The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Minutes for To: Members of the Board From: Office of the Secretary March 26, 1956 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 827 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Monday, March 26, 1956. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mt. Mr. Mr. Mr. Mt. Balderston, Vice Chairman Szymczak Vardaman Mills Robertson Shepardson Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. SheLman, Assistant Secretary Kenyon, Assistant Secretary Thurston, Assistant to the Board Riefler, Assistant to the Chairman Thomas, Economic Adviser to the Board Leonard, Director, Division of Bank Operations Vest, General Counsel Sloan, Director, Division of Examinations Johnson, Controller, and Director, Division of Personnel Administration Solomon, Assistant General Counsel Goodman, Assistant Director, Division of Examinations the members The following matters, which had been circulated to taken in of the Board, were presented for consideration and the action each instance was as stated: Young, Director, DiviMemorandum dated March 12, 1956, from Mr. the resignation of that sion of Research and Statistics, recommending on, be accepted, Divisi that Dorothy A. Culbertson, Statistical Clerk in effective March 24, 1956. Approved unanimously. ent, Federal Reserve Bank of Telegram to Mr. Latham, Vice Presid Boston, reading as follows: Reurtel March 20, 1956, Board approves the desigl nation of William Adrian Van Aartsen as a specia assistant 628 3/26/56 -2- n. examiner for the Federal Reserve Bank of Bosto Approved unanimously. ve Bank of Letter to Mr. Diercks, Vice President, Federal Reser Chicago, reading as follows: your In accordance with the request contained in desig the ves appro Board letter of March 15, 1956, the ner exami tant assis al speci nation of Loren W. Banner as a for the Federal Reserve Bank of Chicago. to desThe authorization heretofore given your bank is ner exami tant assis ignate Mr. Banner as a special hereby cancelled. Approved unanimously. al Reserve Bank of Letter to Mr. Peterson, Vice President, Feder St. Louis, reading as follows: In accordance with the request contained in your appointletter of March 9, 1956, the Board approves the for the ner exami ment of Harold E. Uthoff as an assistant as to e advis e Federal Reserve Bank of St. Louis. Pleas tive. effec made the date upon which the appointment is Approved unanimously. Reserve Bank of Letter to Mr. Diercks, Vice President, Federal Chicago, reading as follows: 16, 1956, Reference is made to your letter of March th, nweal Commo the regarding the request of the Bank of which n withi time of Detroit, Michigan, for an extension Gratiot Avenue to establish a branch on the north side of gan. Michi near Mohican Avenue in Detroit, d in completing conIn view of the delays encountere Board concurs in the ing, struction of the branch build ds to September 27, exten and your favorable recommendation the Commonwealth of Bank the 1956, the time within which as originally h, branc ribed -desc may establish the above 629 3/26/56 -3- approved in the Board's letter of June 27, 1955, provided approval of the State authorities is effective as of the date the branch is established. Approved unanimously. Memorandum dated March 20, 1956, from Mr. Sloan, Director, Division of Examinations, requesting that authority be granted for (1) a the School for Asreception in connection with the eleventh session of School on Monday, tion Examina sistant Examiners of the Inter-Agency Bank a luncheon for (2) and March 261 at 4:30 p.m. in the staff dining room, at 1:00 p.m. 28 March members of the School in the staff dining room on Approved unanimously. Letter to Mr. N. A. Bogdan, President, American Overseas Finance Corporation, 30 Pine Street, New York, New York, reading as follows: This refers to your letter of March 9, 1956 in which conyou state that your corporation has had occasion to are sider the extension of loans to foreign obligors which the of either (i) partially convertible into common stock on favor your in option an by nied obligor or (ii) accompa a specified amount of common stock of the obligor. In either at case the option or right to convert would be exercisable the sole discretion of your Corporation. such conYou further describe the situations involving : version provisions or options substantially as follows loans As a matter of policy you always make sure that on for provisi which you grant are adequately matched by the In tion. equity capital from sources other than your Corpora be would every case the conversion or stock option feature itself, with strictly incidental to the making of the loan ned the usual terms and conditions of the loan being determi ble credit on the basis of your evaluation of all applica feature would estabfactors. A conversion or stock option your consideralish a relationship which would facilitate and if needed. when dation accommo al financi tion of additional particularly in the case Should the stock increase in value, a prosperous enterprise, into s develop of a new venture which n to dispose of positio a in be also your Corporation would every In instance date. later a at the stock at a profit 630 3/26/56 -4- exercise of the option or conversion privilege would be subject to your determination at some future date of the advisability of utilizing the right, and you may elect not to exercise it in any case. In no event do you envisage the payment by your Corporation of any sum for such a right. The Board agrees with your conclusion that under section 25(a) of the Federal Reserve Act and the existing provisions of section IX of Regulation K, the consent of the Board of Governors would be required before your Corporation could exercise any conversion privilege or option under an arrangement such as that described above, but that such consent would not be required at the time a loan involving such an option or conversion feature is established or committed by your Corporation. Following comments by Mr. Solomon, the letter was approved unanimously, for transmittal through the Federal Reserve Bank of New York. There were presented telegrams to the following Federal Reserve Banks approving the establishment without change on the dates indicated Of the rates of discount and purchase in their existing schedules: Atlanta St. Louis New York Philadelphia Cleveland Richmond Chicago Minneapolis Kansas City Dallas March March March March March March March March March March 19 19 22 22 22 22 22 22 22 22 Approved unanimously. In connection with the foregoing action relating to the re-establishment of existing discount rates, there was a discussion of the reasons 631 3/26/56 -5- Why Federal Reserve Banks sometimes follow the practice of establishing rates of discount, subject to review and determination by the Board of Governors, more frequently than at the intervals of 14 days prescribed by section 14(d) of the Federal Reserve Act. Governor Robertson then suggested that the Legal Division be requested to review the practices followed by the Federal Reserve Banks in establishing, and by the Board in approving, rates of discount at the respective Banks. The objective of such a review, made in the light of the statutory provisions and pertinent letters sent by the Board to the Reserve Banks in the past, would be to provide assurance as to the proPriety of current procedures. Agreement having been expressed with Governor Robertson's suggestion, it was understood that the Legal Division would make a review of the kind which he had proposed. A letter had been received from the Federal Reserve Bank of Philadelphia under date of March 2, 1956, advising that on December 30, 1955, the Land Title Insurance Company, a wholly-owned subsidiary of Land Title Bank and Trust Company, Philadelphia, Pennsylvania, merged With Commonwealth Title Insurance Company to form Commonwealth Land Title Insurance Company, in which all or a majority of the stock is owned by Philadelphia banks. The letter pointed out that when the Land Title Bank and Trust company was admitted to membership in the Federal Reserve System 632 3/26/56 -6- on June 19, 1953, it divorced its title insurance business by organizing the Land Title Insurance Company. The Reserve Bank expressed the view that the merger of the two title insurance companies was a constructive step, since it had the effect of eliminating the Land Title Insurance ComPanY as a wholly-owned subsidiary of the State member bank. In a memorandum dated March 15, 1956, which had been circulated to the members of the Board, Mr. Hooff, Assistant Counsel, reviewed the matter from the standpoint of whether the exchange of stock involved in the merger of the title insurance companies amounted to a violation of section 5136 of the Revised Statutes, which prohibits the "purchase" of corporate stock. For reasons stated in the memorandum, including the fact that the Reserve Bank and the Board's Division of Examinations and Legal Division believed the merger to be a constructive step, it was recommended that the letter from the Reserve Bank, which was transmitted to the Board merely for its information, be filed without reply. In a discussion of the matter, Governor Robertson recalled that when the application of the Land Title Bank and Trust Company for adMission to membership in the Federal Reserve System was being considered by the Board he took the position that the trust company should not be Permitted to become a member bank and retain the title insurance business, either direct or through a subsidiary. For reasons stated at that time, he continued to feel that member banks should not be engaged in a title insurance business. It was his view, therefore, that Land Title Bank 3/26/56 -7- Trust Company should be required to dispose of its stock in Commonwealth Land Title Insurance Company within a reasonable length of time. In response to a question by Governor Shepardson, he said that his posibut to all member banks tion applied not only to this one institution holding stock in title insurance companies. Governor Robertson's views having been noted, it was agreed to file the letter from the Federal Reserve Bank of Philadelphia without reply. withdrew from the meetMessrs. Sloan, Solomon, and Goodman then n given to him Governor Balderston referred to the authorizatio at the meeting on March 16, 1956, to act on behalf of the Board with building at 1825 H respect to negotiating for the lease of space in a Street to house some of the Board's operations. He said that since that certain units within the time arrangements had been completed to shift provide sufficient space for Federal Reserve Building in such a way as to current year. the time being and probably for the remainder of the In space outside the the circumstances, he felt it inadvisable to lease building at present. be authorized However, he recommended that funds purchase metal furnifor the Division of Administrative Services (1) to contemplated shifts within ture for seven offices made available through Consulting Architect to the the building, and (2) to retain Mr. Persina, 3/26/56 -8- Board, to study the redecorating and revamping of the Board Members' dining room (the so-called Brown Room) and to review in some detail plans Prepared some years ago for closing in the wings of the building to provide additional space. In amplifying on the work which would be done by Mr. Persina, Governor Balderston said that he would be expected to give an opinion on the feasibility of an arrangement which would permit combining into one room, when necessary, the Brown Room and the adjoining Blue Room. Mr. Persina also would be asked to check over carefully the existing plans for an addition to the Federal Reserve Building on the lot across "C" Street which is owned by the Board. Governor Balderston sug- gested authorizing up to1,000 for the services of the architect and up to *5,500 for the new furniture. During a discussion of Governor BaJderston's report, Governor Vardaman suggested that consideration be given to the possible relocation °f the infirmary now situated on the fourth floor of the building, with 4 View to providing additional space for dining facilities. He also asked whether the authorization of funds proposed by Governor Balderston 'would be sufficient. Governor Balderston responded by saying that according to the estimates that had been made the figure of ::;6,500 should be sufficient, with Perhaps a little leeway. However, in order to avoid the possibility of having to raise the question with the Board again, he suggested that 7,o00 be authorized. 3126/56 -9Governor Mills said that he would have no question about author- izing the sum of $7,000 for the purposes mentioned if it were the sense of the Board that the space changes within the building should be made and further steps taken looking toward a possible alteration of the buildPersonally, he had some doubts about these proposals, including the Proposal to move the Research Division's Government Finance Section to the first floor. Following Governor Mills' comments, Mr. Bethea reviewed in detail the shifts in quarters that would be made according to the present plans. Governor Balderston then made a further statement in which he said that the space problem had been discussed fully with members of the staff, that the proposed arrangements seemed to be as good as could be 14orked out, that the space in some offices would continue to be cramped, but that in the absence of unexpected developments it seemed that enough 8Pace would be available to accommodate the Board's activities at least for the balance of this year. Then, if a decision should be made not to erect an addition to the building or make alterations to the structure, and if it developed that the present building could not accommodate the Board's activities, it would be hoped that it might be possible to find sPace as good as or better than that which would now be available in the building at 1825 H Street. Thereupon, it was voted to authorize the expenditure of up to $7,000 for the equipment and architectural services mentioned by 636 3126/56 -10Governor Balderston, it being understood that Governor Mills had doubts regarding the wisdom of certain changes in office quarters now being planned and regarding the feasibility of altering the building to provide additional space. Mr. Thomas referred to the action taken by the Board on March 15, 1956, in authorizing that an invitation be extended to the Treasury DePartment to have the commercial bank economists participating in its forthcoming seminar visit the Board's offices on Wednesday, May an economic presentation and luncheon in the staff dining room. 9, for He re- Ported that there had now been certain changes in the plans of the TreasIlrY and that it appeared the Treasury might like to have the program at the Board arranged for Thursday, May 10. It was understood that there would be no objection to the change in dates mentioned by Mr. Thomas. Mr. Bethea then withdrew from the meeting. Governor Vardaman referred to an article in the February 1956 issue of the employees' magazine published by the Federal Reserve Bank of Cleveland regarding sales made to employees through the store which has been operated by the Cleveland Federal Reserve Club since February 1952. He raised the question whether such an activity should be conducted within a Federal Reserve Bank and suggested that publicity incident to such a venture might provoke criticism. 3/26/56 -11At the Board's request, Messrs. Leonard and Johnson commented on a similar activity at the Federal Reserve Bank of New York and stated that to the best of their knowledge such operations were not carried on at the other Reserve Banks, except perhaps to the extent of arranging group purchases of various articles. This led to a discussion of group Purchases arranged for Board employees through the Federal Reserve Board Club. Governor Vardaman then suggested that it might be well to have the Divisions of Bank Operations and Personnel Administration provide the Board with a memorandum covering operations of the kind in question both at the Federal Reserve Banks and at the Board. Agreement was expressed with Governor Vardaman's suggestion and it was understood that material of the kind to which he referred would be prepared for the Board's information. The meeting then adjourned. Secretary's Note: Pursuant to the recommendation contained in a memorandum dated March 22, 1956, from Mr. Young, Director, Division of Research and Statistics, Governor Balderston today approved on behalf of the Board the appointment of Laura Bruce Robinson as Clerk in that Division, with basic salary at the rate of3,670 per annum, effective as of the date she assumes her duties.
@FedFRASER