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Minutes for To: March 15, 1960 Members of the Board From: 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 vith respect to any of the entries in this set of Ininutes 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 he Secretary's Office. Otherwise, please initial below. ..11 You were present at the meeting, your initials will indicate approval of the minutes. If you were not present, will indicate only that you have seen the minutes Chm. Martin Gov. Szymczak Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King 101 Minutes of the Board of Governors of the Federal Reserve System on .,L4esday, March 15, 1960. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Balderston, Vice Chairman Szymczak Mills 1/ Robertson Shepardson King Mr. Sherman, Secretary Miss Carmichael, Assistant Secretary Mr. Thomas, Adviser to the Board Mr. Young, Adviser to the Board Mr. Hackley, General Counsel Mr. Farrell, Director, Division of Bank Operations Mr. Solomon, Director, Division of Examinations Miss Hart, Assistant Counsel Extension of time for filing F.R. 728 under Regulation U (Item N0 -6--2)• Pursuant to section 221.3(j) of Regulation U, on December 1, 1959 'the Board approved adoption of a reporting form (F.R. 728) for IIIINIllated lenders. 1:Irted The adoption of the form on which there would be various items including credit extended on registered securities 1144 41-11101111ced in the Federal Register and in a special press release, '41lieh specified that unregulated lenders in business as of December 15, 1959 '811°uld file the form with the Federal Reserve Banks by March 15, 1960. 141 Ilart reported that several requests had been received for extension 0 ttl4leithjn which to file this form and it was noted that there were 111'°1411:4 a number of other firms that would not meet the March 15 deadcase other requests for extensions were received, Miss Hart 414 Bted that the Board might wish to authorize extensions up to 60 4411 Vith-out bringing each individual case before the Board. -thti„ —.elf from meeting at point indicated in minutes. 3/15/60 -2A discussion followed as to the period for which it might be desirable to grant an extension, and it was the consensus that a 6°-day period would be satisfactory. Following a question as to /11,11er a notice of extension should be published in the Federal Register, Governor Mills expressed the thought that there should be 11° Public notice until the views of the Federal Reserve Banks concern14 such a procedure had been received. In view of the March 15 dead- line for filing the form, Governor Robertson felt that it would be desirable to authorize a blanket extension of time before any violation had Occurred, agreeing that it would be desirable to notify the Reserve 84414 today of the extension and to decide later whether to publish an 81111011ncement of the extension. After a further discussion, during which it was brought out that the number of firms expected to file F.R. 728 was relatively small, it Vas n„ ='tIlle_52 that a wire be sent to the Reserve Banks extending the period fc* filing F.R. 728 to May 15, 1960, and asking for comments as to whether a 111ther System announcement regarding the filing of these reports would be taes. lrable. A copy of the wire is attached as Item No. 1. Miss Hart then withdrew from the meeting. Electronic check-processing equipment. Under date of March 10, 196D, there was distributed to the Board a memorandum from Mr. Farrell '41lich "ought to the Board's attention a plan of the Dallas Reserve Bank tQl, el ectronic check-processing equipment. The Dallas Bank contemplated 3/15/60 rdering for its head office and branches 54 proof machines with amountencoders to support mutual encoding programs with commercial allks; whereas, only 17 of these machines had been indicated for all of the other Banks and branches. It was estimated that rental charges for BiX months for the 54 encoding devices would be about $45,000. The me morandum pointed out that the December 1959 Presidents' Con- ference had approved a "policy of installing encoding devices in any P"eral Reserve office at the time and to the extent necessary, in the 4_ €Ifl-rik, of each Federal Reserve Bank, to enable it to cooperate with Melilber banks in their districts in mutual programs for encoding transit be 111111 banks routing symbols and dollar amounts on checks sent to such member End on checks sent by them to Federal Reserve offices having the °r.iirlal five pilot installations." These mutual encoding agreements with co mmercial banks were considered desirable for the purpose of (a.) ey, --couraging commercial banks to participate in the magnetic ink III'ogram, and (b) supplying the five pilot Banks with an additional 1101.11 -me °f coded checks which, though not essential, would be helpful. 44 rect benefit from installation of the equipment at the Dallas Reserve th.e Bank would be an ag reement between the Dallas Reserve Bank and Re PUblic National Bank, under which Dallas would agree to amount- eN,0,1 checks it forwarded to Republic and Republic would agree to the transit number and amount on checks it sent direct to Chicago 3/15/60 -4- 04e or more other Federal Reserve Banks having a pilot installation. Dtder such an arrangement Dallas, which would have no electronic equip- for the time being, would receive no benefit, but the System in general In commenting on the memorandum, Mr. Farrell indicated that the " er had been brought before the Board merely as a matter of informatiot. He also stated, in response to a question from Governor Szymczak, that the alias Bank wished to install the equipment by the first quarter of 1961. Mr. Farrell elaborated on the process involved in handling checks -Ly and indicated that, if the Dallas Reserve Bank should secure the 'quested equipment, there might be pressure from other Reserve Banks to ol) , 'ain this type of equipment also. On the other hand, if the Dallas 'efused to comply with the request of local commercial banks for "al encoding arrangements at this time, the commercial banks might be ' 8 villing to enter into a reciprocal agreement at a later date when it ki ' g t be of immediate benefit to the Dallas Bank--i.e., if and when the bal., -Las Bank secures its own electronic equipment. The memorandum pointed out that, since the number of encoded checks th the five pilot installations would receive from Dallas commercial biazikaa 14°111d not be of significant benefit to the testing program, the te - might be open to criticism for adding to the free services that the ie erve Banks were giving to commercial banks at considerable cost. 3/15/60 -5Following a general discussion of the program for electronic 131‘c)ceeeing of checks, it was noted that a report of the Subcommittee °11 Electronics would be considered at the meeting of the Presidents' Coriference to be held next week and that the plan of the Dallas Bank 14)11.1c1 probably receive attention at that time. Mr. Farrell then withdrew from the meeting. Letter from group of Senators. There had been distributed to the Board a letter dated March 12, 1960, to Chairman Martin from a 81'°11:-P Of 21 Senators. The letter expressed the hope that the Board 14°41c1 adopt what the letter termed as four basic reforms or improvements ill the conduct of its affairs: 1. Recommend the establishment of margins on the Purchase of Government securities by customers of security dealers, and regulate the activities of the security dealers themselves. 2. Abandon its "bals only" policy. 3. Permit an increase in the money supply (currency Plus demand deposits) at approximately the same rate as that at which the real gross national product is growing. 4. Use open market purchases to provide the increase in member bank reserves for the needed long-time or secular expansion of the money supply. There was a general discussion as to the type and substance of 411°881131e reply to the letter, during which it was understood that the 4111't Imuld draft such a reply and that a copy of the letter from the ; ell"8 'would be sent today to the Presidents of all Federal Reserve 101 3/15/60 flka -6- advising them that the matter might be discussed when they were LITAk shington on March 22. During the course of the foregoing discussion Governor Mills Thomas withdrew from the meeting, and Messrs. Shay, Legislative ecktilsel, and Noyes, Director, Division of Research and Statistics, etitered the room. The meeting then adjourned. Secretary's Note: Pursuant to the recommendation contained in a memorandum dated February 16, 1960, from Mr. Johnson, Director, Division of Personnel Administration, Governor Shepardson today approved on behalf of the Board the establishment of a sensitive position in the Stenographic Section of the Office of the Secretary, the incumbent designated by the Secretary to be cleared by means of a full field investigation in the same manner as the incumbent of any other sensitive position. "6, \ Secrta t 'V 1020 TELEGRAM LEASED WIRE SERVICE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON Item No. 1 3/15/60 March 15, 1960. To THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS Re Form F.R. 728, pursuant to section 221.3(j) of Regulation U, which was required to be filed with Federal Reserve Banks on or before }larch 15) 1960, by all persons other than banks, brokers, or dealers who are engaged in the business of extending credit and who, in the ordin_ course of business, extend credit for the purpose of purchasing (31% earrYing securities registered on a national securities exchange. 13°ard has approved blanket extension to May 15, 1960 of time for filing thts reAort by persons required to submit information. Your Bank is allthcrized to grant extensions in accordance with this action. Notice of Board's action extending date for filing is not being 8111".0Litted for publication in the Federal Register at the present time. 11°11c°rnPliance is, of course, subject to criminal penalty. The small 11141ber of reports received at the Board thus far suggests that some 1111° Elhould file may not be informed of requirement. Board would 13Preciate any comment your Bank may wish to make as to whether a 1%1111 '11er SYstem announcement regarding filing of these reports would be 4tlil'able, or whether it would be preferable to leave to individual Banks the decision whether to take steps to bring to the 4tteliti°11 of persons apparently subject to requirement and who have not 41" ilecessary report the need for doing so during the period between 11°1f 4" May 15. (Signed) Merritt Sherman SHERMAN
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