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1:609 Minutes for To: Members of the Board From: Office of the Secretary October 21, 1964. 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 3600 Minutes of the Board of Governors of the Federal Reserve System On Wednesday, October 21, 1964. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mx. Mr. Mr. Mr. Martin, Chairman Balderston, Vice Chairman Mills Robertson Shepardson Daane Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Discount rates. Reserve Sherman, Secretary Bakke, Assistant Secretary Hackley, General Counsel Farrell, Director, Division of Bank Operations Shay, Assistant General Counsel Daniels, Assistant Director, Division of Bank Operations Leavitt, Assistant Director, Division of Examinations McClintock, Supervisory Review Examiner, Division of Examinations Egertson, Supervisory Review Examiner, Division of Examinations The establishment without change by the Federal Bank of Minneapolis on October 17, 1964, of the rates on discounts 44d advances in its existing schedule was approved unanimously, with the nderstanding that appropriate advice would be sent to that Bank. Circulated or distributed items. The following items, copies of /4111-oh are attached to these minutes under the respective item numbers 4 41-41cated, were approved unanimously: Item No. tter to Lincoln National Bank of Chelsea, Chelsea, t_ssaohusetts, granting its request for permission v continue to maintain reduced reserves. 1 • 10/21/64 -2Item No. Letter to Morgan Guaranty Trust Company of New York, New York, New York, granting permission to establish a branch in Frankfurt, West Germany. 2 Revocation of permission to maintain reduced reserves (Item No. 3). There had been circulated a memorandum from the Division of Bank Operations dated October 8, 1964, submitting for Board consideration a draft of letter to The National Bank of Commerce of Dallas, Dallas, Texas, revoking the Permission previously granted that institution to maintain reduced reserves against deposits. This action had been recommended by the Federal Reserve /lank of Dallas, which reported that officials of the bank in question were agreeable to the proposed revocation. Concern was expressed by certain members of the Board that eequiescence on the part of the bank to the revocation might have been asioned by an overly zealous presentation of the case for such action by the Dallas Reserve Bank. However, further discussion developed the sentiment that the grounds for revocation seemed clear, since the bank in question was in active competition with the large city banks in downto4r1 Dallas and its interbank deposits had doubled since the permission to carry reduced reserves had been granted. In this connection, Governor Observed that he perceived some virtue in requiring banks to vnalntain a degree of liquidity consistent with the nature of the banking activity in which they were engaged. It was the consensus that the facts indicated the propriety of t44ng the action proposed by the Dallas Reserve Bank, and that nothing 1o/21/64 -3- 1n the record before the Board suggested the member bank's acquiescence therein was the result of anything but recognition of the merits of the Proposal. Accordingly, revocation of the permission previously granted to The National Bank of Commerce of Dallas to carry reduced reserves Eigainst deposits was approved unanimously. A copy of the letter advising the bank of this action is attached to these minutes as Item No. 3. Mr. Daniels then withdrew from the meeting and Messrs. Molony, Assistant to the Board, and O'Connell, Assistant General Counsel, entered the roan. Report on competitive factors (Hyattsville-La Plata, Maryland). Mere had been distributed a draft of report to the Federal Deposit Irisuranee Corporation on the competitive factors involved in the proposed 111"ger of The Southern Maryland National Bank of La Plata, La Plata, Ma ryland, into Suburban Trust Company, Hyattsville, Maryland. The report was approved unanimously for transmittal to the C°r 'oration. The conclusion read as follows: There is virtually no competition between Suburban Trust Company, Hyattsville, and The Southern Maryland National Bank of La Plata. While the proposed merger would not have serious adverse effects on other banks, it would extend Suburban Trust's operations into another county and constitute a further step in Maryland toward the grouping of commercial banks into large aggregations and a consequent decline of locally headquartered banking outlets. Exchange of information regarding change in control of bank -1115.1112nt (Item No. 4). There had been distributed a memorandum from 10/21/64 the Division of Examinations dated October 15, 1964, to which was attached a draft of letter to the Comptroller of the Currency regarding procedures to be followed in exchanging information on changes in control of bank management reported pursuant to the requirements of the recently-enacted Public Law 88-593. Discussion of the subject between staff personnel of the Board and the Federal Deposit Insurance Corporation had resulted in a decision to recommend to their respective agencies that such information be exchanged at the district level and reported to the Washington offices by the Reserve Bank Vice President in charge of Examinations and the e°rPoration's Supervising Examiner for the district involved. Representa- tilres of the Office of the Comptroller of the Currency had declined to Participate in the staff discussions of the subject, but the Comptroller lias notified by the Board of the decision resulting therefrom by letter dated. September 25, 1964. In a reply dated October 1, 1964, the Chief Counsel of the Office °T the Comptroller of the Currency had stated that: Pursuant to the provisions of the bill J. L. 88-5937, we shall be glad to make available to the Corporation and to the Federal Reserve Board in Washington copies of the reports as they are received. Rather than adapt the procedure suggested in your letter, we would prefer to leave it up to the Washington offices to make whatever further distribution within their respective agencies as they see fit. The above-quoted passage left unclear the question whether it was clesined that the Board provide information directly to the Office of the 10/21/64 Comptroller of the Currency or whether the information should continue to be furnished to his Regional Comptrollers, and the draft letter before the Board sought clarification of his wishes in this regard. Although there was some difference of opinion expressed as to whether it would be preferable to transmit all reports directly to the °trice of the Comptroller of the Currency or to submit all such inforMation only to the Regional Comptrollers for such further distribution as they saw fit, it was the consensus that the Comptroller's preference should govern and that the draft letter was appropriate to elicit this information. Accordingly, transmittal of the letter to the Comptroller 114s akET.124 unanimously; a copy is attached to these minutes as Item No. 4. Messrs. Shay, Egertson, and McClintock then withdrew from the teeting. Further developments regarding Navajo Bancorporation, Inc. Sup- Plementing the remarks he had made at the Board meeting of October 19, 1964) regarding the desire of Navajo Bancorporation, Inc., Phoenix, Arizona, .4° acquire, through foreclosure on collateral for a loan, the stock of VetlleY State Bank, Lamar, Colorado, Mr. O'Connell reported that the " qUisition had been consummated, notwithstanding his advice to counsel t°r Navajo Bancorporation the previous weekend that such action would be illegal- NELvaio In this connection, he noted that apart from the failure of Bancorporation to secure the Board's prior approval, as required by seeticm 3(a) of the Bank Holding Company Act, the acquisition was across 4 1. 10/21/64 -6- State lines, contrary to the restriction imposed by section 3(d) of the Act. According to a member of the Federal Deposit Insurance Corporation staff who had informed Mr. O'Connell of the acquisition, the show-cause hearing held by the Colorado State Banking Board on October 19, referred to in Mr. O'Connell's remarks to the Board of Governors on that date, had resulted in a finding that Navajo Bancorporation's acquisition of control or the bank had rendered its prospects sufficiently favorable to remove the necessity for placing the bank in receivership. Incident to the acquisition in question, Navajo Bancorporation had given the State Banking Board assurances that $175 thousand in new capital would be put into the bank) $125 thousand immediately and $50 thousand within the near future; that new management would be provided for the bank by Navajo Bancorporation; and that at some unspecified future date an effort would be made to return WAership of the bank to local investors in Lamar, and in the event investors tot residents of Lamar should participate in the divestment sale, prior 41)Proval of the State Banking Board would be secured. In discussion, it was the view of the Board that since Navajo Bancorporation's acquisition of Valley State Bank constituted a violation °I* sections 3(a) and 3(d) of the Bank Holding Company Act, notwithstanding the Purpose involved, the Board had an obligation to call the matter to the attention of the Department of Justice. It was understood that Mr. Os c cnnell would secure from counsel for Navajo Bancorporation all available 10/21/64 -7- facts bearing on the transaction in question for submission to that tePartment. Foreign travel by Mr. Sigel (Item No. 5). Pursuant to the recommendation in a memorandum from Mr. Young (Adviser to the Board and Director, Division of International Finance) dated October 20, 1964, Mr. Sigel, Assistant to the Director, Division of Research and Statistics, we's authorized to travel to Paris, France, and to London, England, during the period November 6-15, 1964, to attend a meeting of Working Party 2 Cds the Organization for Economic Cooperation and Development and to confer with staff members of the Bank of England, respectively. Stood It was under- that Mr. Sigel would receive per diem in accordance with the Standardized Government Travel Regulations. A copy of Mr. Young's memo- is attached to these minutes as Item No. 5. The meeting then adjourned. Secretary's Notes: Governor Shepardson approved on behalf of the Board on October 20, 19611., the following items: c Letter to the Bureau of the Budget (attached Item No. znain schedules for calendar years 1963, 1964, and 1965, kIng a presentation on a memorandum basis of data on the 0 , D;v!rations of the Board of Governors in a separate section eral budget document. 6) forwarding for use in financial of the 1966 Letter to the Federal Reserve Bank of Kansas City (attached Item No. 7) Proving the appointment of Edwin Andrew Knipp as assistant examiner. of Personnel Administration recommending the aMemorandum from the Division Schoen as Stenographer in the Division, PPointment of Patricia Ann enf wtth basic annual salary at the rate of $4,630, effective the date of -ranee upon duty. I ri '0 0, 4 $ 10/21/64 -8Governor Shepardson today approved on behalf of the Board the recommendations contained in a memorandum from the Division of Research and Statistics (1) that Mary C. Wing, Technical Editor (Economics) in that Division, be granted an extension of leave without pay for the period October 1 through October 21, 1964; and (2) that Miss Wing be placed on a halftime pay basis (i.e., $5,303) for the period October 22 through December 31, 1964, in order that she might work at home on Board business, it being understood that no precedent was being set. Item No. 1 10/21/64 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 21 1964. Board of Directors, The Lincoln National Bank of Chelsea, Chelsea, Massachusetts. G entlemen: With reference to your request submitted through the Pederal Reserve Bank of Boston, the Board of Governors, acting under the provisions of Section 19 of the Federal Reserve Act, grants permission to The Lincoln National Bank of Chelsea to con'Inite to maintain the same reserves against deposits as are required be maintained by nonreserve city banks, effective as of the date lt opens a branch in Boston. Your attention is called to the fact that such permission . issubject to revocation by the Board of Governors. Very truly yours, igned) Merritt Sherman Merritt Sherman, Secretary. 36. Item No. 2 10/21/64 BOARD OF GOVERNORS OF THE rEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 21, 1964. Mbr gall Guaranty Trust Company of New York, ;3 Wall Street, ew York 15, New York. Gentleme n: The Board of Governors of the Federal Reserve System g arits its permission to Morgan Guaranty Trust Company of New York, usnt to the provisions of Sections 9 and 25 of the Federal see Act, to establish a branch in Frankfurt am Main, Federal _lic of Germany, to be located at Bockenheimer Landstrasse 8, ) 0! to ll'qurt am Main, and to operate and maintain such branch subject ' the provisions of such Sections. fP Unless the branch is actually established and opened for bust 841,riless on or before November 1, 1965, all rights granted hereby 8rei 1. be deemed to have been abandoned and the authority hereby nted will automatically terminate on that date. Please inform the Board of Governors, through the Federal ve Bank of New York, when the branch is opened for business. 'eatnoard should also be promptly informed of any future change in i°n of the branch in Frankfurt am Main. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. (The letter to the Reserve Bank stated that the Board also had !PProved a six-month extension of the period allowed to establish branch; and that if an extension should be requested, the rooedure prescribed in the Board's letter of November 9, 1962 `8 1811-6), should be followed.) ' Zi( Item No. 3 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 10/2464 WASHINGTON, O. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 21, 1964. Board of Directors, The National Bank of Commerce of Dallas, Dallas, Texas. Gentlemen: This refers to the Board's letter dated February 19, 1964, granting permission to The National Bank of Commerce of Dallas to maintain the same reserves against deposits as are required to be maintained by nonreserve city banks. At that time your attention was directed to the fact that the permission was subject to revocation by the Board of Governors. In view of the increase in interbank deposits of The National Bank of Commerce of Dallas, its deposit structure, its increased activity in the Federal funds market and borrowings from the Federal Reserve Bank, its large volume of debits against deposit accounts and high rate of deposit turnover, and its competetive position with other downtown banks in the city, the Board feels it is no longer justified in permitting your bank to continue to maintain the reserves of a nonreserve city bank. In the circumstances, and pursuant to the provisions of Section'19 of the Federal Reserve Act, the Board revokes the Permission heretofore granted The National Bank of Commerce of Dallas to maintain the same reserves against deposits as are required to be maintained by nonreserve city banks, effective with the reserve computation period beginning January 7, 1965. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. ) Item No. 4- BOARD OF GOVERNORS 10/21/64 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 211 1964. Ills Honorable James J. Saxon, ellImPtroller of the Currency, Washington, D. C. Dear Mr, Saxon: In Mr. Bloom's letter of October 1, 1964, he stated that Your office would prefer a different procedure for exchanging informa:'°n about changes in control of management from that suggested in the :OardI8 letter of September 25, 1964. The Board will appreciate mbt aining copies of your reports which it notes you will be glad to ake available as they are received. The Board, however, is not certain if you wish to receive ePor tssubmitted to it, and, if you do, what procedure you would prefer le adopted in submitting reports to you. If you do wish to receive ;7ports submitted to the Federal Reserve System, is it your desire that ,"orts be submitted directly to the appropriate Regional Comptroller vK the Currency or to your Washington Office? f Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. 4 .).. 5 No. Item BOARD OF GOVERNORS 10/21/64 Of THE FEDERAL RESERVE SYSTEM 1,9f ee Correspondence ---„poard of Governors Pro/Ls__ Ralph A. Young Dee Subject: October 20, 1964 Travel by Mr. Sig.el to Paris and London. It is recommended that Mk. Stanley J. Sigel, Assistant to the Director, Division of Research and Statistics, be authorized to travel to Paris, France, to attend the November 8-10 meeting of Working Party No. 2 of the Organization for Economic Cooperation and Development. Mk. Sigel has extensive familiarity with the work of Working Party 2 both as a member of the staff of the OECD and as a member of the U. S. Delegation to recent meetings of the Working Party. It is also recommended that Mk. Sigel be authorized to Visit the offices of the Bank of England in London for conversatiaos with his counterparts on the staff of the Bank, November 12-14. Mk. Sigel l s total travel time would cover November 6-15. It is further recommended that his transportation expenses be paid by the Board and that he receive per diem in lieu of subsistence in accordance with Standardized Government Travel Regulations. 4 t)44)24._ BOARD OF GOVERNORS Item No. OF THE. 10/21/64 6 FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 21, 1964. The H onorable Kermit Gordon uirector 8 ,74reau of the Bvidget 1"ashington, D. C. 20503 i)e4r Mr. Gordon: 1964We are forwarding herewith the following schedules for 1963, . of d and 1965, for use in making a presentation on a memorandum basis se ata on the financial operations of the Board of Governors in a Parate section of the 1966 Federal budget document. 1. Salaries and Expenses by object classification 2, Program and Financing 3, Personnel Summary 4, Revenue, Expense and Retained Earnings' 5, Balance Sheet (also includes 1962) basic There is also enclosed a brief summary statement of the fin, under which the Board operates, its program, and its legislation calcing. It should be noted that 1964 and 1965 data have been taken from 1)4(6 Preliminary budgets submitted by our operating divisions. These tesVs will be reviewed by the Board and should any significant changes 't from this review, revised tables will be submitted, of Members of the Board's staff have worked with representatives the bureau that in developing the above statements, and it is understood heY contain the type of data desired. Very truly yours, LAV• Merritt Sherman Secretary 1 sures 3614 BOARD OF GOVERNORS Item No. OF THE 10/21/64 7 FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 20, 1964. Mr. George D. Royer, Jr., Vice President, Federal Reserve Bank of Kansas City, Kansas City, Missouri. 64106 Dear Mr. Royer: In accordance with the request contained in your letter of October 14, 1964, the Board approves the appointment of Edwin Andrew Knipp as an assistant examiner for the Federal Reserve Bank of Kansas City. Please advise the salary rate and effective date of the appointment. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary.
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