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Minutes for November 25, 1966 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, please initial below. If you were present at the meeting, your initials will indicate approval of the minutes. If you were not present, your initials will indicate only that you have seen the minutes. Chm. Martin Gov. Robertson Gov. Shepardson Gov. Mitchell Gov. Daane Gov. Maisel Gov. Brimmer l'; Minutes of the Board of Governors of the Federal Reserve System on Friday, November 25, 1966. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Shepardson Daane Maisel Brimmer Sherman, Secretary Kenyon, Assistant Secretary Holland, Adviser to the Board Solomon, Adviser to the Board Molony, Assistant to the Board Cardon, Legislative Counsel Fauver, Assistant to the Board Solomon, Director, Division of Examinations Leavitt, Assistant Director, Division of Examinations Mr. Furth, Consultant Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Messrs. Partee, Williams, Bernard, Ettin, Fry, Keir, Kelty, and Rosenblatt and Mrs. Peskin of the Division of Research and Statistics Messrs. Reynolds, Baker, Gemmill, Gekker, Grimwood, and Ruckdeschel of the Division of International Finance Money market review. Today's review consisted of a summariza- tion by Mr. Bernard of recent developments in the Government securities market. Copies of statistical materials prepared for the purpose of the review have been placed in the Board's files. All members of the research staff except Mr. Partee then withdrew, as did Mr. Furth, and Mr. Hackley, General Counsel, joined the meeting. Discount rates. The establishment without change by the Federal Reserve Bank of Boston on November 21, by the Federal Reserve Banks of -2- 11/25/66 Cleveland, Richmond, and Minneapolis on November 23, and by the Federal Reserve Bank of Minneapolis on November 25, 1966, of the rates on discounts and advances in their existing schedules was approved unanimously, With the understanding that appropriate advice would be sent to those Banks. Approved items. The following items, copies of which are attached to these minutes under the respective item numbers indicated, were approved unanimously: Item No. Letter to Bourbon-Agricultural Bank & Trust Company, Paris, Kentucky, approving the declaration of a dividend. 1 Letter to First National City Bank, New York, New York, granting an extension of time to establish a branch in Bombay, India. 2 Letter to Bank of America National Trust and Savings Association, San Francisco, California, granting an extension of time to establish a branch in Munich, Germany. 3 Letter to Bank of America National Trust and Savings Association, San Francisco, California, granting an extension of time to establish a branch in Zurich, Switzerland. 4 Letter to Morgan Guaranty International Banking Corporation, New York, New York, approving an amendment to its articles of association. 5 State of the Union Message (Item No. 6). In a memorandum to the heads of departments and agencies dated November 3, 1966, the President invited suggestions for proposals that might suitably be \ 11/25/66 -3- included in the State of the Union Message to be presented at the first session of the 90th Congress. A distributed memorandum from Mr. Hackley dated November 22, 1966, recommended that the White House Office be advised that the Board had no proposals to suggest. Mr. Hackley's memorandum indicated that the staff of the Federal Deposit Insurance Corporation was considering whether it would be appropriate to suggest a reference in the President's Message to legislation that would make permanent the temporary interest rate control authority enacted in September of this year. In Mr. Hackley's opinion, it was questionable whether that was the sort of legislative proposal that would be appropriate for mention in the State of the Union Message. After discussion a consensus was reached that it would be inadvisable to suggest that such a legislative proposal be included in the State of the Union Message. It was suggested that the Board should itself defer reaching a position on whether to recoumiend that the temporary authority be extended or made permanent pending the accumulation of more experience under the existing legislation. Accordingly, it was understood that the White House Office would be informed that the Board had no legislative recommendations that would seem appropriate for inclusion in the State of the Union Message. It as also understood that the staff of the Federal Deposit Insurance Corporation would be informed of the Board's view that mention in the Message of legislation to make permanent the temporary interest rate 434 -4- 11/25/66 control authority would be inappropriate. A copy of the letter sent to the Special Assistant to the President is attached as Item No. 6. Mr. Hexter, Associate General Counsel, joined the meeting at this point. Public Bank matter. Messrs. Hackley and Hexter reported having been informed by the General Counsel for the Federal Reserve Bank of Chicago that the Commissioner of Banking for the State of Michigan had asked whether a representative of the Reserve Bank would be willing to testify at a hearing to be held on a suit brought by shareholders of the former Public Bank, Detroit, Michigan, against directors and officers of that bank, the Federal Deposit Insurance Corporation, and the Commissioner of Banking alleging conspiracy to close Public Bank and transfer Its assets to Bank of the Commonwealth in a manner such as to defeat the rights of the shareholders. It was understood that the representative Of the Reserve Bank, presumably First Vice President Helmer, would be asked to describe the circumstances surrounding extension of credit by the Reserve Bank to Public Bank. The Reserve Bank's General Counsel felt that the record was quite clear and that there was no compelling reason why Mr. Helmer should not be permitted to testify. He noted that presumably Mr. Helmer could be subpoenaed if necessary. Following discussion of the question whether the request for testimony should be resisted unless a subpoena was issued, a consensus emerged that no objection should be interposed to testimony by Mr. Helmer 11/25/66 if requested. -5It was understood that the Federal Reserve Bank would be advised accordingly. The meeting then adjourned. Secretary's Notes: Governor Shepardson today approved on behalf of the Board the following items: Letter to the Federal Reserve Bank of New York (copy attached as Item No. 7) approving the appointment of Matthew T. Fitzpatrick as examiner. Memoranda recommending the following actions relating to the Board's staff: 6 1ppointments ..1. Doris I. Barker as Secretary, Division of Personnel Administration, With basic annual salary at the rate of $5,507, effective the date of entrance upon duty. Barbara Jean Sullivan as Stenographer, Division of Personnel Administration, with basic annual salary at the rate of $4,936, effective the date of entrance upon duty. Annie Cromortie as Cafeteria Helper, Division of Administrative Services, with annual salary at the rate of $1,927 (4-hour day), effective the date of entrance upon duty. Elizabeth Ann Williams as Cafeteria Helper, Division of Administrative Services, with annual salary at the rate of $1,927 (4-hour day), effective the date of entrance upon duty. Salary increases Howard B. Cloth, Attorney, Legal Division, from $6,451 to $7,696 Per annum, effective November 6, 1966, rather than November 20, 1966, as Previously approved. Landonia Ann Jones, Stenographer, Division of Examinations, from $4,269 to $4,776 per annum, effective January 1, 1967. Sudie G. Phillips, Stenographer, Division of Examinations, from $4,269 to $4,776 per annum, effective December 18, 1966. Patricia Ann Russell, Stenographer, Division of Examinations, from $4,269 to $4,776 per annum, effective December 18, 1966. 11/25/66 -6- Transfers Violet Position of increase in December 4, Herrmann, from the position of Cafeteria Helper to the Grill Cook, Division of Administrative Services, with an basic annual salary from $4,707 to $4,989, effective 1966. Evelyn C. Hill, Cafeteria Helper, Division of Administrative Services, from a part-tine position to a full-tine position, with basic annual salary at the rate of $3,609, effective December 4, 1966. Governor Shepardson also approved today on behalf of the Board a request from Evelyn C. Hill, Cafeteria Helper, Division of Administrative Services, for permission to engage in custodial work on a part-time basis. BOARD OF GOVERNORS Item No. 1 OF THE 11/25/66 FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD November 25, 1966. Board of Directors, Bourbon-Agricultural Bank & Trust Company, Paris, Kentucky. Gentlemen: The Board of Governors of the Federal Reserve System approves, under the provisions of paragraph 6 of Section 9 of the Federal Reserve Act and Section 5199(b) of United States Revised Statutes, the declaration of a dividend of $12,000 by Bourbon-Agricultural Bank & Trust Company, Paris, Kentucky, at year-end 1966. This letter does not authorize any future declaration of dividends that would require the Board's approval under the foregoing statutes. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary 4344 BOARD OF GOVERNORS Item No. 2 11/25/66 OF THE FEDERAL-RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD November 25, 1966. First National City Bank, 399 Park Avenue, New York, New York. 10022 Gentlemen: On the basis of the information furnished In your letter of November 15, 1966, the Board of Governors extends to July 1, 1967, the time within which your bank may establish the branch in Bombay, India, authorized in the Board's letter of January 5, 1966. Please inform the Board of Governors, through the Federal Reserve Bank of New York, when the branch is opened for business, furnishing information as to the exact location of the branch. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS Item No. 3 11/25/66 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 4-• <4,.• • ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD &AL REO.•* • • November 25, 1966. Bank of America National Trust and Savings Association, 300 Montgomery Street; San Francisco, California. 94120 Gentlemen: As requested in your letter of November 3, 1966, the Board of Governors extends to February 1, 1968, the time within Which your bank may establish the branch in the City of Munich, Germany, authorized in the Board's letter of January 7, 1966. Please inform the Board of Governors, through the Federal Reserve Bank of San Francisco, when the branch is opened for business, furnishing information as to the exact location of the branch. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS ..... ..• c)0F GOvi•. Item No. 4 11/25/66 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ,7 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD November 25, 1966. Bank of America National Trust and Savings Association, 300 Montgomery Street, San Francisco, California. 94120 Gentlemen: As requested in your letter of November 3, 1966, the Board of Governors extends to February 1, 1968, the time within which your bank may establish the branch in the City of Zurich, Switzerland, authorized in the Board's letter of February 18, 1966. Please inform the Board of Governors, through the Federal Reserve Bank of San Francisco, when the branch is opened for business, furnishing information as to the exact location of the branch. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS Item No. 5 11/25/66 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS orriciAL CORRESPONDENCE TO THE BOARD November 25, 1966. Morgan Guaranty International Banking Corporation, 23 Wall Street, New York, New York. 10008 Gentlemen: r 27, 1966, Reference is made to your letter dated Octobe r 27, 1966, Octobe of date under enclosing a copy of a Consent signed sharesole York, New of y Compan on behalf of Morgan Guaranty Trust the of ent amendm the to holder of your Corporation, consenting to increase the capital Articles of Association of your Corporation of the par value shares 0 120,00 stock Lo $12,000,000, consisting of of $100 each. nt to the proIn accordance with the request, and pursua d effective revise as K, tion Regula visions of Section 211.3(a) of amendment to the es approv ors Govern of September 1, 1963, the Board ation. Article SEVENTH of your Articles of Associ the capital Please advise the Board of Governors when increase has been effected. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 'oet:j8ii... ' ?+o* VeP: . E: <4.,4.•. 0.* .PALReve.... ••••••• Item No. 6 11/25/66 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 2OSSI OFFICE OF THE CHAIRMAN November 25, 1966 Mr. Joseph A. Califano, Jr., Special Assistant to the President, The White House. Dear Mr. Califano: This is in reply to the President's memorandum of November 3, 1966, regarding legislative proposals that might be included in the State of the Union Message. The Board of Governors has no recommendations for legislation that would be appropriate for inclusion in the President's address. Sincerely yours, (Signed) Wm. McC. Martin, Jr. Wm. McC. Martin, Jr. 4349 BOARD OF GOVERNORS Item No. 7 11/25/66 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS orrtciAL CORRESPONDENCE TO THE BOARD November 28, 1966 Mr. Fred W. Piderit, Jr., Vice President, Federal Reserve Bank of New York, New York, New York. 10045 Dear Mr. Piderit: In accordance with the request contained in your letter of November 22, 1966, the Board approves the appointment of Matthew T. Fitzpatrick, at present an assistant examiner, as an examiner for the Federal Reserve Bank of New York. Please advise the salary rate and the effective date of the appointment. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary.
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