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Minutes for To: Members of the Board From: Office of the Secretary May 28, 1964. 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 Thursday, May 28, 1964. PRESENT: Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Balderston, Vice Chairman Robertson Shepardson Daane Mr. Mr. Mr. Mr. Mr. MT. Mr. Mr. Sherman, Secretary Fauver, Assistant to the Board Hackley, General Counsel Solomon, Director, Division of Examinations O'Connell, Assistant General Counsel Leavitt, Assistant Director, Division of Examinations Spencer, General Assistant, Office of the Secretary Hricko, Senior Attorney, Legal Division Branch application (Item No. 1). Unanimous approval was given to a letter to Peoples Union Bank and Trust Company, McKeesport, Pennsylvania, approving the establishment of a branch on Liberty Way, Liberty Borough, Allegheny County. A copy of the letter is attached to these minutes as Item No. 1. Report on competitive factors (Nashville, Tennessee). There had been distributed a draft of report to the Comptroller of the Currency on e Bank the competitive factors involved in the proposed merger of Nashvill l in and Trust company, Nashville, Tennessee, into Third Nationa Bank Nashville, Nashville, Tennessee. usly for transmittal to the CompThe report was approved unanimo troller in a form containing the following conclusion: A merger of Nashville Bank and Trust Company into te direct Third National Bank in Nashville would elimina pants and partici between would exists competition which 5/28/64 -2- increase significantly the already heavy concentration of banking and trust business in Nashville. This proposal would have clearly adverse effects on competition. Mr. Hricko withdrew from the meeting at this point. Securities reported missing by member bank (Items 2 and 3). There had been distributed a memorandum dated May 27, 1964, from Mr. Solomon, Director, Division of Examinations, with regard to an inquiry by Mr. Robert A. Schremp, on assignment from the General Accounting Office to the House Banking and Currency Committee, about an incident involving certain securities reported missing by State Street Bank and Trust Company, Boston, Massachusetts. At the Board meeting on May 13, 1964, Mr. Solomon reported that Mr. Schremp had inquired whether there had occurred in 1963 or 1964 any incidents of a nature similar to the inadvertent disappearance in 1962 of certain securities from the San Francisco Reserve Bank. It was agreed that Mr. Schremp should be advised in the negative but informed of the incident that occurred earlier this year in which a parcel of $200,000 of U. S. Treasury notes was issued by the Boston Reserve Bank on the basis of a wire transfer transaction originating at the New York Reserve Bank and sent by Brinkls messenger, along with other parcels of U. S. Government securities, to State Street Bank and Trust Company. A week after the date of delivery, the member bank advised the Reserve Bank that the parcel of Treasury notes could not be located. The memorandum of May 27 stated that Mr. Schremp had presented certain questions with respect to the Boston incident. In this connection, -3- 5/28/64 it was suggested that a memorandum be sent to Mr. Schremp indicating that the Federal Reserve Bank of Boston was being requested to give its views on the questions that he raised. A draft of letter to the Boston Reserve Bank that would enclose a copy of the questions presented by Mr. Schremp was attached to the memorandum of May 27. The proposed letter would request the Reserve Bank to review the matter and furnish answers to the questions to the extent practicable. In presenting the matter, Mr. Solomon commented that in conversation Mr. Schremp had indicated that he also wished to obtain answers to certain questions from State Street Bank and Trust Company. Mr. Solomon explained that it would be difficult to get such answers because the Reserve Bank and the member bank were potential opposing litigants; the insurers for State Street Bank and the Reserve Bank in this case would have to decide which company would bear the loss for the missing securities. In a discussion following Mr. Solomon's comments, Mr. O'Connell suggested, for reasons that he outlined, that the letter to the Reserve Bank state clearly that the Bank was to answer only those questions on Which it had information on hand, without carling upon the member bank or Brink's. There being general agreement with this line of reasoning, the letter was approved unanimously for transmittal in the form attached as Item No. 2. A copy of a memorandum dated April 28, 1964, from Mr. Solomon to mi.. Schremp is attached as Item No. 3. t -4- 5/28/64 Questionnaire on external crimes against banking institutions (Item No. 4). There had been distributed a memorandum dated May 28, 1964, from the Division of Examinations discussing a proposed questionnaire, for use in the examination of banks, that would provide certain information on crimes against banking institutions. The memorandum pointed out that earlier this year the Legal and Monetary Affairs Subcommittee of the House Committee on Government Operations submitted to the Congress a report on crimes against banking institutions. The report contained recommendations to the Federal bank supervisory agencies and the Federal Home Loan Bank Board to combat the rise in such crimes. The memorandum stated that it appeared desirable to the staffs of the Federal Deposit Insurance Corporation and the Federal some of the recommendations Reserve that steps be taken to implement contained in the Subcommittee report. In this connection, it was believed desirable to place the external control program on a more formal basis. against external crimes should be In this way controls and security about trends might be developed. strengthened and valuable information supervisors with information so The questionnaire would provide bank it possible to determine that results might be tabulated, thus making by bankers and the steps being the degree of acceptance of the program taken to improve security and controls against external crimes. of May 28 a draft of There was also attached to the memorandum letter to the Comptroller of the Currency explaining the proposal and - -5- 5/28/64 inviting the cooperation of his Office in the program. The memorandum to send a noted that the Federal Deposit Insurance Corporation planned similar letter. At the Board's request, Mx. Solomon commented in supplementation of the information presented in the memorandum of May 28. question In the discussion that followed, Governor Daane raised a American whether the proposed questionnaire had been discussed with the Bankers Association. Mr. Solomon replied that the questionnaire drew external upon a memorandum prepared by the Association on the subject of crimes against banks. Governor Robertson indicated that he was in favor of the questionted naire and that its use by Reserve Bank examiners should be institu without undue delay. At the conclusion of the discussion, it was understood that if would be the Comptroller of the Currency should submit suggestions they the Reserve Banks considered before the questionnaire was transmitted to With instructions for its use. The letter to the Comptroller was then use by Federal Reserve approved unanimously, which action contemplated ed at this meeting examiners of the questionnaire in the form present a reasonable time modifications unless the Comptroller suggested within that seemed to merit consideration. Comptroller is attached as Item No. A copy of the letter sent to the 4. All members of the staff except Mr. Sherman then withdrew from the meeting. -6- 5/28/64 Report on meeting of Group of 10 deputies. Governor Daane reported on the recent Paris meeting of the deputies of the Group of 10, relating to further work on the assignment to study the outlook for the functioning of the international monetary system and its probable future needs for liquidity. The meeting then adjourned. Secretary's Notes: Pursuant to recommendations contained in memoranda from appropriate individuals concerned, Governor Shepardson today approved on behalf of the Board the following actions relating to the Board's staff: Permission to work additional period before beginning maternity leave Nancy H. Teeters, Economist (half-time basis), Division of Research and Statistics, granted permission to work through June 12, 1964, before beginning maternity leave. Change in official headquarters Roger A. Haskell, Assistant Federal Reserve Examiner, Division of Examinations, from Washington, D. C., to Seattle, Washington, effective immediately. Governor Shepardson today noted on behalf of the Board a memorandum from the Division of Examinations advising that Elmer W. Lyster, Federal Reserve Examiner in that Division, had filed application for retirement, effective at the close of business May 31, 1964. Secretary i95 Item No. 1 BOARD OF GOVERNORS 5/28164 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 28, 1964. Board of Directors, Peoples Union Bank and Trust Company, McKeesport, Pennsylvania. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment by Peoples Union Bank and Trust Company, McKeesport, Pennsylvania, of a branch on Liberty Way in the vicinity of the intersection of ny Liberty Way and Owens Street, Liberty Borough, Alleghe shed establi is County, Pennsylvania, provided the branch 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.) Item No. 2 5/28/64 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. AODRESS OFFICIAL CORRESPONDENCE TO THE BOARD May 28, 1964. Mr. George H. Ellis, President, Federal Reserve Bank of Boston, Boston, Massachusetts 02106. Dear Mr. Ellis: of a For your information there is attached a copy Frederic Mr. from nt attachme and 1964, memorandum dated May 14, tions, to Solomon, Director of the Board's Division of Examina Banking House the to nt assignme on is who Mr. Robert A. Schremp, Office. ing Account General the and Currency Committee from Schremp There is also attached a copy of a memorandum from Mr. ion informat further ng requesti to Mr. Solomon, dated May 20, t, Distric your in es securiti the regarding the disappearance of reply in date today's of dum and a copy of Mr. Solomon's memoran to Mr. Schremp. It will be appreciated if you will review this matter questions and, to the extent practicable, supply answers to the you will that course, of , assumed is It . raised by Mr. Schremp bank member the or Brinks from ion informat avoid seeking any in claims possible tions' institu those with that might conflict their to have might they bilities responsi any the matter or with insurers. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Enclosures BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 5/28/64 May 28, 1964. TO: Mr. Robert A. Schremp FROM: Frederic Solomon Your memorandum of May 20, 1964, states several questions regarding the occurrence in the Boston Federal Reserve District in which a member bank reported the disappearance of certain securities. In the course of conversation you have indicated that you would like to have the views of the Federal Reserve Bank of Boston regarding those questions. The Federal Reserve Bank of Boston is being asked to give its views on the questions and you will be advised in due course. 3 /-8 BOARD OF GOVERNORS Item No. OF THE 4 5/28/64 FEDERAL RESERVE SYSTEM WASHINGTON, D. 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. Dear Mr. Saxon: you know, in February of this year the Committee on ed to Government Operations of the House of Representatives submitt tions." Institu Banking Against "Crimes on the Congress a report addressed to This Committee Report contained eight recommendations Loan Home Federal the and s agencie sory the Federal bank supervi Bank Board. As part of the continuing program of improving bank superInsurance vision, the Federal Reserve System and the Federal Deposit y Securit on nnaire d questio enclose Corporation have developed the which nnaire, questio This Crimes. and controls Against External each bank, Would be completed by the examiner at the examination of banks have ial commerc which to degree the will assist in determining l crimes. externa from them protect inaugurated policies designed to tabulate may we that so d designe The questions have been specifically results to determine trends. As the Comptroller The Board would be happy to have the Office of Some nnaire. questio this of of the Currency participate in the use We iate. appropr seems it if made modifications could, of course, be put to hope we as future near the Would appreciate hearing from you in able. practic this program into effect as soon as Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Enclosure.
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