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609 lo/59 Minutes for To: October 16, 1959 Members of the Board From: Office of the Secretary Attached is a copy of the minutes of the Board of Governors of the Federal Reserve System on the above date. It is not proposed to include a statement With respect to any of the entries in this set of minutes in the record of policy actions required to be maintained pursuant to section 10 of the Federal Reserve Act. Should you have any question with regard to the minutes, it will be appreciated if you will advise the Secretary's Office. Otherwise, please initial below. If you were present at the meeting, your initials will indicate approval of the minutes. If you were not present, Your initials will indicate only that you have seen the minutes. Chin. Martin Gov. Szymczak Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Minutes of the Board of Governors of the Federal Reserve System on Friday, October 16, 1959. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Szymczak, Acting Chairman Mills Shepardson King Mr, Mr. Mr. Mr. Mr. Mr. Mr. Mr. Discount rates. Sherman, Secretary Hackley, General Counsel Solomon, Director, Division of Examinations Conkling, Assistant Director, Division of Bank Operations Nelson, Assistant Director, Division of Examinations Goodman, Assistant Director, Division of Examinations Landry, Assistant to the Secretary Hooff, Assistant Counsel The establishment without change by the Federal Reserve Banks of New York, Philadelphia, and Chicago on October 15, 1959, °f the rates on discounts and advances in their existing schedules was oved unanimously, with the understanding that appropriate advice 1401.11d be sent to those Banks. Items circulated to the Board. The following items, which had been circulated to the Board and copies of which are attached to these 11111Utes under the respective item numbers indicated, were approved Linaa imously: Item No. 11-4.etter to The Colonial Bank and Trust Company, Connecticut, approving an additional inerbur -vestment in bank premises. Lett u er to the Chemical Bank New York Trust Company, y br,„ °r-k City, approving the establishment of a -nch at 501 East 79th Street. 1 2 -2- 10/16/59 Item No. 3 Letter to The First National Bank of Westwood, Westwood, New Jersey, regarding an interpretation Of Regulation Q. I. Letter to the Federal Reserve Bank of Richmond aPProving the payment of salary to Mr. Fred Krueger, Jr., Assistant Cashier, Charlotte Branch, for the Period November 1 through December 31, 1959. Letter to the Federal Reserve Bank of Chicago aPProving the payment of salaries to bank elevator operators and starters, retroactive to September 28, 1959. 5 Letter to the Comptroller of the Currency recommending favorably with respect to an application to establish a national bank at Schiller Park, Illinois. 6 Letter to Broadway National Bank of Kansas City, Kansas City) Missouri, granting permission to maintain reduced reserves. 7 Final tax certification with respect to The Kemper Investment Company, Kansas City, Missouri. 8 ..,.etter to the First National Bank of Valparaiso, ?aparaisol Indiana, approving its application for full -Aduciary powers. 9 approving Letter to The Chase Manhattan Bank, New York City, qqt111 .211,Fent of a branch at 241 East 42nd Street (Item No. 10). Ia a memorandum dated October 1, 1959, the Division of Examinations concurred in a recommendation of the Federal Reserve Bank of New York York City to that approval be granted The Chase Manhattan Bank of New establish York, New York, an in-town branch at 241 East 42t0 Street, New .4ithin a period of one year from date of approval. The New York State October 7, 1959. Banking authorities had approved this application 10/16/59 -3- Governor Mills stated that he would not vote against approval of this branch, but he suggested that the application raised the question whether The Chase Manhattan Bank might not be overreaching itself in establishing an additional branch when it already had offices nearby, especially in view of the fact that there were three offices of tvo large commercial banks and one office of a savings bank located in the area to be served by the proposed branch. He also commented that The Chase Manhattan Bank did not appear to be expecting much increase ja deposits compared with a rather substantial investment in the new branch facility. Governor King indicated that he too had wondered whether there lias a real need for this branch. Mr. Nelson replied that apparently branches of other large banks in Similar situations had been made to pay, adding that managements of banks of this type were not likely to continue unprofitable branches indefinitely. He pointed out that the proposed branch was to be located in the 32-story Pfizer Building under construction and that establishinent of a branch would permit the applicant to protect the substantial 41110111A of business it already had in the area, inclndjng that of Charles Pfizer & Company, whose account totaled about $7 million. Following further discussion relating to the possibility that the Proliferation of branches in the metropolitan New York area might "tail in certain instances a marginal loss to the establishing bank, 10/16/59 -4- unanimous uproval was given to the application and to a letter to The Chase Manhattan Bank attached as Item No. 10. Letter to the Colonial Trust Company, New York, New York, authorizing the acce tance of commercial drafts or bills of exchane to 100 r cent of ca ital and s .lus Item No. 11 • The Colonial Trust Company, a State member bank, had filed application for permission under Section 13 of the Federal Reserve Act to accept commercial drafts and bills of exchange up to 100 per cent of capital and surplus and, in a memorandum dated October 6, 1959, the Division of Examinations had concurred in a recommendation of the Federal Reserve Bank of New York that the application be approved. Governor Mills questioned the advisability of granting the requested authorization in view of the following factors: (1) Venezuelan interests owned 95 per cent of the common stock and Venezuelan banks sent many customers to Colonial Trust; and it was kaawn that Venezuela was a country that was "hungry for credit"; (2) Colonial Trust might be overexposing itself by doubling up on its liabilities should it accept commercial drafts and bills of exchange 140 to the limit requested. Mt. Goodman replied the record showed that SS of the end of 1958) of the 82 banks still possessing the Board-granted power to 11°1d acceptances beyond the statutory 50 per cent of capital and 8111151us limit, only one bank held acceptances in excess of 50 per cent _5_ 10/16/59 and that that was the Grace National Bank in New York City, a specialized institution. He recalled that when Regulation C, relating to acceptance by member banks of drafts and bills of exchange, was revised effective August 31, 1946, a large number of member banks had been asked by the Board to request that their authority to buy acceptances in excess °f 50 per cent of capital and surplus be rescinded. He noted that the maturity of the bills of exchange involved was not longer than six months aaa that Colonial Trust was create dollar exchange. not asking for authority to accept bills to So far as standards used by the Division of Examinations in such cases were concerned, if the applicant bank had shown capacity to run a good foreign department and had good experience ta the acceptance field, its application received favorable consideration. Orl the other hand, if it were just a good bank in general without specialization in the foreign field, the Division would look askance at recom114encliag Board approval of its application. Governor Shepardson then remarked that he had been unable to Jai the memorandum from the Division of Examinations recommending al/Pl'oval of Colonial Trust's application any persuasive argument for 8I'anting the request. He wanted to know whether it had been the Pl'actice of the Board in such cases to approve applications unless there were good and sufficient reasons against such approval, rather than good and sufficient reasons supporting such approval. He noted °ir. Goodman subsequently advised that the following sentence would have been preferable: "He recalled that after Regulation C, relating t° acceptance by member banks of drafts and bills of exchange, was revised effective August 31, 1946, the authority of a number of member banks to buy acceptances in excess of 50 per cent of capital and surplus was rescinded." 10/16/59 -6- that despite the favorable report submitted by the New York Reserve Ilank regarding the foreign department of Colonial Trust, the institution did not have the highest rating. Mr. Goodman indicated that Colonial Trust had a relatively new President who had been energetically revitalizing the organization and that in the rest the Board had granted similar requests in some instances even though a compelling need had not been demonstrated. He stressed that large metropolitan banks were usually involved in this specialized field so that, given their sizable absolute net worth position, they seldom came up to even the 50 per cent maximum in the statutory limitation. Re then noted that the Division of Examinations had been studying the 118a of dollar exchange facilities for some time, a letter on the subject having been sent to all Federal Reserve Banks on December 17, 1956, and that it hoped to have ready for Board consideration by the end of 1959 4 general review of Regulation C. Mt. Solomon observed that the "increased exposure" to which °°Irarnor Mills referred as a possible result of raising the percentage 3-imitation was not as great as might appear on the surface, since caPital and surplus of the accepting bank provided a restricted base hi h/ in the case of Colonial Trust, would not mean an increase in 144 holdings of acceptances of more than $2-1/2 million compared to 4ePosits in excess of $70 million. -7- 10/16/59 Governor Mills agreed with this comment, adding, however, that if the bank were to buy acceptances to the limit from the same concern to which it had loans outstanding, its exposure could be severe. Mr. Goodman pointed out that the Board had the power to terminate the approval granted for a higher permissible percentage after giving the bank involved 90 days' notice. He went on to say that, during the early days of the System, Mr. Paul M. Warburg, then a member of the Board, had viewed acceptances as high-grade instruments and that the history of legislation on this matter, as well as its administration, Showed that the Board hPd encouraged the use of acceptances; and he said he assumed the Federal Reserve Bank of New York would rediscount as prime bills any acceptances bought by Colonial under this authorization. Furthermore, he observed, field bank examiners in the New York Federal Reserve District, as well as on the West Coast of the United States, watched the acceptance item most closely in their examinations. Governor King inquired whether the Board could grant authority to accept commercial drafts and bills of exchange up to an amount some"There between 50 and 100 per cent of capital and surplus. Mr. Hackley said that he would like to make three points with l'egard to the foregoing discussion: (1) although it had never been done, he believed it legally possible to permit a member bank to purchase acceptances up to any intermediate percentage between 50 per cent and 100 Per cent; (2) there was a further limitation upon purchase of acceptances from any one individual or firm in an amount equal at any Mr. Goodman subsequently advised that the word "buy" would have been more accurate. # Ot 10/16/59 -8- time in the aggregate to 10 per cent of its capital and surplus unless the bank should be and remained secured as to the amount in excess of such 10 per cent limitation by either attached documents or some other actual security growing out of the same transaction as the acceptance; aad (3) he felt that exceptions to the limitation of 50 per cent of capital and surplus should be made only if there was a demonstrated need and the bank was considered to be capably managed. Governor Shepardson said that the question appeared to be 'whether to refrain from approving these requests unless there was a definite need for the facilities, or whether as a policy the Board should approve the requests in the absence of adverse factors. The latter approach seemed to him to have been the one followed. Thereupon, the attached letter to the Colonial Trust Company, kw York City,Item No. 111 was unanimously approved. The meeting then adjourned. Secretary's Note: Pursuant to the recommendations contained in memoranda from appropriate individuals concerned, Governor Shepardson today approved on behalf of the Board the following actions affecting the Board's staff: alarY increases Name and title effective October 18, 1959 Division Basic annual salary To From Office of the Secretary Eaton, Secretary tlarjorie W. Eschmeyer, Records Clerk $5,730 3,945 $5,88o 4-,o4o 3664 10/16/59 ...a.1..ary increases effective October 18,, 1959 (continued) Name and title Division Basic annual salary From To Research and Statistics Lucile R. MacLean, Librarian $6,135 $6,285 5,430 5,985 5,430 5,580 3,340 3,435 3,435 3,530 5,730 5,880 Bank Operations James A. McIntosh, Jr., Analyst Examinations Richard B. Friedman, Assistant Federal Reserve Examiner Administrative Services , I,1 ,12th A. Brown, Charwoman Edith C. Hartzell, Charwoman Office of the Controller j°sePla H. Hoyle, Supervisor, P4Yro11 and Disbursing Acce tance of resignations Oda R. Johnson, Secretary, Division of Examinations, effective October 22, 1959. C. Pursley, Assistant Federal Reserve Examiner, Division of --omlnations, effective October 21, 1959. Upon consideration of a memorandum from Mr. Fauver, Assistant to the Board, dated October 12, 1959, Governor Shepardson a proved on behalf of the Board on October 15, 1959, a visit to the Board's offices on December 8, .117711-1...1 10/16/59 -101959, by the National and State Bank Divisions of the American Bankers Association, with the understanding that the program would include a luncheon in the Board's dining rooms. A ,•1 Sec '-4 BOARD OF GOVERNORS OF THE Item Noe I 10/16/59 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 16, 1959. Board of Directors, The Colonial Bank and Trust Company, Waterbury, Connecticut. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of Boston, the Board of Governors of the Federal Reserve System approves, under the provisions of Section 24A of the Federal Reserve Act, an additional investment in bank premises of not to exceed $1,456,000, flcluding architectural fees, for the purpose of expandlng and remodeling main office quarters. It is understood that the program will include the enlarging of one building of the bank's main office Property and the razing of the old Colonial Trust Company structure and construction of a new building on the same site. Very truly yours, (signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item lioo 2 10/3-6/59 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 16, 19590 Board of Directors, Chemical Pqnk New York Trust Company, New York, New York. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of New York, the Board of Governors approves the establishment of a branch at 501 East 79th Street, New York, New York, by Chemical Bank New York Trust Company, New York, New York. This approval is given provided the branch is established within one year from the date of this letter and formal approval of State authorities is effective at the time the branch is established. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No, 3 10/16/59 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 160 1959. Mr. K. H. Dickson, President, The First National Bank of Westwood, Westwood, New Jersey. Dear Mr. Dickson: This refers to your letter of September 21, 1959, requesting .advice as to whether it would be proper under section 3(d) of Regulation Q for your bank to pay interest for the full semi-annual period on any withdrawals from savings accounts made during the last 3 business days preceding the 10th of January and July, the days when interest is credited by your bank to ,savings accounts. The procedure you present does not fall technically Within the permission given in section 3(d) of the Regulation which language, incidentally, was not changed by the recent amendment which became effective October 1, 1959. Nevertheless, it would comply with the spirit and purpose of the provision and the Board has no objection to a bank following this Procedure when the last 3 business days of its semi-annual interest period do not coincide with the last 3 business days of a calendar month. Very truly yours, C \ , , k Merritt Sheiman, Secretary.) BOARD OF GOVERNORS OF THE Item No. FEDERAL RESERVE SYSTEM 3.0/16/59 WASHINGTON 25, O. C. woongse arrtasAL CORMESPONOSINCIL TO THE ROAR° October 16, 1959. 9.21112 1 911111EIE1 Mr. Alonzo G. Decker, Jr., Chairman of the Board, Federal Reserve Bank of Richmond, Richmond 13) Virginia. Dear Mr. Decker: The Board of Governors approves the payment of salary tO Mr. Fred C. Krueger, Jr., Assistant Cashier, Charlotte Branch, for the period November 1, 1959 through December 31, 1959, at the rate of $9,000 per annum, which is the rate fixed by your Board Of Directors as reported in your letter of October 8, 1959. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No., WASHINGTON 25, D. C. 10/16/59 5 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 16, 1959. CONFIDENTIAL (ral Mr. H. J. Newman, Vice Presidont, Federal Reserve Dank of CLicago, Chicago 90, Illinois. Dear Mr. Newman: The Board of Governors approves the paynient of salaries by the Federal Reserve Bank of Chicago to the incunbents of the positions shown below. at the rates indicated, retroactive to SepteMber 28, 1959, in accordance with the request contained in Your letter of October 62 1959: Title Annual Salary Starter Assistant Starter 15,0h9.20 41784.00 Split Shift Operators Operators 4,846.40 41576.00 Very truly yours, (Signed) Merritt Sherman lerritt Sherman, Secretary. BOARD OF GOVERNORS OF THE It Noo 6 10/16/59 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO TI-4E BOARD October 16, 1959. Comptroller of the Currency, Treasury Department, Washington 25, D. C. Attenticn Mr. W. M. Taylor, Deputy Comptroller of the Currency. Dear Er. Comptroller: Reference is made to a letter from your office dated August 41 1959, enclosing copies of an application to organize a national bank at Schiller Park, Illinois, and request ing a recomendation as to whether or not the application should be aPproved. Information contained in a report of investigation Of the application made by an examiner for the Federal Reserve Dank of Chicago indicates that the organizers have agreed to Provide a minimum capital structure for the bank of 000,000, instead of ::;2145,0001 as shown in the application. This revised capital structure appears adequate. The prospects for profitable operations are favorable, the character of proposed management is satisfactory, and the existing need appears sufficient to warrant an additional bank in the area. Accordingly, the Board of Governors recommends approval of the application to organize a nationa l bank at Schiller Park, Illinois. The Board's Division of Examinations will be glad to discuss any aspects of this case with representative s of Your office if you so desire. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. BOARD OF GOVERNORS „40A01,4* , t:t4 4047, 4,0 OF THE FEDERAL RESERVE SYSTEM 1. WASHINGTON 25. D. C. 1;4 Item /go:, 10/16/59 ADDRESS OFFICIAL CORRESPONDENCE To THE BOARD 4,4 441) 00U-her 16, 1959* Mr. Wood Woman, President, Broadway National Bank of Kansas Ci Y, Kansas City, Missouri. Dear Mr. Woman: Pursuant to your request submitted through the FedReserve Bank of Kansas City, the Board of Governors, •LflL under the provisions of Section 19 of the Federal Reserve grants permission to your bank to maintain the same reserves against deposits as are required to be maintained by anks located outside of central reserve and reserve cities, effective as of the date your bank opened for business. Your attention is called to the fact that such peris subject to revocation by the Board of Governors of the Federal Reserve System. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WAS FINAL Item No. 8 10/16/0 CERTIFICATION Pursuant to section 1101(e)(2) of the Internal Revenue Code of 1954, the Board of Governors of the Federal Reserve System hereby certifies, to the best of its knowledge and belief, that The Kemper Investment Company, Kansas City, Missouri, which formerly was a bank holding company as defined in section 2(a) of the Bank Holding Company Act of 1956, has ceased to be a bank holding company before the expiration of the period specified in subparagraph (B) of section 1101(e)(2) of the Internal Revenue Code of 1954. Executed in Washington, D. C*, pursuant to direction of the Board of Governors of the Federal Reserve System. (Signed) Merritt Sherman Merritt Sherman, Secretary. Date: October 16, 19590 (SEW BOARD OF GOVERNORS OF THE Item No. 9 10/16/59 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDREBB OFFICIAL CORRESPONDENCE TO THE BOARD October 16, 1959. Board of Directors, First National Bank, Va lparaiso, Indiana. GentleMent The Board of Governors of the Federal Reserve System has liylen consideration to the application for permission to exercise : eiarY powers made by First State Bank of Valparaiso, Valparaiso, wh Ti_ana, on behalf of First National Bank, Valparaiso, Indiana, into to-en it has been converted, and grants First National Bank authority act, when not in contravention of State or local law, as trustee, -4etcutor, administrator, registrar of stocks and bonds, guardian of anvate2) assignee, receiver, committee of estates of lunatics, or in °thor fiduciary capacity in which State banks, trust companies, ar other corporations which come into competition with national banks exe Permitted to act under the laws of the State of Indiana. The see ise of such rights shall be subject to the provisions of toe'lon 11(k) of the Federal Reserve Act and Regulation F of the gr:T of Governors of the Federal Reserve System. The authority so cofl'ed shall be effective as of October 10, 1959, the date the gversion was consummated. g Before issuing a formal certificate indicating the fiduciary Pov*r_ 130,a_b which First National Bank is now authorized to exercise, the tani';u will require a resolution of the directors of First National tor _ratifYing the application made by First State Bank of Valparaiso Ns Permission to exercise fiduciary powers. A certified copy of the TItion so adopted should be forwarded to the Federal Reserve Bank Of 0 licago for transmittal to the Board for its records. Very truly yours, (Signed) Kenneth A. Kenyon Kenneth A. Kenyon, Assistant Secretary. 044* 4.4. 4e ,ofgC4,„*„) BOARD OF GOVERNORS OF THE Item No. 10 10/16/59 FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD ,144**** October 16, 1959. Board of Directors, The Chase Manhattan Bank, New York, New York. Gentlemen: Pursuant to your request submitted through the Federal Reserve Bank of New York, the Board of Governors approves the establishment of a branch at 241 East 4.2nd Street, New York, New York, by The Chase Manhattan Bank, New York, New York. This approval is given provided the branch is established f ished within one year from the date of this letter and approval of State authorities is effective at the t -me the branch is established. Very truly yours, (signed) Merritt Sherman Merritt Sherman, Secretary. A BOARD OF GOVERNORS 44.4,4**,44 op CR Sop*4 t OF THE Item No. 11 10/16/59 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. 44 4 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD ttV 4111* St * * 44401*** October 16, 1959. Colonial Trust Company, 1230 Avenue of the Americas, New York 20, New York. Gentlemen: The Board of Governors of the Federal Reserve System., pursuant to the provisions of Section 13 of the Federal Reserve Act, authorizes your bank to accept commercial drafts or bills of exchange to an amount (which amount shall include any drafts and bills of exchange accepted by other banks for the account of Your bank) not exceeding at any time, in the aggregate, 100 per centum of the paid up and unimpaired capital stock and surplus of your bank, provided that the aggregate of acceptances growing out of domestic transactions shall in no event exceed 50 per centum of such Capital stock and surplus. This authorization is subject to the provisions of the Federal Reserve Act and the Board's Regulation C issued pursuant thereto. The right is reserved to terminate this authorization upon 90 days' written notice to your bank, as Provided in Section 1(e)(2) of Regulation C. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary.
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