the organization would be vested ort.14,4 6/27/62 -13- in 25 per cent of the shareholders. The Board would be placed in a difficult situation in considering similar applications in the future where the percentage of Class B shareholders might be expected to clrolo even lower. t° class He doubted that full disclosure by First Virginia A stockholders of their rights under the proposal was an adequate means for handling the situation. indicate tO stock If First Virginia should a willingness to change their organization with respect control, he would be inclined to approve the three applica- 118, recognizing of course that the accomplishment of these changes il°11-1-d require time. Governor Mitchell inquired as to the propriety of advising "Virginia 1111' that the Board would approve the applications if certain features of its organization were changed. Would it not be 131'eferable for the Board to deny the applications and then let First 161-nia come in with an alternative plan? Chairman Martin then read a memorandum from Governor Mills 111/" 1ich the latter indicated that he did not favor an oral presentati n and stated reasons why he had reached that conclusion. Governor King inquired whether any other holding company had two classes of common stock, some of which carried limited -es privileges and Mr. Solomon responded that there were some sirai lar situations but as far as he knew none of them were exactly the saMe as the First Virginia case. r?grz 6/27/62 Mr. Hackley said that he would have reservations as to the wiry-eAsestion made earlier in the discussion that the Board might EIPProve the applications subject to First Virginia's changing its °rganization with regard to stock distribution and rights. In the event that the company should later fail to make a change in its °rganization, the Board would be faced with an enforcement problem. The Board might wish to disapprove the applications on the grounds the stock distribution proposal as well as any other grounds that seemed appropriate. However, as had been pointed out earlier, the cillestion of stock owmrship and distribution had not previously been the basis for the Board's decisions in any other bank holding C Ortm -.vanY cases and a legitimate question could be raised as to 'Whether this matter was relevant under the Bank Holding Company Act. Acc°rdi , in the event of disapproval, the Board's position might be somewhat stronger if an oral presentation had been held. Governor Balderston said he was impressed with the possibility or the Board's denying the applications and setting forth reasons order that this holding company and others might be advised as to he Board's position on voting control through stock arrangements of this sort. In this event First Virginia would be free to challenge the Board's decision if it so desired. After some further discussion, Chairman Martin suggested that the Board postpone further discussion of First Virginia's 1 6/27/62 -15- aPPlications until July 11 when all members of the Board were expected to be present, at which time the Board could either take up the eaVlications for action, or it could consider further the possibility c)f affording First Virginia some opportunity for presenting further views on the matter. There was agreement with this suggestion. During the foregoing discussion Mr. Molony, Assistant to the 8°ard, joined the meeting and at its conclusion Messrs. Thompson Assistant Director, Division of Examinations), Potter, and Thompson (Review Examiner) withdrew. Examination reports of national banks (Item No. 3). Pursuant tO the understanding at the meeting on June 21, 1962, there had been dj-stributed a draft of reply to a letter from the Comptroller of the elirrency dated April 30, 1962, which informed the Board of a new ellealle of charges to be made for providing Federal Reserve Banks lfith copies of examination reports of national and District of C°111111bia banks. The letter would indicate that, in view of the riecl for the information in the reports and the Board's reluctance t° 814biect national banks to additional examination, the Reserve kriks would for the present and until further notice pay the Comptroller the Currency the new schedule of charges that had been fixed by the Comptroller for each report requested. The letter would request tha4. ,each Reserve Bank be furnished with only one examination of all national banks in its district for each calendar year 6/27/62 -16- 'Would not request reports of trust departments or separate rePorts of branches. If additional reports were needed by any Rsserre Bank, the Office of the Comptroller of the Currency would be so advised. Governor Robertson, who had worked with the staff in the PreParation of the letter, stated that the revised draft reflected the views of the Reserve Banks as well as the Board. clissic After dis- during which a number of editorial changes were suggested Etali agreed upon, the letter was approved unanimously. A copy is attached as Item No. 3. Report on S. 3291 (Item No. 4). In a communication dated 4411e 26, 1962, the Bureau of the Budget requested the Board's Ill-ells on enrolled bill S. 3291, "To amend section 14(b) of the 1Pederal Reserve Act, as amended, to extend for two years the illtta'cQlty of Federal Reserve Banks to purchase United States 0 4 1114.gatlons directly from the Treasury." Unanimous approval was given to a letter to the Budget IkIreall recommending approval of the bill. A copy of the letter 18 ttached as Item No. 4. At this point all of the members of the staff except Niekirs • Sherman, Hackley, and Solomon withdrew from the meeting. Governor Robertson did not withdraw from the room, but he t te that in keeping with his previously announced position he 6/27/62 -17- lgould not participate in the discussion or consideration of the next matter to be taken up regarding the Board's proceeding against The Continental Bank and Trust Company, Salt Lake City, Utah. Continental Bank and Trust Company. to Mr. Hackley referred the discussion of the Continental Bank matter at yesterday's meeting,stating that shortly after the meeting there was received rr°m Counsel for the bank an additional motion entitled "Motion tc) Dismiss and Demand for Final Order." As indicated in his Memorandum dated June 26, Continental moved (1) that the proceeding he dismissed because of the Board's lack of legal authority and the 111118-lidity of its order of July 18, 1960, and (2) if this motion to dismiss was denied, that the record on the show cause hearing contain a stipulation to the effect that Continental had failed to c°mPlY with the 1960 order for the reasons above indicated and that the show cause hearing thereupon be closed, and (3) that the Board then issue a "final" order requiring Continental to surrender its eral Reserve Bank stock and forfeit membership in the System ' 'e6 lithin such reasonable time as to allow Continental to secure Cial review. Mr. Hackley noted that Board Counsel was entitled to t n this motion. e- ---Ys in which to file an answer or objection to Mr. Hackley went on to say that he had no way of knowing 144ether Mr. Sullivan had given up the thought he had expressed to 'Swan on June 6 that he would like to meet with the Board to 141' 6/27/62 -18the possibility of a settlement of the case other than by fUrther litigation. Because of the receipt of this motion and because of some lack of certainty as to just what procedure should be followed in communicating with Mr. Sullivan along lines discussed at Yesterday's meeting, no call had yet been made to Mr. Swan. Hackley said he was not quite sure at this stage whether to in-11°M Mr. Swan that Mr. Sullivan should submit something to the 8°8.rcl in writing or whether he should come to Washington to meet vith the Board, and if so, on what date. Chairman Martin said that the submission of this new motion bY Continental would reinforce the general thinking that he had e)cressed at yesterday's meeting, that is, that it was a matter for Sullivan to decide whether he wished to submit any offer of settlement as an alternative to the Board's 1960 order. In the Chairman's view, it was clear that the Board should not make any e°73matment with respect to the consideration it would give to sileh an offer, and it should not assure Mr. Sullivan that such an trels would not subsequently be placed in the record if the III'°eeecling continued. Mr. Hackley stated that if Mr. Sullivan wished to come to s flgton there was, of course, the question of whom he would meet 141.th• While the staff would be entirely willing to meet with Mr. It was his opinion that in the event Mr. Sullivan came 6/27/62 -19- to Washington it would be preferable for him to meet with the Board, and it might be preferable that members of the Board's staff who vere on the adjudicatory side and who would be advising the Board ill this case in the future not be present at such a meeting. Chairman Martin said that he thought this matter should be discussed with Mr. Swan by telephone and that the important "Ilsideration was to guard against any impression being conveyed to 141'• aullivan that the Board was in any way seeking a compromise settlement of the case. It was essential, in the Chairman's judgment, that the Board not be put in a position intentionaily or otherwise where anybody could suggest that the Board had in any way solicited a set taement of this case. The other members of the Board indicated agreement with this view. Governor Shepardson stated that he understood this to " r4 41 that Mr. Swan would inform Mr. Sullivan along the lines the ChEtirillan had indicated, that is, that if Mr. Sullivan wished to e°1111e to Washington and meet with the Board, the Board would be --J-ng to meet with him but this was a decision entirely in Mr. 21111Avan'8 hands. Further, the Board was making no commitment as t() the consideration that it might give to any alternative plan or oettlement and did not guarantee that an offer that might be vould not subsequently become a part of the record. t- • 6/27/62 -20Mr. Hackley stated that he would talk with Mr. Swan along these lines and that he would include in his comments the statement that Mr. Sullivan should look to his own legal counsel for advice as to the effect that any visit he might make to the Board would have on Continental's position in subsequent proceedings. Chairman Martin stated that unless there was objection, it would be understood that Mr. Swan would be advised along the lines of the discussion at today's meeting. Secretary's Note: Subsequently, after Mr. Hackley had talked with Mr. Swan, a telephone call was received by Governor Balderston from Mr. Sullivan in which arrangements were made for Mr. Sullivan to meet with the members of the Board at 11 a.m. on Monday, July 21 1962. Luncheons for central bankers attending annual Bank and kma Mr. Sherman stated that the annual meetings of the International Rank for Reconstruction and Development, the Iritemotional Monetary Fund, and the International Finance e°1*Poration were scheduled to be held in Washington during the week be/Mining September 17, 1962, and that the Secretaries of the Bank 4411 PUnd had inquired of him as to whether the Board contemplated 1141eheons for visiting central bankers of the type given for them 14 earlier years. He said that, while there were arguments pro 414 eon, it had been assumed that the Board would not wish to have the central bankers come to Washington on this occasion without ',1.'71 • 6/27/62 -21- some recognition by the Board of their presence in the city. Chairman Martin stated that he thought there was no Taestion but that the Board would wish to follow the procedure that had been followed in other recent years when the Bank and meetings were held in Washington and that the most practicable arrangement was to give luncheons on two days to accomModate an attendance of around 100 representatives of other central banks, each luncheon to be followed by a chart show. Following a discussion, it was understood that appropriate 'rangements for such luncheons would be made for September 18 4I and 19. All members of the staff then withdrew and the Board went illt° executive session. Following the meeting, the Secretary was informed that during the executive session the following actions Igere taken by the Board: Appointment of Mr. Thomas as Consultant. A memorandum f1.0M the Division of Personnel Administration dated June 27, 1962, l'ec)Mmended (1) that Woodlief Thomas, recently retired as Adviser to the Board, be appointed as Consultant in the Offices of the Members or the Board for the period July 16-20, 1962, in order that he might 44estr at hearings of the Royal Canadian Commission on Banking and ?1111̀1:1ce, and (2) that he be compensated at the rate of $75.00 a day tor each day worked for the Board plus transportation expenses and Iler diem allowance in accordance with the Board's travel ragulations. 4)41(I 6/27/62 -22- It was noted that Mr. Thomas was scheduled to appear before the Canadian Commission in Ottawa for questioning and discussion incident to the paper that he prepared as Adviser to the Board and at the Commission's request. The two recommendations were approved unanimously. Federal Reserve Bank budget procedures (Items 5 and 6). In a continuation of the discussion of the change in Reserve Bank bluiget procedures, approved earlier during this meeting, the Board continued, effective immediately, its Budget Committee as constituted in the past, and reconstituted it as the Committee on °Isganization and Building Plans, with the understanding that the flInction of such committee would be to meet once a year with each Reserve Bank President for the purpose of considering officer development and compensation and any contemplated changes in major Reserve Bank programs, including sizable building projects, but with 40 intention of over-all budget review. It was understood that, 14 view of the change in budget procedures agreed upon earlier cIttri -ng this meeting, such meetings ordinarily would be held later but that 14 the calendar year than has been customary in the past, Bank President, it 4°thing seemed to require a meeting with a Reserve such meeting need not be scheduled by the chairman of the Committee. The '-'cretary was also informed that the Board designated Governors teaa erston, King, and Mitchell to serve as members of the Committee 6/27/62 -23- 04 Organization and Building Plans, with Governor Mitchell to serve 46 Chairman. In accordance with this action and that taken earlier re- garding the change in Reserve Bank budget procedures, a telegram in the form of attached Item No. 5 was sent to all Reserve Bank presidents on June 291 1962, and a letter, S-18371 dated July 13, 1962, was sent to all Reserve Bank Presidents in the form of a ttached Item No. 6. Salary of President Fulton (Item No. 7). The Board approved the Payment of salary to W. D. Fulton as President of the Federal Reserve Bank of Cleveland at the rate of $40,000 per annum, effective aulY 1, 1962. In accordance with this action a letter dated June 27, 1962, was sent to Chairman Hall of the Cleveland Reserve Bank. PY is attached as Item No. 7. " The meeting then adjourned. Secretary's Note: Governor Shepardson today approved on behalf of the Board a letter to the Federal Reserve Bank of New York (attached Item No. 8) approving the appointment of nine employees as examiners. 1 0, Secretary" -'t A BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 1 6/27/62 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 27, 1962 Chemical International Banking Corporation, 20 Pine Street, New York 8, New York. Gentlemen: In accordance with your request and on the basis of the information furnished in your letter of June 7, 1962, transmitted through the Federal Reserve Bank of New York, the Board of Governors grants its consent for Bank of Liberia, Inc., Monrovia, Liberia, to establish a mobile banking unit in Liberia, to Operate primarily in the interior on the highway between Monrovia and Mt. Nimba, Liberia, a distance of approximately 175 miles. Please advise the Board of Governors in writing, through the Federal Reserve Bank of New York, When the mobile unit begins operations. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 2,9' BOARD OF GOVERNORS voltt,r,*4 44%,00g0,,*4 OF THE 1,V77. 0i= FEDERAL RESERVE SYSTEM g. ,47 Item No. 2 6/27/62 WASHINGTON 25, D. C. * ADDRESS OFFICIAL C0RRESPON0CNCtTO THE BOARD 104B- 0'111 ty. 4423*** June 271 1962 Vir.::qObert 0. :,nderson, Chairman of tbe)oard and 7Sederal Reserve Federal Reserve bantc of Dallas, 'Dallas 2, Texas. 'Dear Er. Anderson: In accordance with the request contained in your letter o' June 21, r 1902, the ho'rd of Governors approves the appointment of ():',s as a Pederal Reserve Agent's Representative at Limood tie Itouston Branch to succeed Er. C. E. Purifoy, effective July 1, 1902. This approval is given with the understanding tinat Mr. Voss 14i11 be solely responsible to the Federal Reserve !.gent and the Board Ot tie . rernors for the proper performance of his duties, except that, 21.3-rit1 the absence or disability of the Federal Reserve Af,!ent or a in that office, his responsibility will be to the Assistant 4:!aneY s "eral 'teservc .gent and the Board of Governors. noengaged engaged in the performance of his duties as Federal fteRA Representative, lir. 1,oss may, with the approval of the p,--rve r,ent's tcleral aeserve AP:ent and the Vice President in charge of the Houston ,t1ch, perform such work for the Branch as will not be inconsistent his duties as Federal Reserve Agent's Aepresentative. 4 It Lill be anpreciated if Yr. Moss is fully informed of the port -ance of his responsibilities as a member of the staff of the deral eserve ...gent and the need for maintenance of independence from oPurations of the flank in the discharge of these responsibilities. It is noted from your letter that -with the approval of appointment by the 1;oard of Governors, he will execute the of Office which will be forwarded to the Board of Governors. Very truly yours, (Signed) Merritt Sherman If.erritt Sheman, Secretary. ettert,,,, ,ow toy:0, op ' 0 0 q6 Ot BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WAS Item No. 3 6/27/62 OFFICE OF THE CHAIRMAN 4UeP" :I June 27, 1962. The Honorable James J. Saxon, Comptroller of the Currency, Treasury Department, Washington 25, D. C. Dear Jim: The Board and the Federal Reserve Banks have given tur4.t. uller consideration to your letter of April 30 informing the ; °ard that a new schedule of charges by your Office for providing 1.161eral Reserve Banks with copies of reports of examination of ja kdional and District of Columbia banks would become effective on 1, 1962. As noted in my letter to you of May 9, you postponed e effective date for the change from June 1 to July 1, 1962. The t!! charges stated in your letter were $100 per report, ;50 for a at department report, and ;iii25 for a separate-bound branch report. Because of the statutory responsibilities of the Board and 4'ederal Reserve Banks, including the responsibility to keep rmed of the general condition of member banks, it is felt that ormation such as is contained in national bank examination reports Ileeded• Although it would be possible for the Federal Reserve ta,, lia.V to obtain such information by making periodic examinations of . thjonal member banks, neither the Board nor the Reserve Banks believe it would be desirable at this time to initiate such a system of `A4aillination5. the tiotbAs stated in the Boardts letter of April 9, 1962, it would your e appropriate for the Board or the Reserve Banks to pay any of of the fact that the nexpense of examining national banks, in view clear that the quite making : exp °11gress has enacted legislation be assessed ashall banks gm:nse of your examinations of national ; 1 -t.ust the banks examined. The Board also expressed therein the ;ZI that a Federal Reserve Bank would be justified in reimbursing ot Qffice for the full cost of making and transmitting to it copies Y'llr reports, calculated on any reasonable cost-accounting basis. 80ard letter do not provide the . The statements in your April 30 With an adequate basis for determining your cost of preparing 111 The Honorable James J. Saxon -2- transmitting the extra copies of reports furnished to the Reserve The new charges far exceed the cost which would be incurred by !Yederal Reserve Bank in preparing an extra copy of a report of amination of a State member bank. However, the Board notes that .,r°11r letter indicates that the new schedule of charges has not "taken J-nto account any of the cost of conducting the actual examinations." 141101 In the circumstances, and because of the need for the information and our reluctance to subject national banks to additional Vcaminations, the Federal Reserve Banks will for the present and until fllther notice pay to your Office the applicable charge for each report ,?(Iuested. In view of the new schedule of charges and our desire to expenditures, the Reserve Banks will dispense with some reports. the time being, You are requested to furnish each Reserve Bank with er2=Sr one examination report of all national banks in its district for calendar year, preferably the first report of the year, but no orts of trust departments or separate reports of branches. Some theeerve Banks may wish later to obtain other examination reports at se new rates, and in that event they will communicate with your 1YProPr1ate regional office in ample time to permit preparation of the equested copies at the time the original reports are being typed. W It is assumed, of course, that there will be no change in the riat .Present practice under which copies of reports of examination of er °nal member, District of Columbia, and State member banks are toeelY loaned back and forth between your Washington Office and the 4111 of Governors. Sincerely yours, (signed) lita. MCC. Martin, Jr. VM. McC. 1.artin, Jr. BOARD OF GOVERNORS OF THE Item No. FEDERAL RESERVE SYSTEM 4 6/27/62 WASHINGTON OFFICE OF THE CHAIRMAN June 27, 1962 Mr. Phillip S. Hughes, Assistant Director for Legislative Reference, Executive Office of the President, Bureau of the Budget, Washington 25, D. C. Attention Mrs. Garziglia. Dear Mr. Hughes: In response to your communication of June 261 1962, 3h 'lle Board recommends that the President approve the enrolled bill, 3291, "To amend section 14(b) of the Federal Reserve Act, as ia!nended„ to extend for two years the authority of Federal Reserve rrliks to purchase United States obligations directly from the ' reaeury.fl ! Sincerely yours, (Signed) Wm. MCC. Martin, Jr. Wm. McC. Martino Jr. flif Item No. 5 TELEGRAM LEASED WIRE SERVICE 6/27/62 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON June 29, 1962 THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS Board has approved revised budget procedures for the Federal Reserve Banks to provide for semiannual reports on basis concurred in by Conference of Presidents at its meeting on June 18, 1962, as reported in memorandum submitted to the Board by the Conference, with the understanding that proposed Bank blIdgets for first half of year would be submitted by November 22 and for 8eccnd half by May 22. With regard to arrangements under which individual Presidents have bee, meeting with Board committee for preliminary discusoi of budgets, Board celleluded that it would be helpful to have each President continue to meet once r.ear with a Board committee for the purpose of discussing officers' salaries anY major changes contemplated in Reserve Bank programs, including sizable 131111,4. - 14 projects, but with no intention of an over-all budget review, such ' Tritings to be held later in the year than has been customary, probably in OctOber or possibly in November. With this in mind, Board's budget committee was reconstituted as Committee on Organization and Building Plans, with underthat scope of the work would include Officer Development and Compensatiorie For your further information, Board designated Governors Balderston, Ki 'and Mitchell as members of Committee on Organization and Building Plans, With Governor Mitchell to serve as Chairman and with further understanding that It e1iflJ consultation suggested an absence of need for conference with 4/1 in dIvidual Reserve Bank President in any year, the Committee would consider the 8. ltuation more fully before calling such a meeting. Letter follows. (Signed) Merritt Sherman SFERMAN 1 ) Item No. 6 BOARD OF GOVERNORS 6/27/62 OF THE FEDERAL RESERVE SYSTEM S-1837 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD July 13, 1962. Dear sir: As you were informed in the Board's telegram of June 29, 19625 the Board has approved revised procedures under which the Federal Reserve blank budgets are to be prepared and submitted to the Board. A number of Pr°Posals designed to simplify and improve Reserve Bank budgetary Procedures were set forth in a memorandum sent to Mr. Fulton as Chairman f the Conference of Presidents with the Boardls letter of April 16, t262, and the revisions that have been adopted are in conformance with 1. (3se approved by the Conference of Presidents at its meeting on June 18, 762. These provide for: 1. Submission of budgets by either departments or functions. 2. Submission of two budgets each year, one covering the period January 1 - June 30 and the other covering the period July 1 - December 31, 3, Comparisons of budget estimates with actual expenses for the same period one year ago, 4. A budget report form showing by departments or functions the average number of employees and total expenses for the base period and for the budget period, and the amount and percentage change in expenses. 5, Limiting explanatory material accompanying the budgets to the reasons for (a) the significant developments resulting in substantial gross increases or gross decreases in departmental or functional expenses, and (b) changes in the number of employees in Grade 12 and above expected at any time during the budget period, as compared with the number of such employees on the last day of the base period . Elimination of the budget experience reports. 2( S-1837 -2- Under the revised procedures, statements covering evaluation of activities of certain functions, membership dues and donations, and five-year projections of bank premises projects need not be submitted With the semi-annual budgets. The first budget to be prepared under the revised procedures is to cover the period January 1-June 30, 1963, and it should be submitted to reach the Board not later than November 22, 1962, The Accounting Manual will be revised to reflect the changes in the Reserve Bank budgetary procedures as outlined above. This letter supersedes the Board's letter of October 4, 1956,* (S-1604) contained in F.R.L.S. 3186. Very truly yours, -"r \ il, Merritt Sh6E' Secretary. lia° TR& PRESIDENTS OF ALL FEDERAL RESERVE BANKS *Correct date is October 24, 1956. 2401.1 BOARD OF GOVERNORS Item No. OF THE 1, 0.1L- FEDERAL RESERVE SYSTEM ., 6/27/62 WASHINGTON D/,ç, s, " Ljjj A 1, OFFICE * or THE CHAIRMAN '4444'4- June 27, 1962 CONFIDENTIAL (FR) Mr. Joseph B. Hall, Chairman, Federal Reserve Bank of Cleveland, Cleveland 1, Ohio. Dear Joe: The Board has approved the payment of salary to Mr. Fulton as President of the Federal Reserve Bank of Cleveland for the period July 1-December 31, 1962, at the rate of $40,000.00 per annum, as fixed by the directors Of your Bank and reported to the Board in your letter of June 14. Sincerely yours, (Signed) Bill Wm. McC. Martin, Jr. 7 14 , BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 8 6/27/62 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD *, ttoot00000 June 27, 1962 CONFIDENTIAL (FR) Mr. Howard D. Crosse, Vice President, Federal Reserve Bank of New York, New York 45, New York. Dear Mr. Crosse: In accordance with the request contained in your letter of June 18, 1962, the Board approves the ;:,:ointment of the following employees, at present assistant examiners, as examiners for the Federal Reserve Bank of New York, effective June 28, 1962: John M. Casazza James J. Clark Joseph A. Clark Harry K. Graveman Thomas R. Heffernan Eugene C. Kranik Lawrence E. Schembri James J. Stahl Jay W. Woods It is noted that Messrs. Clark (Joseph A.), 9raveman, Heffernan, Kranik, Schembri, Stahl and Woods are indebted to various nonmember banks. It is understood, of course, that the Board's approval of these appointments is glven with the understanding that, should your Bank have Occasion to examine any of these institutions, no individual named above will be permitted to participate in any examination of the bank to which now indebted unless his indebtedness to that institution has been liquidated. Very truly yours, (signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary.
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