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Minutes for March 17, 1958 To: 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 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 Chin, Martin Gov. Szymczak Gov. Vardaman Gov, Mills Gov. Robertson Gov. Balderston Gov. Shepardson )5_,ce42 86.) Minutes of the Board of Governors of the Federal Reserve System on Monday, March 17, 1958. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Martin, Chairman Balderston, Vice Chairman Szymczak Vardaman Mills Robertson Shepardson Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Carpenter, Secretary Kenyon, Assistant Secretary Riefler, Assistant to the Chairman Thomas, Economic Adviser to the Board Young, Director, Division of Research and Statistics Hackley, General Counsel Masters, Director, Division of Examinations Noyes, Adviser, Division of Research and Statistics Benner, Assistant Director, Division of Examinations 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 under the respective item numbers indicated, vere approved unanimously: Item No. 41.....1.110111110.1111...OMMORM. Letter to Manufacturers Trust Company, New York, New York, "fProving its application for authority to accept commercial -`41trts or bills of exchange up to 100 per cent of its capital ' e°ck and surplus. (For transmittal through the Federal serve Bank of New York) 1 Lietter to the Federal Reserve Bank of St. Louis approving an pnlrestment in bank premises by Citizens Bank of Pacific, "Inc, Missouri. 2 V Letter to the Comptroller of the Currency recommending approval an application to establish a national bank at Ormond Beach, 4-orida. (With a copy to the Federal Reserve Bank of Atlanta) ' 3 866 3/17/58 Item No. Letter to the Comptroller of the Currency recommending 4 unfavorably with respect to an application to organize a tational bank at St. Petersburg, Florida. (With a copy to The Federal Reserve Bank of Atlanta) Letters to the Federal Housing Administration and to the Presidents of all Federal Reserve Banks regarding an arrangement suggested for the exchange of information respecting Title I loans held by member State banks. 5,6 In view of the Federal Reserve Bank of Atlanta's unfavorable recommendation, the foregoing Item No. 3 was approved with the understanding that a check vould be made with the Atlanta Bank before the letter was aent, in accordance with the usual practice, to ascertain whether the Bank desired to submit any additional information or comment. Following the meeting, the Secretary got in touch by telephone with President Bryan, Ilho stated that the case vas a close one, that the Bank could have as easily recommended approval as disapproval, and that a decision of the Board to recommend favorably would be agreeable to him. Accordingly, the letter to the Comptroller of the Currency was sent in the form in Vilich it had been approved by the Board. For reasons developed in a memorandum from the Division of tx aminations dated February 19, 1958, the Board also approved unanimously The recommendation of the Division that the Federal Reserve Bank of New lork be reimbursed in the amount of $4,330 for reprinting the State Illetber bank examination report form. 3/17/58 -3Mr. Benner then withdrew from the meeting and Messrs. Connell, Controller, Bass, Assistant Controller, and Jones, Chief, Consumer Credit and Finances Section, Division of Research and Statistics, entered the room along with Mrs. Weiss, Consultant. Surveys of consumer expectations. At the meeting on February 24, 19581 Preliminary consideration was given to an inquiry from the Bureau of the Budget regarding the possible sponsorship by the Board of frequent EnarveYs of consumer expectations, including buying intentions. The Board's staff had studied the feasibility of such an undertaking and had came to the tentative conclusion that the most practicable method would be to Procure such information on a quarterly basis through adding certain questions to the Census Bureau's Current Population Survey. It was estimated that the cost would be in the neighborhood of $100,000 a year. After discussion of the subject in the light of the Census Bureau proposal, it vas agreed to defer a decision until all of the members of the Board vere available. At the request of the Board, Mr. Young reviewed the origin of the tticitlirY from the Budget Bureau, the nature of the Census Bureau proposal, 44(1 Problems that would be involved in undertaking an experimental project this kind. He drew attention to the fact that the suggested surveys V°111d not substitute for the annual Surveys of Consumer Finances which 4re conducted for the Board by the University of Michigan Survey Research Center and which are primarily for the purpose of accumulating data on the financial position of consumers. However, he said, the separation 3/17/58 -4- of the portion of the Surveys having to do with consumer expectations would have a certain impact and these aspects of the matter were now under consideration by the Board's staff. While the staff was not prepared to make any recommendation at the present time, it appeared possible, if the Ilaard should decide to undertake the quarterly surveys of buying intentions, that the Survey of Consumer Finances could be placed on a biennial basis. This would not mean necessarily any substantial reduction in the cost of the Survey of Consumer Finances because this project now operates under a close budget and it might be determined to recommend expansion of the se°Pe of coverage in certain respects. Mr. Young also emphasized that the contemplated surveys of consumer expectations would be distinctly of all experimental nature and that perhaps as much as a year's experience vith the collection of such data would be required in order to afford a basis of evaluation. Mr. Jones then made certain supplemental comments concerning the Pr°Posal during which he referred to the extra work which would fall upon the Board's staff and the preliminary testing work which should be undertaken bet°re the quarterly surveys were actually carried out on a full-scale basia, He estimated that the cost of the preliminary work might be in the vicinity of $10,000 to $15,000. Comments by Mrs. Weiss emphasized that the portions of the Survey "Consumer. Finances dealing with consumer intentions seemed to call for 44111e5rs more frequently than once a year and for a larger sample than tha+ " nov used by the Survey Research Center, In response to questions, ' 3/17/58 -5- Messrs. Young and Jones discussed further the origin of the inquiry made by the Budget Bureau. They pointed out that for some time persons interested in this field had been attracted to the idea of surveying consumer expectations and that a recommendation of this kind was made by the so-called Smithies Committee which vas appointed by the Board at the time certain stUdies were made at the request of the Subcommittee on Federal Statistics of the Joint Economic Committee. It appeared that the Budget Bureau had been called upon to submit reports from time to time concerning the imPlementation of recommendations growing out of the Subcommittee's studies, and the inquiry made of the Board was consistent with one of such recommendati°ns• Mr. Young went on to say that at the time the inquiry was made the Budget Bureau suggested that it could arrange for a letter to the Board over the signature of Representative Bolling, the present Chairman (4 the Subcommittee on Federal Statistics. 13°siti011 However, he had taken the that a letter from the agency having responsibility for the e°0rdination of Federal statistical 'work would be satisfactory. In this c°10.ection, it was noted that the Council of Economic Advisers apparently had been urging the Budget Bureau to make arrangements for the compilation f current data on consumer intentions. In response to further questions, Mr. Jones explained that the tield ',murk on the Current Population Survey is undertaken by the Census 1111.eau about the 20th of each month. He felt that results of the survey "consumer expectations could be processed by the Bureau and made available t° the Board by about the end of the month and that perhaps another two 3/17/58 -6- "'leeks should be allowed for analysis of the data by the Board's staff. Mr• Jones estimated that) due to the necessary preliminary work, it would Probably not be feasible to make the first field survey until about SePteMber or October if the Board should act favorably on the program at this time. The discussion then turned to the control that would be exercised over the data collected by the Census Bureau, and explanations were made by the staff regarding the arrangements which are customary when agencies °t the Government enter into contracts with the Census Bureau for the collection of various kinds of information. They felt that without any doOt an understanding could be reached with the Director of the Bureau Inuier which the Board 'would retain full control over the release of the at compiled in the surveys of consumer expectations. With regard to the Board's own decision about release of the data, it was pointed out that the experimental nature of the undertaking might require analyzing the results of more than one survey, perhaps over a period of time extending 843 long as a year, before the Board could feel justified in making an irtitial release, particularly because the initial release would in effect ccrftit the Board to continue unless the entire project should be abandoned. At Present, the staff did not consider it practicable to estimate just hc41 11.101 analysis of the survey results would be required before it could be c°ncluded that they were valid and consistent with other economic il1t°1"mation and that the Board therefore would be justified in releasing them. 3/17/58 In this connection, Governor Robertson stated that there should be a firm understanding with the Census Bureau to the effect that if the Board was not satisfied with the results of the surveys after appropriate analysis of them, the Board would have the right to terminate the arrangement tor collection of the data. Governor Mills then reviewed reasons, some of which he had stated 151"ev1ou5ly during the discussion on February 24, 'which led him to conclude that he would like to be recorded in opposition to undertaking the proposed Pr°gram. These reasons, which were both budgetary and procedural in nature, etemmed from his view that this kind of a program should be analyzed from the standpoint of whether it was essential or whether it was merely desirable ancl not essential. In this case, it was his opinion that the program was b8Y°4c1 question desirable but on the other hand far from essential. From the standpoint of budgetary considerations, he observed that the Board's exp enditures in the area of research were quite substantial at present abd that the scope of the current program involved large projects such 48 the study of smAll business financing and the collection of statistics °4 savings. He also called attention to the fact that the proposal to stirveY consumer intentions had not been provided for in the Board's approved bndget for 1958. As he had indicated on previous occasions, he did not ta'v43r the practice of instituting projects not included in the original 1)148et provisions. Pursuant to a request made at the time of review of the 11,_ 4.A.Jardt8 budget performance for 1957, the Board members had now received tkro rmation comparing the trend of expenses at the Board and the Federal 3/17/58 Reserve Banks since 1953 'which indicated that the Board's expenditures, measured pereentagevisel had increased more than those of the Federal Reserve Banks, and the expenditures of the Reserve Banks had themselves itcreased considerably. This brought him back to the criticism he had Mentioned before, namely, that the Board must exhibit leadership 'within the Federal Reserve System in controlling its expenditures, and he did not believe that this leadership as being shovn. On the procedural side, Governor Mills said that there seemed to be some cloudiness regarding the origin of the current proposal, that is, I./nether it stemmed from the Bureau of the Budget or vas a byproduct of the so-called Talle Committee studies. In either event, hovever, there /4el'e policy considerations that he felt should be taken into account. If this vas a recommendation of the Budget Bureau, there was real doubt his mind that the Board should accept a suggestion having its origin 14ithin the Executive Branch of the Government; if it vas a proposal "Illtating from the Congress, it seemed to him that it should be analyzed 411.inst the 'whole question of the tendency to make assignments to the ?ederal Reserve System in such a vay as to circumvent the use of appropriated r411c16. In his opinion, this sort of undertaking should be studied and analYzed within the context of the Congressional survey of the scope of —;ral research in the area of statistics and economics, including the of which department of the Government should be assigned l'esPonsibility for Particular types of research and how the expense should be borne 3/17/58 .9.. Fundamentally, Governor Mills said, his objection to the current ProPosal was on budgetary grounds, but the procedural objections ranked in his mind a very close second. Governor Balderston inquired about the sufficiency of the sample cUrrently used in the Survey of Consumer Finances, and the replies made by Mr. Young and Mrs. Weiss were to the effect that the present sample appeared tO be adequate for the purpose of collecting data such as now obtained through the Survey, except the data on consumer expectations. However, it ftarther review should indicate the desirability of any changes in the IllcoPs of the Survey of Consumer Finances, this might throw a somewhat clifferent light on the appropriateness of the sample. Governor Vardaman said that the questions he had raised at this Zeeting were intended to bring out problems that would be involved in a decision to accept the proposal to collect data of this kind through the Celisus Bureau, including the problems that might confront the Board if it vel'e then found that the survey results were unsatisfactory. He vent on t° Say he had tended to disregard the budgetary aspects of such a matter /lhere the Board determined that the undertaking was necessary and it was 13°Bsible to get proper procedural agreements. However, Governor Mills' ec)renlents had caused him to think more seriously about the budgetary aspects 844c1 vhere a decision to begin such a program would lead the Board. For elc641Ple, there was the question of release of the data and the question 'What could be done to terminate the project if the Board should conclude th4t it ought to be dropped. To state it another way, this involved the 8), 3/17/58 -10- questi0n whether the Board could begin to work with the Census Bureau on such a program and then be in a position to terminate it in the face of outside influences which might be brought to bear, since it was evident that a number of parties would be interested in having this kind of a survey conducted. In response to questions raised at this point, Mr. Young said that it vas extremely difficult to estimate in advance how much additional work 1()uld devolve upon the Board's staff and what extra personnel, if any, ImUld be required. Rather than to make an estimate which might not prove Nlarranted, he thought it would be preferable to appraise the needs of the 13r°Ject as they developed and then make such recommendations to the Board 843 aPpeared necessary. Governor Shepardson said that, as the staff had pointed out, the 131‘0P°13e1 was one of an experimental character, which meant that it would have to be determined in due course how much value there was in it. In 'the light of the background and the apparent need and desire for this type (41 8111veY, he felt that the Board would be justified in undertaking eX13erimentation along these lines and that the Census Bureau approach 8e fled to be a logical one. There is always a question, he said, of how 1114th to keep adding on to the existing program. Even now, studies were being made by the staff with a view to determining whether any existing 111'°Isam8 had outlived their usefulness and should be discontinued. With l'eard to the budgetary problem, he said that projects of this kind take ttte to work out and develop. One approach in formulating the budget 8,75 3/17/58 -11- v0u1d be to make broad guesses and provide for a number of items which might or might not be instituted but it seemed better to him to approach a program of this kind as deliberately as was done in this case, so that if the Board 'wished to move ahead it could make the decision and handle the matter as an extra budget item. If the Board considered such a Program desirable, he did not think it would be advisable to defer the Program until it could be included in the next year's budget. Instead, it vas his view that the Board should meet situations of this kind when it vas ready to move on them. Governor Szymczak said that he thought all of the points raised at this meeting were very valid, particularly the points raised by Governor Mills. Admittedly, the proposed program was experimental, but the Only way to determine its usefulness would be to experiment and see *ether this kind of knowledge was essential. Therefore, he would favor Proceeding through the Census Bureau along the lines of the staff proposal. Governor Balderston stated that he also would favor going forward 11‘ 1°11g those lines, following which Governor Robertson inquired whether it appeared necessary to conduct the survey four times before being able to determine whether it was worth while. In response, Mr. Jones said that even after four surveys it 14:4111 not be possible to know absolutely. He suggested that serious e°118ideration be given to withholding the results of the first survey beelkuse there would be no basis for making comparisons. Even after the ileccIld survey, it would not be possible to make comparisons on a year-tobasis, but a certain basis for appraisal would then be available. -12- 3/17/58 In response to a further question by Governor Robertson, Mr. Young said that certainly, if the first survey yielded completely Irrational results, there would be no purpose in continuing. Mr. Jones repeated his previous statement that there should be a complete understanding with the Census Bureau on that point. Governor Vardaman said that, aside from the budgetary aspects of the matter, the procedural aspects were of such a nature that he did not feel that he could approve going forward with the proposed program. He thought that the possibilities of abuse outweighed the favorable factors and, for this reason, he did not favor entering into something that perhaps could not be stopped. Governor Robertson inquired whether Governor Vardaman would have the same view if there was an understanding with the Census Bureau and Other interested parties that the data would not be made public without the Board's consent and that the project could be terminated after two surveys if the Board should so decide. Governor Vardaman responded that under such circumstances he Might agree, if the arrangements were made at a sufficiently high level, following which Mr. Young expressed the view that it should be possible to reach agreement on such a basis with the parties concernea. Chairman Martin then stated that he had always entertained some doubts about the Surveys of Consumer Finances, particularly in view of the fact that the Survey had never gone through a period of real recession. 3/17/58 -13- However, he had resolved those doubts in terms of his conclusion that the Board ought to be progressive in the field of research. If it did not do some experimental work in this field, he doubted whether it would be fully discharging its responsibilities. It might then tend to be influenced in its policy decisions by statistics collected from various sources which could prove to be inaccurate or carelessly compiled. He was not sure at this point whether the proposed program for collecting data on consumer intentions was essential, but he was sure that it was desirable and also that it was essential for the Board to move in this area• Without spending too much money, the Board was in a position to do some experimental work which he felt would represent a net gain. With respect to the questions which had been raised by Governor Robertson, he felt there was merit in making arrangements whereby the program could be terminated if it was found not to be appropriate. There was general agreement on this point, with the understanding that it was not possible at this time to say exactly when a determination could be made as to whether the program should or should not be continued. In further discussion, Governor Robertson raised questions about the possibility of conducting the Survey of Consumer Finances through the Census Bureau, and the response was in terms that it would be difficult to incorporate as additions to a Census Bureau questionnaire inquiries as complex in nature as those designed to produce the data compiled in the Survey of Consumer Finances. It was stated, however, that the staff 3/17/58 -14- vas continuously exploring the feasibility of alternative procedures for conducting the Survey of Consumer Finances. Accordingly, the views of Governors Vardaman and Mills having been noted and it being understood that they would be made a part of the record, it was agreed, Governor Mills voting "no", to proceed with the steps necessary to institute a survey of consumer expectations on a Warterly basis under an arrangement with the Bureau of the Census, Subject to the procedural understandings which vere developed in the course of the discussion at this meeting. Governor Vardaman indicated that he vould not object to going ahead on such a basis with his taservations entered in the record, following which Governor Robertson said that he would like to be recorded as sympathetic to the points made by Governor Mills despite his favorable position on the current Ptc/T°Bal. Other members of the Board indicated that they felt likewise. During the foregoing discussion Mr. Thomas withdrew from the r4eetiag and at its conclusion Mr. Jones and Mrs. Weiss left the room. 141% Leonard, Director, and Mr. Daniels, Assistant Director, Division "85nk Operations, joined the meeting at this point. Report of audit of Board's accounts for 1957. With a letter dated February 28, 1958, Price Waterhouse & Co. had transmitted its tePort on the financial statements of the Board of Governors for the h "ended December 31: 1957, and copies had been sent to the members of the Board. As compared with the statements for the prior year which •c -15- 3/17/58 were rendered by Arthur Andersen & Co., the 1957 statements reflected certain significant changes in presentation which in the opinion of Price Waterhouse made them more informative from the standpoint of the reader and better suited to the needs of the Board. In effect, these Changes (1) showed the costs of publication net after deduction of receipts from sale of Board publications;(2) eliminated the depreciation Of furniture and equipment; (3) disclosed the cost incurred for the Printing, issue, and redemption of Federal Reserve notes and the assessments against the Federal Reserve Banks to cover these costs in the body Of assessment and expenditure accounting rather than as a footnote; and (4)excluded from the assets and liabilities statement figures for taxes 'Withheld from employees and set forth this information in a parenthetical comment. As in previous years, the deficit in the cafeteria account 'was shown on a net basis. In a discussion of the form of statements rendered by Price Waterhouse & Co., attention was called to the fact that the Board's Practice of rotating the audit assignment among different public accounting firms might have the effect of producing different forms of statements and thereby raising questions from the point of view of continuity. It was pointed out, however, that this had the advantage Of indicating that the public accounting firms were given a free haad to conduct the audits and submit reports according to their best jndg- ment. 880 -16- 3/17/58 At the conclusion of the discussion, it was agreed to accept the statements rendered by Price Waterhouse & Co. It was understood, however, that alternative statements would be prepared for the Board's information showing how the publications and withholding tax figures would have been reported if the style of the statements for 1956 had been followed and also shaving gross expenses less receipts involved in the operation of the cafeteria. It was noted by Governor Mills that thus far Price Waterhouse had not furnished a statement on scope of audit of the kind furnished in previous years by Arthur Andersen. The view of the Board was that such a statement was desirable, and it was recalled that in the past copies thereof had been furnished to the Banking and Currency Committees along with the audit report proper. Mr. Daniels reported that he had discussed the matter with Price Waterhouse and that the firm planned to submit such a statement. It was understood, therefore, that there would be an appropriate follow-up to assure that the document in question was received. Question was raised whether the financial statements should be included in the Board's Annual Report in the form in which they had been rendered by Price Waterhouse & Co., and it was agreed that they should. It was also agreed unanimously that, in accordance with the usual procedure, copies of the audit report should be sent to the Chairmen of the Banking and Currency Committees of the Congress. 881 3/17/58 The meeting then recessed and reconvened in the Board Room at 2:30 p.m. with all of the members of the Board present along with Messrs. Carpenter, Kenyon, Hackley, Masters, and Hostrup of the staff. Also Present were the following representatives of bank holding companies: Marine Midland Corporation - Baldwin Maull and George Letchworth; General Contract Corporation - Daniel S. Hapke; Citizens and Southern Holding Company - Mills Lane and Hugh W. Fraser, Jr.; BancOhio Corporation - George E. Doersam and John P. Biehn; Northwest Bancorporation - J. Cameron Thomson, Goodrich Lowry, John B. Faegre, and Leonard Langer; Wisconsin Bankshares Corporation - Joseph W. Simpson, Jr., and Allen M. Taylor; First Security Corporation - George S. Eccles and S. J. Quinney; Transamerica Corporation - Gerhard A. Gesell and Hamilton Caruthers; and First Bank Stock Corporation - Joseph H. Colman. Meeting with bank holding company representatives. Pursuant to the decision at the meeting of the Board on February 27, 1958, this meeting had been arranged at the request of Mr. Colman in order to afford the bank holding companies an opportunity to express their views regarding certain provisions of bank holding company legislation, particularly in the light of the report required to be made by the Board to the Congress llot later than May 9, 1958, concerning the Bank Holding Company Act of 1956. The principal statements made by the bank holding company representatives related to the effect on the operations of their respective holding company systems of the Board's recent decision concerning the 3/17/58 applications filed under the Bank Holding Company Act by General Contract Corporation, St. Louis, Missouri. Those who addressed themselves to the subject expressed surprise at the Board's interpretation of the law in respect to the so-called "discount" question and outlined various types of operations which they felt were affected by that interpretation. It was noted that General Contract Corporation did not intend to appeal the Board's decision to the courts and that hearings on the applications Of First Bank Stock Corporation involving a similar question were now in process. Mr. Colman stated that if the Board's decision in the latter case should, as might be anticipated, follow the lines of the General Contract decision, it was the present intention to appeal the matter to the courts. This meant, however, that a period of time would elapse before a determination by the courts was available, and this raised the question whether the bank holding companies must in the meantime discontinue practices which had been conducted within the normal scope of their operations over a long period. It was suggested that perhaps the Board could take some step to permit the bank holding ecftPanies to continue such operations pending final determination of the question without the risk of their being subject to the criminal Pl'ovisions of the Bank Holding Company Act. However, no specific snggestions were made as to how this might be accomplished. At the 8814e time, the bank holding company representatives urged that the lloard recommend to the Congress, in connection with its report on 3/17/58 the Bank Holding Company Act, amendments to that Act which would permit continuation of the transactions that had been called into question by the decision in the General Contract case. The only other major point covered in the discussion was the proposal which had been made to the Congress by representatives of the Independent Bankers Association for an amendment to Section 3 of the Bank Holding Company Act which would have the effect of prohibiting all bank mergers or acquisitions of assets by holding company banks located outside of the home State of the bank holding company and would require Board approval of all mergers or acquisitions of assets by holding company banks located within the holding company's home State. Mr. Thomson illustrated the effect of such legislation by referring to situations involving his awn holding company system and stated reasons 14by the holding companies felt that an amendment of that kind would not be warranted. At the conclusion of the discussion, Mr. Thomson asked whether the Board would like to have memoranda covering the principal points developed at this meeting, and Chairman Martin stated that the Board l'ould be glad to have any such documents for its information. Secretary's Note: Subsequently, Mr. Colman left with the staff a memorandum containing the substance of the statement made by him at this meeting. This memorandum has been placed in the Board's files, along with a memorandum submitted by Mr. Caruthers entitled "Extension of Section 3 of the Bank Holding Company Act to acquisitions of assets by holding company banks." 3/17/58 The meeting then adjourned. Secretary's Note: Pursuant to the recommendations contained in memoranda from appropriate individvals„ Governor Shepardson today approved on behalf of the Board increases in the basic annual salaries of the following persons on the Board's staff in the amounts indicated, effective March 23, 1958: Edythe J. Bascom, Records Clerk, Office of the Secretary, from $3,585 to $3,670. Earl C. Held, Economist, Division of Research and Statistics, from $10,320 to $10,535. Joseph B. Dunn, Assistant Federal Reserve Examiner, Division of Examinations, from $51440 to *5,575. Pletcher E. Brown, Messenger, Division of Administrative Services, from *3,370 to $3,455. Charlie H. Ward, Laborer, Division of Administrative Services, from $2,71i.5 to $2,830. BOARD OF GOVERNORS hitt*** r OF THE 130L *0. FEDERAL RESERVE SYSTEM : WASHINGTON 25, D. C. Item Yo. 1 3/17/5E Lz AOOREEIS OfFICIAL CORRESPONOCNCE vAttofN, TO THC 1110ARO flarch 17, 1958 Manufacturers Trust Company, 55 Broad Street, New York 15, New York. Gentlemen: The Board of Governors of the Federal Reserve System, Pursuant to the provisions of Section 13 of the Federal Reserve Act, authorizes your bank to accept commercial drafts or bills Of exchange to an amount (which amount shnll include any drafts 41„!- d bills of exchange accepted by other banks for the account ?. 1 ., your bank) not exceeding at any time, in the aggregate, J4/0 per centum of the paid up and unimpaired capital stock and surplus of your bank, provided that the aggregate of accept4nces growing out of domestic transactions shall in no event exceed 50 per centum of such capital stock and surplus. This authorization is subject to the provisions of the Federal Reserve Act and the Board's Regulation C issued PUrsuant thereto. The right is reserved to terminate this authorizatio n upon 90 days' written notice to your bank, as provided in Qection 1(e)(2) of Regulation C. Very truly yours, (Signed) S. R. carpenter S. R. Carpenter, Secretary. 886 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 2 3/17/58 WASHINGTON 25. D. C. 440, ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD I I March 17 Mr. George E. Kroner, Vice President, Federal Reserve Bank of St. Louis, St. Louis 2, Missouri. Dear Mr. Kroner:: Reference is made to your recent letter recommending that the Board approve, under the provisions of Section atli. of the Federal Reserve Act, an additional investment by Citizens Bank of Pacific, Pacific, Missouri, in bank premises in excess of the capital stock of the bank. After consideration of all available information, the Board of Governors concurs in your recommendation and approves an additional investment in banking premises of $130,869 for new building, architect's fees, new vault, drive-in window, and parking area. It is understood that net proceeds received from sale of present banking quarters and other real estate are to be epPlied to reduce the carrying value of bank premises, and it is also assumed the member bank will continue to reduce the investment in fixed assets on a planned and regular basis. Very truly yours, (Signed) S. n. Carpenter S. R. Carpenter, Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Iter No. 3 3/17/58 WASHINGTON 25. D. C. ACIDNESS OFFICIAL CORRESPONDENCE TO THE BOARD 1C, Comptroller of the Currency, Treasury Department, Washington 25, D. C. Attention Mr. W. M. Taylor, Deputy Comptroller of the Currency. Dear Mr. Comptroller: Reference is made to a letter from your office December 17, 1957, enclosing copies of an application to a national bank at Ormond Beach, Florida, and requesting Mendation as to whether or not the application should be dated organize a recamapproved. Information contained in a report of investigation of the aPPlication made by an examiner for the Federal Reserve Bank of Atlanta indicates that the proposed capital structure of the bank would be adequate and the management satisfactory. There appears to be some question as to whether sufficient need exists for the !) ,ank at this time and the earnings prospects are not very favorable. rwever, the potentialities for further growth of the area would a.ndicate that it will be able to support a bank, and in view of the eirability of providing more convenient banking facilities for ue residents it is believed that favorable consideration may be given the proposal. Accordingly, the Board of Governors recommends aPProval of the application. The Board's Division of Examinations will be glad to dis- neseYouanysoaspects of this case with representatives of your office 44 desire. Very truly yours, J. 7.. Carncnter S. R. Carpenter, Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 4 3/17/58 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD March 17, 1958 Comptroller of the Currency, Treasury Department, Washington 25, D. C. Attention Mr. C. C. Fleming, Assistant Chief National Bank Ekaminer. Dear Hr. Comptroller: Reference is made to a letter from your office dated August 23, 1957, enclosing copies of an application to organize a national bank at St. Petersburg, Florida, signed by Mr. Anthony S. Battaglia and associates, and requesting a recommendation as to whether or not the application should be approved. A report of investigation of the application made by an ftaminer for the Federal Reserve Bank of Atlanta indicates that the organizers plan to provide a capital structure of $600,000 for the bank instead of 000,000 as shown in the application. This revised capital structure would be adequate. However, it appears that the prospects for profitable operations of the bank are not very favorable and there does not appear to be a sufficient need for the bank at this time. Moreover, the management factor cannot be regarded favorably inasmuch as the managing ?racers have not been selected and the proposed directors appear tio lack the experience necessary to assure sound administration of the affairs of the bank. In view of the unfavorable factors in this situation, the Board of Governors does not feel justified in recommending 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) S. R. Carpenter S. R. Carpenter, Secretary. SS" BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. Item :!To. 5 3/17/58 ADDRESS DFFICiAl CORRESPONDENCE TO THE BOARD narch 17, 1958 11r. Roy F Cooke Assistant Commissioner, Federal Housing Administration, Washington 25, Do C. °ear Mr. Cooke: This is in response to your letter of January 15, 1958, 117.th enclosures, relative to an arrangement suggested by you for re exchange of information respecting Title I loans held by memutIr State banks, Previously, you discussed in general terms the P 1 :Posals contained in your letter and attachments with Mr. Robert lc Masters, Director of the Division of Examinations, and Mr. Henry enner, Assistant Director. Your proposals in effect, as expressed in a memorandum attachment to your letter entitled "Federal Reserve Board - FHA 04)0, Re tion Plan", provide for the submission of information by Theerve Banks that would be of value to the FHA in its operations. e Proposed plan also suggests that the Financial Representatives th the FHA located in various Federal Reserve Districts would visit e aPpropriate Reserve Bank for discussion of the suggested plan. The Board, as a Federal bank supervisory agency, is desirof cooperating with the Federal Housing Administration in uhatel* 144Y It may properly do. In the examination of FHA Title I loans 4.ilmember State banks, Federal Reserve examiners have given close ZT,ention to the propriety and performance of such loans. Possible I 'Vations of law or unsafe and unsound practices observed in conexetion with Title I loans would be criticized by Federal Reserve 44, 111-4ers and mentioned in reports of examination for corrective re -Lon by member banks. If such irregularities were of a nature beci„ing the attention of the United States Attorney, they would 'ePorted to that officer and the Department of Justice for in0IA st, The Federal Reserve Banks would welcome any suggestions trlad to e by Your Financial Representatives contributing to helpful e2Peration. In this regard, it is your desire that your repre'ntatives visit Federal Reserve Banks and there is enclosed, 89 Mr. Roy F. Cooke -2 therefore, a list of vice presidents of Federal Reserve Banks in charge of examinations* It is our understanding that your district representatives will make arrangements for their proposed visits* In connection with your memorandum entitled "Federal Reserve Board.FHA Coordination Plan" mentioned above, it is necessary to point out for your full understanding that information obtained during examinations of member banks and reports of such examinations are required by law and regulation to be treated as confidential. Accordingly, a number of the proposals in your suggested coordination plan are inconsistent with the preservation °f confidentiality and all of the information alluded to could not peay be disclosed to your representatives. The vice presidents n charge of examinations at the Reserve Banks will, however, assist Your representatives in whatever manner they properly may. r You also forwarded a copy of the Board's letter of September 40 1934, respecting policy in the classification of stle I loans by Federal Reserve examiners, with the suggestion present-day policy be affirmed. The letter referred to is °°sclete and has been superseded by S-1613 of December 17, 1956, 4 CON?* of which is enclosed* The Board is notifying the Reserve Banks of the proposed lieitS of your representatives. Very truly yours, (SiEmed) S. H. Carpenter S. R. Carpenter, Secretary. flc1osures-2 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. Item No. 6 3/17/58 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD March 17, 1958 Dear Sir: The Federal Housing Administration through Mr. Roy F. Cooke, Assistant Commissioner, has suggested to the Board the desirability ?I' closer cooperation between the Federal Reserve Banks and the FHA 3 .-!1. the exchange of information on Title I loans. It is understood that similar suggestions have been made to other Federal supervisory agencies. It has been proposed that the Financial Representatives ?t* the FHA visit the vice presidents in charge of examinations of th Reserve Banks in the districts in which they are stationed for 'Is purpose of discussing this suggestion. In its reply to the FHA, the Board has stated that the Res n„erve Banks would welcome any suggestions made by FHA representlves contributing to helpful cooperation. The FHA has been ad'. :tsed that Federal Reserve examiners have given close attention to 171e propriety and performance of FHA Title I loans in member State anks, and that possible violations of law or unsafe and unsound , aetices observed in connection with such loans would be crititized and mentioned in reports of examinations for corrective acby member banks. If such irregularities were of a nature the attention of the United States Attorney, the FHA L4Eta been informed that they would be reported to that officer vtuot the Department of Justice. q It has also been thought desirable to point out to the alLthat obtained during examinations of member State and reports of such examinations are required by law and tigulation to be treated as confidential, and only such informaviZ could be given to FHA representatives as would be consistent 11_ 11 the preservation of confidentiality. The FHA was assured, i7sNrer, that the Reserve Banks would assist FHA representatives "11 Uh ateVer manner they properly could. 892 .2— A copy of the Boardts letter 34*1613 of December 170 19562 on the treatment of FHA Title I loans in reports of examination has also been forwarded to the FHA. While a list of FHA representatives is enclosed for your information, it is understood that these representatives will make . t t he initial contacts with your bank, and for this purpose the FHA as been given a list of vice presidents in charge of examinations. Very truly yours, c3. P.. Carpenter S. R. Carpenter, Secretary. Enclosure-1 TO THE PRESIDENTS OF ALL AUERAL RESERVE BANKS
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