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The attached minutes of the meeting of the Board Of Governors of the Federal Reserve System on November 16, 1962, which you have previously initialed, have been amended at the request of Governor Robertson to revise the second and third full paragraphs on page 3. If you approve these minutes as amended, please Initial below. Chairman Marti Governor Mills 609 9/61 Minutes for To: Members of the Board From: Office of the Secretary November 16, 1962 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. Chu. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Gov. Mitchell Minutes of the Board of Governors of the Federal Reserve System on Friday, November 16, 1962. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Martin, Chairman Balderston, Vice Chairman Robertson Shepardson King 1/ Mitchell Mr. Sherman, Secretary Mr. Young, Adviser to the Board and Director, Division of International Finance Mr. Fauver, Assistant to the Board Mr. Noyes, Director, Division of Research and Statistics Mr. Koch, Associate Director, Division of Research and Statistics Mr. Brill, Adviser, Division of Research and Statistics Mr. Holland, Adviser, Division of Research and Statistics Mr. Hersey, Adviser, Division of International Finance Mr. Sammons, Adviser, Division of International Finance Mr. Mattras, General Assistant, Office of the Secretary Mr. Eckert, Chief, Banking Section, Division of Research and Statistics Mr. Yager, Chief, Government Finance Section, Division of Research and Statistics Mr. Bernard, Economist, Division of Research and Statistics Mr. Reynolds, Chief, Special Studies and Operations Section, Division of International Finance Mr. Goldstein, Economist, Division of International Finance Money market review. f°110w1ng material: There were distributed tables relating to Trend of yields on Treasury bills from Decefiber 1958 to November 1962; tentative Treasury financing schedules 1 Withdrew from meeting at point indicated in minutes. 11/16/62 -2- for the period November 1962 to June 1963; summary of monetary developments during the five-week period ending November 14, 1962. Mr. Bernard discussed recent developments in the Government eecurities market after which Mr. Brill commented on bank reserves. Mr. Brill also discussed a study he had made on the subject of liquidity, 44a it was understood that copies of his remarks would be distributed t° the members of the Board for their further review. Mr. Goldstein then commented on developments in the foreign exchange market. Mr. Koch reported on his participation in the Fiscal Policy C°nterence sponsored by the President's Committee on Labor-Management l'°11.cY, following which Governor Balderston commented with regard to the Panel on which he participated at the Conference. Al]. members of the staff then withdrew except Messrs. Sherman, Noyes, and Mattras and the following entered the room: Mr. Farrell, Director, Division of Bank Operations Mr. Solomon, Director, Division of Examinations Mr. Harris, Coordinator of Defense Planning Mr. Shay, Assistant General Counsel Mr. Leavitt, Assistant Director, Division of Examinations Miss Hart, Senior Attorney, Legal Division Mr. Hill, Attorney, Legal Division Mr. Hunter, Supervisory Review Examiner, Division of Examinations Request for material from chain banking survey. Mr. Noyes Ettivised the Board of a request from the Department of Justice for access rePorts that the Board might have obtained in connection with the 11/16/62 -3- Pntma1 chain banking survey from two Phoenix, Arizona, banks: Valley National Bank and The Arizona Bank. Mr. Sherman noted that there was no report from The Arizona 11411k since it was not a member of the Federal Reserve System. He also noted that the original request to member banks advised the banks that the information was being gathered for the use of Congressman Patman, Chairman of the House Select Committee on Small Business. Governor Robertson commented that somewhat similar information °n Arizona banks had been provided to the Department of Justice several 1-1's ago, and he could see no reason for refusing to furnish the " inf ormation. Mr. Hexter pointed out that the Board's letter to member banks requesting the information for the chain banking survey implied that it ' 1148 being requested for the sole use of the House Committee. In view or the fact that the information was supplied on this basis, he questioned Ithether it would be appropriate to make the data available to the 13e12ertment of Justice. After a short discussion, a majority of the Board decided to -12111Y. the request of the Department of Justice for access to the report or the Arizona member bank. Discount rates. The establishment without change by the Federal Ileserve Banks of New York, Philadelphia, and San Francisco on November 15, 1962, of the rates on discounts and advances in their existing schedules 1148 aPproved unanimously, with the understanding that appropriate advice ' 401.11d be sent to those Banks. U/16/62 Application of Central Trust Company Rochester, N. Y. Central Trut Company Rochester, N. Y., Rochester, New York, had made application to the Board for permission to merge with Prattsburgh State Bank, Pr attsburg, New York. °fettle The Division of Examinations recommended approval application in a memorandum dated November Reserve Bank of New York also favored approval. 9, 1962. The Federal The competitive factor reAorts of the Comptroller of the Currency, the Federal Deposit Insurance C°111)oration, and the Justice Department were not adverse. As stated in its memorandum, the basis for the favorable recommendation of the Division of Examinations was as follows: Central Trust and its nine branches are located in or near Rochester and it is considerably smaller than the three Other commercial banks serving Rochester. Prattsburgh Bank IS the only bank in the small village of Prattsburg, an agricultural community, about 60 miles south of Rochester. There is virtually no competition between the two banks. The merger would provide Prattsburgh with broader banking services, solve its mansgement succession problem, and strengthen the administration of its affairs. It may be expected that conversion of the Prattsburgh Bank to a branch Of Central Trust would stimulate competition with branches °f larger Rochester banks in the Prattsburg area. After discussion the application was approved unanimously, with the Understanding that the Legal Division would draft an order and sup, 44)rting statement for the Board's consideration. Governor King and Messrs. Hill and Hunter then withdrew. Applications for acceptance powers (Items 1, 2, and 3). ha4 been There distributed memoranda from the Division of Examinations dated October 18, 1962, and the Legal Division dated November 9, 1962, with I'eara to requests from Southern Arizona Bank and Trust Company, Tucson, 11/16/62 Arizona; -5National Bank of Washington, Tacoma, Washington; and The First National Rank of Oregon, Portland, Oregon, for permission to accept 4ratts or bills of exchange drawn by Banco de la Republica, Bogota, C°10mbia, for the purpose of furnishing dollar exchange. All three banks requesting permission were subsidiaries of Western Bancorporation, 438 Angeles, California, a bank holding company. According to the memoranda, Western Bancorporation International 13411k) an Edge corporation and a subsidiary of Western Bancorporation, 1144 agreed to make available to Banco de la Republica a revolving credit Or $1.5 million to be used by means of the acceptance of 90-day drafts .1'4/14 by Banco for the creation of dollar exchange. Because this would eeeed the amount that the Edge corporation was permitted to accept 1144er the Board's Regulation K for the account of one person, and also to facilitate foreign operations of some of the subsidiary banks of Western Bancorporation, the Edge corporation approached the three banks laslaled to participate in the revolving line of credit. All three banks 4811 done so, apparently unaware of the requirement that the Board's ilermission had to be obtained before making dollar exchange acceptances. The Legal Division memorandum dealt with this matter in the light of section 6(a)(4) of the Bank Holding Company Act, which forbids e'Yl°an, discount, or extension of credit by a banking subsidiary of ballit holding company to any other subsidiary of the company. For Ileasc)ns stated, it was the Division's opinion that the prohibitions of section would not forbid participations at the outset, in arrangements 4/16/62 -6- to make acceptances, between Western Bancorporation International Bank ama subsidiary member banks of Western Bancorporation. There had also been distributed drafts of letters approving the requests of the three banks. The letters would authorize Southern Arizona Bank and the National Bank of Washington to accept drafts drawn 1113Qa them by Banco in an amount up to $500,000. The Oregon bank would be authorized to accept drafts drawn upon it by Banco up to $250,000. The authorization to Southern Arizona Bank would be subject to termination 04 90-day notice, whereas the authorizations to the Washington bank and the Oregon bank would terminate on December 31, 1962. The Division of 111inations felt that approval of the three applications would regularize 4 rather unsatisfactory situation. After discussion, the proposed letters were approved unanimously. Co :1. are attached to these minutes as Items 1, 2, and Pre-emer ency currenc storage b 3. Boston Bank (Item No. 4). There 441 been distributed a memorandum from the Office of Defense Planning 4te(1 November 14, 1962, in connection with a request from the Federal Reerve Bank of Boston for approval of the Bank's proposal for a partial erllergency storage of currency in the vaults of three of its twenty-five ' III'e 4°4 agent banks. The memorandum noted that the terms and procedures ' Q°41t8 irled in the proposal were substantially the same as those heretofore 4151)rWed by the Board for the Cleveland, Chicago, and Richmond Banks. It '4S estimated that the cost of installing and maintaining the necessary %Inv '444aemt would compare favorably with experience in other districts. 11/16/62 While the Boston Bank did not request a general authorization to make ainalar arrangements with any other of its cash agent banks, the Office (3f Defense Planning suggested that a general authorization be granted to avoid the necessity for considering recurring requests on the same terlas and conditions. After a brief discussion, the proposed letter to the Boston Reserve Bank that had been distributed with the memorandum was approved 144a11mously. A copy of the letter is attached as Item No. 4. The meeting then adjourned. Secretary's Note: 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: Jo Ann Murray, from the position of Secretary in the Division Operations, to the position of Secretary in the Division of Data 7luE prc 46 Znaing, with an increase in basic annual salary from $5,885 to " -vv, effective January 1, 1963. sai increase Of Peter Gajewski, Economist, Division of Research and Statistics, :310 to $9,475 per annum, effective November 25, 1962. Secretary 32 BOARD OF riOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 1 11/16/62 WASHINGTON 25, D. C. • ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD November 16, 1962 Southern Arizona Bank and Trust Company, Tucson, Arizona. Gentlemen: The Board of Governors of the Federal Reserve System authorizes your bank, pursuant to the provisions of Section 13 of the Federal Reserve Act, to accept drafts or bills of exchange drawn upon you by Banco de la Republica, Bogota, Colombia, in an amount not exceeding US$500,000 in the aggregate at any time, which are drawn and accepted for the purpose of furnishing dollar exchange as required by the usages of trade in Colombia and which conform to all Other applicable provisions of said Section 13 and the Board Is Regulation C. The right is reserved to terminate this authorization upon 90 days' notice to your bank, as provided in the Regulation. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. e• BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 2 11/16/62 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD November 16, 1962 National Bank of Washington, Tacoma, Washington. Gentlemen: The Board of Governors of the Federal Reserve System authorizes your bank, pursuant to the provisions Of Section 13 of the Federal Reserve Act, to accept drafts or bills of exchange drawn upon you by Banco de la Republica, Bogota, Colombia, in an amount not exceeding US$500,000 in the aggregate at any time, which are drawn and accepted for the purpose of furnishing dollar exchange as required by the usages of trade in Colombia and which conform to all Other applicable provisions of said Section 13 and the Boardls Regulation C. This authorization terminates as of December 31, 1962. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. • BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 3 11/16/62 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD November 16, 1962 The First National Bank of Oregon, Portland, Portland, Oregon. Gentlemen: The Board of Governors of the Federal Reserve System authorizes your bank, pursuant to the provisions of Section 13 of the Federal Reserve Act, to accept drafts or bills of exchange drawn upon you by Banco de la Republica, Bogota, Colombia, in an amount not exceeding US$250,000 in the aggregate at any time, which are drawn and accepted for the purpose of furnishing dollar exchange as required by the usages of trade in Colombia and which conform to all Other applicable provisions of said Section 13 and the Board's Regulation C. This authorization terminates as of December 31, 1962. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS or 01E. FEDERAL RESERVE SYSTEM Item No. 4 11/16/62 WASHINGTON 25, D. C. ADDRESS OrfICIAL CORRESPONDENCE TO THE BOARD November 16, 1962 411110TIAL (FR) MZIGeorge H. Ellis, President, : 1 1'al Reserve Bank of Boston, -u°11 6, Massachusetts. 4 lle4 'Mr. BostThe Board has approved the proposal of the Federal Reserve Bank " a ken on to make a partial decentralization of the storage of currency as , aredness measure as set forth in your letter dated November 9, 1962. N‘tie It is understood that currency is to be stored in the vaults of Of the Bank's twenty-five emergency Cash Agent Banks and in approxig,mounts as follows: The Howard National Bank & Trust Company t of Burlington, urlington„ Vermont. $4,8000000 :1Irst National Bank of Portland, rortland, Maine. $6,000,000 The $6,000,000 National Bank of Concord, Mechanic 'oncord„ New Hampshire* It is further understood that the currency will be stored in ;kite chests nliip ith adequate security ratings and in vault compartments or from the wired systems alarm and locks ' eu with dual combination l'Eulit Tlartec°111Partment or chests directly to police or alarm service head110 major alterations or additions to the Cash Agent Banks' "i(te are contemplated. 1111111ted s, Prior to a national emergency involving a nuclear attack on the control of the (18t0 'atees the currency will be under the exclusive in your letdescribed procedures tsr of, 8ank The control. including g audit No vember 9, 1962, for maintaining such control are appropriate. 111'. George H. Ellis -2- The Boston Bank is authorized to incur reasonable expenses in. eident to the f pre-emergency storage of currency. It is noted on the basis imates contained in the proposal that the one-time installation and $75213111ent costs amount to $5,697 and the annual recurring cost amounts to illta 3 of which $400 is for vault rent and $352 is for signal alarm service. 'e expenses are considered reasonable. 4r The approval of the Bank's proposal for a partial decentraliza0 . Bark 4 currency constitutes a general authorization for the Federal Reserve ettbs cIt Boston to make further arrangements with other Cash Agent Banks on 111j,antial4 the same terms and the same safeguards as herein approved when, 4,r "e discretion of the Federal Reserve Bank of Boston, such additional 1gemsnts are deemed prudent in the national interest. It is requested ken+ the Board be kept informed of the progress made in completing arrangethe Cash Agents name above and such additional arrangements as e rllede under this general authorization. 4 Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary.
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