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609 6/61 Minutes for To: Members of the Board From: Office of the Secretary June 7, 1961 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. Chin. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King 19r9 Minutes of the Board of Governors of the Federal Reserve System on Wednesday, June 7, 1961. PRESENT: Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Martin, Chairman Balderston, Vice Chairman Mills Shepardson King Sherman, Secretary Kenyon, Assistant Secretary Fauver, Assistant to the Board Hackley, General Counsel Farrell, Director, Division of Bank Operations Solomon, Director, Division of Examinations Hexter, Assistant General Counsel Hooff, Assistant General Counsel Furth, Adviser, Division of International Finance Mr. Kiley, Assistant Director, Division of Bank Operations Mr. Goodman, Assistant Director, Division of Examinations Mr. Leavitt, Assistant Director, Division of Examinations Mrs. Semia, Technical Assistant, Office of the Secretary Mr. Potter, Legal Assistant Mr. Schwartz, Chief, Statistical Operations Planning Section, Division of Research and Statistics Mr. Poundstone, Review Examiner, Division of Examinations Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Items circulated or distributed to the Board. The following items, which had been circulated or distributed to the Board and copies of which are attached to these minutes under the respective item numbers indicated, were approved unanimously: Item No. Letter to the Federal Reserve Bank of Chicago regarding a plan of The First National Bank of Chicago to promote new savings accounts. 1 1910 -2- 6/7/61 Item No. Letter to Union Bond & Mortgage Company, Port Angeles, Washington, regarding the final tax certification issued by the Board on April 28, 1961. 2 Letter to the Presidents of all Federal Reserve Banks regarding insurance carried by the Reserve Banks and the Board of Governors. 3 Letter to the Federal Reserve Bank of San Francisco noting without objection the action of the Bank's Board of Directors authorizing the acquisition of an electronic computer system. Report on competitive factors (Elsie-St. Johns, Michigan). ller of the There had been distributed a draft of report to the Comptro d consolidation Currency on the competitive factors involved in the propose National of The State Savings Bank of Elsie, Elsie, Michigan, and Clinton Bank and Trust Company, St. Johns, St. Johns, Michigan. After a brief discussion the report was approved unanimously, its conclusion reading as follows: The proposed consolidation of The State Savings Bank of Elsie and Clinton National Bank and Trust Company, St. Johns, would eliminate a moderate amount of competition. The resulting bank could provide more effective competition for the larger banks in the area without apparent adverse effects on the smaller banks. Messrs. Hooff and Leavitt then withdrew from the meeting and entered Miss Hart, Assistant Counsel, and Mr. Smith, Legal Assistant, the room. 1911 -3- 6/7/61 Head office location of Chemical Overseas (Item No. 5). At its meeting on May 10, 1961, the Board considered the request of Chemical International Finance, Ltd., of New York City for consent to removal of the head office of its subsidiary, Chemical Overseas Finance Corporation, from New York City to Bermuda. There was some question as to whether the Board's consent was required, and the Board asked the Legal Division to explore that question further. It was also agreed that in the mean- time inquiry would be made of the Department of State as to whether it saw any reason why the change of location should not be approved. The move had, in fact, been accomplished some time before the Board's approval was requested. A memorandum dated June 2, 1961, from the Division of Examinations, which had been distributed, reported that the State Department's response indicated no objection from the foreign relations point of view. However, the response stated that "you may wish to inform the applicant of the Administration's tax proposals under which American corporations would be taxed on their current share of the undistributed profits realized by subsidiary corporations organized in economically advanced countries. The present treatment of subsidiaries' income in less developed countries, namely deferral of tax until income is distributed to the parent, would continue except in the case of a tax haven corporation which is defined generally as one receiving more than 20 per cent of its gross profit from sources outside the country in which it is created. I91.2 6/7/61 These tax proposals, if adopted, would tend to lessen the tax advantage of certain types of operations in countries like Bermuda." Attached to the memorandum was a draft of letter to Chemical International Finance granting the Board's consent to the relocation of the head office of Chemical Overseas and quoting the aforementioned passage from the Department of State's letter. Also attached to the memorandum was a memorandum dated June 1, 1961, from the Legal Division in which the question of the Board's authority over the relocation of Chemical Overseas' head office was comprehensively explored. conclusion reached was that the Board had such authority. The Support for this conclusion was found in a condition the Board had imposed when it granted approval of the investment by Chemical International in the subsidiary. Under that condition, Chemical International could not purchase or hold any stock in Chemical Overseas if the latter, except with the consent of the Board, established any branch or agency, or took any action or engaged in any operation, in Panama or elsewhere, which at that time could not be taken or engaged in by Chemical International itself. In discussion of the matter, Governor Mills questioned the desirability of including in the letter to Chemical International the passage from the Department of State's letter, both because of the inference that he read into the inclusion of the quotation and because it might be assumed that Chemical International was fully familiar with the current tax proposals. -5- 6/7/61 Following staff comments on this point, Chairman Martin remarked ent's that in his view the inclusion of the quotation from the State Departm along letter might well be regarded by Chemical as a courtesy in passing to it information received from the State Department, with which organizations such as Chemical have to deal frequently in the conduct of their foreign business. However, he had no strong feeling about the paragraph in question and would have no serious objection to leaving it out. After further discussion, the letter to Chemical International Finance, Ltd., was approved unanimously in a form in which the quotation from the State Department's letter was omitted. A copy of the letter, as sent, is attached as Item No. 5. Messrs. Farrell, Furth, Kiley, Goodman, Potter, Schwartz, and Poundstone then withdrew from the meeting. Mutual fund investing in Government securities (Item No. 6). A memorandum dated May 31, 1961, from the Legal Division had been distributed in connection with a question raised by the Federal Reserve Bank of Cleveland as to the status under Regulations T and U of shares in a proposed open-end mutual fund, to be formed for investment in Government securities. Although the Board had never ruled directly on the status of a d in mutual fund that invested in exempted securities, in a ruling publishe October 1952 the Board held that it would be a violation of Regulation T 1f314 -6- 6/7/61 for any broker or dealer to arrange credit for the purchase of shares in an open-end investment company that were not themselves registered on a national securities exchange, even though the investment company's portfolio might consist of registered securities. The status of the shares themselves was held to be the determining factor. Therefore, in the present case it would seem to follow that unless the investment company registered its shares on an exchange, they would have no loan value in a margin account under Regulation T, even though the underlying securities were exempt securities and entitled to good faith loan value in such an account. Loans to purchase shares in an investment company such as described would not be "purpose" loans under Regulation U, since the assets of the company would not customarily include registered stock. However, the additional question was presented as to whether the shares in the fund were "stock" as defined in section 221.3(1) of Regulation U. The operators of the fund in question had urged the conclusion that the shares were "collateral other than stocks" under section 221.1(a) and as such should be given good faith loan value rather than the loan value accorded to stock by Regulation U. This conclusion was based on the reasoning that the shares in the fund merely represented participations in the assets of the fund, consisting entirely of Government securities, and were not "stock" under section 221.3(1). 19_ 6/7/61 -7After reviewing arguments for and against that view, the memo- randum expressed the opinion that shares in an open-end investment company are "stock" and should not be regarded as exempt securities. Thus, they would not be entitled to good faith loan value under Regulation U merely because of the fact that the company's assets consisted entirely of exempt securities. A draft of reply to the Federal Reserve Bank of Cleveland incorporating the conclusions reached by the Legal Division was attached to the memorandum. Before the May 31 memorandum was considered by the Board, the Legal Division, having considered certain suggestions for clarification of the proposed letter, redrafted the letter, and the revised draft was distributed with a memorandum dated June 2, 1961. After Mr. Hackley had commented on the questions at issue and the position taken in the draft letter, Governor Balderston noted that if a party held Government securities directly instead of through the fund, he would have certain rights and privileges not obtaining under the proposed ruling. While he recognized the administrative difficulties that would be encountered if any conclusion were reached other than the one presented in the letter, nevertheless the substance of the interpretation gave him some concern. Miss Hart replied that the point made by Governor Balderston was one that had been discussed in the Legal Division. It was noted in those discussions that the investor in a mutual fund presumably was obtaining -.8- 6/7/61 something in addition to a mere participation, namely, the investment judgment of the managers of the fund. He had made a choice--to participate in the portfolio of Governments chosen by the fund's management and rely on the judgment of the management rather than to buy the securities himself. Therefore, it was perhaps not too unfair to say that there were certain penalties, as well as advantages, in investing through the fund rather than directly. After further discussion the proposed letter was approved unanimously, with the understanding that an interpretation based on it would be published in the Federal Reserve Bulletin and in the Federal Register. A copy of the letter is attached as Item No. 6. All members of the staff then withdrew and the Board went into executive session. Personnel matter. The Secretary was informed later by Governor Shepardson that during the executive session the Board, after considering the recommendation contained in a memorandum dated June 7, 1961, from Mr. Young, Adviser to the Board and Director, Division of International Finance, approved the retention of Chu S. P. Okongwu, a native of Nigeria, on a contractual basis, with compensation at the rate of $100 per week and with the understanding that his period of employment would not extend beyond October 1, 1961, or the opening of the fall term at Harvard University, whichever might be the earlier. The meeting then adjourned. 1917 -9- 6/7/61 Secretary's Notes: On June 6 and 7, 1961, Governor Shepardson approved on behalf of the Board the following items: June 6: Letter to the Federal Reserve Bank of New York (attached Item No. 7) approving the appointment of Vincent John Kulda as assistant examiner. Letter to the Federal Reserve Bank of Cleveland (attached Item No. 8) approving the appointment of Larry Elmer Hazen as assistant examiner. Letter to the Federal Reserve Bank of Richmond (attached Item No. 9) approving the appointment of James B. Campbell as assistant examiner. Memoranda from appropriate individuals concerned recommending the following actions relating to the Board's staff: Appointments Peter Gajewski as Economist in the Division of Research and Statistics, with basic annual salary at the rate of $7,560, effective the date of entrance upon duty. Mariellen A. Ford as Clerk-Typist in the Division of Administrative Services, with basic annual salary at the rate of $3,970, effective the date of entrance upon duty. Salary increases, effective June 11, 1961 Name and title Division Basic annual salary To From Research and Statistics Caroline M. Burgess, Assistant Chief Librarian Reba Catherine Driver, Statistical Assistant Evelyn M. Hurley, Economist $8,080 5,655 8,080 $8,340 5,820 8,340 8,34o 4,355 8,600 4,46o Bank Operations D. Lewis McKee, Technical Assistant Mary Teresa Johnson, Clerk-Stenographer -10- 6/7/61 Salary increases (continued) Name and title Basic annual salary To From Division Examinations Hurley Wayne Gray, Assistant Federal Reserve Examiner $4,830 S4,995 Acceptance of resignation ics, David S. Staiger, Economist, Division of Research and Statist 1961. 18, June s busines of close effective at the Permission for outside activity tration, Sylvia Ileen Clements, Secretary, Division of Personnel Adminis ute substit a to work occasionally as an usher at the National Theater on on basis three evenings a week and as a cashier at the Apex Theater Saturday and Sunday evenings. June 7: Letter to the Federal Reserve Bank of Kansas City (attached Item as assistant No. 10) approving the appointment of Perry Alexis de Valpine examiner. Memoranda from appropriate individuals concerned recommending on the increases in the basic annual salaries of the following persons Board's staff, effective the dates indicated: Nancy H. McCaslin, Indexing and Reference Assistant, Office of the Secretary, from $5,335 to $5,655, effective June 25, 1961. ics, Frank de Leeuw, Economist, Division of Research and Statist 1961. 11, June from 439,475 to $10,635, effective r' Secretary BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. Item No. 1 6/7/61 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 7, 1961 Mr. Paul C. Hodge, Vice President, General Counsel (i):. F.ecretary, Federal Reserve Bank of Chicago, Chicago 90, Illinois. Dear Mr. Hodge: This refers to your letter of May 19, 1961, enclosing copies of a letter froqi The First National Bank of Chicago, request new promote to ing a ruling from the Hoard oa a caeh pp:mium plan to savings accounts in connection with the international Trade Fair be held in Chicago in July of this year. It is understood that the bank proposes to distribute to visitors a card or facsimile pass book which would provide that if the holder opens a savings account for any amount from $10.00 to 42)4.99, his account would be credited with a premium of $1.00, and would if he opens an account for $25.00 or more, the credit prepium time the at account the to be $2.00. Such premium would be credited that provide would card re of its opening, but the customer's signatu in premium the of amount the the bank could charge the cust6mer with six of ion expirat the to the event the account were closed prior months from the date of its opening. As you know, the Boardlc pc)licy hes been to disregard incenpromLum8 having only a nolinal Ialun and given merely as an rring nonrecu a on thrift, ge encoura and will good tive to promote al financi basis, and not given with the intention of pro\idinr; the Since compensation to the cnetomer for the use of hie funds. only of s premium proposed plan appears to involve nonrecurring does not nominal value as part of an advertising plen, the Board though the even t, interes eoneider it to be an indirect payment of and a time deposit the of' value of the premium varies with the size credit the retain to r custome limit is imposed in order for the premium. Very traly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. _ _• BOARD OF GOVERNORS * OF THE 11, ,;1•4r:<Vor, , 'I A Item No. 2 6/7/61 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE 0 ea. 4.400 TO THE BOARD 441. MiS c: t 400** . June 7, 1961 Mr. F. O. Fountain, Secretary, Union Bond & Mortgage Company, First National Bank Building, Port Angeles, Washington. Dear Nr. Fountain: This is in reply to your letter of May 8, relating to the Final Certification with respect to Union Bond & Mortgage Company, t which was issued by the Board of Governors on April 28, 1961, pursuan You 1954. of Code l Revenue to section 1101(e)(1) of the Interna mention that the Final Certification does not list "prohibited property" in detail, and you inquire whether it will be possible "to have the Certification dated April 28, 1961 amended to so describe in detail athe prohibited property". As your letter states, the prior Certific d certifie 1960, 23, November on Board the by tion in this matter, issued that "Of the shares owned or controlled by Union Bond C: Mortgage Company, 559 shares of Peninsula Investment Company, Inc., and 601-1/4 shares of Forks Building Corporation are 'prohibited property' as defined in subsection (c) of section 1103 of the Internal Revenue Code of 1954." in In the opinion of the Board, the Certifications issued the of ns this matter meet the requirements of the applicable provisio aCertific Internal Revenue Code. It may be mentioned that the Final of tion in this case is substantially identical with the form subject Certification issued by the Board of Governors in other cases each In 1954. of to section 1101(e)(1) of the Internal Revenue Code to sent was ation such case a duplicate original of the Final Certific of Board the as far the Commissioner of Internal Revenue, and, as l Revenue Governors is aware, there has been no objection by the Interna of ment require no and Service to the form of any such Certit'ication additional information with respect thereto. concluded In the circumstances, the Board of Governors has . amended be not that the Final Certification should Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. * BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. Item No. 3 6/7/61 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 7, 1961. Dear Sir: Reference is made to the 1960 Supplement, "Data with Respect to Insurance Carried by the Federal Reserve Banks and the Board of Governors", prepared by The Insurance Committee of the Federal Reserve Banks. Premiums paid in 1960 for the various types of insurance listed in the Supplement, excluding registered mail and express and workmenls compensation insurance, totaled $166,349. Claims collected from insurance companies aggregated $131781, resulting in an excess of Premiums paid of $152,568. For the five-year period 1956-1960, premiums averaged $173,793, with an excess of premiums paid over claims collected of $160,201. The net cost to the System of such purchased insurance has, therefore, been approximately $800,000 in the past five Years. The Board would appreciate receiving an expression of your views on how the Board would justify such a continuing expenditure by the Federal Reserve System. It is realized that comments from some of the Reserve Banks along the line of justifying insurance carried have been received in reference to the press statement issued by Congressman Patman in June 1959 (see pages 62-65 of the Board's comments on Mr. Patmanls press statement, copy of which was transmitted to you with the Board's letter of February 2, 1960). It is felt that some at least of the reasons originally given by the Insurance Plan Committee in 1941 for continuing to purchase certain types of insurance may not carry the same weight today after the years of experience since the Loss Sharing Agreement was adopted. To some extent the reasons given were colored by the feeling that any arrangement to share losses was a form of mutual insurance. The terms "self insurance" and "interinsurance" are frequently encountered in the documents written at that time, instead of "assumption of risk" or "discontinuance of insurance" and "loss sharing." For your information, the following factors were noted by the Board in a recent review of insurance carried by the Reserve Banks and the Board and of reasons for not including various types of insurance under the Loss Sharing Agreement. With minor exceptions, the Loss Sharing Agreement covers losses on registered mail shipments of currency and securities made at the expense of the Reserve Bank, excess losses of the type covered by the bankers? blanket bond insurance of $500,000, and losses of any type which result from war risk or nuclear reaction. The recent amendment to the Loss Sharing Agreement increased to $100,000 the amount to be absorbed by a Reserve Bank sustaining a loss before any proration of the loss among the Reserve Banks. This means that, for the most part, each Reserve Bank assumes its own risk on types of losses covered by the Agreement. Only one loss distributable on such a basis has been sustained since the Loss Sharing Agreement became effective. The Insurance Plan Committee recommended in August 1941 that bankers' blanket bond insurance be dropped. Subsequently, however, the Insurance Plan Committee and the Committee on Insurance of the Presidents Conference made a joint recommendation that in view of substantial reductions in rates by the insurance companies and of the war conditions, blanket bond insurance be purchased by each Federal Reserve Bank in the amount of $500,000. It was felt that the value of the insurance was primarily derived from the services rendered by the insurance companies. The Loss Sharing Agreement does not permit the Reserve Banks to carry registered mail insurance except that for which the Banks pay premiums subject tn reimbursement by member banks or others. NOTE: Under the Boardls letter of July 25, 1950 (S-1132; F.R.L.S. #4360) Reserve Banks absorb insurance costs incurred in connection with the collection of maturing coupons detached from securities held in safekeeping for member banks. Available information indicates that since the System was established there has been only one loss in excess of $1002000 of the types now covered by purchased insurance. An individual Reserve Bank is free to discontinue purchasing any insurance except, perhaps, workmen,s compensation insurance in some States, and the $500,000 bankers, blanket bond. The inclusion of additional types of risk under the Loss Sharing Agreement can be primarily regarded as a means of obtaining uniformity in carrying or not carrying certain types of insurance, and of providing for sharing unusually large losses, With the specific approval of the Insurance Committee, five Banks carry insurance on street deliveries of securities to A -• -3provide coverage in excess of the $500,000 basic bankers' blanket bond. Two Banks and the Board do not purchase fire insurance on buildings and contents. All Banks and the Board carry public liability insurance for personal injury, with coverage varying from $50,000 to $500,000 for each person and from $300,000 to $1,000,000 for each accident. Property damage insurance is carried by all but two Banks and the Board. All of the Banks and the Board carry automobile liability insurance in varying amounts. Ten Banks and the Board carry fire and theft, five Banks carry collision, and four Banks carry medical payment coverage. All of the Banks purchase steam boiler and machinery insurance. The Board does not carry this insurance. Among the miscellaneous types of insurance carried by one or more Banks are sprinkler leakage, foreign travel (accident and personal effects), currency exhibits, garage keeper's liability, cameras and equipment, medical malpractice, and tornado, cyclone, and earthquake. Very truly yours, \ Merritt 'herm , Secret TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS BOARD OF GOVERNORS OF THE Item No. FEDERAL RESERVE SYSTEM * * 4 6/7/61 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD ‘i At 'ztt4.441, IP June 7, 1961. Mr. Eliot J. Swan, President, Federal Reserve Bank of San Francisco, San Francisco 20, California. Dear Mr. Swan: Referring to your letter of May 19, 1961, the Board has noted without objection the action of your Board of Directors authorizing the acquisition of an IBM 1401 Model E-4 electronic computer system. It is noted from your letter that-- The computer system will cost $296,520 and that delivery of the equipment will be scheduled for early; 1962. The computer system will be equipped with 8,000 positions of memory and four magnetic tape drives. The possibility of obtaining the equipment under alternative plans, including renting with option to purchase, was rejected in favor of the economy or outright purchase. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. 19-.) 'BOARD OF GOVERNORS OF THE 4 0042,0k.,7,4,,, FEDERAL RESERVE SYSTEM 5/ 4 A Item No. 6/7/61 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 7, 1961. Chemical International Finance, Ltd., 165 Broadway, New York 15, New York. Gentlemen: In accordance with the request and on the basis of the information furnished in your letter of February 2, 1961, transmitted through the Federal Reserve Bank of New York, the Board of Governors grants its consent to Chemical Overseas Finance Corporation to move its Head Office from 165 Broadway, New York, New York, to Huntley Towers, Paget, Bermuda. The location of the Head Office may not be changed without the prior approval of the Board of Governors. It is noted from page 2 of the report of examination of : that the principal ofyour Corporation as of December 5, 1960 fices and operations of Chemical Overseas were transferred to Paget, Bermuda, effective January 1, 1961. Very truly yours, a _eta//(4d Elizabeth L. Carmichael, Assistant Secretary. 5 1 YA., BOARD OF GOVERNORS OF THE Item No. FEDERAL RESERVE SYSTEM 6 6/7/61 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 9, 1961 Mr. Paul Breidenbach, Counsel, Federal Reserve Bank of Cleveland, Cleveland 1, Ohio. Dear Mr. Breidenbach: This refers to the inquiry presented through your Bank regarding the status under Regulations T and U of unregistered shares in an open-end investment company that invests only in securities that are "exempted securities" as defined in section 3(a) of the Securities Exchange Act of 1934 (12 U.S.C. 78c(a)(12)). Regulation T. - Under Regulation T, only registered securities and exempted securities are entitled to loan value in a margin account. The Board has consistently taken the position that shares in an open-end investment company which are not themselves registered on a national securities exchange are not entitled to loan value, regardless of whether the company's portfolio consists of registered securities.. Similarly, it is the Board/s view that unregistered shares of an open-end investment company would have no loan value in a margin account even though the securities owned by the company were exempted securities which themselves would be entitled to "good faith" loan value in such an account. Regulation U. - Under Regulation U, two quite separate questions could arise in this connection: (1) whether a bank loan to purchase shares of the investment company would be a "purpose" loan, and (2) whether an admittedly "purpose" loan secured by the shares of an investment company of the kind described would be "secured . . . by . . . stock" within the meaning of section 221.1(a). These questions are discussed in the following paragraphs. (1) A loan by a bank for the purpose of enabling the borrower to purchase the shares of the investment company described would not be a "purpose" loan under Regulation U, since (a) the shares themselves would not be registered stock and (b) the assets of the company would not customarily include registered stocks so as to make section 221.3(b)(2) applicable. Accordingly, a loan by a bank for the purpose of purchasing or carrying such shares would not be subject to the requirements of Regulation U. 00ARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Mr. Paul Breidenbach -2- (2) Should such shares, if offered as security for a bank loan to purchase or carry registered stocks, be regarded as "stock" (as defined in section 221.3(1) of Regulation U) and therefore entitled only to the "loan value" prescribed by the Supplement to Regulation U? Or should they be considered "collateral other than stock" and therefore entitled to "good faitHiloan value? The argument has been advanced that shares of an open-end investment company should be differentiated from other corporate stocks, in this connection, because they actually represent interests in the securities owned by the company for the benefit of its shareholders. It is urged that, for this reason, in determining the loan value status of shares of such t company the assets of which do not include stocks, the conclusion should be reached that the investment company's shares are ..not "stock" under Regulation U. However, even assuming that a shareholder of an investment company acquires an interest in the securities held by it, he unquestionably acquires securities issued by the company (i.e., its shares) which have equity-security characteristics similar to those possessed by stock of other busincss corporations, Consequently, the Board is of the opinion that shores of an investment company of the kind described fall within the definition of "stock" in section 221.3(1) of ILegulation U and are entitled only to the loan value accorded to "stock" by the Supplement to the Regulation, when used as collateral to secure a "purpose" loan. Very truly yours, (Signed) Merritt Sherman erritt Sherman, Secretary. .! ;•54-44k, BOARD OF GOVERNORS OF THE ? 6. Item No. FEDERAL RESERVE SYSTEM , Ot 6/7/61 WASHINGTON 25. D. C. 7 • ADDRESS OFFICIAL CORRESPONDENCE %It TO THE BOARD *4S, 48. witS\t,!;71141 "4,44401- June 6, 1961 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 of May 25, 1961, the Board approves the letter your appointment of Vincent John Kulda as an assistant examiner for the Federal Reserve Bank of New York. Please advise us of the effective date of the appointment. It is noted that Mr. Kulda is indebted to The Bank of New York, New York, New York, a State member bank, in the amount of 4,060, and that he plans to liquidate this loan upon resigning from the bank. It is understood, of course, that the Board's approval of Mr. Kulda's appointment is given with the understanding that he will not participate in any examination of The Bank of New York until tnis indebtedness has been liquidated. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS OF THE Item No. 8 FEDERAL RESERVE SYSTEM 6/7/61 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD June 6, 1961 Mi. 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 May 26, 1961, the Board approves the appointment of Larry Elmer Hazen as an assistant examiner for the Federal Reserve Bank of Cleveland. Please advise us of the effective date Of the appointment. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS ,AittIttr***, OF THE Item NO. 9 FEDERAL RESERVE SYSTEM VI? 4'4 6/7/61 WASHINGTON 25, D. C. alyi ADDRESS OFFICIAL CORRESPONDENCE 0 TO THE BOARD 'tit WA,* JunP 6, 1961 Mr. John L. Nosker, Vice President, Federal Reserve Bank of Richmond, Richmond 131 Virginia. Dear Mi. Nosker: In accordance with the request contained in your letter of May 31, 1961, the Board approves the appointment of James B. Campbell as an assistant examiner for the Federal Reserve Bank of Richmond, effective ' to4ay. Very truly yours, (signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS OF THE fdt" "kbkrei\ Item No. 10 6/7/61 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. t3 It ,: Art mis\f\i• 404,:04.- ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD * June 7, 1961 Mr. L. F. Mills, Vice President, Federal Reserve Bank of Kansas City, Kansas City 6, Missouri. Dear Mr. Mills: In accordance with the request contained in your letter of May 18, 1961, the Board approves the appointment of Perry Alexis de Valpine as an assistant examiner for the Federal Reserve Bank of Kansas City. Please advise us as to the salary rate and the effective date of the appointment. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. 4,,
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