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.609

9/61

Minutes for

To:

Members of the Board

From:

Office of the Secretary

November 29, 1961

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. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell

C., L.

4011
Minutes of the Board of Governors of the Federal Reserve System on
Wednesday, November 29, 1961.
PRESENT:

Mr.
Mr.
Mr.
Mr.
Mr.

The Board met in the Board Room at 10:00 a.m.

Martin, Chairman
Mills
Robertson
Shepardson
King
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Sherman, Secretary
Kenyon, Assistant Secretary
Thomas, Adviser to the Board
Molony, Assistant to the Board
Fauver, Assistant to the Board
Solomon, Director, Division of Examinations
Johnson, Director, Division of Personnel
Administration
Hexter, Assistant General Counsel
O'Connell, Assistant General Counsel
Hooff, Assistant General Counsel
Furth, Adviser, Division of International
Finance
Conkling, Assistant Director, Division of
Bank Operations
Leavitt, Assistant Director, Division of
Examinations
Sprecher, Assistant Director, Division of
Personnel Administration
Spencer, General Assistant, Office of the
Secretary

Items circulated to the Board.

The following items, which had

been circulated to the members of the Board and copies of which are
attached to these minutes under the respective item numbers indicated,
were approved unanimously:
Item No.
Letter to the Federal Deposit Insurance Corporation regarding deposit insurance for a
nonmember bank that would assume the liabilities
and purchase offsetting assets of Security State
Bank, Algona, Iowa, and Farmers State Bank,
Luverne, Iowa.

1

11/29/61

-2Item No.

Letter to The Endicott National Bank, Endicott,
New York, approving its application for fiduciary
powers.

2

Letter to The Savings Deposit Bank and Trust
Company, Elyria, Ohio, granting Pioneer National
Bank, into which it is to be converted, permission
to exercise fiduciary powers. 1/

3

Letter to The First National Bank of Oakland City,
Oakland City, Indiana, approving its application
for fiduciary powers.

4

Letter to the Federal Reserve Bank of Chicago
waiving assessment of a penalty incurred by The
Home Trust and Savings Bank, Osage, Iowa, because
Of a deficiency in its required reserves.

5

Letter to Burns State Bank, Burns, Kansas, interposing no objection to the declaration of a
dividend on October 14, 1961.

6

Letter to the Federal Reserve Bank of Kansas City
approving the appointment of an additional Federal
Reserve Agent's Representative at the Denver Branch.

7

United Security Savings Account Plan (Item No.

8). The Board was

in receipt of a telegram dated November 27, 1961, from the President of the
Federal Reserve Bank of San Francisco reporting widespread advertising in
California by Citizens Bank and Trust Company, Park Ridge (Chicago),
Illinois, of its so-called United Security Savings Account Plan.

The

telegram stated that many inquiries as to the propriety of the plan and
complaints about the advertising had been received.

In this connection,

there had been distributed a memorandum from the Legal Division dated
November 28, 1961, submitting a proposed reply to the San Francisco
1/ Title to be First National Bank of Elyria.
April 6, 1962.

See letter dated

401,
11/29/61

-3-

Reserve Bank which, it was suggested, the Board might also wish to send
to the other Reserve Banks as well as the Comptroller of the Currency
and the Federal Deposit Insurance Corporation.
In discussion of the matter it was stated that a memorandum
would be available to the Board shortly concerning the proposed amendments to Regulation Q, Payment of Interest on Deposits, that had been
published in the Federal Register for comment on September 14, 1961.
Citizens Bank and Trust Company, it was noted, had been *advised that
its United Security Savings Account Plan would not be permissible under
the revised savings deposit definition.

Accordingly, since it appeared

that the Board would be in a position to act on the proposed amendments
to Regulation Q within the next few days, the suggestion was made that
the reply to the San Francisco Bank might be relatively brief, simply
advising that the Board had informed Citizens that its plan would not
be permissible under the amended Regulation.
There being agreement with this suggestion, unanimous approval
was given to a telegram to the San Francisco Bank in the form attached
as Item No.

8.

In connection with the proposed amendments to Regulation Q, the
Board was advised by Mr. Hooff that informal clearances with the staff
of the Federal Deposit Insurance Corporation were expected to be
completed shortly, so that the Board and the Corporation would be in a
Position to make the proposed changes in their respective regulations
effective.

-4-

11/29/61

Mr. Hooff then withdrew from the meeting.
Report on proposed merger (Item No. 9).

In a letter dated

November 27, 1961, the Comptroller of the Currency referred to the
Board's report of June 22, 1961, on the competitive factors involved
in the proposed merger of the National Bank of Westchester, White Plains,
New York, with The First National City Bank of New York, New York, and
invited the Board to submit certain further material regarding this
matter, for inclusion in the record of the hearing to be held on
December

4, 1961. A draft of proposed reply had been distributed to

the Board.
In discussion of the matter certain changes in the draft were
suggested, following which unanimous approval was given to a reply in
the form attached as Item No.

9.

Announcement regarding silver.

At the Chairman's request, Mr.

Furth commented as a matter of information on the nature and effect of
Yesterday's announcement concerning the decision of the President that
Silver metal should gradually be withdrawn from the country's monetary
reserves.

In accordance with this decision the Treasury had been directed

to suspend further sales of free silver and to suspend the use of free
Silver held by the Treasury for coinage.

The amount of silver required

for coinage needs was to be obtained by retirement from circulation of
a sufficient number of $5 and $10 silver certificates.

The President

also announced his intention to recommend to the Congress repeal of

4015
11/29/61

-5-

existing silver purchase legislation, along with repeal of the existing
tax on transfers of interest in silver bullion.

He further announced

his intention to recommend the enactment of legislation to provide for
the gradual release of the silver now required as backing for $1 and $2
silver certificates and to authorize the issuance of Federal Reserve
notes in those denominations.
Following discussion in the light of Mr. Furth's comments, all
of the members of the staff except Messrs. Sherman and Fauver withdrew
from the meeting.
Director appointments.

The following actions were taken with

respect to the appointment of Chairmen, Deputy Chairmen, and Class C
directors at Federal Reserve Banks:
J. M. Cheatham, President of Dundee Mills, Incorporated,
Griffin, Georgia, was designated as Chairman and Federal
Reserve Agent of the Federal Reserve Bank of Atlanta for
the year 1962, with compensation fixed at an amount equal
to the fees that would be payable to any other director of
the Bank for equivalent time and attendance to official
business.
Chairman Martin was authorized to discuss with Ethan A. H.
Shepley, Chancellor of Washington University, St. Louis,
Missouri, whether the latter would accept appointment, if
tendered, as Class C director of the Federal Reserve Bank
of St. Louis for the three-year term ending December 31,
1964.
Homer A. Scott, Vice President and District Manager of Peter
Kiewit Sons' Company, Sheridan, Wyoming, was designated as
Chairman and Federal Reserve Agent of the Federal Reserve
Bank of Kansas City for the year 1962, with compensation
fixed at an amount equal to the fees that would be payable
to any other director of the Bank for equivalent time and
attendance to official business.

4011/29/61

-6-

Oliver S. Willham, President of Oklahoma State University,
Stillwater, Oklahoma, was appointed as Deputy Chairman of
the Federal Reserve Bank of Kansas City for the year 1962.
It was agreed to request the Chairman of the Federal Reserve
Bank of Kansas City to ascertain and advise whether Dolph
Simons, Editor and Publisher of the Lawrence Daily JournalWorld, Lawrence, Kansas, would accept appointment, if tendered,
as Class C director of that Bank for the three-year term ending
December 31, 1964, with the understanding that if it were
ascertained that Mr. Simons would accept, the appointment would
be made.
Lamar Fleming, Jr., Member of the Board of Directors of Anderson, Clayton & Co., Inc. Houston, Texas, was reappointed as
Class C director of the Federal Reserve Bank of Dallas for
the three-year term ending December 31, 1964, and was appointed
as Deputy Chairman of the Bank for the year 1962.
It was agreed to request the Chairmen of the appropriate Federal
Reserve Banks to ascertain and advise whether the following persons
would accept appointments, if tendered, as Federal Reserve Bank branch
directors for the terms indicated, with the understanding that if it
were ascertained that they would accept, the appointments would be made:
Barney Alden Tucker, Farmer, London, Kentucky, as a director
of the Cincinnati Branch of the Federal Reserve Bank of
Cleveland for the three-year term ending December 31, 1964.
Fletcher Lauman Byrom, President of Koppers Co., Inc., Pittsburgh, Pennsylvania, as a director of the Pittsburgh Branch
of the Federal Reserve Bank of Cleveland for the unexpired
portion of the three-year term ending December 31, 1962, to
succeed John T. Ryan, Jr., whose resignation became effective
December 31, 1961.
James W. Miller, President, Western Michigan University,
Kalamazoo, Michigan, as a director of the Detroit Branch of
the Federal Reserve Bank of Chicago for the three-year term
ending December 31, 1964.

11/29/61

-7-

Harry M. Young, Jr., Farmer, Herndon, Kentucky, as a director
of the Louisville Branch of the Federal Reserve Bank of St.
Louis for the three-year term ending December 31, 1964. (It
was agreed that if Mr. Young was unable to accept, the appointment would be tendered to Richard T. Smith, Farmer, Madisonville,
Kentucky.)
William King Self, President of the Riverside Chemical Company,
Marks, Mississippi, as a director of the Memphis Branch of the
Federal Reserve Bank of St. Louis for the unexpired portion of
the three-year term ending December 31, 1962, to succeed Clay
Lyle, whose resignation became effective November 1, 1961.
John T. Harris, Manager, DeGroff Department Store, McCook,
Nebraska, as a director of the Omaha Branch of the Federal
Reserve Bank of Kansas City for the two-year term ending
December 31, 1963. (It was agreed that if Mr. Harris was
unable to accept, the appointment would be tendered to Earl H.
Monahan, Cattle Rancher, Hyannis, Nebraska.)
Edgar H. Hudgins, Rancher, Hungerford, Texas, as a director
of the Houston Branch of the Federal Reserve Bank of Dallas
for the three-year term ending December 31, 1964.
Harold D. Herndon, Oil Operator, San Antonio, Texas, as a
director of the San Antonio Branch of the Federal Reserve Bank
of Dallas for the three-year term ending December 31, 1964.

The meeting then adjourned.

Secretary's Note: Pursuant to recommendations contained in memoranda from
appropriate individuals concerned, Governor
Shepardson today approved on behalf of the
Board the following actions relating to the
Board's staff:
Appointment
Theodore L. Jones as Cafeteria Laborer in the Division of Administrative Services, with basic annual salary at the rate of $3,185,
effective the date of entrance upon duty.

11/29/61

-8-

Salary increase
Att W. Hammons, Jr., Assistant Federal Reserve Examiner, Division
of Examinations, from $7,260 to $7,560 per annum, effective December 10,
1961.

401
BOARD OF GOVERNORS
OF THE

roel

Item No. 1
11/29/61

FEDERAL RESERVE SYSTEM
*

a
a
44

WASHINGTON 25. D. C.

ADDRESS OFFICIAL CORREIEIPONDENCE

4

TO THE BOARD

_

4*,74a, man**
'i044401.-

November 29, 1961

The Honorable Erie Cocke, Sr., Chairman,
Federal Deposit Insurance Corporation,
Washington 25, D. C.
Dear Mr. Cocke:
Reference is made to your letter of November 8,
1961, regarding the organization of a nonmember bank
which will assume the liabilities and purchase offsetting
assets of Security State Bank, Algona, Iowa, and the
Farmers State Bank, Luverne, Iowa, and establish a branch
in Luverne.

programs
the bank
would be
insuring
bank.

The Board of Governors has urged no corrective
upon Security State Bank, Algona, Iowa, nor has
agreed to any programs which the Board feels
advisable to incorporate as conditions of
the deposits of the proposed new nonmember State

Very truly yours,

(Signed) Elizabeth L. Carmichael

Elizabeth L. Carmichael,
Assistant Secretary.

BOARD OF GOVERNORS
OF THE

Item No. 2
11/29/61

FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.

ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARO

November 29, 1961

Board of Directors,
The Endicott National Bank,
Endicott, New York.
Gentlemen:
The Board of Governors of the Federal Reserve System has
to your application for fiduciary powers and
consideration
given
National Bank authority to act, when not in
Endicott
grants The
or local law, as trustee, executor, adminState
of
contravention
stocks and bonds, guardian of estates,
of
registrar
istrator,
of estates of lunatics, or in any
committee
receiver,
assignee,
other fiduciary capacity in which State banks, trust companies, or
Other corporations which come into competition with national banks
are permitted to act under the laws of the State of New York. The
exercise of such rights shall be subject to the provisions of
Section 11(k) of the Federal Reserve Act and Regulation F of the
Board of Governors of the Federal Reserve System.
The Board notes the present capital position of the bank
is not satisfactory, and wishes to stress the need for strengthening the capital structure as soon as possible.
A formal certificate indicating the fiduciary powers that
Your bank is now authorized to exercise will be forwarded in due
course.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.

BOARD OF GOVERNORS
OF THE

Item No.

FEDERAL RESERVE SYSTEM

3

11/29/61

WASHINGTON 25, D. C.

ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

November 29, 1961

Board of Directors,
The Savings Deposit Bank and Trust Company,
Elyria, Ohio.
Gentlemen:
The Board of Governors of the Federal Reserve System
has given consideration to the application for permission to
exercise fiduciary powers made by The Savings Deposit Bank and
Trust Company on behalf of Pioneer National Bank, Elyria, Ohio, 1/
the national bank into which it is to be converted, and grants —
such national bank authority, effective if and when the proposed conversion is consummated, to act, when not in contravention of State or local law, as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee,
receiver, committee of estates of lunatics, or in any other
fiduciary capacity in which State banks, trust companies, or
Other corporations which come into competition with national banks
are permitted to act under the laws of the State of Ohio. The
exercise of such rights shall be subject to the provisions of
Section 11(k) of the Federal Reserve Act and Regulation F of the
Board of Governors of the Federal Reserve System.
After the conversion becomes effective and the Comptroller
Of the Currency authorizes the national bank to commence business,
you are requested to have the Ward of directors of Pioneer
National Bank adopt a resolution ratifying your application for
permission to exercise fiduciary powers, and a certified copy of
the resolution so adopted should be forwarded to the Federal
Reserve Bank of Cleveland for transmittal to the Board for its
records. When a copy of such resolution has been received by the
Board, a formal certificate indicating the fiduciary powers that
the national bank is authorized to exercise will be forwarded.
'Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
1/ Title to be First National Bank of Elyria.
April 6, 1962.

See letter dated

BOARD OF GOVERNORS
OF THE

FEDERAL RESERVE SYSTpvl
WASHINGTON 25, D. C.

Item No. 4

11/29/61

ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

November 29, 1961

Board of Directors,
The First National Bank of Oakland City,
Oakland City, Indiana.
Gentlemen:
The Board of Governors of the Federal Reserve System
has given consideration to your supplemental application for
fiduciary powers and grants you authority to act, when not in
contravention of State or local law, as trustee, executor,
administrator, guardian of estates, and committee of estates
of lunatics. The exercise of such rights shall be subject to
the provisions of Section 11(k) of the Federal Reserve Act and
Regulation F of the Board of Governors of the Federal Reserve
System.
In addition to the fiduciary powers herein authorized, the bank was granted authority, on September 19, 1955,
to act as trustee for bond issues and registrar of stocks and
bonds of the Oakland Columbia School Building Company, Inc.
A formal certificate indicating the fiduciary powers
that your bank is now authorized to exercise will be forwarded
in due course.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.

k

BOARD OF GOVERNORS
e att Cop 740
,
**4""i
1104,./
4

°44n 0r.

OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.

Item No.

5

11/29/61

ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

November 29, 1961

Mr. E. K. Kroll, Assistant Cashier,
Federal Reserve Bank of Chicago,
Chicago 90, Illinois.
Dear Mr. Kroll:
This refers to your letter of November 14, regarding the penalty
Of $38.36 incurred by The Home Trust and Savings Bank, Osage, Iowa, on a
deficiency of five per cent in its required reserves for the biweekly comPutation period ended November 1, 1961.
It is noted that the deficiency resulted from the bank's failure
to realize that a large increase in its deposits was occurring during the
period, and from the nonsynchronization of entries on its books and the
Reserve Bank's books for a currency shipment and a transfer to its reserve
account; and that the bank has had an excellent reserve record since its
membership in the System in 1918.
In the circumstances, the Board authorizesyourBank to waive
assessment of the $38.36 penalty for the reserve period ended November 1,
1961.
Very truly yours,
(Signed) Kenneth A. Kenyon
Kenneth A. Kenyon,
Assistant Secretary.

BOARD OF GOVERNORS
oiistItr*,},4

OF THE

0,100k,,40

Item No. 6

FEDERAL RESERVE SYSTEM

11/29/61

WASHINGTON 25. D. C.

ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

441,Not
zooki***

November 29, 1961

Board of Directors,
Burns State Bank,
Burns, Kansas.
Gentlemen:
The Board of Governors of the Federal Reserve
System has received a copy of a letter written by Mr. C.
L. Bruner, President, dated October 24, 1961, and addressed
to Mr. George D. Royer, Jr., Chief Examiner, Federal Reserve
Bank of Kansas City, in which it is indicated that you voted
to declare a dividend of $750 at your meeting on October 14,
1961, subject to approval by the Board of Governors. Mr.
Bruner's letter requests the Board's permission to declare
this dividend.
After giving consideration to the facts related
to this matter, the Board approves the declaration of the
dividend of $750 declared at your meeting of October 14,
1961. This letter does not authorize any other declaration of dividends for 1961 or later.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.

BOARD OF GOVERNORS
1

ttotxtt****._
4nt,
,
,,4q0Oki' @tita4

OF THE

.,,44,0.„
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Item No. 7

FEDERAL RESERVE SYSTEM

a
-a

11/29/61

WASHINGTON 25, D. C.

ki

ADDRESS OFFICIAL CORRESPONDENCE

*r
1
41. Ni1441
,,,)
',A

TO THE BOARD

—t‘titti;ty.**—

November 29, 1961

Mr. Raymond W. Hall,
Chairman of the Board and
Federal Reserve Agent,
Federal Reserve Bank of Kansas City,
Kansas City 6, Missouri.
Dear Mr. Hall:
In accordance with the request ccntained in your letter of
November 17, 1961, the Board of Governors approves the appointment of
Mr. William Bernard Hoar as an additional Federal Reserve Agent's
Representative at the Denver Branch.
This approval is given with the understanding that Mr; Hoar
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 responsiblity 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. Hoar may, with the approval of the
Federal Reserve Agent and the Vice President in charge of the Denver
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. Hoar is fully informed 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 of the Banx in the discharge of these responsibilities.
It is assumed that Mr. Hoar will execute the usual Oath of
Office, which will be forwarded to the Board of Governors.
Very truly yours,
(Signed) Merritt Sherman
Merritt Sherman,
Secretary.

TELEGRAM
BOARD OF GOVERNORS
OF THE

Item No. 8

FEDERAL RESERVE SYSTEM

11/29/61

LEASED WIRE SERVICE

WASHINGTON

November 29, 1961

Swan - San Francisco
Reurtel 27th on "United Security Accounts"' of Citizens Bank
and Trust Company, Park Ridge (Chicago). Board has advised
Citizens Bank that this plan would not be permissible under proposed
amendments to Regulation Q published in September 14, 1961 Federal
Register for comment.
(Signed) Merritt Sherman
Sherman

BOARD OF GOVERNORS
OF THE

FEDERAL RESERVE SYSTEM

Item No.

WASHINGTON

11/29/61

9

OFFICE OF THE CHAIRMAN

November 30, 1961

The Honorable James J. Saxon,
Comptroller of the Currency,
Treasury Department,
Washington 25, D. C.
Dear Mr. Saxon:
This is with regard to your letter of November 27, 1961,
in which you refer to this Board's report of June 22, 1961, on the
competitive factors involved in the proposed merger of National
Bank of Westchester, White Plains, New York, with The First National
City Bank of New York, and in which you invite the Board to present
additional material regarding the proposed merger.
The Board appreciates and has carefully considered your
invitation to supply further material regarding this matter. However,
the statements you quote from pp. 13 and 14 of the Board's report were
Preceded, as you know, by extensive information and analysis relating
to the case. The Board felt, and continues to feel, that these provide an adequate basis for those statements. Accordingly, upon again
reviewing the applicable provisions of section 18(c) of the Federal
Deposit Insurance Act, as well as the report on competitive factors
which the Board has furnished in this case pursuant to those provisions,
the Board has concluded that it would not wish to add to the report at
this time.
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
WM. McC. Martiho Jr.