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FR 609 Minutes for October 5, 1966 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. Robertson Gov. Shepardson Gov. Mitchell Gov. Daane Gov. Maisel Gov. Brimmer Minutes of the Board of Governors of the Federal Reserve System on Wednesday, October 5, 1966. The Board met in the Board Room at 10:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Robertson, Vice Chairman Shepardson Mitchell Daane Maisel Brimmer Sherman, Secretary Kenyon, Assistant Secretary Broida, Assistant Secretary Bakke, Assistant Secretary Cardon, Legislative Counsel Fauver, Assistant to the Board Farrell, Director, Division of Bank Operations Mr. Solomon, Director, Division of Examinations Mr. Johnson, Director, Division of Personnel Administration Mr. Hexter, Associate General Counsel Mr. O'Connell, Assistant General Counsel Mr. Smith, Associate Adviser, Division of Research and Statistics Mr. Daniels, Assistant Director, Division of Bank Operations Messrs. Leavitt and Thompson, Assistant Directors, Division of Examinations Mr. Hart, Assistant Director, Division of Personnel Administration Mrs. Semia, Technical Assistant, Office of the Secretary Messrs. Robinson, Shuter, and Smith, Attorneys, Legal Division Mr. Golden, Senior Economist, Division of Research and Statistics Messrs. Egertson and Maguire, Supervisory Review Examiners, Division of Examinations Messrs. Burton, Donovan, Lyon, and Rumbarger, Review Examiners, Division of Examinations Miss Greene and Mr. Kline, Assistant Review Examiners, Division of Examinations Mr. Mr. Mr. Mr. Mr. Mr. Mr. 10/5/66 -2Approved items. The following items were approved unanimously after consideration of background information that had been made available to the Board. Copies are attached under the respective numbers indicated. Item No. Letter to United California Bank, Los Angeles, California, approving the establishment of a branch in the planned community of Mission Viejo, Orange County. 1 Letter to Northern Central Bank and Trust Company, Williamsport, Pennsylvania, approving an investment in bank premises. 2 Telegram to the Federal Reserve Bank of San Francisco approving the Bank's proceeding with improvements in its emergency electrical System. 3 Letter to the Federal Reserve Bank of Atlanta approving adjustments in the employee salary structures applicable to the head office and branches. 4 Report on competitive factors. A report to the Comptroller of the Currency on the competitive factors involved in the proposed merger of The Peoples Bank & Trust Company of Chase City, Chase City, Virginia, into The Fidelity National Bank, Lynchburg, Virginia, was approved unanimously for transmittal to the Comptroller. In the form approved, the conclusion of the report read as follows: There appears to be little, if any, competition existing between The Peoples Bank & Trust Company of Chase City and The Fidelity National Bank, Lynchburg; however, there is potential for competition between them in the event a pending merger of Citizens Bank and Trust Company of Clarksville with The Fidelity National Bank is consummated. 10/5/66 -3- In addition to this proposed merger and the pending merger with the bank in Clarksville, The Fidelity National Bank during 1966 has acquired two banks with aggregate deposits of about $15 million, both located within 30 miles of Chase City. The overall effect of the proposed transaction on competition appears slightly adverse. Application of General Bancshares Corporation. There had been distributed a memorandum dated September 15, 1966, from the Division of Examinations, with other pertinent papers, regarding the application of General Bancshares Corporation, St. Louis, Missouri, to acquire 80 per cent or more of the outstanding voting shares of First National Bank in St. Louis, St. Louis, Missouri. (Under the plan General Bancshares would recapitalize and change its name to First Union Bancorporation. It was understood that, subject to approval of the present proposal, applicant would seek to acquire, under section 4(c)(8) of the Bank Holding Company Act, the St. Louis Union Trust Company, the owner of 28.5 per cent of the outstanding voting shares of First National Bank.) The Examinations Division and the Banking Markets Section of the Division of Research and Statistics recommended denial; the Legal Division believed denial could be more easily supported. As to the Fed- eral Reserve Bank of St. Louis, its Bank Examination Department favored approval and its Counsel recommended denial. rency recommended approval. The Comptroller of the Cur- The Department of Justice, in a statement filed with the Board regarding the application, made no recommendations 10/5/66 but indicated that it did not believe the alleged advantages to the community would be sufficient to outweigh the substantial adverse competitive effects. After summary comments by Mr. Lyon, Messrs. Solomon and O'Connell raised a procedural question in regard to the statement by the Department of Justice, which had not been furnished to the applicant. Certain other holding company cases in which the Department had furnished a statement had been the subject of hearings, with the statement made a part of the record and the applicant afforded an opportunity for rebuttal. It was suggested that, if the Board should decide to deny the present application, a copy of the Department's statement be furnished to the applicant, With a specific time allowed for responding comments, in order to forestall any claim that the Board's decision had been based in part on a statement to which the applicant had not been allowed to reply. The Board's decision on the application could be made today, the staff suggested, contingent upon the applicant's supplying no significant additional information. In the ensuing discussion Governor Maisel suggested that the applicant be furnished a copy of the Department's statement and the members of the Board be furnished copies of any response made by the applicant, with the understanding that any member of the Board could request that the case again be considered de novo if he believed the information submitted so warranted. There was general agreement with Governor Maisel's suggestion. (Note: A copy of the statement by the Department of Justice was sent 10/5/66 -5- later in the day to the Federal Reserve Bank of St. Louis to be furnished to the applicant with a request that any comments be submitted by October 14, 1966.) Question was raised also as to whether as a matter of regular Practice statements by the Department of Justice in regard to bank holding company applications should be furnished to applicants. However, it was agreed, at the suggestion of Mr. O'Connell, that consideration would be given to that question at another time after further staff study. In response to the Chairman's request for the views of the members of the Board on the instant application, Governor Shepardson stated that, while he could see the advantage of the proposal to the banks now in the General Bancshares system, the number of banks in St. Louis proper already had been significantly reduced. There were marked similarities, he noted, between the present proposal and the merger between Mercantile Trust Company, N.A., and Security Trust Company, both of St. Louis, which the Board in its competitive factor report had cited as "significantly adverse" to competition, and against which an antitrust suit was now Pending. Although there might be some problem in regard to the competi- tive position of the large banks in St. Louis, he thought the market analysis of the staff was persuasive. The other members of the Board also having expressed themselves as favoring disapproval, the application was denied by unanimous vote, this action being subject to the understanding mentioned earlier. It was 10/5/66 -6- understood that an order and statement reflecting the decision would be prepared for the Board's consideration. Messrs. Smith (Research), Thompson, Smith (Legal), Golden, Burton, Donovan, Egertson, Kline, Lyon, Maguire, and Rumbarger, and Miss Greene then withdrew from the meeting. Currency and coin services (Items 5 and 6). There had been dis- tributed a memorandum dated October 3, 1966, from the Legal Division regarding a proposed revision of Treasury Circular No. 55, relating to distribution of coin and currency. The House Committee on Government Operations had recommended earlier this year that the Treasury clarify the responsibility of the Federal Reserve System to distribute coin directly, on uniform bases, to both member and nonmember banks. Pursuant to that recommendation the Treasury Department requested the Board's views (111 a proposed revision of Circular No. 55. The Conference of Presidents of the Federal Reserve Banks, to which the Treasury's revision was referred, approved a version incorporating certain suggested changes therein and asked that this revision be recommended to the Treasury. Attached to the memorandum was a draft of reply to the Treasury Department that would transmit the Presidents' Conference revision, with comments on the reasons for the changes suggested by the Presidents. Although the Division of Bank Operations was satisfied with the proposed reply, the Legal Division thought it appropriate to bring two Points to the Board's attention. In essence, both points related to the 10/5/66 -7- desirability of a clear understanding that the scope of Treasury regulations governing distribution of currency and coin did not extend to shipments or deliveries, the terms and conditions of which were considered to be within the jurisdiction of the Federal Reserve. Therefore, the term "distribution" should be understood to contemplate only "allocation" or "division," and the language of the circular should not carry an implication of acknowledgment by the Federal Reserve of the right of the Treasury to delegate to the Reserve Banks authority which the Federal Reserve considered it already had. The memorandum suggested two para- graphs that might be added to the draft letter to the Treasury Department. There had also been distributed a draft of letter to the Federal Reserve Bank Presidents that would state that the Board concurred in the approval by the Conference of Presidents of certain recommendations with respect to currency and coin services, with the suggestion, however, the Banks might want to defer revising their operating circulars until Circular No. 55 had been issued in revised form. Discussion at today's meeting centered around the question whether the Federal Reserve's understanding of its authority should be specified in the letter to the Treasury or whether the point could safely be left unstated. There having developed a consensus in favor of including in the letter the two paragraphs suggested by the Legal Division, the letter was ,9_2EL'atd unanimously in the form attached as Item No. 5. Unanimous 112kIlayli was also given to the letter to the Federal Reserve Bank Presidents, a copy of which is attached as Item No. 6. 4 10/5/66 -8Request by Department of Justice (Items 7 and 8). There had been distributed a memorandum dated October 3, 1966, from the Legal Division regarding a request by the Department of Justice for permission to examine the memorandum, and relevant supporting papers, from the Federal Reserve Bank of Philadelphia to the Board with respect to the competitive factors involved in the proposed merger of Provident National Bank and Central-Penn National Bank of Philadelphia. (The merger was approved by the Comptroller of the Currency in March 1966.) The Depart- ment also requested an opportunity to interview an employee of the Reserve Bank (Mrs. Deutermann) who was understood to have worked on the preparation of the memorandum. The information was wanted for use by the Department in preparation for trial in its suit under the antitrust laws to prevent consummation of the merger. The Reserve Bank's memorandum had been favorable to the proposed merger, so far as the competitive aspects were concerned, whereas the Board's competitive factor report to the Comptroller of the Currency was adverse. It appeared that the Department's request had arisen because a former employee of the Reserve Bank who had also participated in the Preparation of the Bank's memorandum to the Board was expected to testify for the banks in the antitrust litigation. If its requests were granted, the Department of Justice felt that it would be in a better position to cross examine the former employee, but the Department did not rule out the use of the information it now sought as evidence or the calling of -;•• ) 10/5/66 1., -9- Mrs. Deutermann as a witness on behalf of the Government. The Legal Division's memorandum set forth reasoning in support of a recommendation that the requests of the Department of Justice be granted. Draft letters to the Department and to the Philadelphia Reserve Bank in terms of that recommendation were attached. After Mr. Shuter had commented in explanation of the favorable recommendation, Mr. O'Connell indicated that study given to the matter after the memorandum was distributed led him to recommend that the Board's response to the Department of Justice be in more limited terms than the memorandum contemplated. It was Mr. O'Connell's suggestion, for reasons that he outlined, that the Board allow the Department to interview Mrs. Deutermann in the presence of responsible officials of the Reserve Bank, but that the Department not be allowed access to the Reserve Bank memorandum or related working papers. The ensuing discussion dealt with various aspects of the reasoning in support of the diverse staff recommendations. While the principle of cooperation with another Government agency was recognized as pointing toward compliance with the requests of the Department of Justice, it was noted that a precedent would be set for disclosure, and possible use in evidence, of unpublished working papers on matters that might become involved in litigation. There would also be an implication that the Board's statement on the subject, as reflected in its competitive factor report, did not stand on its own feet. - 10/5/66 -10Question was asked whether there were grounds for protesting testimony by the former Reserve Bank employee who would be testifying on behalf of the defendants. Response was made that such a protest would not seem in order; however, it was suggested that the Reserve Bank's counsel attend the trial and protest the introduction into evidence of any unpublished Reserve Bank materials if an attempt to do so should be made. In the absence of such an attempt, it would appear that the Department of Justice could obtain through interviewing Mrs. Deutermann, but without access to working papers, information comparable to information the defendants in the litigation might be able to obtain from the former Bank employee. At the conclusion of the discussion there was unanimous agreement that the response to the Department of Justice should be limited in the manner Mr. O'Connell had suggested. Pursuant to this agreement letters were sent to the Department of Justice and to the Philadelphia Reserve Bank in the form attached as Items 7 and 8. Messrs. Holland, Adviser to the Board, Koch, Deputy Director, Division of Research and Statistics, and Hersey, Adviser, Division of In ternational Finance, joined the meeting at this point and Messrs. Robinson and Shuter withdrew. Terms of Chairman and Vice Chairman (Item No. 9). There had been distributed a memorandum dated October 4, 1966, from Mr. Cardon regarding the possibility of consideration by the Congress of some 10/5/66 -11- version of a bill making the terms of the Chairman and Vice Chairman of the Board coincide with that of the President. Chairman Multer of the Subcommittee of the House Banking and Currency Committee that would study various proposals for rearranging the terms had requested a report from the Board. The memorandum described the provisions of several proposals in this area, including one made by President Kennedy in 1962 that would have retained 14-year terms for all seven Board members but would have extended the expiration date of the terms of incumbents by one year, so that they would expire on January 31 of odd-numbered years rather than e ven- numbered years as at present. Since a newly-elected President takes Office in an odd-numbered year, this arrangement would permit him to designate a new appointee as Chairman rather than one of the incumbent members. Attached to the memorandum was a draft of letter to Chairman Multer that would recommend an alternative similar to the Kennedy proposal, except that it would extend all members' terms to June 30 of odd- numbered years (rather than January 31) so as to provide some lag between the inauguration of a new President and his appointment of a Chairman and Vice Chairman; designations as Chairman and Vice Chairman would be for terms of four years expiring on June 30 of the year in Which the term of office of the President expired. Discussion centered principally on the relative merits of a January 31 termination date for terms of Board members, and for . r 10/5/66 -12- designati0n5 as Chairman and Vice Chairman, or of substituting a June 30 termination date. A reason cited in favor of the June 30 date was that the incoming President would have a longer period in which to make his choices for Chairman and Vice Chairman of the Board, which might be useful in relieving, to that extent, the pressures attendant on the need to make Cabinet and other appointments immediately upon a new President's inauguration. An argument cited against the June 30 termination date was that the period from January to June could be one of uncertainty as to whether the incumbent Board Chairman would or would not be redesignated, with possible consequent uneasiness regarding the course of Federal Reserve policies. Chairman Martin commented that either alternative would be satisfactory to him, although he could see some possible advantage in providing a lag to June 30, including perhaps a better prospect for obtaining general suPport for such a provision. At the conclusion of the discussion other members of the Board indicated that they would be willing to concur with the Chairman's judgment. Accordingly, after agreement upon certain editorial changes, the letter to Chairman Multer was approved unanimously in the form attached as Item No. 9. Meeting dates for Open Market Committee. There had been dis- tributed a memorandum from Mr. Broida dated October 4, 1966, suggesting Possible dates for meetings of the Federal Open Market Committee in 1967. g)14. 10/5/66 -13- The schedule called for 14 meetings, spaced at either three or four-week intervals. The memorandum noted that since Veterans' Day, November 11, fell on a Saturday, Federal employees would be given a holiday on Friday, November 10; and it had been the general practice to avoid Committee meetings in weeks in which Monday or the preceding Friday was a holiday. It was suggested that in the circumstances the Federal Advisory Council might be asked if it would be agreeable to shifting its meeting in November from the 21st to the 14th. Discussion developed a consensus in favor of that suggestion. There was general concurrence with the remainder of the proposed schedule, which it was understood would be distributed for comment prior to the next meeting of the Federal Open Market Committee. Governor Maisel referred to earlier informal discussions of the possibility of occasional two-day meetings of the Open Market Committee, and the view was expressed that such meetings might be considered on an ad hoc basis depending on whether the circumstances suggested a need. Comments were made also regarding the possibility of developing procedures that would involve greater use of pre-distributed written material, with consequent reduction of oral reporting at Committee meetings. Foreign travel. Unanimous approval was given to recommendations in a distributed memorandum dated October 3, 1966, from Mr. Young, Senior Adviser to the Board and Director, Division of International Finance, that Messrs. Hersey, Adviser, and Stem, Economist, in the Division of $ m r' 10/5/66 -14- International Finance be authorized to attend a meeting of central bank economists at the Bank for International Settlements in Basle, Switzerland, early in November; that Mr. Hersey also be authorized to visit the central banks in Frankfurt, Paris, and London during the ten days following the meeting; that Mr. Stem be authorized to spend approximately three days in London and two days in Zurich following the meeting; and that Messrs. Hersey and Stem be allowed per diem in lieu of subsistence as provided in the Standardized Government Travel Regulations. Several members of the staff who had been present withdrew at this point, and Messrs. Kelleher, Director, Division of Administrative Services, and Kakalec, Controller, entered. Annex building. The Board had had previous consultations, most recently on September 15, 1966, with representatives of the architectural firm of Harbeson Hough Livingston & Larson regarding the design of a proposed annex building to be constructed on the Board's property north of C Street. Pursuant to suggestions made at the September 15 meeting, Principally with a view to relieving what it was felt might be a somewhat monotonous exterior appearance, the architects had prepared additional Sketches and small models illustrating alternative treatments. Mr. Larson of the architectural firm joined the meeting at this Point and conunented on the rationale underlying the revised treatments that had been considered, after which the meeting continued in the Board's Conference Room where new materials were on display. As a result of the 10/5/66 -15- discussion the architects were requested to prepare further sketches and models reflecting certain refinements that were suggested. The meeting then adjourned. Secretary's Notes: On October 4, 1966, Governor Shepardson approved on behalf of the Board the following items: Letter to the Federal Reserve Bank of San Francisco (copy attached as Item No. 10) approving the appointment of Verlyn R. Johnson as assistant examiner. , Memorandum from Mr. Cardon, Legislative Counsel, reconunending that Carol M. O'Brien, Secretary in the Office of the Secretary, be transferred to the position of Secretary in the Board Members' Offices, with no change in basic annual salary at the rate of $6,461, effective December 1, 1966. Governor Shepardson today approved on behalf of the Board a request from Nathan L. Hunter, Messenger, Division of Administrative Services, for permission to work as a parking attendant on a part-time basis. Secretary 4 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM y /VI it k' Item No. 1 10/5/66 WASHINGTON, D. C. 20551 ADDRESS orrunA,L.FONPICIIIPONDCPICC TO THE 1110AND October 5, 1966, Board of Directors, United California Bank, Los Angeles, California. Gentlemen: The Board of Governors of the Federal Reserve System approves the establishment by United California Bank, Los Angeles, California, of a branch in the vicinity of La Paz Road near the Santa Ana Freeway in the planned community of Mission Viejo, Orange County, California, provided the branch is established within one year from the date of this letter. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. (The letter to the Reserve Bank stated that the Board also had approved a six-month extension of the period allowed to establish the branch; and that if an extension should be requested, the procedure prescribed in the Board's letter of November 9, 1962 (S..1846), should be followed.) 374 ) BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 2 10/5/66 WASHINGTON, O. C. 20551 ADDRESS OFFICIAL. CORRIECIFONOCNCC TO THC SWARD October 5, 1966 Board of Directors, Northern Central Bank and Trust Company, Williamsport, Pennsylvania. Gentlemen: Pursuant to the provisions of Section 24A of the Federal Reserve Act, the Board of Governors of the Federal Reserve System approves an investment of $35,000 in bank premises by Northern Central Bank and Trust Company, Williamsport, Pennsylvania, for the purchase of property adjoining the bank's Newberry office. Very truly yours, (Signed) Karl E. Bakke Karl E. Bakke, Assistant Secretary. 3till TELEGRAM Item No. 3 10/5/66 LEASED WIRE SERVICE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON October 5, 1966 Swan - San Francisco Reurlet September 1, Board approves your Bank's proceeding with emergency electrical project for San Francisco Bank building as described in your letter, and authorizes expenditures of about $272,200 for the project, including a 10 per cent allowance for contingencies as recommended by Hr. Witherell, the Board's Consulting Architect. (Signed) Merritt Sherman SHERMAN BOARD OF GOVERNORS Item No. 4 10/5/66 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS orrocIAL CORRESPONDENCE TO THE BOARD October 5, 1966 C°14FIDEN1-----___111_1_1L FR Mr. Monroe Kimbrel, First Vice President, Federal Reserve Bank of Atlanta, Atlanta, Georgia. 30303 Dear Mr. Kimbrel: As requested in your letter of June 15, 1966, the Board of Gov ernors approves the following minimum and maximum salaries for the respective grades of the employees' salary structures at the Federal Reserve sank of Atlanta and branches, retroactive to July 1. Grade 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 AtlantaBirmingham Minimum Maximum JacksonvilleNew Orleans Minimum Maximum Nashville Minimum Maximum 2,800 $ 3,800 4,000 2,900 4,200 3,100 4,500 3,300 4,900 3,700 5,700 4,200 6,300 4,700 7,200 5,400 8,000 6,000 8,900 6,600 9,700 7,200 10,600 7,800 11,800 8,700 13,100 9,600 14,500 10,700 16,100 11,900 2,800 $ 3,800 4,000 2,900 4,200 3,100 4,500 3,300 4,700 3,500 5,300 3,900 6,000 4,400 6,700 4,900 7,200 5,400 8,000 6,000 8,500 6,300 9,300 6,900 10,500 7,700 11,600 8,600 12,900 9,500 14,400 10,600 $ 2,600 $ 3,400 3,500 2,600 3,600 2,700 4,100 3,000 4,600 3,400 5,100 3,800 5,600 4,200 6,200 4,600 6,800 5,000 7,400 5,400 8,000 6,000 8,600 6,400 9,500 7,000 10,400 7,700 11,300 8,400 12,400 9,200 Salaries should be paid to employees within the limits specified for the grades in which their respective positions are classified. All em'°Yees whose salaries are below the minimum of their grades as a result of these structure increases should be brought within appropriate ranges by January 1, 1967. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 5 10/5/66 WASHINGTON,D. C. 20551 OFFICE OF THE CHAIRMAN October 6, 1966. The Honorable Henry H. Fowler, Secretary of the Treasury, Treasury Department, 20220 Washington, D. C. Dear Joe: This is in response to Hr. Wallace's letter of August 11, 1966, requesting the views of the Board on the Treasury Department's proposal to substitute four new sentences for the present last two sentences of Treasury Circular No. 55 (31 CFR f 100.2). The proposed substitute was submitted to the Presidents of the Federal Reserve Banks for suggestions and comments, and a revised version recommended by the Presidents and concurred in by the Board reads as follows: "The Federal Reserve Banks and branches are authorized and directed to make an equitable and impartial distribution of available Supplies of currency and coin in all cases directly to member banks Of the Federal Reserve System and to nonmember commereial banks. Applications therefor should be made to the Federal Reserve Bank or branch of such Bank which serves the territory in which the applicant bank is located. Deliveries to and from member banks and to and from . nonmember 'commercial banks shall be made under such terms and conditions as may be prescribed by the Federal Reserve Banks. Nothing in the authorization set forth above shall be regarded as requiring Federal Reserve Banks and branches to supply currency and coin to other financial institutions or to the general public." At the end of the first sentence of the proposal contained in the Wallace letter the word "alike" was deleted to avoid a possible conflict with the authority of the Reserve Banks (see third sentence) to prescribe the terms aid conditions of currency and coin shipments. The for shipments Presidents of Should accept third sentence of the Treasury's proposal provided only to member banks and nonmember commercial banks. The the Reserve Banks are of the view that Reserve Banks shipments from nonmember commercial banks as well as L RESERVE SYSTEM BOARD OF GOVERNORS OF THE FEDERA The Honorable Henry H. Fowler -2- the third sentence orders for shipments to such banks. Accordingly, incoming as well as of the revised version has been broadened to cover outgoing shipments of currency and coin. to what constitutes To avoid problems of interpretation as ce of the revised a "non-banking financial institution", the last senten " for "nonutions instit vdrsion substitutes the words "other financial banking financial institutions". ar would continue to In the form proposed above, the Circul same paragraph of refer to "distribution" of currency and coin. The cy and the Circular will also refer hereafter to shipments of curren ous errone the coin to and from commercial banks, which might create able applic are n" "distributio impression that the provisions regarding it er consid may Treasury Department to Li.e_liMEt. To avoid this, the , in ation" "alloc such as advisable to use a more clearly limited term, of ement requir the lieu of "distribution", or to state explicitly that or nt II shipme to not relate equitable and impartial distribution" does t. receip or Other aspects of delivery refer, for the As indicated, the Circular hereafter will of currency first time, to the terms and conditions of shipments nce and coin between Reserve Banks and commercial banks. This refere are Banks e Reserv is not, of course, intended to imply that the with respect to subject to the directions of the Treasury Department respect is this in ion situat such terms and conditions. Since the Banks, it is e Reserv l Federa the Clear to the Treasury Department and the Circular. believed unnecessary to clarify the matter in Sincerely yours, (Signed) Wm. McC. Martin, Jr. Wm. McC. Martin, Jr. BOARD OF GOVERNORS Item No. 6 10/5/66 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS orriciAL CORRESIPONDENCE TO THE BOARD October 6, 1966. Dear Sir: The Board of Governors has noted the action taken by the Conference of Presidents at its meeting on September 12, 1966, approving the following recommendations with respect to currency and coin services. 1. Shipments as well as orders should be accepted from nonmember banks. 2. Services to nonmember banks should include currency as well as coin. 3. Shipments of currency and coin should be made to and accepted from branches of nonmember banks to the same extent as they are made to and accepted from branches of member banks. 4. Transportation of currency and coin to and from nonmember banks shall be at their own risk and expense pending further study of this aspect of the question by the Subcommittee. The Board concurs in these recommendations. Recommendations I. and 2 refer to services that are covered in the proposed revision of Treasury Circular No. 55 approved by the Conference of Presidents at the September 12 meeting. The Board has considered the proposed rtevision and, as requested by Chairman Wayne, it has been transmitted o the Treasury. A copy of the Board's letter of transmittal is enclosed. In thecircumstances, your Bank may wish to defer revising its operating cir any new services to be extended to ovrcula to ce .2- nonmember banks until Treasury dircular No. 55 is revised. However, there would be no objection to issuance of a revised operating circular at this time, if in the judgment of the Reserve Bank that seems desirable. Very truly your Merritt Sherman Secretary. Enclosure TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS. BOARD OF GOVERNORS ..... .• G01. • .0 • eih !!./ 4 • if, Item No. 7 10/5/66 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 NDENCE ADDRESS OFFICIAL CORRESPO TO THE BOARD October 7, 1966 The Honorable Donald F. Turner, Assistant Attorney General, Antitrust Division, Department of Justice, 20530 Washington, D. C. Attention Re: Mr. J. W. Neville U. S. v. Provident National Bank and Central-Penn National Bank of Philadelphia Dear Mr. Turner: 1966, This acknowledges your letter of September 21, the with ion respecting the above case, requesting, in connect ntareprese that Department's preparation of its case for trial, th P. Elizabe Mrs. ew tives of the Department be permitted to intervi lphia, Philade of Bank Deutermann, an employee of the Federal Reserve -Penn Central and nt Provide regarding the competitive aspects of the s be merger. You also request that the Department's representative by the d prepare papers, given access to a memorandum, and supporting and ng analyzi rs Governo Philadelphia Reserve Bank for the Board of merger. that in d discussing the competitive factors involve ew of The Board has agreed to the proposed intervi d to decline has but Mts. Deutermann at the Federal Reserve Bank, documents related and dum grant your request for access to the memoran in use Board's the prepared by the staff 'of the Reserve Bank for connection with the proposed merger. The Board's decision reflects the fact that the documents in question constitute unpublished information of the Board and the Board's judgment that the circumfinding stances attending your request do not sufficiently support a Of good cause for the requested disclosure. 1-0.i/4 I .1..4._ The Honorable Donald F. Turner With respect to your proposed interview with Mks. Deutermann, arrangements therefor may be made through Hr. Joseph R. Campbell, Vice President, Federal Reserve Bank of Philadelphia, 925 Chestnut Street, Philadelphia, Pennsylvania. 19101 A copy of this letter will be sent to Mk. Campbell. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. BOARD OF GOVERNORS Item No. 8 10/5/66 OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD October 7, 1966 Mr. Joseph R. Campbell, Vice President, Federal Reserve Bank of Philadelphia, 925 Chestnut Street, 19101 Philadelphia, Pennsylvania. Dear Mr. Campbell: Reference is made to the recent request of the Department of Justice that, in connection with the pending case of U. S. V. Provident National Bank and Central-Penn National Bank of Philadelphia, representatives of the Department be given an opportunity to interview Mrs. Elizabeth P. Deutermann, an employee of your Bank, and be given access to the memorandum, including related staff work papers, submitted by your Bank to the Board of Governors,which contained your Bank's analysis of and recommendation on the competitive aspects of the proposed merger of Provident and Central-Penn. The Board has authorized the Department to interview Mrs. Deutermann with the understanding that any conversations on this subject be conducted on Bank premises and be restricted in such manner as to avoid disclosure by Hrs. Deutermann of unpublished information of the Board as that term is defined in section 261.2(a) of the Board's Rules Regarding Information, Submittals, and Requests. Thus, the Board's authorization does not contemplate that the Department's representatives will have access to, or be given information from, your Bank's aforementioned memorandum to the Board, or to any of the supporting or related work papers prepared in connection with that memorandum. Further, with respect to the proposed interview of Mrs. Deutermann, it is suggested that you or another official of the Bank whom you designate be present during the interview. 75() Mr. Joseph R. Campbell -2- Regarding the forthcoming trial of the Provident and Central-Penn merger case, it would appear that the attendance at trial of Vice President and General Counsel Vergari, or the Bank's Assistant Counsel, would assure that appropriate opposition would be raised should either plaintiff or defendants attempt disclosure, through elicitation of oral or documentary evidence, of unpublished information of the Board. A copy of the Board's letter to the Department of Justice is enclosed for your information. Very truly yours, (Signed) Merritt Sherman Merritt Sherman, Secretary. Enclosure BOARD OP GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 9 10/5/66 WASHINGTON,0. C. 20551 OFFICE or THE CHAIRMAN October 6, 1966 The Honorable Abraham J. Multer, Chairman, Subcommittee on Bank Supervision and Insurance, Committee on Banking and Currency, House of Representatives, Washington, D. C. 20515 Dear Mr. Chairman: report on H.R. 119 and This is in reply to your request for a an and H.R. 10508, bills relating to the terms of office of the Chairm Vice Chairman of the Board of Governors. office of the Chairman and The Board believes that the terms of term of Vice Chairman of the Board should be related to the President's providing that these Office; this was the apparent intent of Congress in es that a new President terms should be four years. The Board also believ , and should not be !hould be able to appoint a Chairman of his own choice Limited in his selection to incumbent Board members. was submitted to the Congress A bill to carry out these purposes by Mr. Spence,. bY President Kennedy on April 17, 1962, and was introduced 11602. The • H.R. as .11en Chairman of the Banking and Currency Committee, out to worked lly Board favors enactment of that bill, which was carefu nuity and "conti 's System accomplish its objectives without disrupting the to sought has ss Congre ndependence from political influence," which the alegisl the ting submit e ensure, as the President pointed out in his messag tion. time would, of course, require Enactment of such a bill at this of time since it was subtechnical amendments in recognition of the lapse be desirable to provide a mitted. The Board also believes that it would a newly-elected r easonable time lag--perhaps six months--between the time the terms of the Chairman and takes office and the expiration of enclosed Vice Chairman. Amendments for this purpose are incorporated in the d ed extend Board members would be raft. That is, the terms of incumbent The Honorable Abraham J. Multer -2- to June 30 of odd-numbered years rather than January 31 of such years, also as provided in H.R. 11602, and the term of Chairman and Vice Chairman would expire on June 30, rather than January 31. Sincerely yours, (Signed) Wm. McC. Martin, Jr. Wm. MCC. Martin, Jr. Enclosure DRAFT A BILL To amend the Federal Reserve Act to adjust the terms of the chairman and vice chairman of the Board of Governors of the Federal Reserve System. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, that the second Paragraph of section 10 of the Federal Reserve Act (12 U.S.C. 242) is amended by striking out the third sentence of such paragraph which now reads: the "Of the persons thus appointed, one shall be designated by President as chairman and one as vice chairman of the Board, to serve as such for a term of four years." and by inserting in lieu thereof the following four sentences: "The term of each member of the Board June 30 of the lawfully in office on January 31, 1968, shall expire on Year following the year in which his term would have expired in a ccordance with his appointment. design One member of the Board shall be of by the President as chairman and one as vice chairman the Board, each to serve as such for a term of four years expiring on June 30 of the year in which the term of office of the President e xpires, and the terms as chairman and vice chairman of the members date. serving as such on June 30, 1969, shall expire on that Upon the e xpiration of the term for which a member of the Board is designated as chairman or vice chairman of the Board, such member shall continue -2to serve as chairman or vice chairman, as the case may be, until his successor as such is designated by the President. Whenever a vacancy shall occur, other than by expiration of term, in the office of shall be chairman or vice chairman, another member of the Board and shall hold such designated by the President to fill such vacancy Office for the unexpired term of his predecessor." BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Item No. 10 10/5/66 WASHINGTON, D. C. 20551 CE ADDRESS OFFICIAL CORRESPONDEN TO THE BOARD October 5, 1966 . Mr. Irwin L. Jennings, Vice President, Federal Reserve Bank of San Francisco, 94120 San Francisco, California. Dear Mr. Jennings: In accordance with the request contained Board in your letter of September 29, 1966, the on as Johns R. approves the appointment of Verlyn ve Reser al Feder an assistant examiner for the . tive today effec Bank of San Francisco, Very truly yours, (Signed) Elizabeth L. Carmichael Elizabeth L. Carmichael, Assistant Secretary.
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