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Minutes for To: Members of the Board From: Office of the Secretary Mav 22, 1.962 Attached is a copy of the minutes of the Board of Governors of the Federal Reserve System on the above date. It is not proposed to include a statement With respect to any of the entries in this set of minutes in the record of policy actions required to be maintained pursuant to section 10 of the Federal Reserve Act. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, please initial below. If you were present at the meeting, your initials will indicate approval of the minutes. If You were not present, your initials will indicate only that you have seen the minutes. Chin. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Gov. Mitchell Minutes of the Board of Governors of the Federal Reserve SYstem on Tuesday, May 22, 1962. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Balderston, Vice Chairman Mills Robertson Shepardson Mitchell Mr. Sherman, Secretary Mr. Kenyon, Assistant Secretary Mr. Young, Adviser to the Board and Director, Division of International Finance Mr. Molony, Assistant to the Board Mr. Fauver„ Assistant to the Board Mr. Cardon, Legislative Counsel Mr. Hackley, General Counsel Mr. Farrell, Director, Division of Bank Operations Director, Division of Examinations Solomon, Mr. Division of Personnel Director, Mr. Johnson, ation Administr Mr. O'Connell, Assistant General Counsel Mr. Hooff, Assistant General Counsel Mr. Goodman, Assistant Director, Division of Examinations Mr. Leavitt, Assistant Director, Division of Examinations Assistant Director, Division of Thompson, Mr. Examinations Mr. Guth, Review Examiner, Division of Examinations Mr. Poundstone, Review Examiner, Division of Examinations Mr. Potter, Senior Attorney, Legal Division Items distributed to the Board. The following items, which ha4 been, distributed to the members of the Board and copies of which are attached to these minutes under the respective item numbers indieated, were approved unanimously: 5/22/62 -2Item No. Letter to The First National Bank of Chicago, Chicago, Illinois, authorizing the organization of First Chicago International Banking Corporation, to be located at 48 Wall Street, New York, New York. 1 Letter to The First National Bank of Chicago, Chicago, Illinois, authorizing the organization °f First Chicago International Finance Corporation, to be located at 38 South Dearborn Street, Chicago, Illinois. 2 Letter to Counsel for Irving Trust Company, New New York, with further regard to a demand or production of certain reports of examination in connection with a civil proceeding. 3 Letter to Chairman Robertson of the Senate Bankand Currency Committee reporting on S. 3291, bill "to amend section 14(b) of the Federal eserve Act, as amended, to extend for two years 1 authority of Federal Reserve Banks to purchase ;;114e lted States obligations directly from the 4reasury." 4 During discussion of Item No. 2, Governor Mills referred to the following statement that had been made by the proponents of ?irst Chicago International Finance Corporation: Since the risks of investing in either new or expanded business projects abroad are affected by currency convertibility, taxation, political stability, and government attitudes, flexibility in creating an appropriate capital structure for each project will be essential. Investments of First Chicago times, take the International Finance Corporation would, at rate. However, interest fixed a at form of medium term loans by additional d supplemente be to interest would usually have by our Small made loans domestic rewards as it is now for of Corporation Capital First Business Investment Company, Finance the to returns Corporation ry supplementa Chicago. These would include rights to participate in profits, to receive .19(JI 5/22/62 -3- shares or other forms of finance fees, to subscribe to equity shares, to buy shares through warrants, or to obtain a combination of such inducements. The Corporation would not seek voting control of enterprises in Which it invests, but would, however, seek appropriate arrangements with other shareholders so that its interests would be protected. Governor Mills commented that the statement indicated a direction in the use of small business investment companies that he regarded as a far cry from the spirit of the Small Business lavestment Act. While the Board had been aware that there was the tendency to require supplementary inducements in the case of Edge Ilet financing corporations, and had not objected, to him it continued to leave a bad taste that the objectives were of an acquisitive type 44d that they were now being introduced into the operations of small bUsiness investment companies, which dbstensibly had been created out °t interest for customers and not the banks themselves. The theory, 118 he had always interpreted it, was that parties--especially banks-entered this field were doing so with an element of regard to the I/Ublic interest, by taking advantage of a legal authority to engage 14 long-term financing that would benefit the borrower. However, When that statute was used in a manner whereby the lender reaped sUPPlementary rewards from a project such as obtaining equity shares, he legarded it as an inducement to bad banking. ' The routing into small business investment companies of projects having the lure of exceptional 131"ofits could contravene the requirements of sound banking. It might be unobjectionable for a company that obtained capital from the public -4- 5/22/62 market to engage in that kind of undertaking, but he had serious reservations about such an operation being linked with operations or commercial banks. He also had somewhat the same views with regard to Edge Act financing corporations, in that he felt it was the lure Of exceptional profits that had tempted banks into the field. Governor Robertson indicated that he shared many of the Illisgivings expressed by Governor Mills. He felt that many of the °Perations of small, business investment companies involved a departure rliota the original concept of the statute. Governor Mitchell suggested that in order to make a private ry to offer "terprise system function successfully, it was necessa °PPortunities for profit making. To promote interest in high risk ventures, lenders and investors must be given the prospect of a slabstantial return. Messrs. Goodman and Poundstone then withdrew. -Wilmington, North Report on competitive factors (Charlotte iriana). to the There had been distributed a draft of report Cetptroller of the Currency on the competitive factors involved in ton, North the proposed merger of The Bank of Wilmington, Wilming te, North Carolina. Ca•lbolina, into North Carolina National Bank, Charlot he conclusion, as drafted, stated that "North Carolina National in Wilmington and 44(1 Bank of Wilmington are direct competitors Ile'4 Hanover County. te alternate The proposed merger would elimina ance of a trend 44(1 competitive banking facilities and is in continu 5/22/62 -5- I1 North Carolina toward concentration of banking resources in a few large banks." In discussion, Governor Mills raised the question whether, 14 the State of North Carolina where there was a general trend toward combination of banking resources and a relatively few commercial banking organizations, the supervisory agencies were not confronted to a degree with the same situation as in California. If so, he asked whether there were not grounds for recognizing an accomplished tact. In this particular case, in which the tone of the proposed coMpetitive factors report was adverse, a small bank would become Part of a larger bank that in turn would be thrown into more active c°111Petition in the Wilmington area with two other banks of large size. It the proposed merger should be denied, the small bank would be forced t° continue to do business in its present competitive status contrary to its awn wishes. To moderate the tone of the conclusion, a sentence nlight be added to the effect that if the merger should be consummated, 14cl'eased competition in Wilmington could be anticipated between the 1411"ge branch banking institutions operating in that locality. to certain California In further comments, Governor Mills referred illellger proposals that had been decided by the Board or were pending. Using those cases by way of illustration, he raised the question whether a bank that had it'was a proper interpretation of the law to permit ellen behind competitively to enter into a merger while refusing similar 1"miss1on to another bank that had managed to operate successfully. 5/22/62 -6- The Wilmington, North Carolina, proposal was one involving a small hank in the latter category. that the Governors Robertson and Mitchell expressed the view conclusion, as drafted, was appropriate to the facts of the case. Governor Mitchell said that on the basis of statements attributed to the Richmond Reserve Bank in this case and another recent case he had some concern as to whether the Bank fully appreciated the issues involved in proposals of this kind. (The Reserve Bank had in the number stated that "It would not appear that reduction by one banks serving a city the size of Wilmington would result in serious lessening of competition but will, in all likelihood, intensify competitive efforts of the remaining four banks, especially the three against undue Statewide institutions.") Governor Robertson cautioned factors. "thalification of conclusions in reports on competitive they would Governors Shepardson and Balderston indicated that lines suggested be inclined to add to the conclusion a sentence along the hY Governor Mills. transmittal to the Accordingly, the report was approved for C°MPtroller in a form in which the conclusion read as follows, it Mitchell would have prebsitig understood that Governors Robertson and not to include the final sentence: Wilmington are direct North Carolina National and Bank of County. The proposed Hanover competitors in Wilmington and New tive banking competi and merger would eliminate alternate in North Carolina trend a facilities and is in continuance of a few large banks. in es resourc toward concentration of banking -7- 5/22/62 However, increased competition in Wilmington could be anticipated as between the large branch banking institutions operating in that locality. Mr. Young then withdrew. Practice of computing interest on savings deposits on daily basis (Item No. 5). As requested in a Board letter of December 27, 1961, the Federal Reserve Banks had submitted reports on the practice Of some member banks in computing interest on savings deposits on a cledlY basis. The reports did not indicate that the practice was leading to abuses. There had been circulated to the Board a draft of letter to the Reserve Banks citing the tone of the comments received, bUt requesting that the Banks continue to observe developments and l ePort any abuses that might come to their attention. ' Mr. Hackley pointed out that this was the second review made bY the Reserve Banks at the Board's request. Like the first survey, lt revealed little or no evidence of abuse of savings deposits; it did not appear that there was any general tendency for large amounts to obtain °I* idle funds to be placed on deposit for a few days simply ille°111e. a He also pointed out that last year the Board had considered PC)SSible amendment to Regulation Q, Payment of Interest on Deposits, tilet was intended to prevent any such abuses. Under that amendment, r"*er banks would have been prohibited from paying interest on any having been in the bank 141.1bt of a deposit that was withdrawn without 3° days. At that time, however, it was felt that in the absence of elear evidence of abuse, such an amendment probably was not warranted. 5/22/62 -8- It undoubtedly would give rise to bookkeeping problems and be burdensome to many banks, including banks that had not adopted the practice of computing interest on a daily basis. Mr. Hackley then went on to describe a number of possible amendments to Regulation Q with respect to savings deposits that were tinder study by the Legal Division. After assuring the Board that these Possible amendments would continue to receive active consideration, he noted that the Division would be rather reluctant to suggest a series f amendments to Regulation Q, even though the amendments might have 8°Ine merit. The point of view expressed by Mr. Hackley was concurred in bY the members of the Board. Accordingly, the proposed letter to the ?ederal Reserve Banks was approved unanimously, with the understanding that the various suggested amendments to Regulation Q would continue to be studied by the Legal Division and that a summary memorandum 1"'041d be submitted for the Board's consideration in due course. A e°1:17 of the letter to the Reserve Banks is attached as Item No. 5, Mr. Hooff then withdraw. Application of Mariae Corporation. At the meeting on May 17, 1962) the Board gave consideration to an application by The Marine C°1130rat1on, Milwaukee, Wisconsin, for prior approval of the acquisition or shares of Security State Bank, Madison,Wisconsin. Action on the 413P1ication was deferred, however, in view of a suggestion by Governor ktchell that the material pertaining to the case be supplemented by 5/22/62 -9- information as to the extent, if any, to which the holding company /ras providing services for its subsidiary banks, as contrasted with merely accumulating a portfolio of bank stocks. Under date of May 180 there was distributed a memorandum from the Division of Examinations submitting information, taken from reports of examination of the holding company and of the subsidiary banks, which indicated that the holding company was providing substantial services and was integrating the Operations of the subsidiary banks to an appreciable degree. Governor Mitchell stated that he was satisfied with the additional information that had been submitted. He suggested, however, that in making eximinations of bank holding companies it might be well, it it was not being done already, to have as an objective ascertaining 44a describing the functions performed by such companies. It was his IMPression that the information submitted by the Division of Examinations in its May 18 memorandum had been accumulated from scattered comments in e3camination reports of the holding company and its subsidiary banks. Governor Robertson said it was his impression that the Division or Examinations, in preparing memoranda on holding company applications, did so against a general background of information known to the Division. 14 light of Governor Mitchell's comments with respect to the current 415Plication, it might be desirable in the future to include information °4 the activities of the applicant holding company in the memoranda alihraitted to the Board. 5/22/62 -10The application of The Marine Corporation was then approved by unanimous vote, with the understanding that the Legal Division would araft an order and statement reflecting this decision for the Board's consideration. Messrs. O'Connell, Leavitt, Thompson, Potter, and Guth then vithdrew. Question of establishing Federal Reserve Bank branch in 14111Taukee (Item No. 6). Pursuant to the understanding at the meeting On May 17, 1962, there had been distributed to the Board a revised cll'aft of letter to Congressman Reuss of Wisconsin with regard to an inquiry he had made about the possibility of establishing a Federal Reserve Bank branch in Milwaukee. alternative final paragraphs. The revised draft of letter included The first would suggest kinds of infor- Illation that might be provided in submitting an application for a kilwaukee branch to the Board for consideration. The second alternative 154ragraph would state that the Board had requested the Federal Reserve 1344k of Chicago to make another survey in view of the time that had sle•Peed since the Reserve Bank last surveyed the question of branches 14 the Seventh District. Mr. Cardon reported that he had received a letter from e011gressman Reuss enclosing a copy of a "fact sheet" that the latter 44a sent to Wisconsin member banks in the Seventh Reserve District listing points that he considered relevant to the establishment of a 134*rich in Milwaukee. After reciting the items included in the list, L 5/22/62 -11- Cardon discussed the points included in the revised draft of letter to Congressman Reuss, which reflected views expressed by members of the Board at the May 17 meeting. Mr. Farrell commented on certain factors that suggested to htm that an additional branch or branches in the Seventh District could conceivably be helpful from the standpoint of the Federal Reserve System. These had to do principally with the cost of handling country Checks, in which respect the Chicago and New York Banks were the highest in the System. He noted that the Chicago Bank was among those shal'iing the largest increases in the volume of float. Mr. Farrell also slIggested that a tendency to play down the importance of Federal Reserve bl'anches in replying to Congressman Reuss might lead the Congressman to question the need for expenditures on branch buildings in other Cities where construction projects were now pending. The proposed letter to Congressman Reuss was then commented 4Don at some length by members of the Board. Inasmuch as Mr. Reuss aPParently had already begun a survey of member banks in Wisconsin tc'r the purpose of collecting information and sentiment regarding the 1c)saibility of establishing a branch in Milwaukee, it was the consensus that it would be appropriate to advise him generally along the lines of the first alternative final paragraph in the draft letter, rather th44 to state that the Board was asking the Chicago Reserve Bank to tlEtke a further survey. However, a number of suggestions were made r changes in that paragraph and in other parts of the draft letter. ' re 5/22/62 -12Governor Mitchell expressed a different point of view, stating that the Board should avoid seeming to indicate that it had not been alert to the question of additional Reserve Bank branches. By virtue of improvements in transportation facilities and in data processing, it seemed probable to him that a number of existing Reserve Bank branches could in fact be abandoned without detriment to service. These developments, viewed against the background of the 1953-54 84rvey by the Chicago Reserve Bank, would suggest that there was no itletification for additional branches in the Seventh District. In the circumstances, he saw no need for adopting a posture that might sUggest that the Board had been negligent. Turning to the proposed letter, Governor Mitchell made several In.,. ---tsesestions, some of which were concurred in by the other members of the Board. As to the final paragraph, he commented that Congressman Reuss e°111d not be stopped from making a survey if he chose to do so. However, he (Governor Mitchell) did not think that the Board should seem to elldorae such a survey or commit itself in any way. Therefore, he would Prefer to state to Mr. Reuss that in view of the latter's interest the 1 °Etrd was asking the Chicago Reserve Bank to survey the Milwaukee sitUation again and that the Board would advise of the results as 12Tomptly as possible. After further discussion, approval was given to a letter to e°4gressman Reuss in the form attached as Item No. 6, Governor Mitchell liesenting for the reasons he had stated. Note; Pursuant to a subsequent request from Mr. Reuss, a copy of the Chicago Reserve Bank's survey was sent to him on May 28, 1962. 5/22/62 -13All of the members of the staff except Messrs. Sherman and Johnson then withdrew. Salaries of officers--San Francisco (Item No. 7). Reference Ilas made to a draft of letter to Mr. Swan, President of the Federal Reserve Bank of San Francisco, that would approve the payment of salaries to certain officers and under which there would be established at the Los Angeles Branch of the Federal Reserve Bank of San Francisco an additional position carrying the title of "Vice President", effective August 1, 1962. Under this arrangement the Branch would be headed by a Vice President and Manager, and the second officer in the Branch would have the title of Vice President. incident to Mr. Johnson stated that this change was being made the retirement at the end of October of Mr. Volberg as Vice President Manager of the Los Angeles Branch. The directors of the Federal Reserve Bank of San Francisco felt that because of the size and importance Wa the Branch, it should have two senior officers of the Bank assigned to a Reserve Bank This would be the first such arrangement at opinion it would be justified in the alloh, Mr. Johnson said, and in his ' bl of operations, ease of the Los Angeles Branch because of its volume 1141Aber of employees, and general importance. There now would appear to branches at which a similar arrangebe °Illy three or four Reserve Bank Might Mr. Johnson's opinion, even be suggested or considered, in ment for the Los Angeles 44d he did not feel that approval of the arrange /41111ch would constitute a precedent for other Reserve Banks generally. i.91! 5/22/62 After comments by several members of the Board, unanimous aPproval was given to the letter approving the payment of salaries to certain officers of the Federal Reserve Bank of San Francisco. A copy is attached as Item No. 7. Salaries of officers--New York (Item No. 8). There had been circulated to the Board a proposed letter to the Federal Reserve Bank Of New York approving the payment of salaries to certain officers at annual rates fixed by the Board of Directors. Following a brief discussion, the letter was approved unanimously. 4 copy is attached as Item No. 8. The meeting then adjourned. Secretary's Note: Governor Shepardson today approved on behalf of the Board the following items: Letter to the Federal Reserve Bank of Dallas (attached as examiner. .4.21 approving the appointment of Harold P. Dodd 13 Memoranda from appropriate individuals concerned recommending thC following actions relating to the Board's staff: %ointment ative Milton B. Doolittle as Guard, Division of Administr $3,5000 effective of Vices, with basic annual salary at the rate 'he date of entrance upon duty. Sala iricse with change in title per annum, with a change 14P.D. Maddox, from $3,920 to $4,472 title from Guard to General Mechanic-Operating Engineer, Division of 4c1rainistrative Services, effective immediately. -15- 5/22/62 17 increasesL effectiveMay 27, 1962 Name and title Division Basic annual salary From To Office of the Secretary Betty Jane Abbott, Records Clerk °IarY William Wahle, Records Clerk $4,145 4,040 $4,250 4,145 Research and Statistics Charles W. Bryson, Economist Kathryn Ridgway, Statistical Clerk 6,435 6,600 4,670 4,775 7,820 4,355 81o8o 4 46o 4,675 3,290 4,145 51 490 4184o 3,395 41 25o 5,655 Bank Operations Jrames A. McIntosh, Data Processing Analyst , oacqueline Schuster, Statistical Clerk Administrative Services Jane C. Charuhas, Utility Clerk Viola E. Heflin, Charwoman Lorraine T. Hirz, Clerk-Stenographer Charles R. Norris, Head, Mail and Messenger Service Unit 914 BOARD OF GOVERNORS OF THE (!° FEDERAL RESERVE SYSTEM N'Oto WASHINGTON 25, D. C. Item No. 1 5/22/62 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD 0 May 22, 1962 C. W. Wilson, Senior Vice President and General Counsel, The First National Bank of Chicago, 38 South Dearborn Street, Chicago 90, Illinois. Dear Mr. Wilson: The Board of Governors has approved the Articles of kssociation and the Organization Certificate, dated April 17, 1962, of First Chicago International Banking Corporation, and there is enclosed a preliminary permit authorizing that Corporation to exercise such of the powers conferred by Section 25(a) the Federal Reserve Act as are incidental and preliminary to its organization. The Corporation may not exercise any of the other powers conferred by Section 25(a) until it has received a final permit from the Board authorizing it generally commence business. The steps which must be taken prior to 4.euance of a final permit are enumerated in Section 211.3(c) °f the Board's Regulation K. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 1.1closure 1915, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON May 22, 1962 Preliminary Permit IT IS HEREBY CERTIFIED that the Board of Governors of the Federal Reserve System, pursuant to authority vested in it by Section 25(a) of the Federal Reserve Act, as amended, has this day approved the Articles of Association and Organization Certificate, dated April 17, 1962, of FIRST CHICAGO INTERNATIONAL BANKING CORPORATION duly filed with said Board of Governors, and that FIRST CHICAGO INTERNATIONAL BANKING CORPORATION is authorized to exercise such of the powers conferred upon it by said Section 25(a) as are incidental and preliminary to its °rganization pending the issuance by the Board of Governors of the Federal Reserve System of a final permit generally to commence business in accordance with the provisions of the Board of Governors °f the Federal Reserve System issued pursuant thereto. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM By (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. (SEAL) BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 2 5/22/62 ADDRESS OFFtCIAL CORRESPONDENCE TO THE BOARD May 22, 1962 *. C. W. Wilson, Senior Vice President and General Counsel, The First National Bank of Chicago, 38 South Dearborn Street, Chicago 90, Illinois. Dear Mr. Wilson: The Board of Governors has approved the Articles of Association and the Organization Certificate, dated April 17, 1962, of First Chicago International Finance Corporation, and tl.lere is enclosed a preliminary permit authorizing that Corporation to exercise such of the powers conferred by Section 25(a) °f the Federal Reserve Act as are incidental and preliminary t° its organization. The Corporation may not exercise any of the other powers conferred by Section 25(a) until it has received a final permit irom the Board authorizing it generally commence business. The steps which must be taken prior to Issuance of a final permit are enumerated In Section 211.3(c) (3f the Board's Regulation K. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. Enclosure 1917 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON May 22, 1962 Preliminary Permit IT IS HEREBY CERTIFIED that the Board of Governors Of the Federal Reserve System, pursuant to authority vested in it by Section 25(a) of the Federal Reserve Act, as amended, haG this day approved the Articles of Association and Organization Certificate, dated April 17 1962, of FIRST CHICAGO INTER- NATIONAL FINANCE CORPORATION duly filed with said Board of Governors, and that FIRST Ci7ICAGO INTERNATIONAL FINANCE CORPORATION is authorized to exercise ::uch of the powers conferred upon it by said Section 25(a) as are incidental and preliminary to its °r6anization pending the issuance by the Board of Ciovernors of the Federal Reserve System of a final permit - generally to commence • bu Giness in accordance with the proviciions of the Board of Governors of the Federal'ReServe System issued pursuant thereto. BOARD OF GOVERNORS OF THE, FEDERAL nESA1VE SYSTEH By (Signed) hlizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. (sEAL) BOARD OF GOVERNORS 44042104,1,4 to OF THE 74, FEDERAL RESERVE SYSTEM , Item No. 3 5/22/62 WASHINGTON 25, D. C. 47, ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD 10 : 4 11% May 22, 1962 Silas M. R. Giddings, Esq., Iflinthrop, Stimson, Putnam & Roberts, LI° Street, NW York 5, New York. Re: TdA. v. Hughes, et al. 15ear Mr. Giddings: In reference to the above-captioned action, the Board of ver:nors, by letter of May 15, 1962, declined to authorize the proby your client, Irving Trust Company, a defendant in this lIrtion, of copies of designated reports of examination of that Bank til)Pared by the Federal Reserve Bank of New York. It is understood caat following a conference with the Special Master assigned to this se) he has requested that portions of the reports of examination of to ,21g Trust Company for the years 1954 through 1961 be made available reiftim for his determination of the relevancy of entries and comments 1404ting to the respective parties to this action. It is further , 1 pz:eretood that the Special Master has consented to your blocking out, tl,4T to submission of the reports to him, all portions of the reports sat do not relate to the matter at issue. Under these circumstances, :ask whether the Board will authorize the production before the ap 1.96?ial Master of the reports of examination for the years 1954 through ' in the edited form you have described. The Board will permit your editing the reports in such a tha er as to prevent disclosure of any portion of their contents other then that relating to the litigation in question, and thereafter making the reports as edited available to the Special Master for a ruling on edi.i.relevancy of the unedited material. Prior to submission of the ed reports to the Special Master, the reports should be reviewed Pede,he Vice President in charge of the Examinations Department of the ' I'alReserve Bank of New York. Z - 919 - 1 BOARD OF DOVERNORS OF THE FEDERAL RESERVE SYSTEM Silas M. R. Giddings, Esq. -2- The permission herein given contemplates your further Contacting the Board, pursuant to the Board's Rules Regarding InforIllation, Submittals and Requests, before corm)lying with any order of the Snecial Master for disclosure other than is herein authorized. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. • BOARD OF GOVERNORS OF THE Item No. 4 5/22/62 FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE VICE CHAIRMAN May 221 1962 The Honorable A. Willis Robertson, Chairman, 'Committee on Banking and Currency, United States Senate, Washington 25, D. C. Dear Mr. Chairman: This is in response to your letter of May 15, 1962, re— questing the views of the Board on S. 3291, a bill "To amend 8ection 14(b) of the Federal Reserve Act, as amended, to extend for Years the authority of Federal Reserve banks to purchase United otates obligations directly from the Treasury." The use of this authority by the Federal Reserve enables the Treasury to avoid creating unnecessary financial strains that would otherwise occur if it had to draw heavily on its accounts 8Pecially during periods immediately preceding tax payment dates. emPorary Treasury borrowing at such times, followed by prompt ePayment from the proceeds of tax payments, provides a smooth "erating mechanism, without the abrupt money market fluctuations would otherwise occur. The authority could also be useful in raling with situations resulting from a national emergency. Since t942 when the authority was granted it has been used sparingly, and tts use is reported, as required by law, each year in detail in the 1. '0ard1 5 Annual Report. The results of its use also appear currently 4.4 weekly statements issued by the Federal Reserve and in daily .tatements issued by the Treasury. The Board favors the proposed -Legislation. Sincerely yours, (Signed) C. Canby Balderston C. Canby Balderston, Vice Chairman. 1921 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 5 5/22/62 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 22, 1962. Dear Sir: As you will recall, the Board's letter of December 27, 1961, requested your Bank to observe the development of the Practice of computing interest on savings deposits on a daily basis in your District, and to report any such development that Might suggest that the practice is leading to abuses. Reports from the Reserve Banks indicated little, if any, evidence of abuses, and they contain no suggestion for action by the Board at this time to curtail such practice. The Board appreciates receiving this information, and requests that your Bank continue to observe the development of this practice in your District and report any abuses that mayCome to your attention. Very truly yours, -Li un, Merritt S Secretary. To etthSIDElf2S OF ALL FEDERAL RESERVE BANKS 1922 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON Item No. 6 5/22/62 OFFICE OF THE VICE CHAIRMAN May 22, 1962 The Honorable Henry S. Reuss, House of Representatives, Washington 251 D. C. Dear Mr. Reuss: This is in reply to your letter of May 9, 1962, regarding the possibility of establishing a Federal Reserve branch at Milwaukee. I appreciate your courtesy in letting me know of your interest in this matter in advance of the hearing on S. 1oo5. The main function of Federal Reserve branches is to Provide check collection and cash services for the banks in the branch territory, and thus to improve such service for the benefit Of the general public. Efficient performance of these services depends to a large degree on facilities available for transporting checks and cash between Federal Reserve offices and commercial banks. Thus, the marked improvement in transportation facilities in the past twenty-five years has tended to minimize the need for additional branches. To a large extent, checks are moved between Federal Reserve offices and commercial banks by mail. Air express is used where it is available and the volume justifies. In addition, Special arrangements may be developed under which the checks are sent by chartered trucks or by regularly scheduled inter-city buses. Cash is moved by registered mail or by armored car. Postmasters have the option of using air mail where this is more convenient than train mail. The use of armored car services for this purpose has been spreading in recent years. A survuy of the need for additional branches throughout the Seventh Federal Re5erve DiLrict was made in 1953-5h. The report, pubmitted by the Federal ifeserve Bank of Chicago in March 195h, reached the conclusion that such additional branches were not justified. It indicated that, if branches were established, they would be bewt placed in Des Moines, Indianapolis, and Milwaukee; The Honorable Henry S. Reuss additional that establishment of these branches would entail Operating costs in the district of up to $2 million a year plus a possible $3 million for each branch building; and that, while major benefits would accrue to the banks in the three cities would not involved, the establishment of branches in these cities States. three improve service for the great majority of banks in the in service The eserve Bank reported that the only improvement in was ion conclus Wisconsin would be to a scattering of banks. This based on a survey of mailings on five successive days to determine how many collecting points were not reached by one day mail service from Chicago. All points in Wisconsin were usually reached in one day, except nine (five in Shawano County, and one each in COumet, Langlade, Racine, and Waukesha Counties). The facts presented were given extensive consideration by the Board on a number of t occasions over the next few years, but because they did not presen took Board the s, these branche a persuasive case for establishing no action in the matter. In considering whether to establish a branch, the Board in improved takes into account (1) whether the branch would result onal additi what (2) ; public service to the banks and thus to the any, if s, benefit ible intang cost would be involved; and (3) what vely; objecti d measure be would result. The first two factors can son of the first factor, in particular, turns largely on a compari between as ed, concern transportation services to the member banks the proposed location and the office now serving the banks. The such questions third factor is more a matter of judgment, involving of the anding underst better as whether the branch would promote the assist would it r whethe ons, Federal Reserve Systemls operati c economi eting interpr in System the of Board and other officials d and other developments, and whether the various communities affecte ion connect in nce Experie . branch the favor the establishment of n in the city With the 1953-514 survey suggests that favorable reactio bynied accompa Where a branch is proposed to be located may be adverse reactions in other cities in the State. to determine what I understand that you are taking steps Milwaukee branch. support exists in Wisconsin communities for a will, of course, In answer to the question in your letter, the Board ee branch the Milwauk a give to the question of the establishment of of this ce pursuan full and fair consideration you outline. In be given to (1) inquiry, I would suggest that attention should of the shment branch establi information that would indicate how 1924 The Honorable Henry S. Reuss would serve the public interest; (2) information as to what points, if any, would have better or worse mail or other transportation service from the new branch than they have from the Federal Reserve office now serving them; and (3) information as to which banks in the area favor or oppose the establishment of a branch, together With reasons. Sincerely yours, C. Canby Bal erston, Vice Cha rman. ) BOARD OF GOVERNORS 170 flop 4* 40.41% OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. 3* Item No. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD * 0 0 -0440* May 22, 1962 CONFIDENTIAL (FR) Mr. Eliot J. Swan, President, Federal Reserve Bank of Ban Francisco, San Francisco 20, California. Dear Mr. Swan: The Board of Governors approves the payment of salaries to the Officers of the Federal Reserve Bank of San Francisco listed below, from the effective date through December 31, 1YO2, at the rates indicated: Annual Salary Title Officer 2,ffice Effective June 1 Head Office Los Angeles Paul W. Cavan Gerald R. Kelly Vice President Assistant Manager $14,000 9,500 ..Effective August 1 Los Angeles Los Angeles Portland Portland Salt Lake City Seattle 7 5/22/62 C. H. Watkins Donald M. Davenport William M. Brown Francis R. Skinner T. M. Simmons W. R. Sandstrom Vice President Assistant Manager Asst. Vice President Assistant Manager Asst. Vice President Asst. Vice President 17,500 16,000 12,250 10,000 12,000 14,000 Vice President and manager Vice President 20,000 16,000 ...2lective November 1 1433 Angeles C. H. Watkins L°E1 Angeles Donald M. Davenport The rates approved by the Board are those fixed by your Board Of Directors, as reported in your letter of May 4, 1962. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. 1926 BOARD OF GOVERNORS 0"0* t41 OF THE FEDERAL RESERVE SYSTEM ,* Item No. 8 5/22/62 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 22, 1962 Mr, William F. Treiber, First Vice President, Federal Reserve Bank of New York, New York 45, New York. Dear Mr. Treiber: The Board of Governors approves the payment of salaries to the following officers of the Federal Reserve Bank of New York for the period May 15 through December 31, 1962, at the rates indicated, which are the rates fixed by your Board of Directors as reported in your letter of May 10: Name Robert G. Rouse Robert W. Stone Thomas J. Roche Edwin S. Rothman Title Annual Salary Vice President and Senior Adviser Vice President Senior Foreign Exchange Officer Manager $35,000 25,000 20,000 15,000 Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. . BOARD OF GOVERNORS 00110**4 OF THE FEDERAL RESERVE SYSTEM Item NO, 9 5/22/62 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 23, 1962. CONFIDENTIAL (FR) Mr. L. G. Pondrom, Vice President, Federal Reserve Bank of Dallas, Dallas 2, Texas. Dear Mr. Pondrom: In accordance with the letter of Nay 9, 1962, the Board of Harold P. Dodd, at present an eXaminer for the Federal Reserve June 1, 1962. request contained in your approves the appointment assistant examiner, as an Bank of Dallas, effective It is noted that Mr. Dodd is indebted to Park Cities Bank and Trust Company, Dallas, Texas, a nonmember bank. Accordingly, the Board!s approval of the appointment Of Mr. Dodd is given with the understanding that he will not Participate in any examination of that bank until his indebtedness has been liquidated. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary.
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