Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, May 7, 1959, Volume 46, Part 5

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Minutes for i„ay 7, 10r)9.

To:

Members of the Board

From:

Office of the Secretary

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, if you
were present at the meeting, please initial in
column A below to indicate that you approve the
minutes. If you were not present, please initial
in column B below to indicate that you have seen
the minutes.
A
Chm. Martin
Gov. Szymczak
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King

Minutes of the Board of Governors of the Federal Reserve System
on

Thursday, May 7, 1959.
PRESENT:

Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

The Board met in the Board Room at 10:00 a.m.

Balderston, Vice Chairman
Szymczak
Mills
Robertson
Shepardson
King
Sherman, Secretary
Kenyon, Assistant Secretary
Hackley, General Counsel
Farrell, Director, Division of
Bank Operations
Mr. Solomon, Assistant General Counsel
Mr. Hostrup, Assistant Director, Division
of Examinations
Mr. Nelson, Assistant Director, Division
of Examinations
Mr. Smith, Assistant Director, Division
of Examinations
Mr. Davis, Assistant Counsel
Miss Hart, Assistant Counsel
Mr.
Mr.
Mr.
Mr.

Discount rates.

The establishment without change by the Federal

Reserve Bank of
San Francisco on May 6, 1959, of the rates on discounts
and

advances in its existing schedule was approved unanimously, with

the understanding that appropriate advice would be sent to the Bank.
Items circulated to the Board.

The following items, Which had

been eirmaated to
the Board and copies of Which are attached to these
raillutes under the respective item numbers indicated, were approved
Ilnatimously:

Item No.

t

tett:r to
The National Shawmut Bank of Boston,
vit
,11, Massachusetts, granting an extension of time
of "in which to
comply with the divestment provisions
th the Bank Holding Company Act. (For transmittal
°ugh the Federal Reserve Bank of Boston)




1

5/7/59

-2Item No.

Letter to the Bank of Amherst, Amherst, Virginia,
:
,
1143r°ving the establishment of a branch in Madison
fleights. (For transmittal through the Federal
Reserve Bank of Richmond)
Letter to the Progressive Bank and Trust Company,
New Orleans,
Louisiana, approving the establishment
Of a
branch in the 5400 block of Canal Boulevard.
(For transmittal through the Federal Reserve Bank
of
Atlanta)
Prize contest.

2

3

In advertisements concerning a contest sponsored

by the
Procter & Gamble Co., Cincinnati, Ohio, reference had been made
t° a pictured bag of silver dollars "as obtained from a Federal Reserve
Bank."

This reference led to a large number of inquiries and it appeared

that the association of the Reserve Banks with the contest could possibly
result in
embarrassment to the System.

Accordingly, there had been

distributed to the Board copies of a draft of suggested letter to the
e°117PanY expressing the hope that arrangements would be made with its
advertising agency to delete all references to a Federal Reserve Bank
fl'°:m announcements regarding the contest.
After discussion, during which it was noted that the contest

had reached an
advanced stage, it vas agreed not to send the proposed
letter and
instead to request President Fulton of the Federal Reserve
Bellk of Cleveland to have the matter brought to the attention of an
aPPr°Priate person at Procter & Gamble with a view to avoiding similar
reference to the Federal Reserve in any contest that might be held in
the future.




5/7/59

-3Oral argument.

In preparation for the hearing of oral arguments

frcm four bank holding companies on May 11, 1959, in connection with
Pending requests for determinations under section 4(0(6) of the Bank
11°1ding Company Act, there had been distributed to the Board copies
°f a memorandum from Miss Hart dated May 6, 1959

submittinFT. a tabulation

Of the
nature of the organizations involved and a summarization of the
facts and issues.

Also submitted with the memorandum

as a summarization

Of the
facts and issues pertaining to the request for interpretation
of the
Act by St. Joseph Bank and Trust Company and St. Joseph Agency,
both of
South Bend, Indiana, concerning which action had been deferred
peridin

a decision on the insurance agency question involved in the

cases to be
heard next Monday.
At the Board's request

Mr. Solomon outlined a suggested

Procedural arrangement for the hearing of oral argument which reflected
e°1plicat1on5 arising out of the reluctance of Otto Bremer Company to
associate itself in the proceedings with the other three bank holding
eftPanies,
After discussion, the Board expressed agreement with the
all'angement

proposed by Mr. Solomon and it vas understood that a

temorand__
,441 reflecting them would be distributed for the use of the
zezbers of the
Board.




5/7/59

-4In response to an inquiry regarding the procedure for consideration

of the cases
following receipt of oral argument, Mr. Hackley indicated
that the legal
staff would undertake to prepare a memorandum for the
Boardts

assistance analyzing each of the points at issue and perhaps

flaking recommendations.

Then, after consideration of each case by the

Board on the
basis of such memorandum, the hearing examiner's report
and r
ecommended decision, and the oral presentation, the LeFrAl Division
14ou1d be
prepared to draft appropriate orders and statements.
After Governor Mills commented that the several cases presented
not only
broad problems of importance from the standpoint of precedent
bIlt also subsidiary
issues that might tend to confuse the major points,
Mr. RackleY indicated that the staff would have such considerations
14 Mind in
developing its analytical material for the Board.

Messrs. Nelson and Davis then withdrew and Mr. Molony, Special
Assistant to the Board, entered the room.
Amendments to Regulations T and U.

With reference to the action

taken by
the Board on May 1, 1959, in adopting certain amendments to
Regulation T, Extension and Maintenance of Credit by Brokers, Dealers,
arid
Members of National Securities Exchanges, and Regulation U, Loans
by
Banks for the
Purpose of Purchasing or Carrying Stocks Registered
°11 a National
Securities Exchange, but reserving a final decision on
the fi-,_
--LrIg of public announcement and the effective date, Mr. Solomon




5/7/59

-5-

outlined a suggested schedule whereby there would be issued at 4:00 p.m.
on

Friday, May 8) a brief press release to which would be attached
the
approved amendments and a factual explanation, all in approximately

the same style as when proposed amendments to the regulations were
announced on March 13, 1959.

This schedule contemplated that the

amendments would be published in the Federal Register on or about
MaY 13 and would become effective Monday, June 15, 1959.
In discussion, consideration was given to a suggestion by
Gc)vernor Robertson that the effective date be advanced to June 1, 1959,
since publication of the proposed amendments in the Federal Register
had given interested parties ample opportunity to inspect and comment
11130n them and the
approved amendments were less restrictive, taken
as a group, than those published for comment.

It was noted, however,

that under the Administrative Procedure Act a decision to provide less
than a thirty-day period after publication of the approved amendments
ill the Federal Register would require a finding by the Board that this
14as necessary
in the public interest. In view of that requirement,
and in
as the amendments would exert a tightening effect, it
th
-e

majority,

be

!lay that the originally suggested effective date

preferable to the first of June or June

8, which had been

nlentic'ned during the discussion as a possible alternative.
Because of the current Treasury financing operation, Governor
SzYmczak

suggested that it might be advisable to check informally with




5/7/59

-6-

an a
ppropriate Treasury representative to ascertain whether there would
be any
feeling against public announcement of the amendments tomorrow
afternoon.

It was agreed that such a check should be made by the

Vice Chairman, with
the understanding that in the light of the views
expressed to
him the announcement would either be made on the date
con
templated or on a date as soon thereafter as might appear appropriate.
Secretary's Note: On the basis of conversation
with a Treasury representative following the
meeting, Governor Balderston concluded that
it would be advisable to defer public announcement of the amendments at least until 4:00 p.m.
on Tuesday, May 12, and the other members of
the Board were so informed.
All of the members of the staff except Messrs. Sherman, Kenyon,
liackleY, Farrell, and Smith then withdrew.
Report of examination of San Francisco Bank. The report of
e
xamination of the Federal Reserve Bank
of San Francisco made by
the 111°ardts examining staff as of February 2, 1959, had been circulated
to
the Board
along with the customary supplemental memoranda.
At the Board's
request, Mr. Smith reviewed the highlights of
into
developed through the examination.

Nothing in his comments

l'eta deemed to
require further inquiry or action on the part of the
Board.

The meeting
then adjourned.




5/7/59
Secretary's Note: Governor Shepardson today
approved on behalf of the Board a letter to
the Federal Reserve Bank of Boston (attached
Item No. 4) approving the appointment of
David Kent Sheppard as assistant examiner.

,




BOARD OF GOVERNORS

4,4440-40,0

OF THE

Item No. 1
5/7/59

FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.

4
4'
1'
4V3

ADDRESS OFFICIAL CORRESPONDENCE
44
\
0

TO THE HOARD

SMits
,
‘
4

May 7, 1959

Mr. A. B. Tyler, Vice President,
The National Shawmut Bank of Boston,
Boston, Massachusetts.
Dear Mr. Tyler:
This refers to The National Shawmut Bank of
Doston!s application, pursuant to section 4(a) of the Bank
Holding Company Act of 1956, for an extension of the period,
for one year from May 9, 1959, within which it may retain
its direct ownership of 12,601 of the 100,000 shares of
the Nevada-Massachusetts Company, and 6,970 of the 100,000
shares of the Loyal Protective Life Insurance Company.
In accordance with the provisions of section 4(a)
of the Act, the Board has granted the requested extension.




Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.

BOARD OF GOVERNORS

4,pc,0
,01.1
:
0 c
*
,
65. 4

OF THE

4.*

Item No. 2
5/7/59

FEDERAL RESERVE SYSTEM

lt

WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

May 7, 1959

Board of
Bank of Directors,
Amherst,
Amherst, Virginja.
Ge

ntlemen:

Pursuant to your request submitted through the
Feder
a, ral Reserve Bank of Richmond, the Board of
Governors
c)4
;the Federal
Reserve
System
approves
the
establishment
n a branch on
the west side of U. S. Route 29, one mile
Ilor.th of its intersection with Alternate Route 29, in the
crollneorporated community of Madison Heights, Amherst
111,I, ntY, Virginia, provided capital stock is increased to
brk.J0,000 to meet
Federal statutory requirements, and the
th rich is established within nine months from the date of
ls letter.

It
retis
noted that outstanding preferred stock will
besn,
red prior

to the establishment of the branch through
direct °f additional common stock, and that the board of
j_rs has agreed to
provide additional capital in
'fluarY 196l, if
necessary.




Very truly yours,
(Signed) Kenneth AL Kenyon

Kenneth A. Kenyon,
Assistant Secretary.

BOARD OF GOVERNORS
OF THE

Item No. 3

FEDERAL RESERVE SYSTEM

5/7/59

WASHINGTON 25, D. C.
ADORE69 OFFICIAL CONHESPONOENCE
TO THE HOARD

May 7, 1959

Board of Directors,
Progressive Bank and Trust Company,
New Orleans, Louisiana.
Gentlemen:
Pursuant to your request submitted through the Federal
Reserve Bank of Atlanta, the Board of Governors of the Federal
1.serve System approves the establishment of a branch in the
0 block of Canal Boulevard, New Orleans, Loaislana,by
erogressive Bank and Trust Company, providEld (1) the branch
e tablished
within one year from the date uf this letter,
(
)
i c) branch operhtions now conducted at 5055 Canal Street will
e discontinued simultaneously with the establishment of the
above branch,
and (3) the approval of the State authorities is
in effect
as of the date of the establishment of the branch.

r




Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon
Assistant Secretary.

BOARD OF GOVERNORS
OF THE

Item No.

FEDERAL RESERVE SYSTEM

5/7/59

WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

May 7) 1959

Mr. B. F. Groot, Vice President,
Federal Reserve Bank of Boston,
Boston 60 Massachusetts.
Dear Mr. Groot:
In accordance with the request contained
in your letter of May 1, 1959, the Board approves
the appointment of David Kent Sheppard as an assist—
ant 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.

4