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Minutes for October 20, 1961 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 °IllY that you have seen the minutes. Chin. Martin Gov. Mills Gov. Robertson Gov. Balderston Gov. Shepardson Gov. King Gov. Mitchell Minutes of the Board of Governors of the Federal Reserve System on Friday, October 20, 1961. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. The Board met in the Board Room at 10:00 a.m. Balderston, Vice Chairman Mills Robertson Shepardson King Mitchell Mr. Sherman, Secretary Mr. Thomas, Adviser to the Board Mr. Young, Adviser to the Board and Director, Division of International Finance Mr. FtLuver, Assistant to the Board Mr. Noyes, Director, Division of Research and Statistics Mr. Holland, Adviser, Division of Research and Statistics Mr. Koch, Adviser, Division of Research and Statistics Mr. Landry, Assistant to the Secretary Mr. Eckert, Chief, Banking Section, Division of Research and Statistics Mr. Yager, Economist, Division of Research and Statistics Money market review. Mr. Yager reported on recent developments in the 14°11eY market, referring in the course of his remarks to certain charts (1411buted beforehand. Mr. Eckert then commented on the situation with l'es13eot to bank reserves, liquidity, credit, and related matters. At the conclusion of these reports Messrs. Young, Holland, Eckert, aria lager withdrew and the following entered the room: Hackley, General Counsel Hexter, Assistant General Counsel O'Connell, Assistant General Counsel Hooff, Assistant General Counsel Masters, Associate Director, Division of Examinations Mr. Hostrup, Assistant Director, Division of Examinations Mr. Mr. Mr. Mr. Mr. 10/20/61 -2Mr. Leavitt, Assistant Director, Division of Examinations Mr. Thompson, Supervisory Review Examiner, Division of Examinations Mr. Smith, Assistant Review Examiner, Division of Examinations Mr. Young, Assistant Counsel Mr. Smith, Legal Assistant Report on competitive factors (Spokane and Walla Walla, *:1 21.11.2/114. There had been distributed with a memorandum from the 131vision of Examinations dated October 13, 1961, copies of a draft of liePort to the Comptroller of the Currency on the competitive factors Involved in the proposed purchase of assets and assumption of liaties of Walla Walla National Bank, Walla Walla, Washington, by The 0141 National Bank of Spokane, Spokane, Washington. After discussion the report was approved unanimously for transInlesi°n to the Comptroller of the Currency. The conclusion of the report l'e4d as follows: There is very little competition between The Old National lank of Spokane, Spokane, Washington, and Walla Walla National Bank, Walla Walla, Washington. Consummation of the proposed PUrchase of assets and assumption of liabilities would result in virtually no competitive changes in Spokane. Replacing the smallest bank in Walla Walla with a branch of a stronger and more aggressive banking institution should intensify competation without significantly adverse effects on the smallest remaining Walla Walla bank which is well established. Consumer buying intentions surveys in 1962. that 111.1 It had been anticipated the Board would be relieved of financial responsibility for consumer 4 intentions surveys in 1962 as a result of discontinuing in 1959 4;! 10/20/61 -3- suPPcat of the annual survey conducted by the University of Michigan Survey Research Center and the appropriation of funds to the Bureau of the Census to finance the Quarterly Survey of Consumer Buying Intentions sulTorted by the Board since that time. An appropriation to finance the quarterly survey was requested in the President's budget for fiscal 1962 4114 approved initially by both the House and Senate, but in conference Irt)ras were inserted in the Census appropriation that "the additional 160,000 requested for the consumer buying anticipation survey has been 4eferred without prejudice." Upon inquiry it was revealed that the rcIllegoing action by the conference committee was the result of an Objection filed by Sindlinger & Company, Inc., of Norwood, Pennsylvania, 8'114that it was intended to provide both Census and the Sindlinger C°111138x1Y an opportunity to discuss at a future date the issues raised by. the latter before the subcommittee. As a result of the action by the conference committee referred to, appropriated funds could not be InEtcle available to support the Quarterly Survey of Consumer Buying Illtelltions until Congressional action on the fiscal 1963 Federal 1113 t. Consequently, the Board had been approached by the Bureau Or the Budget and the Council of Economic Advisers with the suggestion that interim support be given to the quarterly survey on its present 14484 4.8 for the first two quarters of calendar 1962. Under date of October 13, 1961, there had been distributed copies Or aleillOranduM from Mr. Noyes regarding the foregoing suggestion along 10/20/61 -4- /41.th copies of a letter from the Council of Economic Advisers to the Bureau of the Budget urging continuation of the quarterly survey. The memorandum noted that the staff had been approached by Mr. Sindlinger lth the suggestion that the Board might obtain from his organization information comparable to that previously supplied through the quarterly surveY but on a more frequent basis and with coverage of more items. He had been informed that it was unlikely the Board would wish to re-enter the survey field on a continuing basis on anything like the scale represented by its previous contracts with either the University of Michigan 01s the Census Bureau. that Mr. Sindlinger had then proposed, as an alternative, he add questions on durable goods other than automobiles to certain l'431sk in the automobile area which he is doing under contract with the Gleral Motors Corporation and the Ford Motor Company, and that he 11'°1Iide weekly and monthly tabulations of consumer buying intentions °11 4 subscription basis. As noted in the memorandum, for the coverage In this area, which would be of interest in the Board's analysis of 'ent economic developments, the subscription price would be S5,000 'Year/ contingent upon the Sindlinger Company's ability to find eogl clients for all or part of the data collected to finance its etensive work in the field. After comparing the technical merits of the Census and Sindlinger es, the memorandum went on to state that comparative analysis of the 3b61 10/20/61 -5- aata from the quarterly survey and the Sindlinger survey would provide the best opportunity afforded to date for evaluating the contribution that e°11su1er intentions surveys might have to offer to economic intelligence. Therefore, it was the recommendation of the Division of Research and Statistics that the Board give interim financial support to the Census Quarterly Survey of Consumer Buying Intentions for the first two quarters er calendar 1962 in the amount of $65,000 and carry a one-year subscription to the Sindlinger service for a fee of $5,000. Although this would involve 8. t'nea appropriation of $70,000 for calendar 1962, which was more than 441been anticipated, the amount referred to was considerably less than 4841been spent by the Board in preceding years on consumer buying Irtentions surveys. The memorandum noted that if the Board was favorably 418Posed toward the recommendation made, it was further recommended that Shay be asked to communicate with Senator Holland and Congressman kaare vs, the Managers for the Senate and House of the conference corntee that acted on the Census appropriation, to insure that this 4etl°11 by the Board would not be regarded by them as contrary to the 41)11‘lt of the conference committee's action, it being indicated in the 4 10.r 41dum that a previous inquiry by Mr. Shay had elicited the infor41140n that there was not likely to be any objection. At the request of Governor Balderston, Mr. Noyes commented on his 41°1'411aum, noting that although the staff had arrived at its recommendation t118 matter with some hesitancy and had been tempted at first to recommend 10/20/61 -6- that the Board withdraw completely from the consumer buying intentions survey field, after careful consideration the conclusion had been reached that there was a good deal to be said for continued support by the Board of this program at least during the first half of 1962 lulttl there was a determination of the nature of the Government program that would be forthcoming. Following a discussion during which the view was expressed that there appeared to be no good alternative to adopting the course recomraended in Mr. Noyes' memorandum, unanimous approval was given to 131‘°Irision by the Board of interim financial support to the Census 144arter1Y Survey of ConsumPr Buying Intentions for the first two Tlarters of calendar 1962 in the amount of $65,000 and purchase of a °Ile-Yilr subscription to the Sindlinger service for a fee of $5,000, Il ving a total appropriation of $70,000 for calendar 1962. Messrs. Thomas, Noyes, and Koch then withdrew from the meeting. E2auest by United California Bank (Items 1 and 21.1. After e°41d.eration of all information, including additional facts submitted it n . - Joint memorandum in response to a letter from the Board dated '114428, 1961, the Board on September 26, 1961, denied the application 1).1-illited California Bank, Los Angeles, California, to merge with The aoixt11West Bank, Inglewood, California, and to operate branches incident t° the merger. Under date of October 16, 1961, there had been distributed Ootli4' 10/20/61 -7- a Memorandum from the Division of Examinations regarding a request for reconsideration of the Board's decision received from United California 1681* in a petition dated October 5, 1961, a copy of which was attached to the memorandum. In addition to the foregoing request, United California Bank asked that the Board afford it an opportunity to present orally the following grounds for approval of the proposal: 1. Additional circumstances relating to the difficulties facing THE SOUTHWEST BANK in its management problems; 2. The limited impact of the proposed merger on existing and potential competition between the banks; 3. The effect of the denial of the application on the already dominant competitive position of the two larger banks in the area. There vas also attached to the memorandum a copy of a letter dated October ) 1961, from The Southwest Bank stating that denial of the %adcation could not help but have an adverse effect on that bank's 11'°81Deets in view of its worsening management problem and the intense e°41Petition from branches of the large banks in the area served by krth -Vest Bank. It was the opinion of the Division of Examinations, as exy,, "essed in its memorandum, that the above-listed three factors had been ye ) ( 'ed at length in previously submitted information. Although the .044.0n 11 ' had originally recommended that the Board approve the merger, Achor recommending oppositely), it believed that all facts had been '4.clered and that the requested oral presentation would serve no useful 1)1111)o se) particularly since no apparent new facts were to be presented. 10/20/61 -8- Attached to the memorandum was a proposed letter to this effect to United California Bank. In a discussion of the request for reconsideration it was noted that although applicant had been given an opportunity in the Board's letter of July 28 to make oral presentation before the Board, it had not availed itself of this opportunity, and it was agreed that no siEMificant new facts had been presented by applicant. After further discussion during which certain modifications were suggested and agreed upon in the draft letter to United California Rank, the letter was approved in the form of attached Item No. 1, Governor Mitchell abstaining. In taking this action it was understood that a 4-ar letter would be sent to The Southwest Bank in reply to its letter Of October 5, 1961. A copy of the letter to The Southwest Bank 4a ttached as Item No. 2. Holdi co I an a II •lication b First Colorado Bankshares Inc. C°1)les of memoranda from the Division of Examinations and the Legal 4vision dated August 30 and October 6, 1961, respectively, had been Lstributed regarding an application by First Colorado Bankshares, Inc., holding company by 11€1e/4°°d, Colorado, for permission to become a bank a.(4111iring stock of The First National Bank of Englewood, Englewood, e(114)rado; University Hills Bank, Denver, Colorado; and Lakeside National kr], Lakeside Center, Colorado. The recommendations of both the Division 10/20/61 -9- °I' Examinations and the Federal Reserve Bank of Kansas City were favorable, and the Comptroller of the Currency had recommended approval of the application. The favorable recommendation of the Division of Examinations was based on its estimate that each of the statutory factors required to be e°11sidered was either neutral or favorable. The Legal Division memorandum stated that a consideration of the first three statutory factors revealed little that would favor either approval or denial of the application, but that under the fourth factor relating to benefit to the communities c°11tirivation of the harmonious working relationships that had resulted 111 common ownership of the three banks might be regarded as a somewhat talr°i'able consideration. With respect to the fifth or competitive factor, -PPeared to the Legal Division that the affiliation of the banks concellled through the proposed holding company arrangement would have little "feet upon their competitive positions with relation to other banks. It 1148tbe opinion of the Legal Division, as stated in its memorandum, that illtbe event of judicial review either approval or denial of the application Vb. * , be viewed as a reasonable exercise of the Board's discretion. Reference was made in the memoranda from the Division of Exami0 4t1 'lis and the Legal Division to a request from the Federal Reserve Bank or lc.'Sas City for a ruling as to whether Mr. Aksel Nielsen would be hib*lw fed by section 8 of the Clayton Act or any other statute from ng simultaneously as director of the proposed holding company and , I 10/20/61 or . -10- The First National Bank of Denver. The memorandum of the Legal sion stated its opinion that since the proposed bank holding c°419Perry would not be a bank, barking association, savings bank, or trilst company organized under the National Bank Act or under the laws 'r 8-4Y State or of the District of Columbia, Mr. Nielsen's proposed service as director thereof, while a director of a member bank, would n°t Ariolate section 8 of the Clayton Act. Governor Mills said that he would vote to approve the application, since the organization of the holding company would be in conformance with le881 requirements, and he believed that the conclusions reached in the 14e111°randa of the Division of Examinations and the Legal Division with ' lesPect to the application were correct. Governor Mills then referred to the fact that no cash dividends had been paid by First National for over ten years and none by either University or Lakeside since organization, to reference in the memorandum of the Division of Examinations to the atstement by applicant that no cash dividends were contemplated by any of the three banks and that it was highly unlikely that any could be antici1)4tea for the foreseeable future because of their continued growth and the Ileed for retaining earnings to augment capital. In view of this sitttat ion with respect to nonpayment of cash dividends, Governor Mills 41.4. lred as to the basis for suspicion that the organizers of the holding ' 41Y were deliberately holding back dividends which, considering the 10/20/61 -11- g°0:1 net earning records of the banks involved, might bring holders of stock in the holding company considerable capital gains at the expense or Present individual stockholders of the independent banks who had been clePrived of income on their shares. Reply was made to the effect that acquisition of stock in the presently independent banks by the holding celn-PanY would not substantially alter stock holdings already in existence, strice all stockholders of the banks who were bona fide Colorado residents /iere to be given an opportunity to acquire interest in applicant in proto their ownership in the individual banks, and only minor amounts 014 shares of First, University, and Lakeside were held by stockholders not Isesidents of Colorado. Governor Robertson and Governor Shepardson indicated that they alsc''would vote to approve the application. Governor King referred to discussion at yesterday's meeting of the aPPlication by Whitney Holding Corporation, New Orleans, Louisiana, for 15 :415810n to become a bank holding company and to the question of " -44ative voting for directors of national banks raised on that occasion. elf of yesterday's discussion of this matter, Governor King said, he ' 111311(lel'ed whether the Comptroller of the Currency had given indication of toh„ 41ere.tion of this aspect of the application by First Colorado Bankshares ' Stile e there were two national banks concerned. In reply, it was noted that title e there was no bank consolidation involved in the present application, 10/20/61 -12- unlike the situation in the Whitney application, the question of clUNIative voting would not arise. It was also observed that even if the cumulative voting feature was present, it was doubtful whether the °trice of the Comptroller of the Currency would attach importance to it. Governor King then stated that he would vote to approve the 131'esent application since he considered it to be a constructive type of 11°115-i 1g company that would provide more competition for large banks in Colorado. Governor Mitchell inquired as to whether there was reason to 4.eve that any outside "large bank" interest was involved in the IlreftTE --' application and reply was given in the negative. Governor Illtehell then said that he also would vote to approve the application, 4111 Governor Balderston concurred. Thereupon, the application by First Colorado Bankshares, Inc., I'llg4wood, Colorado, for permission to become a bank holding company by c141ring stock of three banks was approved unanimously, it being under81oOd 1 that the staff would prepare a draft of order and statement reflecting thi. ' action for subsequent consideration by the Board. It was further ncie d that the proposed service by Mr. Nielsen as a director of 1%14 Colorado Bankshares, Inc., while a director of a member bank, not be regarded as a violation of section 8 of the Clayton Act or 0,0 Section 212.1(a) of Regulation L, Interlocking Bank Directorates 1,11xLer the Clayton Act, 10/20/61 -13- Messrs. Hostrup, Thompson, Gary Smith (Legal), and James Smith (Examtinations) withdrew from the meeting at this point. Regulation 0--executive officer status of non-officer bank P-94....s2Lne1 with lending authority. There had been distributed under date c)f October 16, 1961, a memorandum from the Legal Division pertaining to the executive officer status under Regulation 0, Loans to Executive °Ificers of Member Banks, of non-officer personnel possessing lending Ilutalority. The Crocker-Anglo National Bank, San Francisco, California, through the Federal Reserve Bank of San Francisco, had requested clei rlanation of whether the Board's April 1960 interpretation classitYing non-officer employees of a bank having lending authority as eXecutive officers within the meaning of Regulation 0 applied to certain non-officer personnel of Crocker-Anglo. requested reconsideration of the interpretation. If so, the bank The memorandum noted that about 100 of the bank's employees were involved and would be prohibited from borrowing individually more than $2,500 from the bank if it 1/ere ruled that the regulation applied. The Board's April 1960 1111411g concerned certain persons employed by Girard Trust Corn ?1)tehallge Bank, Philadelphia, Pennsylvania, who had no officer titles btrt were authorized to make loans in limited amounts. These employees *were .,_ Foranch managers and assistant branch managers who had authority to unsecured commercial loans up to a limit of $5,000, and secured Qoloolle rcial loans up to a limit of $10,000; and supervisors or assistant 10/20/61 -14- suPervisors in the bank's consumer credit department who were authorized to make personal loans on an unsecured or secured basis 111) to the same limits. Of Information available to the Board at the time consideration of that question was that the Girard Trust employees eercised almost unlimited discretion in the moking of these loans. 111 April 1960, the Board advised the Federal Reserve Bank of PhiladelPhia that the employees under consideration were participating illthe "operating management" of Girard Trust and that, accordingly, they should be considered "executive officers" for purposes of the l'egulation. That interpretation was sent to all Federal Reserve 11841-s on April 22, 1960, (S-1736, F.R.L.S. 6584.1), for their intcaliation, but it was not issued as a published ruling. Crocker-Anglo's inquiry concerned (1) automotive finance clekrtment managers with authority to make loans secured by automotive ahtlOther equipment up to a maximum amount of $7,500 on an automotive e°11tl'act and up to $3,000 on a non-automotive contract, and (2) con8114ler loan department managers with authority to make consumer loans 14 maximum amount of $5,000, but which in most cases were below *a600. The position of Crocker-Anglo was that the department 1411eLgers in question did not exercise judgment or discretion in I'ming their functions as did commercial and real estate officers, 10/20/61 -15- bUt that the functions were essentially clerical and routine, and that the situation with respect to them "is comparable to that of a clerk in the commercial loan department in determining whether a note signed 414 collateral tendered by a borrower conforms to the terms specified bY the approving loan officer." Discussion of this matter with the General Counsel of the Federal Reserve Bank of San Francisco had disclosed no information which would indicate that the managers e°11cerned had any other duties of a managerial nature. It was the opinion of the Legal Division that the facts sharlaY" distinguished the Crocker-Anglo situation from that obtaining the Girard Trust case and that, in view of the underlying purposes or the law and its legislative history, the definition of the term 'ecutive officer" was not intended to include bank employees with sileh duties and responsibilities as the Crocker-Anglo department niallagers. In the event the Board should be disposed to take this le4 of the matter, a draft of letter to the Federal Reserve Bank of 88'11 FranciSCO to this effect had been prepared for the Board's e°11sideration. At the request of Governor Balderston, Mr. Hackley commented on he to nlemorandum, noting that the purpose of section 22(g), which was added he Federal Reserve Act in 1933, was to prevent self-dealing by officers or b 444 at the risk of loss to depositors and stockholders and that o 10/20/61 -16- C°r1gress was cognizant of the fact that many banks that had failed during the early 1930's had made questionable loans to their officers, which More or less contributed to the banks' later difficulties. Mr. Hackley /gent on to say that a liberalization of the law so as to permit loans of greater amounts to executive officers as recommended in the proposed Pinancial Institutions Act of 1957 would not resolve the present problem, was essentially one of determining just what was meant by the phrase "t° Participate in the operating management of the bank" which was nowhere clefined or explained either specifically or in general terms in Regulation 0, Should the Board approve the draft letter, Mr. Hackley thought the 8°ard might wish to send copies to the Reserve Banks and publish the rilling in the Federal Register. If Girard Trust should subsequently reel that this ruling covered their case, that bank might wish to request ree°nsideration of the April 1960 ruling by the Board. Noting that he was in favor of reviving the recommendation that the law be liberalized so as to permit loans of more than $2,500 to executive officers of banks, Governor Mills said that he was disinclined t° accept the recommendation of the Legal Division with respect to the els°eker-Anglo inquiry. In his view the bank personnel concerned eercised executive responsibility on a level comparable to that of or officers elected by boards of directors and were, therefore, c)bliged to conform to the statute. Should the Board relax its 10/20/61 int -17- pretation of the regulation in the manner suggested by the Legal Governor Mills feared that such action might give rise to eWlicts difficult to resolve and productive of ill feelings within bal:14• On the other hand, to adhere to the ruling made in the Girard is118't case as applicable to the Crocker-Anglo situation would not in his estimation create difficulty for the bank personnel in question, since they would not be foreclosed from access to credit from sources °ther than their place of employment. Governor Robertson expressed general agreement with the views sta ted by Governor Mills as to the reply to be sent to Crocker-Anglo, anclhe also said that he was in favor of changing the statute in the '8.11/ler suggested in the Financial Institutions Act. In the discussion that followed the point was made that, while thel'e vas a difference between the facts of this case and the Girard 8e, the Legal Division also felt that a ruling that would make the ' es Ise8taation applicable to the Crocker-Anglo situation would go beyond the intent of Congress at the time section 22(g) was added to the ?ederal Reserve Act in 1933, and of the Board at the time it adopted httiho '"-i-ation 0, effective January 1, 1936. It was necessary to draw a 1111e somewhere as to what constituted an executive officer for purposes Or the regulation, but the farther down the line was drawn the greater d. be the Board's exposure to the criticism of being overly strict. . 10/20/61 -18- Governor Robertson remarked in the course of the discussion that he would be inclined to modify the position he had expressed earlier on the request by Crocker-Anglo. &ratt However, he would not wish to approve the repay so long as the Board's April 1960 ruling with respect to certain employees of Girard was outstanding. He then suggested a thorough review of the whole question looking toward possible revision Or that ruling. Governor Shepardson said that as he had read the Legal Division's nQranclum he thought a significant difference had been drawn between the Gire•rd and Crocker-Anglo cases that justified the conclusions arrived at 14 the Proposed letter to the San Francisco Bank. However, he favored the aPproach suggested by Governor Robertson of restudying the entire qllestion. Governor King commented that he assumed the Board had made the --Ltion of "executive officer" as clear as was feasible at the time Ileiwation 0 was adapted. Personally, he doubted that further study W111.14 arrive at a more generally satisfactory definition than now elstecl. tor 4.1_ that Therefore, since he felt no great hardship would be involved bank personnel concerned, he could accept a narrow interpretation -ould say that authority to lend money in any amount however small CO4 "ituted participation in operating management and that the provisions or - regulation were applicable to all personnel vested with such kltil°rttY. -t O,) 1°/20/61 -19- Governor Mitchell expressed himself as favoring the proposed reply, blAt he indicated that he would not object to restudying the April 1960 ruling in the Girard case, and to deferring a reply to Crocker until that heti been done. Governor Balderston stated that, since a majority of the Board flabers present favored a restudy of the question of what constituted oPerating management" and "executive officers" for the purposes of NWaation 0, the staff would be requested to make such a study, after Ilhich further consideration would be given to the inquiry from Crocker° National Bank. Messrs. Hexter, O'Connell, and Young then withdrew from the • aoonsorship of savings bond drive luncheons. Mr. Sherman reported telelohone call from President Ellis of the Federal Reserve Bank of Boston e€6**' Icling an inquiry received by the Bank from a representative of the d eStates savings bond program as to whether the Bank would pay for a " ln each of the six States of the First District in connection with the °Pening of a savings bond drive on December 7. Mr. Sherman stated that he had received an informal telephone call from the Treasury Departseveral days earlier indicating that the Treasury was asking its regi al directors of the savings bond program to seek private sponsors tor such luncheons with the thought that the Treasury would review the 10/20/61 -20- l'esu14.s of these efforts next week and then, depending upon the results, Come to the Board to inquire whether it might approach the Federal Reserve Banks for assistance in cities where it had not been possible to obtain Private sponsors. Thus, it appeared that the approach to the Boston Bank 1184 been premature. Mr. Sherman also reviewed the discussion by the Board °f a similar request from the Treasury Department in the fall of 1959 as 4 result of which the Board advised the Reserve Bank Presidents on ecember 8, 1959, that it would not object to their paying for such ' t liticheons in 26 cities. Subsequently, the Board's Annual Report for 1960 contained a statement showing expenditures of $29,220 by the Federal Reserve Banks for this purpose. In a discussion that ensued, there was concurrence in a suggestion that the Boston Bank be advised that the Board had not received a request *°14 the Treasury for assistance in the savings bond program this year bl.lt that it anticipated that the question would be raised within the llext few days. In the meantime, it would seem advisable for that Bank to avoid any definite commitment to the local savings bond personnel Pencling receipt of more specific information as to what assistance the 1 Reserve might be requested to give to the Treasury's program, 411118 to the Board's response to such a request. It was understood , Ellis would be advised along the foregoing lines. that* IllaalEy_EsEanlLajiNulation Q (Item No. 3 There had been 48tributed a draft of letter to Citizens Bank & Trust Company, Park 10/20/61 -21- Illinois, referring to its letter of September 29, 1961, addressed to the Federal Reserve Bank of Chicago, requesting advice as to whether the proposed amendment to Regulation Q making certain changes in the definition of savings deposits, which was published at page 8602 in the Pederal Register of September 14, 1961, would affect Citizens' Tnited security Account Plan." Subparagraph (3) of the proposed amendment lirovides, in part, that "no withdrawal shall be permitted by a member bank to be made from a savings deposit received after gffective date7 thr°Ugh payment to the bank itself or through transfer of credit to a derilEtrld or other deposit account of the same depositor if such payment or re4sfer is made pursuant to any advertised plan or any agreement, written or (i) which authorizes such payments or transfers of credit to be 144de as a normal practice in order to cover checks or drafts drawn by the tiellositor upon the bank ... ." The draft reply would state that the Board illaderstood that the United Security Account Plan is an "advertised plan" which a savings account depositor authorizes payments or transfers cltel'edit to be made as a normal practice in order to cover checks or tiret ts drawn by the depositor upon the bank if the depositor does not, ' 4.n seven days, put the bank in funds. The letter would conclude, the.. 'etore, that it appeared to the Board that even an occasional withfrom a savings account would be prohibited by the proposed "Xit if made under a plan or agreement which authorized such 10/20/61 -22- Ilithdrawals as a normal practice and, accordingly, that the plan could not be operated by the bank after the effective date of the proposed a niendinent. It was brought out in a discussion of the draft reply to Citizens & Trust Company that its letter of September 29 expressed the opinion that the proposed amendment would not affect its plan in the sense that the depositor's check under the plan would not be covered out of a savings ceount but rather by extension of credit by the bank to the depositor. Ileterence was made to the fact that the reason for the proposed amendment 1448 to close the loophole in Regulation Q revealed by the bank's plan 1/11e4 first announced. Mention was also made of the fact that although cc)inalents on the proposed amendment had not been received from all Reserve 444) those received so far were favorable. The suggestion was made and concurred in that the letter with 413Propriate changes be addressed to the Federal Reserve Bank of Chicago, had received the inquiry. The letter was then approved unanimously transmission to the Reserve Bank in the form of attached Item No. 3. The meeting then adjourned. Secretary's Notes: Governor Shepardson today approved on behalf of the Board the following items: . Letter to the Federal Reserve Bank of Richmond (attached Item No. 4) °171ng the designation of John M. Brandt as special assistant examiner. , 10/20/61 -23- Memoranda from appropriate individuals concerned recommending the il fo-Jawing actions relating to the Board's staff: Extension of temporary appointment Extension of the appointment of Nancy S. Martino on a half-time basis ,Lie Division of International Finance for a period not later than ' -r cernber 31, 1961. (Mrs. Martino's original appointment, which was ' %proved by the Board on July 7, 1961, expired September 30, 1961.) in -1-9,S.2ktance of resignation Dorothy Szpilawski, Economist, Division of Research and. Statistics, ffectve i at the close of business October 20, 1961. e Governor Shepardson noted on behalf of the Board the retirement of John E. Osborne, Steamfitter-Operating Engineer, Division of Administrative Services, effective at the close of business October 31, 1961. / Secre 17 3583 BOARD OF GOVERNORS Aot#640.70:: Ni. 0 .. 8 OF THE M . FEDERAL RESERVE SYSTE a a 4 a o WASHINGTON 25. D. C. Item No. 1 10/20/61 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD ttSt 4 aa4,8 October 20, 1961. !!card of Directors, united California Bank, 143 Angeles, California. Gentlemen: theIn a letter dated July 28, 1961, the Board of Governors of infoFelderal Reserve System invited your bank to submit further 'Illation or comments, in connection with the proposed merger of the two institutions, as to: (1) the alleged need for strengthening ae'"gement at The Southwest Bank; (2) how this proposed merger would particularly since the e the convenience and needs of the community, ion between the competit (3) offices; two areanow has many banking established recently Bank t Southwes a h 'Jenks, especially since The cumula(4) and Angeles; Los Avenue, ti ranch at 8732 South Western Bank ia Californ United of mergers ti Ira effects of this and other il)(19n other banks and the general competitive situation. The Board be presented either in writing o icated ed that such information could b the Board. oral presentation before By supplement dated August 9, 1961, additional information he t on 1961, art_ above listed 4 points was submitted. On September 26, denied Board the ion, informat e availabl the consideration of all request to merge The Southwest Bank into United California Bank. Board has received your Petition for Reconsideration arid request uquest for oral presentation dated October 5, 1961. No sig::Leant new facts and no arguments not previously submitted and co;:aidered by the Board have been presented. Accordingly, the to ering hae concluded that it would not be warranted in reconsid the application or in arranging for an oral presentation. The A copy of a letter being sent by the Board today to 8°Uthweet Bank is enclosed for your information. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. 1°81tre BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON 25. D. C. Item No. 2 10/20/61 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 20, 1961. Board of Directors, The Southwest Bank, Inglewood 1, California. Ge ntlemen: Your letter of October 5, 1961, requesting that application of United California Bank to merge with Southwest Bank be reconsidered and that an opportunity r oral presentation be afforded your bank was received at about , the same time as a petition from United California B making a similar request. the After careful review of your letter and the P?tition from United California Bank, the Board has con!-Luded that, since no significant new facts and no arguments t Previously submitted and considered by the Board have trn presented, it would not be warranted in reconsidering e application or in arranging for an oral presentation. r A copy of a letter being sent by the Board today t° United California Bank is enclosed for your information. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. 1;itielOgure ! BOARD OF GOVERNORS oteIttItt,*4 OF THE tWoop:, FEDERAL RESERVE SYSTEM Item No. 3 !•- 1? WASHINGTON 25. O. C. 10/20/61 ADDRESS OFFICIAL CORRESPONDENCE 40 TO THE DOARD %; i1.iteat" l We° October 201 1961. 141% Paul C. Hodge, Vice President, Goneral Counsel Pc Secretary, ;,!deral Reserve Bank of Chicago, icago 90, Illinois. tear Mr. Hodge: This refers to the letter dated September 29, 1961, from Mr • Roderick Mac&rthur, requesting advice as to whether the proposed : ar;r ericimont to Regulation Q making certain changes in the definition avings deposits, which was published at page 8602 in the Federal "ttegister of September 14, 1961, would affect the United Security eellra, Plan of Citizens Bank A Trust Company, Park Ridge, Illinois. SubparAgraph "(3)" of the proposed amendment provides, in Part t 3 that "no withdrawal shall be permitted by a member bank to be from a savings deposit received after (effective date] through olrent to the bank itself or through transfer of credit to a demand tr other deposit account of the same depositor if such payment or 110fer is made pursuant to any advertised plan or any agreement, tten or oral, (i) which authorizes such payments or transfers of ereci cil t to be made as a normal practice in order to cover checks or 4rt'S drawn by the depositor upon the bank * * *." 4 The Board understands that the United Security Account Pika auth .LS an "advertised plan" under which a savings account depositor erizes payments or transfers of credit to be made as a normal pra,,, ice in order to cover checks or drafts drawn by the depositor bzi_rl the bank if the depositor does not, within seven days, put the Iii4;Z in funds. It thus appears to the Board that even an occasional ate drawal from a savings account would be prohibited by the proposed /..iirMent if made under a plan or agreement which authorizes such awa1s as a normal practice and, accordingly, that the United S0 effective date ot i:4-tY Account Plan could not be operated after the "0 proposed amendment. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Mr. Paul C. Hodge There is enclosed a copy of this letter which you may * forward to Mr. MacArthur for his information. Very truly yours Merritt Sh Secret Enclosure 35u6 r 6k30 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. WASHINGTON 25. O. C. 10/20/61 4 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 231 1961 Mr. John L. Nosker, Vice Preside Federal Reserve Bank of Richmond, Richmond 13, Virginia. Dear Mr. Nosker: In accordance with the request contained in your letter of October 16, 1961, the Board approves the designation of John M. Brandt as a special assistant examiner for the Federal Reserve Bank of Richmond for the purpose of Participating in examinations of State member banks only. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. I
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