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Minutes for To: Members of the Board From: Office Of the Secretary March 4, 1963 Attached is a copy of the minutes of the Board of Governors of the Federal Reserve .System on the above date. It is not proposed to include a statement with respect to any of the entries in this set of minutes in the record of policy actions required to be maintained pursuant to section 10 of the Federal Reserve Act. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, please initial below. If you were present at the meeting, your initials will indicate approval of the minutes. If you were not present, your initials will indicate only that you have seen the minutes. Chin. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Gov. Mitchell Minutes of the Board of Governors of the Federal Reserve System on Monday, March 4 1963. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Mills Robertson Shepardson King! Mitchell Mr. Sherman, Secretary Mr. Kenyon, Assistant Secretary Mr. Young, Adviser to the Board and Director, Division of International Finance Mr. Molony, Assistant to the Board Mr. Cardon, Legislative Counsel Mr. Fauver, Assistant to the Board Mrs. Semia, Technical Assistant) Office of the Secretary Messrs. Noyes, Koch, Brill, Garfield, Holland, Williams, Dembitz, Solomon, Broida, Eckert, Gehman, Partee, Peret, and Yager of the Division of Research and Statistics Messrs. Furth, Hersey, Sammons, Katz, Irvine, Klein, Maxoni, Mills, and Reynolds of the Division of International Finance Economic review. The Divisions of International Finance and Research and Statistics presented information relating to recent international and domestic financial and business developments, and made further comments in response to questions asked by members of the Board. 17-Withdrew from meeting at point indicated in minutes. 3/4/63 -2Governor King then withdrew, as did all members of the staff except Messrs. Sherman, Kenyon, Molony, Cardon, Fauver, Noyes, and Dembitz, and Mrs. Semia, and the following entered the room: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Hackley, General Counsel Farrell, Director, Division of Bank Operations Solomon, Director, Division of Examinations Conkling, Assistant Director, Division of Bank Operations Goodman, Assistant Director, Division of Examinations Leavitt, Assistant Director, Division of Examinations Young, Senior Attorney, Legal Division Collier, Chief, Current Series Section, Division of Bank Operations Circulated or distributed items. The following items. copies of Which are attached to these minutes under the respective item numbers indicated, were approved unanimously: Item No. Letter to the Federal Reserve Bank of Boston waiving the assessment of penalties incurred by Fall River Trust Company, Fall River, Massachusetts, for required reserve deficiencies. 1 Letter to Wells Fargo Bank, San Francisco, California, granting permission to purchase and hold stock in Wells Fargo Bank International Corporation, San Francisco, and noting without objection that the Corporation was formally started on January 29, 1963, with a fully subscribed and paid-up capital. (Pursuant to the Board's action on January 4, 1963, the agreement required by section 25 of the Federal Reserve Act was executed by Wells Fargo Bank International Corporation on January 30, 1963.) 2 Letter to County Bank of Santa Cruz, Santa Cruz, California, approving an extension of time to establish a branch near the intersection of Front and Cooper Streets. 3 3/4/63 -3Item No. Letter to the Presidents of all Federal Reserve Banks regarding forms to be used by State member banks and their affiliates in submitting reports as of the next call date. 14. Letter to James F. Gallagher, New York, New York supplying certain information regarding holding compagy affiliates. 5 Letter to the Chairman of the Senate Committee on the Judiciary reporting on S. 691, a bill "To require public hearings to be held in each State affected by a proposed agency rule, if timely Protest is filed with the agency after notice of the proposed rule is published in the Federal Register." 6 Messrs. Cardon, Goodman, and Young then withdrew. Reduced reserves. There had been distributed a memorandum from Messrs. Farrell and Noyes dated March 1, 1963, attaching tables prepared pursuant to the discussion at the meeting on February 4 concerning criteria for granting to member banks in reserve cities Permission to carry reduced reserves. The tables contained a list Of all member banks in reserve cities and showed for each bank, at the September 28, 1962, call date, gross demand deposits, time deposits, total deposits, and interbank deposits. vas shown for the year The deposit turnover rate 1959, which was the latest year for which individual bank data were available. The memorandum suggested that the Board might want to ask the Federal Reserve Banks to supply certain additional information. 3/4/63 The discussion at this meeting brought out that the figures indicated that a number of banks that would appear superficially to qualify for the privilege of carrying reduced reserves had not requested such permission. Question was asked whether, in equity, steps should be taken to bring to the attention of these banks the possible availability Of the privilege. It was observed that aside from other possible consider- ations, questions of prestige might be involved in some cases. Also, there appeared to have been a tendency for applications for permission to carry reduced reserves to follow a city pattern; if one bank in a city requested and received the privilege, others in the same city were likely also to apply. There was general agreement that it would be desirable to make the tables available to the Reserve Bank Presidents and ask their comments. Various suggestions were made as to factors that might be of Importance in judging whether or not permission to carry reduced reserves Should be granted. Comment was made, among other things, regarding the question involved in allowing banks situated near reserve cities, and With branches in such cities, to carry reduced reserves on the theory that they were not truly in competition with banks in the heart of the City. Departure from that principle might be indicated, it was suggested, if banks located their head offices in the outskirts of reserve cities and then established downtown branches that competed directly with banks With headquarters in the city proper. 3/4/63 -5During the discussion Governor Robertson observed that the figures presented showed diversity from one Federal Reserve district to another in the size of the institutions that had been granted permission to carry reduced reserves. He raised the question whether the Board should not be cautious about seeming to have different rules for different districts, and whether it might not be well to formulate criteria before asking the Reserve Banks for their views. It appeared to be the consensus, however, that it would be preferable to obtain comments from the Reserve Banks before trying to formulate standards. At the same time, a view was expressed that it might be helpful to the Reserve Banks, in preparing their comments, if a reasonable amount of guidance could be given to them. At the conclusion of the discussion it was agreed that a letter would be prepared transmitting to the Reserve Bank Presidents the data that had been assembled, requesting their views and certain additional kinds of information, suggesting such guidelines for their consideration as might seem appropriate, and tentatively raising the question whether or not banks that superficially appeared to qualify for carrying reduced reserves should be informed that it was possible that the privilege might be granted if they chose to apply for it. Application for permission to carry reduced reserves (City National rik of Beverly Hills) (Item No. 7). There had been distributed a memo- randum dated February 27, 1963, from the Division of Bank Operations -6- 3/4/63 regarding an application by City National Bank of Beverly Hills, Beverly Hills, California, for continuation of permission to maintain reduced reserves after the establishment of another branch within the corporate limits of the city of Los Angeles. Vice President Galvin of the Federal Reserve Bank of San Francisco, in a letter dated February 11, 1963, had recommended that the current status of the bank be continued. The memorandum noted that this was the fifth such request from City National Bank in five years. In granting the most recent request, on November 23, 1960, the Board had stated that it had "been studying the problem of classifying banks for reserve purposes under the legislation enacted July 28, 1959, and the study could result in changes in some of the outstanding authorizations given by the Board for carrying reduced reserves. Pending completion of this study, the Board would be reluctant to consider further requests for permission for your bank to continue to maintain reduced reserves if it were to establish additional branch offices Within the city of Los Angeles." In the light of that reservation, the Division of Bank Operations suggested that, before acting on the current application, the Board might want to have more information from the Reserve Bank. Several subjects on which additional information might be helpful were set out in the memorandum. On the other hand, if the Board deemed sufficient the statement in Mx. Galvin's letter that the Reserve Bank continued to regard the operations of City National Bank as characteristic of a country bank, it might wish to grant the requested permission _7_ 3M/63 without asking for further information. Attached to the memorandum were alternative drafts of letters reflecting these two possible courses of action. After a discussion of the application of City National Bank of Beverly Hills in the light of the preceding discussion of the general question of granting permission to carry reduced reserves, the alternative draft of letter requesting more information bearing upon the application was approved unanimously. A copy of the letter is attached as Item No. 7. The meeting then adjourned. Secretary's Note: Pursuant to the recommendation contained in a memorandum dated March 1, 1963, from Mr. Kenyon, Assistant Secretary of the Board, Governor Shepardson today authorized on behalf of the Board the submission to National Archives, for Congressional approval in accordance with the usual procedure, requests for destruction schedules with respect to certain specified categories of Board records. Item No. 1 3/4/63 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD March 4, 1963 Mr. Earle O. Latham, First Vice President, Federal Reserve Bank of Boston, Boston 6, MasSachusetts. Dear Mr. Latham: This refers to your letter of February 11 regarding penalties totaling $1,062.47 incurred by the Fall River Trust Company, Fall River, Massachusetts, on deficiencif:d ia it required reserves for thirteen 1963. computation periods between January 10, 1962, through January 9, It was noted that: (1) these deficiencies resulted from an incorrect practice in the computation of net demand deposits caused by a change in accounting procedure by the member bank, the significance of which was not understood by the clerk who prepared the daily reports Of deposits; (2) the member has previously had an excellent record in maintaining its required reserves; (3) penalties for two of the periods can be waived by your Bank under the provisions of Paragraph C of the Board's instructions (5-1123; FRIS i6120); and (4) the procedure, now reinstated at your Bank, of comparing the report of deposits for reserve Purposes with the mid-year call report of condition would have disclosed the bank's incorrect practice and avoided three of the smaller deficiencies in October and November. In the circumstances, the Board authorizes your Bank to waive the assessments of the penalties in the amount of $1,062.47 for the eleven deficient periods listed in your letter. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Item No. 2 BOARD OF GOVERNORS ..... 3/4/63 OF THE • t^' \ FEDERAL RESERVE SYSTEM 4,sl; %Vt • w• WASHINGTON 25, D. C. 0- • 4:1.* .••„.•• tli. REs0".• ADDRESS OFFICIAL CORREt3PONOENCE lk TO THE BOARD March 4, 1963 Wells Fargo Bank, San Francisco 20, California. Gentlemen: This refers to the application of your Bank dated November 21, 3*-96-2.1 for permission of the Board of Governors, under the provisions of '!ections 9 and 25 of the Federal Reserve Act, to purchase and hold stock Wells Fargo Bank International Corporation, San Francisco, California. !eference is also made to the agreement dated January 30, 1963, executed cY Wells Fargo Bank International Corporation in accordance with the requirements of Section 25 of the Federal Reserve Act, by which such corPjration agrees to restrict its operations and conduct its business in Ile manner set forth therein. After consideration of the application and agreement, the Board °f Governors of the Federal Reserve System approves the application and ?"ants permission to Wells Fargo Bank, San Francisco, California, subject t° 411 of the provisions of Sections 9 and 25 of the Federal Reserve Act, ,o Purchase and hold stock in Wells Fargo Bank International Corporation 4.4 the amount of approximately $2,000,000. t. The Board of Governors has noted without objection, from Execuive Vice President F. J. Hellman's letter of February 26, 1963, with ersspect to a proposed Philippine investment, that the Corporation was ulormally started on January 29, 1963, with a fully subscribed and paidJ . capital of $2,002,500 on January 31, 1963," and that "proceeds of the Lc'ek have been placed in Bankers Acceptances, Treasury Bills, and cash." Please furnish the Board of Governors, through .the Federal Reser ve Bank of San Francisco, with copies of the articles of incorporation 41.4 by-laws of the Corporation. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS Item No. 3/4/63 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD • iN RE.S • •. • •• March 4, 1963 Board Of Directors, County Bank of Santa Cruz, Santa Cruz, California. Gentlemen: The Board of Governors of the Federal Reserve System extends to September 16, 1963, the time within which County Bank of Santa Cruz may establish a branch in the vicinity of the intersection of Front and Cooper Streets, Santa Cruz, California. Since the bank has now acquired title to property for the proposed branch, the Board trusts that steps leading towards establishment of the branch will be taken as soon as possible. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. Item No. 3/4/63 BOARD OF GOVERNORS OF THE /0VI licy*0 FEDERAL RESERVE SYSTEM if * 4 *• * * * o ,,.$1 4. * WASHINGTON 25, D. C. C ADDRESS OFFICIAL CORREOPONDENCI TO THE BOARD •I;• Atrast 0044*** March 7, 1963 Dear Sir: ing forms are The indicated number of copies of the follow for use of State being forwarded to your Bank under separate cover the -,1,0,aber banks and their affiliates in submitting reports as of next call date. A copy of each form is attached. Number of Copies Condition of Form FR 105 (Call No 167), Report of State member banks. her's Form FR 105e (Revised February 1961), Publis banks. member State of ion condit copy of report of her's Form FR 105e-1 (Revised February 1961), Publis banks. member State of ion condit of copy of report of affiliate Form FR 220 (Revised March 1952), 'Report or holding company affiliate, her's copy of Form FR 220a (Revised March 1952), Publis ate. report of affiliate or holding company affili used on December 28, All of the forms are the same as those 1962. investments in "Bank Inquiring banks may be informed that e Corporation Act Servic Service Corporations" provided for by the Bank 9, Investments item t agains Should be included in reports of condition or other real es premis and other assets indirectly representing bank ownership, a stock of forth the estate, whether such investments are in loan, or other advance of funds, Very truly y Enclosures Merritt Sh Secret TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS rs, ma E3 IA AR D tlf . : ... ...0)0V (.4)1,4, •• Item No. 5 I= Li DVERNORS 3/4/63 HIE FEDERAL RESERVE SYSTEM (). WASHINGTON 25. D. C 1[r;4 ADDREF1S • FICIAL CORFtES.ONDENCE TO THE EJOARD ':4c/ • March 4, 1963 Mr. James F. Gallagher, 313 East 183rd Street, New York 8, New York. Dear Mr. Gallagher: 30, presenting This is in reply to your letter of January the following question: d Corporation, "What companies, other than thc Marine Midlan as holding are now, or have ever been, defined by the Board and 1935 company affiliates under the Banking Acts of 1933 in New for member banks which they control, or controlled, York State?" exists, it In order to be certain that no misunderstanding companies e" "defin is pointed out that the Board is not authorized to ate", y affili compan ng as holding company affiliates. The term "holdi 2(c) n sectio in d define as used in the Federal banking statutes, is of the Banking Act of 1933 (U. S. Code, title 12, sec. 221a), with n 2(c) excludes Which you are familiar. The last paragraph of sectio purposes, most for ry, catego from the "holding company affiliate" ors of Govern of Board the by "any organization which is determined ctly, indire or ly direct d, engage be the Federal Reserve System not to lling, contro or ng managi or of, as a business in holding the stock banks...." company Since a corporation is automatically a holding tion and neither affiliate if it falls within the statutory defini Governors is required, registration with, nor action by, the Board of ies in New York the Board has no certain means of learning what compan affiliates. However, State are now, or have been, holding company es and section 9 of the under section 5144 of the U. S. Revised Statut secs. 61 and 337), shares Federal Reserve Act (U. S. Code, title 12, lled by a of national banks and member State banks that are contro es, most purpos for holding company affiliate may not be voted, ed a first obtain have "unless such holding company affiliate shall 'voting permit" from the Board of Governors. BOARD or GOVERNORS OF THE FEDERAL RESERVE SYSTEM Mr. James F. Gallagher -2- At the present time, Marine Midland Corporation is the only holding company affiliate that holds a voting permit with respect to one or more banks in New York State. In the past, First National Corporation of Elmira, Elmira, New York, First Securities Corporation Of Syracuse, and its affiliated First Trust and Deposit Company, Syracuse, New York, were granted voting permits with respect to certain New York banks. Without an extensive search, it is not Possible to ascertain whether voting permits have been issued to any other holding company affiliates with respect to banks in New York. Under the last paragraph of section 2(c) of the Banking Act of 1933, .referred to above, the Board has made a number of determinations of the nature described therein. As indicated, when such determination has been made, the organization involved is not a holding company affiliate except for the one purpose noted in that statutory Provision, and it is therefore excluded from the requirement of obtaining a voting permit before voting the stock of the member bank or banks involved. In most, if not all, of the cases in which such determinations have been made, the Corporation owned or controlled a majority of the stock of only one bank. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. tim.y1:11) Item No. BOARD OF GOVERNORS 3/4/63 OF THE FEDERAL RESERVE SYSTEM WAS OFFICE OF THE CHAIRMAN March 6, 1963 The Honorable James 0. Eastland, Chairman, Committee of the Judiciary, U. S. Senate, Washington 25, D. C. Dear Mr. Chairman: y 13, 1963, This is in response to your request of Februar hearpublic require for the Board's report on S. 691, a bill, "To rule, agency proposed ings to be held in each State affected by a the proif timely protest is filed with the agency after notice of posed rule is published in the Federal Register." on with Under the Board's Rules of Procedure in connecti Federal the in d Proposed rule making, notice of which is publishe ation of the Board Register, any individual may submit for consider any data, views, or arguments which he may care to present. The as comBoard considers that such presentations in most cases are . Of hearings plete and effective as could be adduced at public a pubpreclude course, under the present law, there is nothing to would ng proceedi lic hearing whenever it is indicated that such a t. judgmen be of assistance to the Board in formulating a the field of Based on its experience with rule making in ion is legislat proposed banking, it is the Board's view that the and delay the that and t not needed to protect the public interes the under required be would expense involved in the hearing that result. might bill would outweigh any benefit which Sincerely yours, (Signed) Wm. McC. Martin, Jr. Wm. McC. Martin, Jr. 6 Item No. 7 BOARD OF GOVERNORS _toot***4 "49 20fr o -> 7 ' 3/4/63 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. 1 4 4 ADDRESS OFFICIAL CORRESPONDENCE 4,0 TO THE EIOARD °*14,:tt hitt: March 4, 1963 MI', Eliot Jo Swan, President, Federal Reserve Bank of San Francisco, San Francisco 20, california. Dear Mr. Swan: This refers to Mr. Galvints letter of February 11, 1963, indicating that the City National Bank of Beverly Hills, Beverly Hills, California, has received permission to establish a fifth branch in the atlying area of the city of Los Angeles, and recommending that the for vermassion which the bank now has to maintain reserves required hestablis the after d continue Member banks not in a reserve city be 01 the new branch. T Mr. Galvin notes that the Board's letter of November 23, 3 6°) giving this bank permission to continue reduced reserves after 2 4Re establishment of the fourth branch within the city of Los Angeles, Stated that the Board would be reluctant to consider any further requests of this nature from the subject bank pending completion of a 13tudY that it was making in regard to the problem of classifying banks . tor reserve purposes under legislation enacted June 28, 1959. In uPPort of the current recommendation, Mr. Galvin's letter states that olle operations of the bank continue to be regarded as characteristic a country bank and that the addition of one more branch in an out-' to ,Png section would not change the type of banking service offered wle public. Z co The Board agrees that the establishment of the branch under bantnsideration would not be likely, in itself, to change the type of r. about the --ang service offered to the public, but it is concerned the city kcIc ' ;ssibility that the increasing number of its offices within Bank of National City the Los Angeles may be gradually bringing in banks downtown with ion competit i!cverlY Hills more and more into carry to on permissi warrant not ,:c3s Angeles to an extent that would venduced reserves. Accordingly, before acting on the current request, 1"e Board would like to have the views of your Bank on this particu'ar question. 1 The following additional information with regard to activiti ated:oi the City National Bank of Beverly Hills would also be appreci-. noARo OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Mr* Eliot J. Swan -2- Average ratio (per cent) of excess reserves to required reserves. Use of the credit facilities of the Reserve Bank. Activity in the Federal funds, Treasury bills, and acceptance markets. Percentage of total loans classified as commercial and industrial, nonbank financial, and loans to brokers and dealers. Any information that can be obtained regarding the nature of the bank's depositors and borrowers, par,ticularly the larger ones, and the activity of its deposit accounts. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary.
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