Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, June 3, 1965, Volume 52, Part 6

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)9

Minutes for

To:

Members of the Board

From:

Office of the Secretary

June 3

1965.

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
initials will indicate approval of the minutes. If
you were not present, your initials will indicate
only that you have seen the minutes.

Chm. Martin
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. Mitchell
Gov. Daane
Gov. Maisel

Minutes of a meeting of the available members of the Board of
Governors of the Federal Reserve System on Thursday, June 3, 1965.

The

meeting was held in the Board Room at 10:00 a.m.
PRESENT:

Mr. Martin, Chairman
Mr. Robertson
Mr. Shepardson
Sherman, Secretary
Kenyon, Assistant Secretary
Molony, Assistant to the Board
Solomon, Director, Division of Examinations
Hexter, Assistant General Counsel
O'Connell, Assistant General Counsel
Leavitt, Assistant Director, Division of
Examinations
Mr. Egertson, Supervisory Review Examiner,
Division of Examinations

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

The following actions were taken subject to ratification at the
next meeting of the Board at which a quorum was present:
Discount rates.

The establishment without change by the Federal

Reserve Bank of Kansas City on June 2, 1965, of the rates on discounts
and advances in its existing schedule was approved unanimously, with
the understanding that appropriate advice would be sent to the Bank.
Circulated items.

The following items, copies of which are

attached to these minutes under the respective item numbers indicated,
were 2REED,

unanimously:
Item No.

Letter to First Trust Company of Albany, Albany, New York,
1
aPproving the establishment of a branch at 1215 Western Avenue.
Letters to Bank of the Commonwealth, Detroit, Michigan,
aPproving the establishment of branches (1) in the Detroit
Trade Center in the vicinity of Sixth Street and Howard
Street, and (2) at 6560 Cass Avenue.

2-3

6/3/65

-2Item No.

Letter to Metamora State Savings Bank, Metamora, Michigan,
approving the establishment of a branch in Hadley.

4

Letter to Chemical Bank and Trust Company, Midland, Michigan,
approving the establishment of a branch at Gordonville and
Poseyville Roads, Ingersoll Township.

5

Letter to Genesee Merchants Bank & Trust Co., Flint, Michigan,
approving the establishment of a branch in Flushing.

6

Letter to Old Kent Bank and Trust Company, Grand Rapids,
Michigan, approving the establishment of a branch at the
Kent County Airport Terminal Building.

7

Examination procedures (Item No. 8).

Pursuant to the understand-

ing at the Board meeting on June 2, 1965, there had been distributed a
revised draft of letter to Chairman Multer of the Subcommittee on Bank
Supervision and Insurance of the House Banking and Currency Committee
regarding bank examination procedures.
Certain additional changes in the letter suggested by Governors
Robertson and Shepardson were agreed upon, following which Mr. Solomon
noted that during circulation of the draft reply Governor Maisel had
Observed that the answer seemed rather unresponsive to the following
question that had been presented by Chairman Multer:

"What if any

difference is there between examining savings banks and that portion of
commercial bank business involving thrift accounts held by commercial
banks and examinations of Savings and Loan Associations?"

Mr. Solomon

said, in this connection, that it was difficult to know how to be completely responsive to a question of this kind.

In the circumstances, the

6/3/65

-3-

draft reply admittedly was somewhat inconclusive, but the effort had been
to deal with the question as effectively as possible.
Unanimous approval then was given to a letter to Chairman Multer
in the form attached as Item No. 8.
The meeting then adjourned.
Secretary's Note: Governor Shepardson
today approved on behalf of the Board
the following items:
.
Memorandum from the Director of the Division of Research and Statistics dated June 1, 1965, recommending that a dinner be arranged on
Tuesday, June 15, in connection with the meeting of the System Research
Advisory Committee, it being understood that, assuming attendance of
about 50 persons, the total cost of the dinner would be about $400 and
that provision was made in the 1965 budget of the Division.
Memoranda recommending the following actions relating to the Board's
staff:
EPPintmts
Robert D. Heyde as Attorney, Legal Division, with basic annual
salary at the rate of $7,220, rather than $6,050 as approved on December 8,
1964, effective the date of entrance upon duty.
Suzanne C. Swenson as Clerk, Division of International Finance, with
basic annual salary at the rate of $4,480, effective the date of entrance
upon duty.
Martha Jane Tucker as Stenographer, Division of Personnel Administration, with basic annual salary at the rate of $4,005, effective the
date of entrance upon duty.
Salar

increases

effective June 6

1965

Mary L. Morris, Secretary, Office of the Secretary, from $5,165 to
$5,330 per annum.
Catherine M. Cole, Secretary, Legal Division, from $5,000 to $5,505
per annum.

54
6/3/65
§'y increases

-4effective June 6J965 (continued)

Caroline M. Burgess, Assistant Chief Librarian, Division of
Research and Statistics, from $10,125 to $10,420 per annum.
Irene M. Fender, Statistical Clerk, Division of Research and
Statistics, from $4,630 to $4,780 per annum.
Fred B. Ruckdeschel, Economist, Division of International Finance,
from $7,710 to $7,955 per annum.
.
Kathleen Thomas, Clerk-Stenographer, Division of International
Finance, from $4,630 to $4,780 per annum.
James A. McIntosh, Technical Assistant, Division of Bank Operations,
from $10,605 to $12,075
per annum.
Alex J. Harris, Jr., Assistant Review Examiner, Division of Examinations from $8,945 to $9,240 per annum.
Jane Smith Wilson, Payroll Clerk, Office of the Controller, from
$5,660 to $5,825 per annum.

Secretary

BOARD OF GOVERNORS

Item No. 1
6/3/65

OF THE

FEDERAL RESERVE SYSTEM
6, 1
"71I

vat

WASHINGTON, O. C. 20551

Mr 441 15:
- • 44<, •*

ADDRESS

orrociAL

CORRESPONDENCE

TO THE EIOARD

RESO;•
••.

June 3, 1965

Board of Directors,
First Trust Company of Albany,
Albany, New York.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by First Trust Company
of Albany, Albany, New York, of an in-town branch at
1215 Western Avenue, provided the branch is established
within one year from the date of this letter.
Very truly yours,
(Signed) Karl E. Bakke

Karl E. Bakke,
Assistant Secretary.

(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)

BOARD OF GOVERNORS

.....
•
.

„• (D OE COve

Item No. 2
6/3/65

OF THE

tr.

FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551

(1:

ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

••
RE0
.
-•*
•.....•

June

3, 1965

Board of Directors,
Bank of the Commonwealth,
Detroit, Michigan.
Gentlemen:
The Board of Governors of the Federal Reserve System
approves the establishment by Bank of the Commonwealth, Detroit,
Michigan, of a branch in the Detroit Trade Center in the
vicinity of Sixth Street and Howard Street, Detroit, Michigan,
provided the branch is established within one year from the
date of this letter.
Very truly yours,
. (Signed) Karl E. Bakke

Karl E. Bakke,
Assistant Secretary.

(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)

BOARD OF GOVERNORS

Item No. 3
6/3/65

OF THE

0tr'•

FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS orriciAL CORRESPONDENCE
TO THE BOARD

June 3, 1965

Board of Directors,
Bank of the Commonwealth,
Detroit, Michigan.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by Bank of the Commonwealth,
Detroit, Michigan, of a branch at 6560 Cass Avenue, Detroit,
Michigan, provided the branch is established within one year
from the date of this letter.
Very truly yours,
(Signed) Karl E. Bakke

Karl E. Bakke,
Assistant Secretary.

(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)

BOARD OF GOVERNORS

Item No. 4
6/3/65

OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS

orrociAL

CORRESPONDENCE

TO THE BOARD

June 3, 1965

Board of Directors,
Metamora State Savings Bank,
Metamora, Michigan.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by Metamora State Savings
Bank, Metamora, Michigan, of a branch at 3521 Hadley Road
in the unincorporated village of Hadley, Lapeer County,
Michigan, provided the branch is established within six
months from the date of this letter.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.

(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)

is
BOARD OF GOVERNORS

Item No. 5
6/3/65

OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON, O. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

June 3, 1965

Board of Directors,
Chemical Bank and Trust Company,
Midland, Michigan.
Gentlemen:
The Board of Governors of the Federal Reserve System
approves the establishment by Chemical Bank and Trust Company,
Midland, Michigan, of a branch at the southeast corner of the
intersection of Gordonville and Poseyville Roads in an unincorporated area of Ingersoll Township, Midland County, Michigan,
provided the branch is established within one year from the
date of this letter.
Very truly yours,
(Signed) Karl E. Bakke
Karl E. Bakke,
Assistant Secretary.

(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)

77,k104..ir

BOARD OF GOVERNORS

Item No. 6
6/3/65

OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS orricsAL CORRESPONDENCE
TO THE BOARD

June 3, 1965

Board of Directors,
Genesee Merchants Bank & Trust Co.,
Flint, Michigan.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by Genesee Merchants Bank
& Trust Co., Flint, Michigan, of a branch in the vicinity
of the intersection of Pierson Road and Elms Road in Flushing,
Genesee County, Michigan, provided the branch is established
Within one year from the date of this letter.
Very truly yours,
(Signed) Karl E. Bakke

Karl E. Bakke,
Assistant Secretary.

(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)

•

BOARD OF GOVERNORS

Item No. 7
6/3/65

OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

June 3, 1965

Board of Directors,
Old Kent Bank and Trust
Company,
Grand Rapids, Michigan.
Gentlemen:
The Board of Governors of the Federal Reserve
System approves the establishment by Old Kent Bank and
Trust Company, Grand Rapids, Michigan, of a branch at the
Kent County Airport Terminal Building, Grand
Rapids,
Michigan, provided the branch is established within six
months from the date of this letter.
Very truly yours,
(Signed) Karl E. Bakke

Karl E. Bakke,
Assistant Secretary.

(The letter to the Reserve Bank stated that the
Board also had approved a six-month extension
of the period allowed to establish the branch;
and that if an extension should be requested,
the procedure prescribed in the Board's letter
of November 9, 1962 (S-1846), should be followed.)

BOARD OF GOVERNORS

Item No. 8
6/3/65

OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON

OFFICE OF THE CHAIRMAN

June 4, 1965
Honorable Abraham J. Multer, Chairman,
S ubcommittee
on Bank Supervision and Insurance,
Committee on Banking and Currency,
House of Representatives,
Washington, D. C.
20515
Dear Mr. Chairman:
This refers to your letter of April 23, 1965, acknowledged
by the Board on May 7, 1965, inquiring as to the differences in the
examinations
of commercial banks made by the Federal Reserve System,
Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency; and also regarding the examination of
savings banks and the thrift account portion of a commercial bank's
bus iness.
In considering the differences in the examinations of
commercial banks conducted by the three Federal bank supervisory
agencies, a distinction should be made between the process of examination in the field and the general supervisory responsibilities of
the three agencies under law, since the major basic differences are
found in the latter area rather than the former.
First, with respect to the examination process, there is a
wide range of procedures and techniques employed in the verification,
Proof, analysis, and/or appraisal of the various components of the
asset, liability, and capital accounts found in commercial banks.
li rthermore,
the scope of application of these procedures and techniques may be modified, expanded, or curtailed depending on the size
of the bank under examination, the nature and extent of its internal
records, systems, and audit controls, as well as other important
actors such as the bank's general condition, capital adequacy, earnings, and management capability. While we cannot speak for other
agencies, it is the policy of the System to apply appropriate procedthires and techniques to whatever extent may be necessary to ascertain
e facts regarding the operations and condition of the particular
bank.
With respect to the classification of assets and appraisal
of bonds in examinations, Federal Reserve examiners operate under the

Honorable Abraham J. Multer

genera' terms
ter
of the so-called "Uniform Agreement" adopted in 1938
and revised July
15, 1949--copy attached. Although the examination
report forms used by the three agencies are similar in many respects,
there are differences in content and arrangement
. In this latter
connection, there are enclosed copies of the commercial and trust
reports of examination used by the Federal Reserve System in the
examination of insured State member banks.
Second, with respect to general supervisory responsibilities --as contrasted
with the examination process--there are basic
differences in the laws under which the respective banks examined
and supervised
by the Federal Reserve System (insured State member
banks), Federal Deposit Insurance Corporation (insured State nonmember banks), and Comptroller of the Currency (insured national
member banks) are chartered and operated, as well as differences due
to regulations
and interpretations issued by the three agencies
pursuant to such laws. For example, there are differences relating
to frequency
of examinations, reserves against deposits, absorption
of exchange
charges, investments in securities, loans to any one
borrower, and loans on real estate.
auuency of examinations. National banks are chartered
by the
Comptroller of the Currency and are examined independently by
that Office. The law
states that they are to be examined at least
three times every two
years.
The Federal Reserve System follows the policy of examining
State member banks at least once each calendar year, and it is understood the Federal Deposit Insurance Corporation follows a similar
Policy as to insured State nonmember banks. Since both these groups
of banks are
chartered and also examined by State authority, both the
Federal Reserve and the Federal Deposit Insurance Corporation coordinate examination
s with the State authorities, and usually examine the
bank either jointly
or alternately with the State.
Reserves against deposits. National banks and State member
banks maintain reserves against deposits in the form and amounts
Specified in the Board's Regulation D issued pursuant to Section 19
of the Federal
Reserve Act (12 USC 461). Insured State nonmember
banks maintain reserves against deposits in the form and amounts
specified by law or regulation of the State under which they are
chartered.
Absorption of exchange charges. On the subject of payment
°f interest on deposits, National banks and State member banks are subject to a regulation issued by the Board pursuant to Section 19 of the
Federal Reserve Act (12 USC 371a), and insured State nonmember banks

Honorable Abraham J. Multer

-3-

are subject to a regulation issued by
the Federal Deposit Insurance
Corporation under the Federal Deposit Insurance Act. In construing
the respective
regulations and statutes, the Board has reached the
. conclusion that
the absorption of exchange does, and the FDIC has
reached the conclusion that it does not, constitute the payment of
interest on deposits.
Investments in securities. National banks and State member
banks are subject to the general limitations fixed by Section 5136
U.S.R.S. (12 USC 24), and regulations issued thereunder by the
Comptroller of the Currency. Insured State nonmember banks are subject to the general limitation fixed
s
by law or regulation of the
States under which they are chartered.
Loans to any one borrower. National banks are subject to
the general
limitations fixed by Section 5200 U.S.R.S. (12 USC 84).
State member banks and insured State nonmember banks are subject to
the general
limitations fixed by law or regulation of the States
under which they are chartered.
Loans on real estate. National banks are subject to the
general limitation fixed by Section 24 of the Federal Reserve Act
(12 USC 371). State
member banks and insured State nonmember banks
are subject to
the general limitations fixed by law or regulation of
the States under
which they are chartered.
While this listing is far from all inclusive, it is believed
it will serve to point up the differences confronting the three
Federal agencies in discharging their supervisory responsibilities
With respect to commercial banks. For the further information of your
Committee, there is enclosed a booklet published by the Federal Reserve
Bank of St. Louis in 1963 on the general subject of "Bank Supervision,"
Which contains articles on the general nature of bank supervision;
the legal basis of bank supervisio
n; the allocation of supervisory
responsibility today; the techniques of bank examination; and review
and appraisal.
Lastly, it may be said that the examination and supervision
of a savings bank or the thrift account business of a commercial bank,
like that of commercial bank activities in general, is concerned
basically with the collectibility and liquidity of the bank's assets
in relation to
its net capital and surplus and the general character
of its deposit liabilities, and other corporate responsibilities.
Particular assets of a bank are not specifically allocated against
its deposit liabilites that happen to be thrift accounts; and the
safety of those accounts is essentially dependent on the safety of
the entire institution. Accordingly, the examination procedures and

Honorable Abraham J. Multer

-4-

techniques, and other supervisory actions, with respect to the
thrift account business of a commercial bank are essentially
similar to, and an integral part of, those applied to the bank's
total operation. In the circumstances, it does not seem to be
feasible to isolate examination procedures and techniques, or
supervisory actions, that relate to the thrift account business of
commercial banks and compare them with those employed in the examination and supervision of savings and loan associations.
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.

McC. Martin, Jr.

Enclosures.