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FR 609
Rev. 10/59
Minutes for
To:
November 2, 1959
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, 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.
Chin. 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 Monday, November 21 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
Riefler, Assistant to the Chairman
Thomas, Economic Adviser to the Board
Fauver, Assistant to the Board
Young, Director, Division of Research and
Statistics
Mr. Hackley, General Counsel
Mr. Farrell, Director, Division of Bank Operations
Mr. Solomon, Director, Division of Examinations
Mr. Chase, Assistant General Counsel
Mr. Daniels, Assistant Director, Division of
Bank Operations
Mr. Masters, Associate Director, Division of
Examinations
Mr. Nelson, Assistant Director, Division of
Examinations
Mr. Goodman, Assistant Director, Division of
Examinations
Mr. Landry, Assistant to the Secretary
Mr. Thompson, Supervisory Review Examiner,
Division of Examinations
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Discount rates.
The establishment without change by the Federal
Reserve
Reserve Bank of San Francisco on October 28, 19591 and the Federal
advances
Bank of Chicago on October 29, 1959, of the rates on discounts and
in their existing schedules was approved unanimously, with the understanding that appropriate advice would be sent to those Banks.
11/2/59
-2Items circulated to the Board.
The following items, which had
been circulated to the Board and copies of which are attached to these
minutes under the respective item numbers indicated, were approved
unanimously:
Item No.
Letter to
regarding
purchase"
sition of
The Chase Manhattan Bank, New York City,
the meaning of the phrase "at the time of
in the Board's letter regarding its acquiassets of West Indies Bank & Trust Company.
1
Letter to the Peoples State Bank of East Tawas, East
Tawas, Michigan, approving its application to establish
an out-of-town branch at 410 Lake Street in Tawas City.
2
Letter to the Maplewood Bank and Trust Company, Maplewood,
Missouri, approving the establishment of a drive-in
facility and an investment in bank premises.
3
Letter to the First State Bank & Trust Company of Lufkin,
Texas, Lufkin, Texas, waiving the requirement of six
months' notice of withdrawal from membership in the Federal
Reserve System.
14.
Letter to the Federal Reserve Bank of Atlanta approving
the appointment of Mr. Milton P. Rieder as a Federal
Reserve Agent's Representative at the New Orleans Branch.
5
Telegram to the Federal Reserve Bank of Minneapolis
interposing no objection to the head office second floor
remodeling project.
6
Memorandum to Counsel for the Hardy Subcommittee relating
to turnover of Reserve Bank examining personnel.
7
Messrs. Daniels and Goodman then withdrew and Messrs. Conkling,
Assistant Director, and Collier, Chief, Current Series Section, Division
of Bank Operations, entered the room.
4.) I
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11/2/59
Status of Bankers Life & Casualty Company as a bank holding
company (Items 8 through 10, inclusive).
There had been distributed
a memorandum from the Division of Examinations dated October 28, 1959,
along with draft letters to Bankers Life & CasnAlty Company, Chicago,
Illinois, Diversa, Inc., Dallas, Texas, and Murmanill Corporation,
Dallas, Texas.
Speaking for the Examinations Division, Mr. Thompson recalled
that the Board had considered this case on September 14, 1959, determined
that Bankers had become a bank holding company without the Board's prior
approval, and concluded that the ramifications of the case involved
questions as to (1) possible recision of previous determinations under
section 301 of the Banking Act of 1935 that Bankers and Murmanill ( a
corporation in which Bankers has a very sizable interest) were not
holding company affiliates, except for the purposes of section 23(a)
of the Federal Reserve Act and (2) whether a section 301 determination
should be issued to Diversa, which is a majority-owned subsidiary of
Murmanill and which owns directly 88 per cent of the outstanding shares
of Chicago City Bank & Trust Company, a State member bank.
He went on
to say that in a letter to the Board dated October 8, 1959, Bankers Life
& CasuBlty Company stated that the matter had been discussed with counsel
and representatives of the Bank
nation Department of the Chicago
Reserve Bank and that it intended to reduce the ownership of Murmanill
stock by National Drilling Company, a majority-owned subsidiary of
11/2/59
Bankers Life, to less than 25 per cent of the total outstanding stock
Of Murmanill.
Bankers Life & Casualty Company had requested in this
ion
letter (1) Board approval of such a divestiture along with an indicat
that such action would eliminate any problem Bankers might have in
n that
relation to the Bank Holding Company Act, and (2) a Board decisio
such action was sufficient to continue in force the Board's section 301
as a
determination of June 29, 1955, with relation to Bankers' status
holding company affiliate.
Bankers advised that the transfer of
not be
Murmanill's stock owned by National Drilling Company 'would
made to any subsidiary or affiliated company of Bankers or to any
that it
person holding for or on behalf of these companies and asked
be allowed until January 21 19601 to complete this divestiture.
the
The Federal Reserve Bank of Chicago had recommended that
determiBoard give favorable consideration to not rescinding its 301
nation with respect to Bankers, assuming Bankers' proposal were
the
consummated; but both the Legal and Examinations Divisions of
holdings
Board believed that if National Drilling Company reduced its
ding
of Murmanill's stock to just under 25 per cent of the total outstan
in view
shares it would still control over 25 per cent of such shares
of the manner of ownership and control of Murmanill's shares.
The draft
as to
reply to Bankers took the position that to eliminate question
ry for National
Bankers' bank holding company status it would be necessa
11/2/59
-5-
Drilling Company to reduce its holdings of Murmanill's shares to less
than 25 per cent of the 1,200 shares owned outside of Murmanill itself.
Governor Mills expressed some concern that the proposed reply
to Bankers Life & Casualty Company spelled out in too great detail the
step-by-step measures Bankers Life would have to take in order to retain
its 301 determination.
He suggested that the letter simply state the
Board's view that the measures planned by Bankers Life would not be
sufficient to remove its bank holding company status.
After further discussion relating to the wording of a reply to
Bankers Life, unanimous approval was given to letters to Bankers Life
& Casualty Company, Diversa, Inc., and Murmanill Corporation in the
form attached as Items 8 through 10) inclusive.
Application to organize a national bank at Honolulu, Hawaii
(Item No. 11).
Governor Robertson had attached a note to a memorandum
from the Division of Examinations that had been circulated under date of
October 20, 1959, in which that Division recommended that the Board
recommend to the Comptroller of the Currency against granting a charter
to applicants for organization of a national bank in Honolulu.
This
note stated that he doubted the advisability of taking any position
solely on the basis of a routine examination report of the Comptroller
of the Currency, which ha0 been the only report available to either the
Federal Reserve Bank or the Board in considering the application.
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11/2/59
Governor Robertson had indicated further that he did not believe a
case had been made for rejection of the application and that he would
vote for a favorable recommendation on such application on the basis
Of information contained in the report of investigation made by the
Comptroller's Office. The Division of Examinations had stated in its
memorandum that it was not feasible for an examiner from the Federal
Reserve Bank of San Francisco to join in the field investigation of
this application.
Following a statement by Governor Robertson of his position
on this question, Governor Balderston asked if it would be deemed
appropriate to write a letter to the Comptroller informing him that
the Board was not presenting a recommendation in this case because the
San Francisco Reserve Bank had not found it feasible to make a field
investigation of the application, and Governor Robertson replied that
he believed this would be appropriate.
Mr. Nelson indicated that an important factor in the situation
was the presence of a new State bank in downtown Honolulu which had
been operating only since June of this year and which would be adversely
affected by the opening of another bank. He stressed that the proposed
letter to the Comptroller stated that the Board did not feel justified
in recommending approval of the application "at this time."
11/2/59
Governor Mills said that he agreed with the position taken by
the Division of Examinations.
He recalled, however, that the Board had
Previously made recommendations to the Comptroller of the Currency on
the basis of reports made outside the System, and he inquired whether
it would be advisable for the Board to change its procedure.
Governor Shepardson expressed agreement with the view that in the
instant case the fact that a new bank was getting established in Honolulu
was an adequate point leading to a recommendation for disapproval of
granting a national charter to an additional bank.
Governor Robertson suggested that a distinction should be drawn
between making a recommendation on an application in an area well known
to the System and on one in an area not so well known.
Following further discussion as to the language of the letter
to be sent to the Comptroller of the Currency, a letter in the form
attached to these minutes as Item No. ll was approved, Governors
Balderston and Robertson dissenting.
Mr. Thompson withdrew from the meeting at this point.
Regulation Q.
Mr. Thomas reported that when he was at the New
York Reserve Bank last week Messrs. Hayes, Coombs, and Crosse raised with
him the question of a possible increase in the maximum permissible rate
of interest payable on time deposits in New York City banks.
11/2/59
-8At Governor Balderston's suggestion, it was understood that
the question of maximum permissible rates under the Regulation would
be considered at an early meeting of the Board.
Messrs. Noyes, Adviser, Koch, Associate Adviser, and Dembitz,
Research Associate, Division of Research and Statistics, entered the
room at this point.
Possible methods of including member banks' vault cash in
reserves.
Copies of a memorandum dated October 29, 1959, from Mr.
Thomas bad been distributed, together with an excerpt from the minutes
of the Board meeting on October 14.
The memorandum presented various
considerations relating to the problem of inclusion of member banks'
vault cash in reserves and described several possible approaches to
action, together with specific figures illustrating these approaches.
Before opening discussion on the contents of this memorandum,
Governor Balderston suggested that it would be helpful to consider four
specific questions: (1) should action be taken this fnll to count vault
cash in reserves; (2) should permission be granted to count all vault
cash or only a portion thereof; (3) if permission were to be granted to
count only a portion of vault cash, what basis should be used; and (4)
should the maximum deferment schedule be increased from two days to
three days?
He then reported having received word from President Bopp
of the Philadelphia Bank of a conversation between President Bopp,
-9-
11/2/59
Congressmen Barr and Moorhead, and Mr. Cordon of the staff of the House
Committee on Banking and Currency.
President Bopp had been asked when
the Board intended to act on the vault cash matter, and he (Mr. Bopp)
had responded that the admonition of the Conference Committee with
respect to limiting the use of open market operations to offset release
of reserves made the implementation of the law more complicated.
At
that point Mr. Cardon indicated that this wording in the Committee
Report had not been intended to inhibit the Board in any way from doing
Whatever it considered necessary and instead was intended to reflect a
Position of neutrality.
During a brief discussion of this matter, it was observed that,
regardless of Mr. Cordon's statement in this respect, the language
referred to was in the Conference Report.
Turning to a discussion of Governor Balderston's questions,
Governor Mills expressed the view that action should be taken to implement
the vault cash proposal this fall in a limited way, with emphasis placed
on avoidance of conflict with monetary policy.
On the assumption that
the moderate amount of reserves released would need to be absorbed early
in 1960, he felt that it would be safe to do this through System sales
of Treasury bills, because the reserves released by inclusion of vault
cash in reserves would constitute only a fraction of the total supplied
11/2/59
-10-
in November and December and their absorption in early 1960 could be
meshed in with the customary absorption of seasonal reserves.
In
substance, Governor Mills said, he would favor proceeding piecemeal
on an experimental basis.
Governor Robertson commented that he also was in favor of
including a portion of vault cash in reserves this fall to take advantage
of the need for reserves during November and December.
Failure to take
some action, he felt, would run contrary to the expectations of the
banking fraternity in view of the hearings on the reserve requirement
legislation and might subject the Board to criticism that he thought
would be justified.
If the other members of the Board wished to do the
whole job at once, he would prefer Mr. Riefler's plan, as summarized in
table 3 on page 12 of Mr. Thomas' memorandum.
However, should the Board
decide to release only a portion of vault cash this fall, he wished to
reiterate his proposal of October 14, 1959, to count in reserves all
vault cash in excess of 3 per cent of net demand deposits at country
banks and in excess of 1-1/2 per cent of net demand deposits at central
reserve and reserve city banks, with a partial offset to this release of
reserves effected through advancing the deferment schedule to three days.
This plan would have the advantage of reducing the free provision of
reserves involved in the present deferment schedule and would alleviate
U/2/59
inequities inherent in country bank holdings of large amounts of vault
cash.
NO new inequities would be created, and the plan would leave time
for considering the problem of classifying banks and cities under the
new legislation.
If the question of the deferment period were again
presented to the Presidents of the Federal Reserve Banks as part of a
plan for release of reserves through inclusion of vault cash in the
reserve base, his guess was that the Presidents who had previously
objected might be less reluctant to accept this feature.
Governor Shepardson concurred in the view that action on the
vault cash question should be taken this fall.
He favored a partial
step at this time, since he felt that moving in two or more steps towards
including vault cash in reserves would provide those banks whose reserve
requirements were raised a better opportunity to adjust.
He indicated
that he would prefer raising reserve requirements to changing the deferment schedule.
After discussing the advantages that he felt would be
gained from utilizing the period when there was a "natural flow" of
reserves from the banks in the fall and into the banks after the first
Of the year, he suggested that release of vault cash during the next
few weeks with a simultaneous announcement of an increase in reserve
requirements to take effect after the first of the year would minimize
the impact of the higher reserve requirements on banks that would be
11/2/59
-12-
disadvantaged by the higher requirements, since they would be adjusting
during a period when reserves were flowing back to them.
Governor King said that he believed that action should be taken
this fall to count vault cash in amounts necessary to meet seasonal
demands for reserves for the balance of 1959 and that this should be
followed by a release of the remainder of vault cash sometime in January,
With simultaneous adjustment of reserve requirements then to compensate
for the releases of vault cash.
In his opinion, the initial release
should preferably be on the basis of a flat percentage of vault cash for
all member banks.
At the time of the January release, reserve require-
ments might be set on the basis of 18-1/2 per cent for central reserve
City banks, 17-1/2 per cent for reserve city banks, and 13-1/2 per cent
for country banks, leaving some excess reserves which could be "mopped
11P" through a limited amount of open market operations.
He did not think
it would be necessary completely to close the gap between central reserve
City bank and reserve city bank requirements at this time, since final
closure of this gap could be accomplished during the next 2-1/2 years,
possibly by lowering central reserve city requirements in steps to be
timed when the economy could absorb such releases without contributing
to inflation.
With respect to setting a maximum of three days in the
deferment schedule, he Observed that it may have been a mistake to go
to a two day schedule but that it might be another mistake to return
11/2/59
-13-
to the former maximum of three days at a time when the Government needed
banker support for a sound monetary policy.
Governor Szymczak commented that in his opinion this was not a
good time to take action to implement the vault cash proposal because of
uncertainties in the economy and that he believed the Board should issue
a statement to such effect.
However, the Board should get ready to put
into effect Mr. Riefler's plan for a full release of vault cash, with
whatever increases in reserve requirements might be deemed necessary,
as soon as a better judgment on the economy and the Government securities
market could be mule.
He vent on to say that he did not believe changing
the deferment schedule should be tied in with release of vault cash.
If
the majority of the Board favored doing something now on vault cash,
Governor Szymczak indicated that he would prefer a partial release of
vault cash.
Governor Balderston said that he would favor releasing a portion
of vault cash to reserves this fall but that he did not believe an increase
in the deferment period should be coupled with the inclusion of vault cash
in reserves because he believed the public relations aspects of the two
problems could be handled better separately than together.
Accordingly,
he would subscribe to Governor Robertson's proposal with respect to the
release of vault cash but would not favor the change in the deferment
11/2/59
-14-
schedule as an offset.
He then asked Mr. Thomas to what extent Governor
Robertson's proposal would supply the reserves normally needed at this
time of year, and Mr. Thomas replied about one-half of the needed reserves
would be supplied by this plan.
Governor Balderston then observed that
it would be possible to amend Governor Robertson's suggestion by increasing
reserve requirements next January as an offset to the fall release of
reserves through partial inclusion of vault cash.
Mr. Riefler noted that supplying the banking system as a whole
with reserves this fall through release of vault cash would not necessarily
supply reserves to the same banks that would benefit from System open
market purchases at this time of year, since a considerable part of the
reserves released through the vault cash mechanism would go to a large
number of banks that were not close to the money market.
Consequently,
over-all reserve figures would not reflect the true situation in the
money market, making operations extremely difficult for the Management
Of the System Open Market Account.
Governor Balderston inquired whether
adoption of Governor Robertson's proposal to provide about half of the
,T)1 billion seasonal need for reserves this fall and the remaining half
by customary open market operations would not allow the Desk to operate
successfully, and Mr. Riefler replied that the Desk probably would give
a good account of itself in any case, but he would not favor making its
task more difficult than usual.
In a further comment, he said he would
11/2/59
-15-
prefer to make vault cash fully available and raise reserve requirements
by approximately the same amount in mid-January at the time of the return
currency flow, believing that this would be the best way to facilitate
the necessary adjustments by individual banks at a time when virtuany
all of them would have excess funds.
He stressed the need for an advance
announcement of the System's intention to increase reserve requirements
after the first of the year, suggesting that if Governor Robertson's
proposal were put into effect an announcement should be made promptly
regarding the planned increase in reserve requirements to be effective
about January 15, 1960.
Like Governor Robertson, he believed a release
of vault cash might serve to make a return to the three-day deferment
schedule more palatable.
If Governor Robertson's proposal were adopted,
the Board might announce shortly that vault cash would be counted,
reserve requirements raised, and the deferment schedule returned to a
maximum three-day basis for certain cash items, all effective on specified
dates in January, the announcement of the whole package to be published
in the Federal Register for comment.
In response to a question from Governor Shepardson as to the
resulting changes that would be required in member bank reports of their
reserve positions, Mr. Thomas replied that at a recent meeting System
economists had suggested there be biweekly instead of semi-monthly
computation of reserves by country banks.
He expected that a report
of this recommendation would be prepared in the near future.
11/2/59
Further views of the staff were then requested, and Mr. Young
commented that he favored doing the whole job at once since, in his
opinion, using a piecemeal approach would still result in unhappiness
among bankers.
He suggested that action be deferred until January, at
Which time the whole job could be done, perhaps including as offsets to
the release of reserves both Governor Robertson's proposal for changing
the deferment schedule and the proposal for increasing reserve requirements.
Although there was a danger that some investors might stand
aside from the Government securities market if such a program were
announced, the inflow of currency after the first of the year would
tend to minimize adverse effects on the market.
Mr. Koch said that, as an economist, his approach to the question
was similar to that of Governor Szymczak.
However, if the consensus was
to move now he would prefer handling the release of vault cash in three
stages, with part of the release this fall, another part next fall, and
still another part the following f 11, with offsets in the form of increased reserve requirements.
He suggested that consideration be given
to inequities between classes of banks as well as to inequities between
1Dank8 in the same reserve classification. One other alternative would
be a release of vault cash in such small amount as to have no great
effect on open market operations and require no offsetting action.
11/2/59
-17Mr. Dembitz said that he would be inclined to release no more
than a portion of vault cash to reserves at this time, or that no
action be taken at this time and an announcement made along the lines
suggested by Governor Szymczak.
Mr. Noyes also indicated support for Governor Szymczak's position.
He commented that he shared Mr. Riefler's concern about the possible
ineffectiveness of releasing vault cash to reserves as a way of supplying
funds to the money mRrket in November and December.
Therefore, he would
Prefer to have moves on vault cash concentrated in January.
After noting that he was impressed by the uncertainty surromaing
the business situation and by the massive offsets required by a release
of vault cash, Mr. Solomon suggested another possible alternative to
Governor Robertson's proposal, namely, to make available as reserves to
all banks any amount of vault cash held above
3 per cent of net demand
deposits.
Mr. Farrell said that it seemed to him preferable to do the whole
Job at once.
Once the program as to vault cash and the level of reserve
requirements was clarified for the banks, the standards for classification
of cities and authorizing banks to carry reduced reserves could be developed,
and, inequities could then be further reduced.
Mr. Conkling said that he had reached the conclusion that it
would be better either to do nothing at this time and to make a statement
11/2/59
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along the lines Governor Szymczak suggested, or to announce a program
for releasing all vault cash and raising reserve requirements as an
Offset.
In further discussion, Mr. Hackley observed that the legislative
history of the law seemed to contemplate that the Board would act in a
"reasonable time," either all at once or in steps.
He hesitated to
express a view on the policy question, but his own feeling was that the
Board should proceed slowly, permitting some vault cash to be counted in
reserves as soon as possible, and thereafter working toward establishment
Of standards for individual banks and cities.
He was concerned by the
amendments that would be required to Regulation D as a consequence of
anY action taken, noting that the whole Regulation needed revision to
bring it into conformity with the law, including reporting requirements
and a definition of vault cash.
Whatever the Board decided to do) he
thought it desirable to make an announcement of the entire program
decided upon at one time.
Governor Mills then commented that, as he sensed the attitude
of the majority of the Board, it was for doing something now on a piecemeal basis.
He felt that the magnitude of the problem perhaps had been
exaggerated, particularly if a release of reserves in the range of $200
million to $500 million should be decided upon.
Even if a misstep were
11/2/59
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made, it should not be too difficult to correct it. He considered it
important that the System manifest a determination to carry out what
appeared to be the will of the Congress.
Should an individual bank be
loath to use its excess reserves, these reserves would tend to gravitate
into correspondent bank accounts.
He then suggested the possibility of
releasing a fixed percentage of vault cash holdings for each class of
bank instead of gearing the release to a percentage of net demand
deposits.
Messrs. Masters, Nelson, and Noyes withdrew from the meeting
during the foregoing discussion, and Mr. Chase withdrew at this point.
At the request of Governor Robertson, Mr. Thomas discussed his
Preference, namely, to do the whole job if any action were to be taken
Within the next few months by releasing about half the vault cash to
reserves around December 1 and the other half on January 15, with an
increase in reserve requirements effective January 15. However, should
a partial release of vault cash be decided upon, he would favor the
plan of Governor Robertson, with simultaneous announcement of an
Increase in reserve requirements effective January 15.
Following a brief discussion as to the legal possibility of
reversing the inclusion of vault cash in reserves should conditions
varrant it in the future, the question was raised as to the desirability
of postponing further discussion of the vault cash matter until next
11/2/59
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week, when the Chairman 'would be back, and it was decided to await
the Chairman's return.
All of the members of the staff except Mr. Sherman then withdrew
from the meeting.
Visit to Board by Mr. Berger of the Bank of France.
Governor
Balderston noted that Mr. Pierre Berger of the Bank of France was
Paying an official visit to the Board's offices with special attention
to the economic research function, and a question had been raised as to
whether he might be permitted to attend that portion of the meeting of
the Board tomorrow during which the economic review of international
and domestic developments was presented. There being no objection, it
vas underatood that Mt. Berger would be invited to observe the presentation of the economic review.
Savings Bonds Program. Governor Balderston referred to a letter
dated October 30, 1959, from Under Secretary of the Treasury Baird
regarding the savings bond program in which he asked that the chief
executive officer of Federal Reserve Banks or branches in 25 cities
serve as co-chairmen of the regional campaign committee, that he attend
a meeting in Washington on January 26 with industrialists and State
chairmen, that he organize a regional top management meeting in the
form of either a luncheon or a dinner to which top executives of firms
With 1,000 or more employees would be invited, that he co-sign the
11/2/59
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letters of invitation to the top executives, that he speak at the
regional meeting regarding the need for increased savings bond sales,
and that the Federal Reserve pay for luncheon or dinner for each of
the 25 groups.
Governor Balderston stated that he had informed Mr.
Baird that the Reserve Bank Presidents would be in Washington on
November
4
and that he contemplated taking the matter up with them
at that time.
In the meantime, he planned, if the Board agreed, to
inform Mr. Johns as Chairman of the Presidents' Conference of the
request in order that Mr. Johns might discuss the proposal with the
Presidents when they were in the Board's building on Wednesday.
There being no Objection, it was understood that the procedure
outlined by Governor Balderston would be followed.
Official appointments.
Governor Shepardson, after stating
the reasons for his proposed action, recommended that Mr. Harry E.
Kern, Chief of Office Services, Division of Administrative Services,
be appointed Assistant Director of the Division of Administrative
Services, effective today, with salary at the annusi rate of $9,500,
effective immediately.
Governor Shepardson's recommendation was approved unanimously.
Governor Shepardson then stated that, pursuant to earlier
informal discussion with the Board, Miss Elizabeth L. Carmichael had
been tendered appointment as an Assistant Secretary in the Office of
11/2/59
-22-
the Secretary and that it was expected that a decision on her part would
be forthcoming promptly, perhaps later today.
All members of the Board indicated that they approved the appointment of Miss Carmichael as an Assistant Secretary) effective upon the
date she assumes her duties.
Secretary's Note: Miss Carmichael indicated
on November 3) 1959, her acceptance of this
appointment, at which time Governor Shepardson
approved on behalf of the Board a personnel
action formally appointing her as Assistant
Secretary) effective November 15) 1959, with
salary at the rate of $10,000 per annum, the
members of the Board previously having indicated
their approval of salary at that rate.
Thereupon the meeting adjourned.
Secretary's Notes: On October 29, 1959,
Governor Shepardson approved on behalf of the
Board a letter to the Presidents of all Federal
Reserve Banks transmitting forms to be used by
State member banks in submitting reports of
earnings and dividends for the calendar year 1959,
with the understanding that the letter would be
sent when the forms were printed.
Pursuant to the recommendations contained in
memoranda from the appropriate individuals
concerned, Governor Shepardson also approved
on behalf of the Board on the dates indicated
the following actions affecting the Board's
staff:
11/2/59
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October 29:
Salary increases
effective November 1 1959
Name and title
Basic annual salary
To
From
Division
Research and Statistics
Arthur L. Broida, Economist
Virginia Lambert, Secretary
Elsie T. Nelson, Economist
Ann M. Van Eckhardt, Statistical Assistant (halftime basis)
$12,075
4,64o
6,285
$12,315
4,790
- 6,435
2,095
2,170
Bank Operations
41790
Doris V. Bubb, Statistical Clerk
Examinations
Patricia R. Baker, Secretary
(Change in title from stenographer)
John M. Poundstone, Federal Reserve Examiner
IrIfin W. Robinson, Assistant Federal Reserve
ner
4,230
41340
9,050
6,135
9/290
6,265
81810
9,050
3,685
3,780
Personnel
June E. Ayers, Administrative Assistant
Aftinistrative Services
Wilhelmina K. Steele, Operator, Tabulating Equipment
John C. Simmons, Laborer
Lydia m. Advell, Salad Maker
3,245
4
3,34)
3,625
3/720
8,570
8,810
Office of the Controller
John Kakalec, Budget and Planning Assistant
Acceptance of resignation
Clifford A. Davis, Assistant Counsel, Legal Division, effective November
201 1959.
-24-
11/2/59
October 30:
Transfer
effective November 1,1959
Anita L. Tidier, from the position of Clerk-Stenographer in the
Division of Personnel Administration to the position of Stenographer
in the Legal Division, with no change in her basic annual salary at
the rate of $3,850.
Increase, effective November 1, 1959
Paula G. Hauprich, from $4,325 to $4,490 per annum, with a change
in title from Stenographer to Secretary, Legal Division.
Acceptance of resignation
Patricia C. Fitzmaurice, Senior Clerk, Division of International
Finance, effective October 31, 1959.
Novtmber 2:
Mary C. Jackson as Statistical Clerk, Division of Research and
Statistics, with basic annual salary at the rate of $3,755, effective
the date she assumes her duties.
A
\t^
e
BOARD OF GOVERNORS
OF THE
Item No. 1
11/2/59
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENLL
TO THE BOARD
November 2, 1959.
Mr. Charles A. Agenian,
Vice President and Comptroller,
The Chase Manhattan Bank,
18 Pine Street,
New York 15, New York.
Dear Er. Agemian:
Reference 13 made to your letter of September 30, 1959,
transmitted through the Federal Reserve Bank of New York, acknowledging the Board's letter of September 14, 1959, consenting to the
acquisition by The Chase Manhattan Bank of substantially all of the
assets and the assumption of substantislly all of the liabilities
of West Indies Bank & Trust Company, Charlotte Amalie, St. Thomas,
Virgin Islands, subject to the condition, among others, that "(2)
1:to securities acquired by The Chase Manhattan Bank are carried on
its books in excess of the market value of the securities at the
time of purchase".
It is noted that you have assumed that the phrase "at the
time of purchase" must refer to the time of purchase by West Indies
Bank & Trust Company and not to the date of transfer of the assets
of that bank to The Chase Manhattan Bank. Your letter requested
that the Board of Governors confirm your interpretation of item (2)
of the Board's letter of September 14, 1959, to the effect that
"no
securities acquired by this Bank are to be carried on its books in
excess of the market value of the securities at the time of purchase
by West Indies Bank & Trust
Company."
As used in the second condition in the third paragraph of
the Board's letter of September 14, 1959, the phrase "at the
time
of purchase" means at the time of acquisition by The Chase Manhattan
Bank. This condition was prescribed because it has been the policy
of the Board to make such
a requirement where a bank purchases the
assets and assumes the liabilities of another institution. While
the.aggregate amount of assets
acquired by your bank in this transaction was small in relation to the size of your bank, it is not
felt that it would be appropriate to make an exception in this
case.
Very truly yours,
(Signed) Kenneth A. Keivon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
001*****4
COCO
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
Item No. 2
u/2/59
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
6111.N.S
4:1040**
November 2, 1959.
Board of Directors,
Peoples. State Bank of East Tawas,
Bast Tawas, Michigan.
Gentlemen:
Pursuant to your request submitted through the
Federal Reserve Bank of Chicago, the Board of Governors
of the Federal Reserve System approves the establishment
of a branch at 410 Lake Street, Tawas City, 1ichi.7,an, by
Peoples State Bank of East Tawas, provided the branch is
established within tel months from the date of this letter.
Trery truly yours,
(Signed) Kenneth A* Kenyon
Kenneth A. Kenyon,
Asstitant Secretory.
BOARD OF GOVERNORS
OF THE
Item No. 3
FEDERAL RESERVE SYSTEM
11/2/59
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE 130ARD
November
2,
1959e
Board of Directors,
Maplewood Bank and Trust Company,
Maplewood, Missouri.
Gentlemen:
Pursuant to your request submitted through the
Federal Peserve Bank of St. Louis, the Board of Governors
of the Federal Reserve System approves the establishment
by Maplewood Bank and Trust Company, r_aplewood„ Missouri,
of a branch 60 feet north of its main office in Maplewood
provided the branch is established within six months from
the date of this letter. The Board of Governors of the
Federal Reserve System also approves, under the provisions
of Section 24A of the Federal Reserve Act, the additional
investment by Maplewood Bank and Trust Company of .:1,110,715
for the purpose of acquiring three additional lots, the
construction of a drive-in facility, and alterations to
the basement of present banking quarters. It is understood
that the aggregate investment in bank premises, upon completion of the improvements and new construction mentioned,
Will not exceed 275,u00 and that the proceeds from the
sale of one lot acquired by the bank, which it does not
contemplate using, will be applied to reduce the book
value of the banking premises.
Very truly yours,
(signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
IP
BOARD OF GOVERNORS
,..„.00•CHttp,,,,
,
,
OF THE
ei00020p.'40
*I *if"
FEDERAL RESERVE SYSTEM
t St
0 tr
WASHINGTON 25, D. C.
*
*
o
4
4
4
'3
%.4.
0
Item No. 4
11/2/59
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
**Sumist
-04..L1***
November 2, 1959.
Board of Directors,
First State Bank & Trust Company
of Lufkin, Texas,
Lufkin, Texas.
Gentlemen:
The Federal Reserve Bank of Dallas has forwarded
to the Board of Governors your letter of September 29, 1959,
and 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 Dallas
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 10(c) of the Board's
Regulation HI as amended effective September 1: 1952, 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 sent to the Federal Reserve Bank of Dallas for disposition.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.
BOARD OF GOVERNORS
OF THE
Item No. 5
FEDERAL RESERVE SYSTEM
11/2/59
WASHINGTON 25, D. C.
ADDRESS arriciAL CORREEIPONDEP4CE
TO THE BOARD
November 22 1959.
Mr. Walter M. Mitchell,
Chairman of the Board and
Federal Reserve Agent,
Federal Reserve Bank of Atlanta,
Atlanta 3, Georgia.
Dear Mr. Mitchell:
In accordance with the request contained in your letter of
October 19, 1959, the Board of Governors approves the appointment of
Mr. Milton P. Rieder as a Federal Reserve Agent's Representative at
the New Orleans Branch to succeed Mr. Henry B. Hoppe.
This approval is given with the understanding that Mr. Rieder
Will be solely responsible to the Federal Reserve Agent and the Board
of Governors for the proper performance of his duties, except that,
during the absence or disability of the Federal Reserve Agent or a
vacancy in that office, his responsibility will be to the Assistant
Federal Reserve Agent and the Board of Governors.
When not engaged in the performance of his duties as Federal
Reserve Agent's Representative, Mr. Rieder may, with the approval of
the Federal Reserve Agent and the Vice President in charge of the
Neg Orleans Branch, perform such work for the Branch as will not be
inconsistent with his duties as Federal Reserve Agent's Representative.
It will be appreciated if Mr. Rieder is fully ineormed of
the importance of his responsibilities as a member of the staff of
the Federal Reserve Agent and the need for maintenance of independence
from the operations or th,, 9ank in the discharge of thes,
I responsibilities.
It is assumed that Mr. Rieder will execute the usual Oath of
Office, which will be forwarded to the ;- 2,o7trd of Governors, and that his
appointment will become effective on the date of execution of the Oath.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
TELEGRAM
LEASED WIRE SERVICE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON
November 2, 19590
Deming - Minneapolis
Reurlet October 19. Board will interpose no objec
tion to
your Bank's proceeding with head office secon
d floor
remodeling project, as described in your letter and
attachments, at a total cost not to exceed 075,0
00,
Which amount includes a contingency allowance
of $18,000.
(Signed) Merritt Sherman
Sherman
Item No. 6
11/3/59
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
ro--______
Miles 0
.,Mr
Item No.
7
11/2/59
Dee October 28, 1959.
Subject:
Mast - RomneC,
of the
During your recent discussions concerning the work
System
Division of Examinations you inquired concerning Federal Reserve
Banks
Reserve
experience related to bank examining personnel of the
that, in the recent past, has resigned to accept positions in commercial
banking.
period
Data has been assembled on this subject covering the
Reserve
the
that
January 1, 1956 to September 30, 1959, which shows
Banks had in their employ on January 1, 1956, 162 examiners and 205
September 30,
assistant expminers (including trainee assistants); on
allowance for
after
1959, employees in these categories had increased,
Banks or to
Reserve
resignation, transfer to other departments of the
261,
and
the Board of Governors, retirement and death, to 194
respectively.
Banks
Average field bank examining personnel of the Reserve
s
examiner
183
d
numbere
during this three and three-quarters' year period
tions
resigna
which
and 228 assistant examiners (including trainees), against
an
at
nced
experie
to enter commercial banking or other fields, have been
cent for
average annual rate of 2.77 per cent for examiners and 11.23 per
assistant examiners (including trainees).
al),
During the period under review one Chief Examiner (offici
rs,
examine
nt
assista
18 examiners, 75 assistant examiners and 21 trainee
Banks.
Reserve
Federal
a total of 115, resigned their positions with the
Seventy of these resigned to accept commercial bank posts; 43 to accept
°fficial positions; 27 to nonofficial capacities. Forty-five resignatrainee assistants)
tions (one examiner, 32 assistant examiners and 12
connections to
Bank
were represented by those sevPring their Reserve
enter fields other than commercial banking.
salary
We do not have complete information relative to the
We
above.
zed
summari
differential involved in the employment changes
was
salary
ed
increas
reel, however, that while immediate prospects for
on
e
influenc
r
stronge
a motive in the majority of cases, perhaps a
was distaste
individual decisions to terminate Reserve Bank employment
ns.
for the travel requirements of field examining positio
purposes.
It is hoped that this information will serve your
be glad
will
we
If clarification or additional information is desired
to assist further.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, ID. C.
Item No. 8
11/2/59
ADORE•11 °mow,. 0014,11E•PONORNOS
TO THM 1110APIO
November 5, 1959
Bankers Life & Casualty Company,
Chicago, Illinois.
Gentlemen?
This refers to your letter of October 8, 1959, in
which it is stated that in compliance with the position taken
in the Board's letter of September 16, 19590 you propose to
reduce the ownership of Murmanill Corporation's (uMurmanillu)
stock by National Drilling Company ("Drilling") to less than
25 per cent of the total outstanding stock of Murmanill. You
further state that the transfer of stock will not be to any
subsidiary of, or to any company affiliated with, Bankers
Life & Casualty Company ("Bankers"), or to any person holding
for or on behalf of such companies. Accordingly, you requested
the Board's approval of such divestiture and advice that such
action would eliminate any problem with reference to Bankers
concerning the Bank Holding Company Act of 1956. You also
requested that such action be sufficient to continue in force
the Board's determination of June 29, 1955, with respect to
Bankers status as a holding company affiliate, provided
Bankers! or any of its subsidiaries! or affiliated companies'
interest in Murmanill remains at less than 25 per cent.
The Board understands that Murmanill, through
majority—owned subsidiaries, controls a significant portion
of its own shares. In accordance with the Board's interpre—
tatio of September 16, 1959, therefore, the status of Bankers
as a Dank holding company would not be terminated by the means
Proposed if Drilling continued to awn 25 per cent or more of
the shares of Murmanill exclusive of those controlled
indirectly by Murmanill itself and those held as treasury stook,
However, if action is taken in such manner as to avoid this
result, Bankers would no longer be a bank holding company.
Furthermore, if Bankers! holding company status is terminated
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Bankers Life & Casualty Company
by January 2, 1960, it will not be necessary for Bankers to
file a registration statement pursuant to section 5(a) of the
Bank Holding Company Act of 1956.
With respect to the June 29, 1955, determination re—
lating to Banker& status as a holding company affiliate, the
Board understands that Bankers awns the majority of shares of
Citizens Bank and Trust Company, Park Ridge, Illinois, about a
13 per cent interest in Lake View Trust and Savings Bank,
Chicago, Illinois, and an indirect interest in Chicago City
Bank and Trust Company through its interest in Drilling,
Murmanill, and Diversa, Inc., but that it does not own or
control, directly or indirectly, any other bank stock. On the
basis of such understanding and if Drilling reduces its holdings
of shares of Murmanill to less than 25 per cent of Murmanillis
shares as outlined above, by January 2, 19600 the Board will
not rescind the 1955 determination. The Board, of course,
reserves the right to rescind such determination and make a
further determination of this matter at any time on the basis
of the then existing facts.
It is requested that the Board be advised promptly
When Bankers terminates its bank holding company status and
that Bankers furnish a list of shares of banks which are then
owned or controlled, directly or indirectly, by Bankers and
any of its 25 per cent or more controlled usubsidiaries."
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
,ittOstp*.
OF THE
GOV
FEDERAL RESERVE SYSTEM
Item No.
11/2/59
9
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
4%
4/ KS%
404****
November 5, 1959.
Diversa, Inc.,
Dallas, Texas.
Gentlemen:
This refers to the Board's letter of September 16,
1959, in which it was stated that the Board was considering
denying the request of Diverse, Inc., for a determination as
to its holding company affiliate status. The letter also
stated that Diverse, Inc. would be allowed 60 days to present
additional information before final action is taken.
The Board understands that by January 2, 1960, a
change in corporate relationships may be effected in the
group of corporations of which Diverse, Inc. is a part, such
as may make it appropriate to grant the determination.
Accordingly, the time within which Diverse, Inc. may present
additional information is extended to January 2, 1960.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 10
11/2/59
WASHINGTON 25, ID. C.
CE
ADDRESS OFFICIAL CORRESPONDEN
TO THE BOARD
November 5, 1959.
The Murmanill Corporation,
Dallas, Texas.
Gentlemen:
September 16,
This refers to the Board's letter of
considering re1959, in which it wan stated that the Board was its holding
ion as to
scinding the January 8, 1958, determinat
stated that The
also
r
lette
The
s.
company affiliate statu
days to present
Murmanill Corporation would be allowed 60
action is taken.
additional information before final
2, 1960, a
The Board understands that by January
effected in the group
change in corporate relationships may be
as to make
Of corporations of which Murmanill is a part, such
dingly,
Accor
it unnecessary to rescind such determination.
present
may
the time within which The Murmanill Corporation
1960
ry 2,
additional information is extended to Janua
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
44
40
4
0
Item No. ll
11/2/59
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
NT ALLttlt
November 22 19590
Comptroller of
the Currency,
Treasury
Department,
W
ashington 25, D. C.
Attention Mr. L. A. Jennings,
Deputy Comptroller of the Currency.
Dear. Mr. Comptroller:
Reference is made to a letter from your office dated March 26,
195o/)
enclosing copies of an application to organize a national bank at
•J‘nolulu, Hawaii, and requesting a recommendation as to whether or not
"a application should be approved.
As it was not feasible for an examiner for the Federal Reserve
tank
of San Francisco to join in the field investigation of this application, the
information supplied by the Reserve Bank with respect to this
is
r°P°sal
;
based on a review of the report of investigation made by an
iner from your office. It appears that the proposed capital strucf;'e and Prospects for profitable operation of the bank would be satis_ ctory. The board of directors is composed of reputable business and
fessional men, but inasmuch as none has had banking experience and a
.74 alified executive officer has not been selected, the management situaon cannot be evaluated satisfactorily. The need for additional banking
;
,
t.acilities in Honolulu is not sufficiently established and it is indicated
rat the proposed bank might have an adverse effect upon the progress of
re cently opened institution. In the circumstances, the Board of Governors
einot feel justified in recommending approval of the application at this
tima
jn
T
L
The Board's Division of Examinations would be glad to discuss
aspects of this case with representatives of your office if you so
esire.
r
Very truly yours,
(Signed) Kenneth AO Kenyon
Kenneth A. Kenyon,
A3sistant Secretary.
@FedFRASER