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Minutes for
To:
May 25, 1960
Members of the Board
Prom: Office of the Secretary
Attached is a copy of the minutes of the
2ard of Governors of the Federal Reserve System on
Ilae above date.
It is not proposed to include a statement
h respect to any of the entries in this set of
Tinutes in the record of policy actions required to
r maintained pursuant to section 10 of the Federal
'leserve Act.
Should you have any question with regard to
minutes, it will be appreciated if you will advise
Secretary's Office. Otherwise, please initial below.
were present at the meeting, your initials will
Zicate approval of the minutes. If you were not present,
"
1r initials will indicate only that you have seen the
Ininntee.
the
17
Chin. Martin
Gov. Szymczak
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
1 8,
Minutes of the Board of Governors of the Federal Reserve System
on We
dnesday, May 25, 1960.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Mr.
The Board met in the Board Room at 10:00 a.m.
Martin, Chairman
Balderston, Vice Chairman
Mills
Robertson
King
Sherman, Secretary
Young, Adviser to the Board
Shay, Legislative Counsel
Hackley, General Counsel
Solomon, Director, Division of Examinations
Hexter, Assistant General Counsel
Furth, Associate Adviser, Division of
International Finance
Mr. Hostrup, Assistant Director, Division of
Examinations
Mr. Landry, Assistant to the Secretary
Mr. Fisher, Economist, Division of Research
and Statistics
Miss Hart, Assistant Counsel
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Discount rates.
The establishment without change by the Federal
'
ve Bank of Atlanta on May 24, 1960, of the rates on discounts and
acbran
ce8 in its existing schedule was approved unanimously, with the
14icierstarlaing
that appropriate advice would be sent to that Bank.
Items circulated or distributed to the Board.
Its,
The following
which had been circulated or distributed to the Board and copies
()tvhich are
attached to these minutes under the respective item numbers
INticated, "ere
approved unanimously:
4titer
,c) the Federal Reserve Bank of Boston regarding
t.11,e retlft
- U
"
ing of apparent violations of section 709 of
--d States Criminal Code.
Item No.
1
5/25/60
-2Item No.
ter to The State Bank and Trust Company, Defiance,
11,111°) aPproving the establishment of an in-town branch
an investment in bank premises.
Lett
e er to the Federal Reserve Bank of San Francisco
iZresaing the opinion that operations which Wells
0810 Bank American Trust Company, San Francisco,
&,,trornia, proposes to conduct at 50-60 First Street,
Francisco, would not constitute the establishment
'a branch
requiring approval of the Board of Governors.
Letter to th
e Bank of Commerce, Milton-Freewater, Oregon,
114iVing the requirement of six months' notice of withclraval from membership in the Federal Reserve System.
T
aelegram to the Federal Reserve Bank of New York
b "°rizing it to open accounts for the Inter-American
e
"
eloPment Bank.
2
3
4
5
Mr. Furth then withdrew from the meeting.
/lEklication of California Bank to establish a branch.
There had
ee'n circulated
a letter to the California Bank, Los Angeles, California,
cll"13Pr°ving its application to establish a branch in the City of Industry,
41if°1111a, in accordance with the recommendation of the Division of
tnations.
The Federal Reserve Bank of San Francisco had recommended
8111
'
°val of the
application.
Mr. Solomon said that the proposed office was to be located
114r0
Inlately 20 miles southeast of the applicant's head office in the
inco
rPorated industrial area known as City of Industry, population 800.
11° rtIrther
residential construction is permitted within the city limits
blIt to
118iderable land is available for industrial expansion. A 53-acre
tor land is to be developed as livestock yards, and a marketing
5/25/60
-3-
certer is to be established, to be owned and operated by the Los Angeles
Livestock marketing Company.
However, this company is still in the
Dr°cess of organization and no definite date has been given for the
c°1ftencement of its operations.
So far as the proposed branch bank was
c°11cerned, the company had extended to the applicant an exclusive claim
to establish branch facilities in the yards.
Although the nearest office
"the applicant is located 2-1/2 miles northwest of the proposed yards,
c°14Petition
would be provided by a branch of Bank of America National
TrIlst and
Savings Association now established near that location and by
4 °trice of Citizens National Bank, the latter being approximately 1/5
"a mile from the site of the proposed branch.
There would be a fair
1114101+4
--Lon of need for another banking office if the stockyards were
vlAshed.
Should the yards
not be established, the applicant proposed
to lilthdrav
its application. Mr. Solomon went on to say that the recommentatto
'
4 for disapproval by the Division of Examinations was in accord with
the u
811al policy of the Board in such cases where the application seemed
151'elliature•
He noted that the draft letter to California Bank indicated
the Betard would be willing to consider another application when more
assurance could be given that the branch would be established
Drompt14,.
It appearing that the Board was inclined to disapprove the applit4tioll
'it vas understood that, pursuant to the usual procedure in such
Qttees
'the San Francisco Reserve Bank be given an opportunity to comment
%me
r On the application before the Board acted upon it.
5/25/60
At this point Mr. Noyes, Director, Division of Research and
Statistic
joined the meeting.
Report on S. 3541 (Item NO. 6).
There had been distributed
a Ine
morandum dated May 24, 1960, from Mr. Noyes attaching for the Board's
e°11eideration
a draft letter to Senator Robertson, Chairman of the
Sella
te Banking and Currency Committee, reporting on S. 3541, a bill
"T° Provide additional financial facilities in the Federal National
Elige Association
and for other purposes," introduced by Senator
411*Ian, it being noted that Mr. Rains had introduced an identical
bill in the House.
Mr. Noyes said that, according to a statement made by Senator
--41 on the floor of the Senate, S. 3541 was introduced "in order
to
Promote study" and so "serve as a basis from which a satisfactory
eentral
m°rtgage program may be evolved." He noted that the proposed
to Senator
Robertson would question the desirability of the changes
1)1.°Pchied in Title I of the bill relating to short-term warehousing-type
444
a) 8111Ce that could lead to ultimate recourse to the United States
T).
..eetati
14Y- The draft reply would also question the desirability of
eatabli
'
ahing Federal mortgage investment companies as proposed in
Title
T
-4-, in
part because the provision would appear to discourage a
l'Itative dividend and reserve policy by such companies.
There was general agreement with the form of the proposed letter
eriat
Or Robertson. However, Governor Mills thought that it would be
5/25/60
-5-
l'rq1 to include in the letter a reference to the fact that the proposed
Imuld create a new group of Federal financial intermediaries,
raising the whole unresolved question of the impact of existing
financial intermediaries as they relate to the conduct of monetary
15°1icY.
Consequently, he thought it desirable to state in the letter
that the Board favored delaying the establishment of such new organize.18 until the larger problem was resolved.
There being agreement with Governor Millst suggestion, the
letter Ifts
approved in the form of attached Item No. 6.
Request of Eastern Trust and Banking Company for prior approval
eqUire voting shares.
Two memoranda from the Division of Examinations
detted MaY 12, 1960, and a memorandum from the Legal Division dated May 20,
;((
had been distributed regarding the request of Eastern Trust and
Ba4kin
g Company, Bangor, Maine, for prior approval, pursuant to secti°11 3(a)(2) of the Bank Holding Company Act for the acquisition of
to 1,400 of the 2,000 outstanding voting shares of Guilford Trust
comp
MY, Guilford, Maine.
Mr. Solomon said that the recommendation of the Division of
t..01,111i
nations and the Legal Division was that this request be approved
atcl
at a Notice of Tentative Decision granting the application be issued.
This r
acommendation was based upon the fact that the case was quite
toi343tirl
to others previously approved by the Board in that a bank holding
Igould be acquiring a bank outside its immediate area but not
rig monopoly power and not appreciably affecting the competitive
5/25/60
-6-
Picture one way or another.
He cited, in this connection, recent
Bclard Pproval of similar applications by The First Virginia Corporation to acquire The Purcellville National Bank; of New Hampshire
13ellkshares to acquire control of The Peoples National Bank of Claremont;
"a of the application by The Marine Corporation to acquire control
t Peoples Trust and Savings Bank, Green Bay, Wisconsin.
There being no objection, unanimous approval was given to the
l'ettaration by the Legal Division of a Notice of Tentative Decision
"Tentative
Statement granting the application of Eastern Trust and
4111ting Company, with the understanding that such Notice and Statement
11°11.141 be returned to the Board for its subsequent consideration.
Mr. Noyes then withdrew and Messrs. John Farrell, Director,
:LIr1611°11 of Bank Operations, Chase, Assistant General Counsel, and
D°11ald Farrell, Assistant Counsel, entered the meeting.
Draft letter to Citizens and Southern Holding Company regarding
am
sition of shares of American National Bank, Two memoranda from
t'
he blvision of Examinations dated March 23, 1960, and a memorandum
irc the Legal Division dated May 20, 1960, had been distribured regardl'eqUests by Citizens and Southern Holding Company and Citizens and
the
-" National Bank, Savannah, Georgia, for prior approval by the
41'cl
cl acquisition of 500 shares of American National Bank, Brunswick,
4°rRia
I Pursuant to section 3(a)(2) of the Bank Holding Company Act.
Attach
ed to the Legal Division's memorandum was a draft letter to Citizens
ci,
K
5/25/60
44a Southern
-7Holding Company, stating that prior approval as requested
cotaA not be
given because an agent of the holding company had exercised
it8
rights to purchase the stock in question. The memorandum from the
Legal Division stated that the Comptroller of the Currency recommended
84211/'°val of the two requests, as did the Division of Examinations,
811bieet to an opinion of the Legal Division as to whether the applicants
had
already "acquired" the 500 shares of American stock in violation of
tile13614k Holding Company Act of 1956 and,accordingly, whether "prior"
aPProw,
--. of the acquisition would now be in order.
This memorandum
also said that if the applicants were not determined to have already
hae
(Illired" the specified shares of American, approval of the applications
vould increase Citizens and Southernts ownership of American's
254(3° outstanding shares from 10-1/2 per cent to a 12-1/2 per cent
ilitereat, the percentage of control approved by the Board in its
eirder dated
July 231 1959.
It was also stated that the Comptroller's
114(lerata2lding was that the purpose of the applications vas to permit
eitize4
to exercise its pre-emptive rights to purchase a proportionate
Per cent of the 4,000 new shares authorized by the shareholders
orAmerican at its annual meeting on January 12, 1960, rights to which
'4ere
required to be exercised and paid for by February 2, 1960.
1)ivisionts
The
memorandum stated that General Counsel Patterson of
th"tianta Reserve Bank considered the applications to be "to acquire
5554aditional shares of the stock of American...by the exercise of
5/25/60
-8-
'
l re-enrPtive rights to its share of a new stock issue." However, the
Reserve Bank had informed the applicants on January 13, 1960, upon
1114114rY, that it would not be possible to get Board approval prior to
the expiration of rights to purchase the additional stock.
Thereupon,
the applicants exercised their rights in the name of an individual as
sgett rather
than let the rights expire or sell them.
Mr. Hackley said that at the time the Atlanta Reserve Bank was
811Pr°ached in January, enactment of a Georgia statute appeared imminent
131‘°111:biting a bank holding company from acquiring or holding more than
5 1)er cent of the voting shares of any bank following date of enactment
clallCh law.
earlts
The law was enacted February
9, 1960. Thus, the appli-
Probably felt in January that they would be caught between this
tatlite and the Bank Holding Company Act. If they had not proceeded
to ex
erciee their pre-emptive rights before the statute was enacted,
they
vould have been barred from acquiring the 500 shares of American
th
--e State statute.
He noted that, following the discussion with
theAtlanta Reserve Bank on January 13, the chronology of the applicatiolls was
as follows: (1) they were dated February 1, 1960; (2) they
Vere
received at the Boardts offices on February 5, 1960; (3) pursuant
to se
cti°11 3(b) of the Act, notification of the applications was forwarded
t° the Comptroller of the Currency on February 9, 1960; and (4) the
IPtl'°11erts reply was dated February 14, 1960.
:
In view of this
1111111°144gY, it was not possible for the Board to act on the
applications
l'i°11 to the expiration on February 2, 1960, of the rights to purchase
5/25/60
-9-
additional stock of American.
In the opinion of the Legal Division,
Hackley said, the applicants had violated the Bank Holding Company
Act Y
not obtaining prior approval from the Board for the acquisition
throv,-1.
''%11 an agent on February 2, 1960, of the 500 shares of American
erred to.
In framing a draft letter of reply to the applicants, the
1)ivision had tried to arrive at a happy solution to the dilemma presented
the fact that, should Citizens and Southern be forced to dispose of
the additional 500 shares of American, the holding company would lose
1
t8Proportionate control of that bank due to the State law prohibiting
"q11
is1tion of more than 5 per cent of such bank stock after February 9,
1960.
Under the circumstances, the Legal Division did not feel that it
vas
necessary to advise the Justice Department of the technical violation
°f the .p
- Bank Holding Company Act in this case.
Mr. Hackley suggested the
DOetib
ilitY of adding to the draft letter a sentence to the effect that
the B
°ard would have granted its prior approval to the acquisition of
"ditional shares of American, provided the applicationshad been
811b ittea
in time.
A discussion followed relating to the chronology involved in the
41)1:11ications and the timing of the original discussion between the
Atlarlta
Reserve Bank and the applicants on January 13, 1960.
During
th141 cliscussion, Mr. Hackley said that the Legal Division believed it
be in order to adopt procedures for expediting the handling of
ilr'gerlt r
equests of this type in the future, and so to advisc the Reserve
I
5/25/60
-10-
4114 in order that no applicant hereafter would be advised that in
sindlar circumstances an application could not be processed in time
to
Permit an applicant to protect its interests.
Governor Mills said that he took a position opposite that of
the Legal Division on this question.
He then read a prepared statement
48 follow.
In considering the application of the Citizens and Southern
11.ational Bank and Citizens and Southern Holding Company to acquire
)00 shares of American National Bank of Brunswick, Brunswick,
Georgia, the steps taken by "Citizens" to consummate this transprior to approval by the Federal Reserve Board should be
"YPassed as a technical infraction of the Bank Holding Company Act
°f 1956 and the application decided upon its merits and net effects.
In net result, the capital structure of the American National
Of Brunswick has been strengthened by consummation of the
.;:ranaaction, which is commendable. In effect, the acquisition
Citizens of 500 shares of American National Bank of Brunswick
la believed to be consistent with Federal Reserve Board rulings
.111d decisions under the Bank Holding Company Act of 1956 as regards
e acquisition by a bank holding company of additional shares
rights
44 a subsidiary bank by way of the exercise of pre-emptive
does
purchase
such
of
completion
where
and
Purchase new shares
of
ownership
of
percentage
companyts
alter the bank holding
the
that
believed
also
is
It
bank.
„ aras in the subsidiary
mPletion of the transaction is in harmony with a statute of the
'tate of Georgia that became law on February 9, 1960.
Viewed from these angles and applying a rule of reasonableag to the application requires its approval despite the technical
bflfraction of the Bank Holding Company Act of 1956, which occurred
becallae of an unusual combination of circumstances which cannot
ae,_raPeated and without any attempt by Citizens to hide its
acqona. A finding by the Federal Reserve Board against the
BITlicants and on the strength of a strict interpretation of the
,71k Holding Company Act of 1956 would be harsh in the extreme and
,!Uld deny the authority of a governmental agency to administer
ZIth reasonable flexibility the statutes for which it is responsible.
example of the Federal Reserve Boards approach to flexibility
administering a statute can be found in its willingness to waive
ralties on deficiencies in the reserves of a member bank where
eld to be justified by extenuating circumstances.
„
r
All factors considered, the application should be approved.
it
5)4%0
-11-
In the ensuing discussion, Governor Robertson said that, because
he believed a violation of the Bank Holding Company Act was involved in
the
.
Present case, it would be appropriate that the Justice Department
be so
advised.
However, Justice should be informed that the Board was
Ell°ving the application ex post facto, despite the questionableness of
the Board's authority, in view of the circumstances.
He also suggested
the't the Comptroller's Office be informed of the situation and the Board's
ILetion.
The view was expressed by Governor King that, since the applicants
hadeonsulted with the Atlanta Reserve Bank on January 13 as to whether
thei
aPPlications could be processed in time to exercise their stock
l'ights by February 2 and had received a negative answer, applicants had
11(1tvi
olated the law by subsequently invoking these rights through the
c'r all agent without Board approval. He believed the Board should
fird
s°111e way of approving the acquisition by the applicants of the 500
Wares
of American.
A suggestion was then made that, since acquisition by means of
kti
Ete
elit was "indirect acquisition" under the statute, the proposed
lette„
tdo the applicants not approve the application. To meet a point
raised.
during the discussion, Chairman Martin suggested including in the
tte
r to the applicants reference to the fact that the Board expected
to re
eive prompt notice regarding the exercise of stock rights in all
131.40,
*Ltar
applications.
5/25/60
-12Governor Mills observed that there was the danger that the
h0,1
d'-ng company and American National Bank would be exposed to the
cl1'aq.
—1
"of minority stockholders of the bank should the Board not
f°1111ea-lY approve the application.
Following further discussion the Legal Division was requested
to
414'epare a revised draft of letter to Citizens and Southern Holding
0Or
la1)84Y, along with a letter to the Reserve Banks, for consideration by
the8oard at a later meeting.
Mr. Hostrup and Miss Hart then withdrew from the meeting and
Th
°mas, Adviser to the Board, entered the room.
Draft letter to the Comptroller of the Currency concerning classitieatin
"time deposits" under Regulation D.
There had been distributed
c°131e
s (pf a draft letter to the Comptroller of the Currency regarding a
Ile8ticm whether dealers' reserve or differential accounts might be
Q148.8
lfled as "time deposits" for the purpose of computing reserves under
Re
atl°n D, Reserves of Member Banks. The draft letter would reply to
the c
°MPtroller's letter of March 14, 1960, regarding the circumstances
a
Which ccounts of the type referred to might be classified as
"ttrae
ePosit
concerning which the Board published an interpretation
(1960
ecieral Reserve Bulletin 265) considering the broader question
'Ihether such
accounts should be classified as deposits against which
rN3erv
es are required under Regulation D. The draft letter took the
Doz.Itic
n that of the two ways in which dealers' reserve or differential
8
ordinarily are set up, only the second type of situation appeared
5/25/60
to
be
-13-
one in which dealers' reserve accounts might qualify as time
4Po5its.
the de
In this case, the whole account is set up at the time that
aler's loan is granted and as instalment payments are received
44 identical proportion is released from the dealer's reserve account.
If the
instalment payments are on 30-day basis, the nature of the account
14°111c1 Preclude withdrawals within 30 days, with the possible exception
the initial withdrawal permitted at the time the first instalment
Pelllerlt is received.
It was concluded in the draft letter that to this
extent
) reserve accounts of the type described would appear to comply
lth the
regulatory requirement with respect to 30 days maturity for
11°.t1
ee Of withdrawal, although the written agreement between the bank
arl(Ithe dealer might not specifically provide for a "30-day maturity"
or 4 ",
,0-day prior written notice of withdrawal." It was stated that
slleh
44 agreement could be regarded as complying with the regulatory
ement in this respect if the agreement in effect would result in
establi
--suing a 30-day maturity or withdrawal limitation on the account.
Governor Mills said that he was fearful that the position taken
11
he
vicie
tlate
draft letter was on "shaky ground."
He believed it opened a
41'ea of abuse by banks to interpret dealers' reserve accounts as
deposits,
open account, since the interpretation could be made to
41)1 to almost
any account that would not be disturbed in less than
30
418 8° long as there was a written understanding between the bank
€41
'
1 the
depositor.
Not only would such an account be eligible for
5I25/6o
-14-
Nftent of interest, but it would also be eligible for a lower reserve
(Mirement.
He was concerned because of the fluidity of dealer
reserve accounts, which were quite active, so that what was involved
'474
a "pool" of funds and not a single deposit.
Mr. Hackley replied that the Legal Division had recognized
tIlese aspects of the matter but had been influenced by the fact that
dealers* reserve accounts are required to be maintained_ by the lending
14014
a
security for the loans.
Many banks in fact thought they were
riot
clePosit liabilities.
He pointed out that the draft letter took the
13°4ition that if the accounts were really fluid--that is, were so-called
l'Ilisrket
accounts," where the dealers' reserve account is not set up
14711.41 after the paper is purchased from the dealer, and the proportionate
t t)f the instalment payments received is not proportionately paid
e
-(3 the dealer, the reserve account would be constantly turning over
4110 th
e bank could not determine that the account would be restricted
Of
at 1
-east 30 days in order to comply with the regulatory definition
v. time
deposit.
Covernor Robertson asked how it would be possible to differentiate
tloteela
dealer reserves of the type indicated and compensating balances
tliat
by banks to be maintained by borrowers.
Mr. Hexter replied
th
-e compensating balance vas held in a demand deposit account
tot come under the definition of "time deposit, open account."
ecicle
that there vas a further distinction in that compensating balances
5/25A0
-15-
required to be maintained as an average balance so that they could
be utilized, permitting fluctuations in the amounts in the account
dill:14 the time period concerned.
Governor Balderston said that he shared Governor Mills' concern
°11 this question.
He was apprehensive that should the draft letter be
sett +.
-0 the Comptroller of the Currency it would "muddy the waters"
t14;arding the Board's definition of time and savings accounts.
Ur) t° bankers to interpret the outstanding definitions.
It was
Governor Robertson
eigteed.
Mr. Hackley replied that it was possible the Comptroller of the
Cl4trencY might feel that the Board was not being responsive to the
11113"ti°n presented to it in the Comptroller's letter of March 14.
Commenting on this point, Governor Mills said that it might be
a4411111:ble to expose the Comptroller's Office, the Federal Deposit Insur1"
Corporation, and State bank examiners to the perplexities of this
glIeltion by
means of a joint meeting between representatives of these
allteies and the Board.
The Board could withhold its decision on this
'14e8tica1 until such a meeting had been held. He referred to the fact
that
IIITY relaxation by the Board on its definitions of savings and time
c1341te in the past had promoted successive problems.
Governor Robertson concurred, observing that the more exceptions
/gere made, the more thethad to be made.
le
It was then agreed that the Legal Division would revise the draft
r t0 the Comptroller of the Currency for the Boardts consideration
5/25/60
indicating that whether dealers' reserve or differential accounts were
treated
as "time deposits" in the computation of reserves was a question
e 'whether they conformed to the definition of such time deposits in
theBoard's regulations.
Messrs. Noyes, Director, Koch, Adviser, and Detbitz, Associate
Athrieler: Division of Research and Statistics, and Collier, Chief,
etIrrent
Series Section, Division of Bank Operations, joined the meeting
'11111118 the preceding discussion and Messrs. Hexter, Chase, and Donald
4.1rel1 "'withdrew at its conclusion.
Possible further release of vault cash to be counted in meeting
e requirements of member banks.
A question had been raised as
to the
timing for an additional release of vault cash to permit such
Nad
8 to be counted in meeting reserve requirements of member banks,
Pl°811ellt to the authority given to the Board for such release in Public
Itri? Ac
‘J"114 enacted July 28, 1959. At Chairman Martin's request, Mr.
1140tilas
commented on the outlook for bank reserves during the next several
Veelta
"d on various possible arrangements that might be considered for
%Atli
rizing additional amounts of vault cash to be counted in meeting
retterv
e requirements. There followed a general discussion, at the con11411,
(In of which it was understood that the staff would prepare a memor4411414
regarding this subject for consideration by the Board.
Thereupon the meeting adjourned.
5/25/60
-17Secretary's Notes: Pursuant to the authorization
at the meeting of the Board on May 4, 19601 a
letter was sent today to the Federal Reserve Bank
of New York interposing no objection to a foreign
travel assignment of Messrs. Holmes and Klopstock
of the Bank's staff. A copy of the letter is
attached to these minutes as Item No. 7.
On May 241 1960, Governor Shepardson approved on
behalf of the Board the following items:
te
Memoranda from appropriate individuals concerned recommending
lollowing actions affecting the Board's staff:
A
efltfltg
etet Katharine Brown as Statistical Assistant, Division of Research and
the Sties, with basic annual salary at the rate of $4,940, effective
date she assumes her duties.
Ste.4,,ra S. Collins as Research Assistant, Division of Research and
v.tetie
8, from about June 201 19601 to about September 15, 19601 with
basic
her. rl allaual salary at the rate of $4,9801 effective the date she assumes
841
Increase
Acilm. Robert B. Hamilton, Personnel Technician, Division of Personnel
tlistration, from $5,430 to $51620 per annum, effective May 29, 1960.
e.s-p
Letter to the Federal Reserve Bank of Boston (attached Item No.
the appointment of John Nye Field as assistant examiner.
8)
Letters to the Federal Reserve Bank of Philadelphia (attached
T1.12) approving the appointment of James H. Butler and Leon L.
,
l'i la7i4.
r as assistant examiners.
‘ Letters to the Federal Reserve Bank of Chicago (attached Items 11
arid, 1,
aa e;:L PProving the appointment of Richard G. Mickel and Edward A. Rusin
Ai\
Secrseta
Owtt:44
BOARD OF GOVERNORS
14
44
01,
‘,
OF THE
Item No. 1
5/25/60
FEDERAL RESERVE SYSTEM
Ar*
f4
4100/
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE •CIARD
May 25, 1960
1,. Benjamin F. Groot, Vice President,
1i3ederal
Reserve Bank of Boston,
oston 6, Massachusetts.
14
'41
'Mr. Groot:
This is in response to your letter of May 3, 1960,
I.”rning reports to the United States Attorney of apparent
whi'ations of section 709 of the United States Criminal Code,
or ?,11 Prohibits the use of certain words as a part of a business
Bo "rm name. This section of the Code is included in the
sy!fd ls compilation of laws relating to the Federal Reserve
11
should be treated as are
other and, for reporting purposes,
laws.
banking
the
criminal provisions of
Z
The offense described in section 709 is a misdemeanor
arid. 4
at'4n determining whether to report violations to the United
4tee
Attorney, the Reserve Banks should be governed by the
a
''ructions contained in the Board's letter of August 19, 1948
referred to
1.111m;L'S. #6503). However, since the case you have
to call the
wish
may
you
"
040;'ves the use of the word "national
to the attention of the District Chief National Bank
for such action as he chooses to take.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
.
j9$)5
BOARD OF GOVERNORS
o%
*
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
Item No. 2
5/25/60
&DORIES' °maim. CORRESPONDENCE
TO THE SOAR°
4
4
80
4400'
May 25, 1960
toard of Directors,
The State Bank and Trust Company,
Defiance, Ohio.
Gentlemen:
Pursuant to your requests submitted through
the Federal Reserve Bank of Cleveland, the Board of
Governors approves (1) the establishment of a branch
at the northwest corner of Third and Wayne Streets,
Nfiance, Ohio, and (2) under the provisions of
Section 24A of the Federal Reserve Act, an additional
investment of $142,270 in bank premises for the purpose
Of constructing the branch building, by The State Bank
and Trust Company, Defiance, Ohio. This approval is
given provided the branch is established within one
Year from the date of this letter.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
04"Q4.
"44t,
OF THE
1 It,
FEDERAL RESERVE SYSTEM
Item No.
3
5/25/6o
WASHINGTON 25, O. C.
ADORE'
arriciAL
CORRESPONDENCE
TO THE •OARO
May 25, 1960
t B.
H. Galvin, Assistant Vice President,
am
-,
4ET,41 Reserve Bank of San Francisco,
anci800 20, California.
te4I'Mr. Galvin:
196(1
This will acknowledge receipt of your letter of l‘tv
anj and enclosure relative to certain operations which Wells Fargo
tobj.„'Te•rican Trust Company, San Francisco, California, proposes to
at 50.60 First Street in the City of San Francisco, California.
collti,„
It is noted that the activities at this location will be
NII:714 Principally to the Computer and Tabulating, Clearing and
akilr, Commercial Bookkeeping, and Multilith Departments. An
41.13 ;!4k1 activity will be the loading and unloading of armored
is scrd to transport cash to and from the bank's branches. It
1)14164_440d that the public will have no direct access to these
'
- 1g11, and no direct service to the public will be provided.
:ILait the On the basis of the information furnished, it would appear
tillers, operations at this location would not constitute the estab.
L.L of a
branch requiring approval of the Board of Governors.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
19
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
Item No.
4
5/25/60
ADDRES• OFFICIAL CORREOPONOENCE
TO THE BOARD
May 25, 1960
Board of Directors,
Bank of Commerce,
thaton-Freewater, Oregon.
G
entlemen:
The Federal Reserve Bank of San Francisco has
1'0
rwarded to the Board of Governors your letter dated
6, 1960, together with the accompanying resolution
::.grlifying your intention to withdraw from membership in
e Federal Reserve System and requesting waiver of the
six months notice of such withdrawal.
In accordance with your request, the Board of
rnors waives the requirement of six months' notice of
;''acirawal. Upon surrender to the Federal Reserve Bank of
Francisco of the Federal Reserve Bank stock issued to
institution, such stock will be canceled and appropri.p,e refUnd will be made thereon. Under the provisions of
ulation H, your institution may accomplish termination
H,Lits membership at any time within eight months from the
the notice of intention to withdraw from membership
1148 given.
7
It is requested that the certificate of membership
be r
eturned to the Federal Reserve Bank of San Francisco.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
TELEGRAM
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
LEASED WIRE SERVICE
Item No.
5/25/60
WASHINGTON
May 25 1960
el3(
"
88 - NEW YORK
Iill
'
esPonse to your letter of May 19 relating to opening of accounts
tor
.uoter-American Development Bank the Board of Governors authorizes
l'°11t0 °Pen the accounts referred to in the letter.
(Signed) Merritt Sherman
SHERMAN
5
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
Item No. 6
5/25/60
OFFICE OF THE CHAIRMAN
MAY 26 1960
TnIle H
onorable A. Willis Robertson, Chairman,
'„°111illittee on Banking and Currency,
u
wnited
States Senate,
48111ngtOrl 25, D.C.
tte
Mr• Chairman:
This is in response to your request of May 18, 1960, for
betj
r°rt from the Board of Governors on S. 3510., a bill now pending
tl,e Your Committee: "To provide additional financial facilities
inco"e Federal National Mortgage Association, to provide for the
otherP°ration of Federal mortgage investment companies, and for
r Purposes."
direct° Title I of S. 35141 would abolish FNMA's present board of
trot
I's, consisting of five members, one of 7...thom is the Adminisena
of the Housing and Home Finance Agency, who serves as chairman
eetag4P°ints the other four members. In its place, the bill would
to
'
Lr eta811 a board of directors consisting of three men, appointed
ggered six-year terms by the President of the United States
"c
ith
01,lk41 with the advice and consent of the Senate. The bill would
°01tirriii7le this board of directors to establish one or more advisory
"ees, and a twelve-man advisory council.
1)0
In addition, Title I would expand FNMA's secondary market
'1.014.1
'
ellrpi.ueng authority from the present limit of ten times its capital,
$ reserves, and undistributed earnings to fifteen times.
to !flak
Title I would also expand FNMA's powers by authorizing it
te
e
,rtne „cans, secured by FHA-insured or VA-guaranteed mortgages, at
ez! exceeding one year and at an interest rate "consistent
,'eoetz4.7.ral loan policies established from time to time by the
I
toel. -ttia.0,,
T4
Cert " s board of directors..." Such loans could not exceed 90
l e bill, of the unpaid principal balance of the mortgage collateral.
i'hericktrt'"4- Provides that the volume of the Association 'a short-term
abe obielTtivitie s among other things, "should be comi stent with
-'clht;;es that the lending activities should be conducted on
43 Will reasonably prevent excessive ute of the Association's
BOARD
OF
GOVERNORS
The H
onorable A. W. Robertson
OF THE
FEDERAL RESERVE SYSTEM
-2-
fact,
tie a, and that the operations of the Association under this
should be within its income derived from such operations and
14011;1211cl-1 operations should be fully self-supporting." Each borrower
"
- 4 be required to make a nonrefundable capital contribution to
ThiIA equal to not more than 1/2 of 1 per cent of the amount loaned.
in,arks tehort-term lending program would become part of FNMA's secondary
ro," functions, although it would involve mortgage warehousing,
'ler than secondary market, activities.
chan
, At this time, the Board questions the desirability of the
warers proposed in Title I of the bill relating to short-term
ttl a °using-type loans. If made effective, these changes could result
by, a marked expansion of FNMA's secondary market operations accompanied
borr sub stantial increase in the sale of its stock as well as in its
Tre4cfsliings from the public, with ultimate recourse to the United States
1117 of up to the current limit of $,{>2.25 billion, subject as at
Ares,:,
riot
to the approval of the Secretary of the Treasury. Whether or
s Consolidation of warehousing and secondary market functions
fz)titii agency, as this bill proposes, would create serious potential
Nth eta with fiscal and monetary policy is a matter that deserves
stsu4.
b
Title II of S.
3541
would provide for the newly constituted
4 rIew t.
c)erd of directors to charter, regulate, examine, and supervise
a YPe of Federal financial Intermediary, which would be known
Fe:
capit-l
'ral mortgage investment companies. These companies would be
Gover,,,,_
41-d-zed at not less than $1 million each in the form of cash,
rnt securities, or first mortgages. They would be authorized
to or
,
411c1 00,
g-In te, purchase, sell, service, borrow on the security of,
'&11:
arl ervise deal in any FHA-insured or VA-guaranteed mortgage, and
t4ore ',t1,tirst mortgage loan (or similar first lien) representing not
'
4 411 75 per cent of the value of the underlying property.
to
The Federal mortgage investment companies would be authorized
uorr.
r,'Aceed,°11 money by issuing obligations in an aggregate amount not
'ng twenty times the amount of their paid-up capital and surplus.
• co
reeerv
:
IPanies would be required to accumulate and maintain minimum
ect,,,
-3 43 specified by rules and regulations of the FNMA board of
To the extent that the companies set aside not more than
7dllotieent of their taxable income in a reserve for losses, a
b-1)%tle °II of the same amount would be authorized from their taxable
cer,i. In a dditi on for companies which distributed at least 90
the3,of their taxable income in dividends or interest, a deduction
'me amount would be permitted from taxable income.
BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
The Honorable
A. W. Robertson
-.3-
The Board questions the desirability of establishing Federal
r„ gage investment companies as proposed in Title II. These comt-fies would apparently have unlimited exemption from Federal income
1:.!Jcation
as long as they set aside 10 per cent of their taxable income
reserve for losses and distributed the remaining 90 per cent as
4-4'87.idends or interest, or as long as all taxable income was distributed
hipid idends or interest. This would place such companies in a
ii1;774'Y favored tax position as against other types of competing
vT,,d.t
utionalized mortgage lenders, whose tax benefits are limited
evenZrnng degrees. Moreover, serjous problems might arise in the
thej uhe Federal mortgage investment companies, in order to honor
63l1gations, attempted to sell or otherwise dispose of their
ngs of conventional loans. Unlike Federally underwritten
gee, these loans might not be highly marketable. In any event,
t
90 Provision granting an equivalent tax deduction only if at least
cent of taxable income were distributed in interest or dividends
EIPpear to discourage a conservative dividend and reserve policy.
tIritver
Special studies by private organizations, especially the
are
tY of California at Los Angeles, as well as by public agencies
cezyt-17/11 under way with regard to the appropriate role and functions of
hitrli:134- mortgage facilities in the private secondary mortgage market.
F,I
; of other studies are also in process concerning the role of
1.(
1 i ti41-k
chartered and other financial intermediaries in our economy
401114
!Problems raised by the large volume of liquid claims resulting
reN;4eir rapid growth in the postwar period. In the absence of the
IlEis :
r s.,°f such studies and in the limited time available, the Board
cliet.i-suricted its comments to some aspects of S. 3541 which seem
able at this time.
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
Wm. McC. Martin, Jr.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No. 7
5/25/60
ADDRESS orrIcIAL CORRESPONDENCE
TO THE BOARD
May 25, 1960
** William H. Braun, Jr.,
,
Secretary,
'ederal Reserve Bank of New York,
44 York 16, New York.
4ar Mr. Braun:
has
With reference to your letter of May 2/41 1960, the Board
tolt, ° Objection to the assignment of Messrs. Holmes and Klopstock
%ay;Period of approximately three weeks, commencing on or about
.
1
1.3 Plus travel time, to enable them to obtain information
stle ....f.ading commercial banks in Europe with regard to the
ittezpuibility of foreign held dollar balances to short-term
ko:est rate movements, and also to investigate the continental
ellIt
!
r market. It is understood thaz at least some of the rethis study project would be used in the preparation of a
or the Commission on Money and Credit.
Very truly your's,
(
Merritt Shermanl,
Secretary.
BOARD OF GOVERNORS
OF THE
Item No. 8
FEDERAL RESERVE SYSTEM
5/25/60
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
May 24, 1960
Mr. William R. King,
Assistant Vice President,
Federal Reserve Bank of Boston,
Boston 6, Massachusetts.
Dear Mr. King:
In accordance with the request contained
in your letter of May 17, 1960, the Board approves
the appointment of John Nye Field as an assistant
examiner for the Federal Reserve Bank of Boston.
Please advise as to the date on which the appointment is made effective.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
Item No. 9
FEDERAL RESERVE SYSTEM
5/25/60
WASHINGTON 25. ID, C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
May 24) 1960
Mr. Joseph R. Campbell, Vice President,
Federal Reserve Bank of Philadelphia,
Philadelphia 1, Pennsylvania.
Dear Mr. Campbell:
In accordance with the request contained
in your letter of May 19, 1960, the Board approves
the appointment of James H. Butler as an assistant
examiner for the Federal Reserve Bank of Philadelphia.
please advise as to the date on which the appointment
is made effective.
Very truly- yours,
(Signed) Kenneth A. Kenyon
Kenn2th A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
ocsoa01,
gik.4
OF THE
t.e.
-00
*
'4;1
a'
41,0,x
FEDERAL RESERVE SYSTEM
14
Item No. 10
5/25/60
WASHINGTON 25, D. C.
a
;
ADDRESS OFFICIAL CORRESPONDENCE
4vrA 4tt
TO THE BOARD
May 24, 1960
CONFIDENTIAL (FR)
Mr. Joseph R. Campbell, Vice President,
Federal Reserve Bank of Philadelphia,
Philadelphia 1,
Pennsylvania.
Dear Mr. Campbell:
In accordance with the request contained in
Your letter of May 18, 1960, the Board approves the
appointment of Leon L. Heartter as an assistant examiner for the Federal Reserve Bank of Philadelphia.
It is noted that Mr. Heartter is indebted to
Tradesmans Bank and Trust Company, Philadelphia,
';ennsylvania, a State member bank, in the amount of $700.
Accordingly, the Board's approval is given with the understanding that Mr. Heartter will not participate in any
"amination of Provident Tradesmens Bank and Trust Company
his indebtedness has been liquidated.
OVident
Please advise as to the date on which the
aPPointment is made effective.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
Item No. 11
5/25/60
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
AOORCIIIII
OFFICIAL
CORRILIIPONOENCIE
TO THIL •0041110
May 24, 1960
Mr, W. R. Diercks, Vice President,
Pederal Reserve Bank of Chicago,
Chicago 902 Illinois.
Dear Mr. Diercks:
In accordance with the request contained in
Your letter of May 17, 1960, the Board approves the
appointment of Richard G. Mickel, at present an assistant examiner, as an examiner for the Federal Reserve
Bank of Chicago, effective June 22, 1960.
Very truly yours,
(signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
Ott
FEDERAL RESERVE SYSTEM
Item No. 12
5/25/60
WASHINGTON 25. D. C.
A4
4#
y
4st:it
0
ADDRESS orriciAL CORRESPONDENCE
rat
TO THE BOARD
May 24, 1960
.
C.442EUalEaLLE1/
14r. ifT. R. Diercks, Vice President,
Federal Reserve Bank of Chicago,
Chicago 90, Illinois.
1)ear Mr. Diercks:
In accordance with the request contained in
Your letter of May 17, 1960, the Board approves the
aPPointment of Edward A. Rusin, at present an assistI't examiner, as an examiner for the Federal Reserve
'
lank' of Chicago, effective June 22, 1960.
T
It is noted that Mr. Rusin is indebted to
Oakland Bank, Royal Oak, Michigan, a non'Jmber bank in the amount of $970.20. Accordingly,
4
!
le Board's approval is given with the understanding
Mr. Rusin will not participate in any examina1.11°11 of Theltlayne Oakland Bank until his indebtedness
as been liquidated.
The 11ayne
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
@FedFRASER