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Minutes for To: Members of the Board From: Office of the Secretary March 16, 1959 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 x &'TJ12 Minutes of the Board of Governors of the Federal Reserve System on Monday, March 16, 1959. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Balderston, Vice Chairman Mills Robertson Shepardson Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Sherman, Secretary Kenyon, Assistant Secretary Fauver, Assistant Secretary Shay, Legislative Counsel Noyes, Adviser, Division of Research and Statistics Solomon, Assistant General Counsel Hostrup, Assistant Director, Division of Examinations Nelson, Assistant Director, Division of Examinations Fisher, Economist, Division of Research and Statistics Items circulated to the Board. The following items, which had been circulated 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 Hackensack Trust Company, Hackensack, New Jersey, approving the establishment of a branch in South Hackensack Township. (For transmittal through the Federal Reserve Bank of New York) 1 Letter to the Federal Reserve Bank of San Francisco concurring in the view that a proposed change in location of the Newport Beach branch of California Bank, Los Angeles, California, would not require Board approval. 2 Letter to the Comptroller of the Currency recommending favorably on an application to organize a national bank at Orange, Texas. (With a copy to the Federal Reserve Bank of Dallas) 3 -2- 3/16/59 Item No. Letter to the Comptroller of the Currency recommending favorably on an application to organize a national bank at Sunnymead, California. (With a copy to the Federal Reserve Bank of San Francisco) 4 Comment on draft letter of Federal Home Loan Bank Board (Item There had been distributed to the Board copies of a memorandum NO. 5). dated March 13, 1959, from Mr. Young, Director, Division of Research and Statistics, submitting a draft of letter to the Bureau of the Budget in response to the Bureau's request for comment on a letter proposed to be sent by the Federal Home Loan Bank Board to the Senate Housing SubCommittee concerning (1) a proposed amendment to bill S. 57 which would authorize Federal savings and loan associations to make loans, uncler certain restrictions, to finance the acquisition and development of raw land, primarily for residential usage, and (2) a proposed amendment to bill H. R. 2357 which would authorize such associations to make or Purchase participating interests in first liens on one- to four-family homes outside their immediate areas to a greater degree than now permitted. Following comments in response to a question concerning the function of the Budget Bureau in obtaining the views of interested agencies with respect to letters such as that proposed to be written in this instance by the Federal Home Loan Bank Board, Mr. Fisher reviewed the issues raised by the proposed amendments and brought out that the draft of reply to the Budget Bureau followed the lines of comments made by the Board to that Bureau in 1955 regarding proposed (19 -3- 3/16/59 loans or investments by Federal savings and loan associations for rawland acquisition and development, and in 1952 regarding the purchase of FHA- or VA-underwritten loans by such associations without regard to the usual 50-mile geographical restriction. After a brief discussion, the letter to the Bureau of the Budget, a copy of which is attached as Item No. 5, was approved unanimously. Mr. Fisher then withdrew from the meeting and Messrs. Young, Director, Division of Research and Statistics, and Molony, Special Assistant to the Board, entered the room. Proposed letter to Senator Johnson. There had been distributed to the members of the Board copies of a letter and accompanying statement proposed to be sent to Senator Lyndon Johnson of Texas in response to his request for comment on a letter that he had received from a constituent, Mr. H. E. Cutcher of Lockhart, Texas, who referred to a statement by Congressman Patman in the Congressional Record of February 25, 1959. This statement was interpreted by Mr. Cutcher to mean that the Federal Reserve Banks were allowed to "give away billions of dollars of our tax money to the commercial banks for the privilege of letting them Pass out some Government money to pay Government bills." Mr. Cutcher indicated that this procedure was very shocking, if true, and requested an explanation. The statement proposed to be sent to Senator Johnson would transmit information which might be helpful to him in responding to his constituent. ( .14 3/16/59 Consideration was given to the type of reply that would be most useful to Senator Johnson and a number of suggestions were made. On the basis of these several suggestions as to approach, it was understood that alternative drafts of a reply to Senator Johnson would be prepared and distributed in order that the matter might be considered further by the Board. Messrs. Molony, Shay, Hostrup, and Nelson then withdrew from the meeting. Appraisal of Directors' Day program. randum dated March 13, With a transmittal memo- 1959, Mr. Fauver had distributed to the members of the Board copies of a memorandum that he addressed to Governor Shepardson under date of March 11 containing suggestions arising out of the program on February 20, 1959, for new directors of Federal Reserve Banks and branches that might be helpful in the preparation of similar programs in the future. General agreement was expressed with the program suggestions, and it was understood that they would be borne in mind. The discussion indicated doubt as to the advisability of going further in the entertainment of directors' wives who might accompany their husbands to Washington on such occasions than to arrange for them to tour the Federal Reserve Building. The discussion also indicated that the Board would not look with favor on the preparation of a transcript of the Proceedings. 3/16/59 Program incident to Mr. King's taking the oath of office. Following a statement by Governor Balderston that Mr. G. Harold King, Jr., had indicated a desire to take his oath of office as a member of the Board of Governors at the Federal Reserve Building on March 25, 1959, there was some discussion as to what procedures incident to the ceremony might be most appropriate. As the result of this discussion, it was agreed to suggest to Mr. King that the swearing-in ceremony be conducted in the Board Room at 3:30 p.m., followed by a reception in the Board's dining rooms for invited guests and members of the Board's staff. Call for reports of condition. The Secretary reported that a letter dated March 13, 1959, had been received from the Comptroller Of the Currency advising that a call would be made upon all national banks on March 17, 1959, for reports of condition as of the close of business Thursday, March 12; and that, in accordance with the usual practice, a telegram had been sent by the Secretary to the Presidents of all Federal Reserve Banks on March 13 requesting that a similar call be made upon State member banks. The action taken in sending the telegram was ratified by unanimous vote. All of the members of the staff except Mr. Sherman then 'withdrew, and Mr. Johnson, Director, Division of Personnel Administration, was called into the room. -6- 3/16/59 Assumption of cost of lunch for certain guests. Governor Shepardson presented for consideration a memorandum from Mr. Johnson dated March 10, 1959, recommending that, subject to approval by a division head, the Board assume the cost of lunch in the Board's building for guests accompanying Federal Reserve Bank employees who visit the Board's offices. The memorandum noted that the Board had always encouraged visits by Reserve Bank employees and in October 1950 addressed a letter to each Bank inviting employees to visit the Board's offices if time permitted; that Board employees were now permitted to Sign cafeteria checks for Reserve Bank employees pursuant to action taken by the Board on September 16, 1937; but that a Board employee or must pay for the lunch of a visiting Reserve Bank employees' guest have the guest pay the bill himself. s After discussion, the recommendation contained in Mr. Johnson' y from memorandum was approved subject to verification by the Secretar the minutes that such action was not in conflict with the terms of the Board's letter to the Federal Reserve Banks dated October 2, 1958, es concerning Reserve Bank entertainment expenses, or with principl agreed upon by the Board in the relevant discussion. Secretary's Note: The Secretary subsequently determined from the October 2, 1958, letter and the minutes relevant thereto that no conflict existed. -7- 3/16/59 Invitations extended to Mr. Marget. The Board approved acceptance by Mr. Marget, Director, Division of International Finance, of invitations (1) to prepare a paper for presentation at the 1959 annual meeting of the American Economic Association, to be held in Washington in December, and (2) to make a talk at the 43d annual meeting of the National Industrial Conference Board to be held in New York City on May 21-22, 1959. The meeting then adjourned. Secretary's Note: At the meeting on February 19, 1959, it was understood that there would be sent to the Federal Reserve Banks, when in form satisfactory to Governor Shepardson, a letter authorizing them, in certain circumstances, to pay salary to an employee beyond the expiration of 90 days after the employee reached age 65, without specific Board approval. Having been approved by Governor Shepardson, the letter of which a copy is attached as Item No. 6 was sent today to the Presidents of all Federal Reserve Banks. Governor Shepardson today approved on behalf of the Board a letter to the Federal Reserve Bank of Cleveland (attached Item No. 7) approving the appointment of Thomas Delvin Reinhold as assistant examiner. 1,4 BOARD OF GOVERNORS e. Gov 40, 000 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. Item No. 1 3/16/59 4 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD 4 real. tr* "4.44.40* March 16, 1959. Board of Directors, The Hackensack Trust Company, Hackensack, New Jersey. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of New York, the Board of Governors approves the establishment of a branch on the east side of Huyler Street, 95 feet north of Hoffman Street and 4o feet south of Leuning Street, South Hackensack Township, Bergen County, New Jersey, by The Hackensack Trust Company, Hackensack, New Jersey. This approval is given provided the branch is established within one year from the date of this letter and that formal approval of State authorities is effective at the time the branch is established. Growth of the capital structure of this bank has failed to keep pace with the increased volume of business experienceiby the bank during the past two years. If, within a reasonable time, retained earnings prove insufficient to Place capital in an ac.-. ceotable relationship to the volume of business, augmentation of capital through a sale of stock for cash would appear warranted. Very truly yours, (Signed) Kenneth A. Kenyon v, nnoth A. Kenyon, Abbistant Secretary. BOARD OF GOVERNORS OF THE Item No. 2 3/16/59 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Acionc•s orriciAL CORRESPONDENCE TO THE MOARO MAR 16 Mr. E. R. Millard, Vice President, Federal Reserve Bank of San Francisco, San Francisco 20, California. Dear Mr. Millard: Reference is made to your letter of March 2, 1959, With respect to the proposal of California Bank, Los Angeles, California, to move its branch office located at 3455 East Coast Highway to a new location at 3147 East Coast Highway, Newport Beach, California, a distance of two and one-half blocks. From the information submitted, the Board concurs in your opinion that this action constitutes the mere relocation of an existing branch in the immediate neighborhood without affecting the nature of its business or customers served and, therefore, the approval of the Board is not required. Very truly yours, (SigPed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE 1 7 C40 " :: ,444 Item No. 3 3/16/59 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. 441 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD March 16, 1959. Comptroller of the Currency, Treasury Department, Washington 25, D. C. Attention Mr. G. W. Garwood, Deputy Comptroller of the Currency. Dear Yr. Comptroller: Reference is made to a letter from your office dated November 17, 1958, enclosing copies of an application to organize a national bank at Orange, Texas, and requesting a recommendation as to whether or not the application should be approved. A report of investigation of the application made by an examiner for the FederP1 Reserve Bank of Dallas indicates that the organizers have agreed to provide a capital structure of 375,000 for the bank, instead of :7,250,000 as shown in the application. This revised capital structure would appear to be adequate. The future earnings prospects of the bank and general character of the management appear to be satisfactory; and, while there does not appear to be a pressing need for the bank at this time, the future prospects appear sufficient to support successful operation. The Board of Governors recommends favorable consideration of the application. The Board's Division of Examinations will be glad to discuss any aspects of this case with representatives of your office if you so desire. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE * qi eilt;O:e -••-•,.. t, FEDERAL RESERVE SYSTEM 0 o * •* %* * 0 0 Item No. 4 3/16/59 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD trtmolt mot **00004 March 16, 1959. . Comptroller of the Currency, Treasury Department, Washington 25, D. C. Attention Mr. L. A. Jennings, Deputy Comptroller of the Currency. Dear Mr. Comptroller: Reference is 1958, enclosing copies Sunnymead, California, the application should made to a letter from your office dated October 10, of an application to organize a national bank at and requesting a recommendation as to whether or not be approved. Information contained in a report of investigation of the application made by an examiner for the Federal Reserve Bank of San Francisco of indicates that the organizers have agreed to provide a capital structure n. applicatio the in shown as $200,000 for the bank instead of 0140,000 This revised capital structure is considered adequate. It is reported that the bank could attract sufficient business to realize profitable operations ln a reasonable time and that the provision of banking facilities in the n area would be in the public interest. It is understood that an applicatio two while and, area; the in branch a is pending for the establishment of banking offices cannot be justified, the local preference is for an indePendent bank. While the management group of the institution is not considered outstanding, it is believed satisfactory with an experienced banker as managing officer. In this connection it should be mentioned that one of the proposed directors may be precluded from serving due to his association with a brokerage firm. After considering the various factors, the Board of Governors recommends approval of the application. The Board's Division of Examinations will be glad to discuss any aspects of this case with representatives of your office if you so desire. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 5 3/16/59 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD March 16, 1959. Mr. Phillip S. Hughes, Assistant Director for Legislative Reference, Bureau of the Budget, Washington 25, D. C. Dear Mr. Hughes: ReThe Bureau of the Budget has asked for the Federal dated March 4) serve Board's views on the proposed draft letter, al Home Loan Feder man, Chair tson, Rober J. 1959, from Mr. Albert Subcommittee tor, Direc Staff Jr., Cash, B. Bank Board, to Mr. James on Housing, Senate Committee on Banking and Currency. The proBank Board's posed draft letter sets forth the Federal Home Loan by the Senate in Febviews concerning Section 709 of S. 57, passed ng. pendi now ruary, and Section 801 of H.R. 2357, Federal sa,iings Section 709 of S. 57 would authorize any us, and unsurpl ves, reser and loan association, whose general accounts, to le rawab withd its divided profits exceed 5 per cent of of such cent per 5 time one any invest an amount not exceeding at and developn sitio acqui the ce finan withdrawable accounts in loans to from its home office, ment of land, located within a radius of 50 miles rules and regulafor primarily residential usage, subject to such ribe. Except for presc may Board tions as the Federal Home Loan Bank the dollar amount of these restrictions, no limit would be placed on anY single land-development loan. to the Bureau of the The Federal Reserve Board, in letters commented on somewhat 1955, Budget dated April 5, 1955, and March 17, ion to substantially the similar proposed legislation, which in addit al savings and loan Feder above provisions would have authorized unimproved real estate. in associations themselves to invest directly is certainly less objecand The present proposal is a more modest one view activities connected tlonable. However, the Board continues to essentially speculative as 11th raw-land acquisition and development sted to Federallyentru in nature. It does not believe that funds Federal savings and as such chartered and insured thrift institutions, Mr. Phillip S. Hughes -2- ative loan associations, for investment should be loaned for this specul activity. Section 801 of H.R. 2357 would authorize a Federal savings and loan association to use without regard to the 50-mile restriction an additional 20 per cent of its assets to make or purchase participating the aggreinterests in first liens on 1- to 4-family homes, except that the plus ion, provis this to t pursuan gate amount that may be invested made loans on s obtain y alread over-all 20 per cent limitation which per cent of an without regard to the 50-mile limit, may not exceed 30 wishes to Board the al, propos this association's assets. Concerning le are princip in tions associa loan emphasize that Federal savings and Board The . utions instit ing financ designed to be local thrift and home a of ily primar be to e feels that their activities should continu differentials in localized nature. On the other hand, geographical not always flow do funds e mortgage interest rates persist and mortgag for some argue facts readily from one region to another. These participation the to t broadening and increased flexibility with respec However, loans. ge Of Federal savings and loan associations in mortga g orizin --auth ity the Board believes that present statutory author e mortgag eed uarant Federal associations to purchase FHA-insured or VA-g assets their of loans in aggregate amounts not exceeding 20 per cent but without regard to the 50-mile limit--seems sufficient. The Board, adopted, it could moreover, feels that if the proposed amendment were ipation Pose additional problems arising from the fact that some partic on ges loans might be made on noninsured or nonguaranteed mortga institutions. pating partici the from remote areas Properties located in Sincerely yours, Merritt Shern n, Secretary. 'S1) Item No. BOARD OF GOVERNORS 3/16/59 S-1692 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD March 16, 1959. Dear Sir: Circular Letter No. 171 of the Retirement System of the Fed133 Reserve Banks dated November 14, 1957, described a procedure estab11 :shed by the Retirement Committee for determining the age or date of birth of a member and reported that the Committee had voted at its Teeting on October 14-15, 1957, to request the employing Reserve Banks to have all members applying for retirement benefits submit to the Pers°nnel Department of the Bank satisfactory proofs of age. This procedure was to become effective for persons retiring on or after January 1, 1958. Since that date several Reserve Banks have discovered that dates of birth previously supplied by some employees were in error. In Some cases this has resulted in continuing employees in active service or more than 90 days past age 65 with the result that, in accordance with the Board's letter of February 4, 1946 (5-895, F.R.L.S. 19151.1), rsquests have been made to the Board for approval for the payment of salary for any services rendered after expiration of such 90-day period. Since the Board understands that all Reserve Banks are presages for retirement purposes, a few additional cases errors in age may be disclosed which involve salary payments for more than 90 days past age 65, the eueard authorizes the payment of salary to this limited group of employearliest pOssible date for effecting retirement, nothwithmarling the Board's letter S-895. No report of such cases need be me,! to the Board, since this information will be available from Retire"k, System records. working on programs to establish ntlY ., since in The Board agrees that the procedure established by the Retirer„7nt Committee for verifying ages at time of receiving applications Or re tirement is desirable, but it is suggested that the Banks take 6 S-1692 steps to establish proofs of age for empl9yees at a somewhat earlier age, say: age 50. This would establish the age sufficiently in advance of retirement in most cases so that instances of payment of salary beyond the limits stated in 5-895 virtually would be eliminated. Very truly yours, Merritt She Secretary. THE p ESIDENTS OF ALL FEDERAL RESERVE BANKS ACTI BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 7 3/16/59 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD March 16, 1959 Mr. Paul C. Stetzelberger„ Vice President, Federal Reserve Bank of Cleveland, Cleveland 1, Ohio. Dear Mr. Stetzelbergert In accordance with the request contained in your appointletter of March 10, 1959, the Board approves the er for ment of Thomas Delvin Reinhold as an assistant examin us advise Please and. Clevel of Bank the Federal Reserve ive. effect made is ment appoint the which on as to the date Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary.
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