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Minutes for November 16, 1956, 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 Chin. Martin Gov. Szymczak Gov. Vardaman Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Minutes of actions taken by the Board of Governors of the Federal Reserve System on Friday, November 16, 1956. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Balderston, Vice Chairman Szymczak 1/ Vardaman Mills Robertson Shepardson Mr. Carpenter, Secretary Mr. Kenyon, Assistant Secretary Mr. Leonard, Director, Division of Bank Operations Mr. Vest, General Counsel Mr. Sloan, Director, Division of Examinations Mr. Hexter, Assistant General Counsel Mr. Goodman, Assistant Director, Division of Examinations The following matters, which had been circulated to the members °I* the Board, were presented for consideration and the action taken in each instance was as stated: Vice President and Secretary, Federal Reawe Letter to Mr. Ds, serve Bank of Chicago, reading as follows: The Board of Governors approves the payment of salaries to the following officers for the period November 1, 1956, through December 31, 1956, at the rates indicated which are the rates fixed by the Board of Directors as reported in your letter of November 2, 1956: Name Joseph J. Srp Paul F. Carey V Title Assistant Cashier, Head Office Assistant Cashier, Detroit Branch Annual Salary f10,250 Azaitered meeting at point indicated in minutes. 9,100 11/16/56 -2- The Board of Governors also approves the payment of salary to Mr. Paul C. Hodge as General Counsel end Assistant Secretary for the period November 11 1956, through December 31, 1956, at his present rate of *18,000 per annum. The salary proposals for 1957 will be considered in connection with the review of your annual budget. Approved unanimously. Letter to Mr. Newman, Vice President, Federal Reserve Bank of Chicago, reading as follows: The Board of Governors approves the payment of salary by the Federal Reserve Bank of Chicago to the incumbent of the position listed below at the rate indicated, effective October 1, 1956, in accordance with the requests in your letters of September 25 and October 291 1956. Title Annual Salaa Marble Man $5,171.40 Approved unanimously. frrust Letter to the Board of Directors, Manufacturers and Traders Company, Buffalo, New York, reading as follows: Pursuant to your request submitted through the Federal Reserve Bank of New York/ the Board of Governors approves the establishment by Manufacturers and Traders Trust Company, Buffalo, New York, of a branch at 97 Main Street, Batavia, New York, the present location of Genesee Trust Company, provided that (a) the merger of Genesee Trust Company into Manufacturers and Traders Trust Company is effected substantially in accordance with the plan of merger dated June 20, 19561 as submitted through the Federal Reserve Bank of New York, (b) formal approval is obtained from the appropriate State authorities/ and (c) the merger and establishment of the branch are accomplished within six months from the date of this letter. Approved unanimously, for transmittal through the Federal Reserve Bank of New York. 23 (31 11/16/56 _3_ Letter to the Board of Directors, American National Bank of Brunswick, Brunswick, Georgia, reading as follows: The Board of Governors of the Federal Reserve System has given consideration to your application for fiduciary powers and grants you authority to act, when not in contravention of State or local law, as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies or other corporations which come into competition with national banks are permitted to act under the laws of the State of Georgia, the exercise of all such rights to be subject to the provisions of the Federal Reserve Act and the regulations of the Board of Governors of the Federal Reserve System. A formal certificate indicating the fiduciary powers Which the American National Bank of Brunswick is now authorized to exercise will be forwarded to you in due course. Approved unanimously, for transmittal through the Federal Reserve Bank of Atlanta. There were presented telegrams proposed to be sent to the fol1°14Ing Federal Reserve Banks approving the establishment without change, (311 the dates indicated, of the rates of discount and purchase in their eisting schedules: San Francisco New York Philadelphia Chicago November November November November 14 15 15 15 Approved unanimously. A letter dated October 25) 1956, had been received by the Board *3111 Mr. E. David Rosen, Assistant United States Attorney, Southern tist. -11-et of Florida, Miami, Florida, requesting the name and address of tate member bank located in certain named cities in the State of 2362 11/16/56 -4- Florida, a copy of the latest report of condition for each such bank, and the names of persons who had served as President or Chairman of the Board of such institutions for the past five years. The letter, however, did not disclose the purpose for which the information was A draft of reply to Mr. Rosen which would furnish the requested sought. information had been circulated to the members of the Board prior to this meeting. In a discussion of the matter the opinion was expressed that although the information requested was of a published nature it would be desirable to know the reason for the request before a reply was sent. Accordingly, Governor Robertson suggested that Mr. Vest be asked to get in touch with the appropriate office of the Department of Justice with a view to ascertaining the circumstances surrounding the request. This Ngestion contemplated that if the response of the Department of Justice Illdicated that the request was made in line with official duties and there appeared to be no other complicating circumstances, the information lould be furnished to Mr. Rosen. There was unanimous agreement with the procedure suggested by Governor Robertson. Secretary's Note: Mr. Vest having contacted the Department of Justice and received advice concerning the purpose of the request, as stated in a memorandum which he placed in the files under today's date, the following letter was sent to Mr. Rosen today: In reply to your letter of October 25, 1956, we are enClosing a pamphlet containing the list of all State member A) 11/16/56 -5- banks on December 31, 1955, and a supplement to the pamphlet showing changes through October; there have been no further changes in November to date. We are also enclosing photostats of September 26, 1956 reports of condition of all State member banks in the cities you have listed. The names of these banks are shown below, together with the names of their presidents and chairmen of boards of directors who, according to available bankers' directories, have served during the last five years; dates of the directories are indicated in cases where they show different officers during this period. Miami Little River Bank and Trust Company, _ James G. Garner, President No Chairman of the Board listed Metropolitan Bank of Miami (Admitted to mjnbership April 20, 1954) G. James Hughes, President (September 1956) Arthur V. Davis, President (March 1956) Robert Pentland, Jr., Chairman of the Board (September 1954 to September 1955) Gordon H. Robertsonl President (March 1955 to September 1955) T. T. Scott, President (September 1954) North Shore Bank, Miami Beach Leonard L.- Abess, Chairman of the Board F. Rouse Smith, President Pan American Bank of Miami James Sottile, Sr., Chairman of the Board (March 1956 to date) James Sottile, Jr., President (March 1956 to date) P. J. Serralles, Chairman of the Board (September 1951 to September 1955) T. A. Davis, Jr., President (September 1951 to September 1955) Peoples Bank of North Miami Beach Admitted to membership May 1- , 1956) Leonard A. Usina, Chairman of the Board Prank H. Willer, President A 2443 11/16/56 -6Union Trust Company, St. Petersburg C. 0. Lowe, Chairman of the Board J. E. Bryan, President Columbia Bank of Thor Cit .y )Tampa A. J. Grimaldi, President No Chairman of the Board listed Marine Bank & Trust Coaany, Tampa George B. Howell, President No Chairman of the Board listed Mr. Leonard then withdrew from the meeting. Reference was made to an application of Bank of the Southwest National Association, Houston, Texas, transmitted through the Federal Reserve Bank of Dallas, for permission to accept drafts or bills of exchange for the purpose of creating dollar exchange. It appeared that the drafts would be drawn by clients of Banco de America, Managua, Nicaragua/ on Bank of the Southwest and endorsed by Banco de America. There had been circulated to the members of the Board a draft of reply to the Dallas Reserve Bank which would take the position that in the eircumstances described, such bills would not be drafts or bills of e)(ehange drawn upon a member bank by banks or bankers in a foreign e°1111trY for the purpose of furnishing dollar exchange as required by the usaFes of trade, as contemplated by section 2(a)(1) of Regulation CI AecePtance by Member Banks of Drafts and Bills of Exchange. The letter 14°111d contain certain suggestions, however, as to an alternative procedure "e°r(ling to which Bank of the Southwest might wish to handle the requested r4ci1ities under an import arrangement. Attention was called to a portion of the proposed reply which 2365 11/16/56 _7_ would state that although Nicaragua had been included since 1916 in the list of countries with respect to which the Board of Governors had found that the usages of trade were such as to justify banks or bankers therein in drawing on member banks for the purpose of furnishing dollar exchange, and although no formal review of the usages of trade in Nicaragua had been made by the Board for many years, informal inquiries had indicated that it was doubtful whether the trade requirements in Nicaragua would conform to the purposes of the amendment to section 13 of the Federal Reserve Act passed on September 7, 1916. The letter would go on to say that the Board would be reluctant to grant the requested permission, even though the bills were drawn by Banco de America or some other banker in Nicaragua, in the absence of a current showing that the usages of trade in that country required the granting of the acceptance facilities regilostExiby the applicant. The suggestion was made that it might be inadvisable to indicate that denial of the current request was based in part on an absence of informatio n concerning the usages of trade in Nicaragua resulting from the lack of a formal review of the situation in that country by the 1 308 . rd . There being agreement with this suggestion, it was understood that the portions of the proposed letter referring to the usages of trade Nicaragua would be deleted. Governor Shenardson then raised with Mr. Goodman a series of bearing'on whether the remaining grounds for denying the appliQati'on were sufficiently strong to warrant such action or whether they 2366 11/16/56 -8- were in effect predominantly technical in nature. In view of these Vestions, it was understood that Governor Shepardson would discuss the subject further with Mr. Goodman after the meeting. Thereupon, it was agreed that the draft of letter to the Federal Reserve Bank of Dnllas would be modified to the extent agreed upon at this meeting and that if the revised draft was satisfactory to Governor Shepardson in the light of his further discussion with Mr. Goodman, the letter would be sent. Secretary's Note: Pursuant to the foregoing action, the following letter, having been approved by Governor Shepardson, was sent to Mr. Irons, President of the Federal Reserve Bank of Dallas, on November 19, 1956: Reference is made to your letter of August 9, 1956, transmitting the application of Bank of the Southwest National Association, Houston, Texas, for permission to accept drafts or bills of exchange for the purpose of creating dollar exchange. It is noted that the management of the Federal Reserve Bank of Dallas recommended that the application be granted favorable consideration subject to the limitations that the Board (1) considers the items as reSlired by the "usages of trade", (2) considers the items 7s,drawn "by banks or bankers in foreign countries", and k3) limits the permissible maturity to not more than three months from the date of acceptance, exclusive of days of grace. On the basis of the information submitted in the aPPlicant's letter, it is apparently contemplated that ;the drafts would be drawn by clients of Banco de America, lagua, Nicaragua, on Bank of the Southwest and endorsed , Y Banco de America. Accordingly, such bills would not drafts or bills of exchange drawn upon a member bank by ( 7 1 banks or bankers in foreign countries for the purpose Of furnishing dollar exchange as required by the usages Of trade as contemplated by Section 2(a)(1) of Regulation C. yT--) e 2')C 11/16/56 -9- In telephone conversation with 14r. Goodman, Assistant Director of the Board's Division of Examinations, Vice President and General Counsel Shuford of your bank stated that he had been informed the Nicaraguan bank had transactions, similar to the facility requested of Bank of the Southwest, with Grace National Bank, New York, and American Trust Company, a State member bank, San Francisco. Upon making informal inquiry through the Federal Reserve Bank of New York, it was ascertained that Grace National Bank had no dollar exchange acceptances outstanding for Nicaragua and had no current line. However, the bank had accepted some bills for this purpose some ten years ago or more. The Federal Reserve Bank of San Francisco ascertained that American Trust Company (which has not been authorized by the Board of Governors to accept drafts or bills to furnish dollar exchange) has accepted 90-120 day drafts drawn for exportation of coffee from Nicaragua to United States. The drafts are drawn by the grower on American Trust Company in favor of self and endorsed to Banco de America, which sends to American Trust for acceptance under a line of credit established for the Nicaraguan bank. The American Trust Company volunteered the opinion that, in all probability, transactions about which inquiry was received arc actually similar to export drafts rather than drafts drawn to furnish dollar exchange. Under the American Trust facility, the drafts are clean bills and not accompanied by shipping documents at time Of acceptance. However, the bill is accompanied by a letter from Banco de America giving particulars of transaction and stating name of purchaser, description of commodity, sales contract number, and amount of coffee sold. These contracts are registered with the Exchange Control in Nicaragua. The purchaser identified in letter is a lar,.e exporter of coffee who sells exclusively to San Francisco importer. Final settlement flows through exporter's account with American Trust and, in turn, usually into account of Banco de America, whose account is charged at maturity of draft. It appears that in some instances drafts are negotiated prior to actual harvest Of coffee. The foregoing information regarding the procedure followed by the State member bank is furnished you in confidence. Bank of the Southwest might wish to consider handling the requested facilities under an import arrangement along similar lines. However, as Bank of the Southwest is a national 236S 11/16/56 -10- bank, it is subject to the restrictions of section 13 and of Regulation C with respect to the kinds of acceptances they may make, which restrictions are not applicable to State member banks (F.R.L.S. #4860). In view of the parties to, and the nature of the transactions in this situation, any such arrangement contemplated by Bank of the Southwest should be considered with particular reference to items Y4900, #49011 and Y4902 of the Loose-Leaf Service. In addition, Bank of the Southwest should satisfy itself, with respect to any such acceptances it may make, that an actual import takes place during the life of the bill. During the foregoing discussion Governor Szymczak joined the meeting. Governor Shepardson called attention to a memorandum from Mr. loan dated November 9, 1956, recommending that the Board authorize the tendering of a reception and luncheon, on November 13 and 16, 1956, ' lespectively, in connection with the thirteenth session of the School fOr Assistant Examiners of the Inter-Agency Bank Examination School. The memorandum stated that it was anticipated that the total expense °f such luncheons and receptions during 1956 would exceed by about $150 the amount of $350 included in the 1956 budget of the Division of Examand it was requested that the Division be authorized to exceed it8 budget for the purpose by that amount. date In an attached memorandum, November 13, 1956, the Board's Controller stated that he had in- itialed the memorandum with the understanding that the Division of Exam- inatimls would report any overexpenditure in the manner provided by the bUdget instructions. Governor Shepardson said that the overexpenditure would be due Part to the scheduling of an additional session of the school. He 2369 11/16/56 -11- vent on to suggest that a blanket authorization for a luncheon and reception at the end of each session of the school would obviate the necessity for requesting authorization on each occasion. Any budget overexpenditure, he said, could be handled in the same way as any Other budget overexpenditure. Governor Robertson said he thought the idea was a good one, but that in his opinion it would also be desirable to circulate a memorandum on each occasion so that the Board could change the practice if it wished. He did not regard the cost of the luncheons and receptions "excessive in view of the benefits derived therefrom. Governor Vardaman stated that although he had no objection to this specific item, he felt that too liberal a policy was being foll 'eNTed with respect to the entertainment of guests in the Board's dining going beyond the proper expenditure of Board funds. He noted that he had raised the same point at times in the past. Governor ahepardson commented that while the general question Inentioned by Governor Vardaman was one to which consideration perhaps Should.be given, he had understood that the tendering of a luncheon and l'eeePtion in connection with each session of the Inter-Agency Examination School met with the Board's approval. Thereupon, Governor Vardaman's comments on the use of the Board's dining rooms having been noted, it was agreed that the procedure suggested by Governor Shepardson with respect to the tendering of luncheons and receptions in connection with the program 2,3'741 11/16/56 -12of the Inter-Agency Bank Examination School should be followed and blanket authorization was given for such luncheons and receptions. The meeting then adjourned. Secretary's Note: On November 14, 1956, Governor Shepardson approved on behalf of the Board the following matters relating to the Board's staff: Divisio Memorandum dated November 6, 1956, from Mr. Bethea, Director, Al, n of Administrative Services,recommendingthe appointment of ce E. Rayman as Secretary in that Division, with basic salary at the rate of $4,075 per annum, effective upon assuming her duties. Memorandum dated November 71 1956, from Mr. Sloan, Director, Div ision of Examinattons, recommending the appointment of Daisy L. Polk . lerk-TYpist in that Division, with basic salary at the rate of rJ)-175 per annum, effective upon assuming her duties. Divis. Memorandum dated November 13, 1956, from Mx. Marget, Director, ion of International Finance, recommending that Samuel I. Katz, 4-ef of the British Commonwealth, Scandinavia, and Near East Section thethat Division, on, be sent to Ottawa, Montreal, and Toronto, Canada, for of 26-30, 1956, to study the new discount rate policy int week monroduced by the Bank of Canada and to review recent economic and etarY developments in Canada. On November 14, 1956, Governor Shepardson also approved on behalf of the Board the following letter to Mr. Phelan, Vice President, Federal Reserve Bank of New. York: 0 In accordance with the request contained in your letter November. 7, 1956, the Board approves the appointment of 1_, 18-rold J. Spony as an assistant examiner for the Federal Re-. Bank of New York. If the appointment is not made efrective November 19, 1956, as planned, please advise us. The Board also approves the designation of Ronald B. Gray as a special assistant examiner for the Federal Reserve Bank of New York. 11/16/56 -13On November 15, 1956, Governor Shepardson approved on behalf of the Board the following recommendations contained in memoranda from appropriate individuals concerned, effective as indicated: %ointments, effective as of the re„Ella'live dates of entrance on dutz_ Division Basic annual Dorothy V. Brooke, S ecretary Legal 4,62o Ell2gene F. Frymier, ; lerk-Typist Examinations 3,515 SalarY increases, effective A ovember 18 1956 Name and title Division Basic annual salary From To ••••••••• Research and Statistics tessie M. McCrae, Clerk Alin I. Van Eckhardt, Clerk 1/ 3,585 $3,670 3/345 3,500 4,080 4,215 3,000 3,640 3,125 3,345 3,085 3,725 3,200 3,430 Examinations Carl A. Zimmerman, Assistant Federal Reserve Examiner Administrative Services Dortch, Cafeteria Laborer ;1.az'les R. ,- ..riche E. Nichols, Guard Peacock, Charwoman Jean Powell, Clerk a/ T-ltle changed from Clerk-Typist,. 11/16/56 Governor Shepardson today approved on behalf of the Board a memorandum dated November 1, 1956, from Mr. Noyes, Adviser, Division of Research and Statistics, recommending that the basic annual salary of Patti A. Davenport, Secretary in that Division, be increased from ',4,210 to :/-1-,350, effective November 18, 1956. Governor Shepardson also approved on behalf of the Board today the recommendation contained in a memorandum dated November 15, 1956, from Mr. Betheal Director, Division of Administrative Services, that The Grenadier Corporation, New York, New York, be authorized to continue caulkinr work in the Federal Reserve Building beyond the terms of the original contract, at a total additional cost of ;10,325, with the understanding that if the work should be completed before December 31, 1956, an overexpenditure in this amount in the annropriate account of the 1956 budrret of the Division of Administrative Services would be authorized, but that if the work should be completed after January 1, 1957, the expenditure would be charged against the 1957 budget of the Division.
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