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No9 Minutes for October 16, 1964 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 wtll 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. Chm. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. Mitchell Gov. Daane Minutes of the Board of Governors of the Federal Reserve System on Friday, October 16, 1964. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Mills Robertson Shepardson Mitchell Daane Mr. Sherman, Secretary Mr. Broida, Assistant Secretary Mr. Young, Adviser to the Board and Director, Division of International Finance Mr. Noyes, Adviser to the Board Mr. Molony, Assistant to the Board Mr. Cardon, Legislative Counsel Mr. Fauver, Assistant to the Board Mr. Brill, Director, Division of Research and Statistics Mr. Solomon, Director, Division of Examinations Mr. Holland, Associate Director, Division of Research and Statistics Mr. Koch, Associate Director, Division of Research and Statistics Mr. Partee, Adviser, Division of Research and Statistics Mr. Sammons, Adviser, Division of International Finance Mr. Katz, Associate Adviser, Division of International Finance Mr. Reynolds, Associate Adviser, Division of International Finance Mr. Spencer, General Assistant, Office of the Secretary Mr. Morgan, Staff Assistant, Board Members' Offices Mr. Axilrod, Chief, Government Finance Section, Division of Research and Statistics Mr. Eckert, Chief, Banking Section, Division of Research and Statistics Mr. Baker, Economist, Division of International Finance 10/16/64 -2- Money market review. There were distributed tables on money market perspective for the period January-October 14, 1964, perspective on bank reserve utilization for the period September 1963-October 14, 1964, and changes in bank lending practices for the period June-September 1964. Mr. Axilrod presented a report on developments in the Government securities market, following which Mr. Eckert discussed bank reserves, bank credit, and the money supply. Mr. Baker then reviewed recent developments in the foreign exchange market. Following these reports, all members of the staff except Messrs. Sherman, Broida, Young, Noyes, Molony, Cardon, Fauver, Solomon, Holland, Eckert, and Spencer withdraw from the meeting and the following entered the room: Hackley, General Counsel Farrell, Director, Division of Bank Operations Davis, Acting Director, Division of Data Processing Daniels, Assistant Director, Division of Bank Operations Kiley, Assistant Director, Division of Bank Operations Leavitt, Assistant Director, Division of Examinations Egertson, Supervisory Review Examiner, Division of Examinations Mr. Smith, Review Examiner, Division of Examinations Mr. Gedanken, Statistician, Division of Data Processing Mr. Solodow, Economist, Division of Research and Statistics Mr. Mr. Mr. Mr. Mr. Mr. Mr. Discount rates. The establishment without change by the Federal Reserve Banks of New York, Philadelphia, and San Francisco on October 15, 1961,., of the rates on discounts and advances in their existing schedules Was al)Proved unanimously, with the understanding that appropriate advice ' l10121d be sent to those Banks. lo/16/64 Circulated items. -3The following items, copies of which are attached to these minutes under the respective item numbers indicated, were approved unanimously: Item No. Letter to Fidelity-Philadelphia Trust Company, Philadelphia, Pennsylvania, approving the establishment of a branch in the Delcroft Shopping Center, Folcroft. 1 Letter to The First Pennsylvania Banking and Trust CoMpany, Philadelphia, Pennsylvania, approving the establishment of a branch at 555 City Line Avenue, Lower Merion Township. 2 Letter to Birmingham-Bloomfield Bank, Birmingham, Michigan, approving the establishment of a branch at 1040 East Maple Road and commenting on the need for strengthening the bank's capital structure. 3 Letter to Old Kent Bank and Trust Company, Grand if Rapids, Michigan, approving the establishment of a branch in the vicinity of East Beltline, S.E., and 28th Street, S.E. Letter to United California Bank, Los Angeles, California, approving the establishment of a branch at 61607 Twentynine Palms Highway, Joshua Tree. 5 Letter to County Bank of Santa Cruz, Santa Cruz, California, approving the establishment of a branch in the vicinity of Capitola Road and 41st Avenue, Santa Cruz County, and noting the bank's plans for increasing its capital funds. 6 ?tter to The Sumitomo Bank of California, San : 1 1:ancisco, California, approving an extension of ulme to establish a branch in Oakland. tter to The Sumitomo Bank of California, San rancisco, California, approving the relocation of lei branch from 1400 Fourth Street to the vicinity of roadway and Fourteenth Street, Sacramento. 7 8 10/16/64 Item No. Letter to Peoples Trust City Bank, Reading, PennsYlvania, waiving the requirement of six months' notice Of withdrawal from membership in the Federal Reserve System. 9 Letter to the Federal Deposit Insurance Corporation regarding the application of Peoples Trust City Bank, Reading, Pennsylvania, for continuation of deposit insurance after withdrawal from membership in the Federal Reserve System. 10 Letter to the Federal Deposit Insurance Corporation regarding the application of The Mont Alto State Bank, Mont Alto, Pennsylvania, for continuation of deposit insurance after withdrawal from membership in the Federal Reserve System. 11 Sorting of unfit Federal Reserve notes. Pursuant to the under- standing at the Board meeting on September 2, 1964, there had been subflitted for discussion at the meeting of the Conference of Reserve Bank Presidents on September 28, 1964, a report from the Division of Bank Operations on a study of the problems involved in avoiding the necessity to sort unfit $1 Federal Reserve notes by Bank of issue. In this connection, there now had been distributed a memorandum fl'om the Division of Bank Operations dated October 14, 1964, stating that the Presidents' Conference had recommended that (1) no change be Inede in the proposed legislation that the Treasury was holding concerning redemption and local destruction of Federal Reserve notes; (2) represent4tiVes of the Office of the Comptroller of the Currency not be stationed et the Reserve Banks to assume responsibilities for verification and 10/16/64 -5- destruction of unfit Federal Reserve notes; and (3) redemption credit for $1 Federal Reserve notes be prorated on the basis of the previous Year's issues. The Conference also had expressed the view that the Board should give consideration to engaging Stanford Research Institute to study the possibility of developing a simplified electronic scanning machine to count notes by Bank of issue. At the Board's request, Mr. Farrell reviewed the recommendations that had been made by the Presidents' Conference. He suggested that the Board might wish to advise the Chairman of the Presidents' Conference that it agreed with the recommendations of the Conference and to indicate that negotiations should be entered into with Stanford Research Institute for a study of the possibility of developing a simplified electronic currency scanning machine able to count notes by Bank of issue. In the discussion that followed, Mr. Farrell observed that originally it had been believed that a satisfactory formula could be devised to allocate credit for redemption of Federal Reserve notes among the Reserve Banks in lieu of depending upon a sort by Bank of issue. Attempts to develop a formula had not turned out satisfactorily, however, and when the matter was discussed with the Board's Division of Data Processing, that Division had suggested that, as an alternative, a sampling procedure Illight offer a solution to the problem. Results of testing showed that there was some deviation of samplings from actual count. However, the 1)1vision of Data Processing had indicated that the sampling results were k -6- lo/16/64 within the expected range from the true figures of all Federal Reserve Districts and had recommended a sampling procedure in lieu of sorting by Bank of issue. The Division of Bank Operations had not concurred in this recommendation because the sampling had not yielded results reasonably close to an actual count. In response to a question regarding the desirability of a single issue of Federal Reserve notes as a solution to the problem of allocating redemption credit, Mr. Farrell noted that a single issue would still require some kind of allocation procedure so long as the Reserve Banks Operated as separate corporate entities. Such a procedure, however, might be more broadly based than any that had heretofore been contemPlated. For example, Federal Reserve note liabilities might be allocated On the basis of total assets. He recalled that when the question of a single note issue was presented to the Reserve Banks in 1960, some apPeared to be in favor, while others expressed reservations on the grounds that this would be a step away from the concept of a decentralized Federal Reserve System. As discussion proceeded, Mr. Davis commented that he would strongly urge that further consideration be given to the use of a samPiing technique for allocating redemption credit among the Reserve Banks 48 a means of avoiding the substantial costs that would be necessary to sort unfit notes by Bank of issue. He felt this alternative needed to be explored further before any action was taken to underwrite costs related to the development of an electronic scanning machine. 10/16/64 -7- Governor Mills commented that, if the recommendations of the Presidents' Conference and the Division of Bank Operations were adopted, this would be a move in the direction of improving present practices for allocating redemption credit, which was necessitated by the accumulation 01 $1 Federal Reserve notes. As he saw it, however, at the heart of the matter was the question whether the Board wished to defer to the "pride Of ownership" on the part of the Reserve Banks insofar as this proprietorshiP related to currency denominated in the name of the Bank and the cost incident thereto. Governor Robertson expressed the view that this morning's discussion pointed up the complexity of the matter of allocating redemption credit. On the basis of the information at hand he was not prepared to Make a decision as to the best procedure to be followed in a matter of this importance. He would find it helpful if a committee were to be Pointed to explore the subject in detail, with a view to having the committee make a specific recommendation to the Board. At the instance of Chairman Martin, discussion then turned to the kind of letter that might be sent to the Chairman of the Presidents' e°11ference. Governor Mitchell expressed the opinion that a sampling technique /448 likely to provide a satisfactory solution to the problem of allocating redemption credit. Statistical sampling was a widely used technique etna one that should be explored further by the Federal Reserve for possible 10/16/64 -8- use in this particular problem. While he had no objection to sending a letter that would express general agreement with certain of the Presidents' recommendations, he felt that the letter should not indicate concurrence by the Board with the suggestion that negotiations be entered into at this time with Stanford Research Institute for the development of a scanning machine. Governor Daane remarked that he also felt the Board should not imPly that it accepted all of the Presidents' recommendations pending further exploration of the sampling technique. Governor Shepardson indicated that he agreed with Governor Daane. The accumulation of unfit $1 Federal Reserve notes provided an opportunity to make a further study of sampling as it might be applied to allocation Of redemption credit among the Reserve Banks. Before making a commitment for the development of a scanning device, which would mean a rather large oUtlay of money, he favored an intensive study of the feasibility of the sPPlication of a sampling procedure to the problem under discussion. After further discussion, it developed to be the consensus that there should be further study of the possible use of a sampling procedure as a means of allocating redemption credit for unfit notes before any 4etion was taken to enter into negotiations for the development of a scanning machine to count notes by Bank of issue. Accordingly, the staff 1448 requested to prepare for the Board's consideration a draft of letter to the chairman of the Presidents' Conference based on the discussion at today's meeting. 10/16/64 Messrs. Daniels and Leavitt then withdrew from the meeting. Experimental sample for reserve reporting by country banks (Item No. 12). There had been distributed, under date of October 15, 1964, a memorandum from Mr. Noyes recommending the establishment of an experimental sample of 300 country member banks to furnish early veekly reports of vault cash and deposits subject to reserve requirements, with a view to reducing errors in staff estimates of free reserves. Attached to the memorandum was a draft of letter to the Federal Reserve Banks explaining the purposes of the program and describing the procedures to be followed. The letter also suggested that the member banks recruited to report in the sample be informed the arrangement was experimental, to be tried until mid-1965 and continued, revised, or abandoned thereafter depending upon the value of the results. At the request of the Board, Mr. Noyes commented on the proposal in supplementation of the information presented in his memorandum. Establishment of the experimental sample of country member banks was part of Et broader effort to improve the current data available to the Manager of the System Open Market Account for use in making decisions on operations. While this program would not offer a complete or final solution to the Problem of errors in reserve estimates and differences between preand final figures, tests indicated that it was likely to result in marked improvement over the present situation. :3,5';11" 10/16/64 -10- In response to a question raised by Governor Mills, Mr. Noyes stated that the object of the program was not to facilitate policy actions of any particular type, but rather improve the Account Manager's ability to carry out the intent of the Federal Open Market Committee, whatever that might be at a given time, by improving the quality of the current information available to him. For example, if the Committee indicated that it would prefer not to have free reserves fall below a certain level, the Manager would be better able to comply with such an instruction if the range of error in his current estimates of reserve factors was reduced. A related goal was to reduce the average size of subsequent revisions in the preliminary data published. After further discussion, unanimous approval was given to the recommendation in Mr. Noyes' memorandum of October 15 relating to the establishment of an experimental reporting sample of 300 country member banks. A copy of the letter sent to the Federal Reserve Banks in connec- tion with this action is attached as Item No. 12. The meeting then adjourned. Secretary's Notes: A letter was sent today to The Chase Manhattan Bank, New York, New York, acknowledging receipt of notice of its intent to establish an additional branch in Nassau, Bahamas, to be located at the northwest corner of Russell Road and Thompson Boulevard, Nassau. Governor Shepardson today approved on behalf of the Board the following items: 0? 10/16/64 e -11- Letter to the Federal Reserve Bank of New York (attached Item No. 13 approving the reappointment of Lyman Brown, III, as assistant examiner. Memorandum from the Office of the Controller recommending the appointment of Robert S. McClellan as Analyst in that Office, with basic annual salary at the rate of $7,9551 effective October 19, 1964. BOARD OF GOVERNORS Item No. 1 10/16/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25, D. C. AOORE88 OFFICIAL CORRESPONDENCE TO THE *WARP October 16, 1964 Board of Directors, Fidelity-Philadelphia Trust Company, Philadelphia, Pennsylvania. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment by Fidelity-Philadelphia Trust Company, Philadelphia, Pennsylvania, of a branch in the Delcroft Shopping Center, Delmar Drive, Folcroft, Delaware County, Pennsylvania, provided the branch is established within one year from the date of this letter. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. (The letter to the Reserve Bank stated that the Board also had approved a six-month extension of the period allowed to establish the branch; and that if an extension should be requested, the procedure prescribed in the Board's letter of November 9, 1962 (S-1846), should be followed.) 35' Item No. 2 BOARD OF GOVERNORS 1016/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 16, 1964 Board of Directors, The First Pennsylvania Banking and Trust Company, Philadelphia, Pennsylvania. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment by The First Pennsylvania Banking and Trust Company, Philadelphia, Pennsylvania, of a branch at 555 City Line Avenue, Lower Merlon Township, Montgomery County, Pennsylvania, provided the branch is established within one year from the date of this letter. Very truly yours (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. (The letter to the Reserve Bank stated that the Board also had approved a six-month extension of the period allowed to establish the branch; and that if an extension should be requested, the procedure prescribed in the Board's letter of November 9, 1962 (S-1846), should be followed.) BOARD OF GOVERNORS Item No. OF THE 10/16/64 coti , 44,•. ft,;i4 • Lu • I— • \".? 3 FEDERAL RESERVE SYSTEM WASHINGTON, O. C. 20551 .\* • C..1 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD •.41 REgos—.• October 16, 1964 Board of Directors, Birmingham-Bloomfield Bank, Birmingham, Michigan. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment by Birmingham-Bloomfield Bank, Birmingham, Michigan, of a branch at 1040 East Maple Road, Birmingham, Michigan, provided the branch is established within one year from the date of this letter. Your bank's capital position is somewhat less than satisfactory, and the further investment in bank premises incident to the establishment of this branch will place an additional burden on the bank's capital structure. The Board understands that the directorate is now giving careful consideration to the strengthening of the bank's capital structure and urges that plans in this regard be formulated as quickly as possible. The Board notes that Vice President Ross of the Federal Reserve Bank of Chicago emphasized in his letter to you of September 23, 1964, the ad visability of the sale of common stock to improve the bank's capital 1?csition. The Board strongly concurs in Vice President Ross' comments in this regard. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. (The letter to the Reserve Bank stated that the Board also had approved a six-month extension Of the period allowed to establish the branch; and that if an extension should be requested, the procedure prescribed in the Board's letter c't November 9, 1962 (S-1846), should be followed.) r, BOARD OF GOVERNORS Item No. OF THE 10/16/64 _ 4 FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 16, 1964 Board of Directors, Old Kent Bank and Trust Company, Grand Rapids, Michigan. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment by Old Kent Bank and Trust Company, Grand Rapids, Michigan, of a branch in the vicinity of the intersection of East Beltline, S.E., and 28th Street, S.E., Grand Rapids, Michigan, provided tn, branch is established within one year from the date of this letter. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. (The letter to the Reserve Bank stated that the Board also had approved a six-month extension of the period allowed to establish the branch; and that if an extension should be requested, the procedure prescribed in the Board's letter of November 9, 1962 (s-1846), should be followed.) k 35s2 t BOARD OF GOVERNORS Item No. OF THE FEDERAL RESERVE SYSTEM 5 10/16/64 WASHINGTON 25. D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 16, 1964 Board of Directors, United California Bank, Los Angeles, California. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment by United California Bank, Los Angeles, California, of a branch at 61607 Twentynine Palms Highway, Joshua Tree, San Bernardino County, California, provided the branch is established within six months from the date of this letter. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. (The letter to the Reserve Bank stated that the Board also had approved a six-month extension of the period allowed to establish the branch; and that if an extension should be requested, the procedure prescribed in the Board's letter of November 9, 1962 (S-1846), should be followed.) BOARD OF GOVERNORS Item No. OF THE 10/16/64 6 FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL. CORRESPONDENCE To THE BOARD October 16, 1964 Board of Directors, County Bank of Santa Cruz, Santa Cruz, California. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment by County Bank of Santa Cruz, Santa Cruz, California, of a branch in the vicinity of the intersection of Capitola Road and 41st Avenue, Santa Cruz County, California, provided the branch is established within one year from the date of this letter. In approving this application the Board has taken particular note of your plans to increase capital by over $1,900,000 this year. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. Crhe letter to the Reserve Bank stated that the Board also had approved a six-month extension Of the period a]loved to establish the branch; and that if an extension should be requested, the procedure prescribed in the Board's letter Of November 9, 1962 (S-1846), should be followed.) 3584 BOARD OF GOVERNORS Item No. OF THE 7 10/16/64 FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 16, 1964 Board of Directors, The Sumitomo Bank of California, San Francisco, California. Gentlemen: The Board of Governors has approved an extension until July 19, 1965, of the time within which The Sumitomo Bank of California may establish a branch in the vicinity of 20th and Franklin Streets, Oakland, California. The establishment of this branch was authorized in a letter dated April 19, 1963. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 8 10/16/64 WASHINGTON 25, D. C. ADDRESS OFFICIAL CORRESPONDENCE TO THE BOAR° October 16, 1964 Board of Directors, The Sumitomo Bank of California, San Francisco, California. Gentlemen: The Board of Governors of the Federal Reserve System approves the relocation of a branch by The Sumitomo Bank of California from 1400 Fourth Street, Sacramento, California, to the vicinity of the intersection of Broadway and Fourteenth Street, Sacramento, provided the branch in the latter location is established within one year from the date ofthis letter and operations at the bank's existing office located at 1400 Fourth Street are discontinued simultaneously With the opening of the office in the vicinity of the intersection of Broadway and Fourteenth Street. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. (The letter to the Reserve Bank stated that the Board also had approved a six-month extension of the period allowed for relocation of the branch; and that if an extension should be requested, the procedure prescribed in the Board's letter of November 9, 1962 (s-1846), should be followed.) 566 BOARD OF GOVERNORS Item No. OF THE 9 10/16/64 FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 24551 ADDRESS arriciAL CORRESPONDENCE TO THE BOARD October 16, 1964 Board of Directors, Peoples Trust City Bank, Reading, Pennsylvania. Gentlemen: The Federal Reserve Bank of Philadelphia has forwarded to the Board of Governors your letter dated September 23, 1964, together with the accompanying resolution requesting permission to withdraw from membership in the Federal Reserve System by December 1, 1964. In accordance with your request, the Board of Governors waives the requirement of six months' notice of Withdrawal. Upon surrender to the Federal Reserve Bank of Philadelphia of the Federal Reserve Bank stock issued to Your institution, such stock will be cancelled and appropriate refund will be made thereon. Under the provisions of Section 208.10(c) of the Board's Regulation H, your institution may accomplish termination of its membership at any time within eight months from the date the notice of intention to withdraw from membership was given. It is requested that the certificate of membership be returned to the Federal Reserve Bank of Philadelphia.. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. BOARD OF GOVERNORS Item No. 10 10/16/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, 0. C. 20551 AooRees orricIAL CORRESPONDENCE TO THE SOAR° October 16, 1964 The Honorable Joseph W. Barr, Chairman, Federal Deposit Insurance Corporation, Washington, D. C. 20429 Dear Mr. Barr: Reference is made to your letter of September 30, 1964, concerning the application of the Peoples Trust City Bank, Reading, Pennsylvania, for continuance of deposit insurance after withdrawal from membership in the Federal Reserve System. No corrective programs which the Board of Govemors 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) Karl E. Bakke Karl E. Bakke, Assistant Secretary. %.1 3588 BOARD OF GOVERNORS Item No. 11 10/16/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 16, 1964 The Honorable Joseph W. Barr, Chairman, Federal Deposit Insurance Corporation, Washington, D. C. 20429 Dear Mr. Barr: Reference is made to your letter of September 30, 1964 concerning the application of The Mont Alto State Bank, Mont Alto, Pennsylvania, 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) Karl E. Bakke Karl E. Bakke, Assistant Secretary. 35L'9 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 12 10/16/64 WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 16, 1964. Dear Sir The Board is concerned that all feasible means be explored • Icr reducing the large differences that frequently occur in the several !!timates of the weekly free reserve figures--as expected by the Manager 7 the System Open Market Account at the conclusion of his operations ( _4 Wednesday, as first published the following day, and as finally L'evised a week or two later. The major sources of such differences have been the deviations fro., an"' Projections of required reserves and vault cash at country member ui, 8. A special System subcommittee, and the staffs at the New York b_ " tt..nk and the Board, have been intensively investigating various means Qt reducing such deviations. k The most promising technique yet devised is the collection earl Of Y re weekly reports of vault cash and deposits subject to reserve quirements from a sample of country banks. This technique calls for atratified sample of 300 country member banks to report to their his!rve Bank offices each Monday, by telephone, telegraph, or other deposits eutgrePeed means, the cumulative totals of their vault cash and that on Ject to reserve requirements as of the opening of business by wired and the four preceding calendar days. Such data would be each Tuesday early Reserve Bank office to the Board each Monday night or the unining. There the sample reports would be blown up to represent week reserve 1erse of country member banks and projected to a full Ety,,1. to"age on the basis of an allowance for regular intra-weekly and intrahlY patterns. With high-speed processing, it is believed possible ! torl confer2ave the resulting estimate available for use by the 11 a.m. ence call each Tuesday. This would place an up-to-date estimate of ha rage country bank required reserves and vault cash in the Manager's ofncia in time for him to adjust his operations on the final two days the statement week. been Statistical tests of probable sample results have suff44 such .ciently promising that the Board wishes to proceed with -2senTle reporting, on a trial basis, beginning promptly and extending ! ntil June 30, 1965. Accordingly, it is requested that each Resertre tank ni Branch arrange for experimental reporting of the type and timing but;;Iined above by each of the selected sample banks located in its territory. Dames of the banks to be included in the sample will be forwarded shortly. 7esP0ndent substitutions in difficult instances can be arranged by contactthe Board staff. Costs of weekly telephone and telegraphic transmisn,°11 of the requisite data by the respondent banks may appropriately be go sorbed by the Reserve Banks. The data received from the sample banks should be edited by the Reserve Bank or Branch and wired to reach the Board's Division of Data Processing on Monday night or early Tuesday morning. After receipt :to the regular weekly reports on vault cash and deposits mailed in by all tountrY members, each Reserve Bank office will also need to forward to the 2rd the totals from such mail reports for the sample banks and the ;lverse of country member banks stratified by size class, in order to fo°vide suitable benchmarks for estimating purposes. Appropriate limits rel. such size classes of banks will be specified by the Board staff. In th"gnition of the numerous details of implementation to be arranged, and need for speedy action, a one-day planning meeting of the System rtisonnel involved will be held in Room 1202 of the Board's offices, beginat 9:30 a.m. on Monday, October 26. Reserve Banks and Branches are uested to send to the meeting representatives who will be responsible muurrl the collection, editing, and transmission of the sample data. Comthalcations regarding arrangements for this meeting, and any questions 'might arise during the interim concerning the proposed procedures, ow pr uld be directed to Mr. Theodore Veenstra of the Division of Data °tesaing. O It is suggested that the member banks recruited to report in the vs umPle be informed that the arrangement is an experimental one, to be dept.ried until mid-1965 and continued, revised, or dropped thereafter sta;t2ding upon the value of the results. During this interval intensive testing of the sample evidence is planned. Reporting procedures ex,„ the number and distribution of respondent banks may be altered 1114:imentally, with a view to improving the results. Testing and refinebaro. 0f the sample will be much assisted by the back data on individual ofEZ vault cash and deposits that will be forwarded by each Reserve Bank in the coming weeks in accordance with the Board's letter of : Ott uer 8, 1964. It is hoped that these and other staff efforts currently underway can co ntribute significantly to improving the promptness and accuracy with : exe member bank reserve statistics are made available to assist in the ,.ution of monetary policy. Very truly yours Merritt Sherman, Secretary. l b° THE PRESIDENTS OF ALL ‘ti3ERAL RESERVE BANKS. 3 Item No. 13 10/16/64 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 CE ADDRESS OFFICIAL CORRESPONDEN TO THE BOARD October 16, 1964 CONFIDENTIAL (FR) Mr. Howard D. Crosse, Vice President, Federal Reserve Bank of New York, New York, New York. 10045 Dear Mr. Crosse: ined in In accordance with the request conta the Board Mr. Quackenbush's letter of October 14, 1964, an assistas III approves the reappointment of Lyman Brown York, New ant examiner for the Federal Reserve Bank of effective October 29, 1964. to It is noted that Mr. Brown is indebted r bank. membe State Bank of Avoca, Avoca, New York, a reappointment Accordingly, the Board's approval of the ing that he stand under of Mr. Brown is given with the that bank until of n natio Will not participate in any exami . dated his indebtedness has been liqui Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary.
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