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Minutes for To: 1959 Members of the Board From: June 30, Office of the Secretary Attached is a copy of the minutes of the Board of Governors of the Federal Reserve System on the above date. It is not proposed to include a statement with respect to any of the entries in this set of minutes in the record of policy actions required to be maintained pursuant to section 10 of the Federal Reserve Act. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, if you were present at the meeting, please initial in column A below to indicate that you approve the minutes. If you were not present, please initial in column B below to indicate that you have seen the minutes. A Chm. Martin Gov. Szymczak Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Minutes of the Board of Governors of the Federal Reserve System on Tuesday, June 30, 1959. PRESENT: Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Balderston, Vice Chairman Szymczak Mills Shepardson Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Discount rates. Sherman, Secretary Kenyon, Assistant Secretary Riefler, Assistant to the Chairman Molony, Special Assistant to the Board Robinson, Adviser, Division of Research and Statistics Solomon, Assistant General Counsel Nelson, Assistant Director, Division of Examinations Benner, Assistant Director, Division of Examinations Smith, Assistant Director, Division of Examinations Young, Assistant Counsel The establishment without change by the 9/ Federal Reserve Banks of Boston, Atlanta, and Minneapolis on June 2 959, of the rates on discounts and advances in their existing schedules 1 l'as approved unanimously, with the understanding that appropriate advice 'would be sent to those Banks. Items circulated to the Board. The following items, which had been circulated to the members of the Board and copies of which are attached to these minutes maer the respective item numbers indicated, vere approved unanimously: Item No. Letter to the Greenfield State Bank, Bakersfield, California, approving the establishment of branches 4 4 East Bakersfield and Oildale. 1 -2- / 0/59 6 3 Item No. Letter to the Federal Reserve Bank of Chicago approving the payment of salary to the Bank's engineers and firemen at specified annual rates. 2 Motion to disqualify in the matter of Continental Bank and Trust Company (Items 3 and 4). Pursuant to the action taken by the Board at the meeting on June 23, 1959, there had been distributed, with a memorandum from the Legal Division dated June 29, 1959, a draft of statement and order denying the motion of Respondent to disqualify Governor Robertson as a member of the Board of Governors to review the Report and Recommended Decision of the Trial Examiner in the matter of The Continental Bank and Trust Company, Salt Lake City, ) Utah or otherwise to participate in the decision on that case. In accordance with the understanding at the meeting on June 25, 1959, there had also been distributed to the Board copies of the statement filed by Governor Robertson withdrawing voluntarily from participation in the proceeding. The memorandum from the Legal Division recommended that the statement and order, if approved, be dated as of the day of Board approval and, together with a copy of Governor Robertson's statement, be sent to counsel for the parties to the proceeding and to the Federal Reserve Banks. In addition, copies of both the statement and order and Governor Robertson's statement would be available to the PlIblic upon request through the office of Mr. Thurston, Assistant to the Board. / 0/59 6 3 In discussion of the matter, it was pointed out by the Secretary that the contemplated procedures would be in line with those followed thus far by the Board in connection with the Continental proceeding. He also noted that the proposed handling of Governor Robertson's statement had been discussed with the Governor and would be satisfactory to him. Question was raised, however, whether the Board's statement and order and Governor Robertson's statement should not be the sUbject of a press release, issued at the same time as the transmittal of the documents to counsel for the parties. Since Respondent had given publicity to the motion that Governor Robertson be disqualified, the thought was expressed that interested persons should he advised of the outcome of the matter through positive action on the part of the Board. Mr. Molony then suggested that a press statement, if desired by the Board, be directed primarily to the fact that oral argument in the continental matter had been ordered by the Board to be held on July 22, 1959. In that connection, reference could be made to attached documents indicating the disposition of the motion to disqualify. There being agreement on the part of the Board that the Matter should be handled in the manner outlined by Mr. Molony, Unanimous approval was given to the issuance of the proposed 6/30/59 statement and order denying the motion to disqualify in the form submitted with the Legal Division's memorandum of June 29. 3, and attached Of the statement and order is attached as Item No. as Item No. 1959. A copy 4 is a copy of the press statement issued on July 1, On that date copies of the Board's statement and order and of Governor Robertson's statement were sent to counsel for the Parties to the proceeding and copies of the press release and its attachments were sent to all of the Federal Reserve Banks. Mr. Nelson then withdrew from the meeting. Request for increase in maximum rates of interest payable on time deposits (Item No. 51. There had been distributed to the Board copies of a letter from The First National City Bank of New York to the Federal Reserve Bank of New York dated June 17, 1959, suggesting an amendment to Regulation Q, Payment of Interest on Deposits, to Permit payment of interest up to 3-1/4 per cent on time deposits maturing between 90 days and six months and up to 3-1/2 per cent On time deposits maturing in six months or more. No change was suggested in the maximum rate on savings deposits. The bank's letter pointed out that since March of this year, when the Board rejected a suggestion to increase to 3 per cent the maximum rate clf interest payable on time deposits maturing between 90 days and six months, there had been a further substantial rise in short-term Market rates, the prime loan rate had gone up from 4 per cent to 6 3 / 0/59 -5- 4-1/2 per cent, and the discount rate of the Federal Reserve Banks had been raised from 3 per cent to 3-1/2 per cent. As other rates had gone up, the letter stated, time deposits had become less and less competitive, particularly in comparison with Treasury bills and bankers' acceptances, and First National City alone had lost time deposits to the extent of $50 million since January. It was noted that the bulk of the bank's time deposits were for foreign account, and the statement was made that banks abroad had been Offering to foreign depositors, and in some cases even to American depositors, rates for United States dollar time deposits in excess of 2-1/2 and 3 per cent. Canadian banks were said to have attracted R large volume of such funds, and British and continental European banks somewhat lesser amounts. This development, First National City stated, demonstrated clearly the growing freedom of movement Of funds in the international money market, which was stimulated by the convertibility moves taken at the end of 1958, and the maximum rates under Regulation Q placed American banks in the Position of being unable to compete with foreign banks for dollar funds. There followed a discussion of distinctions between time aM savings deposits, from which the bank concluded that it might be timely to recognize those differences and accord higher maximum rates to time deposits than to savings deposits. -6- /3o/59 6 In transmitting First National City Bank's letter under date of June 25, 1959, the Federal Reserve Bank of New York commented that in a letter dated February 18, 1959, it had set forth its views on explained why the maximum interest rates under Regulation Q and had m rate for Bank considered it appropriate to establish a higher maximu stated that time deposits than for savings deposits. The Reserve Bank it still subscribed to those views. After noting the recent general ted that although increase in interest rates, the Reserve Bank commen n the current problem in New York City related primarily to foreig y time deposits, it saw evidence that Second District countr member es as banks were losing time deposits of states and municipaliti to take those entities shifted funds from the banks to the market advantage of higher available rates. In conclusion, the Reserve be Bank recommended that the request of First National City Bank given favorable consideration. Copies of the Reserve Bank's letter also had been distributed to the members of the Board. of a letter Distribution had likewise been made to the Board ook, dated June 24, 1959, from the Westbrook Trust Company, Westbr in the Maine, a nonmember insured bank, suggesting an increase ts in order Maximum rate of interest payable on savings deposi that commercial banks might have an opportunity to compete more effectively with other media for investment of savings funds. 6/3o/59 -7Mr. Riefler opened the discussion of First National City Bank's request by commenting that it brought out clearly certain distinctions between time and savings deposits. Time deposits held by the New York City banks were largely foreign in ownership, they were more volatile in nature than savings deposits, and the City banks apparently had to have the benefit of higher maximum rates if they were going to continue actively in the business of holding foreign time deposits in a period When competitive rates of interest had moved higher. A similar situation appeared to prevail with respect to time deposits of states and municipalities. However, it had been the Board's position in the past that allowance of the payment of interest on time and other savings deposits, as opposed to demand deposits, reflected the fact that the former represented savings funds of a less volatile nature than demand deposits, and that commercial banks should be allowed to compete for those less volatile funds by the payment of interest within limitations. Mr. Riefler said that he found the argument of First National City Interesting, but on the other hand he did not see how it could be considered compatible with the fundamental reason for limiting the Payment of interest on deposits. His conclusion was that savings deposits should continue to be the guide and that a higher maximum rate of interest should not be permitted for time than for savings deposits. If, however, the Board adopted such a position, it would have to recognize that in times like the present the banks were going to have difficulty in maintaining their time deposit business. -8- 059 6/3 lly similar to that of Mr. Robinson's position was substantia Mr. Riefler. now more sharply drawn He pointed out that the issue was . than when considered previously by the Board Earlier, the structure bility that the banks of interest rates was such as to namit the possi deposits, at least on narrow could still compete effectively for time opments now presented the margins, but interim interest rate devel not only because of the Board with a clear question of principle, of the attractiveness of advance in Treasury bill rates but because banks. rates offered by Canadian and other foreign In fact, it was could continue to be difficult to see how the New York City banks sted by First National competitive even if the maximum rates sugge City were granted. son suggested, was the At the heart of the problem, Mr. Robin d deposits. Prohibition of the payment of interest on deman Prior to consideration the Banking Act of 1933, the time deposits now under and since that time the would have been carried as demand deposits, se the maximum rates of question had not arisen seriously becau until recently. interest presented no practical problem Unless whole problem of the there was a disposition to reconsider the est on demand deposits, Prohibition against the payment of inter continue to face the question Mr. Robinson felt that the Board must appropriate for commercial banks. Whether time deposits were entirely 6/3o/59 -9- At the same time there would continue to be the likelihood that other vehicles of investment might be able to take time deposit funds away from the banks in times like the present. Mr. Robinson then summarized his views in the following terms. First National City did not ask for an increase in the maximum rate on savings deposits, and the New York Reserve Bank, in a letter dated February 18, 1959, had expressed doubt whether banks generally could afford to pay higher than the present maximum rate of interest permissible on savings deposits. Also, there was now before the Congress a proposal to increase the rates of interest payable on United States savings bonds. In these circumstances, action to increase the maximum rate on savings deposits would seem inappropriate, and if such action were not taken it would be hard to see the logic of changing the maximum rate on time deposits. Accordingly, Mr. Robinson concluded, he would recommend no Change in the maximum rate on either time or savings deposits. Mr. Benner indicated that the Division of Examinations would have the same view. With the exception of a few larger banks, he did not feel that member banks could very well afford at this time an increase in the rates paid on savings accounts, which he noted constitute a large Proportion of total deposits at many country banks. From the supervisory standpoint, an increase in rates would create a problem because current bank earnings would not appear to justify such an -10- / 0/59 6 3 increase and the tendency of the banks might well be to reach out into higher-yielding assets that would carry a greater risk and perhaps a lower degree of liquidity. Mr. Benner also expressed doubt as to the wisdom of permitting an increase in rates for the benefit of one group of large banks when the effect of such action upon banks generally was likely to be adverse. For this reason, he thought it might be desirable to consult all of the Federal Reserve Banks before any action was taken. A change in the ceiling rate, he noted, posed difficult problems from the standpoint of relationships between banks and their depositors. There followed discussion of the trend in interest rates paid on savings deposits since the maximum was increased to 3 per cent it appeared that the effective at the beginning of 1957, from which that majority of banks were still paying 2-1/2 per cent or less and the average rate of approximately 2.20 per cent in 1958 probably had now increased to around 2.35 or 2.40 per cent. ion Governor Mills commented that according to his recollect the payment of interest on time and savings deposits represented the outside of the greatest single cost of operations to member banks Payment of salaries. It was also his recollection that over the in Past year the earnings of smaller banks, particularly those did country areas carrying a large proportion of time deposits, not rise comparably with the earnings of central reserve and reserve city banks. -11- / 0/59 6 3 d to take Mr. Robinson added the comment that most banks electe ble profits capital gains on securities in 1958, so that the favora l gains rather record in that year reflected to a large extent capita than increased earnings from current operations. possibility of declining profits in This indicated the 1959. ting his conclusions Governor Mills then read a statement reflec on the question before the Board. It was understood that copies of this would be distributed to the statement, attached hereto as Item No. 5, members of the Board for further study. or of the Division of InterAt this point Mr. Marget, Direct meeting and the Vice Chairman national Finance, was called into the relating to the request of First directed to him a series of questions international aspects. National City Bank as viewed in its In response n must always be to those questions, Mr. Marget said that consideratio that foreign funds not placed on given to investment alternatives and in Treasury bills. time deposit appeared likely to be placed With ble, he doubted whether any basic the Treasury bill alternative availa l flow of capital was posed by Problem in terms of the internationa the present maximum rates on time deposits. Offhand, he did not see terms of the public interest, from 'ghat advantages there would be, in of time deposits rather than having foreign funds held in the form Treasury bills. -12- / 0/59 6 3 Informed by the Chair that the Board appeared to be coming to a conclusion against taking any action on the maximum time deposit rates at this time, Mr. Marget said he did not perceive that such a decision would present difficulties from the standpoint of the international position of the United States as long as the alternative of investment of foreign funds in Treasury bills remained. With respect to rates offered by Canadian and other foreign banks, he said that this raised the question whether it was necessary for the United States always to compete with every form of investment that might be available elsewhere. The question of encouraging time deposits as against Treasury bills appeared to him to be a separate matter. As of the moment, he said, he could think of no strong reason for differentiating in the Board's regulations between the maximum rates payable on time and on savings deposits. Governor Szymczak then expressed the view that the Board was not in a position to take any action at this time. Although he s felt that sooner or later, depending on when a number of other question were resolved, it might be necessary to increase the maximum rates on both time and savings deposits, he believed that such action at the present time would be unfortunate. In his opinion it was helpful for the New York City banks to hold foreign deposits, but he could not find a basis for distinguishing in the Board's regulations or in 6 3 / 0/59 -13- the law between the permissible rates on such deposits and on domestic savings deposits. Following further comments, Governor Balderston summarized the discussion by saying he understood it to be the view of the Board that no action should be taken at this time on the request of The First National City Bank. While there was no disagreement with this statement, question was raised as to what response would be appropriate if the New York Reserve Bank should make inquiry regarding the status of the matter. It was agreed that it would be appropriate, if such inquiry should be made, to reply that the matter was under study. With respect to the letter from the Westbrook Trust Company, the view was expressed that an acknowledgment should be made in the form of replies ordinarily given to general correspondence regularly received at the Board's offices. Question then was raised whether there were any further studies that the Board would like the staff to undertake. Several items of information that would be useful in consideration of the problem were mentioned, following which Messrs. Riefler, Marget, and Robinson were requested to confer with other members of the staff with a view to determining the availability of such data and making such recommendations to the Board as they deemed appropriate. The Vice Chairman then requested the Secretary to bear in mind that the subject should be listed on the agenda for further consideration at such time as the staff had had an opportunity to develop material for the Board's use. -14- / 0/59 6 3 All of the members of the staff except Messrs. Sherman, Smith, and Young then withdrew from the meeting. Report on Crowe matter. Mr. Smith summarized the results of the visit that he and Mr. Young made to St. Louis, Missouri, last week, pursuant to the understanding at the meeting on June 12, 1959, for the purpose of reviewing the files of the Federal Reserve Bank of St. Louis relative to the allegations of Mr. Eugene Crowe concerning the mishandling of a V-loan and visiting Mr. Crowe to allow him to make a statement on the matter. Mr. Smith's comments included reference to conversations with officers of the Reserve Bank as well as with Mr. Crowe. From the discussion with the latter, it appeared to Messrs. Smith and Young that his allegations were without substance. It was understood that a more detailed report on the matter would be submitted to the Board in writing by Messrs. Smith and Young and placed in the Board's files. The meeting then adjourned. Secretary's Notes: Following a meeting of the Board in executive session yesterday afternoon, the Secretary was informed by the Vice Chairman that the Board,among other things, gave consideration to the request of the Treasury that the Federal Reserve Banks perform certain fiscal agency functions in connection with the handling of tax remittances from individuals, as discussed at the meeting on June 22, 1959, and designated Governor Mills /3 6 0/59 -15as the Board's representative to join designated members of the Presidents' Conference at a meeting to discuss this matter with the Fiscal Assistant that Secretary of the Treasury. It was understood be held at the Federal Reserve the meeting would and that a . Building at 3:00 p.m. on July 7, 1959, the Board and the Presidents would joint meeting of ssion be held on the same day at 1:45 p.m. for discu It was also understood that the of the same matter. d by the Presidents' Conference would be represente ttee on Fiscal Agency Operations, members of the Commi Messrs. Leach, Fulton, and Mangels. 29, 1959, Governor Shepardson today and on June f of the Board letters to the approved on behal Dallas Federal Reserve Banks of Cleveland and and 7) approving the appointment (attached Items 6 LeFlore as of Robert Louis Lett and Jennings B. for the respective Banks, and assistant examiners of San Francisco a letter to the Federal Reserve Bank approving the appointment of (attached Item No. 8) ners. eleven persons as special assistant exami on behalf of the Governor Shepardson approved today affecting the Board's Board the following items staff: Appointment Division of Administrative Charles H. Sims as Messenger in the the rate of 42,960, effective Services, with basic annual salary at the date of entrance upon duty. Promotion of Sergeant, Guard Force, to William F. Becker, from the position Division of Administrative Services, the position of Captain, Guard Force, salary from $4,040 to 434,490, with an increase in his basic annual effective July 1, 1959. / 0/59 63 Acceptance of resignation tive June 30, Robert L. Hill, Assistant to the Secretary, effec 1959. On the basis of a memorandum from the Division 1959, of Personnel Administration dated June 19, on behalf of Governor Shepardson approved today the Board the use of Form FR-711, Oath of Office and Personnel Affidavit, a form that had been developed to replace two existing forms. Secretary BOARD OF GOVERNORS 1 ; tr 6* 440ix ot ,0 00 OF THE Item NO. 1 / 0/59 63 FEDERAL RESERVE SYSTEM 4 1 1 • Cr WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE * TO THE SOARD t 00004. ' June 301 1959 Board of Directors, Greenfield State Bank, Bakersfield, California. Gentlemen: Pursuant to your requests submitted through the Federal Reserve Bank of San Francisco, the Board of Governors approves the establishment of two branches by Greenfield State Bank, Bakersfield, California. One of these branches is to be located on Baker Street in the vicinity of either Kentucky or Lake Street, East Bakersfield, California, and the other is to be located in the vicinity of the intersection of North Chester Avenue and Francis Street, Oildale, California. This approval is given provided the branches are established within six months from the date of this letter and formal approval of State authorities is effective at the time the branches are established. It is noted that capital funds are to be increased by not less than $400,C00 prior to establishment of the two branches and that branch quarters are to be leased. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. 1.10 ? 5t • 7 BOARD OF GOVERNORS OF THE Item No. 2 6/30/59 . FEDERAL RESERVE 'SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 301 1959 C6I\IFIDENTr,L (17a) H. J. NeuAan, Vice President, : Federal I. .eserve Dank of Chicago, Chicaco 90, Illinois. Lear :r. The Poard of Governors approvos the pay4ent of salary by the Federal ilescrve Dank of Chicap to the Bank's Engineers and Firemen at the annual rates of :::6,593.60 and ii5,e0.7.20, respectively, retroactive to Narch 2, 1959, in accordance with the request contained in your letter of June 15, 1959. Very truly yours, (Signed) Merritt Sherman ..crritt Sherman, jecretary. Item No. 3 6/30/59 BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM UNITED STATES OF AMERICA In the Matter of THE CONTINENTAL BANK AND TRUST COMPANY Salt Lake City, Utah STATEMENT AND ORDER ON RESPONDENT'S MOTION TO DISQUALIFY On June 3, 1959, respondent filed with the Board, pursuant to Section 7(a) of the Administrative Procedure Act (5 U.S.C. § 1006(a)), a motion to disqualify Governor J. L. Robertson as a member of the Board of Governors to review the Report and Recommended Decision of the Trial Examiner in the aboveentitled matter, or otherwise to participate in the decision therein. Accompanying respondent's motion to disqualify was an affidavit of its President asserting his belief as to the personal prejudice of Governor Robertson against respondent and affiant, and incorporating by reference in support of the affidavit designated portions of testimony given by affiant during the hearing in this matter, correspondence between Governor Robertson and the respondent exchanged in a period during which the Governor was in the office of the Comptroller of the Currency, and a finding by the Trial Examiner that "'patent bad blood' exists between said Robertson and affiant." Special counsel to the Board filed a memorandum in opposition to respondent's motion to disqualify. -2The aforementioned affidavit, correspondence, portions of testimony, and finding of the Hearing Examiner having been carefully considered by the Board (Governor Robertson not participating), the Board finds that the respondent has failed to establish a personal bias, prejudice, or animosity against respondent or affiant on the part of Governor Robertson. The Board finds nothing in the evidence to support affiant7 s assertion that Governor Robertson would be prevented from considering the evidence and issues in this proceeding in a fair and impartial manner. ORDER ) In accordance with the foregoing statement IT IS ORDERED, That respondents motion to disqualify be, and the same hereby is, denied. This 30th day of June 1959. By order of the Board of Governors. (Signed) Merritt Sherman Merritt Sherman, Secretary. (SEAL) Washington, D. C. June 30, 19590 BOARD OF GOVERNCRS OF THE FEDLHAL REJEV:VE SYSTEM Item No. /3 6 0/59 Statement for the Press For immediate release July 1, 1959 The Board of Governors of the Federal Reserve System has ordered oral argument to be held before the Board on July 22 In the natter of The Continental Bank and Trust Company, Salt Lake City, Utah, a proceeding relating to a determination of the adequacy or inadequacy of the net capital stock and surplus of that bank. There is attached a copy of that order; a Statement and Order by the Board , denying res: ondentts motion to disqualify Governor Robertson from participating in the decision of this matter, and a subsequent statement by Governor Robertson voluntarily Hithdrawing from participation. Attachments 4 Item No. 5 6/30/59 TIIE DEPOSIT RATES The First National City Bank of New York has submitted a request that the Board of Governors increase the ceiling rate of interest allowable on time deposits as follows: From 3 to 3-1/4 per cent on time deposits maturing between 90 days and 6 months; / From 3 to 3-1 2 per cent on time deposits maturing in 6 months or more. It is the writer's judgment that the request should be tabled at this time. If and when the ceiling rate on time deposits should be raised, an over-the-board increase to include savings deposits should be approved. However, consideration of an increase in the ceiling rate of interest allowable on savings deposits should take into account the position of the smaller commercial banks who presently carry a substantial Proportion of savings deposits and whose earning opportunities are not such as to permit them to absorb a higher interest rate on saving deposits if competition should compel an increase in such rates. On the basis of information now available, an increase in the ceiling rate of interest on savings deposits should not be approved for to do so would either compel the smaller banks to acquire high-yield and low-quality assets in order to cover the costs of a higher rate of interest on savings deposits or to lose such deposits to larger banks better able to afford a higher rate of interest on savings deposits without taking undue credit risks. To consider raising the ceiling rate of interest allowable on time deposits but leaving the ceiling rate of interest on savings deposits at the present level of 3 per cent would be undesirable, in that there is no appropriate distinction between savings deposits and time deposits as far as an allowable rate of interest is concerned, and if a higher rate On time deposits was permitted, the transfer of funds from savings dePosits to time deposits would be set up whose damaging consequences to the smaller banks would be comparable to the effects of raising the ceiling rate of interest on savings deposits. As a matter of pure princiPie, a higher rate of interest would be allowed on savings deposits as against time deposits in order to reward the thrift incentive of the individual saver. As regards limiting an increase in the ceiling rate of interest allowable by Board regulation solely to time deposits, the arguments against such action are several: 1. Any such action taken at this time would tend to encourage mutual savings banks to raise their rates of interest on time and savings deposits and, in consequence, would leave the commercial banks in a more -2 at present. Should the mutual unsatisfactory competitive position than ion should be given to the savings banks raise their rates reconsiderat s. present situation of the commercial bank ign and corpora2. By and large, it is preferable to h-ve fore er than in time deposits betion funds invested in Treasury bills rath cause: are of distinct (a) such investments in Treasury bills g operassistance in the Treasury's present financin ly would ations. Although commercial banks presumab sury invest foreign and corporation funds in Trea d do so; bills, there is no assurance that they woul policy of credit (b) the Federal Reserve System's current withdrawal restraint is in effect strengthened by the ercial and transfer of time deposits out of the comm sactions barks into Treasury bills, in that such tran the comexert pressure on the deposit position of mercial banks thus affected. sits should 3. The transfer of corporation funds into time depo should be they that ed. It is preferable, as pointed out, not be encourag to be idle for any considerable invested in Treasury bills when expected unlikely that an interest rate period of time and, in any event, it is would compete for corporate funds could be allowed on time deposits that al paper, Treasury bills and, with the yield rates obtainable on commerci to some degree, bankers' acceptances. an increase in the ceil4. It would be imprudent to consider in order to permit comof interest allowable on time deposits ing rate s with savings and loan associamercial banks to compete on better term een the time deposit rate for tions. The present rate differential betw paid by conservative savings commercial banks and the rate of interest and, in any event, it would be and loan associations is not out of line time deposits high enough to impossible to allow a rate of interest on savings and loan associacompete with the rate paid by the promotional nal savings and loan assotions. As a practical matter, the promotio of the problems in which they ciations are coming into discredit because practices. have become involveidue to loose financial A. L. Mills, Jr. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 6 6/30/59 WASHINGTON 25, D. C. ADDRESS OrFICIAL CORRESPONDENCE TO THE BOARD June 30, 1959 Mr. Paul C. Stetzelberger, Vice President, Federal Reserve Bank of Cleveland, Cleveland 1, Ohio. Dear Mr. Stetzelberger: In accordance with the request contained in your letter of June 21!, 1959, the Board approves the appointment of Robert Louis Lett as an assistant examiner for the Federal Reserve Bank of Cleveland. Please advise as to the date on which the appointment is made effective. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE Item No. 7 FEDERAL RESERVE SYSTEM 6/30/59 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 29, 1959 Mr. L. G. Pondrom, Vice President, Federal Reserve Bank of Dallas, Dallas 2, Texas. Dear Mr. Pondram: In accordance with the request contained es in your letter of June 231 19591 the Board approv the appointment of Jennings B. LeFlore as an assist , ant examiner for the Federal Reserve Bank of Dallas effective today. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE Item No. 8 FEDERAL RESERVE SYSTEM 6/30/59 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 30, 1959 El-. R. H. Morrill, Vice President, Federal Reserve Bank of San Francisco, San Francisco 20, California. Dear Mr. Morrill: In accordance with the request contained in your letter of June 25, 1959, the Board approves the designation of the following employees as special assistant examiners for the Federal Reserve Bank of San Francisco for the purpose of participating in the examination of State member banks only: C. B. H. H. L. G. M. R. Blackburn Booth Brown Brown D. B. Butler R. C. Cromer H. L. Denny D. S. C. E. H. H. R. B. Gray McKowan Morse Naylor Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary.