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Minutes for To: Members of the Board From: Office of the Secretary June 5, 1964 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. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. Mitchell Gov. Daane t4)' Minutes of the Board of Governors of the Federal Reserve System on Friday, June 5, 1964. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Martin, Chairman Mills Shepardson Daane Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Sherman, Secretary Kenyon, Assistant Secretary Fauver, Assistant to the Board Brill, Director, Division of Research and Statistics Holland, Associate Director, Division of Research and Statistics Partee, Adviser, Division of Research and Statistics Furth, Adviser, Division of International Finance Hersey, Adviser, Division of International Finance Sammons, Adviser, Division of International Finance Katz, Associate Adviser, Division of International Finance Eckert, Chief, Banking Section, Division of Research and Statistics Bernard, Economist, Division of Research and Statistics Baker, Economist, Division of International Finance Money market review. Mr. Bernard commented on developments in the Government securities market, Mt. Partee reviewed recent banking and monetary developments, and Mr. Baker summarized the situation in the foreign exchange markets. Materials distributed to the Board and l'eferred to by the speakers during the course of their remarks included 4 summary of monetary developments in the five weeks ended June 3, 1964, 6/5/64 -2- two tables on the maturity distribution of outstanding negotiable certificates of deposit, and a table showing changes in loans and investments at weekly reporting member banks for selected periods. All of the members of the staff who had been present except Messrs. Sherman, Kenyon, Fauver, Brill, and Furth then withdrew and the following entered the room: Hackley, General Counsel Farrell, Director, Division of Bank Operations Solomon, Director, Division of Examinations Shay, Assistant General Counsel Dembitz, Associate Adviser, Division of Research and Statistics Mr. Daniels, Assistant Director, Division of Bank Operations Mr. Goodman, Assistant Director, Division of Examinations Mr. Leavitt, Assistant Director, Division of Examinations Mrs. Sette, Chief, Economic Editing, Division of Research and Statistics Mr. Collier, Assistant to the Director, Division of Bank Operations Mr. Egertson, Supervisory Review Examiner, Division of Examinations Mr. Mr. Mr. Mr. Mr. Discount rates. The establishment without change by the Federal Reserve Banks of New York, Philadelphia, Chicago) Minneapolis, and San Prancisco on June 4, 1964, of the rates on discounts and advances in their existing schedules was approved unanimously, with the understanding that appropriate advice would be sent to those Banks. Distributed items. The following items, copies of which are attached to these minutes under the respective item numbers indicated, Were approved unanimously: .5 4L 0.) L.)4 let,. 6/5/64 -3Item No. Letter to First National City Overseas Investment Corporation, New York, New York, granting permission to purchase shares of Forjas de Colombia, S. A., Colombia. 1 Letters to First National City Overseas Investment Corporation, New York, New York, Irving International Financing Corporation, New York, New York, and The Company for Investing Abroad, Philadelphia, Pennsylvania, granting permission to purchase shares of ADELA Investment Company, S. A., a proposed Luxembourg corporation. 2-4 In discussion preceding approval of Items 2-4, Mr. Goodman Pointed out that the letters from the Board would grant consent to the proposed investments in shares of ADELA Investment Company, S. A., Luxembourg, subject to the understanding that ADELA would not maintain any branch, agency, office, or representative in the United States and that it would not engage or participate in the underwriting, sale, or distribution of securities in the United States. Mr. Shay, although not arguing against approval of the proposed investments, commented that it was understood that ADELA would join together American, European, Canadian, and Japanese investors in a multinational corporation aimed at making equity investments in private ventures in Latin America. He suggested that it might be rather difficult to say whether this would result in a furthering of the foreign commerce Of the United States, at least in a direct sense. In fact, if the Latin American ventures proved successful, conceivably this might result in a diminution of U. S. exports. 6/5/64 Governor Mills said he felt Mr. Shay had raised a question that deserved study. He referred, however, to the recent report of a Presi- dentially-appointed group that was directed in part at means of reducing the flow of funds from the United States into foreign securities. The ADELA concept seemed to fit into that kind of plan and program. Mr. Furth commented that it was the general philosophy of U. S. foreign policy that the industrialization of Latin America would work eventually to promoting the foreign commerce of the United States. Accordingly, he would not be disturbed in that respect by the proposed investments. However, it would work counter to the Objective of in- creasing European participation in ventures of this kind if an organization such as ADELA sold securities in the United States. This would be the likely purpose of establishing an office in the United States. Therefore, he supported the inclusion in the draft letters of the language referred to earlier by Mr. Goodman. Report on competitive factors (Portland-Lake Oswego, Oregon). A report to the Comptroller of the Currency on the competitive factors involved in the proposed merger of Citizens Bank of Oregon, Lake Oswego, Oregon, into United States National Bank of Oregon, Portland, Oregon, was -411112Eayal unanimously for transmittal to the Comptroller. The conclusion read as follows: The effect of the proposed merger of United States National Bank of Oregon, Portland, and Citizens Bank of Oregon, Lake Oswego, would be adverse since it would eliminate direct competition presently existing between the two banks and increase the heavy concentration of banking resources in the State's two largest banks. - 6/5/64 -5Messrs. Shay and Egertson then withdrew from the meeting. Article on reduced reserves. With a covering memorandum from the Division of Bank Operations dated June 3, 1964, there had been distributed a draft of an article proposed for inclusion in the June 1964 issue of the Federal Reserve Bulletin on the granting to banks in reserve cities of permission to carry reduced reserves. The understanding that such an article would be prepared dated back to discussion at the Board meeting on May 23, 1963, and the decision by the staff to suggest its publication in the June issue rather than later this year (when a listing of reserve city banks would normally be published) reflected sUbsequent discussions by the Board relating to requests to carry reduced reserves, most recently at the meeting on April 16, 1964. In commenting on the matter, Mr. Farrell recalled that some time agO there had been a suggestion that the Board might consider granting Permission to carry reduced reserves almost automatically to member banks With net demand deposits of less than a certain amount. As an alternative to proceeding along those lines, the Board wrote to the Reserve Bank Presidents requesting their views on the standards employed in considering requests for permission to carry reduced reserves and on whether it would be desirable for the Reserve Banks to take the initiative in suggesting the submission of requests by banks that almost certainly would qualify for reduced reserves under any standards that might be used. There was a mixed reaction on the latter point, and after further consideration it f kot 6/5/64 -6- was felt that the objective of calling attention to the possibility of aUbmitting requests in certain circumstances might be achieved by the publication of an article in the Federal Reserve Bulletin. Consideration was given to a question by Mr. Brill as to whether the draft article was sufficiently pointed to achieve the purpose, but it was the consensus that the draft went about as far as would be desirable. It was noted that the article probably would be brought to the attention of member banks by the staffs of Reserve Banks that might be interested in pursuing the matter. Accordingly/ subject to a change suggested by Mr. Hackley in the interest of accuracy and such other editorial changes as might be found appropriate, the publication of the article in the June Bulletin was authorized. Travel by Mr. Furth. As recommended in a distributed memorandum dated June 41 1964, from Mr. Young, Adviser to the Board and Director, Division of International Finance, Mr. Furth, Adviser in the Division of International Finance, was authorized to travel to Paris, France, to attend a meeting on June 101 1964, of a working group of the Deputies of the Group of Ten dealing with the supply of information bearing on the financing of Payments surpluses and deficits, with reimbursement on the basis of actual necessary travel expenses. It was understood that Mr. Furth would serve aa an adviser to Mr. George Willis of the Treasury, the U. S. representative at the meeting, and that he would serve generally as an observer on behalf (Ilf the Federal Reserve. 6/5/64 In view of comments by Governor Daane and Mr. Furth that reflected some degree of uncertainty as to the scope of matters that might be covered at the meeting, including the question whether the group would deal with the availability of current data on System foreign exchange operations or with prospective changes in swap agreements, it was understood that upon his return Mr. Furth would confer with Governor Daane to decide what type of report on the meeting, either to the Board or the Open Market Committee, might seem indicated. All of the members of the staff then withdrew and the Board went into executive session. Personnel matters. Following the executive session, Governor Shepardson informed the Secretary that the Board had accepted the resignation, effective the close of business June 10, 1964, of M. H. Schwartz, Director, Division of Data Processing, to accept a position with the DePartment of Commerce. Governor Shepardson also informed the Secretary that during the executive session the Board approved the appointment of Reed J. Irvine, Chief of the Asia, Africa, and Latin America Section, Division of International Finance, as Associate Adviser in that Division, effective June 8, 1964, with annual salary at the rate of $20,000. The meeting then adjourned. 6/5/64 -8Secretary's Note: Pursuant to recommendations contained in memoranda from appropriate individuals concerned, Governor Shepardson today approved on behalf of the Board the following actions relating to the Board's staff: Salary increases, effective June Name and title 7, 1964 Division Basic annual salary From To _ Office of the Secretary Ruth W. Eschmeyer, Senior Records Clerk Dorothy L. Saunders, Secretary $5,170 $5,330 5,170 5,330 6,635 4,215 4,215 7,160 4,690 4,355 6,285 6,46o 4,355 Research and Statistics Helene F. Baur, Statistical Assistant Catherine Cole, Secretary J0Ann C. Corrado, Clerk-Stenographer Reba C. Driver, Statistical Assistant Irene Fender, Statistical Clerk Mary F. Green, Statistical Clerk Emily Last, Programmer Alfred Tella, Economist Penny Winters, Statistical Assistant (change in title from Statistical Clerk) 4,090 4,495 4,690 4,635 4,850 9,530 10,310 4,495 4,850 4,215 7,260 4,355 7,11.90 8,410 8,690 3,880 3,965 3,620 3,725 International Finance Kathleen Alexander, Clerk-Stenographer Pred B. Ruckdeschel, Economist Examinations Alex J. Harris, Jr., Assistant Review Examiner Data Processing Concetta M. Nobilio, Clerk-Typist Administrative Services Prances E. Willis, Charwoman 6/5/64 Acceptance of resignation Gail E. Mullin, Economist, Division of Research aM Statistics, effective at the close of business June 12, 1964. BOARD OF GOVERNORS Item No. 1 6/5/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 5, 1964. First National City Overseas Investment Corporation, 399 Park Avenue, New York 22, New York. Gentlemen: In accordance with the request contained in your letter of April 29, 1964, transitted through the Federal Reserve Bank of New York, and on the basis of information furnished, the Board of Governors grants consent for your Corporation to purchase and hold 500,000 shares, par value Pesos 10 per share, of Forjas de Colombia, S. A., Colombia, at a cost of approximately US$505,000, provided such stock is acquired within one year from the date of this letter. The Board also approves the purchase and holding of shares of Forjas de Colombia, S. A., within the terms of the above consent in excess of 10 per cent of your Corporation's capital and surplus. Very truly yours, (signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. Item No. 2 BOARD OF GOVERNORS 6/5/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE HOARD ; .• RE.O ;14 . 11• .• • June 5, 1964. First National City Overseas Investment Corporation, 399 Park Avenue, New York 22, New York. Gentlemen: In accordance with the request contained in your letter of April 29, 1964, transmitted through the Federal Reserve Bank of New York, and on the basis of information furnished, the Board of Governors grants consent for your Corporation to purchase and hold Up to 50 shares, par value US$10,000 each, of ADELA Investment Company, S.A., Luxembourg, at a cost of approximately US$500,000, Provided such stock is acquired within one year from the date of this letter. The Board also approves the purchase and holding of shares of ADELA Investment Company, S.A., within the terms of the above consent in excess of 10 per cent of your Corporation's capital and surplus. The descriptive memorandum on ADELA furnished with your letter stated that the head office of ADELA will be located in Luxembourg, and branch offices will probably also be maintained elsewhere in Europe and in the United States. In the circumstances, the Board's consent is given with the understanding that ADELA will not maintain any branch, agency, office, or representative in the United States and that ADELA will not engage or participate in the underwriting, sale, or distribution of securities in the United States. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. BOARD OF GOVERNORS Item No. 3 6/5/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 5, 1964. Irving International Financing Corporation, One Wall Street, New York 15, New York, Gentlemen: In accordance with the request contained in your letter of May 15, 1964, transmitted through the Federal Reserve Bank of New York, and on the basis of information furnished, the Board of Governors grants consent for your Corporation to purchase and hold up to 25 shares, Par value US$10,000 each, of ADELA Investment Company, S. A., Luxembourg, at a cost of approximately US$250,000, provided such stock is acquired within one year from the date of this letter. The Board also approves the purchase and holding of shares of ADELA Investment Company, S. A., within the terms of the above consent in excess of 10 per cent of your Corporation's capital and surplus. The descriptive memorandum on ADELA furnished with your letter stated that the head office of ADELA will be located in Luxembourg, and branch offices will probably also be maintained elsewhere in Europe and in the United States. In the circumstances, the Board's consent. is given with the understanding that ADELA will not maintain any branch, agency, office, or representative in the United States and that ADELA will not engage or Participate in the underwriting, sale or distribution of securities in the United States. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. BOARD OF GOVERNORS Item No, L. 6/5/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL. CORRESPONDENCE TO THE BOARD June 5, 1964. The Company for Investing Abroad, Fidelity Philadelphia Trust Building, Philadelphia 9, Pennsylvania. Gentlemen: In accordance with the request contained in your letter of May 7, 1964, transmitted through the Federal Reserve Bank of Philadelphia, and on the basis of information furnished, the Board of Governors grants consent for your Corporation to purchase and hold up to 50 shares, par value US$10,000 each, of ADELA Investment Company, S. A., Luxembourg, at a cost of approximately US$500,000, provided such stock is acquired Within one year from the date of this letter. The Board also approves the purchase and holding of shares of in ADELA Investment Company, S. A., within the terms of the above consent and surplus. capital 's Corporation your of excess of 10 per cent The descriptive memorandum on ADELA furnished with your letter stated that the head office of ADELA will be located in Luxembourg, and branch offices will probably also be maintained elsewhere in Europe and in the United States. In the circumstances, the Board's consent is given with the u nderstanding that ADELA will not maintain any branch, agency, office, or re presentative in the United States and that ADELA will not engage or Participate in the underwriting, sale, or distribution of securities in the United States. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary.
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