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Minutes for To: Members of the Board From: Office Of the Secretary October 11, 1962 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 ; ‘1 t 4.4 1 „4 4 Minutes of the Board of Governors of the Federal Reserve System on Thursday, October 11, 1962. PRESENT: The Board met in the Board Room at 10:00 a.m. Mr. Martin, Chairman Mr. Balderston, Vice Chairman Mills Mr. Shepardson Mr. King Sherman, Secretary Kenyon, Assistant Secretary Fauver, Assistant to the Board Hackley, General Counsel Farrell, Director, Division of Bank Operations Mr. Solomon, Director, Division of Examinations Mr. Johnson, Director, Division of Personnel Administration Mr. O'Connell, Assistant General Counsel Mr. Kiley, Assistant Director, Division of Bank Operations Mr. Leavitt, Assistant Director, Division of Examinations Mr. Thompson, Assistant Director, Division of Examinations Mr. Landry, Assistant to the Secretary Miss Hart, Senior Attorney, Legal Division Mr. Bakke, Senior Attorney, Legal Division Mr. Guth, Review Examiner, Division of Examinations Mr. Mr. Mr. Mr. Mr. Circulated or distributed items. The following items, copies of which are attached to these minutes under the respective item numbers indicated, were unanimously approved: Item No. Letter to the Federal Deposit Insurance Corporation regarding the application of The laeoPles Savings Bank, New Knoxville, Ohio, tor continuation of deposit insurance after withdrawal from membership in the Federal Reserve System. 1 4S(1 10/11/62 -2Item No. Letter to the Federal Deposit Insurance Corporation regarding the application of Osage Valley Bank, Warsaw, Missouri, for continuation of deposit insurance after withdrawal from membership in the Federal Reserve System. 2 Letter to Osage Valley Bank, Warsaw, Missouri, vaiving the requirement of six months' notice (It withdrawal from membership in the Federal Reserve System. 3 Letter to the Federal Reserve Bank of Atlanta aPproving the appointment of W. N. Self as Pederal Reserve Agent's Representative at the Birmingham Branch. 4 Letter to the Chairman of the Presidents' Conference interposing no objection to the establishment, as the basis for further Ilegotiations with the Treasury Department, °t certain principles contained in a policy statement regarding the automation of fiscal agency operations by the Reserve Banks. 5 °rder denying motions by banks protesting the 417Ialication by First Oklahoma Bancorporation, Oklahoma City, Oklahoma, for permission 4) take actions that would cause it to become ' bank holding company. 6 With respect to Item No. 5, Mr. Farrell noted that development °I' the statement of principles referred to was the result of a request rrom the Federal Reserve Bank of Cleveland for permission to process ?ederal taxes on its computer, thereby utilizing otherwise idle computer time, and to base its claim for reimbursement on rental rates for 151411ch-card equipment in lieu of a rate based on the usage of the ccolouter, since the Bank estimated that the latter procedure would - lo/11/62 -3- materially increase the cost to the Treasury Department of this Operation. The Reserve Bank's request was also motivated by the Treasury Department's view that whenever a Reserve Bank was considering transferring a fiscal agency operation to a computer, with the Possibility of an increase in costs, such transfer should be cleared mith the Treasury prior to institution of the change. The policy statement adopted by the Presidents' Conference on September 10, 1962, Provided that: (1) the Reserve Banks would retain at all times complete control over decisions to automate operations, including the timing of transfers to automated equipment; (2) the Reserve Banks would be prepared to assume reasonable development costs in connection with transfers of fiscal agency operations to automated equipment; and (3) the Banks %road be prepared to review current accounting bases for reimbursement claims or, when necessary, to negotiate claims for reimbursement where cost increases resulted from transfer of some fiscal agency function or functions to automated equipment. Messrs. Johnson and Bakke withdrew from the meeting at this Report on competitive factors (Fostoria-Tiffin, Ohio). Copies had been distributed of a draft report to the Comptroller of the Currency on the competitive factors involved in the proposed merger of The City National Bank of Tiffin, Tiffin, Ohio, into The First National of Fostoria, Fostoria, Ohio. ml 10/11/62 Following discussion, the report was approved unanimously in a form in which the conclusion read as follows: Consummation of the proposed merger would eliminate minor competition existing between the applicants. The merger would probably increase competition in Tiffin, but have little effect on banking competition outside that city. Application of Virginia Commonwealth Corporation. been distributed under dates of October There had 8 and October 10, 1962, respectively, memoranda from the Division of Examinations and the Legal Division regarding an application by Virginia Commonwealth Corporation, Richmond, Virginia, to become a bank holding company by acquiring shares of Bank of Virginia, Richmond; Bank of Henrico, Sandston; Bank of Salem, Salem; Bank of Occoquan, Occoquan; and Bank of Warwick, Newport News. The recommendations of the Virginia Commissioner of Banking, the Federal Reserve Bank of Richmond, and the Division of Examinations were all favorable, but the Department of Justice had rendered an adverse recommendation. In its memorandum the Legal Division stated that Particular attention had been given to the arguments advanced in the statement in opposition submitted by the Department of Justice. The Division did not believe that these arguments would require disapproval Of the application, as a matter of law, under the fifth statutory factor. It was of the opinion that a decision of the Board either to aPProve or to disapprove the application would be sustained upon judicial review as based on substantial evidence. 10/11/62 -5- The memorandum of the Division of Examinations stated the following conclusions with respect to the various statutory factors to be considered under the Bank Holding Company Act of 1956: (1) The financial condition, history, and prospects of the banks and the management of the banks were regarded as satisfactory; (2) As to the convenience, needs, and welfare of the communities and areas concerned, the Division believed that, on balance, some increased services would result from consummation of the proposal, and, in consequence, this factor lent some, but not strong, support for approval; (3) With respect to the fifth factor, the size and extent of the holding company and the effects of the proposal on competition, the memorandum noted that the holding company would control about 5 per cent of the banking offices and deposits of all banks in the State but that, other than Bank of Virginia, the remaining banks proposed for the group ranked well dawn the list, with the largest being 42nd in size in the State. Acquisition Of the banks concerned would increase to an appreciable extent control Of deposits in the affected areas of the State only in the Newport News region, where two banks in the group would have about 26 per cent of the deposits of all Newport News banks. It was believed that elimination Of competition among the banks to be acquired, where competition was elrident, would not be significant when consideration was given to alternative sources of banking service. It was not believed that the banks involved would derive such a competitive advantage over remaining banks in the areas specified as adversely to affect the remaining banks' 10/11/62 ab11itY -6- to grow and prosper. It was felt that the Virginia Commonwealth Corporation system would not be of such size and extent as to b inconsistent with adequate and sound banking, the public interest, or the preservation of competition in the field of banking, and that approval of the application would not result in a precedent that would be e mbarrassing to the Board in acting on future cases. At the request of the Chairman, Mr. Thompson commented on the application in some detail, his remarks being based on the memorandum of the Division of Examinations. Governor Mills inquired as to the dates applications had been received from Virginia Commonwealth Corporation awl United Virginia Bankshares, Incorporated. In reply it was stated that the two dates in questi-on were, respectively, May then 7 and July 11, 1962. Governor Mills inquired as to the relationship, if any, between Financial General Corporation, New York, New York, a company operating under the Investment Company Act of 1940, and Virginia Commonwealth Corporation, since he recalled that Financial General at one time had a financial interest in Bank of Virginia and, as the record showed, Financial General had provided initial capital and Bank of Virginia had supplied nianagerial services for Bank of Henrico. Answer was given to the effect that, although Financial General had at one time an investment in //ank of Virginia, this was no longer the case. However, Financial General had the right to acquire additional banks without approval of the Board under the Bank Holding Company Act. Similarly, it would -7- 10/11/62 also be possible for Financial General to absorb Virginia Commonwealth Corporation without such approval, should the Board sanction formation Of the latter as a bank holding company. A discussion ensued as to the extent to which bank holding companies were developing in Virginia. Reference was made during the discussion to recent legislation in that State permitting state-vide bank mergers, and also to the advantages of expansion through the bank holding company device compared to the merger route. Under State law a bank could establish branches only in the city where its principal office was located and in localities within five miles of such city. In response to a question, Mr. Solomon said that the essential difference between the present application and the Morgan New York State and Florida Bancorporation cases was one of degree. This case involved a considerably smaller total concentration of banking resources and much smaller individual banks. In the New York and Florida cases, the hanks concerned were all of substantial size. In the Morgan New York State proposal, for example, every bank that would have been involved /4/8 an institution with $100 million or more of assets; in the instant aPPlication, Bank of Virginia excepted, the banks were institutions With assets ranging from $4 million to $16 million. Therefore, the Possibilities for domination of commercial banking were much less in the Present case. Mr. Solomon went on to say, in response to a further question, that should the Board act favorably on the present application it would by implication be indicating that size was a fundamental 10/11/62 consideration in bank holding company cases from the standpoint of the competitive factor, particularly when a state-wide proposal was concerned. Expressing agreement with the views stated by Mr. Solomon, Mr. Hackley recalled that the rationale of the Board's statement in the Morgan New York State case had been based largely on the size of the banks involved. holding The banks that would have been taken into the company system were among the leading banks in the larger cities of the State, strategically located. The effect of consummation of the Pr°Posal would have been to widen the competitive gap that already existed between the larger and smaller banks in each comminjty. It e°414 be argued, Mr. Hackley said, that the reverse effect (a narrowing or the gap) would follow from Board approval of the application of Virginia Commonwealth Corporation; it involved, except for Bank of Virginia, small banks ranking 42nd (Bank of Warwick), 75th (Bank of Salem), 121st (Rank of Occoquan), and 204th (Bank of Henrico) in size in the State. Governor Balderston indicated that he was more concerned about the distinctions between this case and the Florida case. In this ease the banks in the holding company system would hold about 5 per cent of the deposits of all banks in the State. In the Florida case the comparable figure was only about 13 per cent. However, the Florida case involved large banks in key areas of the State. At the conclusion of the discussion, it being indicated that the members of the Board were prepared to act on the application, the 10/11/62 -9- Chairman called upon the individual members for their views, starting with Governor Mills. Governor Mills stated that he concurred with the staff recommendation. In his view the creation of Virginia Commonwealth C orporation would, not bring into being an organization that would control an objectionably large portion of commercial banking resources in the State of Virginia. Admittedly, the holding company would assume considerable importance in the area of Norfolk and Newport News; at the outset the smiler independent banks in the area might not be exposed to undesirable competitive influences, but over a period of time that ccUld be the case. Nevertheless, he agreed with the Division of Ibcaminations that each case should be considered. by the Board in the order iii which applications were received and in light of the immediate surr°unding circumstances. r POV4 ' - 4JaCe He did not believe it was within the of the Board's authority to project evils that might eventuate at 8clme later date. The proposal of United Virginia Bankshares "IltamPlated operations largely in the same geographic area, which °°141d definitely affect the competitive situation. However, that araication Was not presently before the Board for consideration. In ta44 a position in favor of the Virginia Commonwealth application he " If also mindful, Governor Mills said, of the possibility that sub aaquent establishment of branches on the part of the subsidiary ballka could introduce another element adverse to the competitive picture the trade areas involved, but the Board would have control over the 10/11/62 -10- e6tablishment of branches by Bank of Virginia, Bank of Salem, and Bank of Warwick, which were members of the Federal Reserve System. It would not, of course, have direct control over the establishment of branches by Bank of Occoquan and Bank of Henrico, as nonmembers. In sum, Governor Mills stated, the application had little attraction to him. Taking all factors involved into consideration, however, on balance he would approve. Governor Shepardson said that he concurred with the recommendation of the Division of Examinations on the basis of the arguments advanced in its memorandum. Governor King indicated that he also concurred. He believed that the published statement of the Board should incorporate the general Philosophy outlined by Messrs. Solomon and Hackley, namely, that the "mPetitive strength of the smaller banks involved in the application would be enhanced by consummation of the proposal. Governor Balderston and Chairman Martin said that they also Would favor approval of the application. Accordingly, the application of Virginia Commonwealth Corporation /las approved unanimously. It was understood that the Legal Division if°111d prepare drafts of an order and statement reflecting such approval for the Board's consideration. All members of the staff except Messrs. Sherman, Kenyon, Hackley, 5°10mon, O'Connell, and Leavitt then withdrew. 3895 10/11/62 -11- Continental Bank and Trust Company (Items 7 and 8). On September 17, 1962, the Board tentatively approved an informal proposal submitted by Mr. K. J. Sullivan, President of The Continental Bank and Trust Company, Salt Lake City, Utah, which if formalized would result in the termination of the capital adequacy- proceeding involving that bank. Subsequently, Board Counsel undertook to implement the Board's action. An a result, there had now been presented to the Board a letter from Mr. Sullivan enclosing a resolution of the bank's board of directors, both of which documents constituted a formal presentation or the bask's proposal for settlement of this matter. Copies of the letter and resolution had been distributed to the Board with a memorandum from Mr. O'Connell dated October 10, 1962. The memorandum indicated that pursuant to understandings reached between Counsel for the Board and the bank, if the Board now formally accepted the plan described in the letter and resolution, a letter ev idencing such approval And the Board's understanding of the plan //°1-114 be sent to the bank immediately. Thereafter, the bank's letter, the resolution, and the Board's reply would be introduced into the record of the show cause hearing. This hearing, previously ordered by the Board to commence October 15, 1962, was now scheduled to commence October 29, 1962, pursuant to an order of the Hearing Examiner issued in response to a motion for continuance filed by the bank's Counsel, to hich Board Counsel offered no objection. There would also be introduced lbto the record all official pleadings in this matter filed and acted 10/11/62 -12- upon since the date of the last hearing session (November 1958), together with edited copies of reports of examination of the bank and published statements of condition and statements of income and dividends covering all or portions of this period. There would also be introduced into the record a statement by the bank and by its Counsel evidencing that the corporate proceedings necessary to accomplish the capital increase Program had been set in motion. Finally, the Hearing Examiner would introduce into the record a letter from the Board directing that immediately upon the close of the hearing record the Hearing Examiner waS to certify that record to the Board for final decision without a l ecommended decision being made. ' A draft of such a letter was attached to Mr. O'Connell's memorandum. Also attached to the memorandum was a draft of press statement that Continental Bank proposed to release at the time the hearing was Closed, together with a draft of press statement proposed for release bY the Board immediately upon the close of the hearing. Further, there Was attached for the Board's consideration a draft of order proposed to be issued by the Board following receipt from the Hearing Examiner of the certified record of the October 29 hearing. Copies of the proposed Hearing °Iller, the Board's letter to the bank, the Board's letter to the Examiner, and the Board's press statement had been shown to the bank's ec'unsel as a matter of information. Counsel had advised of the assent c/f Mr. Sullivan and himself to the general form of the documents. 10/11/62 -13- In the judgment of Board Counsel, the contents of Mr. Sullivan's letter and the resolution of the bank's board of directors conformed in all major respects with the plan approved informally by the Board on September 17, 1962. It was recommended that the Board formally accept the Plan and that the Board approve the procedural proposals set forth in Mr. O'Connell's memorandum, as well as the draft documents relating thereto. In a second memorandum, which also had been distributed to the Board, Mr. Hackley concurred in the view that the plan for increasing caPital funds set forth in the resolution of Continental Bank's board directors was substantially in accord with the plan tentatively accepted by the Board on September 17, 1962. Of the He recommended approval proposed letter to the bank formally stating that position. In his view, the drafts of Board press statement and Board order were in satisfactory form. He believed that conclusion of the administrative Proceeding on the basis contemplated would be consistent with preservation or the position taken by the Board as to its legal authority in this Matter and that the Board's position would not be prejudiced if the 154nk's board of directors should fail to accomplish the capital increase Pl'ogram and it becnme necessary to reopen the administrative proceeding to determine whether the bank's membership in the System should be to rfeited. In commenting on his memorandum, Mr. O'Connell noted that there haa been received this morning by Chairman Martin the originals of 10/11/62 -14- Mr. Sullivan's letter and the resolution adopted by Continental's board Of directors. In a telephone conversation yesterday afternoon with Counsel for Continental, Mr. O'Connell had checked carbon copies of the two documents with the copies attached to his memorandum to the Board, which were taken from drafts previously received from Continental. were of a minor nature and in The Only differences, which he described, his judgment had no effect on the issues at hand. procedures Mr. O'Connell continued by reviewing the proposed Outlined in his memorandum, making it clear that he had specified to undertake Counsel for Continental that in his opinion the Board would not by the to approve or disapprove the press release proposed to be issued hank. With the possible exception of one word, which he had discussed with Counsel for Continental, Mr. O'Connell was of the opinion that the statement proposed to be released by the bank was not objectionable. Mrs O'Connell also stated that Mr. Powell, Special Counsel to the Board, by the 1184 suggested that the Board's press release be accompanied Board's 1344k's letter, the resolution of the bank's directors, and the IsegY. Mr. O'Connell indicated that he had expressed his disagreement t° M. Powell. the In his opinion, the proposed press statement of of the trd was a sufficient statement of the basis for termination " j34 caPita1 adequacy proceeding. It would be followed by issuance of the I8°s.rd's order, the content of which would, in his judgment, set forth the Board's position adequately. T49') 10/11/62 -15- After a discussion during which Mr. O'Connell responded to several questions with regard to procedural aspects of the matter, Mr- Hackley spoke in confirmation of the opinions expressed in his October 10 memorandum. In his comments, he pointed out that the bank's Press release would clearly indicate to the reader that the bank itself t°0k the initiative in undertaking a settlement of the capital adequacy Proceeding. that The figures spoke for themselves so far as indicating the bank, under the proposed plan, would have sufficient capital. There per cent /las no statement to the effect that its capital would be 100 adequate, but impliedly the capital position would be sufficiently adequate to warrant the Board in terminating the proceeding. It seemed to tO him the reason for the Board's action would be so apparent as indicate that any other action on the part of the Board might be subject to charges of harassment or arbitrary conduct. the position Governor Mills recalled that he had dissented from taken by the Board on September 17, 1962. He asked that the record were 81101, him as abstaining from voting on the implementing actions that before the Board today. He wished to comment for the record, however, proposal and that in his belief the Board's acceptance of the bank's its acceding to the statement prepared by Continental would in good leasure compromise the Board's good name and standing. There were red objectionable. veLrious elements in the bank's statement that he conside that r() begin with, he felt that there had been a development of figures dla not reconcile with earlier statements of the Board. It was indicated 10/11/62 -16- that through the plan an additional $1,111,000 would be added to the bank's capital accounts, bringing the total injection of capital to a figure that was within range of the $1.5 million that constituted the Poard's original demand. He found no place where these figures were either reconciled with the record or were substantiated by the facts of the case. Further, he thought the proposed statement contained many For example, claims that were not borne out by the history of the case. the release would indicate that since 1956 the bank had added to its capital accounts approximately $2 million from retained net earnings. The correct amount, as Governor Mills understood it, was $1.9 million. The release also would state that the bank planned "to continue the 8041d management policies which have made it possible for us to add , million to our capital accounts from net retained earnings nearlY $21 between 1956 and the end of 1962." Governor Mills noted that over a Period of five or six years the Board had challenged the character of the bank's management and the quality of the bank's assets. Therefore, he felt if the Board were to assent to a statement such as he had cilloted, that would not be consistent with the Board's earlier views. krther, the release would state that Continental Bank felt that its c°nsiderable capital improvement over the past six years had made the ec°nomic issues of the case moot and the legal issues largely academic. G°vernor Mills stated that he would consider it shocking for the Board t° concur in the bank's making a statement of that kind. It would constitute an admission by the Board that its case had been unsound 39f, 10/11/62 -17- from the beginning and that the Board did not feel it had authority under the statute to undertake the proceeding. Also, the release would conclude with a statement that the bank was confident that, with its additional capital and the termination of the Federal Reserve proceedings, it could continue to offer sound and progressive banking services to it8 many customers and friends. Governor Mills expressed the opinion that such a statement could be challenged because it left the impression that Continental had continuously offered sound banking services. As a matter of fact, Board Counsel had brought out contrary facts repeatedly ill the record of the proceeding. He was not sure what rating the 131111s1on of Examinations presently accorded to the bank, but he judged the bank was still ranked among the problem institutions. Mr. Solomon said he thought a great deal depended on the interpretation one placed on certain words. As to the figure of aPProximately $2 mi)lion contained in the bank's release, that presented a rounding up of an actual figure of over $1.9 million. As to the illerease in capital funds of roughly $1.5 million since the date of the 1134-rd's 1960 order--assuming the accomplishment of the capital increase P/'°gram--he thought that was materially correct. The bank had approximately $5 Million of capital at the time of the Board's order, and it would have approximately $6.5 million when the capital increase program was comPleted. Governor Mills inquired whether Mr. Powell had approved the Tiglires in question, to which Mr. O'Connell replied that Mr. Powell had 2 10/11/62 -18- Participated in an arithmetic computation in the presence of Counsel for Continental and concurred in the correctness of the statement as rar as the figures were concerned. Mr. Hackley noted that it was not contemplated that there would be abky indication that the Board approved or concurred in the bank's Press statement. Further, the statement by the bank that the considerable caPital improvement had made the economic issues moot and the legal issues largely academic seemed to him to represent only a reaffirmation 'Or the bank's own legal position. It did not indicate that the Board had backed down from its legal position. Governor King commented that in his opinion the business and inancial community would welcome the manner in which the Board was l'esolving this matter. If the Board took the attitude that capital illust be completely adequate in this case, in his judgment the Board ‘,0414 have a moral obligation to take action against every other bank that did not meet the silme requirement. As he saw it, the status of the Board would be enhanced as a result of the action taken in terminating the proceeding. The Chairman then inquired whether members of the Board wished t° raise additional points concerning this matter, and no comments to slIch effect were heard. Governor Mills affirmed his earlier statement that he wished to be recorded as abstaining from participation in the iletions taken by the Board today, with the understanding that his position would be recorded in the minutes. 10/11/62 -19Accordingly, with Governor Mills abstaining, approval was given to the proposed letter to Mr. Sullivan, the proposed letter to the Hearing Examiner, the proposed Board press release, and the Proposed Board order, with the understanding that the press release would be issued following the show cause hearing to be held on October 29, 1962, and that the order would be issued after the Rearing Examiner had certified the record of the show cause hearing. Copies of the letter to Mr. Sullivan and the letter to the Hearing Examiner are attached as Items 7 and 8, respectively. Secretary's Note: The Board's press release was issued on October 29, 1962. The Board's order was issued on October 30, 1962. Copies of the documents are attached to the minutes for the respective dates. All of the members of the staff except Mr. Sherman then withdrew from the meeting. Establishment of Division of Data Processing. Governor ShePardson referred to earlier informal discussions of the Board Of the possible desirability of establishing a Division of Data Processing to be under the direction of Mr. Maurice H. Schwartz, wIl° has been serving as Assistant to the Director of the Division Research and Statistics, with an assignment for matters in the area of data processing. He referred to a memorandum that had been Prepared proposing the establishment of such a division, effective 1 f ) 10/11/62 -20- January 1, 1963, with Mr. Schwartz to be appointed as director and Mr. Lee W. Langhwm, presently Chief of the Call Report Section in the Division of Bank Operations, as assistant director. The matter 1018 being brought to the Board for consideration at this time, Governor Shepardson said, in order that formal action on the proposal might be taken and announced and plans for establishing a division completed between now and the end of the year. It would be desirable tO have an announcement made promptly, Governor Shepardson said, inasmuch as the development of detailed plans for the new division /10U1d require discussion with different persons and a current announceMeat would serve to answer inquiries as to why certain arrangements "ere being considered. Following a discussion of the proposal, unanimous approval was given to the establishment, effective January 1, 1963, of a Division of Data Processing and to the appointment of Maurice H. Schwartz as Director and Lee W. Langham as Assistant Director, with the understanding that an announcement of the establishment of the Division and of these appointments would be made promptly and that aPPropriate budget and salary proposals would be submitted to the 130ard for consideration at a later date. General adjustment to the Board's regular salary schedule. C'overnor Shepardson referred to the Postal Service and Federal Employees SalarY Act of 1962 that had been signed by the President today. He asalamed that there would be no particular problem with respect to the 10/11/62 -21- Board's applying equivalent salary ranges and salary adjustments to the members of the staff in the classified service. The only Problem that he foresaw was in adjustments for members of the officer staff who were not under the classified service. He noted that earlier this year the President had proposed certain pay adjustments for executives in the Government but the final bill enacted had not contained such adjustments except to permit a ceiling of $20,000 for persons in Grade 18 in the regular Government classified service and a number (3f adjustments for those in super grades 16 and 17. Governor Shepardson stated that he had given considerable thought to whether it would be desirable for the Board to attempt to fit its officer staff into the classified service (including the super grades) and that he had come to the conclusion that, for reasons he stated, it would be preferable or the Board to continue the procedure that it had followed in the Past whereby they were not in the classified service. In making salary 4djustments for the officer staff, the Board was, of course, cognizant Of the rates applicable in the classified service, including the 84Per grades. It would be his thought that at this stage the Board would salary adjustments to members of the officer staff within the $20)000 ceiling that would apply to Government generally under the new 134Y act, with the understanding that when and if that ceiling was revised, 11S Was anticipated would be the case during 1963, the Board would expect t° Illove in accordance with whatever legislation was enacted. 10/11/62 -22During the ensuing discussion, Chairman Martin expressed the view that it would be desirable to continue the Board's officer staff outside the classified service, and the other members of the Board concurred in this view. Governor Shepardson then stated that he would endeavor to bring to the Board promptly specific salary Proposals that would seem desirable for members of the officer staff at this time within the $20,000 ceiling that would apply under the law just enacted. Reserve Bank officer salaries. Governor Balderston stated that he had had a telephone call from President Hayes of the Federal Reserve Bank of New York referring to the Board's letters of October 5, one addressed to the Presidents of the Reserve Banks and one to the Personal and confidential attention of the Chairman at each Federal Reserve Bank, regarding revised procedures for administering officer salaries, effective January 1, 1963. Mr. Hayes had expressed great ce'rIcern regarding the problem that would face the New York Bank in 1214king what he believed to be appropriate salary adjustments within the guidelines set forth in the Board's letter addressed to the President or the Bank. He also expressed concern that the salary range for the Group A officers at New York had not been increased and that the maximum fc'r the First Vice President of that Bank also remained at its present level. Hayes' Governor Balderston stated that he was simply reporting Mr. e411 at this time for the information of the Board and that the matter 10/11/62 -23- Would, of course, be considered by the Board's Committee on Organization, Compensation, and Building Plans in the light of any comments Mr. Hayes might make when he met with that Committee. The meeting then adjourned. Secretary's Note: Pursuant to recommendation contained in memoranda from appropriate individuals concerned, Governor Shepardson today approved on behalf of the Board increases in the basic annual salaries of the following persons on the Board's staff, effective October 14, 1962: !lame and title Division Basic annual salary To From _.... Board Members' Offices Robert I. Stewart, Messenger $4,025 $4,130 4,840 4,510 5,005 5,005 4,675 5,170 7,820 8,080 4,040 4,145 3,970 Research and Statistics !!, 14cY Keen, Secretary ;."Yllis H. Lockhart, Draftsman-Illustrator uO4n R. Winter, Statistical Assistant Bank Operations Seymour Golodner, Technical Assistant Administrative Services Charles M. Wrenn, Operator, Tabulating Equipment 114Y M. Reeder, Operator, Tabulating Equipment 3,865 BOARD OF GOVERNORS OF THE Item No. 1 10/11/62 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS ornmAL CORRESPONDENCE TO THE BOARD October 11, 1962 The Honorable Erie Cooke, sr., Chairman, Federal DepoUt In:.-iurance Corporation, Washington 25, D. C. Dear Mr. Cocke: Reference is made to your letter of September 27, 1962, concerning the desire of The Peoples Savings Bank, New Knoxville, Ohio, to continue as an insured bank following its withdrawal from membership in the Federal Reserve System. No corrective programs have been urged upon the ,bank or agreed to by it which the Board of Governors 'believes should be incorporated as conditions to the continuance of deposit insurance. However, for several Years this bunk has been encouraged to sell common stock 'for cash to provide needed capital funds. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 'Ad BOARD OF GOVERNORS Item No. 2 10/11/62 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE HOARD October 11, 1962 Honorable Erie Cocke, Sr., Chairman, Federal Deposit Insurance Corporation, Washington 25, D. C. Dear Mr. Cocke: Reference is made to your letter of September 27, 1962, concerning the application of Osage Valley Bank, Warsaw, Missouri, for continuance of deposit insurance after withdrawal from membership in the Federal Reserve System. No corrective programs which the Board of Governors believes should be incorporated as conditions to the continuance of deposit insurance have been urged upon or agreed to by the bank. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmf_chael, Assistant, becretary. )(1 BOARD OF GOVERNORS Item No. OF THE 10/11/62 FEDERAL RESERVE SYSTEM WASHINGTON 25, 0. C. AIDORESt3 OFFICIAL CORRESPONDENCE TO THE BOARD October 11, 1962 Board of Directors, °sage Valley Bank, 3 W4rs w, Missouri. Ge ntlemen: The Federal Reserve Bank of St. Louis has forwarded he Board of Governors a letter dated September 22, 1962, signed by Vice President and Cashier U. C. Crudginton, Jr., re" Vice President Walter Riffle, together with the accompanying t_solution dated September 5, 1962, signifying your intention ! r withdraw from membership in the Federal Reserve System and ' 44esting waiver of the six months' notice of such withdrawal. to The Board of Governors waives the requirement of six or , notice of withdrawal. Under the provieions of Section 208.10(c) ter'he Board's Regulation H, your institution may accomplish themin4tion of its membership at any time within eight months from 84 date that notice of intention to withdraw from membership was Upon surrender to the Federal Reserve Bank of St. Louis oto " Federal Reserve stock issued to your institution, such ck will be cancelled and appropriate refund will be made thereon. retu It is requested that the certificate of membership be rned to the Federal Reserve Bank of St. Louis. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 3 !,1 BOARD OF GOVERNORS Item No. 4 10/11/62 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE SOARD October 11, 1962 Mr. Jack Tarver, Federal Reserve Agent, Federal Reserve Bank of Atlanta, Atlanta 3, Georgia. Dear Mr. Tarver: In accordance with the request in Mr. Ray's letter of October 1, 1962, the Board of Governors approves the appointment of Mr. ) 04 Wo N. Self as a Federal Reserve Agent's Representative at the ' L.rmingham Branch to succeed Mr. George W. Mason, who retired. This approval is given with the understanding that Mr. Self 14111 be solely responsible to the Federal Reserve Agent and the Board (Icir Governors for the proper performance of his duties, except that, the absence or disability of the Federal Reserve Agent or a p4c61.11OY in that office, his responsibility will be to the Assistant ederai Reserve Agent and the Board of Governors. Res_ pe,zrve When not engaged in the performance of his duties as Federal Agent's Representative, Mr. Self may, with the approval of the Br"ral Reserve Agent and the Vice President in charge of the Birmingham tA alich3 perform such work for the Branch as will not be inconsistent "44 his duties as Federal Reserve Agent's Representative. It will be appreciated if Mr. Self is fully informed of the 4 1, P,ortance of his responsibilities as a member of the staff of the tr14,"a1 Reserve Agent and the need for maintenance of independence 0 1 the operations of the Bank in the discharge of these responsiltiee. ahoia o* thed Please have Mr. Self execute the usual Oath of Office, which . be forwarded to the Board of Governors together with notification effective date of his appointment. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Item No. 5 BOARD OF GOVERNORS 10/11/62 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. AODRESS arriciAL CORRESPONDENCE TO THE BOARD October 11, 1962. L D. Fulton, Chairman, C onference of Presidents of the Federal Reserve Banks, e/0 Federal Reserve Bank of Cleveland, C leveland 1, Ohio. Dear Mr. Fulton: The Board has noted the action of the Presidents' erence on September 10, 1962 in adopting a policy statement ! egard4 J-gr1 the automation of fiscal agency operations by the Reserve inks and interposes no objection to the establishment of these Principles as the basis for further negotiations with the Treasury ePartment. COnf t Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. 3913 Item No. 6 10/11/62 UNITED STATES OF AMERICA BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. ---------------- 111 the Hatter of the Application of P1RST OKLAHOil BANCORPORATION, INC., Oklahoma City, Oklahoma, LOCKET NO. BHC-64 Pursuant to section 3(a)(1) of the Bank Holding CoApany Act of 1956 --------------ORDER Under date of October 9, 19623 counsel for protesting banks, op/1r,, -Lne the application in the above-captioned matter, filed a Motion to aljy ,„„ Order, to Grant Motion to Strike, and to Take Action in Connection With Factor 3 of the Act. The several motions have been considered by the Board. Accordingly, I. IT IS ORDERED that the motion to clarify the Board's Order of °ctobe r 5, 1962, be, and hereby is, granted. The Board's action set torth • In Part II of its Order dated October 5, 1962, overruled only t'ara, Ph 1 of the protesting banks' exceptions to the hearing examiner's liePcIrt and recommended decision and left undetermined the remainder of Ir°tast• lng banks' exceptions. In respect to protesting banks' motion to strike Applicant's reSPOnSe to protesting banks' exceptions, while the statement referred to i ' 14 Applicant's response does not meet the procedural deficiency noted in the Board's Order of October 5, it may be taken as sufficient evidence of date of receipt so as to satisfy the Board in this respect. 11(z1"ar, for the additional reasons originally given by the Board for its denial of this motion, IT IS ORTIERED that the renewed motion to strike Applicant's response be, and hereby is, denied. Protesting banks further move that the Board postpone oral arglment and order the record of the hearing in this matter reopened to nr. C. A. Vose, one of Applicant's organizers, either an opportunity to testify or otherwise to show cause why the Board should not find a fatlure of proof of Factor 3 of the Act. In the alternative, protesting banks move that the proceeding and the record be remanded to the hearing e%aaTo 'ner With instructions to make findings and conclusions regarding ketor or3 of the Act upon the present record. In the present posture of this proceeding the Board finds no jiat. either to reopen the hearing record for the purposes urged or to r emend the matter to the hearing examiner for additional findings and e(41clu5ion5. Subsequent to the scheduled oral argument in this case, at time as the entire record is before the Board for determination of the application, if the Board should find cause for the remand of any or 3915 all of the matter to the hearing examiner, such action will then be taken. Upon review of the entire record, the Board will be in a ion to determine the adequacy of evidence bearing on the character Or the management of the Applicant and the banks concerned and the sig- nificance, if any, of the failure of Applicant to present in the record testimony of one of its organizers. In this regard, consideration be given to the weight to be attributed to the signed statement by 111.1•Vose received in evidence by the hearing examiner, and to the fact that Protesting banks were unable to cross-examine Hr. Vose on that tatermant. Accordingly, IT IS ORDERED that the protesting banks' motion Postponement of oral argument and to have the hearing record reopened, on in the alternative, to have the proceeding and the record remanded tc) the hearing examiner be, and hereby is, denied. Dated at Washington, D. C., this 11th day of October, 1962. By order of the Board of Governors. (Signed) Merritt Sherman Merritt Sherman, Secretary. (8414 BOARD OF GOVERNORS Item No. OF THE 10/11/62 7 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 11, 1962. AIR MAIL X. J. Sullivan, President, The "le Continental Bank and Trust Company, Salt Lake City, Utah. Dear Mr. Sullivan: reso . This refers to your letter of October 9, 1962, enclosing a l luton of the Board of Directors of your Bank setting forth a plan Under which certain actions therein specified will be taken for the Purpose of increasing your Bank's capital funds. The Board has considered the fact that during the period be bete the Board's July 18, 1960 Order and the June 30, 1962 Report Of Condition the Bank had increased its capital accounts by $398,632 1'417m retained earnings, which together with the additional $1,111,000 ch is the subject of the above-mentioned resolution of the Bank's u_ard of Directors, will result in a total capital account increase su lnce July 18, 1960 of $1,499,181. The Board has further considered c- ch changes as have occurred since July 18, 1960 in the amount, b;r t .acter , and condition of the Bank's assets and in its deposit liace_ lties and other corporate responsibilities. On the basis of these a4Si derations the Board has concluded that accomplishment of the thet°11s described in your plan would warrant the Board in ordering termination of the capital adequacy proceeding involving your institution. Accordingly, if a copy of your letter of October 9, 1962, above the leterred to, am, of this letter of the Board are made a part of record of the Show Cause Hearing scheduled to commence on October 29, 196,), the Hearing Examiner will be directed by the Board to close the record un _rd of that hearing and to certify that record to the Board. Promptly iZtli the s e an receipt of such certification of the record, the Board will appropriate Order terminating the proceeding. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, SecrctaLy. R 1. BOARD OF GOVERNORS Item No. 8 OF THE 10/11/62 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL. CORRESPONDENCE TO THE aciARD October 22, 1962. IR MAIL 2211.-ELIELIALLal David F. Doyle_ 3 Hearing Examiner, Ilational Labor Relations Board, Branch Office, 1 °0m 206, Appraisers' Building, ; 30 Sansome Street, Prancisco 11, California. In the Matter of The Continental Bank and Trust Company, Salt Lake City, Utah Dear Mr. Doyle: In connection with the show cause hearing scheduled for octob ha_ er 29, 1962, in the above matter, the Board of Governors determined that as the duly designated hearing examiner in e_ sUbject proceeding, you should not make an initial or recam; 17. ! , decision at the conclusion of the show cause hearing. Acnoxiec ''inglY, pursuant to section 8(a) of the Administrative Prool eedure Act (5 'USG 1008(a)), you are directed that immediately Upon lsauance of your order closing the hearing record, you will certif the entire record of the show cause hearing to the Board 'Its final decision. Very truly yours, , Merritt Sherman, Secretary.
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