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Minutes for
To:
Members of the Board
From:
Office of the Secretary
September 13, 1962
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.
Chin. Martin
Gov. Mills
Gov. Robertson
Gov. Balderston
Gov. Shepardson
Gov. King
Gov. Mitchell
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Federal Reserve Bank of St. Louis
Minutes of the Board of Governors of the Federal Reserve
System on Thursday, September 13, 1962.
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
Sherman, Secretary
Kenyon, Assistant Secretary
Cardon, Legislative Counsel
Fauver, Assistant to the Board
Solomon, Director, Division of
Examinations
Mr. Harris, Coordinator of Defense
Planning
Mr, Hexter, Assistant General Counsel
Mr. O'Connell, Assistant General Counsel
Mr. Conkling, Assistant Director, Division
of Bank Operations
Mr. Daniels, Assistant Director, Division
of Bank Operations
Mr. Smith, Assistant Director, Division
of Examinations
Mr. Leavitt, Assistant Director, Division
of Examinations
Mr. Thompson, Assistant Director, Division
of Examinations
Mrs. Semia, Technical Assistant, Office
of the Secretary
Mr* Bakke, Senior Attorney, Legal Division
Mr.
Mr.
Mr.
Mr.
Mr.
Circulated or distributed items. The following items, which had
been
" circulated or distributed to the Board and copies of which are
(Itte.ched to these minutes under the respective item numbers indicated,
Proved unanimously:
Item No.
Lettezv. 4L
Neil 7,- Lc) Hunterdon County Trust Company, Califon,
Jersey, approving an investment in bank premises
:
cldent to the establishment of a branch in Oldwick.
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-2Item No.
Letter to The First Pennsylvania Banking and Trust
C°mPanY, Philadelphia, Pennsylvania, approving an
extension
of time to establish a branch at Grant
Avenue and Roosevelt Boulevard.
2
Letter to Peoples Bank of Sarasota, Sarasota,
F
.lorida, approving its application for membership
in the Federal Reserve System.
3
Letter to the Federal Reserve Bank of Chicago waiving
sessment of penalties incurred by First National
4ank of Lansing, Lansing, Illinois, because of
%4eficiencies in its required reserves.
4
letter to The Monon Bank, Monon, Indiana, approving
t8 application for membership in the Federal Reserve
,
°Yatem.
5
Letter to The National Bank of Commerce of Columbus,
e?luMbus, Mississippi, approving its application for
flduciary powers.
6
Letter to First State Bank, Odessa, Texas, approving
an investment in bank premises.
7
!!etter to The Merchants and Farmers State Bank of
weatherford Weatherford, Texas, approving an investnient in bank premises.
8
Letter to Wells Fargo Bank, San Francisco, California,
oPPr°ving the establishment of a branch in Monterey
-°11nty.
9
Let+
n,
,,er
to the Federal Reserve Bank of New York
i'llk,horizing it to act as fiscal agent with respect
r0
0 the proposed issue of the International Bank
„r Reconstruction and Development's Two Year Bonds
10
Tel
tegl:am to Sidney Friedman, Esq., Cole, Friedman
fitct.eilt2) New York, New York, reaffirming a previous
at--.Tn by the Board denying his request to appear
he oral presentation to be held September 17,
196
on the Marine Midland-Security National Bank
"
)2)
7
ra
atter.
11
r
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-3Item No.
Letter to the Joint Committee on Defense Production transmitting an annual report relative
tO mobilization activities.
12
The telegram to Mr. Friedman (Item No. 11) confirmed oral advice
Of the Board's decision, reached at this meeting, which was conveyed to
Mr. Friedman by the Board's Secretary by telephone following the meeting.
After the Board had reaffirmed its decision to deny Mr. Friedman's
request, Mr. O'Connell reported that he had received a telephone call
Ir°111 Mr. Charles G. Blaine, Counsel for Marine Midland Corporation, requestaccess to all correspondence addressed to the Board relating to Marine
Midland's application to acquire Security National Bank of Long Island,
RUntington, New York.
more
Upon questioning, Mr. Blaine had defined his request
narrowly as applying to those expressions of views that would not
be made known to Marine Midland in connection with the forthcoming oral
Presentation.
Mr. O'Connell stated that Mr. Blaine had been furnished
eome time
ago with copies of reports received from the Comptroller of
the Currency and the Department of Justice.
He (Mr. O'Connell) had
--uogested that Mr. Blaine request at the time of the oral presentation
thItt he be furnished any other expressions of opinion that the Board had
l'eceived-
Mr. O'Connell suggested that, if that procedure was agreeable
to the Board, Mr. Blaine then be allowed 15 days in which to file comments
°4 411Y such views furnished.
During discussion it was noted that the procedure Mr. O'Connell
84ggested was in accord with previous practice, and it was agreed that it
1()Ii1-cl be
appropriate in this instance.
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Mr. O'Connell then withdrew.
Federal Reserve motion picture.
There had been distributed a
memorandum dated September 12, 1962, from Mr. Fauver, referring to
Mr. Molony's memorandum of September
6, 1962, which had indicated that
the Conference of Presidents on September 10 would consider the report
et its Committee on Bank and Public Relations concerning a proposed
Fecleral Reserve motion picture.
After the Conference the Board was
14formed that the Conference approved the general format, shape, and
tone of the treatment as suggested by the Committee and referred the
'atter
to the Board for final approval of the project.
On the basis
er the
background information provided in Mr. Molony's memorandum and
the action by the Conference of Presidents, Mr. Fauver recommended that
the Board approve the film project and, should the Board approve, suggested
that a telegram be sent to President Fulton as Chairman of the Conference
144icat1ng that the Board had no objection to the Conference proceeding
with the motion picture project. Mr. Fulton had indicated that the
Pres
idents felt there was a considerable element of time in the decision,
"it
vas hoped to take advantage of the fall coloring to begin photo-
('re•Phing outdoor scenes.
Governor Mitchell expressed doubt that the motion picture would
e°4*ibute significantly to public understanding of the Systeme
There
e two principal aspects of the System's work to which educational
rrc/Its might be directed.
The first aspect had to do with the day-to-day
tilecharlical operations such as check clearance and fiscal agency services,
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the so-called "housekeeping functions."
Governor Mitchell did not believe
that it
was too important to educate the public with respect to those
functions, although he did not particularly object to doing so.
The
Other aspect of the System's work, and the really fundamental one, related
to the
significance of the role of money in the economy and the Federal
Reserve's responsibilities in connection with the formulation and execution
Of monetary policy.
An understanding of that aspect was basic to a
icjac'wledge of the System that meant anything more than lip service.
AithougA
the script for the proposed motion picture dealt primarily with the housekeePing functions, it touched to some extent upon the monetary policy function
4rid thus might lead the public to believe that such minor references constit
an adequate treatment of monetary policy.
If the script were
r2°11fihed to an explanation of the housekeeping functions, Governor Mitchell
said, he would not object, although he had doubts that such an explanation
would serve sufficient purpose to warrant the expense involved.
However,
the script as it stood might be taken as purporting to deal also with
111°IletarY policy, and in his view its inadequacy in that respect would only
le
84 to public confusion.
Mr. Fauver commented that a Conference Committee, and its Subc°ftlittee, had been working on the motion picture project for some time.
It l'as recognized that a completely different treatment would be necessary
to a
-eal with monetary policy adequately. However, in the absence of
ilecess in achieving a meeting of the minds as to how the monetary policy
'
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function might best be presented, the present script had been developed
48 a first step.
If this motion picture was well received, it might
IlelP to crystallize thinking on what would be the most appropriate
Presentation of the monetary policy function.
After further discussion along these lines, Governor Robertson
suggested that Governor Mitchell might meet with representatives of the
l'residents' Conference Committee or Subcommittee with a view to possible
banges in the script.
Accordingly, it was agreed that the Board's Secretary should
14form the Chairman of the Presidents' Conference that some questions had
been raised in discussion of the script of the motion picture, and
84ggest that President Fulton might want to arrange for representatives
°I' the Presidents' Conference Committee on Bank and Public Relations to
Meet with
Governor Mitchell.
Applications of Montana Shares.
There had been distributed a
nlernc3randum from the Division of Examinations dated August 23, 1962,
regarding the application of Montana Shares, Incorporated, Great Falls,
rla, for prior approval of the acquisition of the outstanding common
'
14°rite
tc'ek of Central BPrik of Montana, Great Falls, Montana.
The memorandum
Presented a comprehensive analysis of the application from the viewpoint
of the five factors specified for consideration under the Bank Holding
0Q41PanY Act.
Special attention was given in the memorandum to two circumstances
irlIrcaved in the situation of Montana Shares, which was a family corporation.
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The first concerned the fact that the holding company had two classes of
stock outstanding.
Holders of Class A stock were entitled to elect two
°tit of seven directors; however, advantages given the Class A stock in
d
ividends and liquidation rights made it in essence preferred stock.
Almost all of the Class B stock was held by two brothers, who could thus
elect five of the seven directors of the holding company.
However, no
dividends had been paid on the Class B stock, with one possible exception.
The holding company had announced to shareholders its intention to consolidate the two classes of stock into a single class.
The other special circumstance related to the intention stated
by the
two brothers who controlled the holding company that new capital
Irould be raised to finance the acquisition of Central Bank of Montana.
The Superintendent of Banks for the State of Montana had stated
that although he did not object to the granting of the application, he
(ild have doubts that any benefits would result to either the bank or to
the banking industry of Montana as a whole. The Federal Reserve Bank of
41114eap01i5, with reservations, recommended approval, noting that for
411 Practical purposes Central Bank of Montana was presently operated
a member of the Montana Shares group, and stating the belief that the
4ccAlisition would have little or no effect on competition in the area.
The Division of Examinations recommended approval, provided that
the Board's order require that Montana Shares not acquire the shares of
Celltral Bank of Montana unless cash to pay for the shares had been raised
by
issuance of the holding company's stock or the holding company, prior
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to the purchase of the bank's shares, had a firm commitment from a
l'eliable and independent underwriter that sufficient proceeds from the
sale of such stock would be available within three months of the date
Of the order to liquidate debt incurred in connection with the purchase
of the
bank's shares.
There had also been distributed a memorandum from the Division
Of Examinations dated August 24, 1962, regarding applications by Montana
Shares for prior approval of the acquisition of more than 50 per cent of
the voting shares of Citizens Bank of Montana, Havre, Montana, and up to
100 Per cent of the voting shares of Liberty County Bank, Chester, Montana.
Ettch of these applications involved an increase in a present investment,
434taria Shares now owning 28 per cent of the shares of the Havre bank
allci 25 per cent of those of the Chester bank.
The State Superintendent
Or Banks indicated no objection to approval, and the Federal Reserve
Ballk of Minneapolis recommended approval.
The Division of Examinations,
'
e rter setting forth in its memorandum a detailed analysis of the applicatl°48 from the point of view of the five factors specified for consideration
14 the Bank Holding Company Act, stated the following conclusion:
Recognizing weaknesses in the two banks' asset condition and management, but also considering the facts that
(1) the Superintendent of Banks feels that approval of the
applications would not be harmful to the applicant or the
banks concerned; (2) the Reserve Bank's opinion that approval
Would have no adverse effect on the financial condition or
Tanagement of the two banks, but could have some good effects;
(3) effectuation of the proposals would add further financial worth to the holding company; and (4) it is possible
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that with majority control, especially in the case of
Liberty-Chester, the greater financial interest and actual
voting control might produce betterments in the banks, it
is recommended that the applications be approved.
7,
There had also been distributed a memorandum dated September
1962, in which the Legal Division stated its opinion that in each of
the three applications of Montana Shares described above a decision by
the Board either to approve or disapprove would be sustained upon judicial
review as based on substantial evidence.
The memorandum went into the
tact that Montana Shares' stock was divided into two classes, with unequal
to
veltiag rights, and the possibility that this might present an analogy
the situation of First Virginia Corporation, Arlington, Virginia.
However,
quite
the Legal Division concluded that the circumstances were actually
with regard
different, since Class A stock of Montana Shares had preference
to dividends and liquidation rights.
The memorandum noted that plans
stock to one
had been proposed for conversion of all of Montana Shares'
Ss,
project under way.
although this was so far only a proposal and not a
either to
The memorandum also cautioned that, while a decision
the three
4PProve or deny would appear defensible in regard to each of
41)131j-cations, when viewed singly, if the Board should be disposed to
41313rove the application relating to Central Bank of Montana, decisions to
J the applications relating to the banks in Havre and Chester would be
less defensible.
of
The holding company already had effective control
th0
8e banks, and the applications now before the Board would merely serve
to
uake that control de jure rather than de facto, a matter that would
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Probably be regarded as of less practical consequence than the addition
°f a new subsidiary, Central Bank of Montana, to the holding company
sYstem.
At Governor Balderston's request, Mr. Thompson summarized the
Division of Examinations' analysis, his comments being directed principally
to Montana Shares' application to acquire Central Bank of Montana.
He
reiterated the Division's recommendation that, if the Board approved that
4PPlication, Montana Shares be required to raise new capital to finance
the acquisition. He also noted the Division's further suggestion that the
1(3ard express to Montana Shares its reluctance to approve other bank
4equisitions by that company until examination reports of its subsidiary
banks indicated considerable improvement in their condition.
He further
11°ted that Montana Shares had informed its shareholders of its intention
to acquire the controlling interest in a nonbanking organization, the
Clinic Building Corporation, which in turn held the stock of First National
C°rPoration.
It appeared that First National Corporation had interests in
eertain residential properties, so that indirect acquisition of its stock
bY Montana Shares would fall within the prohibition of section
Holding Company Act.
4 of the
In a letter to the Board dated August 31, 1962,
It'tEtna Shares stated that, immediately following acquisition of Clinic
-'ing Corporation, action would be taken to divest the shares of First
`anal Corporation.
that
If that was done, Mr. Thompson said, it appeared
the transactions would meet the requirements of section 4 of the Bank
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Holding Company Act.
However, he suggested that in notifying Montana
Shares of the Board's decision, it be made clear that divestment of the
shares of First National Corporation was expected.
Mr. Bakke then commented on the points made in the Legal
Division's memorandum, emphasizing the inconsistencies that would seem
to lie in a favorable decision on the Central Bank of Montana application
41°11g with adverse decisions on the applications relating to the banks
Chester and Havre.
Like Mr. Thompson, he recommended that the Board
rake clear its expectation as to the divestment of First National Corporation stock, to preclude violation of section
4(c) of
the Bank Holding
C°1414121Y Act.
The members of the Board then commented, beginning with Governor
kills) who stated that he would approve the applications, subject to the
conditions recommended by the Division of Examinations, especially the
84410nition that the Board would be reluctant to allow further expansion
°I' the holding company except under better circumstances than prevailed
t Present.
To him, the Montana Shares situation was weak and presented
cl°se decision; the term "fair," used by the Division of Examinations,
seerned generous as far as quality of management and character of assets
(It the subsidiary banks were concerned.
However, since Central Bank of
Moatana was
already under the control of Montana Shares for practical
-evses, approval of the application would merely formalize an existing
41.ttlation and possibly strengthen it by putting that subsidiary within
the Montana group in such a way that it would be under better supervisory
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control.
There was present in the situation the concern the Board should
have for the exposure of depositors of weak banks.
Also, he considered
that the Board had a responsibility that was difficult to fix as to the
shareholders of
the holding company.
Approval of the application in a
sense would indicate to the public that the operations of Montana Shares
met the requirements of a Federal agency.
That could attract additional
investment in the holding company, especially if it undertook recapitalization. Where public interest and responsibility to shareholders were
involved, Governor Mills believed that Federal agencies had a double
'
lesP nsibility to follow through to see that the subsidiary banks were
8Q1Ind and had competent management.
Governor Robertson stated that he would approve, though without
eathusiasm, and that he favored following the recommendations of the
kvision of
Examinations in every respect.
Governor Shepardson said that he would concur, for the reasons
°cIvernor Mills had expressed.
4411e hope that Central
Bank
In Governor Shepardson's view, there was
of Montana would be a key bank in the Montana
8441'ea organization and lend greater assurance to the future of that
°I'ganization.
However, he thought that the holding company should be
114111edy along the lines suggested by the Division of Examinations, that
the affairs of the company and its subsidiary banks should be in better
hape before it applied for any further acquisitions.
Governor King asked several questions, to which the staff responded,
the capital structure of Montana Shares and the advantages attached
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to each of
the classes of stock.
He then asked if the Board's authority
under the Bank Holding Company Act extended to giving an approval with a
condition attached, such as the proposed requirement in the present case
that additional capital be raised.
Response was made that the Board could
reject the application on the ground that the capital was inadequate.
Then) if the capital was increased, it could approve a new application.
The Present recommendation was intended to provide a short-cut.
Governor King asked if it could be assumed that denial would
have been recommended in the absence of any proposal to raise new capital.
He shied from any bargaining process, and would prefer simply to approve
Or
disapprove.
Not that he wanted to delay processing and make the handling
applications more difficult for either applicants or the Board, but the
circ umstances of the present case caused him to question whether this was
the Way in which the Board was expected to make decisions.
Governor Mills commented that while he could understand Governor
King's hesitancy, his answer to the question was that the Board had certain
tetUtory factors to consider, among them the character of management and
the financial condition of the holding company.
As had been pointed out,
there might be grave question about the adequacy of the financial position
r the holding company as it now stood, but that inadequacy was susceptible
to correction by the introduction of additional capital.
Mr. Solomon observed that the proposal that additional capital
be
raised did not originate with the Board; the holding company itself
heLa
declared its intention to increase its capital.
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..114._
Governor King asked whether, if the holding company had not
declared that intention, the staff would have made the recommendation
it did, to which Mr. Solomon replied that, if the holding company had
indicated no expectation of raising more capital, conceivably the
recommendation of the Division of Examinations might have been for denial
Of the
application.
Governor King then commented that, as he now understood the
situation, the Board could consider the declared intention of the holding
Cathy%
—vallY to raise new capital as a part of the application.
In the absence
"that declared intention, he felt that he would have preferred to see the
kara deny the application rather than to impose at its own initiative a
eoadition as
to raising new capital.
He would approve the application
t° acquire Central Bank of Montana only in light of the fact that the
aPPlication stated the intention of the holding company to raise new
cal)ital, and he believed that the Board's statement should spell out that
sUch intention had been read as part of the application.
Governor Mitchell stated that, while he would like to see a
oho_
4e grown" holding company flourish in a State where large holding companies
%Is e so prominent, he found it difficult to reconcile the conclusions of the
State Superintendent of Banks and of the Federal Reserve Bank of Minneapolis
Ilith the facts relating to the management and condition of the holding
"141PanY.
As he saw it, this was a poorly managed organization in an over-
et Ilded financial condition; the corporate set-up was so complicated that
the
true interests and equities were not apparent. He did not believe that
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.t vas
V88 appropriate for the Board to endorse a record and a corporate
structure of
that kind.
Therefore, his vote would have to be adverse
until and unless the corporate relationships were clearer and the probability
of a better
-operated organization seemed to be assured.
Governor Balderston indicated that he concurred with the recommendation
of the Division of Examinations.
Thereupon, the applications of Montana Shares (1) to acquire up
to 100 per cent (except directors' qualifying shares) of the outstanding
ahares of Central Bank of Montana, Great Falls, Montana; (2) to acquire
More than 50 per cent of the voting shares of Citizens Bank of Montana,
R4vre, Montana; and (3) to acquire up to 100 per cent of the voting shares
of
Liberty County Bank, Chester, Montana, were approved, Governor Mitchell
dissenting, subject to the condition recommended by the Division of Exami44t1ons and with the understanding that the Board's letter to Montana
Shsrea advising of its favorable action on the applications would contain
statements along the lines suggested by the Division.
It was understood
that the
Legal Division would prepare orders and statements reflecting
the Board's decisions, and that a dissenting statement by Governor Mitchell
4180 'would be prepared.
All of the members of the staff except Messrs. Sherman, Kenyon,
411very Solomon, and Smith then withdrew.
Inter-Agency Bank Examination School.
Governor Robertson reported
4 e sation that had occurred yesterday between Mr. Leavitt and a
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re
presentative of the Office of the Comptroller of the Currency which
indicated that the Comptroller was contemplating withdrawal of his
Office from further participation in the Inter-Agency Bank Examination
Scb°01. In order to facilitate plans for future sessions of the school,
Governor Robertson requested permission to write to the Comptroller and
ssk for advice as to whether the information given to Mr. Leavitt was
ceurate.
Governor Robertson stated that if it were determined that the
ComPtroller had decided no longer to participate in the school, the plan
4'uld be to continue the school under the sponsorship of the Board and
'
the Federal Deposit Insurance Corporation.
This would also mean that
More latitude would be available to accommodate representatives of State
Illthking departments, and he indicated that he would present to the Board
Short
1Y for consideration a proposal whereby financial assistance would
be offered to State banking departments to facilitate the attendance of
their personnel at the school.
There being no objection, it was understood that Governor
Robertson would write to the Comptroller of the Currency for the purpose
or ascertaining the accuracy of the report that the Comptroller's Office
11°111d no longer participate in the Inter-Agency Bank Examination School.
,Report of examination of Philadelphia Bank.
The report of the
e(ezilination of the Federal Reserve Bank of Philadelphia made by the Board's
el“411-14ing staff as of May 17, 1962, had been circulated to the Board, along
Itith the usual accompanying memorandum.
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At the Board's request, Mr. Smith commented on the information
disclosed by the examination, and it was agreed that there appeared to be
no matters requiring action by the Board at this time.
With reference to an earlier indication, as discussed at the
Board meeting on July 23, 1962, that the Audit Committee of the Philadelphia
loard of Directors contemplated retaining an outside accounting firm for
the Purpose of reviewing the audit function at the Philadelphia Bank,
Mr' Smith replied to a question by saying that Chief Federal Reserve
ExaMiner Schaeffer had discussed the subject with the Audit Committee, using
as an illustration the survey made by the Audit Committee of the Richmond
44k. It was understood that the Philadelphia Audit Committee had now diethe thought of retaining an outside accounting firm for this purpose.
It Ifts noted, however, that such firms had been retained for a similar
Pose by the New York and Chicago Reserve Banks.
All members of the staff except Mr. Sherman then withdrew.
Appointment of President at St. Louis Bank (Item No. 13).
Gover-
4°r Balderston reported that it was understood that the Board of Directors
°I* the Federal Reserve Bank of St. Louis, at their meeting today, would
Point Harry A. Shuford, now First Vice President of the Dallas Reserve
tialAy as President of the St. Louis Bank, effective October 1, 1962, for
the Unexpired portion of the five-year term that began March 1, 1961, with
841arY at the rate of $35,000 per annum for the period October 1 through
becember 3
1, 1962, subject to the approval of the Board of Governors.
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km'YI)
4-,
-18After discussion, it was agreed unanimously that if advice should
be received that such action had been taken by the Board of Directors,
Chairman McBride would be advised of approval by the Board of Governors.
Secretary's Note: Advice of Mr. Shuford's
appointment having later been received, a
letter expressing the Board's approval of
his appointment and the payment of salary
to him at the rate set by the Board of
Directors was sent to the Federal Reserve
Bank of St. Louis on September 14, 1962, in
the form attached as Item No. 13.
Appointment of First Vice President at Dallas Bank (Item No. 14).
Governor Balderston stated that it was understood that the Board of
'rectors of the Federal Reserve Bank of Dallas, at their meeting today,
11(3111d appoint Philip E. Coldwell, now Vice President, as First Vice
President of the Bank, effective October 1, 1962, for the unexpired portion
of the five-year term that began March 1, 1961, with salary at the rate
of $25,000 per annum for the period October 1
through December 31, 1962,
84bject to the approval of the Board of Governors.
After discussion, it was agreed unanimously that in the event
4dvice should be received that such action had been taken by the Board
of Directors, Chairman Anderson would be advised of approval by the Board
of
Governors.
Secretary's Note: Advice of Mr. Coldwell's
appointment having later been received, a
letter expressing the Board's approval of
the appointment and the payment of salary
to him at the rate set by the Board of
Directors was sent to the Federal Reserve
Bank of Dallas on September 14, 1962, in
the form attached as Item No. 14.
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-19The meeting then adjourned.
V./WLA.."1
itt‘
Secretary
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Federal Reserve Bank of St. Louis
BOARD OF
(DVERNCIRS
OF THE
Item No. 1
9/13/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ACIORCall OFFICIAL CORREEeDNOENCE
TO THE 00ARO
September 13, 1962
Board of Directors,
Hunterdon County Trust Company,
Califon, New Jersey.
Gentlemen:
The Board of Governors of the Federal
Reserve System approves, pursuant to Section 24A
of the Federal Reserve Act, an additional investment of $91,236 in bank premises incident to the
establishment of a branch in Oldwick, New Jersey,
by Hunterdon County Trust Company, Califon, New
Jersey. It is noted that efforts are being made
to sell the excesc portion of the land acquired
for the branch site and it is assumed that the
Proceeds will be applied to reduce the bank's
investment in bank premises.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
Item No. 2
9/13/62
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL. CORRESPONDENCE
TO THE BOARD
September 13, 1962
Board of Directors,
The First Pennsylvania Banking
and Trust Company,
Philadelphia, Pennsylvania.
Gentlemen:
The Board of Governors of the Federal Reserve
System extends to October 19, 1963, the time within which
The First Pennsylvania Banking and Trust Company may establish a branch at the southeast corner of Grant Avenue
and Roosevelt Boulevard, Philadelphia, Pennsylvania.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
•). A
4.•
Item No. 3
BOARD OF GOVERNORS
9/13/62
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, 0. C.
ADDRESS OF- FACIAL CORRESPONOENDE
TO THE BOARD
40***
September 13, 3.962
Organization Committee,
Peoples Bank of Sarasota,
Sarasota, Florida.
Gentlemen:
The Board of Governors of the Federal Reserve System
.approves the application of Peoples Bank of Sarasota, Sarasota,
4.
jorida,
for stock in the Federal Reserve Bank of Atlanta, effec_ive if and when the bank opens for business under appropriate State
authorization subject to the numbered conditions hereinafter set
torth.
1. Such bank at all times shall conduct its business
and exercise its powers with due regard to the
safety of its depositors, and, except with the permission of the Board of Governors of the Federal
Reserve System, such bank shall not cause or permit
any change to be made in the general character of
its business or in the scope of the corporate powers exercised by it at the time of admission to
membership.
2. The net capital and surplus funds of such bank
shall be adequate in relation to the character and
condition of its assets and to its deposit liabilities and other corporate responsibilities.
3.
At the time of admission to membership, such bank
shall have paid-in and unimpaired capital stock of
not less than $400,000, and other capital funds of
not less than $150,000.
In connection with the foregoing conditions of membership,
iticular attention is called to the provisions of the Board's
tl,gulation HI regarding membership of State banking institutions in
the Federal Reserve System, with especial reference to Section 208.7
reof. A copy of the regulation is enclosed.
t
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Federal Reserve Bank of St. Louis
vs's,
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Noples Bank of Sarasota
-2-
If at any time a change in or amendment to the bank's charter
is made, the bank should advise the Federal Reserve Bank, furnishing
Pies of any documents involved, in order that it may be determined
whether such
change affects in any way the bank's status as a member
of the Federal Reserve System.
Acceptance of the conditions of membership contained in this
letter
should be evidenced by a resolution adopted by the board of
dol:rectors after the bank's charter has been issued and a certified copy
A r_ such resolution should be transmitted to the Federal Reserve Bank.
nulgements will thereupon be made to accept payment for an appropriate
unt of Federal Reserve Bank stock, to accept the deposit of the reed reserve bnlance, and to issue the appropriate amount of Federal
eserve Bank stock to the bank.
7
The time within which admission to membership in the Federal
Rese
t
rve System in the manner described may be accomplished is limited
iT1 six months from the date of this letter, unless the bank applies to
the Board and obtains an extension of time. When the Board is advised
'?"t all of the requirements have been complied with and that the approt
ky-ate amount of Federal Reserve Bank stock has been issued to the bank,
, e Board will forward to the bank a formal certificate of membership
441 the
Federal Reserve System.
The Board of Governors sincerely hopes that you will find members1,4
"-LP in the System beneficial and your relations with the Reserve Bank
Pleasant.,
The officers of the Federal Reserve Bank will be glad to assist
ahq 1-11 establishing your relationships with the Federal Reserve System
makiat ar1Y time to discuss with representatives of your bank means for
ng the services of the System most useful to you.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth Le Czwhaell
Assistant Secret4t7,
1.1c1-c)sure
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Federal Reserve Bank of St. Louis
Item No.
BOARD OF GOVERNORS
4
9/13/62
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 13, 1962
14r. Laurence H. Jones,
Vice President and Cashier,
Federal Reserve Bank of Chicago,
Chicago 90, Illinois.
1/ear Mr. Jones:
This refers to your letter of August 31 regarding
Penalties of $7.67, $17.26, $30.68, and
$36.44 incurred by
First National Bank of Lansing, Lansing, Illinois, on
.elleiencies of 2 per cent or less, in its required reserves
'
-or the bi-weekly computation periods ending May 30, June 13,
June 27, and July 25, 1962.
It is noted that deposit differences were discovered
14 the mid-year comparison of condition reports with deposit
t!Ports; the bank had been excluding the amounts of its
j
easurY Tax and Loan Account from its reports of deposits since
bi-weekly period ended May 16; it had inadvertently left off
'412 account when it devised a neu work sheet for computation
l'eserve requirements; over the past eleven years the bank has
Ilcurred no penalties for insufficient reserves; and that the
0!,naltY of $7.67 can be waived by your Bank under Paragraph "E"
the Board's instructions (S-1123; F.R.L.S. #6120).
In the circumstances, and in view of your recommendation,
tile Board authorizes your Bank to waive assessment of the penalties
re'r the periods ended June 13, June 27, and July 25, 1962.
Very truly yours,
(Signed) Merritt Sherman
merritt Sherman,
Secretary.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
Item No.
OF THE
5
9/13/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 13, 1962
Board of Directors,
The Monon Bank,
Monon, Indiana.
G
entlemen:
The Board of Governors of the Federal Reserve System
aPProves the application of The Monon Bank, Monon, Indiana, for
atoak in the Federal Reserve Bank of Chicago, subject to the
numbered conditions hereinafter set forth:
Such bank at all times shall conduct its business
and exercise its powers with due regard to the
safety of its depositors, and, except with the
permission of the Board of Governors of the Federal
Reserve System, such bank shall not cause or permit
any change to be made in the general character of
its business or in the scope of the corporate powers
exercised by it at the time of admission to membership.
2.
The net capital and surplus funds of such bank shall
be adequate in relation to the character and condition of its assets and to its deposit liabilities
and other corporate responsibilities.
In connection with the foregoing conditions of membership,
s.rtioular attention is called to the provisions of the Board's
eulation H, regarding membership of State banking institutions in
tr Federal Reserve System, with especial reference to Section 208.7
"ereof. A copy of the regulation is enclosed.
Ir
j
If at any time a change in or amendment to the bank's
char
ter is made the bank should advise the Federal Reserve Bank,
4tirro ,
.'sning copies of any documents involved, in order that it may
d etermined whether such change affects in any way the bank's
atus as a member of the Federal Reserve System.
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Federal Reserve Bank of St. Louis
ti
e
BOARD OF GOVERNORS
The Monon Bank
or
THE FEDERAL RESERVE SYSTEM
-2-
It is noted that under its charter the bank may exercise
• tust
powers, and although such powers are not currently being exer!lsed, it is understood that the bank intends to accept fiduciary
business upon admission to membership. It will be expected, of course,
that when such business is undertaken your bank will be equipped to
nandle it in conformity with recognized principles of sound fiduciary
administration.
Acceptance of the conditions of membership contained in
this
letter should be evidenced by a resolution adopted by the Board
°I. Directors and spread upon its minutes, and a certified copy of
resolution should be filed with the Federal Reserve Bank.
"
rangements will thereupon be made to accept payment for an approPrtate amount of Federal Reserve Bank stock, to accept the deposit
°f the required reserve balance, and to issue the appropriate amount
°f Federal Reserve Bank stock to the bank.
The time within which admis:don to membership in the Federal
erve System in the manner described may be accomplished is limited
"
t° 30 days from the date of this letter, unless the bank applies to
tr Board and obtains an extension of time. When the Board is advised
anat all of the requirements have been complied with and that the
tVroPriate amount of Federal Reserve Bank stock has been issued to
e bank, the Board will forward to the bank a formal certificate of
-enlbership in the Federal Reserve System.
The Board of Governors sincerely hopes that you will find
Mem bership in the System beneficial and your relations with the
11.77rve Bank pleasant. The officers of the Federal Reserve Bank
t1114.1 be glad to assist you in establishing your relationships with
the
Reserve System and at any time to discuss with representa'
,s ves of your bank means for making the services of the System most
48e411 to you.
Very truly yours,
(signed.) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
•11°10sure.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
Item No.
6
9/13/62
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL. CORRESPONDENCE
TO THE BOARD
September 13, 1962
Board of Directors,
The National Bank of Commerce
of Columbus,
Columbus, Mississippi.
Gentlemen:
The Board of Governors of the Federal Reserve .
System has given consideration to your application for
fiduciary powers and grants The National Bank of Commerce
Of Columbus authority to act, when not in contravention of
State or local law, as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee,
receiver, committee of estates of lunatics, or in any other
fiduciary capacity in which State banks, trust companies,
or other corporations which come into competition with
national banks are permitted to act under the laws of the
State of Mississippi. The exercise of such rights shall be
subject to the provisions of Section 11(k) of the Federal
Reserve Act and Regulation F of the Board of Governors of
the Federal Reserve System.
A formal certificate indicating the fiduciary
Powers that your bank is now authorized to exercise will
be forwarded in due course.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
Item No.
OF THE
7
9/13/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS OFFICIAL CORRESPONOENCE
TO THE BOARD
September 130 1962
Board of Directors,
First State Bank,
Odessa, Texas.
Gentlemen:
The Board of Governors of the Federal Reserve
SYstem approves, under the provisions of Section 2,4A of
the Federal Reserve Act, an investment in bank premises
by First State Bank, Odessa, Texas, of $325,000. It is
understood that the capital accounts will be increased
by $340,000 through the sale of new stock for cash in
January 1963.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
Item No.
OF THE
8
9/13/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE SOARD
September 13, 1962
Board of Directors,
The Merchants and Farmers State Bank
of Weatherford,
Weatherford, Texas.
Gentlemen:
The Board of Governors of the Federal
Reserve System approves, under the provisions of
Section 24A of the Federal Reserve Act, an investment in bank premises by The Merchants and Farmers
State Bank of Weatherford, Weatherford, Texas, of
$50,000. It is understood that capital funds will
be increased by $200,000 through the sale of new
stock for cash in January 1963.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
Item No.
BOARD OF GOVERNORS
4,.....
ttOF Got,•
4 ••
'
•
0,
Cr:*
9
9/13/62
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
*
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 131 1962
Board of Directors,
Wells Fargo Bank,
San Francisco, California.
Gentlemen:
The Board of Governors of the Federal
Reserve System approves the establishment of a
branch by Wells Fargo Bank at 1160 Forest Avenue
in the unincorporated area of Monterey County
adjacent to the city of Pacific Grove, California,
provided the branch is established within six
months from the date of this letter.
Very truly yours,
(Signed) Elizabeth L. Carmichael
Elizabeth L. Carmichael,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
OF THE
Item No. 10
9/13/62
FEDERAL RESERVE SYSTEM
WASHINGTON 25. D. C.
ADDRESS
OFFICIAL
CORRESPONDENCE
TO THE BOARD
September 13, 1962
hr
Harold A. Bilby,
;1c,i'e President,
iisueral Reserve Bank of New York,
ell York 45, New York.
Mr. Bilby:
This refers to your letter of September 7, 1962, and its
enclos
for 0 tires, concerning the proposed issue by the International Bank
dlae ',',„'econstruction and Development of its Two Year Bonds of 1962,
to,vetOber 1, 1964. In that letter you state that it is proposed
N3
;
111end Schedule A of the Fiscal Agency Agreement, dated as of
itIcill
!
rY 6, 1950, between the International Bank and your Bank to
Ilue the Bonds in question.
kse
The Board of Governors approves of your Bank acting as
Ii4rikal Agent in respect of the proposed issue by the International
the °T its Two Year Bonds of 1962, due October 1, 1964, and approves
ion and delivery by your Bank of an Agreement with the
Si"a•tional Bank in the form or substantially in the form of
?eb'
r ernent No. 22 to the Fiscal Agency Agreement, dated as of
'
erlel arY 6, 1950, between your Bank and the International Bank,
-sed with your letter.
Very truly yours,
(signed)
, Kenneth
A.
Kenneth A. Kenyon,
Assistant Secretary.
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Federal Reserve Bank of St. Louis
Kenyon
3/1 SC
TELEGRAM
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 11
9/13/62
WASHINGTON
September 13, 1962.
(4*
,,ldney Friedman,
Cole, Friedman & Deitz,
40 Wall Street,
New York 5, New York.
lisurtel September 12, 1962 requesting reconsideration of
r?quest to appear at September 17 oral presentation on Marine
Mldland - Security National Bank matter, which request was denied by the Board on September 10, 1962. Upon reconsideration
Of request, including reasons submitted by you in support of
such request, Board has affirmed its original action in denyYour request to appear. Your attention is directed however to advice contained in Board's September 10 letter that due
co nsideration will be given to any views which you may care to
sUbmit in writing if received on or before September 20, 1962.
(signed) Merritt Sherman
Merritt Sherman, Secretary,
Board of Governors.
PI
tioAit.s
4ATEs
'Orr,
s4O
VERNORS Or THE FEDERAL RESERVE SYSTEM
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Item No. 12
9/13/62
WASHINGTON
OFFICE. OF THE VICE CHAIRMAN
September 13, 1962
The Honorable A. Willis Robertson,
Chairman)
Joint Committee on Defense Production,
. engress of the United States,
vmshington 251 D. C.
Attention: lit. Harold J. Warren,
Clerk & Counsel,
Room 459,
Old Senate Office Building,
Washington 25, D. C.
Lear
enator Robertson:
In response to your letter of July 23, 1962, attached
is
tora summary of mobilization activities of the Board of Governors
the year ending June 301 1962.
programs-The summary covers three major preparedness
the
.
of the
functions
peci Program for the continuity of the essential
United
on
the
attack
an
sta.!ral. Reserve System in the event of
'
eel the program for bank preparedness, and the V-loan program.
Sincerely yours,
(Signed) C. C. Balderston
C.! Canby Balderston,
Vice Chairman.
ae
nt.
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Federal Reserve Bank of St. Louis
SUMARY OF THE MOBILIZATION ACTIVITTRS OF
THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Introduction
This report summarizes the mobilization activities of the
Board of Governors of the Federal Reserve System for the year ending
JI:Ine 30, 1962: It has been prepared at the request of the Joint ComTittee on Defense Production, Congress of the United States, and folows the outline suggested by the Committee. The report is divided
Into three Parts, each of which deals with a major preparedness program.
Part I relates to the development of plans and preparedness
measures for the continuity of the essential functions of the Board
,c),f Governors of the Federal Reserve System and the Federal Reserve
ir
'anks
in a war emergency.
Part II relates to the development of plans and preparedness
Ille,sures for the continuity of essential operations of "banking institutions" in a war
emergency.
Part III describes Regulation V-loan activities and plans
for the
conduct of such activities in a war emergency.
Part I
Continuity of the Essential Functions of
The Board of Governors of
The Federal Reserve System, and
The Federal Reserve Banks
1. .!112.E9.,
The Board of Governors is responsible for the develop1
P of -1-57-Ens to assure the continuity of the essential functions
(
st the Federal Reserve System in the event of an attack on the United
03, and for participating in the development of Government policies
e the monetary and bank credit fields to deal with the potential
'
e°nomic consequences of an attack.
2.
,
yr
Authority. The authority to develop plans and preparedness
0,,aeures for the continuity of the essential functions of the Federal
oiserve System and to deal with the potential economic consequences
th an attack derives from the National Security Act of 1947, as amended,
t e Defense Production Act of 1950, as amended, the Federal Civil DeAct of 1950, as amended, Executive Order 10346, Defense Mobilizan c3n Order 1-20, The National Plan for Civil and Defense Mobilization,
Treasuryts Order, January 10, 1961, Delegation to the Board of
°Irernors of the Federal Reserve System of Emergency Authority.
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Federal Reserve Bank of St. Louis
-237 Activities. Activities during the past year can best be described
Within the context of (1) the basic financial policies applicable to
a general war situation involving a nuclear attack on the United
States and a war damageieconomy, (2) what has been accomplished toIlard achieving a satisfactory degree of preparedness, and (3) what
l'emainz to be done.
The basic financial policies needed to make all emergency
Planning in the monetary and bank credit fields consistent were apP
I ed in 1959 by all Federal financial agencies and set forth in the
nO report to the Committee. The policies require that provision be
made for the following:
a. The maintenance of the money, credit, and financial
system.
b. The continuance of banking operations including provision for liquidity and credit.
C, The equitable sharing of war losses.
d. The decentralization of adequate supplies of currency.
e. The availability of bank deposits according to postattack needs.
f. The clearance of checks including those drawn on
destroyed banks.
g. The availability of new bank credit for essential
purposes.
h. Government guarantee of private financing for essential purposes, if not otherwise available on reasonable terms.
Heretofore,
the Board, the Federal Open Market Committee,
44d
tioa he
e Federal Reserve Banks established emergency lines of succeseolaato fill war-caused vacancies until such time as such vacancies
be filled in the normal manner. There has been no need to
• dtfir these arrangements.
Also, heretofore, the Board, the Federal Open Market Cornand the Federal Reserve Banks provided for the emergency
blIv eation of their operations in the event their normal places of
cori
:
nees should become inoperable as a result of an attack. In this
to llleetion, duplicate records essential for wartime operations continue
bitr,2 maintained on a regularly scheduled basis at relocation sites.
the past year, it became necessary to change two relocation
•
'
3 because of the location of a Strategic Air Command facility
•tten
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Federal Reserve Bank of St. Louis
nearby one site, and the location of a missile launching facilit
y
nearby the other site. These changes have been completed. Currently,
consideration
is being given to the selection of an alternate relocation site for the Board due to the increasing vulnerability of its
Present relocation site.
The National Shelter Policy, announced in 1958 and reaffirmed
in 1961, encourages the incorporation of fallout
shelter in all new
Federal buildings and in all existing Federal buildings where feasibl
e
at reasonable
cost. This policy has been applied to Federal Reserve
facilities in order to provide all reasona
ble means for assuring that
tl:le System will be capable of performing its essential wartime
func1°n0. At present, fallout shelters meeting Government standards have
e0n completed in thirteen buildings, are in the process of
completion
.
311 four buildings, and are being planned
for fourteen additional buildlngs. Much of this progress was made during the past year.
It was
0uraged by the action of
the Congress in making appropriations for
'ule purpose with respect to Federal buildings generally in fiscal
Year 1962.
Board's Emergency Regulations Nos. 1 and 2 (attached
'&aft
draft
4:
form as Exhibits D and E to the 1961 report) were promulated on January 15, 1962, and are to become effective automat
ically
n the event of an attack
on the United States. Among other things,
?
1
Regulations require or authorize, as appropriate, Federal Reserve
nks to (1) continue operati
ons where physically possible, to resume
erations as soon as possible, and to operate from temporary substi}lute quarters if necessary, (2) to perform the functions of any other
peserve Bank, and to perform certain functions of the Board and the
Eiederal Open Market Committee, when out of communication with the
(Ord and the Committee, (3) to assure the effective and equitable
'
etribution of available currency and coin, and
to designate emerrrISY Cash Agents for this purpose, (4) to facilit
ate the receipt
collection of checks, other cash items and noncash items, and to
gnate emergency Check Agents for this purpose, (5) to make credit
'gailable to both member and nonmember banks, and to individuals when
twrit for essential purposes is not otherwise available to individol'e, (6) to purchase and sell U. S. Government securities on their
ej,1 account, to. buy and sell due bills and to pledge due bills
as
r'e).4-ateral for Federal Reserve notes, (7) to raise or lower reserve
u c.luirements, and (8) to take such action as fiscal agents of
the
Illted States as authorized by the Secretary of the Treasury.
ill
t
e
Guidance has been prepared to aid the Federal Reserve Banks
to_t 0 performance of certain functions normally resee
reserved
d to the
and the Federal Open Market Committee, and in the performance
or
4-d-seal agency functions in an emergency.
Aro
In 1961, Guidelines on Emergency Monetary Policy were aped and distributed to Federal Reserve Banks
for providing
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Federal Reserve Bank of St. Louis
necessary liquidity and curbinri, inflationary pressures.
In 1962, the Federal Open Market Committee approved and
distributed to Federal Reserve Banks a revision of its Guidelines
°11 Emergency Operations for providing the Treasury with funds and
conducting transactions in United States Government securities.
During the past year, Treasury's 1956. instructions on
fis
11 ,cal agency emergency operations were reviewed, and on July 17,
.°2, revised instructions were issued which complement the objec9
Ives and techniques applicable to emergency monetary policy and
slings in United States Government securities.
The Federal Reserve Banks have made substantial progress
dur.
Ing the past year in the preparation and distribution of emergency
structions to banking institutions. All have completed the distriof (1) Treasury's Emergency.Banking Regulation No. 1, requiring
1,it
0? continuance of banking operations, and regulating the withdrawal
a currency, transfer of account balances, and the extension of credit,
c1 (2) Treasury's delegation of authority to the Board to take such
an.,
'
c l°n as necessary to maintain the operation of banking institutions.
Ai,
oi-4 Reserve Banks, with two exceptions, have completed the distribution
de I llergency Circulars on the distribution of currency. They have
susignated 261 Cash Agents, and have issued special instructions to
Agents. All Reserve Banks, without exception, have completed
the
ot distribution of Emergency Circulars on the collection of checks,
A "er cash items, and noncash items. They have designated 423 Check
Aeits, and have issued special instructions to such Agents. Eight
tL1e twelve Reserve Banks have prepared Emergency Circulars containthg instructions on the extension of credit and the administration of
140e discount function in accordance with the Guidelines on Emergency
netary Policy.
jion
It was reported previously that a supply of Federal Reserve
had been built up (equivalent to a 2-1/2 years' supply based on
;rent use) as a hedge against the possibility of damage to the facilha es of the Bureau of Engraving in the event of an attack. Progress
ofs_been made in the decentralized storage of such notes in the vaults
8''eevederal Reserve Banks and branches, selected on the basis of relative
aridliritY of such vaults from attack damage, availability of vault space
85'' convenience. At the close of the reporting period, approximately
Per cent of such notes had been decentralized to Federal Reserve Banks.
riot
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Federal Reserve Bank of St. Louis
f11(1ir
‘
)
ot
COL;idation i3tiJ. being given to the provision of one or more
strate4cally located, highly secure underground depositories for the
Storage of emergency currency supplies. In addition, a total of $121
!7Il11on of issued Federal Reserve notes and silver certificates has
Iren prepositioned in the vaults of sixteen selected emergency Cash
dents
gents as a part of a program of maximum readiness to overcome the
of disrupted communications and transportation.
The Board and the Federal Reserve Banks maintain lists of
pet'enee
Readiness Actions applicable to various degrees of international
'ftLsions and defense emergencies. It is our objective to progressively
Ilfieduce these lists by doing in advance insofar as possible those things
would need to be done once the emergency was declared. During
the past year, satisfactory progress was made toward this
'"e
objective.
4
Effectiveness. The effectiveness of the program has been tested
..Pinst a variety of possible attack patterns. The results indicate
the measures being taken give reasonable assurance that the essenmial wartime functions of the Federal Reserve System in support of the
°fleY, credit, and financial system can be maintained in a postattack
ernergencY.
5,
,
Current Need
The program will be needed as long as any potential
has the capability of launching a massive nuclear attack upon
p"e United States. The program contributes to the over-all defense
+c)stUre of the nation, to the effectiveness of the family of deterrents
:!) attack, and to the nation's preparedness to maintain the money and
'vedit system if attacked.
6. s
114„./71,
111 Business. The program for the continuity of the essential
functions of the Federal Reserve System relates directly to
the
tue
t.Board and Federal Reserve Banks, and indirectly to banking instit ens and other businesses large and small capable of making a contil ution to the war effort and reconstruction. Since it is assumed
t, the large cities, the industrial-population concentrations, and
ti"ci
01
,ncial centers might be the natural objects of attack with weapons
pr Inass destruction, emphasis has been placed on the utilization and
Parat10n of small banking institutions outside of the more vulnerrel? target areas to serve the smaller business enterprises upon which
t,,,ance must be 'placed to support military, civil defense, and recon.,uction operations.
7.
the Liajor Problems. There is only one major problem which stands in
0 improving the effectiveness of this program. It is the
pr„1„/
tail em of reaching Government-wide agreement on a plan for the equi14 'e sharing of war losses. The need for such a plan was recognized
It 'he adoption of basic financial policies for a postattack situation.
:
etje the sine qua non to al] plans for the maintenance of the finan'
illt systeRTEna7 "going concern" economy. In December 1959, an
or j
e agency committee was established by the Director of the Office
tifilvil and Defense Mobilization to implement the policy. It idenNalli-ed the essential elements which should be contained in an implelng plan. In September 1961, the Director of the Office of
4
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Federal Reserve Bank of St. Louis
-6-Illergeney Planning established a new interagency committee to pursue
the unfinished task, but no tangible progress has been made during
the past year.
Program Changes. No change in the program is contemplated.
'.'hanges in waxand means for furthering the program will be made as
needed, particularly as needed to net changes in enemy capabilities.
9. Standby Programs. There are two programs which might properly
c°1/le under this heading. One pertains to the equitable sharing of
Ilar losses, mentioned above; the other pertains to the postattack
utilization of bank examiners. The three Federal supervisory agencies,
together with the Federal Reserve Banks, have agreed to look to their
!zamination personnel as the primary source of reserve manpower. They
'
lave further agreed that this manpower should be utilized in a cooperative manner to meet the most urgent needs, including staffing
equirements of Federal Reserve Banks, emergency Check Agents and
sh Agents, and banking institutions which may have difficulties in
ontinuing or re-establishing operations.
r
10,
Organizational Changes. There have been no organizational
flanges for administering this program during the past year.
11.
Future Objectives. Future objectives are to keep our prepared!se measures current and to constantly improve our readiness. On
basis of foreseeable needs to cope with increasing missile capalities and decreasing warning time, emphasis will be placed on:
Defense Readiness Conditions (DEFCONs) procedures, (2) improving
ilentslout Protection, (3) completing and propositioning emergency docuil
(4) developing standby plans for the equitable sharing of war
.1.03
of currency to Federal
li
8
Reses$ and (5) continuing the decentralization
erve Banks, Cash Agent Banks, and selected underground depositories.
Z
12. Availability of Funds. Funds are made available as needed to
7
0 17 on the preparedness responsibilities of the Board and the FedBaal Reserve Banks. Since the operating funds for the Board and the
11,,LIks are not derived from Congressional appropriations, the Board
sought to limit expenditures to those kinds of needs which ConGress has
approved in making appropriations to other Government
-gencies.
Part II
Preparedness of Banking Institutions
1, b_
a_m. The Board is responsible for the development of plans,
14 .t.-.-E2Ex2:
c„ coopeiTion with the Department of the Treasury, including the
enPtroller of the Currency, and the Federal Deposit Insurance
:
1Poration, to encourage preparedness measures by the commercial
icing system designed to assure continuity of operations of the
balL
'
ti 11-ng system in the event of enemy attack, including the preserva°11 of essential records. The program has been extended to include
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Federal Reserve Bank of St. Louis
1
-7-.
"bankillg institutions" as that term is defined in the Secretary of
the Treasury's order delegating emergency authority to the Board.
Thus, the program includes not only every commercial bank, but also
very trust company, private bank,
savings bank, and mutual savings
bank
.1tAlrIty. The authority for the conduct of this program is de2. .11.1
rived fro-in-re-Tense Mobilization Order
1-20, February 15, 1956.
3s Activities. Activities under this program relate to (1) providi
ng
gllidar
—io77—
toba.nking institutions on preparedness measures, and (2)
encouraging banking institutions to take effective action on
the guidance given.
General guidance on both preattack preparedness measures
postattack banking operations, contained in seven booklets pre-.
parecl by bankers for bankers with the approval of Federal and State
ank supervisory agencies, has been distributed to all banks. This
neral guidance has been supplemented with detailed instructions on
11-3)0stattack banking operations contained in Emergency Circulars issued
Y. the Federal Reserve Banks as more fully described in Part I.
and
t
P
Activities related to encouraging banks to take effectiv
e
c
ation on the guidance given have been the concern of Federal
tAsflk
and State
supervisory agencies, Federal Reserve Banks, the America Bankers
sciciation, State Bankers Associations, and others.
n
In August 1961, at the time of increasing tensions in Berlin,
eral supervisory agencies in a letter to all banks (1) re;111;Phasized the need for accelerated emergency plannin
g, (2) urged
ille17 bank to initiate a preparedness program, and (3) advised that
ms_future bank examinations the
adequacy of preparedness will be emthe
Between June and October 1961, the Advisory Committee on
coi,:rrcial Bank Preparedness made a special effort through personal
tim.acts to get all banks with $100 million or more deposits to inire-a-e a preparedness program if they had not already done so. The
00riP1(3nses to this special effort, inspired at that time by public
cern with growing international tensions, were most encouraging.
hav.,
During the past year, the Board and Federal Reserve Banks
Riau Participated in thirteen Mobilization Conferences--twelve
rearid one National, sponsored by the Office of Emergency
bani,'i
- ng--at which plans for the maintenance of money, credit, and
--ng Were discussed with State and local officials and with rep
re,
eta 'ntatives of
business and industry. The plans met with underhncling and approval, and the continuance of banking operations in
DII:tattack emergency is being relied upon in support of all other
s for the mobilization of surviving resources.
4
6
ffectiveness. In order to keep abreast with the
progress being
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Federal Reserve Bank of St. Louis
-8made by commercial banks in improving their readiness to serve the
nation in the event of an attack, bank examiners, in the regular
°°urse of their examinations, make inquiry as to what is being done.
The preparedness information contained in examiners' reports is tabulated periodically. Based on such tabulations, it appears that the
ntunber of banks initiating a preparedness program increased over 50
ent between June 301 1961, and 1962. Banks now participating
program represent approximately 70 per cent of the total
lePesits of all banks. Considering that this is a voluntary program,
that the banking system is composed of approximately 114,000 independnt institutions, and that banks representing 70 per cent of the
;lePesits of all banks have a preparedness program, it may be concluded
hat the program is effective, but not complete,
telrae
5. Current Need. The current need for this program is based on the
h°11;17-1-Eat a functioning banking system would be essential to the
atien in time of war, and that the achievement of adequate preparedin time of peace is needed to assure the continued functioning
°f bank operations in the event of nuclear attack.
6.
„
Small Business. The program relates directly to banking institu'
31.;° e, large and small, and indirectly to the entire economy, to
,
-a11 business as well as large. Small banks located in less vul':rable areas must be nrepared to assume a larger role in a postattack
111"F:ency as a result of possible damage to large banks in more vulnerable areas.
7.
I
n
Aajor Problems. The major problems in carrying out the program
;re Trrnicic of rJalization on the part of many banks of the need for
(2 Paredness measures because of their seemingly secure locations,
wi4 a belief on the part of some that an adequate preparedness program
c4,4-1 cost too much, and (3) a tendency to let preparedness activities
ag during periods of quiescence in international tensions.
i
8.
9.
Tam Change. No program changes are contemplated.
Stan
Programs. The entire program is a standby program. It
ulrectc
- a-Tard preparedness for any future emergency.
Organizational Chayes. No organizational changes for the proof the program are contemplated.
11.
i)rom,!1.1ture Obpctives. The future objective is to continue the
7-T0n:7T—the program, largely by overcoming the major problems
-7
'
• forth above.
12*
Availability of Funds. There has been no lack of funds for the
program.
Pli°146-M
ticnvhis
-77
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Federal Reserve Bank of St. Louis
Part III
Guaranteed Loan Program
lc Program. The Federal Reserve Banks, under regulations of the
°arra-Mmrnors, act as fiscal agents of the United States in
r
eonnection with the V-loan program for Government guarantees of de?rise production loans. The Board of Governors, after consultation
!Ith the guaranteeing agencies, prescribes fees, rates, and procedures
60 be utilized in connection with such guarantees.
2,
Authority. The present V-loan program was inaugurated under
,
11thora Y 0 -the provisions of section 301 of the Defense Production
!ct of 1950, approved September 8, 1950, and the President's Executive
fder 10161, dated September 9, 1950. The original Executive Order
"e superseded by Executive Order 10480, dated August 14, 1953, and
!teoutive Order 10819, dated May 8, 1959. Under the law, as amended
the Defense Production Act Amendments of 19602 authority for the
r°gram, unless further extended, will terminate on June 30, 1964.
3pre
, i
.tctivities. Pursuant to the law and Executive Orders of the
eTaZia775-itain designated procurement agencies of the Government
e authorized to guarantee loans made by private financing institutiti°ne to finance contractors, subcontractors, and others engaged in
e,(2 performance of Government defense contracts for the purpose of
-4 diting production and deliveries or services for the National
clef()
4.nses By an amendment made by the Defense Production Act Amend1;10,
of 1953, guarantees may also be issued with respect to loans
'lade to finance contractors and subcontractors or other persons in
2?nnection with or in contemplation of the termination of their de-,
'elle() contracts.
j
At the outset of the program, the designated guaranteeing
:
11-11;-les were the Departments of the Army, Navy, Air Force, Commerce,
10r, and Agriculture, and the General Services Administration.
nle,',951, the Atomic Energ/ Commission and Defense Materials Procure-.
%t 6 Agency were also designated as guaranteeing agencies. By
curcutive Order 10480 of August 14, 1953, the Defense Materials Proement Agency was abolished and its functions transferred to the
enr„
;Ial Services Administration. By Executive Order 10819, dated
cle;.', 1959, the National Aeronautics and Space Administration was
Ignated as a guaranteeing agency.
On June 30, 1962, credit available under guarantee agree
outstanding totaled $181,949,000. Of this amount, approximately
jurper cent on the average was guaranteed by the Government. On
30, loans outstanding amounted to Whh,606,00o, and there was
1111:41able to borrowers an additional $37,343,000. Available credit
ner the guarantee agreements outstanding by the various agencies
Ira"
as follows:
7s
etitS
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Federal Reserve Bank of St. Louis
-10Department of the Anny
Department of the Navy
Department of the Air Force
$24,386,000
89,155,000
68,4082wo
From the beginning of the program to June 30, 1962, net
ine()me
,
of the guaranteeing agencies from guarantee and commitment
-ees and interest on purchased loans, after deducting established
443ses and expenses of the Federal Reserve Banks as fiscal agents,
1MS as follows:
Department of the Army
$5,467l000
Department of the Navy
10,699,000
Department of the Air Force
14,178,000
General Services Administration
6,266,000
Atomic Energy Commission
509,000
Department of Commerce6,000
Total net income
07:11-5,000
The Department of the Army estimates that of the loans it
has
, Purchased approximately $2,273,000 is uncollectible. The Doof the Navy estimates that of the loans it has purchased
IPPI'oximately $11,000 is uncollectible. Assuming these estimated
:
IBT.es are realized, the net income to the Government at this time
8
,;he guaranteed loan program is over $34 million. The relatively
c al-1 net incomes of Atomic Energy Commission and Department of
:
s 4.11Terce reflect smaller activity in the program rather than un- 4.sfactory experience.
'
There has existed since the inauguration of the V-loan
tecrim complete cooperation and understanding between the guaranReellig agencies, the staff of the Board of Governors, and the Federal
set?.r:vs Banks. Any differences that have arisen have been promptly
theu-Led and the primary purpose in the minds of all connected with
tor Program has been to facilitate the financing of defense contrac)as provided in section 301 of the Defense Production Act of
154
as amended, and the implementing Executive Orders.
t 44fectiveness. The guaranteed loan program was successful and
conrii sd a use ul purpose during World War II and during the Korean
dikri„et. It has continued to be useful in support of defense pro.°n, but on a more limited scale. It provides a mechanism
ans whereby
%r
li e contractors and subcontractors, particularly smallbusiness
cl erns, can arrange to borrow the funds necessary to finance their
ph nas Production through their local banks by means of Government
or ,7tmeed loans rather than through the advance of Government funds
'-kl.rect Government loans.
J1145
From the beginning of the program in September 1950 through
30, 1962) 1,593 loans totaling $3,422,075,000 were authorized
"e procurement agencies which guarantee such loans.
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Federal Reserve Bank of St. Louis
During the 12 months ending JUMB 30, 1962, there was disbursed on outstanding loans approximately $313,304,000, most of
which was revolving credits.
5. Current Need. The current need for this program may be drawn
from its current activity and the desirability of being ready to
support an expanded procurement program when needed.
The following tabulation shows the number and amount of
guaranteed loans authorized at the end of each month in the period
June 1961 through June 1962.
1961
June 30
July 31
August 31
September 30
October 31
November 30
December 31
1962
January 31
February 28
March 31
April 30
May 31
June 30
.
Guaranteed loans
authorized to date
Amount
(In thousands
of dollars)
Number
3,339,670
1,581
3,340,870
1,582
1,585
3,347,470
1,585
3,347,770
3,392,970
1,586
3,393,170
1,587
3,393,670
1,587
1,587
1,589
1,590
1,590
1,591
1,593
3,394,670
3,401,200
3,401,850
3,402,850
3:g:M
Small Business. Classifications of guaranteed loans by size of
oorrower have been discontinued because of the relative inactivity
of the program. It is believed that the summary figures in the state(ent as of the end of 1959 enclosed with the January 20, 1960, letter
kreport for the last quarter of 1959) have not significantly changed.
Major Problems.
There are no major problems confronting the
3arTITITTI-Reserve Banks in carrying out this program.
'
a,* Program Changes. The Federal Reserve Banks have plans to conc.illet-The essentianperations of the banks from relocation offices
the event of an emergency. The Reserve Banks plan to continue
r perform such fiscal agency functions under the V-loan program as
the situation then prevailing permits.
1211_17 Programs. Plans contemplate that the Federal Reserve
.
a2
clanks andtliT'Wwill be prepared to participate in an expanded
Program suitable to any future emergency needs.
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Federal Reserve Bank of St. Louis
349!
-1210. Organizational Changes. There have been no organizational
changes
Err-Me conduct of fhis program during the past year.
Ile Future Objectives. As stated in section 301 of the Defense Production Act„ the objective of the guaranteed loan program continues
to be "to expedite production and deliveries or services under Government contracts."
1
. Availability of Funds. The guaranteeing agencies are authorized
2
use any monies appropriated to them for defense purposes to neet
\Y* costs and expenses in connection with the V-loan program. The
availability of funds is adequate.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
OF THE
Itezilfo. 13
9/13/62
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE OF THE CHAIRMAN
September 14, 1962.
CONFIDENTIAL (FR)
Mr. Pierre B. McBride, Chairman,
Federal Reserve Bank of St. Louis,
St. Louis 66, Missouri.
Dear Mx. McBride:
The Board of Governors approves the appointment of
Mr. Harry A. Shuford as President of the Federal Reserve Bank
of St. Louis effective October 1, 1962, for the unexpired
portion of the five-year term that began March 1, 1961.
The Board of Governors also approves the payment
of salary to Mr. Shuford as President for the period
October 1 through December 31, 1962, at the rate of $35,000
Per annum, the rate fixed by the Board of Directors as
reported in your letter of September 13, 1962.
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
Wm. McC. Martin, Jr.
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Federal Reserve Bank of St. Louis
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
4
-0c)
**:`
Item No. 14
9/13/62
OFFICE OF THE CHAIRMAN
September 14, 1962.
EMELPEEEL6I_LEE/
M. Robert O. Anderson, Chairman,
Federal Reserve Bank of Dallas,
Dallas 2, Texas.
Dear Mr. Anderson:
The Board of Governors approves the appointment of
Mr. Philip E. Coldwell as First Vice President of the
Federal Reserve Bank of Dallas effective October 1, 1962,
for the unexpired portion of the five-year term that began
March 1, 1961.
The Board of Governors also approves payment of
salary to Mr. Coldwell as First Vice President for the period
October 1 through December 31, 1962, at the rate of $25,000
Per annum, the rate fixed by the Board of Directors as
reported in your letter of September 13, 1962.
Sincerely yours,
(Signed) Wm. McC. Martin, Jr.
Wm. McC. Martin, Jr.
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Federal Reserve Bank of St. Louis
@FedFRASER