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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