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Minutes for November 27, 1963 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 appiwal of the minutes. If you were not present, your initials will indicate only that you have seen the minutes. Ohm. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. Mitchell 4112 Minutes of the Board of Governors of the Federal Reserve System on Wednesday, November 27, 1963. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Mills Robertson Mitchell Mr. Sherman, Secretary Mr. Kenyon, Assistant Secretary Mr. Young, Adviser to the Board and Director, Division of International Finance Mr. Molony, Assistant to the Board Mr. Cardon, Legislative Counsel Mr. Hackley, General Counsel mr. Noyes, Director, Division of Research and Statistics Mr. Solomon, Director, Division of Examinations Mr. Johnson, Director, Division of Personnel Administration Mr. Connell, Controller Mr. Hexter, Assistant General Counsel Mr. O'Connell, Assistant General Counsel Mr. Shay, Assistant General Counsel Mr. Holland, Adviser, Division of Research and Statistics Mr. Sammons, Adviser, Division of International Finance Mr. Conkling, Assistant Director, Division of Bank Operations Mr. Kiley, Assistant Director, Division of Bank Operations Mr. Smith, Assistant Director, Division of Examinations Mr. Leavitt, Assistant Director, Division of Examinations Mr. Langham, Assistant Director, Division of Data Processing Mrs. Semia, Technical Assistant, Office of the Secretary Mr. Bakke, Senior Attorney, Legal Division Mr. Hricko, Senior Attorney, Legal Division 11/27/63 -2Mr. Eckert, Chief, Banking Section, Division of Research and Statistics Chief, Call Report Section, Veenstra, Mr. Division of Bank Operations Mr. White, Review Examiner, Division of Examinations Application of Bank of Virginia. There had been distributed a memorandum dated November 221 19631 from the Division of Examinations analyzing the application of The Bank of Virginia, Richmond, Virginia, to merge with The Hallwood National Bank, Hallwood, Virginia. The bivision recommended that the application be approved. After Mr. Leavitt had summarized the circumstances underlying the application, he responded to several questions posed by members of the Board. The members of the Board then expressed their views, beginning with Governor Mills, who stated that he was not able to detect any evidence that the public interest would be advanced by the proposed transaction. He believed that the application should be viewed both on the basis of the proposed merger itself and the relationship to Virginia commonwealth Corporation, the bank holding company with which Bank of Virginia was identified. The merger, if consummated, would Increase the concentration of assets and resources controlled by Bank (3f Virginia snd by Virginia Commonwealth; moreover, the merger would be 411- further step in the expansion by Virginia Commonwealth and other Virginia holding companies throughout the State. Hallwood National Bank, as had been indicated, was capable of operating satisfactorily as 11/27/63 an independent bank. -3It was located in an area where there were a congeries of small banks competently serving the kinds of business available to them and where the larger accounts, as necessary, could be serviced by affiliates of Financial General Corporation and nearby branches of Maryland National Bank. The only advantage that he could see to the proposal was that it would afford stronger competition to Financial General and the Maryland National Bank entities. However, he would subordinate that consideration to the elimination of an independent bank and the rather severe competitive potential to which the Other small banks would be exposed if the application were approved. Although the Board, in considering some applications that were regarded as neutral, had leaned to the side of giving the applicants the benefit Of the doubt, he regarded this particular application as not neutral but as having adverse effects. Therefore, he believed that it should be denied. Governor Robertson expressed the view that this was a very close ease. He did not believe there was any significant competition between the banks involved. Also, it seemed probable that Bank of Virginia *would provide broader services in the Hallwood area. However, he agreed with Governor Mills that there was no evidence in the record of a need existing for the merger or of the inability of the Hallwood bank to Perform satisfactorily. This was one more step, even though a small °Ile, toward greater concentration. Viewed as part of an over-all picture, the application was the most recent evidence of the aim of this holding 411 11/27/63 Company to expand rapidly; recently the Board had had before it a report on competitive factors in the Nokesville case, in which another small institution was being taken over. It seemed that, little by little, concentration was being increased and small banks were being replaced by a holding company system through the merger route. Because of the added concentration inherent in the proposal, he would stop right here, and therefore would vote against the application. Governor Mitchell stated that he would approve for the reasons given in the memorandum submitted by the Federal Reserve Bank of Richmond. Re thought that the Hallwood bank was not giving adequate service to the area, and believed that bank holding companies in Virginia had long since embarked on a program of expansion that could scarcely be stopped this point. Governor Balderston indicated that he would approve for the reasons given by the Division. hi The premium being offered concerned but he felt that the Hallwood bank was not giving the service that the community needed; while he was not familiar with this particular tOtr. he was familiar with the area to the north. In his view, the Position taken by the Division was convincing. Chairman Martin stated that he would approve for the reasons given by the Division. He believed that the public interest would be benefited by the additional banking services that Bank of Virginia 1.4)11-1d. provide, and that the community needed those services. 11/27/63 The application of The Bank of Virginia was thereupon approved, Governors Mills and Robertson dissenting. It was understood that the Legal Division would prepare for the Board's consideration drafts of an order and statement reflecting this decision, and that a dissenting statement or statements by Governors Mills and Robertson also would be Prepared. Secretary's Note: Before the meeting, Governor Shepardson had informed the Secretary that he would have voted to approve this application if present at the meeting at which action was taken on it. Messrs. Hricko and White then withdrew from the meeting. Mergers of bank holding company subsidiaries and independent banks Item No. 1). On November 8, 1963, the Board discussed the question, presented by the Legal Division in a memorandum dated November 7, 1963, whether the proposed merger of the Bank of Occoquan„ Occoquan, Virginia (a subsidiary of Virginia Commonwealth Corporation), with The Bank of Nokesville (an independent bank), which fell primarily within the jurisdiction of the Federal Deposit Insurance Corporation, required a collateral application for Board approval under Section 3(a)(2) Of the Bank Holding Company Act since, under Virginia law, the holding company would technically acquire stock in a new bank, The Bank of Prince William. On balance, and for reasons stated in the memorandum, the Legal Division recommended that the Board take the position that no collateral application for Board approval was required. There were attached to the memorandum alternative drafts of a letter to Counsel /, II ' -6- 11/27/63 for Virginia Commonwealth Corporation, one of which would express the Opinion that an application must be filed with the Board under the Bank Holding Company Act before the proposed transaction could lawfully be consummated, and the other of which would indicate that no such application was required. Discussion at the November 8 meeting did not result in agreement as to the position to be taken, and the Legal Division was asked to study the question further. There had now been distributed a memorandum dated November 201 1963, in which the Legal Division stated that upon reconsideration it remained convinced that, although a plausible argument could be made to the contrary, the sounder conclusion for the Board to reach was that the regulatory provisions of the Bank Holding Company Act were inapplicable to mergers between holding company subsidiary banks and independent banks. Extensive comments in support of that view were set forth in the memorandum. At the Board's request, Mr. Bakke summarized and supplemented the Legal Division's memorandum. He concluded his remarks with the if the Board reaffirmed its statement that, while it was true that Previous position, holding companies could expand in certain circumstances without the Board's approval, it was the opinion of the Legal Division that the expansion that might result was more illusory than real. The position that the Legal Division recommended that the Board with the intent of Congress in reaffirm was believed to be consistent enacting the bank holding company statute. 4118 -7- 11/27/63 Governor Mitchell commented that in his view the stronger Policy decision would be not to take the position recommended by the Legal Division. If the Board allowed the perpetuation of a loophole through which bank holding companies could escape the Board's jurisdiction, the Board would be proceeding contrary to the theory of the Bank Holding Company Act, responsibility for the administration of which the Congress had vested in the Board. He believed that such a legislative intent could be established as readily as an intent to remove part of the responsibility from the Board. Here it was proposed that the Board say by interpretation that the judgment of other agencies Should be substituted for the Board's own judgment. This present case was unimportant, but a really important case might be framed in such a way as to move it to the jurisdiction of an agency other than the Board. He believed that the Board ought to be trying to keep all aspects of holding company expansion as close to its jurisdiction as possible. Governor Mills stated that he was persuaded by the Legal Division's reasoning that the law, as it stood, did not give the Board authority to intervene under the Bank Holding Company Act where a subsidiary of a holding company proposed a merger with an independent bank. He was not unsympathetic to Governor Mitchell's reasoning, but Irould take the view that the Board should not attempt a construction of the law that would be so elastic as to permit its rather clear intent to be side-stepped. The ultimate remedy, as suggested in the memo- and in earlier discussion, might be to ask Congress to amend 11/27/63 -8- the law. However) in the present climate of differences of approach on the part of the three supervisory agencies under the Bank Merger Act, such a request might only create rancor and difficulties that the occasion did not justify. Therefore, he would lay that particular remedy on the table. In further discussion, Mr. Hackley commented that the fundamental question was whether under the Bank Holding Company Act the Board must approve every merger by a subsidiary of a holding company with an independent bank. In his view the Board would be in a vulner- able position if it adopted the position that the Holding Company Act required the Board to approve all such mergers, in view of the fact that that seemed contrary to the intent of Congress. Governor Robertson referred to a statement in the first alternative letter attached to the Legal Division's memorandum of November 7, 1963, as follows: "Notwithstanding that the Bank Merger Act affords Federal supervisory control over mergers between banks) there remains the fact that section 3(a)(2) of the Bank Holding Company Act enjoins the acquisition by a bank holding company of more than 5 per centum of the voting shares of a bank in which it does not already have majority ownership or control) and therefore if a proposed merger involves such acquisition of voting shares the Board has no choice but to honor the Congressional mandate regarding the applicability of section 3(a)(2) of the Act thereto. While this results in an overlap of Federal supervisory control, the duplication is one of legislative direction, not the Board's 11/27/63 -9- choice in the matter." It seemed to Governor Robertson that that state- ment was correct from the technical point of view; the only justification for an opposite view was that the kind of stock acquisition involved in the Nokesville case was not the kind contemplated by the Bank Holding Company Act. However, this was a technical point, and he did not see that the Board would make a great mistake in going either way, except that if section 3(a)(2) of the Holding Company Act were to become a loophole through which Virginia Commonwealth or any other holding company could seek the jurisdiction of one of the other supervisory agencies in order to expand, the Board might be called upon to explain its position In view of the language of the statute. He would not have strong feelings for or against the adoption by the Board of either position. Governor Balderston commented that he did not believe that the technicalities of Virginia law should trouble the Board too much. He had sympathy with Governor Mitchell's point of view, and had been concerned about the Morgan New York State Corporation case in 1962 because it carried the possibility of half a dozen banking systems in New York State, each of which could be branched, with a resulting extensive network. ever, he would accept the Legal Division's recommendation. Chairman Martin stated that he was persuaded by the Legal Division's memorandum. It seemed to him that the law was clear. At the conclusion of the discussion it was the consensus that the position that section 3(a)(2) of the Bank Holding Company Act did not apply to mergers between holding company subsidiary banks and How- 4121 11/27/63 -10- independent banks should be reaffirmed. Accordingly, the second alterna- tive draft of letter that had accompanied the Legal Division's memorandum of November 7, 1963, was approved. A copy of the letter is attached as Item No. 1. Messrs. Hexter, O'Connell, and Bakke then withdrew and Mr. Schwartz, Director, Division of Data processing, entered the room. Discount officers conference. There had been distributed a memorandum dated November 14, 1963, from Mr. Holland reporting on the meeting of discount officers of the Federal Reserve Banks held on October 29, 1963. The conference had devoted the bulk of its time to three subjects: (1) the increased pressure that had been and was likely to be put on discount administration as a result of the shift to a somevhat less easy general monetary policy; (2) the revision of Regulation A, Advances and Discounts by Federal Reserve Banks, that might be adopted if the congress should adopt discount legislation recommended by the Board; the loan officers contributed a number of suggestions supplementing the formal Reserve Bank replies to the Board's letter of August 22, 1963; elld (3) the desirability of achieving appropriately uniform lending Procedures to be followed under a revised Regulation A. The Reserve ' lank officers expected that some guiding principles in this area would be developed and promulgated, and wished to help in their formulation. The memorandum concluded by recommending that a letter be drafted setting forth guiding principles for Reserve Bank lending under the 131‘0Posed revision of Regulation A, it being contemplated that the first , 4 1 2') 11/27/63 -11- draft of letter would be prepared by the Board's staff in consultation With discount officers, for consideration by the Board and subsequent formal transmission to the Reserve Banks for comment. It was also recommended that a second discount officers conference be convened at an appropriate time next year, at which the group could concentrate its attention on operating procedures, including particularly means of judging and restraining continuous borrowing. After comments by Mr. Holland, Governor Robertson suggested that it would be well to institute an educational program for discount officers of the Federal Reserve Banks, especially to prepare them for changes that might be expected in the nature of Federal Reserve discounting, that is, from the current practices under which the officers were rarely called upon to deal with anything but Government securities as collateral to the type of appraisals they might be expected to make of commercial paper. Other members of the Board expressed concurrence. At the conclusion of the discussion it was understood that consideration would be given to the organization of such a program, 44a agreement was expressed with the recommendations in Mr. Holland's Memorandum. Format for call report of condition (Items 2 and 3). There hwa been distributed a memorandum dated November 19, 1963, from the tivision of Bank Operations reporting on the results of inter-agency utaff negotiations concerning the form of the call report of condition, 411c1 on alternative methods of collecting usable statistics in the forthe°411ing call. 1 1 2:7. 11/27/63 -12- It was noted in the memorandum that the Federal Deposit Insurance Corporation had decided to use the same form as was used by all insured banks on June 29, 1963, for the forthcoming call. Thus, State banks would continue to report on the 1961 format, while national banks would report on the revised face used at the September call. The reverse side 'would be unchanged in appearance from the 1961 format; it would also be unchanged in content except that Federal funds sold, a new item on the face of the national bank form, would not be in the loan schedule. Rep- resentatives of the Comptroller of the Currency had informed the Division of Bank Operations that the Comptroller would make no further substantive Changes on the face of the national bank form for December and would not include a slip-sheet reconciliation form for purposes of making available Usable all-bank statistics on securities of States and political subddvisions, other securities, and corporate stocks. (The detailed schedules on the back of the form would, however, be consistent among the agencies, and usable detail statistics on loans, Government securities, cash assets, and deposit breakdowns would be available.) A draft of letter to the Comptroller that might be used to obtain confirmation of this understanding Ilas attached to the memorandum. Alternative actions that the Board might take to collect usable statistics at the December call date were (a) to make a call on national banks under section 11(a) of the Federal Reserve Act to submit full l'ePorts of condition to the Reserve Banks on the old basis; or (b) to ' lequest national banks to submit a reconciliation slip-sheet, in some t°1'm to the Federal Reserve Banks. 1 24 -13- 11/27/63 The memorandum discussed the advantages and disadvantages of these alternatives and recommended that the Federal Reserve Banks request from each national bank a simplified balance sheet reconciliation statement that could be processed and edited under existing automated Processing procedures with only minor modifications. A draft of letter to the Bureau of the Budget requesting approval was attached to the memorandum, with the thought that it would be sent if the understanding Of the Comptroller's position was confirmed. After comments by Messrs. Conkling and Holland weighing the considerations in the choice of alternatives and describing the interagency staff negotiations thus far on reporting uniformity among the bank supervisory agencies, it was the consensus that the Board should adopt the procedure recommended by the Division of Bank Operations. Question 'was raised as to the necessity for the letter to the Comptroller of the Currency, but it was brought out that it seemed advisable to have direct word from the Comptroller, since the present understanding was based On staff discussion. At the conclusion of the discussion the letters to the Comptroller of the currency and Bureau of the Budget were approved unanimously. are attached as Items 2 and Copies 3. Messrs. Cardon, Shay, Leavitt, Eckert, and Veenstra then withdrew from the meeting and Mr. Collier, Chief, Current Series Section, Division Qf Bank Operations entered the room. -14- 11/27/63 Cooperation with Western Hemisphere central banks. There had been distributed a memorandum dated November 261 19631 from Mr. Young regarding conversations he and Governor Mitchell had had with the Latin American central banking community--notably the President of the Central Bank of Venezuela and the Director of the Center for Latin American Monetary Studies--regarding the desirability of, and possible means for achieving, closer cooperation among the monetary authorities of the Western Hemisphere. A primary object of such an effort, at least from a Federal Reserve point of view, would be to widen the understanding Of the proper role of national monetary and fiscal policies in providing a financial climate under which the private and public productive energies of Western Hemisphere economies could find constructive and equitable fulfillment. Until recently, discussions had been confined to the suggestion that it would be highly useful for the top officials (governors or deputy governors) of central banks to meet occasionally and discuss matters of mutual concern, at first annually or even semiannually) and later perhaps quarterly. However, the recent conference Of central bank technicians in Rio de Janeiro had developed a view among the Latin American participants that something more than a discussion conference would be needed to attract the attendance of top officials. It was contended that an institution with substantial, although not necessarily extensive, financial responsibilities would really be needed to ensure continuity and dignity. Such an institution, Perhaps modeled after the Bank for International Settlements, might serve 112 11/27/63 -15- as a first line of secondary reserves (before resorting to the International Monetary Fund), especially for the smaller countries. There had been no suggestion at the Rio meeting that the contributing members of such an institution should include the United States and Canada. However, it was also clear that the active cooperation of those two countries was desired, if not essential to the success of the scheme. The conference of technicians had recommended that the Center for Latin American Monetary Studies make a study of possible ways of achieving the desired objective, and that it report its progress to the various central banks as soon as possible. The Director of the Center had now suggested that a conference of central bank governors be held next spring and proposed a steering committee to plan the conference discussions. As a central theme for the conference, he had Proposed the subject "mechanisms for financial coordination," so that consideration of a Bank for International Settlements-type institution for Latin America might become one of the matters for conference discussion. The steering committee, under his plan, would meet in January. The Director felt that the Federal Reserve ought to participate in both the steering committee and the conference session, it being understood that the System would be free to decide later on what association it desired to have with any further program that might be developed. Such Participation, the memorandum pointed out, would provide System representatives with an occasion to keep in the immediate foreground the thought cd* a conference of Western Hemisphere central bank governors, and to 1127 11/27/63 -16- emphasize the desirability of maintaining a hemispheric frame of reference in any further conference planning. Also/ participation, even if only in one conference, would afford a setting favorable to special educational effort in behalf of sound financial policies in Latin America. After further comments, Mr. Young's memorandum concluded with the recommendation that the Board authorize the staff to participate in any further inter-American discussions of this subject that might occur in the near future, and to which the Federal Reserve might be invited. In particular, Mr. Young recommended that he and Mr. Sammons be authorized to attend the proposed meeting of the steering committee (probably to be held in Mexico City), and that he be authorized to indicate to the Director of the Center for Latin American Monetary Studies that they would be prepared to attend such a meeting. At the Board's invitation Mr. Young supplemented the information in his memorandum/ commenting especially on the nature and extent Of previous technical cooperation by the Federal Reserve with other countries in dealing with problems of inflation, financial and banking legislation, and related matters. He also described the extent to which the proposals for periodic meetings of central bank governors had been discussed informally with representatives of the State and Treasury Departments and had received endorsement. Governor Mitchell expressed some reservation as to the proposal for establishing a new institution. In his participation in the discussions, 4t28 -17- 11/27/63 he said, he had tried to stress the importance of making any conference of governors hemispheric, with the United States and Canada included among the nations represented. In his view, if the United States was to use its moral suasion and strength in Latin America, it must act on Parity with the Latin American countries. After further comments on the discussions he had had, he expressed the view that the proposal for a conference of governors had sufficient merit to deserve further exploration. Governor Mills expressed concern that a new international institution might duplicate existing institutions, at least to some extent. He had misgivings that identification of the United States with the Proponents of such a proposal might provide the very force that would carry the idea beyond the discussion stage. He also observed that, With a new Administration now coming into office following the recent assassination of President Kennedy, the officials in the State and Treasury Departments who had been approached about the conferences of central bank governors might not continue in the same positions. Chairman Martin remarked that the proposals had pitfalls of Which RII were aware. In any initial discussions, it would be well to bear in mind the points Governor Mills had made. It seemed probable, was in office would support the however, that whatever Administration Proposal for a new international organization if a useful framework was developed, or would oppose it if the plan seemed to offer only duplication of existing facilities. 41' 11/27/63 -18- In further comments it was observed that while a Federal Reserve delegation might be instructed to refrain from discussing at this time the possibility of a new organization, representatives of the other nations attending might nonetheless proceed with such discussions. On the other hand, notwithstanding the spontaneous enthusiasm that had been expressed at the meeting of central bank technicians, such enthusiasm might dwindle. At the conclusion of the discussion Messrs. Young and Sammons were authorized to attend the meeting of the steering committee to be held in Mexico City in January as well as any other similar meetings that might be scheduled in the near future. Messrs. Molony, Kenyon, Noyes, and Sammons then withdrew from the meeting. Study of bad debt reserves (Item No. 4). There had been dis- November 20, 1963, in which the Treasury tributed a copy of a letter dated study of commercial bank bad debt Department requested assistance in a toward a careful economic and statistical reserves for tax purposes, looking to remedying any serious inappraisal of those reserves with a view equities that might exist. Within the next week the Treasury planned to have ready a relatively short questionnaire that it was hoped the Board would send to each State member bank. Similar requests were being Currency with respect to national addressed to the Comptroller of the banks and to the Federal Deposit Insurance Corporation with respect to 4130 -19- 11/27/63 nonmember insured banks. The Treasury Department would provide a letter to the banks giving instructions on completing the form and assuring them that no individual bank data would be published. The form was to be returned with the December 1963 report of condition. The letter from the Treasury Department indicated that the assistance of the Board's data processing staff was requested in connection with the project. During discussion the staff furnished information as to the amount of computer time and expense that might be involved in compliance With the Treasury's request. Some misgivings were expressed that the member banks as a request from questionnaire might be regarded by State the Federal Reserve rather than from the Treasury Department. The objec- tives and scope of the Treasury research project and the extent to which it might yield benefits were also discussed. At the conclusion of the discussion, approval was given to a form attached as Item No. 4. reply to the Treasury Department in the The meeting then adjourned. Secretary's Note: Acting in the absence of Governor Shepardson, Governor Robertson today approved on behalf of the Board the following items: Memorandum from the Division of Personnel Administration recomMending the appointment of Dorothy B. Saunders as Secretary to Mr. Daane, Board Members' Offices, with basic annual salary at the rate of $8,575, effective the date of entrance upon duty (December 2, 1963). 41_31 11/27/63 -20- Memorandum from Mr. Young, Adviser to the Board and Director, Division of International Finance, requesting that the Board authorize payment of the cost of a small dinner at the Cosmos Club on December 2, 1963, in honor of Jasper Rootham„ Chief, Central Banking Information Department, Bank of England. , Secre - 477132 BOARD OF GOVERNORS Item No. 1 11/27/63 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD November 27, 1963. R. Colston Christian, Esq., State Planters Bank Building, Richmond, Virginia. Dear Mr. Christian: t The Board has considered the relevan facts concerning the and The Bank of Nokesville, Occoquan of Proposed merger between The Bank your dum on the in memoran d containe including the representations ed the to Board through submitt was which subject dated October 25 1963, d. the Federal Reserve Bank of Richmon it has been concluded On the basis of this consideration, Board is not required by the by tion transac that prior approval of the of Act 1956. Company section 3(a) of the Bank Holding Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. ill q"-.1" BOARD OF GOVERNORS Item No. 2 11/27/63 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD November 27, 1963. Mr. James J. Saxon, Comptroller of the Currency, Main Treasury, Washington, D. C. 20220 Dear Mr. Saxon: This refers to the Board's letter to you, dated August 27, 1963 and to subsequent meetings of the staffs of the three Federal bank supervisory agencies and the National Association of Supervisors of State Banks with respect to the format to be used in the call report of condition. It is understood that some progress has been made toward eventual uniformity in the format but that at the forthcoming call State banks will use the format adopted in 1961 and your Office will require from national banks substantially the same format on the face as revised for the September 30 call, although all of the reverse side schedules Will follow the 1961 format. In these circumstances, some additional information must be collected for national banks in order that bank statistics may be compiled to meet the critical need for consistent benchmark data, and to measure the breaks in existing statistical series. Alternative forms have been discussed at staff meetings. It is also understood that your Office is unwilling to undertake the collection of information from national banks Under either of these alternatives or in any other manner that would produce year-end national bank statistics comparable with those to be collected from all other commercial banks. In making its own plans to obtain usable statistics at the forthcoming call, the Board would appreciate verification that its understandings of your position in these matters is correct. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. 4131! BOARD OF GOVERNORS Item No. OF THE 11/27/63 3 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD November 27, 1963. Mx. David Cohn, Clearance Officer, Office of Statistical Standards, Bureau of the Budget, Executive Office of the President, Washington, D. C. 20503 Dear Mr. Cohn: your agency of a This is to request clearance by on report statistics conditi reconciliation schedule to collect ent with those to be consist from all national banks on a basis oming year-end call forthc collected from State banks at the ed form topropos the date. Two copies of your form 83 and ent are attached. statem gether with the required supporting 30 advised you of The Board's letter of August condition report form for changes made in the national bank ions of call data the fall call date that would make tabulat T. Crowder of your for all insured banks impossible. Mr. E. developments and the Office has been advised of subsequent the three Federal bank unsuccessful negotiations between representatives of the National supervisory agencies and Banks to obtain consistent Association of Supervisors of State data for the year-end call. ller of the Currency Representatives of the Comptro r substantive furthe no make will have informed us that he bank form for December al nation changes of the face of the the same tially as that used substan and that the form will be the Board's to the of letter copy for the September call. A tion. informa your Comptroller is enclosed for All insured State banks will continue to report on the format adopted in 1961 and used since that time. The ged in appearance reverse side of both forms will be unchan be ged in content unchan also from the 1961 format and will on item new the face of the a sold, except that Federal funds the in d loan include schedule. national form, will not be cash loans, , and deposits assets on ation Therefore, detail inform a on ble basis. availa tent consis be from the reverse side will BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Mr. David Cohn balance The Board has decided to collect a simplified can that banks l all nationa from sheet reconciliation statement in ly ed present res automat procedu be edited and tabulated using bank l d nationa the with combine effect. This statement can be a consistent basis, all condition report form to obtain, on State banks. Although this from information to be collected ng by national banks in reporti method will require some dual be reported on two must same the that a few items which are it since would be practically ry necessa forms, it is considered the revise automated tabulating to impossible at this late date the at Federal Reserve Banks. and procedures used at the Board of type liation statement this reconci It is believed that use of of ility ics availab summary statist Will preclude any delays in r the familia type sheet balance of from the year-end call. Use of statement will be less burdensome on national banks than a which is not familiar to reporting complex reconciliation statement tial reporting errors. substan banks and therefore subject to Because of serious time limitations to prepare for the appreciate favorable consideration Year-end, call, the Board would Of this form at your earliest convenience. The delay in presentresulted from the extended negoing this request for clearance s. tiations among the banking agencie Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Enclosures. .4136 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD November 27, 1963. MEMORANDUM FOR: Mr. David Cohn, Clearance Officer, Office of Statistical Standards, Bureau of the Budget, Executive Office of the President, Washington, D. C. 20503 Supporting Statement to Request for Approval of Statistical Reconciliation Schedule for National Bank Condition Report Series A. Justification of Form or Other Document (or revision thereof) in its Relation to aerating or Research Programs tion schedule is The attached slip-sheet reconcilia n from national informatio sheet required to collect balance be to collected from all that with banks on a basis consistent tabulated when with other data, insured State banks. These of report of national condition call information derived from the 2130A), form will be Currency combined banks (Comptroller of the banks tabulated State from Federal With similar information for report form for State member Reserve form FR 105, the condition and Federal Deposit InsurSystem, banks of the Federal Reserve insured nonmember State banks. by ance Corporation form 64 used primary source of commercial the are These summary tabulations used by economists, finanwidely banking condition. data and are and Government elsewhere and are cial analysts and others in of its conduct responsibilities for required by the Board in the monetary policy. B. Justification of Method Used in Selecting and Contacting Those to be Covered This form will be collected from all national banks in the United States (about 4,6w) that report to the Office of the Comptroller of the Currency on form 2130A. A 1,37 BOARD Mr. David Cohn SYSTEM OF GOVERNORS OF THE FEDERAL RESERVE -2- and C. Brief Description of Plans for Collection, Tabulation Publication only for the It is planned that this form will be used be will consolidated data the and forthcoming year-end call date Banks with inforReserve Federal by automated procedures at the the of official copy Banks' mation from the Federal Reserve and consistent national bank condition report to obtain complete forms will be collected The banks. condition data for all national with Banks ion on informat Reserve and keypunched at the Federal Board's data with computer the on d tabulate State member banks and punched the by on cards d furnishe for insured nonmember banks d, as usual, in the Summary FDIC. Summary data will be publishe Banks and in the Member of ies Report of Assets and Liabilit used ly by the Board as internal well as Federal Reserve Bulletin, nt Governme agencies that rely on other staff and the staffs of these data. D. Documentation of Consultation with those Supplying Data, Users of the Data, and Others The format of this reconciliation schedule has been members of the staff of the discussed in general terms with Shapiro and Watson), and (Messrs. Comptroller of the Currency e Corporation (Messrs. Insuranc the staff of the Federal Deposit format, however, was determined Cramer and Cresswell). The final was and drafted in a form by the staff of the Federal Reserve minor modifications in procedures that could be tabulated with some es in effect at the ng techniqu under established automated processi a with Board minimum reporting 12 Federal Reserve Banks and at the The format used is a simplibanks. national nt burden on responde are banks national familiar and the which with fied balance sheet used by that as same banks national the is content of the items when the national bank form Prior to the September 30 call date was revised. (Signed) Merritt Sherman Merritt Sherman, Secretary. Attachments. BOARD OF GOVERNORS Item No. OF THE 4 11/27/63 FEDERAL RESERVE SYSTEM WASHINGTON 25. O. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD December 4, 1963. Mr. Stanley S. Surrey, Assistant Secretary of the Treasury, Washington, D. C. Dear Mr. Surrey: This refers to your letter of November 20 regarding the Treasury Department's proposed study of bad debt reserves of commercial banks for tax purposes. The Board would be willing to include a copy of your questionnaire form with the report of condition in December 1963, and would appreciate receiving a draft of the proposed form as soon as practicable. The Board also is pleased to make available the assistance of its Data Processing staff. In addition to the advice on planning requested in your letter, the Division will arrange for programming and machine processing in connection with the study, along the lines indicated by Mr. Sherman Shapiro in conversations with members of our staff. It is understood that draft detailed specifications for the various stages of the data processing will be furnished in the relatively near future. the Treasury Department, • It is also understood that of Data Processing, will with the assistance of the Division arrange for key punching the data as reported in the questionnaire form. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary.
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