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Minutes for To: Members of the Board From: Office Of the Secretary May 16, 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 °n1Y that you have seen the minutes. Chin. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Gov. Mitchell http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ' Minutes of the Board of Governors of the Federal Reserve SYstem on Thursday, May 16, 1963. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. M±. Mr. Mt. Mt. Mt. M±. Martin, Chairman Balderston, Vice Chairman Mills Robertson Shepardson King Mitchell Sherman, Secretary Molony, Assistant to the Board Cardon, Legislative Counsel Fauver, Assistant to the Board Hackley, General Counsel Noyes, Director, Division of Research and Statistics Mr. O'Connell, Assistant General Counsel Mr. Shay, Assistant General Counsel Mr. Dembitz, Associate Adviser, Division of Research and Statistics Mr. Solomon, Associate Adviser, Division of Research and Statistics Mr. Conkling, Assistant Director, Division of Bank Operations Mr. Leavitt, Assistant Director, Division of Examinations Mrs. Semia, Technical Assistant, Office of the Secretary Miss Hart, Senior Attorney, Legal Division Mr. Hricko, Senior Attorney, Legal Division Mr. Young, Senior Attorney, Legal Division Mr. Hunter, Supervisory Review Examiner, Division of Examinations Mr. McClintock, Supervisory Review Examiner, Division of Examinations Mr. Sanford, Review Examiner, Division of Examinations Mr. Mr. Mr. Mr. Mr. Mr. Re ort on co etitive factors (Baltimore-H erstown land . There 484 been distributed a draft of report to the Comptroller of the Currency °II the Nicodemus competitive factors involved in the proposed merger of The http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis rfN 5/16/63 -2Bank of Hagerstown, Hagerstown, Maryland, into The First National tarik of Maryland, Baltimore, Maryland After discussion, the report was approved unanimously for transmission to the Comptroller of the Currency. The conclusion of the report read as follows: There is virtually no competition between these two banks; however, First National, as a large institution, does solicit the business of large customers throughout the State. Consummation of the proposed merger would alter significantly the banking structure in Hagerstown and provide a potential threat to the ability of other local banks to continue to offer effective competition and remain independent units. The acquisition of Nicodemus National would not add substantially to First National's resources, second largest bank in the State, but it would continue the trend toward concentration of banking resources in the State. AU112212,111V of section 32 (Item No. 1). There had been distributed a me morandum dated May 14, 1963, from the Legal Division, accompanied by a letter replying to an inquiry from the Federal Reserve Bank of Minne13°118 as to whether section 32 of the Banking Act of 1933, as amended, would 1)1'°Ilibit a vice president and director of a national bank from serving at the 84111e time as agent of APA, Incorporated, in the sale of partnership units in 1)1'°gram8 for the development of gas and oil properties by the Apache Corpotl°n, Minneapolis, Minnesota. The proposed reply took the position that the, vartnership units were "other similar securities" within the meaning of 4eet1°n 32, and that therefore an officer, director, or employee of a national bank might not, at the same time, serve as an agent in the marketing of the 44its. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 -3- After discussion, the letter was approved unanimously. is A copy attached as Item No. 1. Request for examination reports (Items 2 and 3). There had been distributed a memorandum dated May 15, 1963, from the Legal Division in connection with a request varle through the Federal Reserve Bank of Chicago by an attorney for Genesee Merchants Bank & Trust Co., Flint, Michigan, ecr copies of reports of examination of Davison State Bank, Davison, Michigan, tor the years 1957-1962. Davison State Bank merged with and into Genesee Merchants in November 1962. In its transmittal letter the Federal Reserve 841* of Chicago indicated that the request for copies of reports of examination arose from the fact that an officer and an employee of Davison State Bank, at a time prior to its merger with Genesee Merchants, allegedly misapplied flds Of Davison State Bank. That bank carried a fidelity bond issued by the America Fore Loyalty Group, and Genesee Merchants had now filed 101 claims under the fidelity bond against the bonding company in respect to the alleged misapplications of Davison State Bank funds. Counsel for Genesee Merchants stated that the bank was willing to make its copies of the reports Of examination available to a representative of the bonding company. Re The — ae4ve Bank made no recommendation. The Legal Division recommended that the Board decline to authorize Genesee Merchants to furnish copies of the reports to the bonding company's l'ePresentative. and Pursuant to section 9 of the Federal Reserve Act section 261.2(d) of the Board's Rules Regarding Information, Submittals, 41.4 Requests, the authorization could be given upon the Board's finding http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 that such Such disclosure would be in the public interest. In the Legal Division's view, however, no such finding would be justified under the eircumstances stated. Despite the minimal information given to the Board l'egarding either the nature of the claims filed or the particular information sought from the reports of exPmination, it was believed that only a small portion, if any, of a given report would relate to or bear upon the queation whether or not the bonding company was liable under the tidelitY bond. Rather, there would result an unwarranted disclosure of a considerable volume of confidential information bearing on persons and matters wholly unrelated to the claims filed. The memorandum then reviewed previous instances in which the Board had. refused similar requests, and with which the suggested refusal in the resent matter would appear to be consistent. It was pointed out that, so as was known, neither Genesee Merchants nor the America Fore Loyalty ar°121) had identified the nature of or basis for the claims filed or the lielelrEtneY of any particular portion of the examination reports to those elalma. The request was of such a nature that if it were to come before the 80ard in the form of a subpoena duces tecum, the Legal Division would that action be taken to have the subpoena quashed as being too general ana unspecific. The memorandum concluded with the suggestion that, if the Board concurred in the Legal Division's recommendation, a letter be sent to C°11118e1 for Genesee Merchants informing him only that his request was .4ad for the reason that in the Board's judgment disclosure of the http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 _5_ information in the reports of examination would not be in the public interest. Chicago This letter would be sent to the Federal Reserve Bank of with a transmittal letter explaining more fully the reasons for the Board's denial of the request. Drafts of such letters were attached to the memorandum. Governor Mitchell, noting that the Legal Division had cited as part ot the basis for its recommendation the fact that no information had been € 1.ven as to the manner in which the examination reports were expected to be used, asked if that information could not be obtained. Response was 1114de that the information could be obtained but that, regardless of the IfaY in which the bonding company expected to use material from the reports, the Legal Division was of the view that the request should be denied. Other comments brought out that, since the matter was only in the elttim stage, the bonding company could not seek to obtain the reports by 8111Voena; it could resort to subpoena only in the event litigation was be url. It was also observed that in any event the type of information in e3ceml1nation reports did not constitute the best kind of evidence for defalcation proceedings. After further discussion, the letters to Counsel for Genesee Merchants 844k & Trust Co. and to the Federal Reserve Bank of Chicago were approved lInttnimously. Copies are attached as Items 2 and 3, respectively. Mr. O'Connell then withdrew from the meeting. Report on draft legislation (Item No. 4). On May 15, 1963, the 180ard discussed a request from the Bureau of the Budget for the Board's http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 -6- views on a preliminary draft bill to increase deposit insurance coverage and to and various other provisions of law. In a distributed memorandum dated May 14, 1963, Mr. Hackley summarized the bill, the principal provisions of uhich would (1) increase insurance coverage for both banks insured by the Federal Deposit Insurance Corporation and institutions insured by the Federal Savings and Loan Insurance Corporation from $10,000 to $15,000; (2) require the maintenance of reserves against time and savings deposits by nonmember insured banks and against withdrawable accounts by institutions that are members of the Federal Home Loan Bank System; (3) give nonmember insured banks access to Federal Reserve discounts and advances; (4) make Pr°vision for assuring the liquidity of all insured banks and all members or the Home Loan Bank System; (5) place on a standby basis the authority °t the Board of Governors and the Federal Deposit Insurance Corporation to fix maximum interest rates payable by member banks and nonmember insured banks on time and savings deposits, and authorize the Federal Home Loan Dank Board similarly to fix maximum dividend rates payable by members of the Home Loan Bank System on share accounts; and (6) strengthen and make al/Plicable to all insured banks and members of the Home Loan Bank System certain provisions of present law designed to prevent conflicts of interest in dealings by financial institutions with directors, officers, and employees, Public examiners, and affiliates of such institutions. Attached to Mr. s memorandum was a draft of reply to the Bureau of the Budget that, al‘ter commenting on various provisions of the proposed bill, stated that the Board would have no objection to introduction and enactment of the http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis — 5/16/63 -7- draft bill except in one respect, namely, that extension of reserve lequirements against time and savings deposits of nonmember insured banks, ' but not against their demand deposits, would be highly undesirable. The draft letter expressed the Board's concurrence with the recommendations Of the President's Committee on Financial Institutions that reserve requirements against both time and demand deposits be extended to all insured banks and that reserves against demand deposits be computed on a graduated basis. At the conclusion of the discussion at the May 15 meeting, the Starr was requested to prepare a revised draft of reply to the Bureau of the Budget reflecting the views expressed by members of the Board, and such 4 revised draft had now been distributed. The revised draft (as had the previous draft) referred to Vice Chltillaan Balderston's testimony on April 25, 1963, before the House Banking 4141 Currency Committee in connection with H.R. 5130, a bill providing for en increase in insurance coverage of deposits in banks insured by the l'ederal Deposit Insurance Corporation and share accounts in institutions insured by the Federal Savings and Loan Insurance Corporation from $10,000 to $25,000 for each account. Vice Chairman Balderston had indicated that it 1448 the Board's view that the proposed increase would not be in the interest; that if any increases were appropriate, they should be small and infrequent; and that effective supervision over the institutions covered was an important prerequisite to insurance protection. drart in The revised stated that the Board would interpose no objection to a small increase insurance coverage, expressing a preference for an increase to $12,500 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 -8- rather than $15,000. The draft also stated that in the Board's judgment it would be unnecessary and undesirable to include in the bill provisions dealtn6 with maximum rates of interest on deposits in insured banks and with reserves and liquidity of such banks, as proposed in sections 3, 4, and 6 of the bill. The draft indicated that the Board favored the extension to all commercial banks of reserve requirements against both demand and time deposits but felt that this was a matter that should be dealt with, atter careful study, in separate legislation rather than on a piecemeal basis as contemplated in the draft bill. Similarly, it might be desirable t° revise and place on a standby basis provisions of present law relating and to 111ximum rates of interest on time and savings deposits in member nonmember insured banks; but again this was a subject that should be studied seParstely and covered by separate legislation. For the reasons indicated, the Board would oppose the draft bill in its present form, but would consider 1111 revision that would omit the provisions of sections 3, 4, and 6. At the Board's request Mr. Hackley reported that, as the Board had a ale(i him to do yesterday, he had telephoned Mr. Reeve of the Bureau of ' the Budget to inform him that the Board had substantive objections to certain substance of 131\-Ylrisions of the draft bill, and he had given Mr. Reeve the the statement Governor Mills had submitted yesterday in opposition to the bill. handling Mr. Hackley and Mr. Reeve had discussed alternatives for the various components of the bill, and Mr. Reeve had indicated that the eall would like to have the Board's comments today. ' 13111 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 his view it would be a mistake Governor Robertson stated that in tor the Board to register major objections to the bill. He believed that When the Administration got behind a bill that would effect so many desirable sals reforms, the Board should accept the whole package, except that the propo relating to reserve requirements should be made the subject of a separate 1)r°P°88-1. maximum authority to prescribe He saw no reason to try to prevent the its from being put on rates of interest on time and savings depos a Perraissive and standby basis rather than a mandatory one. He did not should be suggested. believe that additional study of that question At most, n, although his own preferthe suggestion should be for separate legislatio being drafted. He was ence would be to include the change in the bill now letter that it would be not in agreement with the statement in the draft relating to liquidity. unnecessary and undesirable to include provisions He b Board could well go along elieved they were innocuous, and that the pro'With them and say nothing about bank liquidity in its comments on the 1/csea bill. was not whether the package of Governor Mills asked if the issue hastily or whether they ProPosed statutory changes should be accepted consideration. Should come before the Board for more deliberate strong feeling that the whole package Governor Mitchell expressed a concur with the suggestion that the (111611t to be supported. He did not be dealt with separately, although Provisions relating to reserves should ve requirements he aid agree that they Should be expanded to impose reser nonmember on demand deposits as well as time and savings deposits of insured http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 bank5. -10In his opinion, the Board was in a poor position in regard to the subject of reserves, and he had liked the recommendation in the report of the 10 .Fresident's Committee on Financial Institutions because it gave the Board an opportunity to get out of that position. Even after long study, it had not been possible to arrive at a new set of standards for classification of reserve cities, and the Board was in the position of removing cities from reserve city status haphazardly. The draft bill presented an °I3Portunity to gain important advantages to the Board's ultimate goals, such as the extension of reserve requirements to insured nonmember banks, Placing the authority to prescribe maximum interest rates on a standby basis, 414 subjecting savings and loan associations to reserve requirements, by €c'ing along with a measure proposed by another Governmental body. In his with the 'the Board should vigorously endorse the complete package, vie/*T added recommendation that the reserve requirements proposals be expanded to cover demand deposits. members of the Chairman Martin reviewed the attitudes expressed by stand must °41*d Yesterday; there had. been general agreement that a strong demand deposits be taken as to the necessity to extend reserve requirements to g 481/ell as time deposits of insured nonmember banks, but the prevailin vieW had been that it might be wiser to reserve several elements of the sillIft bill for later consideration. The latter point, of course, involved a matter of judgment. a quid pro Governor Shepardson added that his position was that on enactment of the 1411° basis the Board might have a better chance to obtain http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 -11- ll'cArisions it considered most important than it would if the package NPIProach were not followed. At the Board's request, Mr. Cardon commented on the probable fate of the bill's provisions in the Banking and Currency Committees and in the Congre8S . with Although that was a matter that could not be foretold certainty, it would be his expectation that the entire package would be 14111.i1 e1y to be reported out by the Committees. If he understood cor- l'eetlY that the Board's question was whether the advantage of the increase In insurance coverage made the bill sufficiently attractive to carry Ptance of the features that would be unattractive to nonmember insured bank, c' and to savings and loan associations, his view was that it did not. During further discussion as to how the various elements of the dr4tt bill might fare in the course of the legislative process, Governor ShePardson commented that it would be well for the Board to make it clear that the bill was acceptable to it only if it included certain features, 414 that if any of the provisions that the Board considered important drorTed through amendments the Board would not be foreclosed from 1.4tering its objections and pointing out inequities that might result such deletions. Governor Balderston expressed the view that it would be the worst thin that could happen if nonmember banks were afforded access to Federal -ve discount facilities merely in return for maintaining reserve re11411ements against their time deposits. Chairman Martin observed that the two members of the Board who had 110tb, -en present during yesterday's discussion were in favor of supporting http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 -12- the proposed bill as a package, a position toward which Governor Shepardson had expressed some leaning yesterday. This seemed to confront the Board /71th the question whether the consensus of yesterday should be reversed. Governor Robertson commented that to him it seemed advisable for the Bcpard to take advantage of the lift supplied by the recommendations 1X the report of the President's Committee on Financial Institutions in (3rder to have the authority to prescribe maximum interest rates put on PernliSSiVe l'el3E rather than a mandatory basis and to obtain extension of requirements to nonmember banks. Governor Mills stated that the draft bill involved fundamental 1884es that had been debated over not merely months but years, and for tliel3(3aDi to take a position on them in its report on the draft bill Seelted to him a very hasty and ill-considered action. The Board's corn- would become a matter of public knowledge, which would place the 13°"zi in a poor position if, after further deliberation, it should arrive t a different view on any of the points involved. Chairman Martin remarked that in yesterday's discussion thought had been given to whether, on more mature judgment, the members of the 441 might have a different attitude toward the proposals in the bill. Governor Mitchell questioned what mature judgment should be cond. to be. The proposals under consideration had been studied for a 3434g time and by many groups, such as the Commission on Money and Credit, the c omptroller of the Currency's Advisory Committee, and the President's C°11217alttee on Financial Institutions. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis In his view, the Board should be 5/16/63 -13- Prepared to take a position; he felt that no amount of further study would change his appraisal of the merits of the proposals. Governor King commented that he had heard repeated remarks from bankers that loan standards were declining, especially to enable banks to obtain higher earnings in order to pay as much interest as possible on time and savings deposits. In the face of deteriorating standards, he considered that the present was the wrong time to put on a standby basis the authority to prescribe maximum permissible interest rates. In his view, if the present res trictions were lifted, the only time the Board would ever reimpose them would be when chaos had already developed. Governor Mills expressed concurrence with Governor King's comments. There ensued a discussion of the procedures specified in the draft bill for reimposition by the Board of maximum interest rates on time and savings deposits. The bill would require that the Board consult with the ederal Deposit Insurance Corporation and the Federal Home Loan Bank Board, and. that the Board make an affirmative finding that any interest rate limitaticsn would be consistent with the Employment Act of 1946 and "required general credit conditions or to prevent unsound competitive or other Practices among member banks that would endanger the safety" of such banks. 4140, the draft bill permitted the fixing of different maximum rates on a More flexible basis, including differentiation based on the nature or location or the depositor or the member bank. Mr. Hackley suggested that the Board's letter to the Bureau of the 114ciget might include a caveat to the effect that, while the Board supported http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 the provisions of the draft bill in principle, it reserved the right to reconsider any of them on the basis of the language of the bill in final form. Governor Balderston then outlined the direction in which his thoughts had turned since yesterday's discussion. He shared the concern that other members of the Board had expressed that the climate in which this legislative Proposal was being developed suggested the likelihood that the bill would "counter amendments disadvantageous to the System. Yet he was strongly teMPted by the possibility of obtaining some of the statutory changes the 18°ard wanted, especially the requirement that nonmember insured banks Maintain reserves. He considered the extension of the reserve requirement 13rQvision5 to demand deposits of nonmember insured banks essential. Should such reserve requirements be written into law, the incentive for State member 11444 to leave the System would be diminished, and for the hope of attaining that end he would like to see the System on record in support of this e°11crete proposal even though it seemed unlikely that the entire package /4)1.11c1 be adopted. ' The strong opposition that undoubtedly would be exerted 127 small banks and by banks that liked to wrap themselves in the cloak of 4 11184tiMUM permissible interest rate might prevent the package from even ebnerging from the Committee. Nevertheless, Governor Balderston would like t° see support for the proposals that he persona/1y favored made a matter c)t Public record if he could be sure that that could be done with safety and that the Board would not be surprised with an unhappy outcome. It 14.°11.1d be most unfortunate if the extension of reserve requirements to time http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 -15- and savings deposits were enacted but extension to demand deposits failed, thereby making it advantageous for large State member banks to leave the System. Governor King remarked that he had great doubt that provision for reserve requirements for demand deposits of insured nonmembers would ever be enacted. Small banks would complain, and they could exert a great deal Of influence on members of Congress. Messrs. Noyes and Solomon commented on the objectives that had guided the staff work of the President's Committee on Financial Institutions and the Budget Bureau and the Treasury Department in developing the predraft bill. The point Governor King had made had been very much in mind, and the package in the bill was designed to make it at least Palatable, if not wholly acceptable, to small banks. There were a number of l'eas0118 why extension of reserve requirements to demand deposits was not °lade a Part of the bill. Principally, it was thought difficult to tie 811ch a Provision to an insurance bill, which was regarded as a means of strengthening supervision of savings and loan associations. However, eterlaion of reserve requirements to demand deposits was an accepted bjective, hoped to be accomplished later along with a change to a ated structure of reserves. gradu- In that event, small banks would not be subjected to present reserve requirements, but to lower requirements ace °rding to their size, which it was hoped would be acceptable to them return for obtaining higher insurance coverage. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 -16- Governor Mills remarked that the tenor of the discussion emphasized to him that the draft bill represented a lot of horse trading, and support of it would lead the Board down a path the end of which could not be seen. Governor Robertson expressed the opinion that by swinging behind a PropOSta that was sponsored by the Administration, although preferably adding to it coverage of demand deposits and a graduated reserve structure, t least some desirable measures might be obtained. The Board might not get e verything it wanted, but it was necessary to make a start in order to get anything. Governor Mitchell stated that he regarded the increase in insurance coverage as a small issue in comparison with the other provisions of the bill. to Having the $25,000 maximum that had been proposed originally reduced $15,000 was sufficient accomplishment, without trying to whittle it further to $12,500. During further discussion various changes were agreed upon in the clraft of letter to the Bureau of the Budget, after which the letter was .2:ZPZSIKal in the form attached as Item No. 4. Governor Mills dissented from this action for the reasons he had expressed yesterday and today. Messrs. Molony, Cardon, Noyes, Solomon, and Conkling then withdrew *°111 the meeting and Mr. Smith, Senior Economist, Division of Research and Statistics, entered the room. Aalication of Sussex County Trust Company. There had been dis- tributed a memorandum dated May 1, 1963, from the Division of Examinations re garding the application of Sussex County Trust Company, Franklin, New http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 -17- Jersey, to merge with The Farmers National Bank of Sussex, Sussex, New Jersey. The title of the resulting bank would be The Bank of Sussex County . The memorandum analyzed the circumstances underlying the appli- cation, with particular reference to the factors cited for consideration by the Bank Merger Act. Upon consideration of the legislative history Of the Pict, the various banking and competitive criteria required to be ec)nsidered, and after consultation with the Legal Division, the Division t Examinations recommended that the merger be denied. The Legal Division felt that it would be more difficult under the statutes to support approval than denial on the basis of the information supplied by the applicant. The basis for the Division of Examinations' recommendation was that it (lid not appear that the positive benefits flowing from the merger would frset unfavorable factors. A fairly significant amount of competition existed between the two banks, which would be increased upon establishby Sussex County Trust Company of a branch in Vernon Township, six mile east of Sussex, for which it had obtained approval. The below-average ealllings of two such banks would probably often weigh in favor of approval; 411elier, in this case one of the banks had delayed action to improve ea-rnings upon the assumption that the merger would be approved. Sussex C°11nty Trust had deferred improvment of its capital position, again on the assumption that the merger would be approved. While the merged institutio would be able to attract and retain better management, management Of each of the banks was now reasonably satisfactory. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis The convenience and 5/16/63 -18- needs factor was believed to weigh in favor of the merger, but not strongly. Despite the recommendation of the Division of Examinations for clenial as appearing consistent with the Bank Merger Act, on the broader questions of the banking structure and the best interests of the general Public, the Division had reservations about denying an application to merge two relatively small institutions, notwithstanding the existence °t significant competition between them. The merged institution would be about the same size as the largest bank nw in Sussex County. Go Those two banks would hold slightly over Per cent of deposits and loans of a31 commercial banks in the County; Yet they would still be relatively small banks, with about $20 million e4ch in deposits, total County deposits being about $65 million. This See rned considerably different from a situation in which two banks held 6o Per cent of county deposits totaling $650 million or $6,500 million. Moreover, aggregate demand deposits of the two banks were only 29 per cent °f the County total; their time and savings deposits equaled about 71 per cent of the county total. There were more sources seeking timP and savings clePosits than there were sources seeking demand deposits. Since most time anci savings deposits require less servicing than do the bulk of demand ePoslts, it seemed reasonable to conclude that the market area from which tinancial institutions obtain time and savings deposits was broader than the area from which demand deposits were obtained. It seemed likely that commNew York State might -"'reial banks in adjacent New Jersey counties and in http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 -19- be more effective competitors in Sussex County for time money than for demand. money and the savings banks and savings and loan associations were said to solicit savings money throughout the area. The Division of Examinations also believed that there were significant economies available upon increases in the size of a bank to some undetermined point, but almost certainly to a size larger than would be the continuing bank if this merger were approved. Banks the size of these tWO, in combination would be able to effect economies that would permit imProved and broadened bank services to the community. Moreover, in this Particular instance there would remain within Sussex County a number of alternative sources of banking services with additional sources available in adjoining New York State and New Jersey counties, particularly Passaic County, which had some aggressive large banks. While it could not be said with any degree of certainty, it appeared likely that the area within which New Jersey banks may branch might be enlarged by the State Legislature in the not-too-distant future. Should this, LlaPpen, the large banks in neighboring Passaic and other counties Illight well seek to expand into Sussex County. It would seem that one el' the best ways to retain locally headquartered banks would be to permit the local banks to achieve sufficient size to provide reasonably adequate bank.; 4-ng services, to attract and retain competent management, and thus be able to compete more effectively with large banks should they be permitted to expand into the area of the smaller bank. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 -20- It was these rather intangible considerations that had disturbed the Division of Examinations. While the Division felt that, strictly speaking, denial of the application would be consistent with the Bank Merger Act, it nevertheless was not certain that the best interests of Sussex County residents might not be better served over the long run by aPProval of the application. There had also been distributed a memorandum dated May 6, 1963, rr°m the Division of Examinations transmitting two charts that had been PrePared for the purpose of illustrating some of the issues involved in the Proposed Sussex County Trust merger. One chart showed the hypothetical relation of the number of banks to banking alternatives; the other showed the hYPothetical relation of size of bank to ability to serve. At the Board's request, Mr. Leavitt summarized the salient points r the situation, basing his remarks primarily on the Division of Examinations Me morandum of May 1. Among other comments, he stated that the Sussex County erea might eventually be part of metropolitan New York. ' It was difficult 'him to believe that the Bank Merger Act was aimed at preventing the t°1 Merger of two such small banks. It might be more important to build a str(Ing local unit that might compete with city banks that might come into the area in the future; it was a question of what kind of institution would Wide the best service to the area. The proposed State legislation, 14entioned in the Division of Examinations' memorandum, was a bill that liotaa divide New Jersey into four banking districts. The district in hieh Sussex County would be located would also include Hudson, Bergen, http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis r 5/16/63 -21- and Passaic Counties, in all of which there were large banks. If the bil1 became law, those banks would probably expand into Sussex County. Mr. Shay then commented on the application, expressing the view that the reasons that might be set forth as supporting approval were ilic)re conjectural than those that might be cited as supporting denial. (3ne or the most troublesome circumstances was perhaps a technical one, ne431e1Y, that the banks involved had delayed improvements in their situIn the expectation that the merger would be approved. It was 13c1ssible that they were merely more candid than other applicants, yet their admissions of deliberate delay made it more difficult to support al113rOval of the merger, especially since there was competition between the 13444 and there would. be more when Sussex County Trust's Vernon Township 'anch was opened. bl The adverse competitive factor reports received from he Comptroller of the Currency and the Department of Justice also weighed On the side of denial. Mr. Hackley observed that in some cases the Board's statements on Mellger decisions had said that while elimination of competition was an adverse circumstance, the Board must also have concern for the general 13441ng structure of the area. It seemed to him that the Bank Merger Act 13erkitted the Board to look at competition in different ways - the elimina11 or competition in some cases, and the possible effect on the over-all the llking structure in others. In the present case, it was possible that ' be toard might consider that the merger of two small banks near New York City illIght stimulate competition with New York City banks. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 -22- statements Governor Mitchell stated that he was uneasy as to the Made that a strict interpretation of the Bank Merger Act would point to Of the application. Mr. Shay responded that he was perfectly satis- fied that no court would upset a decision to approve, and that there had been -_ 110 violate the law. intention to imply that an approval would The the Legal Division's position had been based partly on the poor record of tIgc banks in delaying improvements and the fact that the favorable arguments were largely conjectural. beginning The members of the Board then stated their positions, /.11th Governor Mills, who said that he would vote to approve. In his view, deposits, each of the two banks involved, with about $10 million each in //Thad find it difficult individually to overcome the lead of their largest ec)raPetitor, which had deposits of more than $20 million. The combination of the two smsiler banks would provide more effective competition, esPecially in an area that was graving markedly. Governor Mills took studying sclae exception to the market area that had been chosen for e°11115etit10n. County, In Passaic and Morris Counties, abutting Sussex seeking the lle were large banks not many miles from the banks that were t° Merge. would result in It seemed to him that approval of the merger buffer against 1147-ing two fair-sized banks in a growing area to offer a Cnrft. at a later date. etitiVe encroachment by large banks from nearby areas self-sufficient in The merger also would enable Sussex County to be more it8 --ang resources rather than dependent upon banking facilities in 4dicAning counties. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis County must not be considered He believed that Sussex 5/16/63 -23- 48 isolated but as adjacent to the other counties. Judged in relation to the large banks in those counties, the merged institution would still be a relatively small bank. Governor Robertson stated that he would vote for denial for the reasons given by the Division of Examinations. , princiGovernor Shepardson said that he would vote for approval PallY for the reasons cited by Governor Mills. In addition, it appeared to Governor Shepardson that the area involved was developing industrially an°1 had need for further credit resources. Those resources were being supplied at present by the larger banks in adjoining areas. If the Board Ifa8 concerned about the future of local banks, it seemed to him that there of 1148 much better prospect for the merged bank than there was for either the two banks separately. The potential competitive situation, intangible though it might be at present, offered a possibility for the large neighboring banks to extend their activities. He considered that approval 1448 celled for in the interests of the needs of the growing industrial community and of a strong local institution. for the Governor King indicated that he would vote for approval l'e48°118 given by Governors Mills and Shepardson. he could Governor Mitchell stated that he would approve because 11°t see that the damage to competition was substantial enough to warrant c/44PProval. the merger would He was not impressed with arguments that 1111Prove service in the area, but he was convinced that institutions such http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 -24- as these, under the conditions presented, should be allowed to do what waS best suited to their needs. Governor Balderston commented that the present case was distinguished in his mind from many that had come before the Board, for the considerations that Mr. Leavitt had discussed. In his view, the Board had to be thinking ahead for some decades as to what the structure of banking might become. 8ecause of the potential situation in the present case, plus the considerations mentioned by Governor Mills, he would vote to approve. Chairman Martin said that he also favored approval. It seemed to him that in this case disapproval would tend to invite outside interests to take over the territory and the Board would be unable to do anything about it. As he saw it, this merger would tend to preserve local interest and ownership. The application of Sussex County Trust Company was thereupon veu, Governor Robertson dissenting. It was understood that the Legal Division would prepare for the Board's consideration an order and tatament reflecting this decision, and that a statement reflecting GcYlerer'nor Robertson's dissent also would be prepared. Messrs. Young and Sanford then withdrew from the meeting and Mr. /1011., and, Adviser, Division of Research and Statistics, entered the room. _.Rplication, of Chemical Bank New York Trust Company. There had been distributed a memorandum dated May 13, 1963, from the Division of t% anlinations in connection with the application by Chemical Bank New York Trust Company, New York, New York, to acquire the assets of and assume http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 -25- the liability to pay deposits made in Bank of Rockville Centre Trust C°mPanY, Rockville Centre, New York. The memorandum contained data based largely on the application, reports of examination of the two banks/ and reports on competitive factors. However, it was being submitted in advance of a more comprehensive memorandum that would be distributed to the Board during the week of May 20, 1963, when the findings and conclusions of the Federal Reserve Bank of New York were available. The purpose of the present memorandum was to enable the embers of the Board to familiarize themselves with the proposal and also to consider the question whether or not an oral presentation should be held. It was the feeling of the Division of Examinations that the 186 ues in the case were fairly clear and that little would be gained by affording the bank an opportunity to make an oral presentation. noted It was that Mr. Arthur Roth, Chairman of the Board of Franklin National 84.4k, Franklin Square, New York, had asked to be informed as to the date 8. 13111)11-e hearing on the matter would be held. He was informed that he 14.°1-11d be notified if a public hearing were held, but that whether or not there vas to be one was a matter within the discretion of the Board. After discussion, it was agreed that an oral presentation would 11°t be held in regard to Chemical Bank New York Trust Company's application Secretary's Note: The Federal Reserve Bank of New York was informed of this decision by the Board in a letter dated May 17, 1963, and was asked also to notify Mr. Roth, Chemical Bank New York Trust Company, and Bank of Rockville Centre Trust Company. The meeting then adjourned. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 5/16/63 -26Secretary's Note: Governor Shepaxdson today approved on behalf of the Board the following items: to Letter to the Presidents of all Federal Reserve Banks transmitting Ms to be used by State member banks and their affiliates in submitting as of the next call date. (With the understanding that the letter 'would be sent when the forms were printed.) ,, Letter to the Bureau of the Budget (attached Item No. 5) regarding terms of the detail to the Bureau on a reimbursable basis of John E. .tne . .1,:e.Yllolds, Chief, Special Studies and Operations Section, Division of International Finance, for a period of one year beginning May 8, 1963. The Bureau's request for Mr. Reynolds' services was approved by the Board April 12, 1963. Clerk, Division of Memorandum from Irene M. Fender, Statistical Re • ba * s?arch and Statistics, requesting permission wor k on a part-time to tvsls as a telephone solicitor for newspaper subscriptions to the Washington ening Star. Secret ry http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ( 4) Item No. 1 5/16/63 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 16, 1963. Mr. M. H. Strothman, Jr., Vice President and General Counsel, Federal Reserve Bank of Minneapolis, Minneapolis 2, Minnesota. Dear Mr. Strqthman: forwarded in behalf your letter of April 24, 1963, you • With of Oberg and Davidson, ad, the law firm of Henretta, Muirhe furth with your letter of ed er material concerning the question present section 32 of the whether 16, 1963, and its enclosures, as to JanuaryB a president and vice a it nt`ing Act of 1933, as amended, would prohib as agent of director of time same a national bank from serving at the s for the program in units k) Incorporated; in the sale of partnership . ! de tion, Corpora Apache u,veloPment of gas and oil properties by the -nneapolis, Minnesota. ' ted, it appears that From the information that has been submit gas in the Apache uu4, -orporation, which explores and drills for oil and an.c,iLed States and Canada, acts as agent for participants in Apache Gas properties and condu (/il Programs in acquiring leases on gas and oil programs, which apparently h:ing exploratory drilling thereon. These financed by the sale oZe been conducted annually since 1956, have been cio- Participating units in the programs which, until this year, have been Gas and Oil prnducted as joint ventures. Beginning with the Apache and the partnersh7gram 1963, the partnership business form was adopted Apache Corporawhich m, for t4 P units of participants in the 1963 Progra .On is the Managing Partner, are priced at $15,000 each. and Oil Program 1963, In the Prospectus covering the Apache Gas concerning the letter of which was enclosed with your earlier copytt ship units in partner [i.e., ies T,r, it is stated that 'These securit the e Apache [Corby basis s' effort po- r rogram] will be marketed on a 'best APA, Incorporated, iary, subsid -owned asrati°n], as issuer and by its wholly " group. selling underwriter and managing agent of a a subscriptions to partnership Briefly, it appears further that may be made in multiples • $15,000 units of of „ ln the 1963 Program in excess e in installments. payabl is price Tb 5,000, and that the subscription a stated minimum whether he co on depends mmencement of any such program http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BOARD FEDERAL RESERVE SYSTEM OF GOVERNORS OF THE Mr, M. H. Strothman, Jr. -2- total or 1. subscriptions is obtained. If not obtained, the subscriptions errninate and funds received in payment thereof are returned to the ship units rvestors. Provision is made for disposition of the partner m, any lar progra particu investors without discontinuance of the change and ors. Gains invest the in which must be put to the vote of the ors in invest of s account ()aaes of any program are allocated to the " ratio that their subscriptions bear to the total subscriptions of the Program. provides as follows: Section 32 of the Banking Act of 1933 tion "No officer, director, or employee of any corpora or unincorporated association, no partner or employee of any engaged in the Partnership, and no individual, primarily or distribution, sale, public , issue, flotation, underwriting at wholesale or retail, or through syndicate participation, of stocks, bonds, or other similar securities, shall serve the same time as an officer, director, or employee of any which the member bank except in limited classes of cases in allow Board of Governors of the Federal Reserve System may t of judgmen the in when ions such service by general regulat the said Board it would not unduly influence the investment gives its Policies of such member bank or the advice it customers regarding investments." submitted with your There is no indication in the material other than letter the s that APA, Incorporated, is engaged in any activity It is above. related marketing of program or partnership units, as d" in engage ily "primar :"Rcluded, therefore, that APA, Incorporated, is that activity. Apache In the enclosures with your letters counsel to ities" of 'secur • C°rPo a L, ration urges that the partnership units are not of the ration conside kind covered by section 32. Following careful fall within units ship the er, the Board is of the view that the partner e statut the that Cle language of the statute. The Board believes ies which, while a,flY is sufficiently broad to comprehend securit them to be somecause which ,'"er stocks nor bonds, have attributes what like either bonds or stocks. also suggests that an interl°ekiCounsel to Apache Corporation question would not be lik _ng relationship in the circumstances in was intended to statute the that 'IY to involve abuse of the kind to time in which time from Prevent statute it vent. Cases have arisen under the I._ was contended that improper action by the parties involved was highly e resulted in some 'Probable and that the application of the statut http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis f;23 BOARD RESERVE SYSTEM OF GOVERNORS OF THE FEDERAL Mr. M. H. Strothman, Jr. h ardship. However, as indicated in the decision in Board of Governors Nr.):170 329 U. S. 411 (1947), section 32 is aimed at relationships /4!1.101 present the opportunity for improper action, regardless of whether abuses actually exist in specific cases. It should be noted also that, .111.der the statute, it is only by "general regulations" that the Board !las authority to exempt relationships which, in its judgment, would not be a source of undue influence. As you know, the Board's Regulation R 18 limited to situations not related to the case in question. In view of the foregoing, and on the basis of its understanding of the information submitted, it is the Board's view that an officer, director or employee of a national bank may not, at the same time, serve 77'1 agent of ApA, Incorporated, in the marketing of partnership interests . 1 Apache Gas and Oil Programs. It would be appreciated if your Bank would convey the views exPressed herein to either Mr. John A. Muirhead or Mr. Arthur Rubenstein of Renretta, Muirhead, Oberg and Davidson. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Item No. 2 5/16/63 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 16, 1963. Edward J. Neithercut, Esq., N eithercut & Neithercut, Suite 704, Genesee Bank Building, Flint 3, Michigan. Dear Mr, Neithercut: This refers to your letter, dated May 7, 1963, to Mr. Leland Ross, Vice President, Federal Reserve Bank of Chicago, .2? behalf of the Genesee Merchants Bank & Trust Co., Flint, T.chigan, advising of the request by the America Fore Loyalty Group, Company which issued the fidelity bond for the Davison State Bank, Ink, Davison, Michigan, for copies of the reports of examination of : the Davison State Bank for the years 1957-1962 prepared by examiners of the Federal Reserve Bank of Chicago. It is understood that the Copies of reports of examination referred to are those in the posses]) °n of the Genesee Merchants Bank & Trust Co. into which bank the _avison State Bank merged in November 1962, and that the request is said to relate to numerous claims filed by Genesee Merchants Bank & Trust Co. under the fidelity bond issued by America Fore Loyalty Group. Section 261.20Y- of the Board's Rules Regarding Information, Submittals, and Requests (12 CFR Part 261) provides that, with certain ePtions not here applicable, the Board will not make available or nerwise disclose reports of examination of any particular bank unless the Board deems such disclosure to be in the public interest". Upon crsideration of the several interests involved in this request, inc .4ding that of America Fore Loyalty Group in responding to the claims filed, the Board has concluded that furnishing of the reports under e circumstances stated would not be in the public interest. Accordingly, the Board declines to authorize the Genesee Merchants Bank & Trust Co, to furnish copies of or otherwise make available information from reports of examination of the Davison State Bank prepared by )taminers of the Federal Reserve Bank of Chicago. Z Very truly yours, *Reference should have been made to Section 261.2(d) (Signed) Merritt Sherman http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Merritt Sherman, Secretary. Item No. BOARD OF GOVERNORS ..... •'_p0fGoi,•• • 3 5/16/63 OF THE FEDERAL RESERVE SYSTEM ' • IIIIji V' •• • WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD RESt• .• May 16, 1963. Mr. Leland M. Ross, Vice President, Federal Reserve Bank of Chicago, Chicago 90, Illinois, Dear Mr, Ross: This will acknowledge your letter of May 8, 1963, enclosing of a May 7 letter from counsel for the Genesee Merchants Bank , Trust Co., ! 6 Flint, Michigan, wherein a request is made for permission the Genesee Bank to make available to the America Fore Loyalty mr P, copies of reports of examination of Davisoa State Bank, Davison, -i higan, prepared by Federal Reserve Bank examiners during the years '6'.)7 through 1962. It is understood that the America Fore Loyalty _r°111) had issued the fidelity bond under which Davison State Bank ated prior to its merger with the Genesee Bank in November 1962. Iru advise that Genesee Bank has filed 101 claims under the fidelity _ 011d in respect to losses allegedly suffered by Davison State Bank as '11 result of alleged manipulations by an officer and an employee of the i,atter bank, and that in connection with such claim, America Fore YaltY Group, with the consent of the Genesee Bank, seeks copies of "e reports of examination of Davison State Bank for the periods me ntioned. 4 CCTY i j The Board's ability to fully appraise the assistance that rrlight be rendered America Fore Loyalty Group through access to the reports of examination in question is substantially impeded by the that the request fails to identify the nature of the claims filed tact', by the Genesee Bank, what portions, if any, of some or all of the rePorts of examination are relevant to the claims filed, or whether part Or, all of the information sought, whatever its nature, is not equally v : ailable from retained records of the Davison State Bank, or elsewhere. san the basis of the information before the Board, it would appear that u w major portion of any one or all of the reports of examination sought Pild not be relevant to claims filed under the fidelity bond, and that sco t esure of the confidential contents of these reports would not be public interest. Z http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1,G21; BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Mr, Leland M. Ross -2- It will be appreciated if you will transmit to counsel for the Genesee Merchants Bank & Trust Co. the enclosed letter Whereby the Board declines to authorize the disclosure requested. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Enclosure http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 4 5/16/63 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 16, 1963. Mr. Phillip S. Hughes, Assistant Director for Le gislative Reference, Bureau of the Budget, Wa shington 25, D. C. Dear Mr. Hughes: This refers to Legislative Referral Memorandum dated May 13, 1963) the Board's views regarding a preliminary draft bill "To for Provide for an increase in the maximum amount of insurance coverage saf bank deposits and savings and loan accounts, to protect further the scr tY and liquidity of insured institutions, to strengthen safeguards ' a'nst conflicts of interest, and for other purposes." On April 25, 1963, Vice Chairman Balderston of the Board 4PPeared before the House Banking and Currency Committee in connection with hearings on the bill H.R. 5130 that would have increased the nl bellit On insurance coverage of deposits in banks insured by the Federal 11,'"it Insurance Corporation and share accounts in institutions insured 5the Federal Savings and Loan Insurance Corporation from $10,000 to cha!°00 for each deposit or account. As indicated in the Vice prolrnlan's statement at that time, it was the Board's view that the pubraad increase in insurance coverage to $25,000 would not be in the shouic interest, but that, if any increases are appropriate, they irls id be small and infrequent and that effective supervision over the t itntions covered is an important prerequisite to insurance proaction. 6 The preliminary draft bill would (1) increase insurance coverage r ps14, 4-cr both banks insured by the FDIC and institutions insured by the saalC from $10,000 to $15,000; (2) require the maintenance of reserves Isqti_ nat time and savings deposits by nonmember, insured banks and against : 4c d rawable accounts by institutions that are members of the Federal Pede 14an Bank System; (3) give nonmember insured banks access to Reserve discounts and advances; (4) make provision for assuring the Systliquidity of all insured banks and all members of the Home Loan Bank : em; (5) place on a standby basis the authority of the Board of Gov 'rnors and the FDIC to fix maximum interest rates payable by member http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Mr. Phillip S. Hughes -2- banks and nonmember insured banks on time and savings deposits, and It!thorize the Federal Home Loan Bank Board similarly to fix maximum dividend rates payable by members of the Home Loan Bank System on share accounts; and (6) strengthen and make applicable to all insured banks I nd members of the Home Loan Bank System certain provisions of present .1w that are designed to prevent conflicts of interest in dealings by :lnancial institutions with directors, officers, and employees, public xaminers, and affiliates of such institutions. The Board would interpose no objection to the small increase in aioinsurance coverage proposed by the draft bill, in view of the inclubmn °f Provisioni regarding regulation of dividend rates paid by member rrt itutions of the Home Loan Bank System, reserves and liquidity inirements for such institutions, and the strengthening and extension the applicability of present conflict-of-interest provisions. j With respect to the reserve requirement provisions of the bill, , bowe, er) v the Board favors the extension of such reserve requirements to de "mmercial banks, not only for time deposits but also for demand ll"its, as recommended in the Report of the President's Committee on pin no,!ncial Institutions. Extension of reserves against time deposits to deZember insured banks, without a like extension of reserves against nd deposits, would result in an inequitable situation, if the quid ; pr With (tee quo were the privilege of borrowing from the Federal Reserve. have would a ,n8 to Federal Reserve credit facilities, nonmember banks without System advantage of membership in the Federal Reserve being 488 subject to reserve requirements against demand deposits and without System. : 140 ling other responsibilities that are assumed by members of the against requirements of reserve in connection with extension demand exi... deposits to nonmember banks, it would be important to change the ‘tng structure of reserve requirements in order to provide a more .eal and equitable basis for such requirements, such as the graduated 4 : b4 "recommended by the Committee on Financial Institutions. For these reasons, the draft bill would be acceptable in P"nei toqui P1e to the Board of Governors only if modified to include reserve expressed. Any bill rement provisions in accordance with the views here must be necessarily the cq this kind relating to such important matters of Board, cou flubJect of further careful technical review; and the pielties reserves the right to consider and comment upon detailed pro• °n8 of any such bill that may be introduced in Congress. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4-"If BOARD OF GOVERNORS OF THE Item No. 5 5/16/63 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 16, 1963. Mrs, Velma N. Baldwin, Personnel Officer, Bureau of the Budget, Executive Office of the President, Washington 25, D. C. Dear Mrs. Baldwin: In accordance with your letter of May 8, 1963, the Board of Governors approves the reimbursable detail of Mr. John E. Reynolds to the Review Committee for Balance of Payments Statistics effective May 8, 1963, for a period of one year. The Board is agreeable to this reimbursable detail in the manner as set forth in your letter. It is understood that the Bureau will reimburse the Board for Mr. Reynolds' salary and related expenses with the exception of the reimbursement for purposes of retirement, which Will be limited to the rate contributed by Civil Service agencies to the Civil Service Retirement Fund (currently 61/2 per cent). It is expected that the Board's Office of the Controller will submit a voucher on a quarterly basis for this reimbursement. The time and attendance reports for Mr. Reynolds mentioned in your letter may be submitted direct to the Board's Division of Personnel Administration. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis
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