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Minutes for October 23, 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 0n1Y that you have seen the minutes. Chin. Martin Gov. Mills Gov. Robertson Gov. Balderston, I,f Gov. Shepardson Gov. King Gov. Mitchell "1- 1-`C) 0004-1 Minutes of the Board of Governors of the Federal Reserve System on Monday, October 23, 1961. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Balderston, Vice Chairman Mills Robertson Shepardson King Mitchell Mr. Mr. Mr. Mr. Mr. Mr. Mr. Sherman, Secretary Kenyon, Assistant Secretary Thomas, Adviser to the Board Molony, Assistant to the Board Fauver, Assistant to the Board Landry, Assistant to the Secretary Morgan, Editorial Specialist, Board Members' Offices Messrs. Furth, Sammons, Katz, Irvine, Wood, Dahl, Maroni, and Reynolds, and Miss Logue of the Division of International Finance Messrs. Noyes, Garfield, Koch, Brill, Williams, Dembitz, Eckert, Solomon, Manookian, Peret, Smith, Wernick, Wood, and Yager of the Division of Research and Statistics Economic review. Members of the Divisions of International ---41ce and Research and Statistics presented a review of economic and 411exlcia1 developments in the United States and abroad. At the conclusion of this presentation all members of the staff elolt Messrs. Sherman, Kenyon, Fauver, and Landry withdrew and the entered the room: Mr. Hackley, General Counsel Mr. Chase, Assistant General Counsel Mr. Goodman, Assistant Director, Division of Examinations Mr. Benner, Assistant Director, Division of Examinations 0"61...) 10/23/61 -2- Discount rates. The establishment without change by the Federal Reserve Banks of New York, Philadelphia, and San Francisco on October 19, 1961, of the rates on discounts and advances in their existing schedules 1/48 2EPLEan.4 unanimously, with the understanding that appropriate advice vould be sent to those Banks. Items circulated or distributed to the Board. The following items, which had been circulated or distributed to the Board and copies of which ' e attached to these minutes under the respective item numbers indicated, were a roved unanimously: Item No. Letter to The First State Bank of Lamed, Lamed, granting its request for permission to Xercise fiduciary powers. 1 leetter to Morgan Guaranty International Banking loration, New York, New York, granting the consent to the purchase of shares of Fclue Nationale pour le Developpement c°110mique, Rabat, Morocco. 2 O Question under section 32 of the Banking Act of 1933 (Item No. 3). ecil)ies had been distributed of a draft of letter to American Security and IsNst company, Washington, D. C., regarding an inquiry from the bank as to Vhether Mr. Robert L. Garner would be prohibited by section 32 of the ing Act of 1933 from serving at the same time as a director of the ban L. and as an officer and director of The Japan Fund, Inc. The draft -- would express the understanding that The Japan Fund, Inc., would be 4 closed end investment company authorized by its articles of incorpo- I'Mi °11 to issue 5 million shares of common stock, of which the initial 3'90 10/23/61 issuance would be 2 million shares; that the 2 million shares would be sold to underwriters in a single transaction; that the underwriting and distribution of the shares to the public was expected to be completed in a Period not to extend beyond two or three weeks; and that the Fund did hot intend to make a continuous offering of additional shares or frequent issues of additional shares, although it might issue additional shares up to the amount authorized by its charter by means of single transactions silailar to the original issue. The letter would state that on the basis °t this understanding there appeared to be no reason to distinguish this case from that described in the Federal Reserve Bulletin for 1961 at page 156 in which the Board found that section 32 would not be applicable because it appeared that the company would only be issuing its stock a period originally required for corporate organization." The letter would conclude with the comment that in the earlier case the 111°ard had noted that if the company should subsequently issue additional res frequently and in substantial amounts relative to the size of its ' he tal structure, it would be necessary to reconsider the matter. After comments by Messrs. Hackley and Chase, Governor Mills said that he would vote to approve the letter but that he regarded the con.111(1-Ing statement as important, since he believed the situation would be4-1' Watching. The letter to American Security and Trust Company was the, 2_ved unanimously. A copy is attached as Item No. 3. 3531 10/23/61 Continental Bank and, Trust Company. Governor Mills inquired as to the possible bearing of the recent death of President Cosgriff on the status of the litigation involving The Continental Bank and. Trust Company, salt Lake City, Utah. Reply was made to the effect that the appellate Procedure was moving along in the manner originally contemplated. It aPpeared that a decision might be expected from the United States Court °t APpeals by early December 1961; if so, and if the Court of Appeals uPheld the lower court, the show cause hearing in this matter could be commenced in January. The meeting then adjourned. Seer BOARD OF GOVERNORS 0....rt4,4 teik ,, iA OF THE FEDERAL RESERVE SYSTEM Iv* 1:4 * 4,, ., WASHINGTON 25. D. C. Item No. 1 10/23/61 * tt. ADDRESS OFFICIAL CORRESPONDENCE 0 i. TO THE BOARD ' l rP4MA: -4440* October 23, 1961 Board of Directors, The First State Bank of Lamed, Lamed, Kansas. Gentlemen: This refers to your request for permission, under applicable provisions of your condition of membership numbered 1, to act in certain fiduciary capacities. ' Following consideration of the information submitted, the Board of Governors of the Federal Reserve System grants permission to The First State Bank of Larned to act as executor, administrator, guardian of estates, and trustee under the bank's pension and profit sharing trust, with the understanding that your bank Will not accept fiduciary appointments of other kinds Without first obtaining the permission of the Board. Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. 4't BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM A* 44 ." *4 WASHINGTON 25. D. C. Item No. 2 10/23/61 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD .* , : t N4thtt 44444** October 23, 1961. Morgan Guaranty International Banking Corporation, 23 Wall Street, New York 8, New York. G entlemen: In accordance with the request and on the basis of the information furnished in your letter of September 13, 1961, transTitted through the Federal Reserve Bank of New York, the Board of r !overnors grants consent for Morgan Guaranty International Banking rrPoration to purchase and hold 10,000 ordinary shares, par value ) -10? Dirhams each, of Banque Nationale pour le Developpement Economique, ' 44bat, Morocco, at a cost of approximately US$75,000, subject to a lser a share call of 12.5 Dirhams or approximately US$25,000, provided mlil. oh stock is acquired within one year from the date of this letter. ' no Board also grants consent to the payment of the per share call cl 12.5 Dirhams upon call. The Board's consent is granted upon condition that Morgan Gu aranty International Banking Corporation shall dispose of its noid• ,lngs of stock in the Moroccan bank, as promptly as practicable, Ole event that the Moroccan bank should at any time (1) engage t4.issuing, underwriting, selling or distributing securities in the ted States; (2) engage in the general business of buying or sellorg goods, wares, merchandise, or commodities in the United States transact any business in the United States except such as is c,seidental to its international or foreign business; or (3) otherwise 4duct its operations in a manner which, in the judgment of the Board G4 Governors, causes the continued holding of its stock by Morgan th4l'airtY Internatiornl Banking Corporation to be inappropriate under tie Provisions of Section 25(a) of the Federal Reserve Act or regula' 4111$ thereunder. 4 Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary. BOARD OF GOVERNORS 0"Q:14 OF THE 001%04, FEDERAL RESERVE SYSTEM a a WASHINGTON 25. O. C. Item No. 3 10/23/61 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD '4o October 23, 1961. Robert C. Baker, President inican Security and Trust Com:any, -suington 13, D.C. 1)ea.r lir. Baker: lieference is made to the conversation which you and 4. D kir,-obert L. Garner had on October 18, 1961 with Governor trston and Mr. Howard Hackley, and your letter of October 18 Hackley, enclosing a preliminary registration statement, leles of incorporation, etc. of The Japan Rind, Inc. You asked to be advised whether Mr. Garner would be Pael'et3hsibited by section 32 of the Bankint; Act of 1933 (12 U.S.C. Arkv 78) from serving at the same time as a director of the ok4an Security and Trust Company and as an officer and Or of The Japan Fund, Inc. It is understood that The Japan Fund, Inc. will be a qosed loco„ end investment company, authorized by its articles of lillei-lvoration to issue 5 million shares of common stock, of 2 41i11 2 million shares will be issued initially; that the 4NT-Lion shares will be sold to underwriters in a single transtile °II; that the underwriting and distribution of the shares to to P1b1ic will be completed within a period which is not expected ' 41teroelld beyond two or three weeks; and that the Fund does not Nci ; make a continuous offering of additional shares, or ackiii;nu issues of additional shares, although it may issue bY ' rtie °11a1 shares, up to the amount authorized by its charter, alls of single transactions similar to the original issue. to b On the basis of the above understanding, there appears II° basis for distinguishing this case from that described thet Federal Reserve BulJetin for 1961 at page 156, in which °a1x1 found that section 32 would not be applicable because I3eared that the company would only be issuing organization." its stock 4 Period ordinarily required for corporate V 01* . Robert C. Baker -2- In connection with that case, the Board stated, however, that r the company should subsequently issue additional shares TIllently and in substantial amounts relative to the size company's capital structure, it would be necessary 'or the Board to reconsider the matter. Very truly your (Signed) Merritt Sherman Nerritt Sherman, Secretary. t- tr). ro
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