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Minutes for To: Members of the Board From: Office of the Secretary 1'4ay 1 1957 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. Chm. Martin Gov. Szymczak Gov. Vardaman Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson I243 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Monday, May 13, 1957. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Vardaman Mills Robertson Mr. Carpenter, Secretary Mr. Kenyon, Assistant Secretary Mr. Sloan, Director, Division of Examinations Mr. Johnson, Controller, and Director, Division of Personnel Administration Mr. Hackley, General Counsel Mr. Cherry, Legislative Counsel Mr. Masters, Associate Director, Division of Examinations Mr. Sprecher, Assistant Director, Division of Personnel Administration Mr. Solomon, Assistant General Counsel IIpyls circulated to the Board. The following items, which had bee 4 circulated to the members of the Board and copies of which are attached to these minutes under the respective item numbers indicated, Were a unanimously Item No. tett to aer the Federal Reserve Bank of Chicago the retention in service until July 1, ilr -1 1 lering of five employees who have attained age 65. tett Z to The Citizens State Bank, Sturgis, kle 14 v.gan, approving the establishment of a branch ty of West Chicago Road and Center(For transmittal through the Federal erve Bank of Chicago.) ,_ tettR the Comptroller of the Currency recommend-' L " tr1P ea avorably concerning an application for the a-ulishment of a national bank at Cherry Hill in beis 4, , Ware Township, Camden County, New Jersey. (With cRY to the Federal Reserve Bank of Philadelphia.) ' 2 3 .4 5/13/57 412 0 During a discussion preceding approval of Item No. 3, Governor Balderston said that over the past weekend he had traveled by automobile through the area where the proposed national bank would be established, that he had found the community to be growing rapidly, with most of the hous ing consisting of modest residences, and that the area was close en°11gh to the city of Philadelphia to assure further growth. In these circumstances, the question came to mind whether this application, the thirA to be submitted by practically the same group of organizers, should nc)t be granted if the proponents constituted a reasonably satisfactory gr°1113. On the other hand, it appeared that the proponents wanted to have a bank assured in connection with a large new shopping center which had 11°t Yet been started, and the unfavorable recommendation of the Federal 4ese,, 've Bank of Philadelphia perhaps could be supported on that basis. After Governor Vardaman raised a question whether a bank should - regarded as an essential part of a contemplated development, GovQ1'11°r lalls said that a review of the investigation made by the Philadelphia 4eserve Bank seemed to suggest that the shopping center might be secondary to the other interests of the proponents for, despite the fact that two Years had now elapsed in which to build the shopping center and attract tenants, there was no conclusive evidence that the project was going forward. In this connection, he noted that in a number of other cases throughout the °11.11trY, failure to complete contemplated shopping centers for a long had created problems for the bank supervisory agencies in relation t° charters and branch permits. A_ t215 5/13/57 .3.., Governor Vardaman then stated that he would be willing to back the Jdgrnefl of the Federal Reserve Bank of Philadelphia and Governor Balder- et°n said that, all things considered, he would be content to advise the C°Thptroller of the Currency in line with the Reserve Bank's conclusions. Extension of time for filing re&istration statement (Item No. 4). ern januarY 16, 1957, the Board extended until March 15, 1957, the time tor registration by The Fort Worth National Bank, Fort Worth, Texas, Pursuant to the Bank Holding Company Act of 1956 in order to allow more °PP°rtilnity for the Board to determine the national bank's status as a bark holding company. Later, on March 13, the Board requested the Federal Reserve Bank of Dallas to obtain certain additional information, and at the same time further extended the time for registration until May 150 1957. A memorandum from Mr. Hackley dated May 9, 1957, copies of which h" been sent to the members of the Board, stated that the requested int°rInation Was received from the Reserve Bank under date of May 2, 1957, that the question of the status of the national bank under the Act vas -""'remely involved, both factually and legally. In view of the com- IDle) citY of the situation and the need for careful study of the recently 81thttitt e- information, doubt was expressed whether it would be possible to advise the national bank of the Board's decision before May 15; and if the ard , snould conclude that the bank was a bank holding company) it would eeera rlecessary to allow the bank further time in which to prepare its ration statement. Accordingly, it was recommended that the Board l'urthe r extend until July 15, 1957, the time for registration, pending A 246 5/13/57 -4- determination of the question involved. he A draft of suggested letter to Federal Reserve Bank of Dallas was subnitted with the memorandum. On the basis of the recommendation contained in Mr. Hackley's memorandum, unanimous approval was given to the letter to the Federal Re Serve Bank of Dallas of which a copy is attached hereto as Item No. 4. 11?.221121111. 1168. In a letter dated May 6, 1957, the Chairman °f the Senate Banking and Currency Committee requested the views of the Board on the subject bill, which would apply certain requirements of the Seellritiee Exchange Act of 1934 (including the margin requirements) to 'ver-the-counter securities of large, widely-owned corporations. A memorandum from Mr. Solomon dated May 9, 1957, copies of which had been distributed to the members of the Board, stated that the bill was 211bstantia1ly similar to S. 2054 of the 84th Congress, on which Chairman 14artin testified before the Senate Banking and Currency Committee in Jklne 195,. After pointing out the main differences between the two bills, all re lating to the details of the securities which would be covered, the PlergeTand suggested that the Board probably would wish to take a position sinillar to the position that it took on S. 2054 in 1955. A draft of letter 13ased on that assumption was submitted with the memorandum. lir. Cherry stated that last Friday, after the memorandum from Mr. Solo__ m°n had been distributed, he received a telephone call from a staff eInber of the Senate Banking and Currency Committee who said that Senator tatLsch Chairman of the Securities Subcommittee, intended to commence hearilig3 shortly on five bills relating to the Securities and Exchange Come, and that the Board would be invited to testify on Tuesday, May 21. 124E7 5/13/57 The Board would be asked to give testimony only on such of those bills "might be of interest to the Boardland it appeared that S. 1168 was the (3417one in which the Board would have a primary or direct interest. If the E°.41-0, gave testimony on that date, it would not be necessary to male rep). to Chairman Fulbright's letter at this time. Chairman Martin said that he was scheduled to be out of town on . In the circumstances, he suggested that Governor Balderston be 114 21 designated to testify on behalf of the Board, and there was unanimous a eftent with this suggestion. Mr. Cherry then made the further comment that at the hearing vari °us questions might be asked, including questions concerning S. 1601, which would require the proxies given on certain securities to disclose "%el. ueneficial ownership of those securities. In view of Mr. Cherry's comment, Governor Balderston suggested that 4 lated memorandum covering anticipated questions be prepared and circu- to the members of the Board prior to the date of the hearing in order that the Board might consider what answers would be appropriate. Testimon before the Fiscal Policy Subcommittee. Chairman Martin aid that he had received a letter dated Nay 6, 1957, from Representative 111118 °f Arkansas, Chairman of the Subcommittee on Fiscal Policy of the Joilat Economic Committee, who advised that the Subcommittee would hold a 4rie_ of hearings during the first two weeks of June on fiscal policy imr 1)licati°ns of the economic outlook and budget developments. Since Repreeerltati ve Mills wished to have testimony from the Board on Friday, June 14, /248 5/13/57 -6- and this would be the date of his (Chairman Martin's) return from his forthcoming trip to Europe, the Chairman suggested that Governor Balderston he deSignated to testify on behalf of the Board. There was unanimous agreement with this suggestion. Availability of credit to small business. At the meeting on Friday, Xazio, the Board approved a letter to Representative Patman, Chairman of the Joint Economic Committee, setting forth the problems involved in obtain-. information on the availability of credit to small business, with the Illade rstanding that the letter would be delivered personally by Mr. Young 14 order that the problems might be discussed with Mr. Patman. Mr. Cherry stated that the letter was delivered Friday afternoon anci that, after Mr. Young had commenced an explanation of the matter, Repre- eerltative Patman said that he would release the Board from his request for a 81/rveY• In other words, if the Board wanted to go ahead with such a litlreY, that would be all right, but Mr. Patnan did not insist upon it. Ir he needed any further information in this area, he would try to get it throu gh Committee sources but, if necessary, he might come back to the Board. In response to a question whether the development reported by s4 Y- Would affect the Board's plan to consider making a survey of the ability of credit to small business, reference was made to the deci- atoll at the meeting on Thursday, May 9, to establish a System staff group to m. ' - 114Y the feasibility of such a survey and make a recommendation to the 114.1„, '• It was the unanimous view that the staff study should proceed but that thhe action at the meeting on May 9 directing the survey should be 1249 5/13/57 —7— re'riewed to determine whether it should be changed in any way. post of consumer instalment credit study (Item No. 5). On May 3, 1957, the Board sent a letter to Representative Patman, as Chairman of the j°i.nt Economic Committee, responding to his request for a breakdown of the eetirnated cost of the study of consumer instalment credit which was undertaken by the Board at the request of the President. Subsequently, in a letter dated May 6, 1957, Mr. Patman requested a further breakdown of the alaries and honoraria paid in connection with the Conference on Regulaticlicf Consumer Credit which was reported in Part II of the study and was cond. ucted for the Board by the National Bureau of Economic Research. On the basis of additional information received from the National beau of Economic Research, a draft of suggested reply to the second letter tr '111 ae presentative Patman had been prepared. At the request of the Chairn,. Tk 11%41 'Mr. Johnson commented on this additional information, following which the ''ggcsted reply to Representative Patman was approved unanimously, sub-. lectt, - review by the individual members of the Board, with the understand-. itg that it would be sent this afternoon if possible. A copy of the letter le attached to these minutes as Item No. 5. The meeting then adjourned. Secretary's Note: Pursuant to recommendations contained in memoranda from appropriate individuals concerned, Governor Shepardson approved on behalf of the Board on May To, 1957, the following actions regarding the Board's staff: °ittinent he nna- C. Shunk as Statistical Clerk, Division of Bank Operations, ' 41th lp 81411 -asic annual salary at the rate of $3,175, effective the date she asea her duties. s 5/13/57 Chan in basis of lo ent Georgine Winslett, Clerk-Typist, Division of Research and Statistics 1‘1*°111 half-time to full-'time, with no changein her annual salary at the rate Of 4'p3,260 (full-time basis), effective May 27, 1957. On May 10, 1957 Governor Shepardson also approved on behalf of the Board a letter to the Executive Director of the United States Civil Service Commission dealing with positions which should be included in the "noncareer executive group", as referred to in recommendations of the Hoover Commission. The letter, a copy of which is attached hereto as Item No. 6 was sent today over Chairman Martin's signature. -1 2c1 Item No. 1 5/13/57 May 13, 1957 H. J. Newman, Vice President, ;:deral Reserve Bank of Chicago, Cago 90, Illinois. tear Mr. Newman: A In view of the circumstances outlined in your letter of Pril 22, Be 1957, the Board of Governors approves the retention in s ce of the individuals named in your letter, and the payment of elar7 to each of these individuals to July 1, 1957. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. 1.252 Item No. 2 5/13/57 May 13, 1957 Board of Directors, The Citizens State Bank, Stilrgis, Michigan. Ge ntlemen: Rese,. Pursuant to your request submitted through the Federal ve Bank of Chicago, the Board of Governors of the Federal R.' cit,"e System approves the establishment of a branch by The 4.2enS Stat.. Bank, in the immediate vicinity of West Chicago iZ and Centerville Street in Sturgis, Michigan, provided the 1et4ch is established within nine months from the date of this erf'er, and the approval of the State Banking Department is "-vs as of the date the branch is established. Very truly yours (Signed) Merritt Sherman Merritt Sherman Assistant Secretary. 1253 Item No. 5/13/57 May 13, 1957 C°1uPtroller of the Currency, trl ' easury Department, "ashington 25, D. C. Attention: Mr. Hollis S. Haggard, Chief National Bank Examiner. tear Mr. Comptroller: Reference is made to a letter from your office dated 1, 1957, enclosing photostatic copies of an application 3 ,2 7 to cat-4-ganize a national bank at Cherry Hill in Delaware Township, t, clen County, New Jersey, and requesting a recommendation as etether or not the application should be approved. Similar vglications were considered by the Board of Governors in 1954 hritia arld in YD). An investigation of the current application, made by ea,:maliner for the Federal Reserve Bank of rhiladelphia, indie‘-a that the proposed capital structure of the bank would be ilien4.citlate and that the organizers would provide satisfactory manageortZ if the services of an experienced and competent executive ite.cQr were obtained. However, it appears that the volume of busIlea : 8 which would be available to a new bank at present or in the et ; a future would hardly support profitable operations. The conbe icti°11 of the shopping center in which the proposed bank would ia,c)cated has not been started and only moderate progress has 1 1ade in the development of the residential sections in the : 4r: In the circumstances, the organization of the bank still seez to be somewhat premature and it is believed that it would be 118 to j t eferable to defer the matter until the area has developed Ace° Point where the need for banking facilities is more apparent. apprnIglY, the Board of Governors does not feel justified in -1/1-ng the application at this time. 3 125a Coniptroller of the Currency -2- The Board's Division of Examinations will be glad to di "use any aspect of this case with representatives of your °trice if you so desire. Very truly your (Signed) Merritt Sherman Merritt Sherman, Assistant Secretary. a 4 Item No. 4 5/13/57 May 13, 1957 *. L. G. Pondrom, Vice President Pederal Reserve Bank of Dallas, Dallas 3 Texas. tear Mr. Pondrom: Reference is made to the Board's wire of March 13, 1957, the time for the Fort Worth National Bank to register er the Bank Holding Company Act of 1956 was extended from March 957., to May 15, 1957, pending determination as to whether the 46 Worth National Bank is a bank holding comDany under the Act. Refer in erice is also made to your letter of May 2, 1957, to Mr. Sloan sli.„1 : hich, pursuant to the Board's mire of March 13, there is ".4-osed certain additional information. 4 11 „-44-ch This additional information is now under consideration and, 44 on as practicable, the Board will advise you of its opinion as to the bank's status under the Act. ex rids In view of the time situation the Board hereby further v,rori,t, until July 15, 1957, the time for registration by the Fort /t ,':',',National Bank pursuant to the Bank Holding Company Act of 1956. *Ill be appreciated if you will advise the bank accordingly. Very truly yours, (Signed) S. R. Carpenter S. R. Carpenter, Secretary. L256 Item No. 5 5/13/57 May 13, 1957 The Honorable Wright Patman, Chairman, Joint Economic Committee, Senate Office Building, Washington 25, D. C. Dear Mr. Patman: As requested in your letter of May 6, 1957, the breakdown th e item "Salaries and Honoraria, $25,408.64", included in sub1eic sion (c) of my May 3, 1957, letter to you, is as follows, as furto the Board of Governors by the National Bureau of Economic Re 131. 7 Salaries Edward Krowitz Donald P. Jacobs Philip Klein Geoffrey H. Moore $ 519.19 894.89 1,615.38 2,800.00 Payments to 13 persons, each under $500 1,429.18 $ 7,258.64 2.12n2raria. John S. Atlee James Tobin Theodore A. Andersen Don D. Humphrey Ervin Miller Robert P. Shay Edward C. Simmons Marcus Nadler $ 500.00 1,500.00 1,550.00 1,600.00 1,600.00 1,600.00 Milton Friedman 1,600.00 2,000.00 2,000.00 University of Michigan, for services of-George Katona John Lansing 1,000.00 18 honoraria, each under $500 2,200.00 Total Salaries and Honoraria 1,000.00 18 150.00 $25,408.64 125 The Ronorable Wright Patman -2- We shall be glad to provide any additional information for the use of your Committee, if you so desire. Sincerely yours, (Signed) Wm. MCC. Martin, Jr. Wm. McC. Martin, Jr. 1259 Item No. 6 5/13/57 May 13, 1957 Ir. John W. Macy, Jr., t'44(ecutive Director, United States Civil u Service Commission, "ashington 25, D. C. Dear Mr. Macy: The White House requested, in its letter of February 18, 1957, addre a / ssed to "Heads of Departments and Independent Establishments," that 11t11.8t Of the positions vhich should be included in the Noncareer Exec: b Ire Group, as referred to in recommendations of the Hoover Commission, forwarded to you within 90 days of that date. As suggested by The Honorable Rowland R. Hughes, Director of th st;_nureau of the Budget, on March 4, 1955, the Board and members of its 04 having responsibilities for personnel matters considered the Report a .ifersonnel and Civil Service submitted by the Hoover Commission, with ,,viev to determining its application to this organization. Mr. Hughes ;31:15 advised that the applicability of the Commission's recommendations ared to relate generally to the problems and needs of the larger 04!" .artment8 and agencies of the Government whose employees are under "il Service. e to For this reason, it is our considered opinion that there are 10_,Positions at the Board, in view of the nature of its organization, ' -tch should be included in the Noncareer Executive Group. Sincerely yours, (Signed) WM. McC. Martin, Jr. Wm. Me. Martin, Jr.
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