The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Minutes for To: Members of the Board From: Office of the Secretary May 27, 196k. 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. Chm. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. Mitchell Gov. Daane Minutes of the Board of Governors of the Federal Reserve System on Wednesday, May 27, 1964. PRESENT: Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Balderston, Vice Chairman Mills Robertson Shepardson Mr. Sherman, Secretary Miss Carmichael, Assistant Secretary Mr. Bakke, Assistant Secretary Mr. Noyes, Adviser to the Board Mr. Cardon, Legislative Counsel Mr. Fauver, Assistant to the Board Mr. Hackley, General Counsel Mr. Brill, Director, Division of Research and Statistics Mr. Farrell, Director, Division of Bank Operations Mr. Solomon, Director, Division of Examinations Mr. Shay, Assistant General Counsel Mr. Hooff, Assistant General Counsel Mr. Holland, Associate Director, Division of Research and Statistics Mr. Dembitz, Associate Adviser, Division of Research and Statistics Mr. Leavitt, Assistant Director, Division of Examinations Mr. Langham, Assistant Director, Division of Data Processing Mr. Sanders, Attorney, Legal Division Mr. McClintock, Supervisory Review Examiner, Division of Examinations Mr. White, Review Examiner, Division of Examinations Mr. Veenstra, Chief, Financial Statistics Section, Division of Data Processing Discount rates. The establishment without change by the Federal Reserve Bank of Boston on May 25, 1964, of the rates on discounts and , advances in its existing schedule was approved unanimously with the Understanding that appropriate advice would be sent to that Bank. 5/27/64 -2Circulated or distributed items. The following items, copies of which are attached to these minutes under the respective item numbers indicated, were approved unanimously: Item No. Letter to Irving Trust Company, New York, New York, approving the establishment of a branch at 675 Third Avenue, Borough of Manhattan. 1 Letter to Bank of Delaware, Wilmington, Delaware, approving the establishment of a branch at Chestnut Hill Road and Route 273, White Clay Creek Hundred, New Castle County. 2 Letter to The Southwestern National Bank of Oklahoma City, Oklahoma City, Oklahoma, granting its request for permission to maintain reduced reserves. 3 Letter to Chippewa Trust Company, St. Louis, Missouri, waiving the requirement of six months' notice of withdrawal from membership in the Federal Reserve System. 14. Letter to the Federal Deposit Insurance Corporation regarding the application of Northtawn Bank of Decatur, Decatur, Illinois, for continuation of deposit insurance after withdrawal from membership in the Federal Reserve System. 5 Letter to Mr. Eugene Adams, President, The First National 6 Bank of Denver, Denver, Colorado, regarding conflicts between the bank supervisory agencies. Report on competitive factors (Dayton, Ohio). After discussion, a report to the comptroller of the Currency on the competitive factors involved in the proposed merger of The Community Bank, Dayton, Ohio, into The National Bank of Dayton, Dayton, Ohio, was approved unanimously for transmittal to the Comptroller. The conclusion read as follows: e -3- 5/27/64 The Community Bank and The National Bank of Dayton are not direct competitors to an important extent. While the proposed merger will not have adverse effects on other banks serving Montgomery County, it will increase the concentration of banking resources in three banks which now hold about 89 per cent of the total bank deposits in Montgomery County. z, Mr. White then withdrew from the meeting, and Messrs. Schwart nt General Director, Division of Data Processing, and O'Connell, Assista Counsel, entered the room. Call report form (Items 7 and 8). There had been distributed suba memorandum dated May 25, 1964, from Messrs. Veenstra and Holland mitting for the Board's consideration drafts of letters to (1) the Bureau of the Budget responding to a letter dated May 15, 1964, to the heads of the three Federal bank supervisory agencies and (2) the Comptroller of uniform the Currency making clear the System's position with respect to a call report, both in general and with special reference to the forthcoming June call. ed that The May 15 letter from the Bureau of the Budget indicat sory agencies differences in the forms used by the Federal bank supervi had prevented the compilation of regular benchmark statistics for the had involved incomSeptember 1963 call and that the April 1964 call by estimating techniques. Patibilities, which had been overcome The tion of this situation into the letter stated further that a continua June call might be expected to have more serious consequences and urged -4- 5/27/64 that negotiations be undertaken that would assure compatibility for the June and subsequent calls. The draft reply to the Bureau of the Budget would indicate that the Board wished to support the Bureau's efforts to improve the Federal of a uniform call statistical system and was interested in the adoption report and the continuation of a cohesive and integrated banking statistics program consistent with a minimum respondent burden. The letter would state also that the Board had been in communication with the other Federal bank supervisory agencies, specifically urging the adoption of a compatible report form for the June call, and would enclose a copy of a letter that was being sent to the Comptroller of the Currency along this line. In discussion, Mr. Holland pointed out that the letter from the e which Budget Bureau was an outgrowth of a telephon conversation during Mr. Bowman of the Bureau had expressed concern to Governor Robertson the Federal bank supervisory about the lack of common purpose among agencies. In that conversation Mr. Bowman had stated that he proposed to write letters to the three agencies expressing his concern. the proposed letter to the Governor Robertson commented that do any good but, on the other hand, Comptroller of the Currency might not it would at least put on record the Board's willingness to cooperate with the other agencies in working out a suitable format for the call report. ce of having full and comMr. Holland emphasized the importan call. Patible statistics for the mid-1964 -5- 5/27/64 In the discussion that followed, Mr. Holland commented that as yet the Board's staff had no definite information as to the format that the Comptroller of the Currency proposed to use for the June call, although it was understood that the Federal Deposi., Insurance Corporation planned to use a form that would be compatible with the December 1963 call report. If the Comptroller should decide to use an abbreviated form, then it would again be necessary for the Board to collect supplementary information from national banks in order to provide certain benchmark statistics. Governor Mills said he would favor sending the proposed letters to the Bureau of the Budget and to the Comptroller of the Currency. He also suggested that representatives of the Board's staff should be especially recorded about the profusion of attentive to any complaints that were statistics that the Board was requesting. He felt strongly that the Board should have in mind the proper interests of banks, and he would not wish to place on them the burden of reporting a mass of statistics for which there was little or no real need. staff had in Mr. Veenstra commented that the plans the Board's in the total mind for the call report would result in a net reduction burden of reporting. Referring to Governor Mills' remarks, Mr. Noyes stated that, on the other side of the picture, complaints had been received from the in usefulness and validity of the banking fraternity about the decline Board's statistics. S';'S -6- 5/27/64 Governor Robertson expressed the view that it was important to have a record of this sort of complaint as well as the type mentioned by Governor Mills. After some further discussion, the letters to the Bureau of the Budget and the Comptroller of the Currency were approved unanimously in the form attached as Items 7 and 8. It was understood that a copy of the letter to the Comptroller would be sent to the Federal Deposit Insurance Corporation. Mr. McClintock then withdrew from the meeting and Mr. Hexter, Assistant General Counsel, entered the room. Payment of interest on "borrowed" funds (Item No. 9). Pursuant to the understanding at the Board meeting on February 17, 1964, a letter was sent to the Presidents of all Federal Reserve Banks enclosing a copy of a proposed reply to an inquiry from Wachovia Bank and Trust Company, Winston-Salem, North Carolina, as to whether it would be permissible for a member bank to "borrow" at an agreed rate of interest, from correspondent banks and other depositors, by means of transfers from "deposits" to "bills Payable", "borrowed money", or other similar liability account. The inquiry from Wachovia described a procedure under which a a certain country bank requests its city correspondent to "invest for weeks -- a specified Period of time" -- overnight or for a few days or Portion of the country bank's deposit balance with the city correspondent. The city correspondent itself agrees to "borrow these funds ... at the 1879 5/27/64 Federal funds rate." The specified amount is thereupon transferred, on the books of the city correspondent, from the deposit account to "bills payable", and the country correspondent is paid interest thereon at the current rate for Federal funds. The Board's letter to the Reserve Banks pointed out the possibility that the procedure described might have important implications with respect to sound banking practice, the statutory prohibition against payment of lity of reserve requirements, interest on demand deposits, the applicabi and the Federal funds market. The letter requested comments on the pro- posed reply, including views as to the nature and magnitude of the problems presented and recommendations as to procedures for dealing with those problems. Prior to today's meeting there had been distributed a memorandum from the Legal Division dated May 25, 1964, transmitting a summary of the responses from the Reserve Banks to the Board's February 17 letter. In view of the importance of the matter from the standpoint of bank the proposed supervision generally, the Legal Division recommended that reply to the Wachovia inquiry be sent to the Comptroller of the Currency and the Federal Deposit Insurance Corporation for comments. A draft of memorandum. letter to the two agencies was attached to the d the responses At the Board's invitation, Mr. Sanders summarize Of the Reserve Banks, his remarks being based mainly on information in the attachment to the May 25 memorandum. He noted that all of the Reserve ALt4 4-11 -8- 5/27/64 Banks except St. Louis and Kansas City had agreed with the conclusion reached by the Board's Legal Division that the transaction described by Wachovia would not constitute the payment of interest on demand deposits in violation of section 19 of the Federal Reserve Act and the Board's Regulation Q. Five of the ten Reserve Banks that had agreed with the Legal Division conclusion favored publication of the Board's interpretation. Mr. Solomon stated that, in general, he would not consider the type of transaction under discussion to be sound; he would like to find a way to discourage it if there was any feasible way of doing so since he doubted that the prohibition against payment of interest on demand deposits could be maintained if such transactions became general. In the ensuing discussion, Mr. Hexter said that after careful consideration of the matter the Legal Division was unable to find a solution that would restrict the practice without virtually destroying the Federal funds market. As had been pointed out at the Board meeting On February 17, 1964, the kind of transaction presented by Wachovia seemed to be indistinguishable, on any clearly defensible ground, from Permissible Federal funds transactions. Governor Mills stated that he agreed regretfully with the conclusion that had been reached by the Legal Division, but he also agreed with Mr. Solomon that some way should be found to discourage this type of transaction. He felt there should be an actual exchange of instru- ments between the lender and borrower in the case of each transaction IhHI 5/27/64 involving a transfer of a portion of a customer's deposit account to a "borrowed money" account. Otherwise, Governor Mills suspected that a situation would develop where a bank depositor would tell his bank that any time his deposits were in excess of a certain amount, he would lend the excess to the bank at the Federal funds rate of interest. If the Board were to prescribe that each such transaction be handled individually, at least some restraint would be provided. Governor Robertson said that he was disturbed about the transaction Presented by Wachovia. It appeared that the Board might be permitting a practice where a bank would "borrow" from a correspondent and, instead of calling the bank's obligation a deposit, it would be called a loan, Which would not be subject to reserve requirements or to interest rate limitations under Regulation Q. Governor Robertson said he agreed with the Legal Division's opinion regarding the transaction, but he thought an attempt should be made to curtail such a transaction to the fullest extent possible. He concurred in the view expressed by Governor Mills that the transaction should be evidenced by something more than a book entry. Governor Mills noted that before the officers of a bank could borrow funds they would need to have some authorization. Accordingly, Lt would seem that supervisory examiners would be able to find in the records of a bank some evidence of the authority to borrow funds in the circumstances under consideration. In his judgment, there should be some instrument clearly executed in accordance with a duly approved resolution. ' -10- 5/27/64 As the discussion progressed, Governor Shepardson stated that he was bothered by the possibility that the Board might be placed in the position of trying to work with an unenforceable restriction. Accordingly, he considered it important for the Board to explore what its ultimate position would be before answering the question that had been presented. Mr. Hackley suggested that a paragraph might be added to the Proposed response to the effect that, while the transactions described did not violate section 19 of the Federal Reserve Act or Regulation Q, it should be understood that whenever a transfer was made from a deposit account to "bills payable" or similar account, statutes relating to borrowing and lending would be applicable. However, a question could be raised as to the ways in which a "deposit" account differed significantly from a "borrowed money" account. The Congress had prohibited the payment of interest on demand deposits, but if a bank should choose to cast a transaction in the form of a loan rather than a deposit, then the customer from whom the money was borrowed could no longer draw checks on the "borrowed" portion of his funds. Mr. Hackley noted that there was a limit on the amount of money a bank could borrow, and he wondered if there was any real problem unless the practice were to develop to such an extent that this sort of transaction was being used by banks generally not as bona fide borrowing but as a device to evade provisions of Regulation Q. 188:3 -11- 5/27/64 Governor Robertson commented that if the Board's reply to the Wachovia inquiry were to include a reference to the statutory requirements that would be applicable with respect to the borrowing of funds, that might discourage the practice to some extent. At the conclusion of the discussion, it was understood that the proposed reply to the Wachovia inquiry would be revised in line with views expressed at this meeting and that copies would be sent to the other Federal bank supervisory agencies for comments. A copy of the letter sent to the Comptroller of the Currency is attached as Item No. 9. A similar letter was sent to the Federal Deposit Insurance Corporation. It was further understood that copies of the proposed letter and of the letters to the two agencies would be sent to the General Counsel of the Treasury Department as a matter of information, even though the procedure outlined in the Secretary of the Treasury's letter of March 3, 1964, did not appear to be applicable in this instance. Messrs. Noyes, Schwartz, Hooff, Langham, and Sanders then withdrew from the meeting. Request of Chairman Patman for supplemental information (Item .__12). B.2. There had been distributed a draft of reply to Chairman Patman Of the House Banking and Currency Committee in response to his letter of April 20, 1964, in which information was requested that would supplement material contained in the Board's 50th Annual Report to the Congress. -12- 5/27/64 Following discussion during which a number of changes in the was wording of the letter were suggested and agreed upon, the letter approved unanimously in the form attached as Item No. 10. Visit of Mr. Roth. Mr. Farrell reported on arrangements that had been made for Mr. Roth, Chairman of the Board of Franklin National with members of the Board's Bank, Franklin Square, New York, to meet Board's denial of the bank's staff on Thursday, May 28, to discuss the carry country bank reserves followrequest for permission to continue to ing establishment of a branch in New York City. Several suggestions as to the approach that the staff might follow in talking with Mr. Roth were made. It was understood that a report on the conference would be furnished each member of the Board. Reception for Reserve Bank representatives. Mx. Sherman reported son's approval, a telegram had that on May 26, 1964, with Governor Shepard Federal Reserve Banks and Vice Presidents been sent to the Presidents of all invitation to an informal reception in in charge of branches extending an the Board's dining rooms at 3:30 p.m. on Wednesday, June 3, for Reserve American Institute of Banking Annual Bank representatives attending the ton. Convention, to be held in Washing ed that they were in agreement with Members of the Board indicat plans for the reception. The meeting then adjourned. Secretary's Note: Governor Shepardson approved the on behalf of the Board on May 26, 1964, following items: 1885 5/27/64 -13- Letter to the Federal Reserve Bank of San Francisco (attached Item No. 11) approving the appointment of Jon E. Garcia as assistant examiner. Memoranda from the Division of Personnel Administration recommending the appointment of Bernice Bell and Joyce Matile as Clerk-Stenographers in that Division, each with basic annual salary at the rate of $3,880, effective the respective dates of entrance upon duty. tett Secreta -- 1886 BOARD OF GOVERNORS Item No. 1 5/27/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL. CORRESPONDENCE TO THE BOARD May 27, 1964. Board of Directors, Irving Trust Company, New York, New York. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment by Irving Trust Company, New York, New York, of a branch at 675 Third Avenue, Borough of Manhattan, New York, New York, provided the branch is established within one year from the date of this letter. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, 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.) 88I Item No. 2 5/27/64 BOARD OF GOVERNORS OF THE soi9UV GOve„:, FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 4' ADDRESS OFFICIAL CORRESPONDENCE , ....\k,".•• •f•it;ILREO:'• TO THE BOARD ...,, '•• • • •• May 27, 1964. Board of Directors, Bank of Delaware, Wilmington, Delaware. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment of a branch by Bank of Delaware at the intersection of Chestnut Hill Road and Route 273, White Clay Creek Hundred, New Castle County, Delaware (site to be designated as 414 Christiana Road, Newark P.O., Delaware), provided the branch is established within one year from the date of this letter. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, 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 90_962 (S-1846), should be followed.) I e43( Item No. BOARD OF GOVERNORS 3 5/27/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 27, 1964. Board of Directors, The Southwestern National Bank of Oklahoma City, 6000 South Western Avenue, Oklahoma City, Oklahoma. Gentlemen: With reference to your request submitted through the Federal Reserve Bank of Kansas City, the Board of of Section 19 of the Governors, acting under the provisions to the Southwestern sion Federal Reserve Act, grants permis in the same reserves mainta to National Bank of Oklahoma City ined by nonbe mainta to ed against deposits as are requir it date the opens for of as reserve city banks, effective business. Your attention is called to the fact that such by the Board of Governors. permission is subject to revocation Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. 1889 Item No. L. BOARD OF GOVERNORS ,.'t OFGovi •. • ,.4 to, A, 5/27/64 OF THE .40,04 FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 c•-1 • A, •-) ADDRESS OFFICIAL.. CORRESPONDENCE TO THE BOARD 'f!'ll. RF.S.•. May 27, 1964. Board of Directors, Chippewa Trust Company, St. Louis, Missouri. Gentlemen: The Federal Reserve Bank of St.. Louis has forwarded to the Board of Governors your letter dated May 6, 1964, together With the accompanying resolution signifying your intention to Withdraw from membership in the Federal Reserve System and requesting waiver of the six-months' notice of such withdrawal. In accordance with your request, the Board of Governors waives the requirement of six-months' notice of withdrawal. Upon surrender to the Federal Reserve Bank of St. Louis of the Federal Reserve Bank stock issued to your institution, such stock Will be canceled and appropriate refund will be made thereon. Under the provisions of Section 208.10(c) of the Board's Regulation H, your institution may accomplish termination of its membership at any time within eight months from the date the notice of intention to withdraw from membership was given. It is requested that the certificate of membership be returned to the Federal Reserve Bank of St. Louis. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. taoci 4 . ( _AL Item No. BOARD OF GOVERNORS 5 5/27/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL. CORRESPONDENCE TO TNE BOARD May 27, 1964. The Honorable Joseph W. Barr, Chairman, Federal Deposit Insurance Corporation, Washington, D. C. 20429 Dear Mr. Barr: Reference is made to your letter of April 30, 1964, concerning the application of Northtown Bank of Decatur, Decatur, Illinois, for continuance of deposit insurance after withdrawal from membership in the Federal Reserve System. Since the examination of subject bank by the Federal Reserve Bank of Chicago as of the close of business July 5 1960, adequacy of the bank's capital has been considered less than satisfactory in relation to the volume of risk assets held by the bank. The Reserve Bank has regularly requested that action be taken to improve the bank's capital position through the sale of unspecified amounts of additional capital stock for cash. There have been no other corrective programs urged . Upon the bank, or agreed to by it, which have not been fully no other such are opinion, there Board's the in consummated, and, programs that it would be advisable to incorporate as conditions of admitting the bank to membership in the Corporation as a nonmember of the Federal Reserve System. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. Item No. BOARD OF GOVERNORS 6 5/27/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON OFFICE OF THE VICE CHAIRMAN May 27, 1964. Mr. Eugene H. Adams, President, The First National Bank of Denver, Denver 17, Colorado. Dear Gene: In the absence of Chairman Martin, I am taking the g liberty of acknowledging your letter of May 18, 1964, advisin of your appointment by the President of the American Bankers m that Association as chairman of a commiLtee to study the proble isory superv the bank between ts conflic has arisen from current agencies. Your letter will be brought to the Chairman's attento tion upon his return, and I am sure that he would be happy study. your with tion connec in him visit have your committee Meantime, with the thought that it may be of some some of assistance, I am enclosing a memorandum that describes cy and Curren of the ller Comptro the the major conflicts between . months ed recent during develop have that the Board of Governors gs hearin the r with familia are you In addition, I assume that that were held in May of last year by the House Committee on 5874, to Banking and Currency with respect to the bill, H. R. and Martin an Chairm sion. Commis establish a Federal Banking dually ed indivi testifi ll Mitche and Governors Robertson, Mills, tee were at the hearings; and their statements before the Commit e Bulletin, Reserv l Federa the of issue reprinted in the May 1963 ed. a copy of which is enclos one but Your committee's assignment is a formidable sure that you am I and ance, import t certainly one of the highes sting. will find it extremely intere Sincerely yours, (Signed) C. C. Balderston C. Canby Balderston, Vice Chairman. Enclosures 18 '1 Item No. BOARD OF GOVERNORS 7 5/27/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, 0. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 27, 1964. Mr. Raymond T. Bowman, Assistant Director for Statistical Standards, Executive Office of the President, Bureau of the Budget, Washington, D. C. 20503 Dear Mr. Bowman: The Board appreciates the concern for statistical cooperation among the Federal bank supervisory agencies expressed in your letter of May 15 and hopes that it will prove to be a stimulus to early resumption of the arrangements which prevailed for many years. The Board suPports the Bureau's efforts to improve the Federal statistical System; it has a strong interest in the adoption of a uniform call report and the continuation of a cohesive and integrated banking statistics program consistent with a minimum respondent burden. The Board has been in communication with the other Federal bank supervisory agencies specifically urging the adoption of a compatible report form for the June call. You may be interested in the enclosed copy of the Board's letter to the Comptroller of the Currency, a copy of which also has been sent to the Chairman of the Federal Deposit Insurance Corporation. Compatibility in the report forms of the different agencies is regarded as essential for an effective banking statistics program. Beyond the question of the June reporting form, the Board is hopeful that the agencies can arrive at some orderly means for considering and reconciling various views toward improving the call report in the kiture. In this connection, your offer of personal assistance in leiPing to work out an appropriate program will be kept very much in mind. The Board's staff will continue to keep your Office advised of developments in this area. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Eticlosure. -2(-7 ' L( ). BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 8 5/27/64 WASHINGTON OFFICE OF THE VICE CHAIRMAN May 27, 1964. The Honorable James J. Saxon, Comptroller of the Currency, Washington, D. C. 20220 Dear Mr. Comptroller: In the light of attention now focused on differences with respect to condition report format and procedures, it seems desirable to bend every effort to achieve some orderly means for considering and reconciling our various views toward improving the call report. At the same time, the Board believes it imperative to minimize the problems posed for call report data collection in the interim. The Budget Bureau's letter of May 15, 1964, to the heads of the three Federal bank supervisory agencies and the President's directives on the simplification of reports to the Government are indications of a new and growing interest in coordinating this area of Governmental activity. In the past, it has been possible to accommodate individual needs through effective cooperation and compromise among all the bank supervisory authorities. We should like to see this cooperation continue, and we are prepared to extend our own efforts in this direction. You recognize, I am sure, that in such a spirit the Board did not endeavor to argue against the abbreviated call report form for March, even though the resulting incompatibilities necessitated the development of some time-consuming and not entirely accurate estimation procedures in order for the Board, the Federal Deposit Insurance Corporation, and other agencies to be able to publish summary totals for the banking system. We, for our part, recognize that your Office has occasionally, as last December, submerged its own desires to the needs for compatible statistical bench marks. In the light of this experience, the Board suggests that the mid -1964 call date is one for which full and compatible statistics are Of unusual importance. Not only is the typical June 30 date a bench mark for comparing a wide variety of midyear financial and nonfinancial figures, but its importance as a bench mark this year is enhanced by the absence of detail from the back of the reports submitted in March* Should have read April The Honorable James J. Saxon -2- this year and last September, and the intramonth dating chosen for the call last December. We therefore urge that your Office give serious consideration to the distribution of a condition report form at the forthcoming midyear call date that will contain a full front and back and be compatible with the form to be distributed to State banks. It is recognized that, because of operating difficulties and time limitations arising from the necessity for the Board and the Federal Deposit Insurance Corporation to coordinate with State banking departments, this may require postponement of some desired revisions in the national bank report form. However, any such move on the part of your Office to achieve compatibility in June will not prejudice the mutual consideration of these revisions in the report form for later calls. It is apparent to us that the substance of some of the innovations introduced in the national bank form recently merit adoption in any uniform State-national report, and we believe this can be accomplished without overburdening either national or State banks. The representatives of the State banking departments have already indicated a willingness to consider sympathetically any reasonable program on which the Federal agencies can agree in this area. We share with you the desire that the Federal banking agencies should continue to exercise initiative in this respect. The three Federal agencies may have somewhat divergent interests in the use of the condition report form, but there is also a meet dominant community of interests. Considerable latitude remains to feel We form. report most legitimate interests in a single compatible confident that, if the three agencies can achieve consistency for the June call, we can thereafter manage to work out a compatible format for the three classes of banks that would serve our individual needs for supervisory and statistical information and also serve as a means of appropriate disclosure to the public of the condition of individual banks. In critical instances, the possibility of supplemental sample reporting, discussed among our staffs, may well offer an avenue for reducing respondent burdens. We shall be happy to discuss this subject With you, or to have members of our staff work with yours, in an effort to arrive at the goals indicated. Sincerely yours, • ) ) C. Canby Balderston, Vice Chairman. Item No. BOARD OF GOVERNORS 9 5/27/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 28, 1964. The Honorable James J. Saxon, Comptroller of the Currency, Treasury Department, Washington, D. C. 20220 Dear Mr. Saxon: A member State bank has inquired whether it is permissible rate of interest from a for a member bank to "borrow" at an agreed from "Deposits" to "Bills transfers of means correspondent bank, by account. liability similar a or payable", "Borrowed money", The inquiry may have important implications with respect of security to banks' to sound banking practice (including the giving of payment on demand interest against creditors), the prohibition the Federal To and funds market. deposits, reserve requirements, this of ion the would matter, Board considerat assist in its further appreciate receiving your comments and recommendations. The enclosed draft of a proposed response may be of assistance in your study of the question presented. The Board's staff is available for discussion of the matter with representatives of your Office. The Board is also seeking the views of the Federal Deposit Insurance Corporation. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Enclosure BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 10 5/27/64 WASHINGTON UFFICE OF THE VICE CHAIRMAN May 27, 1964. The Honorable Wright Patman, Chairman, Committee on Banking and Currency, House of Representatives, Washington 25, D. C. Dear Mr. Chairman: In response to your inquiry of April 20, 1964, there are enclosed herewith (a) a breakdown of the reimbursements received by the Federal Reserve Banks during 1963 for the fiscal agendy function and other expenses, and (b) a copy of the 1963 audit of accounts and holdings of the System Open Market Portfolio by the Board's examiners. You also asked whether if vault currency and coin had not t been allowed to be counted as part of member banks' reserves subsequen by have the not purchases would System market to December 1959, open been larger, with the result that the open market portfolio would have been larger and the return to the Treasury in the form of interest remittance somewhat larger. It is true that if member banks had not been allowed to count their vault cash as part of required reserves, beginning in had to be provided by other December 1959, more reserves would have through Federal Reserve purchases of being ty possibili means—one Open Market System Account. the for s securitie Government The amount of such purchases that might have been required found cannot be estimated with exactitude. We know that member banks it necessary, prior to being enabled to count their vault cash as assets reserves, to hold, on the average, around $2 billion of such by seasons, bly figure considera varied the although for operating needs, open that approaching $2.5 billion in December. It may be assumed market purchases of approximately this amount were rendered unnecessary at the time vault cash began to be counted toward required reserves, thus reducing to some extent interest "rebates" to the Treasury, by the Congress in 1959 to You will recall that the action was taken for a as reserves cash vault of authorize the counting number of reasons. The main purpose was to correct inequities in the nts among banks, by distribution of the burden of reserve requireme The Honorable Wright Patman -2- eliminating the necessity for "double holding" of nonearning Federal Reserve liabilities by member banks, in one form to satisfy cash needs and in another form to satisfy reserve requirements. Reduction in Federal Reserve costs of shipping currency between member banks and the Reserve Banks, and the desirability of larger supplies of currency at member banks in case of a national emergency, were also factors. d the A fuller exposition of these considerations was presente in this on hearings during e Committe Board's testimony before your legislation. Sincerely yours, (Signed) C. C. Balderston C. Canby Balderston, Vice Chairman. Enclosures. '9F4 Item No. 11 5/27/64 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 26, 1964. CONFIDENTIAL (FR) Mr. E. H. Galvin, Vice President, Federal Reserve Bank of San Francisco, San Francisco, California. 94120 Dear Mr. Galvin: In accordance with the request contained in Mr. Cavan's letter of May 19, 1964, the Board approves the appointment of Jon E. Garcia as an assistant examiner for the Federal Reserve Bank of San Francisco. Please advise the effective date of the appointment. It is noted that The State National Bank of located in Federal Reserve he will not participate in Mr. Garcia is indebted to Wayne, Wayne, Nebraska, District No. 10, but that any examination of that bank. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary.
@FedFRASER