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Minutes for October 10, 1958 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, if you were present at the meeting, please initial in column A below to indicate that you approve the minutes. If you were not present, please initial in column B below to indicate that you have seen the minutes. A Chin. Martin x Gov. Szymczak x Gov. Vardaman Gov. Mills Gov. Robertson Gov. Balderston X Gov. Shepardson x evo p 290S Minutes of the Board of Governors of the Federal Reserve System on Friday, October 10, 1958. The Board met in the Special Library at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Balderston, Vice Chairman Vardaman Robertson Shepardson Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Sherman, Secretary Kenyon, Assistant Secretary Fauver, Assistant Secretary Thurston, Assistant to the Board Hackley, General Counsel Molony, Special Assistant to the Board Hooff, Assistant Counsel Poundstone, Federal Reserve Examiner, Division of Examinations Resignation of Governor Vardaman. Governor Vardaman reported for purposes of the official record that he had submitted to the President of the United States his resignation from the Board of Governors of the Federal Reserve System effective December 1, 1958. He stated that the Board's Secretary had been furnished photostatic copies of his letter to the President dated October 1, 1958, and the President's letter dated October 7, 1958, accepting the resignation. with the Governor Vardaman also stated that he would discuss Board later certain questions of procedure, including the appropriate clisPosition of the files accumulated in his office. Governor Balderston stated to Governor Vardaman that the Board %/ished for him the best of health and success in his future endeavors. Mr. Thurston then withdrew from the meeting. 2904 10/10/58 -2- Proposed change in Regulation Q (Item No. 1). At the meeting on Wednesday, October 8, preliminary consideration was given to a suggestion from the City National Bank of Rockford, Rockford, Illinois, that the provisions of Regulation Q be amended to allow a grace period of 10 calendar days at the beginning of any month in the computation of the rate of interest paid on savings deposits. In view of differences of ()Pinion among the members of the Board present, action on the matter was deferred and it was understood that prior to further discussion the Legal Division would determine the rate of interest actually being paid by the Rockford bank and also whether any similar suggestions had been received by the Federal Deposit Insurance Corporation. In a memorandum dated October 9, 1958, which was distributed before this meeting, Mr. Hooff rePorted having been advised by the Office of the Comptroller of the Currency that the Rockford bank was paying only 1-1/2 per cent interest °a savings accounts at the time of the last examination, which was made 14 January 1958. He also stated that counsel for the Federal Deposit I48urance Corporation was aware of no suggestion by nonmember insured baloks that the grace period allowed on savings accounts be modified. 14 the light of the information that had been received concerning the an rate of interest paid by the Rockford bank, Mt. Hooff suggested aadition to the proposed letter to the member bank which would clarify the fact that a member bank paying interest not in excess of two per cent Per annum may accept savings deposits through the 10th day of any month without resort to the grace period allowed by Regulation Q. 291)5 10/10/58 ...3.. Mr. Hackley stated that in originally presenting the matter to the Board the Legal Division h.fri proceeded in accordance with the view that this was a relatively minor matter and that, although the suggestion might have some merit, the Board perhaps would not wish to consider amending its regulation without evidence that such an amendment was necessary. On the other hand, he said, the Legal Division would see no objection, if the Board so desired, to obtaining the views of the Federal Reserve Banks, the Comptroller of the Currency, and the Federal DePcsit Insurance Corporation with regard to a possible amendment to Regulation Q. After Governor Balderston had summarized the discussion at the Board meeting on October 8, Governor Shepardson said that in reading the Inemoranda from the Legal Division it occurred to him that the present Provisions of Regulation Q constitute something of an irritating technicality. He failed to see what harm would be done by simplifying those provisions. In the ensuing discussion, during which Governor Vardaman commented that he was concerned more about the principle involved than said that about the situation at the Rockford bank, Governor Robertson he had no feeling against adopting an amendment of the kind suggested even though the matter did not seem particularly important. He noted, however, that the Present Provisions of Regulation Q pose no problem for the Rockford benk and that the number of institutions paying the maximum Permissible rate of interest is relatively small. Before any change was illade in the Regulation, he felt that the Board should explore the 2906 10/10/58 Possibility of adverse factors in the manner suggested by Mr. Hackley aad that the Board might also wish to ascertain the views of the banking fraternity. Following a comment by Governor Vardaman that he had not intended to suggest precipitate action but only that the usual procedures be instituted, Governor Shepardson again expressed the view that simplification of the present language of Regulation Q apparently could be Justified in the interest of easing administrative problems. He felt that the Board's decision should not be based on the views of a few member hanks but rather on what would constitute a sound and logical rule. There followed some discussion of the advice that should be conamunicated to the City National Bank of Rockford at the conclusion of 'which it was agreed unanimously that the Legal Division would clarify the Pl'°visions of Regulation Q for the Rockford bank by means of a telephone conversation, that the oral advice would be confirmed by a letter to the oember bank, and that copies of the letter would be sent to the Federal Reserve Bank of Chicago and to the Office of the Comptroller of the Culgrency for their information. A copy of the letter sent pursuant to this action is attached as Item NO. 1. It was also agreed unanimously that steps would be instituted to seek the views of the Federal Reserve Banks, the Comptroller of the CUrrency, and the Federal Deposit Insurance Corporation with regard to a 1)°88ible change in the provisions of Regulation Q with respect to grace Periods. Mr. Hooff then withdrew from the meeting. 10/10/58 -5- Discount rates. Unanimous approval was given to telegrams to the following Federal Reserve Banks approving the establishment without change by those Banks on the dates indicated of the rates on discounts and advances in their existing schedules: San Francisco New York Cleveland Richmond Atlanta St. Louis Kansas City Dallas October October October October October October October October 8, 9, 9, 9, 9, 9, 1958 1958 1958 1958 1958 1958 9, 1958 9, 1958 Branches of Banca d'America e d'Italia (Item No. 2). The Board aPProved unanimously, for transmittal through the Federal Reserve Bank Qf New York, a letter to Bank of America, New York, granting extensions c)f the time within which Banca d'America e d'Italia may establish agencies 111 Genoa and Naples. The file on this matter had been circulated to the Members of the Board PrO a copy of the approved letter is attached as Item No. 2. Mr. Poundstone withdrew from the meeting at this point. No. 3). Request from Committee for Economic Development (Item Governor Balderston presented for the Board's consideration a request *olm a representative of the Committee for Economic Development that cil*rangements be made for a visit to the Board's offices by members of the Committee's recently established Commission on Money and Credit. The request had been made originally in the form of a letter to Chairman 'tin, and in a subsequent telephone conversation between Governor 290S 10/10/58 -6- Balderston and a member of the Committee's staff a visit on November 12, 1958, at 2:30 p.m. had been suggested. It appeared that the Commission had held an organizational meeting, that a second meeting had been arranged, and that the Commission deemed it appropriate to pay informal visits to the Board as well as to the Treasury before proceeding further vith its program. Following a statement by Governor Balderston concerning his telephone conversation, the matter was discussed by the Board from the standpoint of the understandings that should be explicit in making the arrangements for such a meeting; namely, that the Board would not be in a Position to discuss the nature or character of the Commission's research Program or what other institutions should be studied and that questions of substance concerning monetary policy should await the formulation of the Commission's program so that they might be discussed after appropriate agenda. allalYsis and consideration of each point on the Commission's of a letter Governor Robertson then suggested the general wording there was of invitation which would embody these understandings, and agreement that the letter should be couched in such terms. Economic DevelopA copy of the letter sent to the Committee for Merit over the Vice Chairman's signature pursuant to this action is a ttached as Item No. 3. The meeting then adjourned. 2909 10/10/58 Secretary's Notes: On October 9, 1958, Governor Robertson,acting in the absence of Governor Shepardson, approved on behalf of the Board a letter to the Federal Reserve Bank of Dallas (attached Item No. 4) approving the appointment of George E. Butts, Jr., as assistant examiner. Pursuant to recommendations contained in memoranda from appropriate individuals concerned, Governor Shepardson today approved on behalf of the Board the following items affecting the Board's staff: A pointments Jacqueline Ann McDaniel as Statistical Clerk in the Division of Bank Operations, with basic annual salary at the rate of $3,495, effective the date she assumes her duties. Richard B. Friedman as Assistant Federal Reserve Examiner in the Division of Examinations, with basic annual salary at the rate of $5,430, effective the date he assumes his duties. Mildred Jean Small as Disbursing Clerk in the Office of the Controller, 'with basic annual salary at the rate of $3,7551 effective the date she assumes her duties. Salary increase Fredrick L. Frost, Messenger, Board Members' Offices, from $3,920 to ;P4,015 per annum, effective October 19, 1958. 211inge in effective date of salary increase Merritt Sherman, Secretary of the Board, from $15,950 to $17,500 per aanum effective today rather than at the beginning of the first payroll eriod subsequent to his assuming his duties as Secretary. (Amendment of oard action on June 5, 1958.) l 2910 BOARD OF GOVERNORS 4400tat,,,, sop 4 OF THE FEDERAL RESERVE SYSTEM Item No. 1 10/10/58 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE 4,4k TO THE BOARD ''ktoo* October 10, 1958 Mr. Charles Summerfield, President, City National Bank of Rockford, nroadway at Seventh, Rockford, Illinois. Dear Mr. Summerfield: sed to This refers to your letter of September 4, 1958, addres letter your to and cy, Curren 11!. G. W. Garwood, Deputy Comptroller of the d revise be Q tion Regula that 21 October 4, 1958, to the Board, suggesting to Permit member banks a grace period of 10 calendar days at the beginning • any calendar month so that savings deposits made within that period would be entitled to interest from the first of the month. which would There is nothing now in the Board's Regulation Q day of a first the from Pyeclude a member bank from computing interest calenten first the riender month on any savings deposit made within not exdoes paid ly actual 44r days of that month provided the interest ' rate a at st intere of t ?eed an amount which would result in a paymen bank. 'xceeding 3 per cent from the time the deposit is in the member bank to pay Section 3(d) of the Regulation permits a the first day erest "at the applicable maximum rate" calculated from business the month on a savings deposit received during the first 10 period st intere ulaYa of any month commencing a quarterly or semiannual o effect this other month. In ,! during the first 5 business days of any the m of maximu excess in ly • ision permits payment of a rate slight Prescribed by the Board in the circumstances stated. However, if the bank • rate and if the calcula paying less than the 3 per cent maximum lation of interest from the first day of the month on a deposit there• ter received would not cause the amount actually paid to exceed Hr. Charles Summerfield -2- 3 Per cent per annum, the provision of the Regulation would not prohibit calculation in that manner; in such a case the provision would not be aPplicable. For example, if your bank is paying interest on savings deposits at a rate not in excess of 2 per cent per annum, you may, without regard to the grace periods allowed by Regulation Q, pay interest from the first day of any month on savings deposits received through the tenth business day of that month. Very tray yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. cc: Office of the Comptroller of the Currency Federal Reserve Bank of Chicago 2912 BOARD OF GOVERNORS OF THE Item No. 2 10/10/58 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRIL•PONDENCE TO THE aoARD October 10, 1958 Mr. Russell G. Smith, Executive Vice President, Bank of America, 40 Wall Street, New York, New York. Dear Mr. Smith: This will acknowledge your letters of September 18, 1958, and Mr. Ralph's letter of September 30, 1958, transmitted through the Federal Reserve Bank of New York, referring to the establishment by Banca d'America e d'Italial Milan, Italy, of four agencies in Italy to be located in Naples, Genoa (two agencies), and Milan, pursuant to the consent granted in the Board's letter of April 2, 1958. It is understood that the Milan-Zona Sempione agency opened on 'hay 25, 19580 In reference to the Genoa-Zona Marassi agency and the Naples-Zona Monteoliveto agency, on the basis of the information furnished, the Board extends to October 31, 1958, and December 31, 1958, respectively, the time within which the agencies maybe established and opened for business. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE Item No. FEDERAL RESERVE SYSTEM 10/10/58 3 WASHINGTON OFFICE OF THE VICE CHAIRMAN October 10, 1958. Mr. Robert Lenhart, Secretary, Committee for Economic Development, 1000 Connecticut Avenue, N. W., Washington, D. C. Dear Mr. Lenhart: In response to your telephone inquiry of Wednesday afternoon, the Board of Governors will be happy to meet with the Commission on Money and Credit at 2:30 on Wednesday afternoon, November 12. At that time, our Board will wish to make it clear that it welcomes any conscientious study of monetary Policy--past, present and future--because in the formulation of such policy it always desires the benefit of the views and criticisms of others. Of course our Board would not be in a position to discuss the nature or character of your research or what other institutions should be studied because that is questions strictly the prerogative of your Commission. Moreover, formuthe await should of substance concerning monetary policy e appropriat after discussed lation of your program so they can be agenda. your on point analysis and consideration of each Sincerely yours, (Signed) C. C. Balderston C. Canby Balderston, Vice Chairman. ii BOARD OF GOVERNORS OF THE Item No. FEDERAL RESERVE SYSTEM 4 10/10/58 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 9, 1958 Mr. L. G. Pondrom, Vice President, Federal Reserve Bank of Dallas, Dallas 2, Texas. Dear Mr. Pondrom: In accordance with the request contained in your letter of October 3, 1958, the Board approves the appointment of George E. Butts, Jr., as an assistant examiner for the Federal Reserve Bank of Dallas. Please advise the Board if the appointment is not made effective October 13, as planned. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary.
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