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Minutes for October 19, 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 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. Chm. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. Mitchell Gov. Daane rev, Minutes of the Board of Governors of the Federal Reserve System °n Monday, October 19, 1964. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Martin, Chairman Balderston, Vice Chairman Mills Robertson Shepardson Mitchell Daane Mr. Sherman, Secretary Mr. Broida, Assistant Secretary Mr. Bakke, 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. Fauver, Assistant to the Board Mr. Solomon, Director, Division of Examinations Messrs. Brill, Holland, Koch, Garfield, Partee, Dembitz, Altmann, Axilrod, Eckert, Fisher, Gehman, Keir, Manookian, Osborne, Weiner, and Wernick of the Division of Research and Statistics Messrs. Furth, Hersey, Sammons, Irvine, Katz, Reynolds, Wood, Dahl, Gekker, Hayes, and Maroni of the Division of International Finance Economic review. The Division of International Finance summarized selected international financial developments, following which the Division °t Research and Statistics reviewed domestic business and financial develcTments. All members of the staff except Messrs. Sherman, Bakke, and 8°1°1110/1 then withdrew and the following entered the room: Mr. Mr. Mr. Mr. Mr. Mr. Hackley, General Counsel Johnson, Director, Division of Personnel Administration O'Connell, Assistant General Counsel Daniels, Assistant Director, Division of Bank Operations Collier, Assistant to the Director, Division of Bank Operations Lyon, Review Examiner, Division of Examinations 10/19/64 -2- Circulated or distributed items. The following items, copies °r which are attached to these minutes under the respective item numbers indicated, were approved unanimously: Item No. Letter to Schroder Trust Company, New York, New 1 °1*, granting its request for permission to main! Lain reduced reserves. Letter to The Alamo National Bank of San Antonio, S?4, Antonio, Texas, denying its request for perto maintain reduced reserves. Letter to the Federal Reserve Bank of Dallas approving .. 14e payment of salary to Fredric W. Reed as Vice Presi' 4eat in charge of the El Paso Branch at the rate proPosed by the Bank's Board of Directors. 2 3 With respect to Item No. 31 Mr. Johnson observed that the salary Pr°Posed by the Dallas Reserve Bank for the Vice President-designate at the El Paso Branch was quite low in relation to the salaries received br Other Branch Vice Presidents, and was below the minimum salary for " II group. He suggested that while the Board might wish to approve the 41417 proposed for Mr. Reed by the Reserve Bank, it might also be desir- *Ike that the matter be considered at a meeting of the Board's Committee °4 Organization, Compensation, and Building Plans that was scheduled to c°tIvene later in the day, with a view to discussing with President Irons the level of compensation for an individual occupying the position in qUestion. After brief discussion, it was understood that a review of the s4larY level should be made by the Committee and that the matter should tIlea be discussed with President Irons. OZ, 10/19/64 -3- Messrs. Johnson, Daniels, and Collier then withdraw from the Meeting. Question under Bank Holding Company Act raised by Navajo 1corporation, Inc. Mr. O'Connell reported, for the information of the Board, that he had received a call from counsel for Navajo BancorPoration, Inc., Phoenix, Arizona, a holding company affiliate by virtue 0f its control of First Navajo National Bank, Holbrook, Arizona, stating that Navajo Bancorporation desired to acquire, through foreclosure, a Inajority of the shares of Valley State Bank, Lamar, Colorado, held as collateral for a loan. According to Mr. O'Connell, Navajo Bancorporation had lent $104,000 to Lamar Investors, Ltd., Lamar, Colorado, which controlled ValleY State Bank and Brighton National Bank, Brighton, Colorado, secured by a second lien on stock of Lamar Investors and Valley State Bank, the PltmarY lien holder being Central Bank and Trust Company, Denver, Colorado, //llich had previously lent Lamar Investors $237,000 on the collateral of the stock in question. Central Trust had called its loan to Lamar In- vstors, which the latter had been unable to repay. In order to avoid rclreclosure on the stock held by Central Trust as collateral for the 1°841 which action would have extinguished Navajo Bancorporation's klbordinated interest in the same stock, Navajo Bancorporation paid off Lftwo . Investors' note and took an assignment of the stock in question l'olm Central Trust. 3595 10/19/64 Subsequently, due to certain questionable transactions between Valley State Bank and Brighton National Bank, wherein the former had Illade a $400,000 interbank deposit with the latter that Brighton National mas unable to return when called for by Valley State, the Banking Board 'the State of Colorado had ordered a hearing at which Valley State f°1 14ae ordered to show cause why it should not be placed in receivership because of inadequate capital. In connection with the foregoing action, the State Banking Board had approached Navajo Bancorporation, undoubtedly because of its substantial interest in the solvency of Valley State, to take over operation of the bank temporarily until its affairs could be straightened out; collaterally, Navajo Bancorporation proposed to foreclose on the stock of Valley State that it held as collateral for advances to or on behalf of the bank. Mr. O'Connell stated that he had called attention of counsel tOZ Navajo to the fact that by acquiring the stock of Valley State through foreclosure Navajo Bancorporation would become a bank holding e°11113allY, and that before this could be done legally the Board's approval 14°141d have to be obtained pursuant to the requirement of section 3(a) Of the Bank Holding Company Act. He added, however, that in this case the Board could not grant its approval in any event because the acquisition would be across State lines, in conflict with the prohibition contained in section 3(d) of the Bank Holding Company Act. ay r 10/19/64 Counsel for Navajo Bancorporation had then discussed with Mr. O'Connell possible alternative methods of accomplishing the desired Objective, following which Mr. O'Connell had suggested that the matter be Pursued with the staff of the Federal Reserve Bank of San Francisco. Mr. O'Connell stated, in response to a question from Chairman that there was nothing before the Board for action at the moment, 41though a" ection 301" determination for Navajo was beiag processed bY the staff. The Board would, of course, be kept informed of develop- The meeting then adjourned. Secretary's Note: Governor Shepardson today approved on behalf of the Board a memorandum from the Division of Research and Statistics recommending acceptance of the resignation of Barbara A. Bosworth, Statistical Clerk in that Division, effective as of the close of business October 23, 1964. 359 , BOARD OF GOVERNORS Item No, OF THE 10/19/64 1 FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 19, 1964 Board of Directors, Schroder Trust Company, New York, New York. Gentlemen: With reference to your request submitted through the Federal Reserve Bank of New York, the Board of Governors, acting under the provisions of Section 19 of the Federal Reserve Act, grants permission to the Schroder Trust Company to maintain the same reserves against deposits as are required to be maintained by nonreserve city tanks, effective with the first biweekly reserve computation period beginning after the date of this letter. Your attention is called to the fact that such Permission is subject to revocation by the Board of Governors. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Item No. 2 10/19/64 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS orrtciAL CORRESPONDENCE TO THE BOARD October 19, 1964 Board of Directors, The Alamo National Bank of San Antonio, San Antonio, Texas, G entlemen: This refers to the application from your bank, submitted through the Federal Reserve Bank of Dallas, for permission to maintain the same reserves against deposits as are required to be zaintained by nonreserve city banks. In the light of the volume of your bank's total demand de c Posits, its interbank demand deposits, its activity in the Federal 4unds market and frequency of borrowing at the Federal Reserve Bank, nd its competitive position with other banks, the Board feels that character of your bank's business is more nearly like that of bheother reserve city banks in San Antonio than that of San Antonio anks to which the Board has granted permission to maintain reduced 1:eserves. Accordingly, the Board believes that it would not be J ustified In granting your application for reduced reserves. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. BOARD OF GOVERNORS Item No. OF THE 3 10/19/64 FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE SOARD October 19, 19613 gPNFIDENTIAL Mr. Watrous H. Irons, President, Federal Reserve Bank of Dallas, Dallas, Texas 75222. Dear . Irons: As requested in your letter of October 9, 1964, the Board of Governors approves the payment of salary to Mr. Fredric W. Reed as Vice President of the Federal Reserve Bank of Dallas, in charge of the El Paso Branch, at the rate of $13,500 per annum, effective November 1, 1964. The Board has noted the reassignment of Vice resident Roy E. Bohne, from the El Paso Branch to the Read Office with no change in title or salary, also effective November 1. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary.
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