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Minutes for
TO:
Members of the Board
From:
Office of the Secretary
May 17, 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
411h,
...00°1111116111"
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell
-
r4tn
Minutes of the Board of Governors of the Federal Reserve
System on Friday, May 17, 1963.
The Board met in the Board Roam
at 10:00
a.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
Martin, Chairman
Mills
Robertson
Shepardson
Mitchell
Mr. Sherman, Secretary
Mr. Young, Adviser to the Board and Director,
Division of International Finance
Mr. Cardon, Legislative Counsel
Mr. Fauver, Assistant to the Board
Mr. Noyes, Director, Division of Research
and Statistics
Mr. Koch, Associate Director, Division of
Research and Statistics
Mr. Brill, Adviser, Division of Research
and Statistics
Mr. Holland, Adviser, Division of Research
and Statistics
Mr. Solomon, Associate Adviser, Division of
Research and Statistics
Mr. Sammons, Adviser, Division of International
Finance
Mr. Katz, Associate Adviser, Division of
International Finance
Mr. Landry, Assistant to the Secretary
Mr. Eckert, Chief, Banking Section, Division
of Research and Statistics
Mr. Partee, Chief, Capital Markets Section,
Division of Research and Statistics
Mr. Yager, Chief, Government Finance Section,
Division of Research and Statistics
Miss Dingle, Senior Economist, Division of
Research and Statistics
Mr. Fisher, Senior Economist, Division of
Research and Statistics
Mr. Bernard, Economist, Division of Research
and Statistics
Mr. Gemmill, Economist, Division of International
Finance
Money market review.
There were distributed tables relating
to dealer awards of Treasury bills in recent years and bank liquidity
•
•.•
5/17/63
-2-
ratios, together with a summary of monetary developments in the preceding
four weeks. Mr. Bernard reported on the Government securities market,
f°11cYwing which Mr. Eckert discussed changes in bank reserves, bank credit,
and the money supply.
Mr. Gemmill then reported on foreign exchange
dev.i
Following these presentations all members of the staff withdrew
"cePt Messrs. Sherman, Young, Cardon, Fauver, Noyes, Landry, Partee,
414 Fisher Ana the following entered the room:
Mr. Rackley, General Counsel
Mr. Conkling, Assistant Director, Division of Bank
Operations
Mr. Goodman, Assistant Director, Division of
Examinations
Mr. Benner, Assistant Director, Division of
Examinations
Mr. Leavitt, Assistant Director, Division of
Examinations
Mr. Young, Senior Attorney, Legal Division
Mr. Doyle, Attorney, Legal Division
Mr. Poundstone, Review Examiner, Division of
Examinations
Discount rates. The establishment without change by the
Petieral Reserve Banks of New York, Philadelphia, and San Francisco
°I1 MELY 16, 1963, of the rates on discounts and advances in their existing
"
ledUles was approved unanimously, with the understanding that appropriate
a(lvice would be sent to those Banks.
Distributed items. The following items, copies of which are
Etttetehed hereto wider the respective item numbers indicated, were approved
5/17/63
-3Item No.
.4_etter to Planters Bank and Trust Company,
aoPkinsville, Kentucky, approving the establishment
c)f a branch (conversion of its existing facility)
vithin the military reservation of Fort Campbell.
1
Letter to Chase International Investment Corporation,
New York, New York, granting consent to the purchase
2f shares of National Investment Bank for Industrial
uevelopment,
S.A., Athens, Greece.
2
With reference to Item No. 2 Governor Mills noted that National
ItIvestment Bank for Industrial Development was empowered to accept
deposits.
Shod
In view of this fact, he wondered whether the institution
properly be viewed as a banking rather than a financing corporation
'Purposes of Regulation K, Corporations Doing Foreign Banking or Other
t°1
(3re1gn Financing under the Federal Reserve Act. Discussion of this
Point brought out that, as mentioned in a letter dated April 19, 1963,
tr.°141 Counsel for Chase International Investment Corporation, National
Tnvestment Bank, which was not authorized to accept demand deposits,
c°41c1 not under Greek law fulfill its purpose of making loans and othere extending credit unless it qualified as a bank with authority to
ace
ePt at least some deposits.
However, the bank's authority in this
lissPeet would be limited to acceptance of time deposits having a
1118:tilritY of at least one year and in amounts of not less than 100,000
cil'4ehtlae (U.S. $3,333 equivalent) per deposit, which might properly
be regarded
as a means of borrowing money subject to a minimum term and
4r4(31111t, rather than a power to engage in ordinary depositary banking.
The letter, as sent, reflected the Board's decision not to
illcorporate an additional paragraph that would have imposed a condition
‘1'
5/17/63
that
National Investment Bank not engage in a deposit type of
business.
Proposed revision of Regulation K.
In the course of discussion
°f the preceding item, reference was made to a proposed revision of
Regulation K, Corporations Doing Foreign Banking or Other Foreign
Financing under the Federal Reserve Act, that had been published in
the
Federal Register, and to a suggestion that representatives from the
institutions that had submitted comments thereon and from other affected
inst
itutions be afforded an opportunity to present their views informally
to the Board.
It was understood that further consideration would be
i.ven to these requests at an early meeting of the Board.
Draft bill to amend section 24 of the Federal Reserve Act
There had been distributed under date of May 15, 1963,
e°Pies of a memorandum from the Legal Division relating to a request
Nm the Bureau of the Budget for a report on a Treasury draft bill to
4111encl section 24 of the Federal Reserve Act to permit national banks to
418.k
e amortized conventional real estate loans on both residential and
residential property up to 80 per cent of the appraised value of the
'
4°11
l'eal estate and for a term up to 30 years.
By comparison, under present
41? national bfinkS are permitted to make such loans up to
41113raised value for a term no longer than 20 years.
75 per cent of
Attached to the
tnelll°randum was a draft of letter report to the Budget Bureau that would
gtlestion whether national banks were, as a practical matter, operating
tInder a serious competitive handicap because of more liberal laws
r
applicable to certain competing institutions.
The letter would note
in this
connection that commercial banks, both national and Statechartered, had recently added record amounts to their mortgage holdings,
aad. in fact over the past year national banks increased their conventional
zeal estate loan portfolios in somewhat greater proportion than did
State-chartered commercial banks.
Following reference to the record
'
lace at which total mortgage credit had risen, the substantial
liberalization of statutory limits upon mortgage lending in recent
Year's) both for national banks and other lenders, and the current
a/iraus of funds seeking mortgages, as well as higher delinquencies and
r°reclosures on existing mortgage loans, the view would be expressed in
the letter to the Budget Bureau that the Board believed it inadvisable
at th4
is
id.
time further to relax statutory restrictions.
In discussion, the Board members present indicated a favorable
disPosition toward transmitting to the Budget Bureau the letter essentially
48
drafted.
Governor Mitchell noted, however, that although he did not feel
at "glY about the matter, he thought it slightly preferable to leave
h iflhl
'
'
-3.ions such as those under discussion, regarding maximum percentage
°taPPraised value sna maximum permissible term of real estate loans,
llithin the discretion of the supervisory agency rather than to have
'-'14
Written into the law.
Governor Mills stated his belief that the Board as an agency
l'eaP°neible for sound banking practices was obligated to take a firm
5/17/63
-6-
Position on the issue presented.
To his mind there were serious questions
r'egarding the quality of many real estate loans currently being made.
Re was concerned, furthermore, with the specific proposal in the draft
legislation to permit national banks to extend credit on conventional
'
leal estate loans up to 80 per cent of appraised value for longer periods
than now permitted by law, not only because it would intensify the loancleP°8it ratio problem but also, among other things, because the
(14tsta1ding authorization for banks to invest in subsidiaries of Edge
Act
cvrporations and in bank computer centers served to reduce the amount
c/f "free capital" at the banks affected.
For these reasons, he thought
the Position taken in the draft letter was correct.
After further discussion, the letter to the Bureau of the Budget
vas
d. unanimously
N.IP.E2y2.
in the form attached as Item No.
3.
The meeting then adjourned.
Secretary's Notes: Governor Shepardson
today approved on behalf of the Board
the following items:
a41. Letters to the Federal Reserve Bank of Chicago (attached Items 4
rl approving the appointment of Thomas E. McKiernan and Thomas H.
as assistant examiners.
the Memorandum from the Division of Personnel Administration recommending
bivi ELPPointment of Catherine Marie Cole as Clerk-Stenographer in that
clEtt:si°11) with basic annual salary at the rate of $4,110, effective the
- Of entrance upon duty.
Governor Shepardson today noted on behalf
of the Board the following items:
beath
Jfl active service
may, 9Ralold.F. Stone, Analyst in the Division of Bank Operations, on
5/17/63
t8
Charles R. Nichols, Guard, Division of Administrative Services,
ef
fective June 1, 1963.
Charles R. Norris, Head, Mail and Messenger Service Unit, Division
v4 Administrative Services, effective June 1, 1963.
Secret,y
1;3I
BOARD OF GOVERNORS
Item No. 1
5/17/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
May 17, 1963
Board of Directors,
planters Bank and Trust Company,
Hopkinsville, Kentucky.
Gentlemen*
The Board of Governors of the Federal Reserve
System approves the establishment by Planters Bank and
Trust Company, Hopkinsville, Kentucky, of a branch
(a conversion of its existing facility) within the
provided
military reservation of Fort Campbell, Kentucky,
the branch is established within six months from the
date of this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
(The letter to the Reserve Bank stated that the Board
also had approved a six-month extension of the period
allowed to establish the branch; and that if an extension
should be requested, the procedure prescribed in the Board's
letter of November 9, 1962 (S-1846), should be followed.)
•
638
Item No. 2
5/17/63
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
May 17) 1963
Chase International Investment Corporation,
1 Chase Manhattan Plaza,
New York 5, New York.
G
entlemen:
In accordance with the request contained in your
_letter of April 9, 1963, transmitted through the Federal
.naerve Bank of New York, and on the basis of the informalon furnished, the Board of Governors grants consent for
hase International Investment Corporation ("CIIC") to pur2hase and hold shares of National Investment Bank for
4-ndustrial Development S.A. ("NIBID"), Athens, Greece, at
c°st of approximately US$500,000 (equivalent), provided
Ich stock is acquired within one year from the date of
:
chis letter.
The Board's consent is granted upon condition
that CIIC shall dispose of its holdiAg of stock of NIBID,
Promptly as practicable, in the event NIBID should
anY time (1) engage in issuing, underwriting, selling or
`J-stributing securities in the United States; (2) engage in
'le general business of buying or selling goods, wares,
nlerchandise, or commodities in the United States or transany business in the United States except such as is
idental to its international or foreign business; or
.1) otherwise conduct its operations in a manner which, in
)
.6
'
h e Judgment of the Board of Governors, causes the continued
°1ding of its stock by CIIC to be inappropriate under the
,
°v15i0ns of Section 25(a) of the Federal Reserve Act or
egulations thereunder.
(1.,1
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
Item No. 3
BOARD OF GOVERNORS
,4',19c0t4'q
AV
5/17/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
May 17, 1963.
1,1's Phillip S. Hughes,
hssistant Director for
Legislative Reference,
11311reau of the Budget,
,
yva
shington 25, D. Co
Dear Mr. Hughes:
This is in response to your request of April 17, 1963, for a
rePort
Re, on a Treasury draft bill, "To amend section 24 of the Federal
erve Act (12 U.S.00 371) relating to certain limitations on real
State
loans by- n'ational banks."
The proposed amendment would increase the maximum percentage
a Ypraised value that a national bank may advance on "conventional"
lo,r
th'I estate loans from 75 per cent to 80 per cent and would increase
ofe,Taximum permissible maturity- from 20 years to 30 years. The purpose
ene'ne proposed amendment, as stated by the Treasury Department, is to
urage national banks to compete for mortgage loans with other institiaj
cox:L(3ns such as savings and loan associations, insurance companies, and
protain State-chartered banks, which may operate under laws that either
applicable
o vide no restrictions or may be less restrictive than those
tO
national banks.
Whether national banks are, as a practical matter, operating
lindel" a serious competitive handicap because of more liberal laws applie4ble to certain competing institutions, is open to question. Commercial
1 10 83 both national and State-chartered, have recently added record
,47
riejnts to their mortgage holdings. Moreover, during the past year,
kIll':°nal banks increased their conventional real estate loan portfolios
more, proportionately, than did State-chartered commercial
yanks.
A monthly survey released by the Federal Home Loan Bank Board
orl ma.
in March, convent4 Y. 10, 1963, showed that for home mortgage lending
life
loan
and
associations,
ilia44.0nal loans originated by savings
and cornbanks,
savings
mutual
ra.a ranee companies, mortgage companies,
al banks carried average contract maturities and average price-to-.
BOARD
SYSTEM
OF GOVERNORS OF THE FEDERAL RESERVE
Mr. Phillip S. Hughes
-2-
ratios considerably lower than would be permitted national banks
the proposed amendment. For commercial banks alone, the average
ter '
ti -8 on such loans were even less than the present statutory restricons on national banks.
regard
While some State laws are less restrictive in the above
than
l
banks,
nationa
governs
, section 24 of the Federal Reserve Act which
than
ive
restrict
more
are
understood that in other States the laws
tion.
legisla
d
propose
44 apply to national banks under the
If consideration were given only to the competitive aspects of
this
the question, there might be some basis for relaxing the limitations on
l banks. But
terra3 of conventional real estate loans made by nationa
,
tot,
and
pace,
record
a
at
rising
stezL mortgage credit has recently been
tially
substan
ized
liberal
been
have
in ut°rY limits upon mortgage lending
view
In
.
lenders
other
for
and
of recent years, both for national banks
or _current conditions in the mortgage market characterized by a surplus
on lunds seeking mortgages and by higher delinquencies and foreclosures
inadviswi e4.sting mortgage loans, the Board believes that it would be
'a at this time torelax statutory restrictions further.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
Item No.
4
5/17/63
BOARD OF GOVERNORS
4414****4
W OO 44,
0
.
4
aa
*4
OF' THE
*
#
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
*
*
4
4
4
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
May 17, 1963
AIR MAIL
C°Nl'IDENTIAL
FR)
Mt. Leland Ross, Vice President,
Pederal Reserve Bank of Chicago,
Chicago 90, Illinois.
Dear Mr,
Ross:
In accordance with the
1963,
the Board approves
as
,
Ta an assistant examiner for the
e the effective date of the
Nay 10
s
request contained in your letter of
the appointment of Thomas E. McKiernan
Federal Reserve Bank of Chicago. Please
appointment.
It is noted that Mr. McKiernan is the beneficiary of a trust
estate
which owns 23 shares of stock of, and is administered by, Fort
Way
ne National Bank, Fort Wayne, Indiana. Accordingly, the Board's
tVr°val of Mr. McKiernan's appointment is given with the understanding
bealt he will not participate in any examination of that bank so long as
Of "as an interest in any trust administered by that institution, or
be anY bank the stock of which is held in a trust of which he is a
rleficlary
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
1642
BOARD OF GOVERNORS
Item No.
5
5/17/63
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
4,t4
May 17, 1963
MAIL
e°NPIDENTIAL
FR
Leland Ross, Vice President,
4:plesderal Reserve Bank of Chicago,
'uleag° 90, Illinois.
Deat Mr. Ross:
In accordance with the request contained in your letter of
lia.y 0
) 1963, the Board approves the appointment of Thomas H. Walsh
as
effela assistant examiner for the Federal Reserve Bank of Chicago,
ective June 17, 1963.
It is noted that Mr. Walsh owns one share of stock of
atj
fath nal Bank of Monticello, Monticello, Illinois, of which bank his
of Jr is Chairman of the Board. Accordingly, the Board's approval
he 1,7'.'e appointment of Mr. Walsh is given with the understanding that
0,„111 not participate in any examination of that bank so long as he
stock of, or is related to an officer or director of that
.titution.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
@FedFRASER